Happy New Year's!

I wanted to wish you all Happy New Year's. One of my resolutions is to continue with this blog and try to make the posts appear more regularly.

EUCFR, child-friendly justice and consumer law

Today, it is exactly 10 years ago that the European Parliament, the Council and the European Commission solemnly proclaimed the EU Charter of Fundamental Rights (EUCFR). Commissioner Viviane Reding commemorated this fact in a speech she gave this morning at the 'Fundamental Rights Conference 2010: Ensuring Justice and Protection for all Children'.

Reding emphasised the importance of the Charter for ensuring the compliance of EU legislation with the rights laid down in the now-binding document:

'This means in particular that rigorous and systematic assessment of the fundamental rights impact of new legislative proposals is crucial. For this purpose, the Commission has developed a special methodology, which is reinforced now by a "fundamental rights check list", which the Commission services will use to identify and evaluate the effect of policy options on fundamental rights. This analysis can therefore better inform policy makers throughout the EU legislative process of the way fundamental rights can be affected and lead to a stronger legal grounding of the final act.'

From the consumer law perspective, it may be expected that future initiatives in this field, such as an optional instrument for European Contract Law, will likewise be assessed in light of this 'check list'.

Furthermore, Reding considered:

'The Charter explicitly recognises children as citizens with their own rights. This recognition is essential towards seeing children not just as in need of protection but also as independent and autonomous holders of rights. The Lisbon Treaty is a remarkable step forward in this respect.'

In light of the broader European contract law debate, the protection of children's rights and autonomy seems to be of special importance in the digital context (on which an earlier post appeared on this blog). Many consumers of digital content products, such as ringtones, music and movies, are minors. This raises the question to what extent an optional instrument should explicitly regulate their interests.

From another point of view, finally, it may be asked to what extent European consumer law should take into account children's rights when assessing the validity of contracts: should it consider to be invalid contracts concerning the sale of products that were made by children (in developing countries)? A difficult topic, which one of our PhD researchers in Amsterdam is analysing (a working paper she prepared on this subject may be found here), and fundamentally engages the legal possibilities for (or law's limits to) fully 'ensuring child-friendly justice' within as well as across the European borders.

ECJ instructs businesses what NOT to publish on their website to keep operations domestic only - case C-585/08 Pammer & C-144/09 Hotel Alpenhof

7 December 2010: ECJ joined cases C-585/08 Pammer and C-144/09 Hotel Alpenhof

I've previously discussed the AG's opinion in these cases: "Does having a website mean you operate worldwide?". You, dear reader, may find the summary of the facts of these cases there as well as an introduction to the legal questions discussed.

...

Have you read the previous post? No? I'll give you some more time.

...

Now that we are ready to talk business: ECJ repeated most of the arguments of the AG in this case. However, certain detailed instructions to the national courts had been formulated differently so let's start with that.

The ECJ was asked:

"(...) on the basis of what criteria a trader whose activity is presented on its website or on that of an intermediary can be considered to be 'directing' its activity to the Member State of the consumer's doimicile (...)" (Par. 47)

The ECJ mentioned that:

"(...) development of internet communication, (...) makes it more difficult to determine the place where the steps necessary for the conclusion of the contract are taken and at the same time increases the vulnerability of consumers with regard to trader's offeres." (Par. 62)

On one hand the courts have to look at the intention of the traders to turn to citizens of a Member State in order to trade with them. That intention may be implicit in certain methods of advertising. (Par. 63-65) On the other hand, the ECJ recognizes that this intention is not always present in case of advertising online, since it automaticaly has a worldwide reach, regardless of the intention of the trader to target consumers outside the country it is established in. (Par. 68)

The national court needs to establish whether, before any contract with that consumer was concluded, there was evidence demonstrating that the trader was envisaging doing business with consumers domiciled in other Member States. (Par.76)

What is not indicative of the trader's intention to direct trade to other MS than the MS where it is established: (Par. 77, 79, 94)

• email address mentioned on the website
• geographical address mentioned on the website
• telephone number (without an international code) mentioned on the website
• whether the website is passive or interactive
• the sole fact that the website is accessible in another Member State
• use of language/currency which is also used in the MS in which trader is established

What is indicative of the trader's intention: (Par. 81, 83, 84)

• clear offer directed to other Member States designated by name
• disbursement of expenditure on an internet referencing service to the operator of a search engine in order to facilitate access to the trader's site by consumers domiciled in various MS
• international nature of the activity at issue offered by the website, such as certain tourist activities
• telephone numbers with the interational code
• use of top-level domain name other than that of the MS in which the trader is established
• use of neutral top-level domain names
• description of itineraries from one or more other Member States to the place where the service is provided
• mention of international clientele, e.g. by presentation of accounts written by such consumers
• websites permits to use different languages/currencies

The ECJ confirmed also the belief of the AG in the Pammer case that a boat excursion that had been subject matter of the contract in this case was a package travel contract. (Par. 45-46)

Behavioural Economics discussed by European Commission

Just a quick note to let you readers know that video clips and presentations of the conference in Brussels (Behavioural Economics, so What: Should Policy-Makers Care?, mentioned before on this blog) are now available online.

You may access them here.

When comparative advertising is not misleading to consumers: ECJ case C-159/09 Lidl v Vierzon

18 November 2010: ECJ case C-159/09 Lidl v Vierzon

Dear reader, if you had previously on this blog read my summary of the Advocate General's opinion in the ECJ case Lidl v Vierzon then you should be warned that the European Court of Justice followed closely on what the AG had said and you should not expect to be surprised by this judgment. Still, certain interesting (and VERY CLEAR) guidelines had been given as to what is allowed in the world of comparative advertising.

