New Green Deal proposals published today: Right to repair

Photo by Kilian Seiler on Unsplash

The European Commission published two new legislative proposals today implementing the programme of the European Green Deal for Consumers: Proposal for a Directive on new rules on substantiating green claims and Proposal for a Directive on common rules promoting the repair of goods (text of both proposals may be found here). Below we provide our first thoughts on the proposal on the right to repair. 

Promoting the right to repair (COM(2023) 155 final)

Consumer Sales Directive prioritises consumers' access to and choice of two remedies in case goods are defective (non-conforming the contract): repair and replacement. Traders may refuse the remedy chosen by consumers if it is impossible to provide or it would be disproportionate to provide it. Infamously, the assessment of disproportionality does not account for environmental impact of the to-be-provided remedy (although some national courts started to include this impact in their assessment). Consumers are often not incentivised to ask for repair, which may be perceived as more time-consuming, less trustworthy, difficult to obtain. For traders repairing goods is also often a less preferred solution, e.g. due to the need to keep spare parts available, arrange repair points.

The new proposal aims to address the above-mentioned issues and incentivise more uptake of repair as a chosen remedy, which should also incentivise producers and traders 'to develop more sustainable business models' (see Commission's press release here).

What are the proposed legislative changes:

• Sellers to offer repair, unless it is more expensive than replacement.
• Comment 1: This limits the choice of consumers as to their remedy. We could argue that the choice left to consumers is illusory. Unless repair is more expensive, consumers have to accept it. If replacement is cheaper but consumers would exercise their choice for repair instead, sellers would be able to claim disproportionality of remedies and provide replacement instead. 
• Comment 2: Proponents of promoting repair as leading to more sustainable consumption are bound to be disappointed by this middle-of-the-way solution. It is worth noting, that previously unless repair was more expensive than replacement, there was no disproportionality when consumers asked for repair, thus sellers needed to provide it to consumers, as well. The only difference then is that now consumers will need to accept repair even if it was not their first choice. This may increase the number of repairs on the market, but would the change really be significant? It will depend on what is calculated in the price of repair vs replacement (e.g. price of environmental impact?), the availability of spare parts etc. Assessment of disproportionality remains key and has not been further addressed by the proposal.
• Consumers to have a right of repair against producers for products that are technically repairable under EU law, when their legal guarantee with sellers expires (that is which are covered by reparability requirements)
• Comment 1: This new right fills the gap that often occurred when the product would malfunction immediately after the legal guarantee's expiry date, or when non-conformity at the moment of delivery could not be established. However, the scope of the application of this new right is rather limited (see below).
• Comment 2: Repairability requirements are any EU law requirements listed in Annex II that enable a product to be repaired. This limits the applicability of this new right to specific product categories, e.g. washing machines, dishwashers, refrigerators, vacuum cleaners, servers, mobile phones, aligning this proposal to the previously adopted Ecodesign rules. 
• Comment 3: It is producers' choice whether to repair for free (commercial guarantee) or against payment (with the hope that market pressures will keep the price reasonable). Producers may be discouraged from providing this right for free as it would drive their product prices up, unless there would be a clear and clever way to emphasise them providing free repairs. It will be interesting to observe whether consumers' transactional choices will be impacted by the difference in the provision of repair services.
• Comment 4: For goods produced outside the EU, consumers could still expect repair - either from these producers or other traders within the EU. This, as we know, may be a right that will be difficult to enforce in practice.
• Producers' duty to inform about products they are obliged to repair themselves
• Comment 1: The aim of this new information piece is to ensure consumers know they can turn to producers for repair. However, there is lack of specificity, as to how this information is to be provided to reach consumers. Well, besides required transparency, as usual. This information may be more effective if it was provided by sellers, highlighted at the point of contracting.
• Online matchmaking repair platform to connect consumers with repair points, sellers of refurbished goods in their area
• Comment 1: Article 7 introduces an obligation for the Member States to establish at least one such platform. This means that cross-border buyers may be somewhat inconvenienced, as the platforms are bound to differ in each MS The platforms need to have search functionality for goods, location of repair, repair conditions (time), availability of temporary replacement goods, ancillary services, quality standards, refurbished goods sellers. It should allow directly asking for the ERIF, as well as display of any adopted national repairability labels.
• Comment 2: Repairers may choose whether to register on the platform and MS may place conditions on who can access the repair platform. Repairers may be incentivised to register due to competition on the market, but it is also clear that some of them may not opt in. This will leave consumers with fewer choices and less transparency.
• European Repair Information Form (ERIF) available on request from repairers - to assure transparency to repair conditions and price
• Comment 1: This is supposed to facilitate comparison between different repair providers. It is interesting, however, that the form is not available by default, but only upon consumer request. This limits transparency as many consumers may not know to or take the time to ask for this form, esp. if they are looking for a quick fix of their product's problem.
• Comment 2: Consumers may be asked to pay for costs that repairers incur to provide this form. This is quite baffling, honestly, as repair remains a free remedy pursuant to the CSD, which right this new framework may undermine. Hopefully, the EP will re-write this part of the proposed Article 4 (para 3).
• Comment 3: The benefit of the proposed framework is that the ERIF would remain fixed for 30 days from the day it is provided. Consumers may then take their time comparing various offers available on the repair market.
• European quality standard for repair services - to help identifying repairers of higher quality
• Comment 1: The Commission's plan is to facilitate development of a voluntary European quality standard for repair services (Recital 27). There is then no specific standard in mind yet, which could provide more transparency as to repair quality. In the hopes that one (or more) is adopted soon, Article 7 mentions that any European or national quality standards would need to be searchable on online comparison platforms. 

It is worth it to note the new term proposed by the Directive: 'Repairer' is a natural or legal person who offers a repair service for commercial purposes, incl. independent repair points, producers, sellers.

