CJEU in C-100/21 (Mercedes-Benz group): technical rules on motor vehicles and emissions are also aimed at consumer protection

Dear readers, 
 
this week, the CJEU has decided a case that may go unnoticed among consumer lawyers scouting the CVRIA website for new cases but has a clear connection to consumer law - namely, C-100/21 (Mercedes-Benz Group)  concerning the liability of a producer of "defeat" vehicles. 
We know, of course, the background to this case - namely, the so-called "Dieselgate", revealing how several car producers had tweaked their vehicles to cheat on emissions tests. Quite a few court cases have previously reached the CJEU, lastly based on the Consumer Sales Directive. This case is similar to its predecessors qua facts, but also different in terms of the legal basis. 
In Mercedes-Benz, in fact, the basis for the consumer's claim was to be found in German tort law (para 823(2) BGB), which provides for recourse in tort by individuals when a law aiming to protect them has been infringed (see para 29). The question that the CJEU had to ask, then, was whether two European instruments read together - namely Directive 2007/46 establishing a framework for the approval of motor vehicles (‘the Framework Directive’), and Regulation No 715/2007 regulating the approval of certain auto vehicles - had to be interpreted as aiming to protect individual buyers of auto vehicles. According to the referring court, the question was a matter of doctrinal contention under German law, with some considering such technical instruments as merely aiming to protect the environment and secure road safety, while others emphasised the function of technical standards in securing consumer autonomy and individual interests (see paras 29-30 and ff.
According to the Court, it is the case that the European rules under consideration in fact (also) aim to protect individual consumers: that this is the case, the Court argues (para 78 ff), can be evinced from the fact that the Framework Directive requires manufacturers to provide individual purchasers with a certificate declaring that the purchased vehicle complies with the requirements set out in law. Buyers of auto vehicles carrying a conformity certificate can thus expect the acquired vehicles to comply with the relevant regulations. Failure to comply is "liable, inter alia, to create uncertainty as to the possibility of registering, selling or entering into service that vehicle and, ultimately, to harm the purchaser of a vehicle equipped with an unlawful defeat device" - all of which obviously directly affect the cars' individual purchasers. 
Member States, hence, are required to make sure that individual consumers have recourse against the producer of a defeat vehicle, where it is proven in national proceedings that the vehicle indeed contained a "defeat" mechanism. The rules applicable to actions seeking to obtain compensation for the damage suffered by individual consumers, however, are not harmonised; it is up to the Member States, subject to compliance with the principles of equivalence and effectiveness, to determine the exact contours of the claims. In this context, national courts are asked to assess the facts of the case - in which context, while tasked with securing the effectiveness of consumer's right to compensation for any damages suffered, they are also allowed to consider principles such as unjustified enrichment that would allow for balancing such damages against possible benefits enjoyed thanks to using the vehicle (paras 91-93). 
Given previous cases, the outcome in this case is perhaps not too surprising; it goes, however, to show further ways in which national private law systems and EU rules gradually come into more direct conversations, also where one would not immediately expect it. Furthermore, the case may be of interest to students and teachers of comparative tort law, always looking for current examples to illustrate this specific German doctrine :). 

Lexitor saga takes (perhaps not so) unexpected twist: CJEU in UniCredit Bank Austria v VKI (C-555/21)

 Dear readers, 

while some of you may think this blogger spends too much time online (true), lately social media have been a great source of information concerning new case-law - take Thursday's CJEU decision in case C-555/21 on non-interest costs in the case of early repayment of mortgage credit as an example. Within an hour of the Court issuing a press release, I could see the judgment *everywhere*. People in my bubble were, in general, not happy (see eg fellow consumer lawyer Catalin Stanescu; however, I should say: people were not happy, except some fellow Italians, see * below). What happened? 

In 2019, the CJEU decided Lexitor, a case in which it was requested to decide whether article 16 in the 2008 Consumer Credit Directive, regulating the unwinding of consumer debt in case of early repayment, required also non-interest costs to be returned pro rata tempore. In that case (see our post here), the CJEU ruled that indeed this would be the case: a different interpretation, in particular, would have made it too tempting for credit providers, who are to a large extent unilaterally able to set up the remuneration structure for consumer credit, to set up a business model largely based on low interest and high fixed costs.

This case sent airwaves throughout Europe, even if more visibly so in some systems: in Italy, for instance, it led to a recent decision by the Constitutional Court that may or may not need to be reconsidered after today. Why?

An important question outstanding after Lexitor was whether the established interpretation should be limited to the Consumer Credit Directive or could also be extended to the 2014 Mortgage Credit Directive - this in particular given that the two directives contain textually similar provisions and hence a consistent cross-directive interpretation may be good for legal certainty. Today's decision seems to suggest that it can be extended, as a matter of national law - but such extension is anyway not required by EU law. In particular, the preliminary reference asked whether the Austrian provisions preventing the recovery of non-interest costs unconnected to the duration of the credit contract was compatible with article 25 of the 2014 Directive. The CJEU concluded that it is. 