Brief reminder of the facts of the case: Lidl accused Vierzon from publishing a misleading advertisement in a French newspaper. It was misleading, according to Lidl, because it compared prices of certain goods (mostly food products) in a few supermarkets without naming the brands of the goods compared nor taking into account that these goods might have differed as to certain characteristics (as well, as that demand for them might have been different, due to the fact that consumers might have used them in various ways during the cooking process).

First decision of the ECJ in this case was that Article 3a(1) of the Directive 84/405 on misleading advertising (as amended by Directive 97/55) regulating requirements for comparative advertising should apply also to food products. ECJ noted that there is nothing in the wording of the provision that suggest an exclusion of these products from being covered by the protection of the Directive. Also, such a prohibition would lead to a considerable restriction on the scope of comparative advertising. (Par. 35-36) The prices of food products could be thus compared in an advertisement provided that these food products fulfill the requirement of a sufficient degree of interchangeability.

"(...) Article 3a(1)(b) of Directive 84/450 is to be interpreted as meaning that the fact alone that food products differ in terms of the extent to which consumers would like to eat them and the pleasure to be derived from consuming them, according to the conditions and place of production, their ingredients and who produced them, cannot preclude the possibility that the comparison of such products may meet the requirement laid down in that provision that the products compared meet the same needs or are intended for the same purpose, that is to say, that they display a sufficient degree of interchangeability." (Par. 39)

ECJ allows for a comparative advertising of food products provided that such an advertising is not misleading. When would it be misleading?

1. If it were misleading for an average consumer. (Par. 47)
"That court must, first, take into account the perception of an average consumer of the products or services being advertised who is reasonably well informed and reasonably observant and circumspect. As regards an advertisement such as that at issue, it is not disputed that it is addressed not to a specialist public but to end consumers who purchase their basic consumables in a chain of stores."

2. If the misleading character flows not only from the information contained in the advertisement but from all its features. (Par. 48)

3. Omission may render advertising misleading, as well. (Par. 49)
"The Court has also held that an omission may render advertising misleading, in particular where, bearing in mind the consumers to whom it is addressed, the advertising seeks to conceal a fact which, had it been known, would have deterred a significant number of consumers from making a purchase."

4. If advertisement convinces consumers that if by regularly buying their everyday consumer goods from the advertiser rather than from the competitor, they will save money or if it makes them believe that all of the advertiser's products are cheaper than those of his competitor. (Par. 50)

5. If food products compared in the advertisement are objectively different and the differences are capable of significantly affecting the buyer's choice. (Par. 51) E.g. in case products of two different brands are compared and one brand is significantly better-known for the consumers. (Par. 53) The same may be true as to other features of the products compared, e.g. composition, method or place of production. (Par. 54)
"The [consumer] may thus be led to believe that he will in fact obtain an economic advantage because of the competitive nature of the advertiser’s offer and not because of objective differences between the products being compared." (Par. 55)

Finally, the ECJ seems to suggest that the brand names should, after all be mentioned in the advertisement since the consumer should be able to identify the product mentioned in the advertisement when the consumer goes to the supermarket, in order that he can check whether the advertisement was correct. (Par. 62)

Transparent and comparable bank fees

Making banking fees more transparent and comparable for consumers. That's the way forward according to the European Commission when it comes to the promotion of a competitive single European market for banking services. This Monday the European Commission, together with the banking industry and consumer advocates, launched a self-regulatory initiative to achieve these aims.

The self-regulation should address the following problems:
(1) Complex bank fee terminology;
(2) Difficulty in comparing bank fees;
(3) Lack of basic consumer information on bank fees.

For more information, including reports identifying the problems on the internal market for consumer banking services, click here.

National courts need to do some legwork: ECJ case C-137/08 Pénzügyi Lízing

9 November 2010: ECJ case C-137/08 Pénzügyi Lízing

ECJ decided today also on a reference concerning assessment by the national court of its own motion whether a contractual term conferring jurisdiction is unfair in respect of the Directive 93/13/EEC on unfair contract terms.

Opinion of the Advocate General has been previously discussed here.

The facts of the case were as follows: Mr Schneider concluded a loan with Pénzügyi Lízing to finance the purchase of a car. When Mr Schneider stopped paying the loan back, Pénzügyi Lízing terminated the contract and brought a case before court demanding repayment of a debt with interest. Pénzügyi Lízing brought an application for a payment order before the court to which jurisdiction has been conferred in the loan agreement and not the court corresponding to the place where Mr Schneider lived. The payment order was issued without the parties having to enter into proceedings. Upon appeal by Mr Schneider (who did not mention any ground for that appeal), when the parties entered into proceedings, the court realized that Mr Schneider did not live within its territorial jurisdiction and questionned the fairness of the contractual term conferring jurisdiction.

Proceedings in this case has been stayed until Pannon case (C-243/08) was decided. In Pannon case ECJ answered some of the questions of the Hungarian court. However, upon Pannon case was decided, the Hungarian court referred a few other questions to the ECJ, asking for more explanations.

One of these additional questions asked was, whether the jurisdiction of the ECJ extends to the interpretation of the concept of 'unfair term' and to the criteria which the national court may or must apply when examining a contractual term in the light of the provisions of the Directive.

ECJ, in his answer, reminded that:
"Article 3 of the Directive merely defines in a general way the factors that render unfair a contractual term that has not been individually negotiated, that the Annex to which Article 3(3) of the Directive refers contains only an indicative and non-exhaustive list of terms which may be regarded as unfair and that Article 4 of the Directive provides that the unfairness of a contractual term is to be assessed taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of it." (Par. 42)

ECJ stated therefore, that while it has jurisdiction to the interpretation of the concept of 'unfair term' and to the criteria which the national court may or must apply when examining a contractual term, it leaves to the national court to determine, in the light of those criteria, whether a particular contractual term is actually unfair in the circumstances of the case.

