Price calculation indications in online offers: Misleading or not? CJEU in NEW Niederrhein Energie und Wasser (Case C‑518/23)

 On 23 January, the CJEU provided further clarity on what amounts to a misleading omission in an invitation to purchase under the UCPD (Case C‑518/23). The case concerns an online electricity tariff calculator operated by the German company NEW Niederrhein Energie und Wasser. Based on customer input, the calculator generates a tariff offer that the customer can accept, resulting in a contract with NEW. However, the generated tariff appears lower than the actual price as it fails to indicate a variable percentage increase – a ‘compensatory’ amount charged by the electricity distribution network operators for the use of low-tariff electricity for high-tariff purposes. The legal question is whether this missing information constitutes a ‘misleading omission’ under Art. 7(1) and (4)(c) UCPD.

The CJEU first confirmed that the tariff offer generated by the calculator qualifies as an ‘invitation to purchase’ under Art. 7(4)(c) UCPD and that information about the compensatory amount constitutes material information thereunder (‘the manner in which the price is calculated’). Thus, this information must be included in the invitation to purchase to enable the average consumer to make an informed transactional decision (para 33). However, Art. 7(4)(c) UCPD does not prescribe how price calculation methods should be communicated (para 37). More broadly, the UCPD does not contain ‘any specific details concerning the question of the degree to which material information must be communicated, and by what medium this must be done’ (para 40). As such, it cannot be implied that pricing indications must enable the consumer ‘to calculate that price himself or herself and thus reach a final numerical result’ (para 39). Instead, such indications can be displayed in various ways, such as a percentage range, a conditional percentage or a fixed percentage with an indication that it may vary over time (para 41).

Then, referring to the general scheme of Art. 7 UCPD, the CJEU established that the required extent of price calculation indications in the invitation to purchase should be assessed ‘on the basis of the factual context of that invitation and the medium of communication used’ (para 46). As to the latter, the tariff calculator does not seem to impose limitations of space or time (Art. 7(3)UCPD). The CJEU continued to highlight a couple of factors as to the ‘factual context’, which, of course, are ultimately for the national court to ascertain. First, since the electricity distribution network operators in Germany retain different and fluctuating percentages for the compensatory amount, it would require ‘disproportionate resources’ for NEW to indicate to consumers the exact percentage in real time (para 49). Second, the generated price offer contains a link to NEW’s general terms and conditions, which do include information on the applicability of the compensatory amount and that it has been set at 25% by the local network operator of the area of NEW’s registered office (para 50). If such information is visibly displayed and consumers’ acceptance is technically conditional on their consent to the terms and conditions, the omission of the percentage increase in the generated price offer does not constitute a misleading omission.

In conclusion, the UCPD does not require the inclusion of the specific percentage of a variable price component in an invitation to purchase, as long as it ‘indicates the applicability in principle of such a percentage, together with a possible scale and the components having an impact on that percentage’ (para 52). There you go: while a specific percentage is off the hook, some general indication of price variability is nonetheless required. The CJEU seems to suggest that an indication in the company’s terms and conditions is sufficient – thereby expecting the average consumer to read them. But why can’t the CJEU ask for such an indication to be included in the displayed price offer itself? Is the CJEU asking too much from the average consumer? Or do national courts still have the discretion to exercise their faculty of judgment (see para 36)?

Price reductions to be determined on the basis of the ‘prior price’ (C-330/23 Aldi Süd)

 Guest post by Laura Bakola (PhD candidate at Leiden University)

In September the CJEU issued a judgment on price indications and the obligation of the trader to announce a price reduction on the basis of the ‘prior price’ of the product. The case comes after the amendment introduced by Directive 2019/2161, as regards the better enforcement and modernisation of consumer protection rules (hereafter Omnibus Directive), to Directive 98/6 on consumer protection in the indication of the prices of products offered to consumers (Price Indication Directive, hereafter PID). According to the amendment, any announcement of a price reduction shall indicate the prior price applied by the trader for a determined period of time prior to the application of the price reduction (Article 6a(1) PID); the prior price means the lowest price applied by the trader during a period of time not shorter than 30 days prior to the application of the price reduction (Article 6a(2) PID).