(Non-)Existence of right of withdrawal must be unconditional – CJEU in C‑529/19

In Case C‑529/19 (here), the CJEU interpreted the Consumer Rights Directive, particularly the right of withdrawal and its exceptions (Article 16). In this case, the consumer bought a fitted kitchen from Möbel Kraft (a German furniture company) at a trade fair. Later, the consumer communicated to Möbel Kraft its wish to withdraw from the contract. Consequently, the consumer refused to accepted delivery of the kitchen. In response, Möbel Kraft sued for breach of contract. Möbel Kraft had not yet started to manufacture the kitchen parts at issue when the consumer withdrew from the contract.

While Article 9 of the Consumer Rights Directive gives consumer the right to withdraw from an off-premises or distance contract, Article 16 lists several situations where that right does not apply. One of those situations is when the consumer buys goods made to the consumer’s specifications or clearly personalized (Article 16(c)). Given Article 16(c), the referring court asked the CJEU whether the consumer’s right to withdraw from an off-premises contract is also excluded in case where goods are made according to the consumer’s specifications, but the seller has not yet begun to produce the goods and therefore does not incur in any (or few) costs in case of the consumer’s withdrawal.

The CJEU starts by clarifying that the contract in question can only be considered an off-premises contract if it was not concluded at the trade fair stand, which can be seen as ‘business premises’ according to Article 2(9) of the Consumer Rights Directive. Then, the CJEU states that there is nothing in the Consumer Rights Directive that indicates that the exception of Article 16(c) is dependent on the occurrence of any event after the conclusion of the off-premises contract (para 24). In fact, the CJEU states that this exception is inherent to the subject matter of such a contract. In other words, the application of this exception is independent from the stage of performance of the contract (or the stage of production of the products in question) (para 24). Consequently, the CJEU determines that the exception to the right of withdrawal in off-premises contracts where the consumer acquires personalized goods applies from the outset of the contract. The CJEU extracted this conclusion not only from the literal element of Article 16(c) but also from its systematic element, since Article 6(1)(h) and (k) of the Consumer Rights Directive impose a pre-contractual duty on the trader to inform the consumer of the existence or absence of a right of withdrawal (para 25). If the existence of a right of withdrawal would be dependent on a decision of the trader (namely when to start performing the contract), the goal of providing the mandated pre-contractual information would be frustrated (para 27). Finally, to allow the right of withdrawal to depend on the moment in time where the trader starts to produce the goods would be contrary to legal certainty (para 28).

With this decision, the CJEU establishes the inflexible character not only of the right of withdrawal but also of its exceptions. The CJEU’s decision opts for legal certainty over consumer protection considering that, in practice, this means that every time that a consumer acquires a personalized product she can never withdraw from that contract, regardless of the actual costs suffered by the business. Therefore, the CJEU directly contradicts national case law from, for example, the Bundesgerichtshof, which previously determined that the right of withdrawal is not excluded if the goods can be restored at a low cost to the condition they were in prior to the personalization.

Return to sender - CJEU in Fülla (C-52/18) on bulky non-conforming goods

We have not yet had a chance to address the CJEU's judgment of 23 May in the case Fülla (C-52/18). As we have mentioned in the comment on the AG Wahl's opinion, Mr Fülla was convinced that a party tent he has ordered on the phone was not in conformity with this order. The trader was disputing this claim, but the main issue of the case was the lack of a proper communication between the parties as to where and on what conditions the goods could be brought into conformity to begin with. Mr Fülla demanded that the tent was brought into conformity at his place of residence and did not offer to return it. The trader expected the goods to be returned, but did not inform of this requirement the consumer nor offered to advance the postage costs for the return of the goods.

As it was mentioned in our previous comment, and following the opinion of AG Wahl, the CJEU also leaves the determination of the place, in which the goods should be brought into conformity, to the discretion of national laws (para. 46). After all, the place has not been specified in the Consumer Sales Directive, except for its provisions requiring that the determination of such a place enabled repair or replacement: free of charge, within a reasonable time and without significant inconvenience to the consumer (para. 32). Therefore, national courts have to take into account these three requirements, as well, in their interpretation of national laws in accordance with EU law (para. 47). The CJEU emphasises that consumers could experience some inconvenience when having to package and deliver goods to a place where they will be brought back into conformity. It just cannot be a significant inconvenience (para. 40). However, due to the character of certain goods (e.g. that are heavy or bulky) a need to send/transport them to a place other than their location with the consumer may automatically constitute a significant inconvenience (para. 43). It is worth to note that the CJEU is not overly concerned with the lack of harmonisation that such a solution would lead to, as the CSD is in any case a minimum harmonisation directive.

When a consumer sends the goods back to a trader, claiming that they are non-conforming, the question arises whether the trader needs to advance the costs of posting the goods back to him. The CJEU considers such an obligation too far-reaching and able to distort the balance of rights and obligations of both parties. The main argument here is that the goods may turn out not to be non-conforming and that advancing such postage costs could also slow down the process of bringing the goods back into conformity (para. 53). Therefore, in general, consumers may only expect that the postage costs will be reimbursed to them after the non-conformity is confirmed by the trader. However, the situation is different if the advance of postage costs would be necessary in order not to prevent the consumer from making use of their rights (para. 55). Therefore, in specific cases where the transport is costly, e.g., traders could be required to advance such costs. We may expect some disputes arising to determine when exactly such a significant inconvenience would arise.

Finally, the CJEU addresses the issue of the hierarchy of remedies. As a consumer may only then terminate the contract due to non-conformity if a trader was first given an opportunity to remedy that non-conformity, the question was whether in a given case this condition was fulfilled. After all, Mr Fülla did not deliver the tent to the trader's place of business. The CJEU answers this in the affirmative. As the consumer notified the trader of the non-conformity and of the fact that the repair/replacement could occur at his home, when the transport of goods was likely to cause a significant inconvenience to consumers, and the trader did not inform the consumer about his requirement for the place at which repair/replacement could occur - the consumer could terminate the contract on the basis of the non-conformity (para. 65).

DSM directives published

Many of us have been waiting for this moment: on May 22 two Digital Single Market directives have been published in the Official Journal: Digital Content Directive (Directive 2019/770) and the new Consumer Sales Directive (Directive 2019/711). 

 

Time to update our frame of reference.