Further questions referred to the ECJ sought to establish responsibilities of the national court, from the time when it begins to consider whether a contractual term conferring exclusive territorial jurisdiction may be unfair. Whether the national court is obliged to undertake, of its own motion, an investigation with a view to establishing the factual and legal elements necessary to assess whether a term is unfair, where the national procedure rules permit that only if one of the parties so requestes.

In her opinion the Advocate General stated here that there is no general obligation for the national courts to examine the unfairness of the contractual terms of their own motion. She mentioned that the national courts would have to assess unfairness of contractual terms only in case there would be an indication of possible unfairness on the basis of the arguments of the parties or other circumstances. The ECJ does not repeat this argument, however.

ECJ made it clear that the Directive's aim is to protect the consumer as a weaker contractual party, both on account of his weaker bargaining power and his level of knowledge. (Par. 46) It is because of that weaker position of the consumer that Art. 6(1) of the Directive provides that unfair terms are not binding on the consumer. This is a mandatory provision which aims to replace the formal balance which the contract establishes with an effective balance which reestablishes equality between the parties. (Par. 47) That imbalance between consumer and the professional party may be, according to the ECJ, corrected only by positive action unconnected with the actual parties to the contract. (Par. 48) Therefore:

49 Thus, in the exercise of the functions incumbent upon it under the provisions of the Directive, the national court must ascertain whether a contractual term which is the subject of the dispute before it falls within the scope of that Directive. If it does, that court must assess that term, if necessary, of its own motion, in the light of the requirements of consumer protection laid down by that Directive.

50 As regards the first stage of the examination to be carried out by the national court, it appears from Article 1 in conjunction with Article 3 of the Directive that it applies to any term conferring exclusive territorial jurisdiction which was not individually negotiated appearing in a contract concluded between a seller or supplier and a consumer.

51 In order to safeguard the effectiveness of the consumer protection intended by the European Union legislature, the national court must thus, in all cases and whatever the rules of its domestic law, determine whether or not the contested term was individually negotiated between a seller or supplier and a consumer.

After giving these guidelines as to the first stage of the test, the ECJ reminds that as far as the second stage of the test is concerned (assessment of the unfairness) that has been already explained in its verdict from the Oceano case (C-240/98) stating that a term conferring territorial jurisdiction must be regarded as unfair in so far as it causes, contrary to the requirement of good faith, a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer. (Par. 53)

The ECJ concluded here categorically that the national court must investigate of its own motion whether a term conferring exclusive territorial jurisdiction in a contract concluded between a seller or supplier and a consumer, which is the subject of a dispute before it, falls within the scope of the Directive and, if it does, assess of its own motion whether such a term is unfair. (Par. 56)

It is interesting to see that the ECJ ignored prepared by the AG arguments on the 'legal and factual elements necessary' to assessing the unfairness of a contractual term of the court's own motion. It gives the impression that the ECJ wanted to ensure the high level of consumer protection against unfair contract terms despite national courts' worries that had been expressed after publication of ECJ's earlier judgments. Whenever a court receives a copy of the contract in which there is a clause conferring territorial jurisdiction, that national court is obliged to inquire whether that clause had been individually negotiated and if it had not been, then it has to assess its fairness. The national courts have to some legwork here. They are not allowed to wait until the parties point out the jurisdiction clause in the contract or until it is being brought to their attention otherwise. They have to check whether such a clause was added to the contract and what was its status.

Can we add a bonus to the goods we have for sale so as to attract more consumers? ECJ case C-540/08 Mediaprint

9 November 2010: ECJ case C-540/08 Mediaprint

This judgment concerned interpretation of the Directive 2005/29/EC on unfair commercial practices, its maximum harmonisation and the subject of combined offers.

The opinion of the Advocate General in this case has been discussed in an earlier post.

As a short reminder, the facts of the case were as follows: The dispute was between two Austrian newspaper publishers. One of them organised the election of the 'footballer of the year' and invited the public to join in that competition, by internet or by means of a voting slip appearing in the newspaper. Participation in that competition carried the prize of dinner with the footballer chosen.

Austrian law lays down a general prohibition on sales with bonuses, which is aimed at ensuring both the protection of consumers and the maintenance of effective competition. Pursuant to that provision it was an unfair commercial practice.

The questions were:
1. Whether the general prohibition in Austrian law is compatible with the regulation of the Directive on unfair commercial practices?

ECJ upheld the view of the AG in this case. Austrian law is incompatible with the Directive enforcing a general prohibition on sales with bonuses.

There is no doubt that: "Promotional campaigns, such as those at issue in the main proceedings, which enable consumers to take part free of charge in a lottery subject to their purchasing a certain quantity of goods or services, clearly form part of an operator’s commercial strategy and relate directly to the promotion thereof and its sales development. It follows that they constitute commercial practices within the meaning of Article 2(d) of the Directive and, consequently, come within its scope (Case C-304/08 Plus Warenhandelsgesellschaft [2010] ECR I-0000, paragraph 37 and case-law cited)." (Par. 18)

The Austrian government argued that national provisions at issue did not fall withing the scope of the Directive in that they were established to maintain pluralism of the press in Austria. However, it was proven during the proceedings that aside that purpose these provisions were to give additional protection to consumers, as well. (Par. 23) Since the Directive introduces full harmonisation measures, Member States are not free to offer more protection to the consumers in their national laws. (Par. 30) This led the ECJ to concluding:

"(...) it is undisputed that practices consisting in offering consumers bonuses associated with the purchase of products or services do not appear in Annex I to the Directive. Therefore, they cannot be prohibited in all circumstances, but can be prohibited only following a specific assessment allowing the unfairness of those practices to be established." (Par. 35)

As far as the second question was concerned:
2. "whether sales with bonuses must be regarded as unfair commercial practices within the meaning of Article 5(2) of the Directive, merely on the ground that the possibility of gain represents, for at least part of the public concerned, the deciding factor which causes it to buy the main product."?

