One size fits all in collective proceedings? CJEU in C‑450/22

 Dear readers, 

it is with genuine excitement (albeit with some delay) that I type out some thoughts in reaction to a very rich new decision by the CJEU, namely Caixabank and others of 4 July 2024 (C‑450/22).

This case is, shockingly but not incredibly, yet another instalment in the floor clauses saga that we have so often written about. It is especially salient, however, both in that it delivers additional insight in the relationship between the national and European dimensions of the story, and in that it decides important points of law in the still relatively underdeveloped area of collective proceedings. 

Our readers will remember the story: in 2013, the Spanish Tribunal Supremo (TS) declared that commonly used “clausolas suelo”, or “floor terms” which made sure that interest rates in variable interest rate mortgage contract would, counterintuitively, never change below a certain minimum rate – were unfair. The case subsequently reached the CJEU when the same TS tried to limit in time the effects of its judgement - which the CJEU (in its 2016 Gutiérrez Naranjo case) decided it was not the TS's call to make. Years later, the controversy is not over since affected consumers are stil trying to recover unduly paid interests.

What was this specific preliminary ruling application about, though? The TS was invested with questions of law concerning a very large cease-and-desist cum damages lawsuit against, eventually, circa one hundred banks. The dispute followed declarations that floor terms included in many c contracts were in transparent and unfair under the Spanish rules implementing the unfair terms directive. Spanish courts had previously found that this unfair occurred, in particular, when the terms considered were presented in particularly misleading ways - hidden, framed by terms that looked like they reduced their impact, and so forth. The defending banks, however, questioned the rather wholesale application of the transparency test - was it not supposed, according to the UTD and CJEU case law, to be carried out having in mind the specific circumstances of each individual case? How could it be applied, in collective proceedings, to clauses in different contracts, offered to different customers, with different variations of the overall contract drafting?

This question was asked at two levels: first, as to whether in general the idea of collective proceedings for transparency did not clash with the possibility to assess on a case-by-case basis; second, whether in the specific case of this dispute, concerning contracts offered to very different segments of the consumer mortgage markets, it would not be misplaced to apply the same "average consumer" standard to assess all the concerned terms. Ex ante, the first question would have looked quote moot to an informed observer; the second seems to me less obvious, even though the Court seemed to find it relatively easy to answer. We will look at those questions in order. 

In the first question, the court had to consider whether transparency assessment under the UCTD could be carried out "in the context of a collective action brought against a large number of sellers or suppliers operating in the same economic sector, and concerning a very large number of contracts."

In answering this question, the Court acknowledged that in individual proceedings, assessing whether a term meets the transparency requirement requires considerations of the circumastances surrounding the conclusion of the individual contract. This specific feature of the assessment can obviously not be transposed to collective proceedings. The rest of the test, however, can be transposed. In this sense, national courts will have to assess

"in the light of the nature of the goods or services which are the subject matter of the contracts concerned, whether the average consumer, who is reasonably well informed and reasonably observant and circumspect, is in a position, at the time the contact is concluded, to understand the functioning of that term and to evaluate its potentially significant economic consequences. To that end, that court must take into account all the standard contractual and pre-contractual practices followed by each seller or supplier concerned, including, in particular, the drafting of the term in question and its position in the standard-form contracts used by each seller or supplier, the advertising employed for the types of contract concerned by the collective action, the dissemination of generalised pre-contractual offers aimed at consumers and any other circumstances which the court might consider relevant in order to exercise its power of review with regard to each of the defendants"

The national court, thus, will have to apply the average consumer test to a range of different practices and different actors. This can make the litigation complex, but, according to the Court, does not make collective proceedings non-viable as long as they meet the two requirements set in the directive's article 7(3), namely that they concern similar terms used or recommended by operators or associations of operators in the same sector. A different interpretation would plausibly undermine the whole construction of collective proceedings under the provision. 