DSM proposals approved by the Parliament

We have announced in December that the work on the DSM proposals (on digital content and on the sale of goods) was moving more smoothly and that we expected the first EP reading to take place in March 2019 (2019 forecast...). This reading took place yesterday, with the EP approving proposals for both directives and passing the ball along to the Council for their formal approval. Since the changes introduced by the Parliament have previously been discussed with the Council, this final approval should really be just a formality and we may expect these new Directives to start binding in the Member States within the next 3 years. 

A few remarks on digital content

Just a reminder, one of the novelties of the DSM proposals is the stipulation that consumers who pay with their data for access to digital content or online services will need to be provided with consumer rights just like paying consumers (Recital 24). However, unless the Member States stipulate differently, if the trader only collects metadata or where consumer gets access to digital content by exposing themselves to advertisements - these situations will not fall within the scope of protection of the directive. The Directive on digital content also provides for different remedies in case of non-conformity of the digital content (price reduction or reimbursement) than of goods (whether purchased online or offline), but the same longer reversal of the burden of proof (non-conformity manifests itself with in 1 year from the date of supply, with the possibility for the Member States to extend this to two years for goods) and a two year guarantee period (with a possibility for the Member States to extend this for goods). The Directive on digital content fully harmonises requirements for conformity, remedies for non-conformity or a failure to supply and the modalities for their exercise, as well as the modification of digital content or service, thus it adopts the model of targeted full harmonisation. The Member States retain however the right to regulate some matters related to lack of conformity of digital content, e.g. liability of third parties, such as developers of digital content who are not traders. Curiosity: recital 23 recognises e-vouchers as a digital representation of value, digital currency, which is a method of payment and therefore on its own is not a form of digital content. See the final text here.

A few remarks on sale of goods contracts

The Directive on the sale of goods fully harmonises requirements for conformity, remedies for non-conformity and the main modalities for their exercise, thus it adopts the model of targeted full harmonisation. It allows the Member States for example to elect to provide consumers with the right to repudiate the goods shortly after delivery or to regulate sellers' duties to warn. It will apply to 'smart' goods, that is goods embedded with digital elements (whether digital content or digital services), where the goods would not perform their functions without the digital content and where the digital content was provided as part of the same contract. Recital 49 changes the nature of assessment whether the seller is able to bring the goods back into conformity, as the new Directive will allow sellers to refuse to replace the goods or repair them when one of these two remedies is impossible and the other one could only be provided at a disproportionate case (contrary to the Weber and Putz approach to impossibility/disproportionality assessment). See the final text here.

Status quo on fighting planned obsolescence

Some of our readers might have noticed a news item posted yesterday on the BBC website 'Climate change: 'Right to repair' gathers force'. Despite what the title suggests, consumers of course already have the right to repair a non-conforming good, pursuant to Article 3 of the Consumer Sales Directive. The discussed issue pertains rather to the problem of planned obsolescence, that is: designing goods in a way that they malfunction shortly after the warranty period lapses. This not only causes inconvenience and burdens consumers financially, but is also bad for the environment as it increases the amount of industrial waste (most of the time the goods are impossible or too expensive to repair, so consumers purchase a new replacement product instead). 

This problem has been repeatedly raised in the news, scholarship and on a political scene in the past few years. Are there any solutions coming on the EU level? The BBC article mentions that European environment ministers are planning 'to force manufacturers to make goods that last longer and are easier to mend'. However, the EU Ecodesign Directive, mentioned in the article is already in force for quite a few years and as it is a framework directive, it only defines general principles of ecodesign, without placing any specific, restrictive conditions on the manufacturers. Such specific requirements could be adopted through further implementing measures, i.e. regulations adopted by the European Commission. Some of the implementing measures adopted so far concern sectors such as lighting, televisions and large home appliances (dishwashers, refrigerators etc.). More details on the Ecodesign and Labelling can be found on this portal.

What the BBC article does not mention are the changes proposed to the Consumer Sales Directive in the amended proposal for a Directive on certain aspects concerning contract for the online and other distance sales of goods (COM/2017/0637 final) (we have reported on the general approach being agreed by the Council in December, see: 2019 forecast...). This new measure aims to further prioritise the right to repair of consumers. Draft recital 26 mentions "...enabling consumer to require repair should encourage a sustainable consumption and could contribute to a greater durability of products." So far, the draft text of the new directive does not really reflect this priority though, to the contrary - disposing of the strict hierarchy of remedies might facilitate easier contract's termination. The Council added one beneficial provision though: the goods' conformity will be assessed also on the basis of such goods meeting consumers' expectations as to their durability (see draft recitals 19, 27 and art. 5(1)(c) of the General Approach). Will the Council and the Parliament introduce further changes to the draft proposal in the coming months?

2019 forecast: Sun shines on consumer sales contracts

Over a week ago, on December 7, the Council has announced reaching an agreement on the revision of the sales of goods directive (Consumer Sales Directive 1999/44/EC) (More unified rules on contracts for the sales of goods: Council agrees its position). This means that there is a chance for the European Parliament to adopt the new Directive before the elections. The first reading has now been scheduled for March 2019.

 

The original proposal of the Commission intended to provide separate remedies for non-conformity of products purchased at a distance and of digital content. Due to the opposition to this further fragmentation of consumer protection rules, the proposal has, however, been adopted and the amended new rules would regulate non-conformity in all sales contracts. The Council welcomed this change. If we (and the EP) follow the Council's general approach, which may be read here in more details, this is what we may expect:

Harmonisation level

The new rules would apply targeted maximum harmonisation, with Member States being able to maintain further reaching consumer protection in respect of: time limits for guarantee periods (with the minimum set at 2 years); the reversal of the burden of proof for non-conformity (if it manifests within one year from the moment of the delivery there will be a presumption of non-conformity, but the Member States may extend this time period to two years); allowing consumers to choose a specific remedy if the lack of conformity became apparent within a short period after delivery, no longer than 30 days; maintaining flexibility on adoption of the obligation to notify about non-conformity within two months from detecting it. 

