Dutch court upholds Fortnite fine for UCPD violations

 While the "Digital Fairness Act" may or may not become a thing in the near future, it is interesting to see how regulators have started to perhaps gain more confidence in the enforcement of existing rules in the digital context. A most recent example comes from a Dutch decision published today in Epic Game's case against the Dutch Authority for Consumer and Market's decision to fine the Fortnite producer for a number of prohibited practices embedded in the game. 

According to the ACM, Epic Games exposed children to advertisements which directly exhorted them to buy a product (a banned practice under the UCPD's annex) and put them under pressure to decide about a complex and unclear offer within a short time (para 1 decision).

Epic Games had earlier accepted parts of the ACM's decision, in so far as it concerned timers in the Item Shop that created the false impression that an item or offer may soon run out or disappear. They challenged, however, 1) the existence of exhortation to purchase directed at children, as well as 2) the ACM's claim that the game's Item Shop was designed in such a way to create artificial scarcity, putting players under pressure to decide within a short period of time whether to buy certain items. 

As to the first point, this hinged on the interpretation of the text in the annex. From the judgment it appears that Epic Games wanted the District Court to decide on the ACM's assumption that "children" in the UCPD's annex covers all minors, which was challenged on the basis that it failed to differentiate between young children and older teenagers. The court considers that this distinction may matter for the amount of the fine but not for the question of whether the finding of an infringement was justified and hence declines to examine the issue in detail since Epic Games has not challenged the entity of the fine. Even without a detailed examination, this element in the decision may in fact embolden authorities, which have found it tricky to claim that practices constituted direct exhortation to buy directed at children whenever a product was not exclusively marketed to very small children. There was otherwise relatively little in the decision that tried to suggest that the practices at stake (see picture, from decision) did not constitute direct exhortation to purchase.

As to the second point, the ACM (see decision para 17 and sub-paras) was relying not on a direct prohibition but on a savvy reading of the general prohibition of unfair practices which go against "professional diligence" and distort the average consumer's decision making (art 5 UCPD). In this respect, the Court says, the ACM has understood professional diligence through "the principles and international rules on ethical design such as transparency and the avoidance of damaging or misleading design". The ACM also claims that professional diligence requires abstaining from exploiting behavioural pitfalls of consumers through so-called "dark patterns".  In particular, lack of transparency about the offer was due to a mix of several elements:  items potentially disappearing from the item shop, lack of information about the items' significance within the game and their rarity (which all connected to their price), all combined with time pressure (because the Item Shop content was refreshed every 24 hours), made it difficult for consumers/children to decide without excessive pressure. The Court has accepted the ACM's analysis and characterisation of the practice, rejecting Epic Games' contention that the analysis relied on the wrong test. 

A final challenge concerned the burden of proof: did the ACM need to prove that the concerned practices had actually influenced the behaviour of children as a result of the factors that its analysis identified? The Court finds that no proof has to be provided of actual influence: it is sufficient that the analysis makes it sufficiently plausible (aannemelijk) that these effects would occur. Among other things, the court points to ACM relies on research reporting that 37% of the kids playing the concerned version of the game (namely, Battle Royale) do make in-game purchases and that significant numbers of children who make in-game purchases regret their choices afterwards (see decision para 21.1). 

The confirmed fine amounts to 1.1 million euros. It is clear from the points raised in the case that Epic Games was here seeking to establish a principled precedent against the ACM's interpretation of the UCPD and their recent steps in digital enforcement. This may suggest that the decision will be appealed - which we should know within a few weeks. Interesting case in any event!

Polish bankruptcy law fails consumers with unfair loan terms - CJEU in Wiszkier (C-582/23)

Photo by Towfiqu barbhuiya on Unsplash

In July 2025, the CJEU issued a judgment in Wiszkier (C-582/23), concerning a Polish case involving a consumer mortgage loan indexed to Swiss francs. In this instance, the consumer had to declare bankruptcy after being unable to meet, among other obligations, their mortgage payments. Although the bankruptcy court found that the contract potentially contained unfair terms, raising the possibility of the contract being null and void, Polish law prohibits this court from examining this issue further. Under Polish law, even if the unfairness of contract terms had not been previously raised by the consumer, the bankruptcy court is only competent to approve or reject a repayment plan based on a list of claims drawn up by the trustee (paras 26-27). At most, the court may stay the proceedings and refer the unfairness' matter to another competent, supervisory authority (paras 29 and 45). 