In the case of mortgage contract, the referring court [see para 18] had already observed, much of the fees that do not depend on the duration of the credit are actually outside of the credit provider's control: think for instance of notary costs, obtaining an assessment of the value of the house and so on. In such context, the CJEU found, the risk of perverse incentives found in Lexitor does not seem so serious to justify the consequences that a strict interpretation of the right to pro rata restitution would entail [see para 32].  

While somewhat irrationally finding solace in the idea that the standardised information to be provided pursuant to the Mortgage Credit Directive would prevent abuse on the side of credit providers by empowering consumer choices [para 33-34; reader, take it from someone who has recently concluded a mortgage contract - it doesn't], the Court also makes space for appreciation of the circumstances of the case and arguably national variations. This emerges from paras 37-38, according to which it is for national courts, seized with a dispute, to ensure that the Directive's protective aims are not circumvented and that costs that are in fact remuneration for the availability of cash over time are not accounted for under different headers to avoid restitution. This is an interesting and imposing task for national courts (with possible further implications such as: what would be the contractual consequences of a misclassification? would it in any event entail an unfair commercial practice? would the courts have to perform this check ex officio if for any reason they are confronted with the case?).

In Italy, the Judgement has drawn particularly much attention - Lexitor had previously led to a consequential decision of the Italian constitutional court and had drawn quite the criticism in Law & Econ circles (see eg here), which means this weeks decision has been quickly celebrated by parts of Italian academia.  

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.

Price reduction for travel services not performed due to pandemic - CJEU in FTI Touristik (C-396/21)

On January 12, the CJEU issued a judgment in FTI Touristik (C-396/21) as to the application of the Package Travel Directive  (Directive (EU) 2015/2302) in the times of a global pandemic. Specifically, the question raised by the national court was whether national restrictions adopted to fight the spread of Covid-19 could be perceived as leading to non-conformity of a package, if such restrictions were imposed globally. 

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The travellers booked a 2-week package holiday from Germany to Greece for March 2020 and, unfortunately, were unexpectedly subject to the first wave of pandemic restrictions being put in place (e.g. beaches were closed, curfew was adopted, access to swimming pools/sunbeds was prohibited, entertainment was discontinued). Their 'holiday' ended early, after 7 days. Could they claim price reduction for the package they purchased considering that it was performed in a very limited scope?

Art. 14(1) PTD entitles travellers to price reduction in any circumstances when there was a lack of conformity, unless it was attributable to them. As the CJEU observes, there is one condition to obtain this remedy (lack of conformity) (para 21), with AG Medina pointing out also that there is only one exception to this - attribution to a traveller (para 16 Opinion of AG Medina, para 23 judgment). As the lack of conformity is defined as a 'failure to perform or improper performance of the travel services' (Art. 3 point 13 PTD), this concept is not linked to fault or any specific circumstances that led to non-conformity. The objective nature of this finding does not allow for considering the cause/origin of the lack of conformity (para 22). Consequently, even if non-conformity results from extraordinary circumstances, these would not impacts its finding (para 24). 

Further, as the CJEU rightly observes, the structure of Art. 14 PTD clearly divides remedies that travellers could always claim (provided they did not contribute to it) - that would be price reduction, and these they could claim only if the organiser or parties involved in the provision of travel services were responsible for the non-conformity - that would be compensation (para 24). There would be no need to separate these remedies in the structure of the Directive, if either could be excluded from consumer rights by the occurrence of extraordinary circumstances (para 24). This dissociation of the two remedies occurred during the legislative process, which serves to prove the intention of the legislator to equip consumers in the right to price reduction in the majority of non-conformity cases (para 30). 

Consequently, irrespective of whether Covid-19 restrictions are recognised as force majeure  or a 'general life risk' (para 33), consumers have a right to claim price reduction for the lack of conformity of their package. Their claim will, however, be restricted to non-performance or improper performance of these services that were included in the contract (para 37), incl. services that were not explicitly mentioned in the contract but could be linked to it based on the purpose of the travel (para 38). In this case, courts will need to consider e.g. whether access to the public beach would be linked to the purpose of the travel, even if it was not guaranteed in the contract. Also, the assessment of the 'appropriateness' of the price reduction itself needs to objectively consider the travel services' value (para 39).

It is important to note, as well, that the CJEU specifically addresses whether PTD applies in a situation of a pandemic, stressing that 'the application of Directive 2015/2302 is not limited to instances of travel disruption of a certain scale or at a local level.' (para 29).

This judgment will allow at least some travellers whose travel was affected by the pandemic to claim remedies easier. However, the preliminary reference was limited to circumstances where the travel started before pandemic restrictions were put in place. It will likely not apply to these cases, when the contract was concluded and travel began after restrictions were already imposed (para 33 Opinion of AG Medina).

It is your right to know the actual identity of recipients to whom your personal data have been or will be disclosed (C-154/21 Österreichische Post)

The General Data Protection Regulation (GDPR) provides individuals (data subjects) with a number of rights. These are listed in Chapter III of the GDPR and include, inter alia, the right to be informed of the processing of personal data (Articles 13 and 14 of the GDPR), right of access (Article 15 of the GDPR), right to rectification (Article 16 of the GDPR), right to erasure (Article 17 of the GDPR) etc. In mid-January 2023, the Court of Justice in Case C-154/21 Österreichische Post answered a question concerning one of those rights, namely the right of access.

