On the 31st of May the
AG Campos Sánchez-Bordona's opinion in the Wind Tre cases (C‑54/17 and C‑55/17) was published. This is the first case where the meaning of
aggressive commercial practices is discussed, making it highly important.
Before Wind Tre the only ECJ case on aggressive practice was Purely Creative (C-428/11), in which one of the blacklisted practices was contested, without invoking art. 8-9 of the Unfair Commercial Practices Directive (UCPD, Directive 2005/29/EC). In the Wind Tre case the issue of the relationship between sectoral legislation, such as the Universal Service Directive (Directive 2002/22/EC), as lex specialis to the UCPD and the general rules of the UCPD is discussed.
Facts of the case
The dispute concerned the marketing of mobile phones in Italy. The mobile
phones came with SIM cards which had answering and internet services
pre-installed, of which fact consumers had not been informed. It is important to
note that there was no complaint as to the cost of these services or the
information provided about their function, the complaint was about telecom
companies omitting to inform consumers that these services were pre-installed.
The same practice was used by two companies, Wind Tre and Vodafone Italia,
and the Italian Market Authority (Autorità Garante della Concorrenza e del
Mercato, hereafter AGCM) imposed fines on the two companies for engaging in an
aggressive practice. The telecom companies challenged that decision in court,
claiming that the AGCM lacked competency to impose fines stating that the
telecommunications authority (Autorità per la Garanzie nelle Comunicazioni,
hereafter: AGCom) was responsible instead. This argument was based on art. 3(4)
UCPD stating that in case of a conflict between the UCPD and other sectoral rules
on unfair commercial practices, the latter will prevail and apply.
The case reached all the way to the Council of State (Consiglio di Stato)
which ruled in favour of the competence of the AGCM stating that the practice
was aggressive within the meaning of the Italian Consumer Code (transposing the
UCPD). It argued that even though sectoral legislation of the
telecommunications sector was also breached, the case in question presented a
‘progressive harmful conduct’, which gave rise to a more serious infringement,
thus making the application of the Consumer code, instead of the sectoral
legislation, appropriate. (para 25)
Questions
The Italian court referred 7 questions, which the AG Campos Sánchez-Bordona, with the agreement
of all parties, summed up into the following two groups (para 32).
- Can the conduct of the telephone operators be classified as an ‘unsolicited supply' (as per point 29 of Annex I of the UCPD) or an aggressive commercial practice?
- According to art. 3(4) UCPD should the UCPD cede to other EU rules, and, if so, to national provisions enacted in implementation of those rules?
The first group of questions refers is of a substantive nature as to
whether the practice in question can be characterised as aggressive according
to the UCPD; either using the blacklist of the UCPD, or by using art. 8-9 UCPD.
The second group of questions refers to the relationship between the UCPD
and other EU sectoral legislation as lex specialis.
AG's Opinion
In answering the first question, AG Campos Sánchez-Bordona provides us with what has been
the most detailed analysis of the elements of aggressive commercial practices
by the Court to this day.
Inertia Selling
He begins to first examine whether the practice in question can be caught
by the blacklist, and specifically point 29 forbidding inertia selling.
According to the AG, there are two conditions to satisfy simultaneously: 1) unsolicited supply
and 2) unlawful demand of payment (para 44).
From the facts it can be established that the phone operator had not
properly informed consumers on the pre-installed services on the sim card,
meaning that consumers could use them without configuring them. AG Campos Sánchez-Bordona examines
whether this supply, of which consumers were not informed of, qualifies as
‘unsolicited supply’. In his opinion ‘unsolicited’ means more than not being
provided with essential information on a service, it means that the consumer
was not aware of its existence (para 48).
The AG finds that a consumer (and not the average consumer) has no reason
to expect that services have been preinstalled, if he has not been
informed thereof and which he has to opt out of by using a process which he is likely to
be unaware of (para 53).
Hence, whilst in this case unsolicited supply is possible, the AG does not find the same
for the demand for payment. In his opinion not any demand for payment could fulfil the
conditions of point 29, but it needs to be an undue request for payment. The
referring court specifies that there was no complaint as to the cost of the
services or the information about them, only about the lack of information about the pre-installation.
AG Campos Sánchez-Bordona argues further that the average consumer could expect that the SIM card
purchased would be able to provide him with services about the costs of which
he has been informed.
