Sanctions for Not Providing Essential Information in Credit Contracts - CJEU in Lexitor II (Case C-472/23)

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The case concerned a debt collection agency (Lexitor), acting as an assignee of the rights of a consumer who had concluded a consumer credit agreement with a bank for an amount of approx. 9.000 EUR. In addition, the consumer was required to pay capital interest (approx. 4.500 EUR) and a commission fee (approx. EUR 1.100), whereas the Annual Percentage Rate of Charge (APRC) was specified at 11.18%. Lexitor argued that, since the APRC was partly calculated on the basis of unfair contract terms, the bank had failed to provide the correct APRC in the agreement. Consequently, Lexitor sought to recover the total sum of interest and costs as a sanction prescribed under national law. 

The first question was whether the creditor had failed to fulfil its obligation to provide the APRC in the credit agreement where the APRC was overstated due to certain contract terms being declared unfair. The Court emphasised that, although the actual APRC would indeed be overstated if calculated with reference to non-binding unfair contract terms, Article 19(3) of the Consumer Contract Directive (CCD; Directive 2008/48 on credit agreements for consumers) requires that the APRC be calculated based on the assumption that the credit agreement is to remain valid for the period agreed and that the creditor and the consumer will fulfil their obligations under the terms and by the dates specified in the credit agreement (para 34). Consequently, where the APRC is determined in accordance with the mathematical formula set out in Annex I to the directive - incorporating the total cost of credit to the consumer, including costs payable under the contract’s terms - the creditor does not infringe its obligation to provide the APRC in the credit agreement. This remains the case even if some of the terms on which the APRC was calculated are subsequently declared unfair and therefore not binding on the consumer (para 35).

The Court also addressed the question of whether listing various circumstances under which charges connected with the performance of the credit agreement may increase, without enabling the consumer to determine whether those circumstances have arisen, constitutes a breach of the creditor’s information obligation under the CCD. The Court referred to its established case law, holding that the terms of the credit agreement must be drafted transparently so that an average consumer can foresee, on the basis of clear and intelligible criteria, the changes that may be made to such charges (paras 41–44). Applying this principle to the contract terms in question, the Court concluded that where a credit agreement enumerates specific circumstances justifying an increase in charges without enabling the average consumer to ascertain whether those circumstances have materialised and their effect on the charges, this constitutes an infringement of the creditor’s obligation to provide information (paras 45–47).

Finally, the Court considered whether Article 23 CCD precludes national legislation that, in cases of infringement of the creditor’s obligation to provide information under Article 10(2) CCD, imposes a uniform penalty depriving the creditor of its right to interest and charges, irrespective of the seriousness of the infringement or its effect on the consumer’s decision. The primary concern was whether such a sanction would be proportional (para 51). Drawing upon its previous case law, the Court reaffirmed that Article 10(2) CCD sets out essential information that consumers must receive to assess the extent of their liability. A breach of this obligation may be sanctioned under national law by the forfeiture of the creditor’s entitlement to interest and charges (paras 53–54). The Court then turned to the specific circumstances of the case. Since the obligation to provide the APRC had not been infringed (first question), it focused instead on the conditions under which costs related to the performance of the agreement (such as commission fees) could be changed, considering this equally vital information under the CCD due to its impact on consumers’ financial obligations (para 55). The Court emphasised that the principle of proportionality does not preclude a Member State from imposing a uniform penalty depriving the creditor of its right to interest and charges for breaches of information obligations under Article 10(2) CCD, including those relating to the calculation of charges connected with contract performance, even where the gravity of the infringement may vary (para 57).

A Short Comment

The Court’s answers to the second and third questions are not surprising. It confirmed that the average consumer standard has been employed to assess the transparency of contract clauses under the CCD framework, as seen previously in BMW Bank, and has been extensively applied in consumer credit case law since Kásler. The response to the third question reaffirms that the information contained in a credit agreement (Article 10(2) CCD) is essential for the consumer to make an informed decision; consequently, failure to comply with this obligation may trigger sanctions under national law. The Court appears to have linked the proportionality of the sanction to the essential nature of the information provided.

The Court’s reasoning in relation to the first question, however, may be called into question. A literal interpretation of Article 19(3) CCD does not address the unfairness of terms used by the creditor but instead focuses on two distinct elements: first, that the APRC’s calculation is based on the assumption that the credit agreement remains valid for the agreed period; and second, that both parties will fulfil their respective obligations under the agreement. The unfairness of certain contract terms, on the other hand, means that they are null and void ab initio under Article 6(1) of the Unfair Contract Terms Directive, with the consequence that no obligations arise from them.

The first part of Article 19(3) CCD assumes the continued validity of the credit agreement. However, since finding the terms at issue null and void is unlikely to render the agreement invalid - as they do not appear to be essential to the contractual obligation (see Profi Credit Polska III, paras 68–70), although this must be verified under national law - this part of Article 19(3) CCD would not apply here. The same reasoning extends to the second part of Article 19(3) CCD: if obligations based on unfair terms do not exist ab initio, there is no obligation to fulfil on the side of any of the party.

It is also unclear how concluding that the APRC’s calculation, when partially based on unfair contract terms - leading to an overstatement of the APRC - does not infringe the information obligation under Article 10(2)(g) CCD, would contribute to achieving a high level of consumer protection. This raises at least three concerns.

First, in such cases, creditors would not face additional disincentives against using unfair terms in credit agreements. This appears inconsistent with Recital 20 of the CCD Preamble (“Creditors’ actual knowledge of the costs should be assessed objectively, taking into account the requirements of professional diligence”), which suggests that creditors could reasonably be expected to know when they are using unfair terms.