As stated in Article 15(1) of the GDPR „the data subject shall have the right to obtain from the controller confirmation as to whether or not personal data concerning him or her are being processed, and, where that is the case, access to the personal data and the following information: […]

(c)  the recipients or categories of recipient to whom the personal data have been or will be disclosed, in particular recipients in third countries or international organisations; […].

The dispute concerned the fact that the data subject requested from the controller the actual identity of the recipients to whom he was disclosing his personal data. However, the controller did not reveal the identity of the recipients, but informed the data subject of the "categories of recipients", indicating that they were „customers, including advertisers trading via mail order and stationary outlets, IT companies, mailing list providers and associations such as charitable organisations, non-governmental organisations (NGOs) or political parties” (para. 20). 

Indeed, doubts arise when applying Article 15(1) of the GDPR in practice. The main question is whether it is necessary to inform about the particular recipients of the data, or would it be enough to notice about general categories of these recipients? Similar doubts arise in the context of Articles 13(1e) and 14(1e) of the GDPR, which oblige the controller, as part of its information obligations performed at the time of data collection, to inform about "the recipients or categories of recipients of the personal data, if any".

In the Court's view, Article 15(1) of the GDPR gives the right to be informed about the specific recipients of personal data and thus to know their actual identity. The Court cites several arguments in this regard:

(1) The data subjects should be guaranteed the right to know and be informed about the processing of their personal data, in particular about the recipients to whom the data are made available. This is emphasised in Recital 63 of the GDPR, which, nota bene, does not refer to the right to information about "categories of recipients of data", but generally to the right to information about "recipients of personal data" (para. 33).

(2) The controller must process personal data in accordance with the principle of transparency, which from the data subject's perspective means that information on how his or her personal data is processed should be easily accessible and comprehensible (para. 35).

(3) „Article 15 of the GDPR lays down a genuine right of access for the data subject, with the result that the data subject must have the option of obtaining either information about the specific recipients to whom the data have been or will be disclosed, where possible, or information about the categories of recipient” (para. 36).

(4) The right of access is often exercised to verify the accuracy of the data or the lawfulness of the processing. In this sense, the right of access frequently determines further actions of the data subject, i.e. the exercise of other rights under the GDPR, e.g. the right to erasure or the right to object to processing. Therefore, the complete and diligent exercise of the right of access is essential to guarantee the effectiveness of the data subject's rights (para. 38).

However, the Court reminded that the right to the protection of personal data is not an absolute right and is subject to limitations. The controller, despite an express request by the data subject, does not have to provide information on the identity of the recipients of the data if "in specific circumstances it is not possible to provide information on specific recipients" (e.g. when it is not possible to identify those recipients - para. 51), and furthermore when the data subject's request is unjustified or excessive in nature [as stated in Article 12(5b) GDPR].

In practice, this means that each request will have to be carefully analysed. It is certainly easier for controllers to provide general information on the categories of recipients rather than precise information on the identity of the recipients. For controllers with large datasets, who share data with many entities and receive many requests of data access, a detailed examination of data flows may be cumbersome. What the judgment lacks, in my view, is a clarification of what the 'special circumstances' that would justify a refusal to disclose the identity of data recipients could consist of. 

It appears from the CJ's reasoning that such a special circumstance may be the lack of knowledge of the future recipients (para. 48). The question is whether such a circumstance could be the difficulty of stating all data recipients due to their large number. In practice, this is a common problem for controllers. Yet, such an interpretation does not seem to be acceptable. It can be said that the Court has spread a protective umbrella over data subjects, obliging controllers to be more accurate, transparent in their processing and to provide reliable and complete information to data subjects. This is a good signal for data subjects, especially consumers of various online services, as the judgment provides clear grounds for demanding detailed information about the processing of personal data. 

Evaluating the unfairness of immediate repayment clauses in loan contracts: the CJEU in Case C-600/21 (QE v Caisse régionale de Crédit mutuel)

Case C-600/21

Facts 

In 2006, QE was granted a loan to purchase immovable property from Caisse régionale de Crédit mutuel de Loire-Atlantique et du Centre Ouest to be repaid over 20 years. The contract established that Caisse was entitled to accelerated and immediate repayment of the outstanding amount in case of a delay in the payment of more than 30 days by QE. According to the agreement, this repayment could be triggered without the need for the bank to present a formal written demand. QE could however ‘request an amendment to the payment schedule’ to avoid non-payment (para 7). In late January 2013, the bank triggered accelerated repayment, without any formal written demand, when QE did not pay the instalments of December 2012 and January 2013. In 2015, QE’s home was repossessed by Caisse régionale and the former brought an action before the court during the enforcement proceedings lamenting irregularities of the report of repossession. In 2019, the Court of Appeals of Versailles, rejecting QE’s claim, denied that the term establishing that the accelerated repayment procedure did not require a formal written demand was unfair in light of the criteria established in CJEU’s ruling Banco Primus. 