Unfairness assessment by the bankruptcy court 

Decision: Incompatibility with EU law. Unsurprisingly, the CJEU found Polish law incompatible with EU law. Specifically, it held that the Unfair Contract Terms Directive precludes national provisions that prevent a bankruptcy court from examining the unfairness of contract terms in a loan agreement underlying a claim included in the list of claims, or from amending that list, where no such assessment has been conducted by the authority preparing the list (para 58).

Although EU law leaves enforcement of consumer protection rules against unfair contract terms to the Member States, such national rules must comply with the principles of equivalence and effectiveness (para 40). The CJEU found that the principle of effectiveness was violated in this case. While Polish law allows a bankruptcy court to stay proceedings so that a supervisory court may assess the potential unfairness of contract terms, this process introduces delay and exposes consumers to further financial hardship. During the stay, the bankrupt's salary continues to be withheld by the bankruptcy estate, which may discourage consumers from raising objections based on unfair terms (para 46). Notably, monthly repayments set in bankruptcy proceedings are often lower than the salary amounts withheld during the proceedings (para 47), exacerbating the financial strain. Moreover, in this case, although the consumer had acknowledged all the claims listed by the trustee, this was done without legal representation and likely without understanding that an unfairness objection could be raised (para 52). The consumer only raised this issue. through legal counsel, once the case reached the bankruptcy court (para 53). The CJEU clarified that it is irrelevant whether the list of claims has become res judicata (para 55).

Interim measures by the bankruptcy court

Decision: The CJEU further ruled that national law must enable bankruptcy courts to grant interim measures to protect consumers while the fairness of a claim included in the list is under judicial review.

The Court reiterated that ensuring effective consumer protection against unfair terms may require granting interim measures, for example, adjusting monthly instalments during prolonged proceedings to prevent consumers from being forced to pay more than the amount actually due if the unfair terms were ultimately invalidated (paras 67-68). As noted by the referring court, the fear of higher interim payments to the bankruptcy estate may deter consumers from raising unfairness objections altogether (para 69). The court responsible for granting interim measures must consider: "whether there is sufficient evidence that the contractual terms concerned are unfair, whether there is a real possibility that the bankruptcy estate is already sufficiently funded to satisfy the creditors, with the exception, as the case may be, of the claim concerned, as well as the bankrupt's financial situation and the risk of that person having to endure a prolongation of the bankruptcy proceedings which could result in an unwarranted deterioration in his or her financial situation pending the conclusion of those proceedings." (para 71)

Facilitating enforcement of unfairness control - CJEU in Getin Noble Bank and Others (C-531/22)

Happy 2024 Dear Readers!

We are starting a new year of reporting with the reference to the last week's judgment in the Polish case referred to the CJEU as Getin Noble Bank and Others (C-531/22 - not yet available in English, but accessible in other languages). This judgments continues to provide guidance on the application of the Unfair Contract Terms Directive to terms in mortgage contracts indexed in Swiss Francs. The CJEU considered two questions/issues: 

1. Ex officio judicial authority to test unfairness while overseeing enforcement of a final payment order with res judicata status

To not keep you in suspense: The CJEU decided that national courts may ex officio assess unfairness in such circumstances, provided that: 1) national law did not allow for unfairness test at the moment of issuing of a payment order, or 2) if such unfairness test is only allowed if a consumer would have objected to the issued payment order, provided that there is a significant risk that a given consumer is not going to issue an objection. This risk could result from: the short time allowed for filing the objection, objection's costs compared to the debt amount, or the lack of obligation to provide consumer with all the information necessary to determine their rights in this respect (para 61). This is, in large extent, confirming Court's previous judgment in Leasing România judgment (C-725/19) (paras 50-51).