Second, since the APRC was overstated, it is unclear how the average consumer could accurately determine - not merely approximate - the extent to which the stipulated APRC would affect their future rights and obligations under the credit agreement. This appears to contradict the Court’s reasoning in its response to the second question, where the transparency of information is deemed crucial for consumer decision-making.

Third, it also seems to conflict with the Court’s reasoning in Pereničová and Perenič, here it held that an incorrect APRC constitutes false information regarding the total cost of credit and the price under Article 6(1)(d) of the Unfair Commercial Practices Directive (UCPD), as it causes or is likely to cause the average consumer to make a transactional decision they would not have otherwise taken (para 41). However, the Court may have drawn a distinction between cases where the actual APRC is lower than that stipulated in the contract (Lexitor II) and those where it is higher (Pereničová and Perenič), as well as between the transparency requirements under the CCD and those under the UCPD. Yet, these distinctions are not explicitly addressed in the commented judgment. Further clarification from the Court on this point would be necessary to provide much-needed clarity.

Who is the average consumer? CJEU in Compass Banca (C-646/22)

On the 14th of November, the CJEU published its long-awaited decision on Compass Banca (Case C-646/22; we have previously discussed it here). In this case, the CJEU, for the first time, elaborated on who the ‘average consumer’ is, especially in light of the persistent critiques from behaviouralists, and further clarified the assessment of and the consequences for unfair commercial practices under the UCPD (Directive 2005/29/EC).

The case involves a commercial practice by the Italian company Compass Banca which the Court termed ‘framing’ – a term typically associated with a specific type of cognitive bias rather than a concrete commercial practice. Namely, Compass Banca presented an offer for a personal loan alongside an unrelated insurance product, leaving consumers with the impression that it was not possible to obtain the loan without taking out the insurance. In particular, there was no cooling-off period between the signing of the two contracts. Even though Compass Banca claimed that it was made clear to consumers that the loan was not contingent on the insurance, the Italian consumer authority requested a seven-day cooling-off period to be granted and, upon Compass Banca’s failure to comply, found the practice of framing an ‘aggressive’ and thus ‘unfair’ commercial practice under the UCPD. Compass Banca challenged this decision in court, which invited questions reaching the CJEU.

The CJEU’s ruling

The first question concerns the extent to which behavioural insights about individuals’ cognitive biases should inform the concept of the ‘average consumer’, a notion that lies at the heart of the UCPD as a benchmark for assessing the effects of a particular commercial practice on consumers’ decision-making processes. Such an explicit reference makes this (abstract and somewhat academic) question not merely ‘hypothetical’ and justifies its admissibility (paras 37-39). Probably unsurprisingly, however, the Court avoided adopting academic terms like ‘homo economicus’ and ‘bounded rationality’ which were used by the referring court. This, of course, does not really make a difference to the substantive reasoning.

With reference to recital 18 of the UCPD (which came from the Court in the first place), the Court restated that the ‘average consumer’ is an individual ‘who is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors’. The CJEU highlighted the nature of the ‘average consumer’ as an objective criterion which is independent of any specific consumer’s knowledge, but ‘not statistical’, which nonetheless allows national courts to take into account ‘more realistic’ considerations when exercising their own faculty of judgment to determine the ‘typical reaction of the average consumer’ (paras 48-51, recital 18 UCPD). With this understanding, the Court continued to clarify the two prongs of the average consumer benchmark: ‘reasonably well-informed’ and ‘reasonably observant and circumspect’. (I read it as the former relates to obtaining information/its availability, while the latter to processing information/its effectiveness.) As to the former, in view of the trader’s mandatory information obligations, it should be understood as ‘referring to the information which can reasonably be presumed to be known to any consumer, taking into account the relevant social, cultural and linguistic factors, and not to the information which is specific to the transaction in question’ (para 52). The lack of information is thus not excluded from the assessment of the effects of a commercial practice. Here, I think the Court was indicating that being ‘reasonably well-informed’ does not require consumers to actively seek out material information that the trader is legally obliged to provide.

Similarly, the nature of being ‘reasonably observant and circumspect’ does not exclude considering the influence of cognitive biases, should such biases be likely to affect a reasonable average consumer to materially distort their behaviour (para 53). The Court then recalled its several cases which acknowledge that an average consumer may be deceived, may have varied levels of attention regarding different goods and services, may be subject to an erroneous perception of a piece of information and may be simply unable to understand the technical details in certain transactions (paras 54-56). While these cases were usually discussed as ‘deviations’ from the average consumer standard, the Court used them as ‘evidence’ to confirm that a ‘reasonably observant and circumspect’ consumer is not a perfectly or particularly observant and circumspect one (adverbs used by AG Emiliou in para 42). Nonetheless, the Court cautioned that the existence of constraints like cognitive biases does not automatically make them legally relevant and decisive in finding an unfair commercial practice: ‘it is still necessary for it be duly established that, in the particular circumstances of a specific situation, such a practice is of such a kind as to affect the consent of a person who is reasonably well-informed and reasonably observant and circumspect, to such an extent as to materially distort his or her behaviour’ (para 57). There seems to be a high bar for courts to apply behavioural insights. In all, the Court concluded by sticking to the classic definition of a rational consumer while accepting the possibility of constraints that can impair consumers’ decision-making capacity, such as cognitive biases.

The second question concerns whether the practice of ‘framing’ in this case is in all circumstances aggressive or at least unfair. First, the Court found that framing is not categorically blacklisted in all circumstances, since it does not correspond to any practice listed in the ‘complete and exhaustive list’ of Annex I (para 68). Second, the Court indicated that neither can framing be found aggressive, in most cases, when applying the general test under Art. 8 UCPD: there is no ‘harassment’ and ‘coercion’ in their usual meaning in daily language (para 72), and there is no ‘undue influence’ as framing ‘does not, as such, imply the existence of acts of pressure, even if that practice is likely to create a bias of framing’ (para 75). Third, it is still possible that a non-aggressive practice can be a misleading one in the sense of Arts. 6-7 UCPD. In this case, the Court noted that framing leaves consumers with the (misleading) impression that it was impossible to get a loan without taking out the insurance (para 80) – though Compass Banco has claimed otherwise (para 82). Ultimately, it is for national courts to assess the unfair nature of a commercial practice (para 83).