Questions 

The referring Court de cassation presented five questions, three of which are most relevant. It asked whether: .

1. Under Articles 3(1) and 4 of Directive 93/13/EEC (UCTD) it is necessary to have a formal written demand even when the contract expressly excluded it 
2. Under Banco Primus the 30 days of delay can be considered serious non-compliance, in light of the term and amount of the loan 
3. The same provisions prohibit the accelerated repayment clause when national law ‘which requires a formal written demand (…) permits the parties to dispense with that step, in which case reasonable notice is required’ (para 18) 

Ruling 

It shall be recalled that Banco Primus (at 66) laid down four non-exhaustive criteria to determine if ‘a term in a contract causes a significant imbalance to the detriment of the consumer’ (para 29 of QE). The national court must consider whether: 

1. The right of the bank to request the totality of the loan depends on whether the non-compliance by the consumer concerns an obligation of essential importance within the contract 

2. The right ‘is provided for in cases in which such non-compliance is sufficiently serious in the light of the term and amount of the loan’ (para 29) 

3. The right, absent a specific contractual provision, derogates from the ordinary law 4. national law establishes ‘adequate and effective means’ which enable the consumer to ‘remedy the effects of the loan being called in’ (para 29). 

Because in Banco Primus the Court also ruled that Article 3(1) and 4 of UCTD must be interpreted as meaning that the unfairness of a term must be assessed considering all the circumstances which surround the conclusion of the contract, the criteria cannot be interpreted as being either cumulative or alternative. 

Coming to the substance of the ruling, the Court answers by observing that – as it is evident from Banco Primus’ second criterion – determining the seriousness of the non-compliance depends on the overall evaluation of the terms and amount of the specific loan at issue. Since a debtor’s failure to comply with her obligation needs to be evaluated in the context of her contract, Articles 3(1) and 4 of the UCTD must be interpreted as meaning that a delay of more than 30 days in the payment ‘may, in principle (…) constitute, in itself, sufficiently serious non-compliance’ (para 41). 

The first and third questions of the French supreme court then concerned whether Articles 3(1) and 4 of the UCTD must be interpreted as preventing the parties from inserting into their contract a term which allows automatic accelerated repayment once a certain period of time is over. The court asked, in essence, whether the term would be subjected and would fail the unfairness test. The CJEU first noted that the unfairness test aims to verify whether there exists a significant imbalance in the parties’ rights and obligations to the detriment of the consumer and that such test applies whenever a term has not been individually negotiated. Further, because, pursuant to Article 4(2), a term would escape the unfairness review exclusively if considered related to the main subject matter of the contract, the question is whether the term under analysis does relate to it or can be rather considered ancillary. The CJEU noted that a term relates to the main subject matter of an agreement whenever it lays down the essential obligations of the contract and thus characterises it. While this evaluation is for the referring court to carry out, the Court also observed that the clause at issue does not appear to fall within that definition. The answer to the questions is therefore that the provisions must be interpreted as precluding the parties from inserting such a term wherever the term a) does not concern the essential obligations of the contract; b) has not been individually negotiated; c) creates an imbalance to the detriment of the consumer. 

With QE v Caisse régionale the CJEU essentially reiterates those which are the fundamental principles related to the so called ‘unfairness test’. Relevantly, it provided guidance as to the interpretation that a national court should give of what constitutes an ‘essential obligation’ in a loan contract.

We read *that* preliminary ruling request so you don't have to

Dear readers, 

as many others, I was mesmerised yesterday when a twitter user shared a preliminary reference (Italian version here - the English translation contains some mistakes so it's not super reliable right now) from the Italian Consiglio di Stato (that is the highest court in administrative matters, competent for final decisions on actions of the Italian Competition and consumer authority) bluntly asking the CJEU to renege on the UCPD definition of "average consumer". 

This is the bit from the reference that almost got viral: 

Should the concept of ‘average consumer’ referred to in Directive 2005/29/EC, understood as a consumer who is reasonably well informed and reasonably observant and circumspect — given that it is vague and flexible — be worded according to the best science and experience and thus refer not only to the classic concept of homo economicus, but also to the findings of the latest theories on bounded rationality, which have shown how people often act by limiting the information they need through decisions which appear ‘irrational’ when compared with those that would be taken by a hypothetically observant and circumspect person; findings that impose a need for greater consumer protection where — as is increasingly the case in modern market dynamics — there is a risk of cognitive influence?

Now, of course one could wonder whether the CJEU would want to venture into theoretical debates on appropriate consumer images. Utrecht colleague Catalina Goanta has suggested that the Court could answer the question in typical CJEU style, by referring to the margin of appreciation for national courts (+ statement that average consumer is not a statistical test) in the Directive's recital 18 and somehow quoting own case-law. 