The ECJ reminded that the Directive contains a test for the unfair commercial practices and all elements of this test have to be fulfilled in order for a commercial practice to be prohibited as unfair.

"The fact that, for at least part of the public concerned, the possibility of participating in a competition represents the factor which determines the purchase of a newspaper constitutes one of the factors which the national court may take into account when making such an assessment.

That fact may lead the national court to consider that the commercial practice in question materially distorts or is likely materially to distort the economic behaviour of the consumer, within the meaning of Article 5(2)(b) of the Directive.

However, that fact does not in any way lead in itself to the conclusion that a sale with a bonus constitutes an unfair commercial practice within the meaning of the Directive. For that purpose, it must also be verified whether the practice in question is contrary to the requirements of professional diligence within the meaning of Article 5(2)(a) of the Directive." (Par. 44-46)

ECJ concluded then by saying that possibility of participating in a prize competition, linked to the purchase of a newspaper, does not constitute an unfair commercial practice simply on the ground that, for at least some of the consumers concerned, that possibility of participating in a competition represents the factor which determines them to buy that newspaper.

Consumers and the big bad wolf (aka internet)

European Comission has recently been paying more and more attention to the fact that online contract law is not sufficiently regulated (that might have something to do with the European Parliament calling for more actions to increase e-confidence of consumers, read more: here). Most of the directives and regulations currently in force have been introduced back in 80's and 90' when internet commerce was just beginning to be developed and no one dreamed of the necessity to protect consumers who would start using this tool daily as one of the common means to conclude contracts. Moreover, cybercrime, like stealing identities, or marketing based on online preferences did not seem very profitable nor likely then. As a result, the laws protecting consumers online badly need an update.

A report on digital content services and how they are regulated in various Member States have been commissioned by the EU and is being prepared by the Centre for the Study of European Contract Law (CSECL) and the Institute for Information Law (IVIR) of the University of Amsterdam as we speak. There is a hope that after the national reports have been analyzed, the EU will see a need for an instrument and would introduce European level regulation of that sector.

A public consultation has also just started on the Commission's comprehensive approach on personal data protection in the EU. One of the issues raised is whether consumers/individuals have their personal data sufficiently protected online (e.g. the right to have their personal data permanently deleted after having them first submitted on a social networking site, the right not to have their personal data gathered while they are browsing online world by e.g. use of cookies).

If you want to take part in this public consultation (citizens, organisations, public authorities are encouraged to do so) you may contribute to it here up to 15 January 2011.

Also: BBC published an article 'EU aims to boost web privacy safeguards' by Ben Shore on Thursday, 4 Nov 2010 on the EC public consultation.

Conference: The Role of Legal Translation in Legal Harmonisation

On 21 January 2011 the Centre for the Study of European Contract Law and the Amsterdam Circle for Law & Language (ACLL) organise an international interdisciplinary one-day conference on the Role of Legal Translation in Legal Harmonisation.

I'm mentioning this interesting conference on this blog because many times within European Consumer Law we struggle with consumers being victims not only of different regulations but also of different understanding of the same (or at least 'the same-sounding') regulations.

The programme of this conference and full description you may find here.

Towards an optional instrument?

Last Wednesday, 27 October, the Legal Affairs Committee of the European Parliament organised an inter-parliamentary meeting on the idea of an optional instrument (OI) for European contract law. On the basis of a number of briefing papers from experts in the field, members of national parliaments and of the EP reflected on the possible advantages and the political attainability of enacting such a facultative set of rules that parties may choose to apply to their contract. The briefing papers can be found on the EP’s website.

Topics that were discussed include:

- the need for an OI, from the point of view of consumers’ organisations, business representatives, judges, and the European Commission;

- the extent to which an OI might increase legal certainty and foster cross-border trade;

- the material, territorial and personal scope of an OI;

- the relation of an OI with substantive rules of national law and rules of private international law.

The workshop was organised with the aim of giving members of national parliaments the opportunity to express their views on the policy direction that the EU should pursue in the field of European contract law, on which the European Commission published a Green Paper and launched a public consultation last Summer (see an earlier post on this blog).

For those of you who are following the discussion on the Green Paper, some upcoming conferences may be of interest:

- 10 November 2010, conference organised by the Centre for the Study of European Contract Law (CSECL) in Amsterdam (in Dutch; the full programme may be found here);

- 3 December 2010, colloquium organised in Brussels on ‘European Contract Law: To an optional tool for the practitioners’ (programme available here)

To be continued...

Sheena Iyengar on the art of choosing

Consumer should be free to make his own choices.

Consumer should be well informed so that he can make the right choices.

Consumer has too many choices in our society...

Those are just a few of the 'common' statements that refer to the consumers' choice that influenced regulation and creation of many consumer laws (e.g. duties to inform). Since I find it interesting to take a look at what lies underneath the legal instruments, i.e. whether there is really a legitimate basis in consumer behavior that justifies creation of certain legal rules, I was very much interested in the presentation that Sheena Iyengar (from the Columbia Business School, author of the book: The Art of Choosing) gave during TEDGlobal 2010 on the art of choosing.

EU collective redress regulation needed? Undoubtedly so.

Joaquín Almunia (Vice President of the European Commission responsible for Competition Policy) gave a speech in Brussels on 21 October 2010 addressing the 'State of Play and Future Outlook'.