 

Goods with digital elements

IoT or connected goods (goods with digital elements) will be regulated by this new directive rather than the directive on digital content. Sellers will be obliged to provide updates for goods with digital elements but only for a period of two years (whilst digital content not integrated in goods will need to be updated during a time that consumers may 'reasonably expect').

 

Remedies

Consumer remedies for lack of non-conformity will remain the same (repair, replacement, price reduction and termination) but the strict two tier system has been mellowed down by the introduction of a more detailed exceptions allowing sellers to opt for price reduction or termination instead of specific performance. New provisions account for CJEU's case law stating that consumers should not be liable to pay for the normal use of goods during the period prior to their replacement, as well as that they are not to bear the costs of removal of installed non-conforming goods and the re-installation of the conforming goods.

In the news

Some of the interesting reads we found in the news from last week:

Five misleading pricing tactics to avoid in sales (V. Crowe in Which?) - warns which pricing offers may be misleading considering the rulings of the UK's Advertising Standards Agency from last year

How Airbnb's Tech Is Impacting People's Fundamental Human Rights (L. Coulman in Forbes) - more specifically the right to housing

Blue Planet has "huge impact" on shopper behaviour, finds report (L. Wells in Talking Retail) - Waitrose study shows more sustainable behaviour patterns of consumers and what impacts them

Time to let go of the services/goods distinction? - CJEU in X (C-360/15 & C-31/16)

In an interesting judgment (X, joined cases C-360/15 and C-31/16) the CJEU has decided to broaden the scope of application of the Services Directive (Directive 2006/123), by encompassing within its scope activities of retail trade in goods, such as shoes and clothing. Traditionally, the sale of goods and the provision of services have been kept separate (hence also different legislative measures are applicable to these two types of commercial activities), even though modern transactions often combine elements of both provision of services and sale of goods. In the internal market of the EU there are also two separate freedoms guaranteeing traders their fundamental rights separately in the area of provision of services and movement of goods. 

Whilst this case is not a consumer law case, it could potentially have implications for the understanding of the provision of services to consumers, as well. The Court interprets in this judgment the definition of a 'service' contained in article 4(1) of the Directive, which states that a service is 'any self-employed economic activity, normally provided for remuneration'. This definition of the service applies under the TFEU providing for the freedom of provision of services as well as under this Directive. Its general notion of economic activity provided for remuneration is easily applicable to retail trade in goods, esp. as the Court points out due to the recital 33, which mentions services provided both to businesses and to consumers, such as distributive trades (paras 89 and 91). Whilst most of the Court's comments clearly refer to a possibility of an autonomous interpretation of 'services', just for the purposes of this Directive, paragraph 95 of the judgment makes a more general statement:

"Any such analysis would, moreover, cause particular difficulties with regard to the retail trade in goods, given that that trade nowadays encompasses not only the legal act of sale/purchase but also an increasing range of activities or services that are closely inter-related and that are intended to induce a consumer to conclude that sale/purchase with one economic operator rather than another, to provide advice and assistance to the consumer at the time of that sale/purchase or to provide after-sales services, which may vary considerably according to the trader concerned."

This comment reflects very well the difficulties that nowadays exist in separating the sale of goods activities from the provision of services, which could justify finally abolishing this distinction and e.g. setting one timeframe for calculating the right of withdrawal or one set of remedies for non-performance, regardless the type of transaction. We can see such overarching provisions in the proposal for a directive for the supply of digital content, but not in the provisions of the new proposal for a directive for the sale of goods (originally, online and other distance sale of goods). Which still states that in case of a mixed contract for the sale of goods and provision of services, the directive should apply only to the part of the contract related to the sale of goods. Is it not the time to let go of the services/goods distinction?

Towards a more coherent European contract law (once again)? Major amendments to the sales proposal

Last Tuesday the Commission published an amended proposal for a directive on certain aspects concerning contracts for the (online and other distance) sales of goods, introducing far-reaching changes to the original file. Most importantly, the scope of the proposal was extended to cover face-to-face sales of goods, meaning that the European lawmakers are now looking into a much broader reform of consumer contract law. Like the original proposal, which extended only to distance sales, but unlike the currently applicable Directive 1999/44/EC, the amended proposal is based on a full harmonisation approach. Impact of such a fully harmonised set of rules is discussed in the Staff Working Document accompanying the proposal. Should the newly presented file go through, Directive 1999/44/EC on consumer sales would be repealed completely. 

The idea of having two distinct sets of contract rules for distance and face-to-face sales did not seem to sit well with anyone from the very beginning. A potential extension of the scope was already envisaged in late 2015, when the original proposal was tabled. Concerns with regard to the original file were also voiced by stakeholders and co-legislators. Indeed, up till now reports about the progress made in the European Parliament and the Council with regard to the sales proposal were not very encouraging. Much more attention seemed to be devoted to the second proposal adopted at the same time, concerning contracts for the supply of digital content. Analyses were nevertheless ongoing - for further reading see in particular the results of the Commission's REFIT exercise or the impact assessment carried out the the European Parliamentary Research Service. 

This is not to say that the amended proposal will not be a source of controversy. Past experience with regard to the harmonisation of European contract law shows that this is a very tricky ground. Even if the potential inconsistency between the rules applicable to different sales channels is now removed and material scope of the proposal is largely based on Directive 1999/44/EC, the full harmonisation approach is bound to raise concerns. Suffice it to recall that this was one of the key issues raised by BEUC with regard to the original proposal. Heated discussions concerning the particular solutions provided for in the proposal are thus to be expected.

CJEU in Schottelius: a sales contract under Directive 99/44 is... a sales contract.

Back to school for students and us teachers, but also back to work for the CJEU. 

Last week, the Court had to decide on a case allegedly involving the Directive on Consumer Sales and Associated Guarantees of 1999 - Schottelius, or C-247/16. 

Under the Consumer Sales Directive, the seller of a defective good must perform a repair request within a "reasonable time", after which inaction on their side authorizes the purchaser to seek alternative remedies. Under general contract law, on the other hand, the creditor of an outstanding obligation usually first has to set a deadline for the debtor to comply. Failing that, they have no recourse against the debtor for any expenses they may have undergone as a result of the latter's failure to comply. 