The third and fourth questions ask: Should framing be found unfair, do the UCPD and Art. 24(3) of Directive 2016/97 on insurance distribution preclude the national authority from requiring a cooling-off period to be granted in order to put an end to the unfair practice? Regarding Directive 2016/97 the question was answered negatively, as Art. 24(3) only requires the possibility of buying a good or service separately without the ancillary insurance (as a package). As to the UCPD, the Court held that while it precludes ‘a general or preventive obligation to comply with a certain cooling-off period’ in an ex-ante manner (para 91), it does not preclude national authorities’ ex-post ‘power to issue directions to that trader’ once there has been an established unfair commercial practice (para 92). However, the measure taken cannot restrict the freedom to provide services (per Art. 4 UCPD) and must respect the rights codified in the Charter of Fundamental Rights, in particular the freedom to conduct a business under its Art. 16 (paras 94-95). In this light, the principle of proportionality mandates that a measure is only acceptable when ‘there are no other equally effective means of putting an end to that practice which are less prejudicial to the freedom to provide services and the freedom of the trader concerned to conduct his or her business’ (para 96). In short, requiring a cooling-off period is fine, unless there are less intrusive alternatives. Here, the Court took a rather constitutionally informed approach to the enforcement of consumer protection, though one might wonder why consumer protection itself (Art. 38 of the Charter) was not brought to the balancing exercise.

Comments

This case adds an interesting (but definitely not conclusive) annotation to the controversial notion of the ‘average consumer’. The Court wants to keep the baby and the bathwater: the average consumer is indeed ‘observant and circumspect’ (which receives heavy criticism) but only ‘reasonably’ so (which allows considerable leeway and flexibility). While the Court stressed that its analysis was specifically made ‘within the meaning of [the UCPD]’, its reasoning would most likely have broader implications as the average consumer benchmark is creeping into other consumer instruments. 

To some, the Court has said nothing new in this case – nowhere in EU law has it ever committed to interpreting the average consumer as ‘homo economicus’. To others, this decision may be celebrated as a victory for behavioural law and economics. However, the wording of the decision suggests (‘an individual’s decision-making capacity may be impaired by constraints, such as cognitive biases’) that cognitive biases are not the decisive nor the only factors that can ‘impair’ a consumer’s decision-making capacity. (Here, I would prefer ‘influence’ over ‘impair’ as we don’t want to reinforce ‘observant and circumspect’ and marginalise ‘reasonably’.) Indeed, while behaviouralists have commendably challenged the predominant information paradigm for better consumer protection, it has been pointed out that their critique lacks a social dimension – how choices are shaped not only by our individual cognitive capacities but also by our interpersonal interactions, social practices, cultural preferences and institutional set-ups. In this regard, the Court made reference ‘to the fact that a loan applicant is normally in need, to the complexity of the contracts presented for signature by the consumer, to the concurrent nature of the combined offer and to the short period granted to take up the offer concerned’ (para 80) – which appears to be a list of factual and contextual factors that should be considered when ascertaining how ‘reasonably observant and circumspect’ the average consumer should be in this case. And this list clearly goes beyond cognitive biases (so does the list by AG Emiliou in para 40).

In any case, determining the average consumer’s typical reaction should not be reduced to an empirical exercise solely aiming for a realistic approximation of real-life consumer behaviour, even with the help of behavioural science and even AI. This is clear in recital 18 of the UCPD (‘in line with the principle of proportionality’, ‘taking into account social, cultural and linguistic factors’, ‘not a statistical test’) and from the Court. Instead, delegating national judges ‘to exercise their own faculty of judgement’ ultimately asks them the normative question of how much protection should be afforded to the consumers in our political economy. So if we take this normative dimension seriously, we can explore other ways to flesh out the benchmark beyond what was discussed in this case. But then, to what extent should realistic considerations inform this normative assessment? And what assumptions, insights, frameworks, theories or imaginaries should serve as the normative guideline for judges to fill in the definition? 

Like it or not, the average consumer is here to stay, and the debate is certain to persist. How ‘reasonable’ the average consumer should be expected to be, what and who should inform this definition, and therefore what the desirable level of consumer protection should be – these questions will continue to puzzle academic debates, judicial reasonings and even political processes. 

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

 Dear readers, 

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

Alternative terms on performance, average consumers... tune in to CJEU in mBank (C-139/22)

Claudio Schwarz on Unsplash

Today the CJEU decided another case on unfairness in mortgage loan agreements with an index-link to Swiss francs - in the Polish mBank case (C-139/22). The first part of the judgment is Poland-specific, as it refers to the validity and effect of a national register of unlawful terms, which Poland happens to have. This issue has already been considered in the previous Biuro case (see our comment on case C-119/15 here). The Court now reiterated that as long as the register is transparent, kept up to date, and the traders have an opportunity to question the applicability of the register in their particular case, national courts could benefit from such registers (paras 41-43). Hence, contested terms could be declared by national courts as unfair if their content has previously  been registered as unfair, provided that the court warns parties to the proceeding about this and gives the trader the opportunity to challenge this finding (para 45). 