One could also expect the Court to go around the question, depending on the underlying issue. What was it, then? Based on the preliminary reference, which contains four more questions, it seems that the following has happened: 

- the authority has ordered Compass Banca, a credit institution offering jointly some consumer credit and an unrelated insurance, to grant consumers a 7-day "cooling off period" between signing the two contracts;

- this on the assumption/theory that selling the two products together would make consumers falsely believe that entering the insurance contract is a mandatory requirement for obtaining the desired credit;

- the Authority thus considers the practice as always unfair because, in essence, it appears to exploit a cognitive bias that the Authority has connected to "framing" - whereby the presentation of a product alongside a different one gives the consumer a different impression compared to a situation in which the product would be offered on its own (see question 2);  

- it seems that in this case the Authority has claimed that the bundling as such would be an aggressive practice, which the defendant company must have challenged, claiming that the contracts being signed at the same time should be consider as unproblematic considered that consumers get the express opportunity to withdraw from the insurance contract or confirm their choice during a devoted phone call (see the authority decision - in Italian - here); the defendant company's actions (hinted to at question 4) to limit the potential effects of the practice were not considered sufficient commitments to prevent the issuance of a fine;

- hence the Consiglio di Stato seems unsure whether the prohibition needs to be seen as a move akin to "blacklisting" the bundling practice, without considering whether the concrete practice at hand should be considered aggressive, or whether indeed the specific form of bundling - combining insurance and credit - can be considered as so bad that it would be for the company concerned to show that it does not concretely affect the autonomy of the average consumer (see question 5). Should it be seen as blacklisting, the Authority would have gone beyond the space left to national authorities under the Directive's maximum harmonisation standard. 

Looking at the case, it seems that there could be several ways for the CJEU to answer the question without entering into the specifics of the debate hinted to in the first preliminary question that caught all our attention yesterday - also depending on the submissions by the parties during the preliminary ruling proceedings. 

Concern with the overall "environment" in which consumers make decisions concerning, in particular, distance credit contracts is something that is really not specific to the Italian AGCM - the Dutch financial markets authority for instance has been for years advocating for a responsible "choice environment" in the provision of credit to consumers (see eg here), with a specific focus on framing effects. 

At the same time, should we wish for the CJEU to embrace "bounded rationality" as "best science" and "most recent insights"? Current debates in consumer psychology and social sciences seem to have already gone far beyond the idea of bounded rationality to account not only for cognitive limitations but also for social constraints, habits, motivations... not to mention, as Martijn Hesselink has observed in passing, of reinforcing the idea that when no obvious exploitation of cognitive bias is at stake, "homo oeconomicus" could actually be a viable standard. 

Opening 2023 in style: CJEU C‑395/21, transparency of hourly fees in contracts for legal assistance

Dear readers, 

you may have noticed this already if your social media feed looks anything like mine: the CJEU has issued a decision on the transparency of lawyers' fee under Directive 93/13, which is all but sure to make us talk in the coming times. While the most remarkable element in the decision concerns the application of transparency to a new - and potentially quite ripe for expansion! - set of circumstances, the decision also further testifies to the CJEU's struggle to deal with its own strict approach to the consequences of unfairness under the Directive. 

So, to start with the facts: the case arose between a Lithuanian consumer and their lawyer and concerned several contracts concluded between the two. Each of the contracts included a relatively unsophisticated remuneration clause, according to which the client stood to pay 100 EUR per hour of work by the lawyer. 

After several years and a series of partial payments, it appears that a dispute had arisen between lawyer and client as to the amount of the overall fee - with the former asking for roughly double, in total, of what the client had paid until then. This controversy led to a court case, during which successive Lithuanian courts found the remuneration term unfair for its failure to provide the consumer sufficient clarity on the likely significance of their financial commitment. To make things worse for the lawyer, Lithuanian law (article 6.2284(6) of the Civil Code)  has implemented the transparency requirement "the German way", that is by specifying that terms can be deemed unfair for the sole fact that they are not transparent. The Lithuanian supreme court, thus, turned to the CJEU to know, in particular: a) whether indeed a term only indicating an hourly fee should be considered as lacking transparency; b) whether indeed they should follow the letter of Lithuanian law and consider that the term should be invalidated; c) what the consequences should be in such case, given the fact that the contract would obviously not stand without the unfair term. [other questions need not be addressed here]

As to the first question, which is also the most interesting, the Court [para 41] ]had to acknowledge that identifying and indicating with certainty what the final cost of legal services will be poses serious hurdles and cannot be expected of lawyers (interesting to think: what other professions could this apply to and how?); at the same time, it concludes, there can be several ways for the professional to provide the consumer, before concluding the contract, ways to estimate future expenses or anyway know how they can expect to be able to keep them under their purview. A mere indication of an hourly fee, without information as to the rough expected amount of hours to be invested or as to ways in which the consumer will be kept informed of the hours worked and fees due, does not comply with the transparency requirement. This is, according to the Court, necessary in order to allow the consumer to take a prudent decision. [paras 44-45]

As to the second question, it should surprise no-one that indeed, opting for a higher level of consumer protection is expressly allowed under the Directive and hence – while the Directive itself does not require terms lacking transparency to be declared unfair, it certainly allows for this consequence when so established under national law. [see paras 51-52]. This means that the court did not elaborate, in this case, on how courts in systems that do notautomatically connect lack of transparency and unfairness would have to go and investigate whether the term caused a significant imbalance, contrary to good faith, under the Directive’s article 3. 