In the case before the CJEU, the contract at stake concerned the renovation of a swimming pool- a contract that national private laws usually would identify as one of "services". The Directive, on the other hand, only applies to sales contracts. 

The referring court asked whether a general principle of European contract law should be deduced from the Directive, according to which in consumer contracts the setting of a term for performance is not required when the consumer is acting as the creditor. 

The Court of Justice answered that, even though the definition of "sales" under the Directive does not need to coincide with the various definitions given under national contract laws, and it even expressly seeks to deviate from those by including contracts that comprise the delivery and installation of certain goods (see article 1.4 of the Directive), a contract to carry out renovation works such as the one as stake in this case cannot fall under the remit of the Directive. 

Nice try from the referring court, though!

Time limits for consumer claims under Consumer Sales Directive - CJEU in Ferenschild

Setting the scene

The European debate on consumer sales law has taken an interesting turn these days. Its legislative dimension appears to be fixated on the two digital proposals tabled in 2015: on online and other distance sales of goods and on the supply of digital content. By contrast, case law on the good old Consumer Sales Directive has become awkwardly dominated by disputes related to the sales of used cars (see e.g. the widely commented Wathelet case from last year). Of course, legal questions addressed in this context remain of much broader relevance. This was also the case in C-133/16 Ferenschild, on which the Court of Justice ruled this Thursday (see also our previous post on AG's opinion).

In the commented case the CJEU was called upon to provide its guidance on several procedural stipulations of Directive 1999/44/EC. As indicated above, the case involved a purchase of a second-hand car which did not work out quite as planned. The source of non-conformity was rather unusual: the vehicle itself worked well, but could not be registered directly after delivery since its documents had earlier been used as a cover for a stolen car. Nevertheless, the actual crux of the dispute lied in its specific timing: although the defect became apparent shortly after delivery, formal claim for compensation was only made over one year later. 

This would not have been an issue had we been dealing with a regular sale of brand new products. After all, Article 5(1) read in conjunction with Article 3(1) of Directive 1999/44/EC provides that the seller shall be liable for the lack of conformity which exists at the time the goods were delivered and which becomes apparent within two years from delivery. It further clarifies that the limitation period for claims arising from the lack of conformity, if laid down by national law, shall not expire within an analogous period of two years. 

The situation can nevertheless be different with respect to contracts for the sale of second-hand goods. Article 7(2) of Directive 1999/44/EC allows Member States to provide, by way of derogation, that the seller and consumer may agree on a shorter time period for the liability of the seller arising from such contracts (although no less than one year). At the same time, the directive remains silent as to the duration of the limitation period which should apply in this situation. Since that question appeared to be of direct relevance to the unfortunate buyer in the case at hand, the referring court decided to stay the proceedings and seek guidance from the CJEU. 

The question referred can be summarised as follows (para. 32):

Must Article 5(1) and the second subparagraph of Article 7(1) of Directive 1999/44/EC be interpreted as precluding a rule of a Member State which allows the limitation period for action by the consumer to be shorter than two years from the time of delivery where the Member State has made use of the option given by the latter of those two provisions, and the seller and consumer have agreed on a period of liability of the seller of less than two years for the second-hand goods concerned?

Judgment of the Court

The Court largely followed the pro-consumer interpretation proposed by Advocate-General Szpunar earlier this year (see also our earlier post here), holding that a national rule, which would allow the limitation period afforded to consumers to be shortened as a consequence of the reduction of the period of liability of the seller to one year, is precluded by Article 7(1) of Directive 1999/44/EC.

In reaching that conclusion the CJEU relied on the following set of arguments. Firstly, it drew a distinction between two types of time limits referred to in Article 5(1), namely the period of liability of the seller and the limitation period (para. 33-35). The Court further emphasised the difference between aims pursued by both types of time limits as well as other factors which, in its view, supported the claim that duration of the limitation period was not contingent on that of the period of liability (such as the fact that the former does not necessarily commence at the time of delivery or that no reference to the first sentence of Article 5(1) is made in the second sentence of that provision). It then went on to discuss the wording on Article 7(1), read in conjunction with recital 16, and concluded that the derogation provided therein concerns only the period of liability of the seller and not the limitation period (para. 42-45). This interpretation was further supported by the fact that the second subparagraph of Article 7(1) constituted an exception to the rule expressed in its first part (on binding nature) and, as such, had to be interpreted strictly.

Concluding thought

By holding that the duration of the limitation period for action by the consumer should, in all cases, not be shorter than two years from delivery, the Court confirmed its strongly pro-consumer stance, which had already been visible in its earlier judgments - both on Consumer Sales Directive (Wathelet) and on Unfair Contract Terms Directive (from Aziz to Banco Primus). In the commented case, the Court relied heavily on the advice of the Advocate-General. However, as seen from the recent opinion in case C-598/15 Banco Santander (see also our post here), AGs are not always arguing in a similar vein. Therefore, even if the Court has so far remained largely consumer-friendly, and probably rightly so, one has to wonder if this pro-consumer direction is not going to reach its limit sometime soon. 

Liability and limitation periods - AG Szpunar in Ferenschild (C-133/16)

AG Szpunar issued his opinion today in the case Ferenschild (C-133/16) concerning interpretation of liability and limitation periods in the Consumer Sales Directive.

Mr Ferenschild bought a second-hand car (what else?) in Belgium, which inevitably concluded with him raising non-conformity claims. Somewhat less common is the fact that the non-conformity claim would in some Member States classify as a legal defect of the purchased goods, as the car could not be registered for 6 months after the delivery (and, therefore, could not be used for its normal purpose), due to its documents being used as a cover for a stolen vehicle. Mr Ferenschild claimed this non-conformity and as remedies demanded price reduction, as well as compensation for the replacement goods (renting another car prior to the registration) and damages resulting from this non-conformity. The preliminary question addresses the issue whether this claim has been raised timely. 