The second question was more interesting: What happens if the mortgage loan contract contains a term that is likely to be unfair, however, it also contains another term, which allows consumers to disregard the unfair term and follow a different path for contractual performance? In this case, the contract included a term that obliged consumers to reimburse a loan index-linked to Swiss francs 'exclusively in the national currency as converted according to a rate of exchange freely determined by the bank' (para 52). This term was previously determined as unfair by Polish courts. However, the contract also included a term that allowed consumers instead to reimburse the bank directly in Swiss francs. This would allow consumers to choose where to obtain Swiss francs from, avoiding the conversion rates set by mBank. According to the bank, consumers could have then avoided the detrimental effect of the first term, which, again pursuant to the bank. would not lead to unfairness. The Court rightly rejects this argumentation. Contrarily, it emphasises that a contract containing such a mechanism - two alternative terms referring to the same obligation, one of which is unfair and one of which is lawful - per definition should be considered unfair (para 55). The trader could be seen as counting on consumers' 'lack of information, failure to pay due attention or a lack of understanding', which would lead them to re-pay the loan in the way set out by the detrimental, unfair term, with the other term then only providing a mechanism to avoid liability by the trader (para 55).

Interestingly, the Court makes the above-finding fully aware of the average consumer standard that applies to the interpretation of the UCTD provisions. On its basis, we could expect that reasonably well-informed and circumspect consumers, who are to read and attempt to understand the contract and its consequences, should recognise the better of the two options for re-payment. And yet... the Court does not think so.

The average consumer is mentioned by the Court when giving the answer to the third question: Does the fact that one of the borrowers worked for the bank exclude them from the scope of protection of the UCTD? The answer is: No. As the concluded contract does not pertain to the employment relationship, the sole fact that it is concluded with the employer does not mean that it could change its non-commercial purpose (para 69). Further, even if the consumer in this case had insights into exchange rates of mBank, which were not available to consumers not working for this bank, this did not mean that their 'more specialised' knowledge should exclude them from the scope of protection of the UCTD. The CJEU reminds that we refer to the objective benchmark of an average consumer and their knowledge. Thus neither less nor more consumer knowledge in a given case will matter (para 66).

We read *that* preliminary ruling request so you don't have to

Dear readers, 

as many others, I was mesmerised yesterday when a twitter user shared a preliminary reference (Italian version here - the English translation contains some mistakes so it's not super reliable right now) from the Italian Consiglio di Stato (that is the highest court in administrative matters, competent for final decisions on actions of the Italian Competition and consumer authority) bluntly asking the CJEU to renege on the UCPD definition of "average consumer". 

This is the bit from the reference that almost got viral: 

Should the concept of ‘average consumer’ referred to in Directive 2005/29/EC, understood as a consumer who is reasonably well informed and reasonably observant and circumspect — given that it is vague and flexible — be worded according to the best science and experience and thus refer not only to the classic concept of homo economicus, but also to the findings of the latest theories on bounded rationality, which have shown how people often act by limiting the information they need through decisions which appear ‘irrational’ when compared with those that would be taken by a hypothetically observant and circumspect person; findings that impose a need for greater consumer protection where — as is increasingly the case in modern market dynamics — there is a risk of cognitive influence?

Now, of course one could wonder whether the CJEU would want to venture into theoretical debates on appropriate consumer images. Utrecht colleague Catalina Goanta has suggested that the Court could answer the question in typical CJEU style, by referring to the margin of appreciation for national courts (+ statement that average consumer is not a statistical test) in the Directive's recital 18 and somehow quoting own case-law. 

One could also expect the Court to go around the question, depending on the underlying issue. What was it, then? Based on the preliminary reference, which contains four more questions, it seems that the following has happened: 

- the authority has ordered Compass Banca, a credit institution offering jointly some consumer credit and an unrelated insurance, to grant consumers a 7-day "cooling off period" between signing the two contracts;

- this on the assumption/theory that selling the two products together would make consumers falsely believe that entering the insurance contract is a mandatory requirement for obtaining the desired credit;

- the Authority thus considers the practice as always unfair because, in essence, it appears to exploit a cognitive bias that the Authority has connected to "framing" - whereby the presentation of a product alongside a different one gives the consumer a different impression compared to a situation in which the product would be offered on its own (see question 2);  

- it seems that in this case the Authority has claimed that the bundling as such would be an aggressive practice, which the defendant company must have challenged, claiming that the contracts being signed at the same time should be consider as unproblematic considered that consumers get the express opportunity to withdraw from the insurance contract or confirm their choice during a devoted phone call (see the authority decision - in Italian - here); the defendant company's actions (hinted to at question 4) to limit the potential effects of the practice were not considered sufficient commitments to prevent the issuance of a fine;

- hence the Consiglio di Stato seems unsure whether the prohibition needs to be seen as a move akin to "blacklisting" the bundling practice, without considering whether the concrete practice at hand should be considered aggressive, or whether indeed the specific form of bundling - combining insurance and credit - can be considered as so bad that it would be for the company concerned to show that it does not concretely affect the autonomy of the average consumer (see question 5). Should it be seen as blacklisting, the Authority would have gone beyond the space left to national authorities under the Directive's maximum harmonisation standard. 

Looking at the case, it seems that there could be several ways for the CJEU to answer the question without entering into the specifics of the debate hinted to in the first preliminary question that caught all our attention yesterday - also depending on the submissions by the parties during the preliminary ruling proceedings. 

Concern with the overall "environment" in which consumers make decisions concerning, in particular, distance credit contracts is something that is really not specific to the Italian AGCM - the Dutch financial markets authority for instance has been for years advocating for a responsible "choice environment" in the provision of credit to consumers (see eg here), with a specific focus on framing effects. 

At the same time, should we wish for the CJEU to embrace "bounded rationality" as "best science" and "most recent insights"? Current debates in consumer psychology and social sciences seem to have already gone far beyond the idea of bounded rationality to account not only for cognitive limitations but also for social constraints, habits, motivations... not to mention, as Martijn Hesselink has observed in passing, of reinforcing the idea that when no obvious exploitation of cognitive bias is at stake, "homo oeconomicus" could actually be a viable standard. 