So far, so good. The next part of the answer, however, may prove a bit trickier in the future. The second question, the Court said, required essentially to consider whether the average consumer, "who is reasonably well informed and reasonably observant and circumspect" can be used as benchmark to assess the transparency of a term (or similar terms) used in multiple contracts "where those contracts are aimed at specific categories of consumers and that term has been used for a very long period of time during which the degree of awareness of that term was developing." (para 47)

In the case under consideration, the referring court had observed that the concerned contracts had been concluded, over a long period of time, by "consumers who had taken over mortgage loans concluded by real estate developers, consumers coming under social housing finance programmes or public housing access programmes according to certain age brackets, or consumers who had obtained loans under a special scheme on account of their profession" (para 51). 

According to the CJEU, however, it is "exactly the heterogeneity" of the public concerned that makes recourse to the "legal fiction" of the average consumer necessary in order to be able to assess the terms in collective proceedings. (para 52). In contrast, it is possible that different assessments concerning the transparency of a term at the time of concluding the contract could have to be made because of supervening events alerting the general public to the significance of certain terms - here, the floor clauses. National courts can take this into account, to the extent that such a change in perception could be documented on the basis of "concrete and objective evidence" rather than "inferred from the passage of time alone" (para 55).  The judgement recalls that, during oral proceedings, the objective event or matter of common knowledge could consist in the collapse in interest rates, characteristic of the 2000s, which led to the application of the floor clauses and therefore to consumers becoming aware of the economic effects of those clauses, or in the delivery of judgment No 241/2013 of the Tribunal Supremo (Supreme Court) of 9 May 2013, which found that those clauses were not transparent" were suggested as possible relevant moments - it is then for the referring court to ascertain whether such events would have led to a change "over time, in the level of attention and information of the average consumer at the time a mortgage loan agreement was concluded." (para 56). 

The follow-up of this case will be interesting to observe for at least two reasons: on the one hand, the question of what specific developments can be considered to have generated a change, in the degree of attentiveness, alertness or information, relevant to how an average consumer would have understood a certain clause requires a degree of fact-finding that is partially at odds with the abstracting ideal of the average consumer. It also leaves national courts, and potentially lower courts, considerable leeway – especially given the limited reviewability of matters of fact in many jurisdictions. 

 

Second, while instrumental to an overall logical conclusion here – safeguarding the Directive’s explicit indication that collective proceedings should not be confined to entirely homogeneous terms and contracts – the idea that the target consumer doesn’t matter for applying the average consumer test seems to contradict the spirit of the Unfair Commercial Practices directive, which the average consumer notion is ultimately borrowed from. In that context, namely, article 5(2) declares unfair a practice that is likely to affect the economic behaviour of the average consumer or “the average member of the group when a commercial prac-tice is directed to a particular group of consumers” -the so-called “targeted consumer” benchmark.  Why would the referring court not be expected or be able to consider these different targeted consumers? Besides being potentially at odds with the UCPD, this insistence on abstraction seems to contradict the Court’s insistence that national courts can distinguish between what average consumers would understand before a certain event and what they would understand thereafter: if empirics matter in this case, why not with reference to targeted consumers?

Don't know about you, but I will be taking this question with me into my holidays! Hopefully many interesting developments to comment on after the summer break. Stay tuned 

The 

The

Online safety and "vulnerable" consumers: the new OFCOM's draft codes of practice

The English Office of Communications (OFCOM) has recently released its new draft "Children's safety online" codes of practice in line with the Online Safety Act (OSA) the main act providing for online safety in the UK, which became law in October 2023. 

OFCOM is responsible for enforcing the OSA. Its draft codes of conduct are meant to complement it and to suggest platforms (especially, social media) how to shape a safer environment, with a focus on underage consumers. Accordingly, the guidelines encourage platforms to be stricter in setting up adequate procedures for age-checking, to provide users with the due instruments to report harmful content, to remove it when necessary, and to clarify the systems used to monitor and moderate online content, particularly with respect to young people.

Platforms ought to take measures based on their size, the purpose of their services, and the risk of harm to children. Thus, the Online Safety Act adopts a risk-based approach, similar to the European Digital Services Act (Regulation EU, 2022/2065). The purpose is indeed the same: ensuring that online service providers implement procedures that are able to tackle the threats to online safety while safeguarding users’ privacy rights and freedom of expression. The two acts therefore cover issues such as content moderation, and other generative AI outputs, such as deep fakes. They both show the increasing attention placed by lawmakers on new forms of digital vulnerability, and how to address them.