The Consumer Sales Directive in its article 5(1) introduces two deadlines: a two year period for the liability of the seller for the lack of conformity of the goods with the contract (first sentence) and a two year limitation period for raising such liability claims (second sentence). AG Szpunar distinguishes between these two periods and considers them independent of one another. The justifications to keep these periods separate are: linguistic (par. 65), structural and historical. The structural argument is based on the fact that the limitation period for raising the claim does not start running from the moment consumers find out about the lack of conformity of the goods. Instead, it starts running already from the moment of the delivery of goods, limiting sellers' exposure (par. 53-54). The historical argument looks into the inspiration for this provision - provisions in the CISG (par. 57-58) - as well as the original draft of the directive (par. 67-69).

It is important to differentiate between these two periods because the Directive allowed in its Article 7(1) for the Member States to facilitate contractual limitation of the period for the liability of the seller of second-hand goods. If these two periods can, therefore, be kept apart, as AG Szpunar suggests, then the Member States would only be able to allow parties to limit the period of liability of the seller for non-conforming goods to one year, but consumers could continue to raise such claims within two years from the moment of the delivery (par. 72). This is the interpretation that the AG Szpunar prefers in order to 'safeguard the minimum model of consumer protection guaranteed by EU law' (par. 104). This seems consistent with the general aim of the CSD to balance consumers' and sellers' interests (par. 81). The nature of second-hand goods suggests the need to narrow down the period for the liability of the seller for non-conforming goods (par. 98), but that should not then also impact consumers' legal remedies (par. 87, 92).

Other interesting comments from the opinion pertain to: CSD not introducing a clear distinction between liability for non-conforming with the contract goods and liability for hidden defects, with both classifying as non-conformity (par. 36); high probability of the CSD applying also to legal defects (par. 38-40).

If it talks like a seller... - CJEU in Wathelet (C-149/15)

Last week the CJEU also issued a judgement in the Wathelet case (C-149/15) concerning interpretation of the Consumer Sales Directive (CSD) with regard to a sale of a second-hand vehicle in Belgium.

Ms Wathelet has purchased a second-hand vehicle for 4.000 Euro as a consumer from a professional garage and did not obtain any receipt, proof of payment or a sales invoice for this purchase. The garage paid for the roadworthiness test, while Ms Wathelet paid for the registration of the vehicle. The car has promptly broke down, before the consumer received the invoice for the purchase. The garage found that the fault was with the engine and charged Ms Wathelet for 2.000 Euro for its repair. She has refused to pay this repair price, claiming that the garage as the seller of the vehicle was responsible for this fault. At this point, Ms Wathelet was informed that the garage has never owned the car and has sold it on behalf of Ms Donckels, another consumer. Ms Donckels has, however, never received the full purchase price, as the garage withheld 800 Euro to credit repairs that have been conducted on the vehicle. The garage sent then a letter to Ms Wathelet, confirming its capacity as an intermediary, stating that the engine failure is an 'ordinary risk' when buying a second-hand car from another consumer, and attached an invoice for the purchase price of 4.000 Euro on which it was handwritten that Ms Donckels was the seller. The invoice only had the signature of Ms Donckels. The garage refused to return the car until the repair price of 2.000 Euro is paid in full and brought proceedings against Ms Wathelet for payment of this invoice. Ms Wathelet counter-claimed demanding termination of the contract of sale and damages.

The Court of Appeal in Liege, Belgium, finds that there is strong evidence that Ms Wathelet was never informed that it was a private sale and, therefore, asks the CJEU whether the notion of a 'seller' encompasses not only professional traders who transfer ownership of consumer goods to consumers, but also traders acting as intermediaries for private parties, and whether the answer would differ depending on whether they are remunerated for their services and whether the consumer was informed of the fact that the sale was a C2C sale.

The CJEU first determines that the notion of the seller should be interpreted autonomously for the purposes of the Consumer Sales Directive, considering its objectives. The notion does not cover intermediaries (par. 33), however, that does not mean that it could not cover traders who act as intermediaries (regardless of whether they are remunerated for their services - see par. 43) but present themselves as professional sellers to consumers, giving consumers false impression that they are concluding a B2C contract (par. 34). The CJEU states that literal interpretation of art. 1(2)(c) of CSD does not prevent such an interpretation, teleological arguments - supporting high level of consumer protection - strengthen it (par. 35-36). It is essential for consumers to know the identity of the seller, and whether it is a professional party, as they will only have remedies for non-conformity of the purchased goods from a professional seller under CSD (par. 37). The consumer should have, therefore, been informed that the owner was a private individual, eliminating information imbalance between the parties. (par. 39-40)

"Therefore, in circumstances such as those at issue in the main proceedings, in which the consumer can easily be misled in the light of the conditions in which the sale is carried out, it is necessary to afford the latter enhanced protection. Therefore, the seller’s liability, in accordance with Directive 1999/44, must be capable of being imposed on an intermediary who, by addressing the consumer, creates a likelihood of confusion in the mind of the latter, leading him to believe in its capacity as owner of the goods sold." (par. 41)

"...The degree of participation and the amount of effort employed by the intermediary in the sale, the circumstances in which the goods were presented to the consumer and the latter’s behaviour may, in particular, be relevant in that regard in order to determine whether the consumer could have understood that the intermediary was acting on behalf of a private individual." (par. 44)

Commission's proposal on the Digital Single Market out

Yesterday, the European Commission published two proposals aimed at harmonising the rules on two aspect of digital economies: sales of goods and provision of so-called digital content. There will be chances to discuss the proposals more in detail in the weeks and months to come (in particular: to what extent can they still be considered as a legacy of the discarded common sales law proposal?). Curious readers, however, will find them on the website of DG justice, accompanied by a number of context documents as well as country factsheets. Exciting times!

Towards more durability for consumer products

When you purchase a more expensive hand mixer for your cooking experiments, you expect it not only to whip and mix everything faster, easier and better, but also to last longer. Imagine then that the whisk breaks within a year of your purchase. Even though you have used your hand mixer often, you still feel like it should have survived longer. Do you then buy a new hand mixer or just try to replace the whisk? What if you cannot buy a separate accessory or if the hand mixer has already been replaced by newer models and old accessories are not on the market? This is when we would talk about a planned obsolescence of a product - when the producer intended the product to last only for a specific amount of time and designed it to e.g. break after this time. 