OECD report on Dark Patterns

 Yesterday, aka 26 October 2022, the OECD has released a report on Dark Patterns which had been in the making for almost two years. LLM students who would like to write about the topic or just about anyone looking for a clear intro to the subject - this report is your friend! It contains not only a helpful classification of different types of dark patterns but also a quite comprehensive review of relevant regulatory frameworks/interventions, known case-law and much (if not all, and if arguably too US-centred and English-based) of the literature you may also want to look at, including... Joasia's 2019 JCP paper The Transparent Trap! Kudos there.

A working definition is provided at the outset which may or may not gain traction in the field: dark patterns, accordingly, are 

"business practices employing elements of digital choice architecture, in particular in online user interfaces, that subvert or impair consumer autonomy, decision-making or choice. They often deceive, coerce or manipulate consumers and are likely to cause direct or indirect consumer detriment in various ways, though it may be difficult or impossible to measure such detriment in many instances."

[The first part of the report, where dark patterns are typified and their impact assessed, I skip for now - but you can find it all online!]

The report acknowledges that more enforcement is necessary in the EU, while ultimately praising the UCPD's relative ability to address the problem in comparison with other instruments: if on the one hand resonance with the black listed items in the annex makes it possible to address certain black patterns with a degree of legal certainty, the report observes, the "principle-based" prohibition of unfair commercial practices works quite well to cover technological and commercial developments like the ones at hand. 

One critical point that is (thankfully) mirrored in the report is known criticism of the average consumer standard: this standard is hard to square with consumers' apparent vulnerability to dark patterns & other online perils &, the report observes, seems particularly problematic in the context of increasing online personalisation. The report also highlights criticism of disclosure rules, in particular as a way of preventing consumers from falling for dark traps: it turns out, the report concludes, that all experiments trying to measure the effects of disclosures in this area failed to detect any serious improvement. Hence the relevance of information may be limited to broader education campaigns and possibly to a limited set of dark patterns. 

The report also interestingly reviews examples of technical supports that are being developed - essentially, dark pattern-blockers for one's browser. These are, apparently, useful in some cases but less so when the dark patterns is not to be "written away" in code (p 47). I would like an app like that though!

As a scholar who reads Law & Econ work with a mix of interest and skepticism, I was less impressed by the report's discussion of nudges on page 37, under "Digital choice architecture". The title reflects a trend that has been going on for a long time of course; the report, however, brings together under one technique concerns that may need to be kept separated. "Privacy by design", that is mentioned as example, is not the same as a "bright pattern" based on extrapolating "welfare enhancing" choices from supposed "preferences or expectations". While the report necessarily gives a limited overview on each issue, conflating privacy protection with "consumertarian" views and hard-core nudge advocates is to my mind quite problematic.

Anyway, this is really a good starting point but also, as far as I can tell, a fairly comprehensive restatement that those already in the debate will also benefit from. Recommended read!

A promise is a promise - or is it? Ask the average consumer! CJEU in C‑249/21, Fuhrmann

 We've all been there - trying to decide whether to go for the hotel which promises nicer breakfast or the one with free cancellation until 24 hours before arrival. We don't know what happened to mr B, who booked an expensive hotel in a German village and didn't show up to take possession of his room(s). We do know, however, that he did not cancel his reservation in time - after which he was confronted with a hefty bill for a five-night stay he had reserved and made no use of. This led to an interesting decision by the CJEU last week, in case C-249/21.

The hotel reservation in this case took place via booking.com, which displays a final button: "complete booking" once a user has filled in all necessary identifiers. Does this mean that once they have clicked the button, a consumer has in fact entered a contract with the facility they selected?

According to the national court that referred this case to the CJEU, the dispute depends on whether the words ‘complete booking’ (in the German original: Buchung abschließen), satisfies the obligation laid down in Paragraph 312j(3) of the BGB, which requires the trader to display in an easily legible manner on the button for placing orders the words ‘order with obligation to pay’ or a corresponding unambiguous formulation. This provision implements the information obligations established by the second subparagraph of Article 8(2) of Directive 2011/83; the next section, namely Paragraph 312j(4) of the BGB, provides that a contract is then concluded if the information/warning was correctly provided. 

 Is "complete booking", in other words, a sufficient clue that a contract is about to be concluded, or should more explicit language be adopted given the fact that "booking" in everyday language can easily refer to a non-committal form of reservation with no contract being concluded?

The CJEU recalls that the Consumer Rights Directive must be interpreted with an eye to the achiement of a high level of consumer protection; in this spirit, however, any formulation that will deliver the essential notice to the consumer will be apt to comply with the Directive's requirement: while the Directive itself mentions "order with an obligation to pay" as an example of wording that can convey the necessary message, according to the court this does not mean that service providers have to reproduce the exact same wording (para 26-27). However, according to the Court it is also clear from the wording of the Directive that the button itself must display sufficiently unambiguous language - the context alone, or previous stages in the interaction between consumer and trader, cannot make good for insufficiently clear communication at the late stage since the Directive's article 8 refers to information to be explicitly provided just before the contract is finalised (para 28-29, with reference to recitals).  

In conclusion, thus, it is for the referring court to ascertain whether, in the day-to-day use of the German language, "Buchung abschließen" can be considered to carry an unambiguous meaning which is tantamount to "order with an obligation to pay". In doing so, the court will have to keep in mind the "average consumer who is reasonably well informed and reasonably observant and circumspect".  