This is an important judgment to address some inefficiencies of the Polish civil law procedure that may limit the scope of the unfairness testing. Specifically, payment orders may be issued by Polish courts upon an electronic request by creditors, without the courts having either legal or technical access to contractual documents, on the basis of which this payment order is issued. If the debtor does not file an objection to the issued payment order within 2 weeks from its delivery, they become final with the res judicata status. This means that they may not be further questioned in enforcement proceedings (para 49). As the CJEU previously considered a 2 week timeframe too short to reasonably give a chance to consumers to file an objection (paras 54-55), this judgment clearly indicates the lack of compliance of the Polish civil procedural rules with the effective consumer protection framework against unfair contract terms. This finding is not weakened by the inertia of the consumer during previous judicial proceedings with them as a party, as the option to file an objection to the payment order is the only opportunity for the consumer to procedurally stop the enforcement proceedings, and as such the consumer needs to be given a real chance to do so (considering the timeframe, costs etc.) (para 60).

2. Recognition of an unfair character of a contract term, upon it having been entered into a register of unfair contract terms, also in subsequent judicial proceedings against a given consumer, even with a different trader involved and when the term has been differently drafted, but when it retained the same substance and led to the same consequences.

The CJEU first (paras 69-73) recalls the conditions for the validity of a register of unfair contract terms in national legal systems, which were first discussed in the Biuro case (see our comment here). Pursuant to the Court, the opportunity for national courts to compare a given contract term to a term already entered into a register after previous judicial proceedings, may lead to a more efficient and faster enforcement of the unfairness control, freeing consumers from harmful consequences of unfair terms in many contracts simultaneously (para 75). The finding of unfairness of a given term could then indeed be recognised and applied also in subsequent judicial proceedings - even with a different trader involved, and when the term has been differently drafted, but when it retained the same substance and led to the same consequences (para 78).

Revision of EU travel rules

By Alex Azabache on Unsplash

Last week, on November 29th, the European Commission announced the forthcoming (long-awaited) revision of EU travel rules (Improved rights and better information for travellers). This concerns a few legislative measures: 

1. Revision of Regulation 261/2004 on Passenger Rights through a newly proposed Regulation as regards enforcement of passenger rights in the Union

• new rules for passengers who booked flights via an intermediary
• an intermediary being defined as any ticket vendor, organiser or retailer other than a carrier
• new Article 8a adds a reimbursement right 
• passengers will need to be clearly informed by the intermediary and air carrier about the reimbursement process
• free of charge
• if reimbursement occurs through intermediaries: Air carriers shall reimburse intermediaries within 7 days, with intermediaries reimbursing passengers within further 7 days
• if passengers do not receive reimbursement within 14 days of choosing for this remedy, the air carrier contacts passengers to receive payment details and reimburses them within further 7 days
• new Article 14a adds rules on the transfer of passenger information, its safeguarding and when to delete it
• this will facilitate intermediaries sharing passenger information with air carriers, so that air carriers can be in contact with passengers about their flights
• strengthening enforcement mechanisms (similar mechanisms have been proposed to be added also to Regulation 1107/2006, Regulation 1177/2010, Regulation 181/2011, and Regulation 2021/782)
• new Article 15a requires air carriers to establish 'service quality standards' (Annex II contains a minimum list thereof) and implement 'a quality management system'
• new Article 16a specifies that the Commission will adopt a common form for reimbursement and compensation requests under Articles 7 and 8 Regulation 261/2004
• passengers will retain the right to submit their refund requests by other means
• passengers shall be free to provide information in any of the EU languages
• new Article 16b specifies that national enforcement bodies should adopt a risk-based approach to monitoring compliance with passenger rights
• this should allow detection and correction of 'recurrent non-compliance'
• new Article 16bb determines that carriers shall share information with national enforcement bodies within 1 month from the request (max 3 months in complex cases)
• new Article 16bc requires informing consumers about ADR

2. Revision of Regulation 1107/2006 on Rights of Disabled Persons and Persons with Reduced Mobility when Travelling by Air through a newly proposed Regulation as regards enforcement of passenger rights in the Union