In his speech Mr. Alumnia devotes some time to the problem of private enforcement and the lack of effective measures for collective redress.

"All EU citizens and businesses should enjoy the right to obtain compensation for damages caused by a breach of EU law. But in reality, their rights depend on where they live in Europe. About half of the Member States don't have any form of collective action, and even where this right is recognised, its use is very diverse both in scope and effectiveness.

Last week, the College of Commissioners debated these and other issues related to collective redress. The discussion was prepared by an information note I put forward together with my colleagues Reding and Dalli, developing the ideas the three of us had anticipated to the EP during our confirmation hearings last January.

The College agreed on the need for a coherent EU framework to strengthen collective redress across Europe that would draw on the different European national traditions. At the same time, we are committed to avoid the excesses and drawbacks of the US system.

Five principles for group actions across the Union were agreed:

•We should ensure effective compensation for everyone who has suffered damages, recalling that group claims are often cheaper and more practical than individual claims.

•We should put strong safeguards against abusive litigation;

•We should consider settlements or systems in addition to court proceedings to resolve disputes;

•Collective judgements should be enforceable throughout the EU; and

•Finally, we should ensure that adequate financing can be allowed so as to give citizens and businesses – especially SME’s – fair access to justice.

We decided to launch a public consultation from this coming November until the end of February 2011. In light of the replies that we will receive, we will propose a framework for collective redress.

This framework would become the basis for possible legislative initiatives in several policy areas including competition, environment, consumer protection, and others.(...)"

It's good to hear that we are getting closer to having the collective redress actions for consumers sufficiently regulated.

13th International Conference on Consumer Law: Protecting Consumers in Economic Recessions

13th International Conference on Consumer Law organized by the IACL (International Association of Consumer Law) will take place at Brunel University, UK, on 27-29 June 2011. Deadline for submission of papers is set for 10th January 2011. The theme of this conference will be: Protecting Consumers in Economic Recessions. To see the call for paper, click here.

European Consumer Centre Online Survey

European Commission is trying to find out how to get better at informing citizens about the European Consumer Centres. To help them, please answer an online anonymous survey here.

If you don't care about remaining anonymous, you may submit your email address and enter into a competition. You may then win an overnight trip to the next European Consumer Summit in Brussels (planned for March 2011) organised by the European Commission.

I don't know about you, readers, but I'm not going to pass an opportunity to win this prize...

European Consumer Centres, happy birthday!

It has been five years now that European Consumer Centres exist that are 'at the service of European consumers'. Whether a problem occurs with goods bought online, holidays are ruined because of cancelled flights, or other consumer problems: the ECC is there to help. 29 Centres exist, one in each of the Member States plus one in Iceland and one in Norway.

To get an idea of the activities undertaken and services offered by the ECC, here you can find the report published at the 5-year anniversary.

Collective redress addressed again by the European Commission?

Yesterday, European Voice published a short note (by Simon Taylor) that talks on group compensation are to resume. Collective redress had been a hot topic in European Commission in the past few years, since it should guarantee consumers to start actions for compensations against companies that might cause no or little loss to an individual consumer while harming significantly consumer interests as a whole. Naturally, the plans of regulating collective redress on EU level have been strongly opposed by the business representatives in Brussels. Now, it has been announced that next week the European Commission will re-open a debate on EU legislation that would allow collectives of consumers to seek compensation from companies found guilty of anti-competitive practices (e.g. price fixing). On 12 October commissioners will hold an orientation debate on whether any action should be taken at EU level. The existing solutions for collective redress actions on national level will be discussed. If commissioners agree to further regulate these actions, public consultation will be launched.

Feeling jaded - short note on marketing tricks against consumers

Are you interested, just as I am, in consumer behavior research? If yes, have you noticed that since you started reading all the literature available on this subject, you started paying more attention to your surroundings? Did you also start to see (more or less) clever marketing practices in certain, previously seemingly innocent, situations?

A Dutch chain of luxurious malls organizes this special 3-days-long event every year, during which their clients may buy various products (from food to scooters) with (more or less significant discount. This year, they went overboard advertising this event. They were day and night talking about it on Twitter and Facebook. They organized special contests to encourage consumers to constantly follow them via social media and to be sure that consumers will be prepared and informed about all profitable bargains they could make during this event. Today was the first day of this event. What happened? It seems that marketing worked too well and as the shop representatives are saying 'they didn't expect to have as many clients'. Result: online shop was down, in shops themselves the most popular items were sold out within half an hour.

That's the official story, at least. My jaded mind suggests another solution: gear up consumers for purchase of various products by offering them discounts, incite that intention by constantly reminding them about that opportunity and then stock the stores short and block the online website, so that consumers don't get to buy what they intended. Apologize for it. Potential benefit: consumers want that good now, they made their decision to buy - it's quite likely they will continue with the purchase after the price returns to 'normal'.

This reminds me about certain articles I've read recently on the blog The Siutationist. Adam Benforado wrote a short article 'Breaking Up Is Easy to Do: When Corporations Dump Consumers'. In this article he argues that while corporations constantly refer to the rational consumer who is able to make his own, free choices, at the same time they refuse to provide services or goods to anyone who is actually rational and does not fall for their tricks. He mentions how it became a good marketing practice to actually ban consumers that see through all the marketing tricks and to work on decreasing price transparency instead of increasing it. Tamara Piety commented on that article by giving further examples of unclear/unfair marketing practices as far as rebates are concerned: 'Tamara Piety on Market Manipulation'.

It helps to know I'm not the only jaded one out there.

Behavioural Economics, so What: Should Policy-Makers Care? - conference in Brussels on 22 November 2010

Two years ago I attended a first conference organized by European Commission on Behavioural Economics and it was very useful and interesting. On Monday, 22 November 2010, again in Brussels, a second conference will take place: "Behavioural Economics, so What: Should Policy-Makers Care?".