A number of elements are remarkable or interesting in this case: first, the demanding interpretation of article 8(2), excluding that the context of the transaction would be enough to expect the consumer to understand a certain click as entailing an obligation to pay; second, the fact that booking.com likely uses very similar language across its language versions, but will now probably have to initiate an investigation into the overall implications of all those versions (or change the button to add a reminder that confirming means entering an obligation to pay, which would probably - without really changing the legal reality in most Member States, scare off a certain quota of consumers); third, it reminds us of the importance of different implementation techniques, as it was Germany's specific choice to connect the contract's conclusion to the compliance with information obligations in cases like this one; finally, and perhaps most startingly, the case reminds us of the platform paradox. While booking.com had been the one setting up the context of the transaction as well as the concrete looks and language of the confirm button, the company stays entirely out of the underlying litigation: if their button, in other words, would be found ambiguous, other service providers (ie the hotels) would possibly be in trouble.  Neither does it seem to me - but it may be due to my poor reading - that article 4 in the modernisation directive, amending the CRD to add specific information obligations on the side of platforms, would change this conclusion. LMK via available channels if you have any thoughts on this!

Health claims and the value of an asterisk for the average consumer: case C-524/18 Dr. Willmar Schwabe

Back in January the Court of Justice delivered a noteworthy judgment in case C-524/18 Dr. Willmar Schwabe, on which we have not had a chance to comment so far. The case concerned the interpretation of Article 10(3) of Regulation (EC) No 1924/2006 on nutrition and health claims made on foods and arose from a dispute between two competing producers of food supplements in Germany: Dr. Willmar Schwabe and Queisser Pharma, concerning the alleged misleading packaging of a ginseng-based supplement marketed by the latter.

To recall, Regulation No 1924/2006 harmonises national provisions relating to nutrition and health claims used in the labelling, presentation and advertising of foods placed on the EU market. Besides not being false, ambiguous or misleading, the use of nutrition and health claims should comply with a number of more specific conditions. Notably, the presence, absence or reduced content of a substance in respect of which the claim is made must have been shown to have a beneficial nutritional or physiological effect, as established by "generally accepted scientific evidence" (Article 5(1)(a)). What is more, reference to general, non-specific benefits of the nutrient or food for overall good health or health-related well-being may only be made if accompanied by a specific health claim from the lists of permitted health claims in the Union Register (Article 10(3)). Under Commission's implementing Decision 2013/63/EU food business operators are responsible to "demonstrate the link" between specific claims included on the list and the general references made in relation to their products.

Visual link between general and specific claims

Source: apotheke-adhoc.de

Core question in the case at hand revolved around the necessary link between general and specific claims. Specifically, the question was whether a general statement "B vitamins and zinc for the brain, nerves, concentration and memory" made on the front side of the packaging was sufficiently linked to the more specific health claims included on the reverse side, considering that no visual link was established between the two.

The Court addressed the question referred using literal, systematic and teleological reasoning. Included in the analysis were among others: the use of the word "accompanied" in Article 10(3) of Regulation No 1924/2006, the regulation's purpose of providing "a high level of consumer protection", and the need to interpret derogations from the general prohibition of health claims in Article 10(1) strictly. Considering these factors together, the Court found that specific health claims should not only specify the content of general claims, but also the location of those two claims on the packaging of the product should enable an average consumer to understand the link between those claims. Accordingly, the concept of "accompanying" referred to in Article 10(3) must be interpreted as including both a substantive and a visual dimension (para. 40), the latter referring to an "immediate perception by the average consumer ... of a direct visual link between the reference to general, non-specific health benefits and the specific health claim" (para. 47). Interestingly, according to the Court, such a link requires, in principle, spatial proximity or immediate vicinity between the reference and the claim, yet the relevant requirement could exceptionally be satisfied by means of an explicit reference, such as an asterisk (*). The chosen method should ensure, in a manner that is "clear and perfectly comprehensible to the consumer", that, in spatial terms, the content of the health claims and the reference match (para. 48).

Evidential requirements for general claims

Applying a similar interpretative toolkit, the Court went on to analyse whether ‘general’ health claims, such as the ones made on the front of analysed packaging, should also be justified by scientific evidence in accordance with Articles 5(1)(a) and 6(1) of Regulation No 1924/2006. In this regard the Court opted for a reading which reduced the burden placed upon the food business operators. Thus, although the response to the second question referred was generally an affirmative one, the Court went on to conclude that the evidential requirements for general claims are satisfied when such claims are accompanied by specific health claims that are supported by generally accepted scientific evidence which has been verified and authorised and have been included in the Union register.

Overall, while the first part of the judgment applies a rather strict benchmark, the second part restores the balance for food business operators. Although the notion of an average consumer, who is reasonably well informed and reasonably observant and circumspect,  features prominently in the judgment, the requirement to interpret exceptions strictly lends support to the application of a strongly protective test in the first part of the analysis. Importantly, food business operators should bear in mind that the use of an asterisk may, but does not necessarily have to, satisfy the requirement of sufficient visual link, and was accepted only exceptionally, due to large size or length of the specific health claims invoked. Whenever possible, spatial proximity or immediate vicinity between general and specific claims should be ensured. As long as the conditions of Article 10(3) are fulfilled, evidential requirements of Article 5(1)(a) are also satisfied.

Recent research reveals how consumers engage with crypto-assets

The Financial Conduct Authority, the UK's financial regulator/supervisor recently published an interesting report on how consumers behave in relation to crypto-assets: How and why consumers buy cryptoassets. To remind ourselves, crypto-assets are virtual, digital assets used for payment or investment purposes or both. This research fits well into the current EU efforts on regulating fintech services and products. We have reported earlier on the EU Commission's 2018 Action Plan on Fintech within which crypto-assets are of a special concern. More recently we have discussed ESMA's recommendation for a need for tailored regulation for the protection of consumers, buyers of crypto-assets.