OFCOM’s choice to enact codes of conduct is in line with the European approach, too; in fact, the EU lawmaker has also emphasized the relevance of codes of conduct and soft laws in shaping a safer digital environment. The draft codes of conduct provide for transparency, placing on platforms the duty to make available to the public their risk-assessment findings, and providing systems to easily report illegal content. 

And the Agency has gone even further. Indeed, it has declared that it could even impose a ban on people under the age of 18 to access platforms that fail to comply with its guidelines. 

However, some questions arise from reading the new OFCOM document. Will the procedures for ascertaining the age of users lead to the collection of an excessive amount of personal data, violating the data minimization principle under the GDPR? Are OFCOM’s codes too restrictive if compared to the DSA, forcing platforms to adopt a “double standard” between users based in the UK, and those that are based in the rest of Europe? Is the Online Safety Act “technologically neutral” enough when differentiating platforms’ obligations on the basis of the content type or the most comprehensive approach adopted by the DSA, based on equal risk mitigation for all the illegal content, is to be preferred?

Despite these concerns, which undoubtedly will be further examined by many scholars and privacy advocates in the coming months, the guidelines seem promising for improving the online safety of English users, especially children. The true test will be their implementation and enforcement.

Transparency about online payments even if they are conditional - CJEU in Conny (C-400/22)

Last week, on May 30, the CJEU gave its judgment in the Conny case (C-400/22) elaborating on the requirement from Article 8 of the Consumer Rights Directive to clearly label an online obligation to pay on a website on a relevant button with the words 'order with obligation to pay' (or an equivalent of this).

Photo by Alice Pasqual on Unsplash

The facts of this case are interesting as it was a trader that tried to argue that the lack of clear wording on a website about an order with an obligation to pay should lead to the voidness of the concluded contract. The contract in case was a lease contract, concluded between a landlord and a tenant. Pursuant to German law, this lease contract had a ceiling on the rent that consumers had to pay and if this ceiling was exceeded, consumers could claim reimbursement of overpayments. Conny - a debt collection company - offered to collect the rent overpayments as an assignee of consumers rights. The contract between Conny and consumers was concluded online, via its website. Consumers had to approve T&Cs and click on a button to place the order, which button was not labelled with the required wording. The reason given for this was that the payment was conditional on Conny successfully securing the debt collection. Only at that time consumer would have had to pay a third of the annual rent saved, pursuant to T&Cs. The landlord used the lack of the proper labelling on Conny's website as an argument that the assignment of consumer rights was void and, that therefore, Conny could not have been successful in claiming repayment of rent from the landlord. 

Order with an obligation to pay - whether payment is conditional or unconditional

The CJEU clarifies, as expected, that the trader's obligation to transparently inform consumers concluding a contract through its website about an obligation to pay, just before a consumer binds themselves to this payment, does not change if the payment is dependent on satisfying a subsequent condition (para 56). This allows the consumer to explicitly acknowledge his consent to be bound by an online order with an obligation to pay (paras 43, 50). The CJEU points to the lack of distinction in the CRD between conditional and unconditional payments, as well as the duty to inform placed on traders when an order 'implies' an obligation to pay (paras 46-47). A different interpretation would have led to traders being able to explicitly inform consumers about their obligation to pay not at the ordering process, when consumers may still avoid the order and the subsequent payment obligation, but only at a time when the payment becomes due (para 52). Traders could then circumvent their duty to inform by placing in their T&Cs an objective condition, fulfilment of which would be required to lead to a payment obligation (para 53).

Sanction of voidability

An important clarification follows in paras 54-55 of the judgment. The CJEU emphasises the CRD's wording, which only states that a consumer is not bound by the contract in case the above-mentioned trader's duty has been breached. This does not need to indicate that a contract is void, but rather that a consumer has an opportunity to avoid it. This would make a significant difference in cases such as the one referred to the CJEU, when it is a trader who is trying to use an infringement of consumer protection rules as a 'weapon' against, ultimately, a consumer.

