Friday, 14 September 2018

SIM cards with pre-installed services can be an aggressive practice: CJEU on Wind Tre

On 13th September, which was a busy day for consumer law cases, the ECJ published its judgement on the Wind Tre case (C-54/17 and C-55/17).

Wind Tre concerns the Unfair Commercial practices directive and in particular, aggressive commercial practices, which have been the subject of very few cases, therefore this judgement is meant to be illuminating as to the meaning of the aggressive practices provisions.

This blog reported on the AG opinion on this case, published on 31st May 2018. It is interesting to see that the judgement has departed from the AG opinion, yet managed to steer clear out of some of the more thorny issues.

Facts of the case

In Italy, two companies Wind Tre and Vodafone Italia, sold mobile phones with SIM-cards with pre-installed answering and internet services. Consumers were not informed about the pre-installed services, thus leaving them exposed to charges.

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.

Questions referred

Seven questions were referred to the ECJ, which, following the approach of the AG placed them in groups.

The first two questions  were summed up as whether the conduct of the traders, where SIM cards on which specific services such as internet browsing services and voicemail services had been pre-loaded and pre-activated, without first sufficiently informing the consumer of that pre-loading and pre-activation, nor of the cost of those services, can be characterised either as an aggressive practice according to art.8-9 UCPD or as inertia selling, as per point 29 of Annex I of the UCPD.

The remaining questions referred to whether 'Article 3(4) of Directive 2005/29 must be interpreted as precluding national rules under which conduct constituting inertia selling, within the meaning of Annex I, point 29 of Directive 2005/29, such as that at issue in the main proceedings, must be assessed in the light of the provisions of that directive, with the result that, according to that legislation, the ARN, within the meaning of the Framework Directive, is not competent to sanction such conduct' (para 57).

Inertia selling and average consumer

The judgement set out the conditions for finding a practice to be aggressive and focuses freedom of choice of the consumer. 'For a service to be solicited the consumer must have made a free choice' (para 45). Furthermore the information provided must be clear and adequate and certainly information on the price is considered necessary for an informed decision (para 47). Interestingly, ECJ frames aggressive practices around information, which bears the question: what then distinguishes aggressive from misleading practices?
The Court found that selling SIM cards with pre-installed internet and voicemail services without first sufficiently informing the consumer of the pre-loading, pre-activation and cost of theses services would be conduct falling within the term 'inertia selling' (para 56).

Thus, the Court did not follow the AG opinion, also clarifying that whether there was 'concious action' or 'active conduct' on behalf of the consumer, is irrelevant for deciding whether a practice has been aggressive (para 49). This is a welcome clarification, as following the 'active conduct' requirement set by the AG would have made the conditions too restrictive and departed from the letter of the law, as the UCPD itself requires no such condition.

However, the judgement was more complex than simply establishing that such conduct falls under inertia selling. There is the caveat that it is for the referring court to verify whether such conduct took place. This is surprising as the main facts of the case, which are that the services were pre-installed and consumers were not informed of that fact are not disputed.

What is even more puzzling is that the decision refers to the conduct of the average consumer. The referring court has to verify whether the average buyer of a SIM card might be aware of the fact that it automatically contains such pre-installed services that incur additional fees (para 52). While this condition would make sense if art.8 UCPD was applied, the average consumer concept does not apply to the blacklist and in this case to inertia selling. 

It seems like there is no escaping the average consumer, yet the Court does not provide any guidance as to how that test is to be applied. It limits itself to referring to rec.18 UCPD as stating that the reaction of the average consumer is to be established by the referring court (para 52). However, there is nothing in recital 18 or anywhere else that restricts the ECJ from deciding on the behaviour of the average consumer. Contrary to that, it does state that national courts and authorities should decide taking into account the case law of the Court of Justice. Yet, it seems like the ECJ is refraining from offering (much needed) guidance to the national courts.

Relationship between UCPD,  Universal Service Directive and Framework Directive

Art. 3(4) UCPD states that in cases of conflict between the UCPD and other EU rules regulating specific aspects of unfair commercial practices (lex specialis), the latter are to prevail. 
The question here is whether such conflict indeed exists, and the Court agrees with the AG that conflict is a strong term one that 'goes beyond a mere disparity or simple difference, showing a divergence which cannot be overcome by a unifying formula enabling both situations to exist alongside each other without the need to bring them to an end' (para 60). Furthermore, it only refers to conflicts between EU rules, and not national rules (para 59).

The Court cites previous case Polkomtel which found that the Framework Directive and the Universal Service Directive (hereafter:USD) do not provide for full harmonisation of consumer protection aspects. (para 64). Furthermore, while art. 20(1) USD sets information requirements for traders it does not regulate inertia selling and in any case, art. 1(4) USD sets out that the directive is without prejudice to EU consumer protection rules.

Therefore, the Court finds that in this case, there is no conflict between the UCPD and these two Directives.

This is a very interesting judgement, not only for what it includes, but also on what it failed to include. While this was an opportunity to shed light on aggressive practices and the average consumer, it seems like the ECJ let it pass by.

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