The aim of the conference is to understand how behavioural economics could be used to influence public policy and regulatory design across the Commission, in a way that benefits EU consumers and citizens. During this conference results of the joint MARKT SANCO pilot behavioural study on retail investment services will be presented.

Key questions that are to be answered include:

- What behavioural economics can tell us about consumers that economic models or surveys can't?

- Are there relevant examples where the behavioural approach has significantly improved the effectiveness of policy measures?

- What are the main individual and external factors explaining decision-making in retail investment services?

- Are consumers well-informed and numerate, so to be able to make optimal choices?

- How did the US Government go about regulating some markets in the past, and how behavioural economics is going to change the old approach?

The programme of the conference may be found here. The registration form - here.

No EU group action for consumers

EU Justice Commissioner Viviane Reding told the Financial Times Deutschland in an interview that there will be no legislative proposal for a group action for consumers on the short term. This applies for both consumer law and competition law. Reding argues that the risks for businesses are to severe, which would be particularly undesirable taking into consideration the current state of the economy.

Click here for the article in the FTD.

Towards an e-market.eu - EP resolution on completing the internal market for e-commerce

Yesterday, the European Parliament adopted a resolution on the completion of the internal market for e-commerce. It calls upon the European Commission to take legislative and non-legislative means to:
- counteract fragmentation of the on-line internal market;
- complete the Internal Market by e-commerce;
- enhance users' legal protection in cross-border e-commerce; and
- enhance the e-confidence of consumers and businesses.

In a press release, in particular the idea of introducing a European 'trust mark' for online traders and goods is emphasised.

In relation to the current discussion on the further development of European Contract Law, some interesting questions present themselves when considering the approach suggested by the EP, which entails the development of a 'single legal instrument combining the various texts currently in force in order to clarify the rules applicable to e-commerce' (no. 80). How would such an instrument relate to other initiatives that affect B2C contracts on the internet? It would of course be helpful if the level of consumer protection provided by such an instrument corresponded to other (future) instruments governing e-contracts, such as the proposed Directive on Consumer Rights and perhaps an optional instrument on European contract law (which is considered in the Commission's Green paper on policy options for this field, on which this blog reported earlier). And how would all of these measures relate to the political CFR that is currently being drafted? Possibly, the drafters of the Resolution had such matters of coordination in mind when indicating that a 'horizontal approach' would be called for, involving 'effective coordination between Directorates-General' (no. 6).

Furthermore, IP experts will be happy to see that the EP observes that the 'consistent enforcement of copyright laws in the area of e-commerce' should not be undermined by the initiatives taken (no. 68, no. 83).

Finally, the EP promotes the protection of fundamental rights of citizens/consumers on the European digital market, for instance in regard to privacy and non-discrimination (no. 32, no. 46). This seems to be in line with Commissioner Reding's views on the development of the digital market (see an earlier post on this). In this context, the EP refers to a previous report, in which it called for the 'creation of a European charter of citizens' and consumers' rights in the digital environment' and the development of 'a "fifth freedom" permitting the free circulation of content and knowledge' (no. 99).

Sweep investigation electronic goods

The ECJ today reported success as a result of the sweep investigation on the online sales of electronic goods (cameras, MP3 players, etc). The sweep, an enforcement action led by the EU and carried out by the national enforcement authorities, investigated the compliance of consumer rights by the major websites offering electronic goods online. While only 44% of the websites investigated complied with consumer rights in 2009, this figure has now climbed to 84%. Whether this has made buying electronic goods online "much safer" (as the Commission claims), remains to be seen.

The commission has also published the first results of another sweep, on online sales of tickets for cultural and sporting events.

Click here for more information.

Strawberry vs cherry yoghurt aka Lidl v Vierzon in C-159/09 - AG's opinion on comparative and misleading advertising

7 September 2010: ECJ Advocate General's opinion in case C-159/09 Lidl v Vierzon

Advocate General gave today its opinion in the Lidl v Vierzon case (English text is unavailable for now) concerning interpretation of the comparative advertisement provisions of the Directive 84/450 on misleading advertising (as amended by Directive 97/55).

Two parties involved in this case are companies Lidl and Vierzon who have a chain of international supermarkets, respectively Lidl and Leclerc. On 23 Septemeber 2006 Vierzon published in a local French newspaper an advertisement in which it compared register receipts for groceries done in four different supermarkets. In every supermarket 34 products were purchased, within which mostly products meant for daily use: food and cleaning products. The products on all receipts were mostly overlapping. The brands of the products were not mentioned. Out of the total price of the purchases it seemed that Leclerc was the cheapest supermarket. Vierzon published it with the slogan in which it mentioned that Leclerc was the cheapest supermarket. Lidl questioned this sort of advertising as an example of an unfair comparative advertising, misleading the consumers.

The French court asked a very specific question to the ECJ:

"Is Article 3a of Directive 84/450 (...) to be interpreted as meaning that it is unlawful to engage in comparative advertising on the basis of the price of products meeting the same needs or intended for the same purpose, that is to say, products which are sufficiently interchangeable, on the sole ground that, in regard to food products, the extent to which consumers would like to eat those products, or, in any case, the pleasure of consuming them, is completely different according to the conditions and the place of production, the ingredients used and the experience of the producer?"