The present research is focused on consumer behavior, on how consumers engage with crypto-assets. It is especially interesting to discover the profile of an 'average' fintech customer of crypto-assets and their ability to make informed decisions. The report answers questions such as why did consumers decide to buy crypto-assets, what sources of information they used to make their decisions, and how well in general they understand the market. As expected, this research seems to suggest crypto-assets are bought for investment purposes without fully understanding the risks involved in their decisions. 

The report is an interesting and easy read with plenty of direct testimonies from consumers, and  as such is highly recommended to our readers interested in consumer behavior and/or financial innovation.

In the future, it would be interesting to expand this research onto other areas of fintech services i.e. credit, insurance and payments to get a fuller picture of the fintech market structures and their consumers.

If it looks like withdrawal, it quacks like withdrawal... it may still be financial services. AG Pitruzzella in Romano

Yesterday, AG Pitruzzella published his opinion in Romano v DSL, a case concerning a somewhat less well-known instalment in EU consumer protection: Directive 2002/65/EC. The concrete issues discussed in the case, however, are quite similar to typical consumer cases: they have to do with withdrawal rights and information provision. 

In 2007, the Romanos entered a distance consumer credit contract. They signed a form acknowledging that demanding immediate performance of the credit meant that they were forsaking their right of withdrawal. For more or less ten years, they went on paying back the credit, until they decided to sue the bank arguing that the contract should be terminated: they had not been provided appropriate information on their withdrawal rights, and hence should not be held to the contract. Additionally, as provided by German law, the creditor should pay them compensation for having all the while retained use of their money. 

The right of withdrawal in distance consumer credit contracts, as featured in the Directive, appeared to have been implemented in the various sub-provisions going under article 312 of the German Civil Code, or BGB. These excluded withdrawal from already performed financial contracts, when performance had taken place at the express requests of the consumers before their withdrawal period expired. However, it appears to be the case that the German Supreme Court had affirmed that the consumer’s right of withdrawal in distance financial services was still regulated by article 355 (and 495) of the BGB, where the general provisions on withdrawal in consumer contracts find their place. This meant that the contract’s performance did not exclude the right of withdrawal when consumers had not been properly informed.

The referring court asked, in essence:

1)   Whether it was precluded, under the Directive, to regulate the right of withdrawal in the field covered by it in a way different than what established by Article 6(2)(c) of the directive itself; 

2)   Whether the information to be given under the Directive and concerning the right of withdrawal must be aimed at the “average consumer” as defined by CJEU case-law, or whether the directive allows for a different consumer image. 

As to the first question, the AG answers in the affirmative: the Directive must be understood as pursuing full harmonisation except when expressly providing otherwise.  A clause allowing for additional protection at MS level had been included with regard to information provision, but not to withdrawal rights. The fact that in this case the two issues were to an extent interrelated – the right of withdrawal being extended as a result of (allegedly) insufficient information provision – did not lead to a different conclusion, because the Directive (we must understand: intentionally) did not attach any consequences to the provision of insufficient information on the right of withdrawal. It only said that the withdrawal period only started running once the consumers were informed of their right. 

As to the second question, the AG engages in a sort of systematic interpretation, explaining that since the definition of “consumer” in Directive 2002/65 was essentially the same as the ones found in Directive 93/13 and 2005/29, and the Court of Justice has already clarified that the average consumer standard applies to both of those directives, the same consumer notion – postulating a reasonable, informed and circumspect consumer – should apply here. It is such a consumer, thus, that should be kept in mind when ascertaining whether sufficient information has been provided in the context of the Directive. In this case, the AG does not engage in a discussion concerning minimum and maximum harmonisation – likely because providing “additional protection” under the Directive is an activity that would only be open to national legislatures and is precluded to civil courts adjudicating on specific cases. 

The AG also answers the third question – which would fall if the court followed him on the first two points: can a member state require providers of financial services to pay the withdrawing consumers compensation for the availability of the consumers’ money between the contract’s conclusion/performance and the time of withdrawal? According to the AG, member states cannot introduce such a requirement: the Directive’s article 7 regulates exhaustively the consequences of withdrawal, without providing for such additional compensation. In light of the system of the Directive, which gives consumers two weeks to exercise their right of withdrawal, such additional compensation would make little sense. 

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The opinion contains some possibly controversial passages – such as the assumption that lending “imperialist” force to the average consumer standard is just a matter-of-fact operation – but does not come across as particularly surprising. Perhaps its most remarkable feature is to remind us of the complications arising from the EU’s resolve to treat consumer financial services as a field of its own, requiring national legislators and courts to fragment otherwise rather indistinguishable situations in accordance with the Union’s rather arbitrary legislative boundaries. Have a nice weekend!

AG Campos Sánchez-Bordona's opinion on Orange Polska (C-628/17): Signing a contract with the courier present can be undue influence under UCPD

On 30 January 2019, the AG Campos Sánchez-Bordona's opinion on case C-628/17 Orange Polska has been published. This is a case of great significance as it is the first one clarifying the meaning of aggressive practices and especially undue influence under the Unfair Commercial Practices Directive (UCPD). In the last year there has been a growing interest in aggressive practices with this being the second case on aggressive practices, following the judgment on Wind Tre, after the Directive being in force for more than 10 years. It is not clear why this is happening now, yet it is a welcome development. Perhaps it is telling that both these cases concern telecommunications companies.

Facts of the case

Orange Polska is a Polish telecommunications company which concludes service contracts with consumers through their website, using the following stages (the opinion also mentions sales via phone, yet the stages listed are relevant only for online sales):

1. Consumer’s visit to the website of the company where he can get informed on the offers of the company as well as access the standard forms.
2. Choice of product.
3. Send an order. What is highlighted about this is that the consumer does not consent to any statement that he has read the terms and conditions at this stage.
4. The order is executed with the courier service employee bringing the standard form contract to the consumers, along with any other appendices to sign.
5.  Contract is concluded when the consumer signs the contract and the declaration that he has reviewed all the documents is handed to him and he accepts their content. The signing needs to take place while the courier employee is there, otherwise the consumer needs to go to a physical shop or place a new order online.
6. The contract is activated.