Delays in luggage loading a possible extraordinary circumstance - CJEU in Touristic Aviation Services (C-405/23)

On May 16, the CJEU issued a new judgment on air passenger rights when there is a long flight delay and an airline claims extraordinary circumstances, in the case Touristic Aviation Services (C-405/23).

In a given case, the flight was delayed by 3hrs and 49 min between Germany and Greece. The delay was a result of a perfect storm of various contributing circumstances: shortages of staff in both boarding the previous flight on this route as well as in loading the baggage on the plane, but also weather conditions worsening after the plane was ready for departure. At a glance, we could then say that at least some of these circumstances (weather) could qualify as extraordinary circumstances. The main issue in this case was whether the shortage of staff provided by the operator of the airport, rather than the airline, to load the luggage on the plane, could amount to an extraordinary circumstance. If yes, this would likely lead to a delay for which the airline was  not responsible, i.e.,  not exceeding 3 hours (not long enough for compensation under Regulation 261/2004). 

The CJEU's answer is not straightforward, unfortunately. There are two conditions that need to be met: the event not falling within the normal exercise of the airlines' activity and it remaining outside the airlines actual control (para 21). It refers to its previous case law on defects in refuelling systems at the airport as amounting to an extraordinary circumstance if the defect "is the result of a general failure", in that case in the refuelling system managed by the airport (para 23 - reference to case C-308/21, SATA International - Azores Airlines). The CJEU then advises the national court to check whether the shortage of staff for the baggage loading could amount to a general failure of baggage loading operations (para 24). What is missing here is an advice as to more precise parameters that would allow to lead to the demarcation of a general failure. Regarding the second requirement, whether the airline had control over the baggage loading operations could depend, per CJEU, on whether the airline could "exercise effective control over the operator of that airport" (para 27). Could this requirement potentially create a distinction between bigger and smaller airlines, as well as airlines who have their hubs at a given airport? Finally, the national court needs to examine whether the airline could have avoided this delay by taking all reasonable measures, which can e.g. mean using services of another baggage loading service provider (para 29). This again may depend on airlines' resources, leading to a further distinction between various airlines in avoiding having to pay compensation under Regulation 261/2004.

Overall, this judgment does not introduce more legal clarity by stating that a shortage of staff in luggage loading operations could constitute an extraordinary circumstance, but not being very directive on when this could occur.

New action by BEUC: Tamig Temu

We all like a good deal! However, those of us who know (a bit more) about consumer rights and consumer law are aware that cheap goods and services often come at a high price, by infringing our consumer rights.

TEMU, the online marketplace that has gained popularity in the EU, has recently came under the spotlight. This month, BEUC, The European Consumer Organisation, has taken a significant step by initiating an enforcement campaign against TEMU, named 'Taming Temu'. The campaign is a response to TEMU's violation of its consumer protection obligations under the Digital Services Act. The identified breaches include:

•   failing to provide sufficient traceability of the traders that sell on its platform and thereby to ensure that the products sold to EU consumers conform to EU law.
•   using manipulative practices such as dark patterns to get consumers, for example, to spend more than they might originally want to, or to complicate the process of closing down their account.
•   failing to provide transparency about how it recommends products to consumers.

BEUC filed a complaint with the European Commission, while 17 of BEUC’s members filed the same complaint with their competent national authorities. For a more efficient and effective enforcement action, BEUC asks the Digital Services Coordinators of each country (national authorities responsible for enforcing the EU’s Digital Services Act) to transfer the complaints to the Irish authority, TEMU’s country of registration. It would then be up to the Irish authority to take swift action to prevent further consumer harm.

Given the fast growth in the number of TEMU users, it is possible that the platform would pass the threshold of 45 million users per month, which would then classify it as a ‘very large online platform’ and grant the Commission competence to enforce the Digital Services Act.

Given that consumer law enforcement, especially against large platforms, was less effective in the past (see for instance our reports here and here), a concerted EU action is a welcome solution.