The Advocate General had no doubts that the answer should be that a comparative advertising of food products on the basis of their price is lawful as far as the laws on misleading and comparative advertising are concerned, even if the compared products differ as to taste, as long as one can be substituted by the other. The national court should consider whether the comparative advertising fulfills other conditions of the Directive, specifically whether it is not a misleading advertisement. (Par. 63)

The Advocate General mentioned that there are eight cumulative requirements in Art. 3a of the Directive for the comparative advertising to be lawful, out of which three were relevant in this case: (Par. 40)

1. The comparative advertisement may not be misleading. (Par. 41)

2. The comparative advertisement compares products or services meeting the same needs or intended for the same purpose. This requirement may not be interpreted too strictly. It is sufficient if the consumer may substitute one good with another. (Par. 42)

3. The comparative advertisement compares objectively one or more material, relevant, verifiable and representative features of those goods and services, which may include price. Comparative advertisement may compare only prices of goods. (Par. 43)

As far as the second requirement is concerned:

The Advocate General stated that it does not matter that the advertisement in a given case compares lists of products and not specific products since the products on the lists are mentioned in a specific order and can be easily substituted by products placed on the same position on other lists - which gives these lists sufficient specifity. (Par. 46) Furthermore, the food products listed on the receipts do not have to bear the same taste. The comparison would lose its point if the only lawful comparative advertisement would be for advertising identical products since the competitors could easily claim unlawfulness of any comparative advertisement by stating that the taste of the food products differs. (Par. 49/53) It is not possible to mention all the factors that would make the food products interchangeable for consumers - that has to be decided on a case by case basis. However, AG mentions that elements such as quality of compared products or assortiment to which they belong could be essential. (Par. 51)

As far as the first requirement is concerned:

Despite the French court not making an inquiry about that sort of comparative advertisement as being misleading, the AG decided to give a few tips for the future. First of all, such a comparative advertisement may not be seen as misleading only because the brand of the products is not mentioned in it. That would be misleading only in cases where a brand of a product could seriously influence the consumer's choice and the comparison would be done between brands that seriously differ as to brand recognition. (Par. 58) The yardstick lies quite high here. (Par. 59) Such advertisement could be misleading if it would not be possible to identify compared products (Par. 61) or if it gives the consumer a misguided belief that all articles in that supermarket would be cheaper than by its competition (Par. 62) The last one could happen only if the advertisement did not compare specific products but just a general price level in the supermarkets. Even the fact that the comparative advertisement was enriched by a slogan stating that the prices in Leclerc are cheaper did not seem relevant for the Advocate General to consider this advertisement misleading. (Par. 62)

Advocate General mentioned in one of the paragraphs of this judgment that comparative advertisement should be allowed in the broadest scope possible, as long as it does not mislead the consumers. On the basis of this judgment I started to have doubts whether that second requirement is really being taken into account. In my opinion the consument would compare the total prices on the receipts and pay attention to the slogan, concluding that he should start doing groceries in Leclerc pronto. I am not so certain whether the consumer would consider that if the brands had not been mentioned on the list that could mean that the list included e.g. two different brands of butter on them (with a 0.50 euro difference; multiply 0.50 euro by 34 products and that could justify price differences between the receipts). To me it seems that such a practice leaves lots of room for misleading the consumers and it should be more strictly controlled.

New measures aiming at enhance financial consumer protection in Europe through prudential regulation

EU negotiators reached agreement on a package of measures to beef up supervision of the bloc's banks, giving new EU watchdogs a mandate to overrule national authorities and ban risky financial products that were widely blamed for the world's worst recession in decades.

Negotiators from the EU's three institutions - the EU Council of Ministers, the European Parliament and the European Commission - reached a political consensus on the package. A European Systemic Risk Board (ESRB) and three new European Supervisory Authorities - a European Banking Authority (EBA), a European Insurance and Occupational Pensions Authority (EIOPA) and a European Securities and Markets Authority (ESMA) - will form part of the new architecture of financial supervision agreed on September 2. The trio of new financial watchdogs will be complemented by a group attached to the European Central Bank that will keep watch for other economic risks, like a property price bubble.

In the European debate, where regulation is aimed at protecting the consumer a distinction can be made between prudential regulation(based upon the idea of information asymmetry and concerned with soundness, solvency, safety and of banks and may apply even if there is not systemic risk) and conduct of business regulation(that focuses on how banks conduct business and self regulation with their customers) which also raise questions related to the legal status and binding character of this codes.

Definitely, this new supervisory architecture is a step forward to protect consumers against toxic financial products. More information is available on EurActive.com

Eyjafjallajökull's aftermath: informal guidelines on Regulation 261/2004

Informal guidelines are now available for the application of Regulation 261/2004 (denied boarding, cancellation and delay of flights) regarding the eruption of the Icelandic volcano Eyjafjallajökull. The guidelines have been formulated by the European Commission and the national enforcement bodies (NEBs).

The guiding principle is that airlines are not sanctioned if they can prove that, taking into consideration the special circumstances at hand, they have sincerely tried to fulfill the Regulation's obligations. At the same time the informal guidelines stress that NEBs shall apply sanctions if airlines have taken advantage of the volcano crisis.

Click here to download the document "Non paper - proposed informal guidelines on the application of some articles of (EC) Regulation 261/2004" (source of the document: Dutch parliamentary discussions; click here for the Government's letter to Parliament).

[photo by AP]

Keeping up-to-date with DG Justice

A new website from DG Justice, created on 1 July 2010, offers a clear and concise overview of recent developments in European contract law and consumer rights. You can find it here.

Vacation

It was a summer vacation time not only for the authors of this blog but also, luckily, for the ECJ and many other authorities that could significantly influence European consumer law. Soon, the regular updates will follow. I hope the readers of this blog managed to get a proper consumer treatment during their travels.