The European legislator generally encourages not only the increase in the products' durability but also transparency about the life span of the products and the availability of spare parts. The Waste Electrical & Electronic Equipment Directive (2012/19) sets, therefore, only minimum requirements and allows the Member States to adopt stricter ones. While the European Economic and Social Committee set up the Consultative Commission on Industrial Change (CCMI) that argues for the introduction of a ban on planned and built in obsolescence (see their publication: Towards more sustainable consumption...), no enforcement action at the European level has been taken yet and the rules on transparency have not been further specified either. Some Member States are, thus, adopting their own national rules to provide more consumer protection. For example, in France a new decree 2014-1482 obliges French producers to inform sellers, who then are to convey this information to consumers, about the durability of their products and the availability of the spare parts under a threat of fine of 15.000 euro (see French government tackles planned obsolescence). As of 2016 they would also have to provide a 2 year warranty for white goods, which would force them to repair or replace free of charge any defective products within two years from the original purchase date, since the consumers would enjoy a presumption that any non-conformity manifesting within the first 2 years from the purchase date was inherent in the product (Loi Consommation: consommation responsable). This effectively extends the minimum period for this presumption of 6 months (guaranteed by the implementation of the Consumer Sales Directive 1999/44) to two years.

Notification without naming the cause of non-conformity possible - CJEU in Faber (C-497/13)

4 June 2015: CJEU in Faber (C-497/13)

And important judgement has been issued today by the CJEU in the Dutch case Froukje Faber v Autobedrijf Hazet Ochten BV. Ms Faber bought a second-hand car from the Hazet garage. The contract was a pre-printed form entitled 'contract of sale to a private individual'. A few months after the purchase (26 Sep 2008) Mrs Froukje was driving her car with her daughter, on her way to a business meeting, when it burst into flames and was completely destroyed. It's in dispute between the parties whether immediately after the accident they discussed the matters of liability of the garage. A few months after the accident the garage contacted Mrs Faber and was told she was waiting for the police report on the fire. The police informed her that no technical report had been compiled. The vehicle was scrapped in May 2009, upon which event Ms Faber informed Hazet garage that she held them liable for her damage (purchase price of the car + value of items in the car). Since the car had been scrapped, investigation into the fire cause was no longer possible. In her claim against the company, Ms Faber raised the issue of non-conformity of the car, without, however, alluding to her status as a consumer. If she was seen as a consumer, she could have used the non-conformity presumption reversing the burden of proof as to the defect's cause when the defect materialised within 6 months from the delivery.

The Dutch court of appeals asked among other 1) whether it should investigate ex officio whether consumer protection granted by the Consumer Sales Directive should apply in this case to preserve effectiveness of these rules, 2) especially when the court did not have sufficient information to establish consumer status, 3) also on the appeal when the matter was left open in the proceedings of first instance. Moreover, 4) the Dutch court asks whether Art 5 (3) of CSD on the presumption of non-conformity within 6 months from delivery should be seen as equivalent in status to rules of public policy. Furthermore, 5) it is questioned whether Dutch law requiring consumer to notify the seller about non-conformity could be validly combined with a duty to present facts and evidence with regard to that non-conformity at the same time. Finally, 6) it is inquired what standard of proof should be placed on the consumer with regard to presenting facts and adducing evidence on non-conformity and its apparent character within six months of delivery. Should the consumer prove which defect caused the goods to malfunction or only that they malfunction?

The first three questions were easiest to predict the answer to. Consistent with its case law (Par. 42), the CJEU establishes the duty of national courts to ex officio determine whether the buyer could be classified as a consumer, even if the buyer did not rely on that status. This holds true when the court "has at its disposal the matters of law and of fact that are necessary for that purpose or may have them at its disposal simply by making a request for clarification" (Par. 48). It is for the national court to undertake necessary investigation as to these facts. (Par. 40)

Art. 5 (3) of the CSD changes the burden of proof with regard to the non-conformity, considering that it is usually easier for the professional to disprove the existence of the default at the moment of purchase. The CJEU declares this provision as of equal standing to national rules of public policy. (Par 56)

Dutch law used the option from the CSD and adopted the notification duty for the buyer within two months after the discovery of the lack of conformity. Some case law of the Dutch Supreme Court accepted also as valid notification delivered after this period of time, if circumstances of the case (difficulties in gathering evidence) justified this. It is the buyer who has the burden of proof that he fulfilled this notification duty.  (Par 59) The aim of the CSD was to encourage diligence of the buyer and increase the legal certainty for the seller, without imposing an obligation on the consumer to carry out a detailed inspection of the goods. (Par 61) "As is apparent from the wording of Article 5(2) of Directive 1999/44, read in the light of recital 19 in the preamble thereto, and from the purpose of that provision, the obligation thereby imposed on the consumer cannot go beyond that of informing the seller that a lack of conformity exists." (Par 62) Most interesting is the following paragraph 63 giving detailed instructions as to the requirements for the notification duty:

"As regards the content of that notification, the consumer cannot be required, at that stage, to furnish evidence that a lack of conformity actually adversely affects the goods that he has purchased. In view of his weak position vis-à-vis the seller as regards the information relating to the qualities of those goods and to the state in which they were sold, the consumer cannot, in addition, be required to state the precise cause of that lack of conformity. By contrast, in order for the notification to be of use to the seller, it must include a certain number of particulars — the degree of precision of which will necessarily vary depending on the specific circumstances of each case — relating to the nature of the goods in question, the wording of the contract of sale in respect of those goods and the way in which the alleged lack of conformity became apparent."

Dutch law may not, therefore, make it difficult for consumers to fulfil their notification duties by obliging them to provide excessive evidence with regard to the lack of conformity. What is then for the consumer to prove?