The case involved a supermarket chain which had issued an advertising brochure containing product offers. One of the brochures contained price indications that were presented in the following manner:

Concerning the first price indication, a percentage was used, but the reduction was not determined on the basis of the lowest price charged in the trader’s stores in the 30 days prior to the offer, the latter being the same as the selling price. Concerning the second price indication, the statement ‘price highlight’ was used, while indicating a higher price than the lowest price charged in the 30 days prior to the offer. Against this background, the questions asked by the referring court pertained to the interpretation of Article 6a(1) and (2) PID; namely, whether these provisions require that a price reduction announced by a trader in the form of a percentage, or in the form of a promotional statement intended to highlight the advantageous nature of the announced price, must be determined on the basis of the ‘prior price’, within the meaning of Article 6a(2) PID.

According to the Court, although Article 6a(1) PID does not make it possible to determine whether the price reduction must be calculated on the basis of the prior price, as defined in paragraph 2 of that Article, account should be taken of the Directive’s objectives, as well as the specific objectives pursued by the provisions in question (paras 20-21). As regards the objectives pursued by the Directive, these are the improvement of consumer information and facilitating comparison of the selling price of products, in order to enable consumers to make informed choices (Article 1 and Recital 6 PID); the selling price of products must be unequivocal, easily identifiable and clearly legible, so that that information is precise, transparent and unambiguous (Article 4(1) and Recital 2 PID). Furthermore, both the Omnibus Directive and the PID were intended to achieve a high level of consumer protection (Recital 1 Omnibus Directive and Recital 2 PID). Interpretation of Article 6a PID as meaning that it suffices to mention the ‘prior price’, without using it as the basis for calculating the price reduction, would undermine the aforementioned objectives, in particular that of improving consumer information (para 24). As regards the specific objectives pursued by Article 6a PID, these were intended to prevent traders from deceiving the consumer, by increasing the price charged before announcing a price reduction and thus displaying false price reductions (para 25). Mentioning the ‘prior price’ for mere information purposes, without using it as the basis for calculating the price reduction, would undermine that specific objective, by allowing traders to mislead consumers through price reduction announcements which are not real (para 26).

It follows that the selling price of a product in a price reduction announcement cannot be the same as the ‘prior price’, within the meaning of Article 6a(2) PID, or be higher than it (para 27). The Court also clarified (para 28) that assessment of a commercial practice consisting of displaying a price reduction, which is not determined on the basis of the ‘prior price’, will be made with regard to the relevant PID provision and not the provisions of Directive 2005/29 on unfair commercial practices (UCPD). Article 6a PID specifically regulates aspects linked to price reduction announcements, thus constituting lex specialis in relation to the UCPD.

In light of the above, the Court ruled that Article 6a(1) and (2) of the PID must be interpreted as requiring that a price reduction of a product announced by a trader in the form of a percentage, or in the form of a promotional statement intended to highlight the advantageous nature of the announced price, must be determined on the basis of the ‘prior price’, within the meaning of 6a(2) PID.

The judgment in case C-330/23 Aldi Süd is a welcome ruling, clearing up the interpretation of Article 6a(1) and (2) PID. However, as business practices evolve in response to regulatory changes, problematic price promotion techniques are not expected to cease. The onus is then on enforcement authorities to ensure application of the rules, thus achieving transparency of price indications in consumer markets.

Recyclable packaging priced separately - CJEU in Verband Sozialer Wettbewerb (C-543/21)

The CJEU agreed today with the opinion of AG Emiliou in the case Verband Sozialer Wettbewerb (C-543/21). I commented on this opinion previously on our blog (see here), and as the CJEU confirmed the AG's opinion today, my remarks expressed in the previous blog stand. 

To briefly remind our readers, the referring German court asked for a clarification on the concept of a 'selling price' from Directive 98/6/EC on price indication. The question was whether consumers purchasing goods in returnable (glass) containers should see the deposit for the returnable container included in the product price, as it would be part of the final selling price, unavoidable and foreseeable. The CJEU confirms that this is not the case and that such deposits should be priced separately. 

Both AG Emiliou and the CJEU focused mainly on the avoidability of the deposit becoming a final part of the selling price, as even if consumers decide not to return the container and obtain a reimbursement, in theory they could and maybe even should have done so (paras 21-23). Additional argument relates again to the legislative aim of ensuring consumers make better-informed decisions. CJEU states that consumers receiving separate information on the price of a product and on a deposit for a container would be better able to compare products available on the market, and different deposit schemes (paras 25-27). The CJEU invokes the average consumer concept as a benchmark for a consumer who should be able to add the two price points together and assess the final price. The latter is a response to the Commission's concern about possible confusion as to the final price of vulnerable consumers (para 62 AG Emiliou's opinion). 