Financial Services User Group

The European Commision has decided to set up a Financial Services User Group. Its main task will be to advise the EC on issues affecting users of financial services e.g. retail banking, mortgage credit and insurances. It will also provide insight, opinion and advice on the practical implementation of relevant policy initiatives. The group will be composed of 20 members, who will be individually appointed to represent the interests of consumers, retail investors and micro-enterprises, and invididual experts with expertise in financial services from the perspective of the financial services user. The EC aims to strengthen the representation of consumers, retail investors and other users of financial services at EU level by creating this group. A call for expression of interest has been launched - deadline for application: 30 September 2010. You may apply here.

Why would you decide to shop online? EC thinks: you might want to shave your legs at the same time.

The DG Sanco have collaborated on creating a video clip on online shopping some time ago. The European Commission would like to hear the opinion of the consumers on this video clip, in order to be able to improve the way in which they communicate their consumer policy. The survey is available in English, French, German, Dutch, Swedish and Danish. The English survey may be filled in on this website.

I watched the video and I have to say it's quite funny and creative. However, I'm not entirely sure what is supposed to be the message behind this video clip. It seems to show the trivial benefits of concluding transactions online rather than offline. I don't know why they would want the consumers to go take a look at the website they are trying to promote, since the video clip itself does not present any potential problems with the online transactions. So if the message of the DG Sanco was: 'consumers, conclude more contracts online!' - I think they managed to convey it. If it was, however, supposed to sound: 'consumers, online transactions are more convenient if you know your rights online, so please check your rights on our website' - then they should give some more thought to broadcasting this video clip.

The influence of European consumer law on national legal systems - conference in Katowice 23-24.09.2010

The Faculty of Law and Administration of the University of Silesia in Katowice, Poland organizes a conference 23-24 September 2010 on 'The influence of European consumer law on national legal systems'. Registration for the conference is possible until 10 September 2010.


The aim of the conference is to discuss the most recent developments in European Private Law, and additionally the impact of European consumer legislation on the indigenous legal systems of Member States, with a focus on the Polish example. This conference takes place in light of the ongoing harmonisation of private law in the EU, and EU consumer law in particular, as well as the current drafting of the new Civil Code for Poland, which is likely to be heavily influenced by European consumer law.
The guests invited for the first day of the conference include representatives of the European Parliament, the European Commission and international experts involved in the process of drafting the Common Frame of Reference. They will present new EU ideas concerning the future of private law harmonisation and the ‘optional instrument’. Discussing these issues is particularly interesting in the context of the recent developments in the area of private law at the European level, i.e. the commencement of work of the Expert Group established by the European Commission and the publication of Communication of the Commission on the future of private law in the EU, as well as the upcoming Polish Presidency in 2011.
The second day of the conference will focus on the impact of EU consumer law on national legal systems, taking the example of drafting the new Polish Civil Code. During this session, members and academics who work for the Polish Civil Law Codification Commission will analyse the problems arising from the implementation of EU consumer legislation into a system of private law based on a civil code. The speakers will concentrate on the problems relating to the differences between the structure and systematics of a national legal system based on a civil code, and European consumer law based on directives. They will also discuss the possibility of using legal instruments such as the DCFR as a source of inspiration in overcoming the difficulties.

Less jargon, more protection - the OECD's practical guide to policy making

Yesterday, the OECD presented its new Consumer Policy Toolkit (which we referred to in an earlier post on behavioural studies). The toolkit is meant to advise consumer authorities on 'how to assess areas where markets may be failing consumers and how best to address the problems consumers may face'. More information is available on the OECD's website.

Consumer Protection in Financial Services: two sides of the same coin

On 2nd and 3rd July the European Coalition for Responsible Credit held its international stakeholder conference ‘Financial Services Providers and Consumer Protection - Two Worlds?’ at Hamburg. The symposium, gathered consumer organisations, financial service providers, policy makers, academics and politicians to discuss current issues in retail markets for financial services in Europe and elsewhere. Issues that were discussed include national reports on consumer credit and banking, a comparison of bankruptcy laws, bank reporting on responsible lending, financial literacy, and consumer information overload.

Whenever you as an academic researcher get the chance to attend this type of events straightforward you get the flavor of the progressive nature of consumer credit law in various European legal systems. Which basically have increasingly developed into a combination of private and public regulation, attributable to the fact, that, through mandatory law it combines economic (transparent, competitive market) and social concerns (such as social consequences of over-indebtedness) in a private law setting. Hence, a balancing act between stimulating financial services and safeguarding economic interests of consumers.

The panel on ‘information overload at the point of sale‘ conformed by Sarah Linch(European Commission), Prof. Geraint Howells(Uni. Manchester), Dr. Bernhard Dychhoff (VW Financial Services) explored quite interesting topics through their presentations. The lectures in this panel touched upon the provision of ‘adequate explanations’ related to credit. This duty encapsulated in article 5(6) European Consumer Credit Directive apparently aims at enhancing contractual fairness between contracting parties. At the same moment, the article may provide an opportunity to empower consumers in their contracting position. Since has been introduced as flexible element in the Directive it will provide a range of possible options for a Member States regarding implementation.

The panelists agreed with the need of consumer testing as regards of ‘Standard European Consumer Credit Information’ (Annex II of the Directive), which also regulates the form in which specific information must be conveyed to consumers in the pre-contractual stage. Such standardisation of information apparently aims at avoiding information overload and at maintaining or allowing the comparability of different offers. As a result the suggestion to focus on duties to disclose a summary or short-form contract in plain language, highlighting rather than hiding key terms seems less meddlesome than one might suspect.

Nevertheless, standardization may not necessarily help consumers directly nor level the playing field for them; for example, if they fail to use or understand the information provided. The ideal of transparency, though laudable, may lead to an increase in information, yet not necessarily facilitate accessibility and simplicity. At the bottom line, in striving for simplicity it must be borne in mind that borrowers are heterogeneous in their preferences and concerns.