Stage 5 of the ones listed above is the problematic one, especially the aspect that consumers have to sign the documents in the presence of the courier employee, meaning they might be pressured into signing without having the opportunity to review the documents in detail. That was the view of the Polish regulator who found the practice to be harmful to the collective interests of consumers. This administrative decision was disputed in the Warsaw courts with the decision being cancelled in the first instance only to be reinstated by the Court of Appeal. 

Referred questions

Finally the case reached the Supreme Court of Poland, which referred the following questions:

The Court asked whether the practice in question, where in order to conclude a telecommunication contract the consumer has to make the final decision in the presence of the courier employee who is handing him the contract terms, should be considered an aggressive practice with the use of undue influence, according to art. 8 and 9 UCPD.

The referring Court goes on to discern different scenarios the practice can be characterised as aggressive:

1. Always when the consumer has not been able to be informed of the content of the terms during the visit of the courier employee without hindrance.
2. Only when the consumer has not received the full terms in advance individually before the visit of the courier employee, even though he had the chance to access them online.
3. Only when from it can be deduced that the business is engaging in unfair practices aiming at impairing the freedom of choice of the consumer thereby causing him to take a transactional decision he otherwise would not have taken.

AG opinion

The decision on whether a practice is aggressive needs to be made taking into account all of its features and circumstances, as stated in art. 8 UCPD.

The phrasing used in the referred questions is contentious, such as the use of the word ‘always’. As the AG clarifies, only the practices included in ANNEX I of the Directive are meant to be always unfair. Given that the practice in question is not one of the blacklisted practices, then it cannot be said to always be unfair. (para. 42)

Sometimes classified as aggressive

One of the arguments put forward by the Orange Polska is that the practice cannot be characterised as using undue influence as it did not make use of illegal influence. The AG Campos Sánchez-Bordona in his opinion rejects this restrictive interpretation of the term ‘undue influence’ and states that undue influence is the influence which, regardless of its legality, leads in an active way, through the use of pressure, to the manipulation of the will of the consumer (para 45).

In order to decide whether the particular practice was aggressive, three relevant factors are listed. The AG correctly states that the weight placed on each of these factors will depend on the facts. Each one of these factors may be able to establish the aggressive character if it is intense enough, or there may be a need to combine the presence of all three to find the practice aggressive (para 53).

These factors are listed in para 52 of the opinion:

1. If the behaviour or the actions of the employee of the company are especially pressuring or aggressive.
2. If the consumer received in advance limited, fragmented or partial information or information that does not correspond to the one provided later by the courier employee. This element is enough to establish a misleading action or omission (as per art. 6-7 UCPD) and possible undue influence.
3. Finally, other unfair actions of a different nature would suffice, according to their potential for influencing the will of the consumer to amount to undue influence.

Relevant factors

While the facts are to be determined by the national court AG Campos Sánchez-Bordona is offering a helping hand by providing a list of relevant factors for deciding when a practice is aggressive.

The AG distinguishes between sales via phone and sales via the internet, as the circumstances call for a different approach.

In online sales, usually the consumer chooses to visit the website of the trader and nothing stops him from taking time to consider the different offers and terms. Conversely, on the phone, there is often an element of surprise and the consumer is passive (para 57).

Furthermore, there is a different average consumer in the two instances (para 58). The average consumer shopping online is considered to have a minimum level of familiarity with online processes and the ability to handle them at least until placing an order. On the other hand, the average consumer of phone sales may be less circumspect and well-informed and therefore in need of greater protection. The rationale for that is that it is easier to reach that consumer on the phone, as all that is needed is to take a call.

Also, the quality of the provided information is important, as one of the important features of aggressive practices are that they limit the freedom of choice of the consumer, as stated also in Wind Tre case (para 59). Since this is only the second case on aggressive practices ever, and AG Campos Sánchez-Bordona was involved in both, there is a frequent mention of the remarks made in Wind Tre (see the previous post on that case here).

It is essential that consumers are informed of the terms prior to the conclusion of the contract, as that is how they decide whether to commit to the contract. The AG Campos Sánchez-Bordona states that ultimately, there is a disparity between the information provided in online and phone sales with the information in the latter one being of a lower quality (para 62).

The important question is here whether the timing of the provision of information, in this case in the presence of the courier employee is enough to make the consumer take a transactional decision he would not have taken otherwise. This may be the case particularly if the consumer has doubts on whether the information provided by the courier employee is the same as the one they read online or were given by phone (para 66). This issue is exacerbated by the fact that the courier employee is not in the position to answer any questions on that matter and dissolve their doubts.

The behaviour of the courier is key in determining whether the practice would be aggressive. Every measure needs to be taken to alleviate any psychological pressure to the consumer to sign. This can be achieved by the employee not insisting that the consumer signs on the spot. Should the courier employee be linked to the trader (which was not the case here), there is a higher standard to adhere to as they should be able to answer questions. Furthermore, they should not imply that if the consumer does not sign they might face a penalty or less favourable terms in the future and should offer to visit on another day to allow consumers to read the terms in their own time (para 72).

These suggestions do not so much list what would classify as aggressive behaviour but rather what wouldn’t.

Conclusion

This is the most detailed interpretation of what constitutes an aggressive practice in the case law of the ECJ. It is a sorely needed guidance, going beyond the phrasing of art. 8-9 UCPD, which would assist regulators and traders. It reflects the difficulties in defining aggressive practices to the extent that they are tied to human behaviour. It remains to be seen whether the ECJ in its judgement will follow the AG’s opinion and how they will interpret the meaning of undue influence.