Blog team changes

Dear Readers, we wanted to update you on a few changes that have taken place in our merry blog team. After a few years of productive collaboration with Agnieszka Jabłonowska (Leiden University), she has decided earlier this year to give up this side project. It was a pleasure working with Agnieszka and we keep hope she may return to blog writing in the future. Since then, we have expanded our authors' team, thus you may shortly expect to see posts by new authors. Warm welcome to our three new contributors (in order of joining us): Marina Federico (Ca' Foscari University of Venice), Jie Ouyang (University of Groningen) and Dominik Dworniczak (EUI). 

Reversed burden of proof under strict conditions to exercise early repayment rights of consumer credit- the CJEU in C-326/22

Case C-326/22 Z  arose regarding Article 16(1) of Directive 2008/48/EC on consumer credit and the right to early loan repayment, which provides consumers with a right to repay their loan early and to the costs of the loan reduced accordingly.

The facts

Six consumers assigned to Z their claims regarding 15 consumer credit contracts that were repaid early, who intended to claim the total cost of credit reduction. However, under the applicable Polish law, Z needed to prove the claim's existence, which could have been only done by reference to the contract, but the consumers did not have the contract anymore. Consequently, Z requested access to the contracts, which the bank refused, saying there was no legal duty to do so. However, the referring national court rightly noted that the absence of such duty of the bank would lead to a contrary result to Article 16(1), which may, as in this case, effectively make the right to cost reduction unenforceable.

The legal question

The referring Polish court asked the CJEU whether Article 16(1), read in the light of the principle of effectiveness of EU law, must be interpreted as meaning that a consumer may request, from the creditor, a copy of that agreement and information concerning the repayment of the credit not featured in the contract when this is necessary to verify the calculation of the sum owed by the creditor connected to the early loan repayment right and for allowing that consumer to bring an action for the recovery of that amount.

The ruling

The answer was not apparent from the wording of Art. 16 (1). However, the CJEU noted that in interpreting the provisions of EU law, it is necessary to consider not only the wording but also the context of the provision and the objectives it aims to pursue, which is, achieving a high level of consumer protection.

Crucial is paragraph 26:

In that regard, it is relevant that Article 16(1) of Directive 2008/48 implies that the consumer is entitled to a reduction in the total cost of the credit, such reduction consisting of the interest and the costs for the remaining duration of the agreement, without needing to adduce evidence other than that of the early repayment of the credit. It follows that it is for the creditor to provide the information necessary to establish the amount of the reduction in the total cost of the credit to which the consumer is entitled.

If the information is unavailable in the contract, the creditor must provide that information to the consumer where it is necessary to calculate the amount owed by the creditor (para 27).

The CJEU ruled that Article 16(1) must be interpreted as meaning that a consumer may request, from the creditor, a copy of that agreement and all information concerning the repayment of the credit not featured in the agreement itself which is necessary for verifying the calculation of the sum owed by the creditor under the reduction in the total cost of the credit due to its early repayment and for allowing the consumer to bring a possible action for the recovery of that amount.

The approach was justified by the banks' duty to provide information to consumers via Article 10, which ensures a high level of consumer protection. This duty includes information to be incorporated into the contract and a copy of the agreement provided to the consumer. A credit agreement must be drawn up on a durable medium that should enable the consumer to easily access and store the information provided.

Our analysis 

This rare interpretation of Article 16 follows the only case so far (Lexitor). A seemingly very technical judgment on access to documents turns into a decision that establishes an important legal principle. The court effectively reversed the burden of proof in exercising the rights connected to early loan repayment. Depending on how we define the burden of proof, this might not technically be a reversal of the burden. However, it is based on the same idea of easing the burden of proof. This is based on an understanding that the consumer cannot access the documents and that this access is an essential condition for realising the consumer's rights. The judgment is a significant development, given that the burden of proof was only previously reversed in connection to Article 5 -providing evidence that the creditor complied with pre-contractual information duties (CA Consumer Finance). However, the reversal of the burden of proof here has important limits. It only applies when:

1)    the consumer does not have a copy of the credit agreement or if the agreement does not contain the relevant information, and

2)  the information is necessary for verifying the calculation of the sum owed by the creditor to reduce the total cost of credit due to its early repayment, and

3)   the information is necessary to allow the consumer to take action to recover the sum owed by the creditor. 