"In the first place, the consumer must allege and furnish evidence that the goods sold are not in conformity with the relevant contract in so far as, for example, they do not have the qualities agreed on in that contract or even are not fit for the purpose which that type of goods is normally expected to have. The consumer is required to prove only that the lack of conformity exists. He is not required to prove the cause of that lack of conformity or to establish that its origin is attributable to the seller.

In the second place, the consumer must prove that the lack of conformity in question became apparent, that is to say, became physically apparent, within six months of delivery of the goods." (Par. 70-71)

The seller would then need to prove that the cause or origin of that lack of conformity lies in circumstances that occurred after the delivery. (Par. 73)

Very important case for all aficionados of notification duties and evidence rules! I would think that in this case Ms Faber could then rest by stating that her car caught fire within 6 months from delivery and it would be the seller who would need to establish the cause of that fire as not resulting from a lack of conformity. This would eliminate the need for consumers to await the professional reports on the non-conformity potential origins, which often delay them in making notifications to the seller.

Press digest

Consumer Products & Sustainability

Some of the recent press articles express concerns that some of popular consumer products will be soon disappearing from the market if they do not meet new European requirements on efficiency and sustainability set by the Ecodesign Directive. (Europe's ban on 'wasteful' gadgets - doest it cost or save?) 

Another article points out to the decreased life span of consumer electronic products, where wasteful consumption of goods may result from the consumer's need to update their products to newer, better versions more often (Lifespan of consumer electronics is getting shorter, study finds). 

You may also read in recent press more about the problems of marketing of sustainable products. While some researchers discovered that consumer care about e.g. environmental impact of their purchases, this often still doesn't influence their purchasing behaviour. Could this be explained by the fact that consumers don't see what's in it for them to change their decision-making to reflect sustainability trends? (The problem with sustainability marketing? Not enough me, me, me)

Customer service & consumer information

Interesting findings of two studies on customer service in the UK have been discussed in Forbes by Adrian Swinscoe (Is Customer Service Going to Get Worse Before It Gets Better?). Tentative conclusions that could be drawn from this article are that while customer services seems to be improving, the improvement may be too slow for the dramatic raise in consumer expectations as to what level of customer service they should be receiving.

Speaking of customer services, some banks are considering to start texting their customers that it may be in their interest to switch a financial service provider, lower balance levels, avoid overdraft charges, etc. This may be the result of the reported inefficiency of bank statements that consumers currently receive. (British watchdog tells banks to text time-poor customers)

Are the European institutions looking for a way out from the promises they have made to deliver roaming-free phone services to Europeans in 2015? This is the subject of an article discussed in Deutsche Welle (Europeans free to 'roam if you want to' - but without phones, without data).

Ex Officio Examination of the Status of the Buyer and Burden of Proof in Consumer Sales - Opinion AG Sharpston in case Froukje Faber (C-497/13)

27 October 2014: Opinion AG Sharpston in case Froukje Faber (C-497/13)

Today AG Sharpston handed down her opinion in a case where the consumer Froukje Faber bought a used car from Autobedrijf Hazet. The Dutch court of second instance dealing with the case asked for an interpretation of the  consumer sales directive. 

The car caught fire four months after having been handed over to Ms Faber. Neither in the proceeding in the first nor in the second instance Ms Faber claimed that she had bought the car for private purposes. The court asked if it had to examine out of his own motion - in violation of national rules and as a duty arising from the directive - whether the purchaser is a consumer. Unsurprisingly, GA Sharpston argued that national courts have this duty (due to the principle of effectiveness).

The wreck had been dismantled before the cause of the fire was found out. The Dutch court asked if it had to apply Art 5 (3) which partially reverses the burden of proof for the benefit of consumers ex officio, a question the GA answered in the affirmative. According to GA Sharpston, the consumer has to proof the lack of conformity if the latter becomes apparent within six months of delivery. He or she, however, does not have to show the cause for the lack of correspondence. For the present case this means that Ms Faber has to show that the fire occurred and '...why, as a result of the fire, she considers that the car which was delivered to her did not correspond with the car which, based on the contract and other relevant information, she had expected to receive. ... in the present case, it may be sufficient for Ms Faber to show that the product can no longer (properly) perform the function for which it was purchased...'. It is then up to the seller to proof that the car was in conformity with the contract at the moment of delivery. 

The Netherlands made use of the possibility to introduce a rule under which the buyer has to notify the seller about the presumed lack of conformity of the good in due time (Art 5 [2] consumer sales directive). The Dutch court asked how far this duty to notify goes. AG Sharpston highlighted that the buyer, when notifying the seller, does not yet have to proof the lack of conformity.

Consumers' choice and innovation in retail food sector

The European Commission published last week the results of a retail food study. The study "The economic impact of modern retail on choice and innovation in the EU food sector" has been jointly prepared by Ernst & Young, Cambridge Econometrics Ltd. and Arcadia International and for anyone interested in this sector and its developments it has a fascinating amount of data spread out on ca 450 pages (more than 300 shops analysed in 9 Member States with 23 product categories and for a period of time 2004-2012). What we can gather from the European Commission's press release is that there was a worry expressed by the traders active in the food supply chain that large retailers imposed detrimental conditions on their suppliers (a reason to adopt CESL?) and the latter ones were not able to invest in new products, which could lead to the reduction of choice and innovation in food products for EU consumers (Commission publishes results of retail food study). The main results as we could hear are:

• consumer choice continuously increases (more shops, products, brands, package sizes);
• number of innovations reaching consumer each year decreased since 2008 by 6.5%;
• most innovations nowadays concern the packaging;
• range of choice/innovation is related to the size and types of shops and the economic environment (e.g. whether the local area is high or low on unemployment, GDP per capita etc.), as well as to the turnover in a product category;
• more competition among shops leads to the introduction of more choice/ innovation;
• in moderately concentrated retail markets, retailers' stronger bargaining power in comparison with the supplier did not point to the reduction of choice and innovation in food products.

The last presented finding suggests that the assumption that led to this study might have been incorrect, so that the need to grant suppliers more protection in EU law might not necessarily be related to consumer protection. We will need to see what are the responses to this study (allowed to be submitted before 30 January 2015).