Deposit on recyclable packaging not included in a selling price - AG Emiliou in Verband Sozialer Wettbewerb (C-543/21)

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Last week, on February 2, AG Emiliou issued his opinion in the case Verband Sozialer Wettbewerb (C-543/21) concerning interpretation of the 'selling price' from the Price Indication Directive (Directive 98/6/EC). The facts of the case concerned yoghurts and drinks sold in glass containers, which consumers could return for re-use and recycling purposes. The products were sold at a specified total price 'plus ... deposit'. The question discussed was whether the total selling price should have included the cost of the deposit. 

Article 2(a) Directive 98/6 determines as a 'selling price' the 'final price for the unit of a product, or a given quantity of the product'. A few points in AG Emiliou's opinion drew my attention:

Final components of the price 

AG Emiliou refers to a previous case in Citroën Commerce (C-475/14) where the Court determined two conditions for qualifying a component of the price as a 'final one': 1) it needs to be a pecuniary consideration for the acquisition of the product; 2) unavoidability and foreseeability thereof (paras 38-40). Whilst the first condition seems to be fulfilled here by consumers paying money as the deposit on the glass container, acquisition of which is necessary to purchase a drink/yoghurt, the second condition is more difficult to pin down here. On the one hand side, the deposit has to be paid at the time of the purchase, thus it could be deemed unavoidable. On the other hand, consumers may get their money back if they return the packaging, which could make the payment ultimately avoidable (para 48).  The question then is whether we assess the unavoidability of payment at the moment of the purchase of a product, or by looking holistically at a given transaction. Even in the latter case, there could be situations when consumers do not return the deposit and thus forfeit the payment, not necessarily voluntarily. The Commission draws attention in its submission to the fact that tourists may leave the country with a container and not be able to return, that glass containers may easily be broken or even repurposed by consumers themselves at home, all of which would not allow consumers to reclaim the deposit (para 49). To AG Emiliou these would not be typical situations though (para 51), invoking German governments submission that at least in case of plastic containers - 96% would be returned for recycling. There is a difference though in durability of plastic vs glass containers, and Germany has quite a long history in recycling efforts, compared to many other European countries. However, one cannot but agree with AG Emiliou that the deposit at least can and even should be refunded (para 52), which could lead the CJEU to conclude that it is an avoidable part of the price. 

Selling price vs price per unit

An interesting argument to not count the deposit within the selling price is made by AG Emiliou in reference to the need to allow consumers to have insights into price per unit of a product. Indeed, if we would include deposit price in the product price, this could obscure the comparison between yoghurt/drink prices of competitors, if consumers would return the packaging and be refunded their deposit money (paras 59-61, 65). At the same time, AG Emiliou does not give enough weight to the Commission's argument, in my opinion, that not including deposit money in the selling price may mislead consumers (esp. vulnerable consumers) as to the total price of the product at the moment of its purchase (para 62).

Environmental context

'Deposit-refund schemes are, above all, tools of environmental policy...' - thus starts para 69 introducing AG Emiliou's arguments based on the green agenda of the EU policymakers, highlighting various recent developments aimed at promoting recycling of consumer goods packaging. This concludes with a claim that by splitting the price, providing a separate quote for the deposit, consumers' attention may be easier drawn to the fact that the container could be recycled or reused (para 77). First, this argument makes information design/transparency claims, without, however, justifying them by referring to any literature showing that providing consumers with a separate price point would indeed increase their awareness of the recyclability of a container. Second, it is interesting to observe how interpretation conducted through the lens of current policy objectives could introduce new meaning to old provisions.

Three new guidance notices for Christmas

The European Commission has been busy in the past months and this resulted, amongst other things, in a publication of three new guidance notices, respectively concerning the interpretation of the Unfair Commercial Practices Directive, Consumer Rights Directive and Price Indication Directive. It will take some time to go through the hundreds of pages provided in these documents, but it is good to see that at a glance many of the current questions that the digitalisation raises are being tackled (such as personalised pricing, influencer marketing), as well as that there are some paragraphs on consumer protection (UCPD) dealing with the environmental claims.