As to the third question, finally, the Court reiterated its standpoints articulated in a vast (if complex) body of case-law: an unfair contract must be disapplied; when a contract cannot survive without the unfair term, the concerned court must consider whether the contract’s ocverall invalidity would cause a significant disadvantage for the consumer. Only in that case, the term can be replaced by “a supplementary provision of national law or a provision of national law applied by mutual agreement of the parties to those contracts. ”The provision in question, however, must be “intended to apply specifically to contracts concluded between a seller or supplier and a consumer and […] not so general in scope that its application would be tantamount to allowing the national court, in essence, to set, on the basis of its own estimate, the remuneration due for the services provided” [para 63]. Otherwise, the court says, it is ultimately to be accepted that the contract may be invalidated, even though that may entail some “legal uncertainty” – which I understand to open to an action for unjustified enrichment? In the case at hand, it appears that the national court may be able to identify a suitable provision, which leads me to close with an appeal to our Lithuanian readers: please keep an eye on this and let us know what the final bill was!

Trivia and curiosity aside, it seems to me (but I may be biased as I have argued it elsewhere) that the decision marks a new step towards transparency as determinacy or at least some constraint on uncertainty and arbitrariness. This move is enabled in particular by the Court’s relatively nonchalant use of parameters originally articulated in the specific context of variation clauses (Invitel, RWE, foreign currency loans etc) outside of their original context – see for instance para 37 in the decision, where the court recalls how transparency entails that the contract (in context) must set out transparently “the specific functioning of the mechanism to which the relevant term relate” – which in those old cases were all variation mechanisms, not at hand in this case.

This my first take of course – I must admit to not having checked AG Szpunar’s opinion yet, so there may be more to be said as to the first answer has come about, also in particular with reference to this last point. To be continued!

 

December wrap-up of data protection cases (Google, Österreichische Datenschutzbehörde and Pankki S)

The end of the month (and the end of the year as well) is a good moment for summaries. This time we are taking a closer look at events in the area of data protection law. December was a month with a couple of interesting events, so here is a brief recap. 

Dereferencing allegedly inaccurate content (C-460/20 Google)

The case concerned two executives of a group of investment companies (a board member and a proxy) who asked Google to remove search results linking their names to certain articles criticising the group's investment model. They exercised the so-called right to be forgotten, guaranteed under Article 17(1) of the GDPR, claiming that the information presented contained false claims and defamatory opinions. They also wanted Google to remove their thumbnail images from the search results. Google rejected these requests, arguing that it does not know whether the information contained in the articles is true or not.

In cases involving the erasure of data from a search engine operator's search results, two rights usually collide: the public's right of access to information (especially about persons holding public positions) and the individual's right to protection of his or her personal data, including the right to erasure, protection of his or her good name, image, etc. The same problems were considered in this case, as we wrote about when reporting on the AG's opinion issued in the proceedings. In the ruling of 8th December 2022 the Court held that the person requesting the deletion of data is obliged to show that the information is manifestly inaccurate. "However, in order to avoid imposing on that person an excessive burden which is liable to undermine the practical effect of the right to de-referencing, that person has to provide only evidence that, in the light of the circumstances of the particular case, can reasonably be required of him or her to try to find in order to establish that manifest inaccuracy" (para. 68). It means that such a person cannot be required to present a judicial decision made against the publisher of the website in question, even in the form of a decision given in interim proceedings, since it would be an unreasonable burden imposed on such a person. At the same time "the operator of the search engine concerned cannot be required to investigate the facts and, to that end, to organise an adversarial debate with the content provider seeking to obtain missing information concerning the accuracy of the referenced content" (para. 71). Therefore, if the person who made a request for de-referencing submits relevant and sufficient evidence showing the manifest inaccuracy of the information found in the referenced content, the operator of the search engine is required to accede to that request for de-referencing. But an operator should not grant a request if the inaccurate character of the information is not obvious in the light of the evidence presented (para. 72&73). 

As regards the thumbnails the Court concluded that "a separate weighing-up of competing rights and interests is required depending on whether the case concerns, on the one hand, articles containing photographs which are published on an internet page and which, when placed into their original context, illustrate the information provided in those articles and the opinions expressed in them, or, on the other hand, photographs displayed in the list of results in the form of thumbnails by the operator of a search engine outside the context in which they were published on the original internet page" (para. 101). The Court also stated that the informative value of those images should be taken into account independently of the context of their publication on the website from which they originate, nevertheless taking into account all the content that directly accompanies the display of those images in the search results and that can explain the informative value of those images (para. 108).

The concept of a "copy of personal data" under the Article 15(3) of the GDPR. AG Pitruzzella opinion on Österreichische Datenschutzbehörde case (C‑487/21)

The dispute arose over the interpretation of Article 15(3) of the GDPR, which provides that a data subject, as part of the right of access to one's personal data, may obtain a copy of that data. The complainant requested an exact copy of the data processed by the controller, including full copies of documents containing his personal data. However, the controller provided only some of the requested information as an aggregate that reproduced the stored personal data of the data subject in a table broken down by name, date of birth, street, postal code, and place, and in a statement summarising corporate functions and powers of representation. As part of the proceedings, the national court decided to refer several questions concerning the interpretation of Article 15(3) of the GDPR to the Court. 

