Friday, 21 December 2018

If it can be cleaned, it can be returned? - AG Saugmandsgaard Øe in slewo (C-681/17)

Another opinion given this Wednesday was by AG Saugmandsgaard Øe in the case slewo (C-681/17) concerning interpretation of Article 16e) of the Consumer Rights Directive. The question concerned the scope of application of the exception from the right of withdrawal for goods sealed due to health protection or hygiene reasons, when the seal was broken upon delivery and before withdrawal.

In a given case, the trader was selling mattresses, which the consumer purchased online for personal use. The mattress was wrapped in foil, which the consumer removed. The trader claimed that this prevented the consumer from later on withdrawing from the contract.

AG Saugmandsgaard Øe considers that the consumer should have the right of withdrawal in the case of purchasing a mattress, even if it has been 'sealed', which 'seal' (protective foil) has been removed by the consumer. He rightly compares mattresses to clothes - which both can be wrapped in protective foil by traders and may get in direct contact with the human body whilst being tested for their fit (para. 29). Due to the strict application of the exception from the right of withdrawal, it does need to be considered whether the trader could clean the mattress and make it possible to sell as new again upon the use by the consumer of the withdrawal right, similarly as clothes again (para. 32-34). Therefore, the exception from Article 16e) CRD will only apply to goods, which, if unsealed, would prohibit the trader from reselling them, as despite any action he might take they would be compromised as to their hygiene. Moreover, AG Saugmandsgaard Øe correctly draws attention to art. 14 para. 2 CRD, which allows the trader to claim the diminished value of the returned goods from the consumer.

Just in case the Court does not share his view, in the remaining part of the opinion AG Saugmandsgaard Øe elaborates on what it means for the goods to be recognised as sealed goods, and the moment of providing information to consumers about losing their right of withdrawal if they break the seal (for this elaboration we send our readers to the opinion).

Crying over spilled fuel - AG Tanchev in Moens (C-159/18)

On Wednesday AG Tanchev gave an opinion in the case Moens (C-159/18) concerning interpretation of extraordinary circumstances that Regulation 261/2004 allows the airlines to claim to avoid paying compensation for cancelled and delayed flights. In the given case, the airline claimed as an extraordinary circumstance the fact that there was a spillage of fuel on a take-off runway, which needed to be closed and cleaned for more than two hours. The flight in case ended up being delayed by over 4 hours as a result thereof.

In short, AG Tanchev recommends the Court to advise the national court that a spillage of fuel on a runway, causing its closure for more than two hours, classifies as an 'extraordinary circumstance', as the event is not inherent in the normal exercise of the activity of the air carrier and is beyond its actual control. 

This conclusion follows from seeing as an extraordinary circumstance not the event of spilling the fuel on a runway, but rather the subsequent decision of the airport authorities to close that runway. This decision was "not foreseeable, planned or announced in advance" (para. 23) and, therefore, may not be inherent in the normal exercise of the activity of the air carrier (para. 28). The reason for taking such a decision seems irrelevant to AG Tanchev (para. 26). AG Tanchev then relies on previous case law, such as McDonagh, Pešková and Peška, Wallentin-Hermann

I have some problems with comparing a given case to the previous case law. In the previously mentioned cases the events that were considered to qualify as extraordinary circumstances were all extraneous not only to the airline but also to other parties, upon which the air carrier could seek redress (extreme weather conditions, birds, terrorism). This is not the case here, as the air carrier could potentially claim its losses from the airport authority, or the other air carrier, whose faulty aircraft caused the spillage of the fuel (mentioned in para. 29). This route of compensation is not, however, available to the passenger. Should we, therefore, so easily exclude from the normal exercise of the activity of the air carrier having to deal with the results of the operational decisions caused by airport authorities? This would provide a significant leeway for claiming extraordinary circumstances.

The reasoning that the closing of the runway was beyond the actual control of the air carrier and that he could not otherwise accommodate passengers' timely departure is, in turn, convincing (paras. 35-36). However, the test is twofolds and the event should both not be inherent in the normal activity of the air carrier and lay beyond its actual control. As mentioned above, contrary to AG Tanchev, I would be more hesitant to recommend the national court to consider the first limb of that test as having been met.
An interesting point mentioned in the opinion is that an event such as a spilled fuel on a runway may be classified as extraordinary circumstances, but such a classification depends on all circumstances of a given case, thus should not be automatic. For example, if the airport authorities open other runways upon closing the one, which has been contaminated, there would be no need to delay or cancel flights (para. 11).