All three documents may be found here.

Modernisation Directive adopted by the Council

The Council adopted the Modernisation Directive today, i.e. directive on the better enforcement and modernisation of EU consumer law (press release), which introduces changes to the Consumer Rights Directive, Unfair Commercial Practices Directive, Unfair Contract Terms Directive and Price Indication Directive and is part of the New Deal for Consumers legislative agenda. We have commented on the provisions of the draft directive before (see e.g. our previous posts here and here). The full text of the directive may be found on this website. 

To recall the main changes are as follows:

Consumer Rights Directive:

• broadening the scope of application to contracts where consumers pay with personal data
• traders' information duties have been adjusted to accommodate 
• modern communication means
• contracts for the provision of digital content and digital services 
• the need to inform consumers about personalised pricing
• contracts concluded on online marketplaces - new Art. 6a
• specifying trader's and consumer's obligations in case consumers withdraw from a contract providing them with digital content or digital services

Unfair Commercial Practices Directive:

• right to individual remedies for consumers - new Art. 11a
• incl. compensation for damage, price reduction and termination of contract
• the notion of a product encompasses digital services and digital content
• Member States are given more leeway in addressing aggressive and misleading off-premises selling in order to protect consumer interests
• marketing goods as identical to goods sold in a different Member State, when they differ in composition or on characteristics (dual quality goods) is a misleading action - new Art. 6(2)(c)
• not specifying whether the seller on an online marketplace is a consumer or a trader is a misleading omission - new Art. 7(4)(f)
• websites offering search function that presents consumers with an offer of products (but not online search engines) need to provide information on the ranking of products (parameters determining ranking and importance of these parameters)
• this information is material, and thus lack of its provision will result in finding of a misleading omission - new Art. 7(4a) 
• it does not matter whether the products are offered by traders or consumers
• websites offering consumer reviews need to inform consumers (material information) how they guarantee that these reviews were placed by consumers who used or purchased the product - new Art. 7(6)
• blacklist has new additions: 
• providing search results without disclosing paid adverts or payments for placement higher in the ranking
• resale of tickets, when acquired by automated means circumventing limitations on the number of tickets sold
• placing consumer reviews without taking reasonable steps to ensure they are placed by consumers who used or purchased products
• placing fake reviews

Unfair Contract Terms Directive:

• harmonisation of penalties for provision of unfair contract terms (and for breach of obligations under the Unfair Commercial Practices Directive, Price Indication Directive)
• Whilst previously Member States were obliged to assure effective, proportionate and dissuasive sanctions for breach of obligations to ensure consumer protection against unfair terms, this obligation has been further specified for all 4 directives. The level of penalties traders will be obliged to pay may depend on criteria specified in these provisions (such as the scale and gravity of infringement, repetitive character of infringing consumer law, etc.). 
• In respect of the UCTD, the harmonisation effect is weakened due to options left to the Member States to limit sanctioning traders with penalties to the infringement of black-listed terms or to situations when traders did not follow administrative decisions placed on them for the breach of the UCTD obligations.

Price Indication Directive: 

• more information on price reductions
• e.g. on the lowest price applied by the trader in 30 days (unless goods are perishable or were just introduced on the market) prior to the introduction of the price reduction

The traps of online shopping: the most recent sweep investigation reveals irregularities in how information is presented to consumers

Last week the EU Commission published a press release on the results of a recently conducted EU-wide sweep of e-commerce websites that revealed shocking results: more than half of the websites breached aspects of EU consumer law.

The sweep extended to 560 websites in 26 countries (including 24 Member States, Norway and Iceland), and included a range of websites, from selling clothing, to audio and video equipment and digital content.

More than 60% of websites showed irregularities. It is in particular striking that:

• Information was misleading in particular in regard to the final price of products. On more than 31% of the websites that offered discounts, consumer authorities suspected that the special offers were not authentic or they thought the way in which the discounted price was calculated unclear. On around 37% of websites the final price at payment was higher than the initial price offered, mainly due to the lack of information on extra unavoidable fees on delivery, payment methods, booking fees etc.
• 59% of the traders failed the obligation to provide an easily accessible link to the  Online Dispute Resolution Platform, and
• Almost 30% of websites information on the right of withdrawal was no transparent.

The press release does not contain any information on interesting question on what actions are to be followed to address the above irregularities.