On 15 December 2022, the AG delivered an opinion stating that the concept of “copy” referred to in Article 15(3) of the GDPR must be understood as "a faithful reproduction in intelligible form of the personal data requested by the data subject, in material and permanent form, that enables the data subject effectively to exercise his or her right of access to his or her personal data in full knowledge of all his or her personal data that undergo processing – including any further data that might be generated as a result of the processing, if those also undergo processing – in order to be able to verify their accuracy and to enable him or her to satisfy himself or herself as to the fairness and lawfulness of the processing so as to be able, where appropriate, to exercise further rights conferred on him or her by the GDPR". The AG underlined that this provision does not, in principle, entitle the data subject to obtain a full copy of documents containing the personal data, but, at the same time, does not exclude the need to provide that person with extracts from documents, whole documents or extracts from databases if that is necessary to ensure that the personal data undergoing processing are fully intelligible.

Right to know the identity of the persons who had access to one's personal data. AG Campos Sánchez-Bordona on Pankki S case (C-579/21)

The third case also concerned the right of access to personal data, but from a different perspective. Data subject wanted to know who exactly (among the employees of the financial institution) had access to his personal data at the time when he was a customer of that institution and an employee thereof. The controller refused to provide names of the employees arguing that Article 15 of the GDPR does not apply to log data of the institution's data processing system and that the information requested does not relate to personal data of the data subject, but to the personal data of the employees. 

The AG approved the controller's view and stated that Article 15(1) of the GDPR "does not give the data subject the right to know, from among the information available to the controller (where applicable, through records or log data), the identity of the employee or employees who, under the authority and on the instructions of the controller, have consulted his or her personal data". In justifying his opinion, he pointed out that "the identity of individual employees who have handled the processing of customer data is particularly sensitive information from a security point of view, at least in certain economic sectors" (para. 76). Disclosure of employees' data could expose them to attempts by customers of the banking institution to exert pressure and influence. Nevertheless, the AG noted that if a data subject has reasonable doubts about the integrity or impartiality of an individual who has participated on behalf of the controller in the processing of his or her data, this could justify the interest of that customer in knowing the identity of the employee in order to exercise the customer's right to take an action against that employee (para. 78; nb. in the relevant case the data subject made his request, in particular, in order to clarify the reasons for his dismissal).

Pre-contractual information in multi-party settings: mobilizing legitimate interests to restrict consumer protection? (C-179/21 absoluts-bikes)

Today we come back to the judgment in C-179/21, absoluts-bikes, issued by the Court of Justice earlier this year. The decision may have passed under many radars, particularly as it was not preceded by the opinion of the Advocate-General. However, it is worth taking a closer look at it, as the judgment is not just interesting at the theoretical level, but also quite alarming in its implications. 

 

Facts of the case

 

The judgment was triggered by a dispute between two German traders offering consumer goods for sale online: the-trading-company and absoluts-bikes. According to the former, the latter failed to provide sufficient information about the products which it sold with help of Amazon. More specifically, the dispute concerned the listing of a pocket knife of the Swiss manufacturer Victorinox. In that listing, under the subheading labelled “Further technical information”, the consumers could find a link described as “Operating instructions”. The link led to a two-page information sheet, drafted by the knife’s manufacturer and referring, among others, to the ‘Victorinox guarantee’, describing the damage covered and the relevant time period. 

 

The claimant argued that the information provided by the defendant was not sufficiently specific. In particular, absoluts-bikes failed to inform the consumers that the manufacturer’s guarantee did not affect their statutory rights, neither did it describe the territorial scope of the guarantee. This – following the claimant – constituted an infringement of the German act on unfair competition. Since the relevant provisions had their background in the EU law, namely the Consumer Rights and Consumer Sales Directives, the national court decided to stay the proceedings and refer preliminary questions to the Court of Justice.

 

Guarantees in the Consumer Rights Directive

 

The Court began its analysis by turning to Directive 2011/83/EU on consumer rights and I will also limit this blog post to this part, as it is most developed and most consequential.

 

To recall, Article 6(1)(m) of the CRD requires traders to inform the consumers before concluding distance contracts, where applicable, about “the existence and the conditions of after sale customer assistance, after-sales services and commercial guarantees”. The relevant question in the present case was whether the information requirement arises “merely through the existence of that guarantee or whether it is only in certain circumstances that the trader is required to inform the consumer of the existence and conditions of such a guarantee” (para. 24).

 

The Court began its reasoning by recalling the purpose of pre-contractual information duties laid down in the Directive. The relevant provision, it remarked, “seeks to ensure the communication to consumers, before the conclusion of a contract, both of information concerning the contractual terms and the consequences of that conclusion, allowing consumers to decide whether they wish to be contractually bound to a trader, and of information necessary for proper performance of that contract and, in particular, for the exercise of their rights” (para. 26). It follows that the information duties aim to allow consumers to, firstly, make informed decisions about the contracts they wish to enter into and, secondly, effectively exercise their rights after contract conclusion.