Tuesday, 18 December 2018

2019 forecast: Sun shines on consumer sales contracts

Over a week ago, on December 7, the Council has announced reaching an agreement on the revision of the sales of goods directive (Consumer Sales Directive 1999/44/EC) (More unified rules on contracts for the sales of goods: Council agrees its position). This means that there is a chance for the European Parliament to adopt the new Directive before the elections. The first reading has now been scheduled for March 2019.
The original proposal of the Commission intended to provide separate remedies for non-conformity of products purchased at a distance and of digital content. Due to the opposition to this further fragmentation of consumer protection rules, the proposal has, however, been adopted and the amended new rules would regulate non-conformity in all sales contracts. The Council welcomed this change. If we (and the EP) follow the Council's general approach, which may be read here in more details, this is what we may expect:

Harmonisation level
The new rules would apply targeted maximum harmonisation, with Member States being able to maintain further reaching consumer protection in respect of: time limits for guarantee periods (with the minimum set at 2 years); the reversal of the burden of proof for non-conformity (if it manifests within one year from the moment of the delivery there will be a presumption of non-conformity, but the Member States may extend this time period to two years); allowing consumers to choose a specific remedy if the lack of conformity became apparent within a short period after delivery, no longer than 30 days; maintaining flexibility on adoption of the obligation to notify about non-conformity within two months from detecting it. 
Goods with digital elements
IoT or connected goods (goods with digital elements) will be regulated by this new directive rather than the directive on digital content. Sellers will be obliged to provide updates for goods with digital elements but only for a period of two years (whilst digital content not integrated in goods will need to be updated during a time that consumers may 'reasonably expect').
Consumer remedies for lack of non-conformity will remain the same (repair, replacement, price reduction and termination) but the strict two tier system has been mellowed down by the introduction of a more detailed exceptions allowing sellers to opt for price reduction or termination instead of specific performance. New provisions account for CJEU's case law stating that consumers should not be liable to pay for the normal use of goods during the period prior to their replacement, as well as that they are not to bear the costs of removal of installed non-conforming goods and the re-installation of the conforming goods.

Tuesday, 11 December 2018

Consumer organisations join forces against 'no show' practices by air carriers

A recent communication from BEUC informs about a coordinated initiative by several national consumer organisations directed against the so-called 'no show' clauses used by air carriers. Pursuant to these clauses air carriers are authorised to cancel complete multi-flight bookings if passengers miss parts of their journey. This can lead to cancellations of connecting flights or return flights in round-trip itineraries (already paid for by the passengers). According to BEUC, such clauses are contrary to national laws implementing Directive 93/13/EEC on unfair terms. Arguably, this interpretation has already found support from several national courts (e.g. in Germany, Spain and Austria).

Two aspects of this development are worth highlighting.

Firstly, it is not the first time 'no show' clauses have been brought to public attention. Most notably, partial ban of 'no show' clauses in contracts between air carriers and passenger (i.e. not just consumers) was envisaged in the proposed reform of Regulation 261/2004, put forward in 2013. The proposal, however, got stuck in the legislative pipeline. BEUC is now calling on the Commission to revisit the matter.

Noteworthy are furthermore the two types of strategies pursued by consumer organisations. On the one hand, there are measures taken directly against the companies concerned (formal requests to cease the practice, (threats of) taking legal action). Besides the abovementioned proceedings in Germany, Spain and Austria (interestingly, no requests for a preliminary ruling as far as I can see), this has reportedly been the case in Greece, Malta, Belgium, Denmark and the UK. On the other hand, there are complaints to national consumer authorities and calls for a CPC action.

It will be interesting to see whether and if so, which of these different avenues will prove successful. Equally relevant are, of course, the possible legislative developments at the EU level, including as part of the 2018 'New Deal for Consumers' package. It is far from certain, however, whether EU-wide proposals on collective redress will not suffer the same fate as the 2013 passenger rights reform. For the time being, consumers and consumer organisations have to make do with existing enforcement mix.

Brexit and consumers: the Court in C-621/18 Wightman

Dear readers,

A quick update. Yesterday the Court of Justice delivered its judgment in C-621/18 Wightman. The Court confirmed that the UK can indeed unilaterally withdraw its intention to leave the EU (see for a full analysis here), largely following AG Sanchez-Bordona's Opinion (on which we reported here).

Although the judgment is very generous, its real effect is yet to be seen. As always, we will keep you updated.

Saturday, 8 December 2018

Italy fines Facebook for data related unfair commercial practices

Yesterday the Italian Competition Commission fined Facebook 10 million EUR for breaching the relevant provisions of the Italian Consumer Code implementing the Unfair Commercial Practices Directive. The Competition Commission found that not-disclosing that consumers' data is provided for commercial purposes amounted to a misleading practice and that the pre-selected consent on data sharing comprised aggressive practices. Interestingly, in addition to the large fine, Facebook was also ordered to issue an apology to its users on its website and on its app (see for more here).

This is an important step in the aftermath of the Cambridge Analytica scandal (see for more here, and our report here), and it will be hopefully followed in other Member States where due to the global nature of social media, it is very likely that similar breaches occurred. This then leads us back to an 'old' problem of national enforcement of EU wide infringements of consumer law, and the question of whether there is a need to overhaul and improve the existing enforcement regime of EU consumer law by empowering the EU Commission to take enforcement actions against EU-wide infringements (which we discussed here). What do you think?