The question is whether the judgement will have a broader effect of reversing the burden of proof regarding Article 10 more generally. This seems to be the direction, but it is yet to be confirmed by further CJEU judgments. 

Financial services concluded at a distance in digital age - the new Directive 2023/2673

In 2023, European lawmakers were busy improving the protection of consumers in financial services. In addition to the new Directive 2023/2225 on consumer credit (on which we reported here), the regime distance marketing of financial service was also revamped. The new Directive 2023/2673 on financial services contracts concluded at a distance repeals the current Directive 2002/65/EC. The Directive entered into force on 18 December 2023, Member States are obliged to implement it by 19 December 2025 and apply the rules from 19 June 2026.

The 2023 Directive was driven by the need to ensure consumer confidence and trust in digital transactions. This need was underscored by the rapid development of digitalisation and the evolving means of distance communication, which have revolutionised how we use technology since the creation of the 2002 Directive. Digitalisation has also changed how products are marketed to consumers, with new products emerging in the online environment.

The other rationale was the progressive introduction of other sector-specific legislation that significantly overlapped the current, 2002 Directive, creating legal uncertainty.

The 2023 Directive clarifies its nature as a horizontal, general instrument that remains a safety net for matters not covered by other EU instruments or subject to exemptions. The Directive is a maximum harmonisation instrument and applies only to contracts concluded at a distance. Importantly, it amends Directive 2011/83/EU, which currently does not apply to financial services.

The Directive follows the current information approach to consumer production, detailing pre-contractual information duties and making the associated right of withdrawal more effective by mandating an easy-to-find 'withdrawal function' on the service provider online interface that should be continuously available during the withdrawal period. In laying down the rules on adequate explanations, the 2023 Directive adds the right to request human intervention when the trader uses online tools such as chatbots. 

Finally, the 2023 Directive recognises the realities of the online world and the difficulties in making informed decisions, thus protecting consumers against dark patterns or deceptive design patterns.

The new directive is a welcomed development of EU consumer law. It is based on the realities of the digital world and aims to tackle the most pressing problems for consumer decision-making.

Validity of limitation periods for claiming mortgage costs back from banks - CJEU in Caixabank (C-484/21) and Banco Santander (C-561/21)

While many consumer lawyers are currently busy analysing the details of the opinion of AG Emiliou in Compass Banca case (C-646/22) (and we will add our own analysis of it in the coming days, too), on the same day (April 25) two judgments were issued by the CJEU clarifying the consequences of terms' unfairness on restitution of costs paid by consumers. Both in Caixabank (Délai de prescription) (C-484/21) and Banco Santander (Départ du délai de prescription) (C-561/21) Spanish courts posed questions concerning validity of various limitation periods for consumers raising a restitution claim for 'the costs clause'. The costs clause included in mortgage loan contracts obliged consumers to pay all the costs relating to the mortgage's creation. This may encompass notary, registry and agency fees.

The CJEU refers back to the Gutiérrez Naranjo and Others case (C-154/15 - with our comment here) to reaffirm the obligation of national courts to facilitate restitution of amounts consumers paid, which were imposed by an unfair contract term (e.g. paras 16-17 in C-484/21). Could national limitation periods stand in the way of such consumer claims? Previously, the CJEU already confirmed that limitation periods could be set in national laws as applicable to restitution claims brought by consumers in enforcing their rights from UCTD, however, these cannot make it in practice impossible or excessively difficult to exercise such rights (para 27 in C-484/21).

In short, regarding limitation periods for restitution claims, which are raised by consumers following a declaration of unfairness of terms setting the payment obligation, CJEU decided as follows:

1. They cannot start running from the date of the payment, irrespective of whether consumers were or could reasonably have been aware of the unfairness of terms at the time of the payment, or before the term was found to be void (paras 30, 32, 34-35 in C-484/21).
2. They cannot start running from the date on which the national supreme court delivered a judgment in a separate, earlier case, declaring a corresponding term unfair (C-484/21 and C-561/21). To pay attention to: The CJEU highlights here the lack of obligation for service providers to inform their consumers that terms in their contracts are equivalent in scope to terms in other contracts that have been found unfair (para 41 in C-484/21). Further, it mentions that average consumers cannot be 'required not only to keep himself or herself regularly informed, on his or her own initiative, of decisions of the national supreme court relating to standard terms contained in contracts of a similar nature to those which or she has concluded with sellers or suppliers, but also to determine, on the basis of a judgment of a national supreme court, whether a term included in a particular contract is unfair' (para 45 in C-484/21).
3. They cannot start running on the date of the CJEU's judgments, which confirmed, in principle, that limitation periods for actions for restitutions are compatible with EU law (provided they are equivalent and effective) (C-561/21). (for similar as above reasons + the fact that CJEU often leaves determination of unfairness to national courts - para 58 in C-561/21)
4. They can start running on the date on which the decision about unfairness of a term in a given case becomes final, without prejudice to the trader's right to prove that consumers were or could have been reasonably aware of the unfairness before the decision was made (paras 35-38 in C-561/21).

Unintentionally becoming an apparent producer - AG Campos Sánchez-Bordona's opinion in Ford Italia (C-157/23)

Photo by Benjamin Scheidl on Unsplash

AG Campos Sánchez-Bordona elaborated today on the notion of a producer under the Product Liability Directive (Directive 85/374) in the case Ford Italia (C-157/23). A consumer in this case purchased a Ford Mondeo car from Stracciari, Ford's dealer in Italy. The car itself was manufactured by Ford WAG, a German company, which used another company, belonging to the same company group, - Ford Italia - to distribute it to Stracciari. After the consumer was involved in a traffic accident, during which the airbag did not work, they brought a claim against the seller - Stracciari, and Ford Italia. The latter claimed their 'supplier' status and identified Ford WAG as the producer. Still, Italian courts allocated producer's liability to Ford Italia in the cases before them in both instances. 

As AG Campos Sánchez-Bordona also agrees here with, using Art. 3(1) PLD that is considering Ford Italia as an 'apparent producer' instead of Art. 3(3) PLD, which only allows to hold the supplier liable if they did not timely identify the producer, is what the CJEU should consider here. The referred question asks then whether if the supplier has not physically placed its own name, trader mark or other distinguishing feature on the consumer product, they could be held liable as a producer on the ground that they share in whole or in part the same name, trader mark or other distinguishing feature as the producer. How broad then is the concept of an 'apparent producer'?

AG Campos Sánchez-Bordona advises the CJEU to consider that in the given case not only the producer and the supplier share the same name (which allows the supplier, Ford Italia, to raise consumer confidence, taking advantage of the reputation of Ford brand - para 39) , but that they also belong to the same group of companies, operating under the same emblem (para 50), and that the car bears the trade mark the characterises both companies. As such, the consumer could have considered Ford Italia as presenting itself as a producer, which could lead to their liability under the PLD. '(...) the consumer cannot be expected to discover, by his or her own means, who the (actual) producer is, where that producer is distinct from the supplier which presents itself with those characteristics." (para 41). This according to AG Campos Sánchez-Bordona could lead to to joint and several liability of actual producer and apparent producer (para 48).

The AG Campos Sánchez-Bordona draws parallels to the recent Fennia v Philips case (C-264/21 - with our comment), however, in that case both Saeco and Phillips names were placed on the consumer product, which made the reference to the 'apparent producer' easier. The second invoked case, O'Byrne (C-127/04), made it easier to consider as a producer another company, a distributor, belonging to the same company group. However, there, the distinction with the current case was that in O'Byrne the actual producer could no longer have been sued, due to the time limits having passed. 

As AG Campos Sánchez-Bordona mentions in para 31 the given case requires careful weighing of the consumer protection interests, which the broader interpretation of the notion provides, against interests of traders involved in the production and supply chain. 

I am not fully convinced whether in the current case the latter should not have prevailed. Considering that the supplier, Ford Italia, promptly identified the actual producer, it seems that the consumer interests could have been protected by national procedural laws allowing either adding to the procedure another party (Ford WAG) or raising a new claim against them. However, holding the supplier liable as an apparent producer under the circumstances of this case may expose suppliers to claims they have not accounted for either by insurance or in their B2B agreements within the production and supply chain. Let's see what the CJEU decides in this case.