 

These two main functions of information duties have previously been remarked upon in the scholarship and testify to the importance of mandatory disclosure beyond the moment of the contract conclusion. Indeed, the paradigm of consumer protection that focuses primarily on allowing consumers to make informed decisions has long been questioned in the light of behavioural findings showing that consumers may suffer from information overload and take account only of certain details communicated to them by the traders. Such details may nonetheless prove rather valuable at a later stage, e.g. when a problem related to the contract arises. This also seems to be the case for the producer’s guarantees, discussed in the present context.

 

Against this background, the attention paid by the Court to the two functions of information duties is be welcomed. Unfortunately, it is not subsequently translated to the remaining part of the judicial reasoning. Instead, the Court appears to focus primarily on the influence of pre-contractual disclosure on consumers’ decisions to enter into contracts, and views it through a particularly narrow lens, namely the lens of a possible deception. This lens, however, is not an obvious one in the context of the Consumer Rights Directive, but rather seems aligned with the perspective of (certain provisions of) the Unfair Commercial Practices Directive.

 

How then, did the Court proceed with its analysis? First, rather typically, it attempted the decode the meaning of Article 6(1)(m) of the CRD by looking at its wording, context and objectives. Referring to Article 2(14) of the CRD it concluded that the concept of a ‘commercial guarantee’, within the meaning of Directive 2011/83/EU, covers both commercial guarantees offered by traders (sellers) and by manufacturers. The trader is thus required, at least in certain circumstances, to provide the consumer with details concerning not only its own commercial guarantee, but also that of the manufacturer. So far, so good.

 

Turning to the objectives of the CRD the Court understandably referred to establishing “a high level of consumer protection”, also pointing to Article 169 TFEU and Article 38 of the Charter of Fundamental Rights (para. 38).  Having said that, however, the Court went on to emphasizing the need of ensuring “the right balance between a high level of consumer protection and the competitiveness of enterprises, while respecting the enterprise’s freedom to conduct a business”, as also set out in the Charter (para. 39). The Charter was thus invoked primarily to set the scene as one in which competing interests must be balanced.

 

Focusing on the interests of traders, the judgment concluded that an unconditional obligation to provide information about commercial guarantees, in all circumstances, “seems to be disproportionate, in particular in the economic context of the functioning of certain undertakings, in particular small undertakings” (para. 40). This seems rather uncontroversial: it would indeed be burdensome for traders to have to continuously collect and update information about any potential guarantees, when they are not the ones providing them, nor pointing at them in their offer. However, according to the Court, the balancing exercise should go even one extra step in favour of the traders. And interestingly, the Court did so by referring to the notion of legitimate consumer interests – and mobilizing it to the consumers’ disadvantage. 

 

To illustrate this point consider the following passage of the judgment:

In those circumstances, the weighing up of a high level of consumer protection and the competitiveness of enterprises, as set out in recital 4 of Directive 2011/83, must lead to the conclusion that the trader is required to provide the consumer with pre-contractual information on the manufacturer’s commercial guarantee only where the legitimate interest of the average consumer, who is reasonably well informed and reasonably observant and circumspect to a high level of protection must prevail in the light of his or her decision whether or not to enter into a contractual relationship with that trader. (para. 41)

As is apparent from the cited passage, the Court seems to forget about the double function of information duties referred to earlier in the judgment. This is additionally harsh for consumers considering the subsequent reasoning, whereby the Court considers a legitimate interest in being informed about producers’ guarantees to exist “where the trader makes the manufacturer’s commercial guarantee a central or decisive element of its offer” (para. 44). The latter is supposedly the case “where the trader expressly draws the consumer’s attention to the existence of a manufacturer’s commercial guarantee for sales or advertising purposes and, accordingly, to improve the competitiveness and attractiveness of its offer in comparison with its competitors’ offers” (para. 45). When this is not the case, the information on the guarantee is not likely to mislead the consumer, and thus their legitimate interest does not seem to exist.

 

In so doing, the Court essentially limits consumer protection not only to the pre-contractual phase and to the contested idea of informed decision-making, but also to the protection from being “misled by unclear, ambiguous or incomplete information”. As mentioned, that seems to rather be the domain of the Unfair Commercial Practices Directive, in which a link with the CRD is indeed established (cf. Article 7(5) UCPD). Moreover, the way in which the “average consumer” notion is constructed in the case at hand appears at least debatable. As a reference point for undertaking the balancing exercise the Court refers to the consumer, “who is reasonably well informed and reasonably observant and circumspect with respect to the different rights which he or she may exercise under a guarantee or to the real identity of the guarantor” (operative part). However, information about those very factors is precisely what the consumer should be equipped with by means of mandatory disclosure. Overall, it can be questioned, in my view, whether the reading adopted by the Court in the case at hand corresponds with the requirement of a “high level” of consumer protection.