Friday, 7 December 2018

Ex officio control of unfair terms presupposes an effective remedy: CJEU order in PKO Bank Polski

On 28 November 2018, the EU Court of Justice issued an order in PKO Bank Polski (C-632/17), which concerns the same issue as Profi Credit Polska (C-176/17), a case we have reported on earlier. In short, the question raised by the referring Polish court was whether the order-for-payment procedure at issue is incompatible with Article 7(1) of the Unfair Contract Terms Directive (93/13/EEC), because:
(i) the procedural rules restrict the consumer's right to lodge an objection against such an order for payment in such a way that there is a significant risk that she will not exercise that right, and
(ii) in the absence of the consumer, the court does not have the power to examine (a) the unfairness of the terms of the underlying credit agreement and (b) compliance with the requirements deriving from the Consumer Credit Directive (2008/48/EC).

Thus, there were two problems:
  • The court's role is, in principle, limited to a review of formalities; it does not have available to it all the elements of fact and law arising from the credit agreement and thus, is not in the position to examine unfair terms. 
  • The legal relationship resulting from the credit agreement is reviewed only if the consumer lodges an objection; the objection must meet various procedural requirements in an extremely short period (two weeks); and the consumer-defendant must pay a court fee that is three times greater than the claimant; see also our blog on Profi Credit Polska

In Profi Credit Polska, the CJEU already held that the Member States' obligation "to lay down procedural rules that ensure observance of the rights which individuals [i.e. consumers] derive from Directive 93/13", which "implies a requirement that there be a right to an effective remedy", also enshrined in Article 47 of the EU Charter of Fundamental Rights. The two above-mentioned problems combined prevented the court from carrying out the required assessment under the EU consumer protection legislation at issue. This is reiterated in PKO Bank Polski. The CJEU concludes that the Polish order-for-payment procedure is precluded by Article 7(1) of Directive 93/13 and Article 10 of Directive 2008/48/EC.

We can tentatively draw two conclusions from the CJEU's decisions:
  1. While the CJEU (still) does not make a clear distinction between Article 7(1) of Directive 93/13 (which requires "adequate and effective means" against unfair terms) and Article 47 of the Charter, it appears that the first presupposes the latter. If a case is not brought before the court, it cannot perform unfair terms control (either ex officio or at the consumer's request). In case of an "inversion of the dispute", i.e. it is the defendant – here: the consumer-debtor who must initiate adversarial proceedings by lodging an objection, the court must determine whether the procedural rules infringe the consumer's right to an effective remedy (or rights of the defence, for that matter) as guaranteed by Article 47 of the Charter. If the obstacles are too high, there is a significant risk that consumers will not lodge and objection. 
  2. The CJEU seems to suggest that the national court must be able to perform ex officio control, whether the consumer involved invokes the existence of unfair terms or not. This is in line with its earlier case law, see e.g. Banesto and Radlinger. But how does the referring Polish court obtain the necessary information? One possible answer is that the creditor must submit the underlying credit agreement in evidence. This calls into question the entire order-for-payment procedure, which is based on only a banking ledger excerpt. Is such an excerpt sufficient? And what should happen in the absence of the consumer? Should she be required to lodge an objection at all? The CJEU does not answer these questions. 
In its case law on other types of debt collection proceedings, the CJEU did not consider an "inversion of the dispute" to be contrary to EU (consumer) law in itself, as long as there were judicial remedies available to consumer. We have brought this up in previous blog posts.
However, PKO Bank Polski shows why a reliance on the consumer's initiative might be problematic, exactly because of the procedural obstacles discussed in light of Article 47 Charter. Removing those obstacles is a first step. Preventing creditors from circumventing judicial control – by allowing them to resort to extrajudicial enforcement procedures or to withhold information from the court – would be the next.

Wednesday, 5 December 2018

Brexit and consumers: AG Sanchez-Bordona in C-621/18 Wightman

Dear readers,

Yesterday AG Sanchez-Bordona delivered his Opinion in a landmark case C-621/18, in which a group of citizens lead by Mr Wightman challenged the revocability of UK decision to withdraw from the EU, that is, the now famous Art. 50 TEU. AG Sanchez-Bordona proposes that the Court of Justice should find that the case is admissible to the Court and that it should instruct the referring Scottish court that Art. 50 TEU allows the unilateral notification of the intention to withdraw from the EU.

Given that this case does not raise consumer law issues per se, we are not going to provide a detailed analysis (see for detailed account here). The case however may be of an utmost importance for consumer in Britain (see how Brexit may affect consumer protection here) and thus this case deserves a mention on our blog.

And who knows, perhaps it will be a catalyst for a major change? We will see soon and keep you posted!