It is worth noting that the AG makes reference to the average consumer in the context of the blacklist, where the average consumer test is not meant to apply. This goes to show that the blacklist does not offer the legal certainty promised.
It is worth noting that the AG makes reference to the average consumer in the context of the blacklist, where the average consumer test is not meant to apply. This goes to show that the blacklist does not offer the legal certainty promised.
Based on the above reasoning, point 29 of Annex I of the UCPD on inertia selling is not
applicable. The next step is to examine whether the practice can be caught by
art. 8-9 UCPD.
Aggressive Practices
The focus is on the practice in question being one of omission of information.
AG Campos Sánchez-Bordona looks to the factors of art. 9 UCPD to determine what would qualify as a
practice using the notions of: harassment, coercion or undue influence. Out of art. 9 UCPD the
AG deduces that harassment and coercion cannot be applied in this case as they
require ‘active conduct, which is not
present in the case of an omission of information’ (para 64).
It is not clear how the AG reaches that conclusion, as the factors of
art. 9 UCPD apply for all three categories of harassment, coercion and undue
influence without distinction. Also, even the omission of information requires an
active choice of the trader to omit that information, so one could argue that
active conduct is not entirely absent.
The AG continues to examine solely whether the practice can be caught
under the concept of undue influence. Undue influence is the only one defined in UCPD in its art.
2(j), unlike harassment and coercion.
Undue influence refers to exploitation of a position of power which
significantly limits the ability of the consumer to make an informed decision.
The AG differentiates between two different kinds of positions of power (para
67):
- Exploitation of a position of power which allows the trader to infringe the consumer’s freedom when it comes to buying a product.
- Position of power held by a trader who, following the conclusion of the contract, may claim from the consumer the consideration which the latter undertook to provide on signing the contract.
Consequently, the AG defines a position of power in undue influence as both applying in pre-sale and
post-sale conditions. What is to be noted is the focus on the fact of the conclusion of a contract,
of consideration of the terms, that is the use of contract law terms through which aggressive practices seem to be defined. However, aggressive practices are broader than that, to
the extent that they cover all transactional decisions of the consumer and are
not limited to the decisions to enter into a contract.
The opinion explains that the aim of prohibiting aggressive practises is,
in essence, protecting the freedom of contract, as consumers should be bound only
by obligations that they freely entered into. So the criterion is whether
the omission of information about the pre-installation impaired the freedom of choice
of the consumer to the extent, where he accepted contractual obligations he
would not have otherwise (para70).
AG Campos Sánchez-Bordona found the practice not to be aggressive, as according to him, the
practice was not sufficient to impair the freedom of the consumer to such an
extent that he would not have entered the contract. The AG does not elaborate
on how he reached that conclusion or what is the standard against which it is
weighed. This view of aggressive practices appears to raise the standard,
making it more difficult to show that impairment of the freedom of choice of
the consumer is indeed significant enough.
Lex specialis
Given the answer to the first two questions, there was no reason to
examine the rest, on the conflict of law, yet the AG did submit his observations.
In these he makes the accurate observation that the UCPD is not designed
to fill the gaps that sectoral legislation leaves; instead it offers its own
stand-alone system of protection which exists in parallel with the sectoral
legislation (para 94). This sets the tone also for art. 3(4) UCPD that should be
interpreted strictly as focus should be on maintaining a high level of
protection. Therefore, art. 3(4) UCPD is better conceptualised as regulating
conflict between provisions and not systems of sectoral legislation (para 111).
In this case, it means that the existence of sectoral legislation that covers
aspects of unfair commercial practices does not preclude the application of the UCPD.
AG Campos Sánchez-Bordona didn’t find a conflict in this case between the UCPD and the
Universal Service Directive, but rather the need for them to be applied
jointly (para 129). The Universal Service Directive regulates the information
requirements, which are crucial for determining whether there was unsolicited
supply as per point 29 of the Annex I of the UCPD.
Conclusion
This is an intriguing case, as it
is the first of its kind for aggressive practices in the UCPD. It reveals
contrasting interpretation of the UCPD notions and objectives between the Member States and AG Campos Sánchez-Bordona. Italian authorities
viewed aggressive practices as a tool for penalising the abuse of power by the
trader. The AG on the other hand interpreted the same provisions focusing on
protecting consumers' contractual freedom, especially as applied to the decision to enter into a contract.
It remains to be seen what the Court will decide and this blog will follow the
developments with great anticipation.