• special right to assistance for persons with reduced mobility 
• including right for free of charge travel for a companion (if necessary to comply with safety procedures) - in Article 4(2)

3. New proposal for a Regulation on passenger rights in the context of multimodal journey

• multimodal journey is defined as a 'journey of a passenger between a point of departure and a final destination covering at least two transport services and at least two modes of transport' (Art 3(1))
• whilst the new provisions will apply to various types of multimodal journeys (single contract, combined contract, separate tickets) the unifying link between them (and limitation to scope) is that all transport contracts need to be offered by a carrier or intermediary
• whether payment takes place together for all services or separate is irrelevant though
• still, this means that the Regulation will not apply when it is the traveller who seeks out various connection between travel modes on their own
• Art. 4 - establishes the right to non-discriminatory contract conditions and tariffs
• discrimination is not allowed on the basis of passenger's nationality or the place of establishment of the carrier or intermediary
• Art. 5 - better information for passengers combining different travel modes (air, rail, road) in one trip
• e.g. on minimum connecting times between different transport modes, time schedules and conditions for the fastest trip, highlighting the lowest fares, disruptions and delays, complaint procedures
• intermediary transfers passenger data to all carriers involved to facilitate direct communication between them
• caveat: SMEs are exempted from having to provide real-time information
• right to assistance in case of missed connections
• Art. 7 - right to reimbursement and re-routing
• re-routing with the same (or another commissioned) carrier should not bring with it additional costs to passengers
• reasonable efforts should be made to ensure short delays in total travel time and to avoid additional connections
• reimbursement should be paid within 14 days (and may include vouchers, provided passengers agree to this)
• Art. 8 - reimbursement through intermediaries
• provided carriers agree, travellers could request reimbursement from intermediaries
• carriers then reimburse intermediaries within 7 days, and intermediaries have further 7 days to reimburse passengers
• if passengers do not receive reimbursement within 14 days of choosing for this remedy, the carrier contacts passengers to receive payment details and reimburses them within 14 days
• Art. 9 - right to assistance
• free of charge
• means and refreshments - reasonable to waiting time
• accommodation (and transport to it) - up to 3 nights
• Art. 10 - liability for combined multimodal tickets (with a single point of payment for all services) in case of missed connections
• carrier/intermediary liable to reimburse total amount paid for combined multimodal ticket + compensation (75% of the total ticket price) 
• unless clear information that the combined multimodal ticket consists of separate transport contracts
• Art. 11 - common form for reimbursement and compensation requests
• Chapter IV - contains rights for passengers with reduced mobility
• Chapter V - contains provisions on assuring quality of services
• Chapter VI - information and enforcement provisions

3. Revision of Package Travel Directive (2015/2302)

• Package organisers granted a right to a refund from service providers in case of cancellation or non-provision of a service within 7 days (Art. 22)
• to facilitate reimbursement of travellers within 14 days
• Downpayments for packages limited (new Article 5a)
• to max 25% of the package price, unless higher downpayment is justified by package organisers having to pay upfront for service provision
• total payment should not be requested until 28 days before the start of the package
• this is to protect consumers against risk of bankruptcy of organisers
• Revised Art. 12 clarifies termination rights in case of extraordinary circumstances (such as Covid-19)
• e.g. the need to consider official warnings against travel, but also serious restrictions that would have applied to travellers' travel at destination or upon return from travel at home country - when looking for justified termination
• New Art. 12a clarified vouchers policies 
• travellers transparently informed on the right to insist on a refund and voucher characteristics (validity period)
• voucher's amount should at least equal the amount of the refund right
• vouchers shall be valid min 12 months from the day travellers' accept them (with an option to extend by 12 months - once)
• refunded automatically (within 14 days) if not used before the end of the validity period
• vouchers shall be transferable to another traveller without any additional cost
• vouchers and refund rights covered by insolvency protection

Additional proposals have been adopted that aim to facilitate better provision of information to travellers on available travel modes, incl. combining different types of travel (revision of Delegated Regulation 2017/1926 on the provision of EU-wide multimodial travel information services). This new service intends to provide real-time information and updates, also on delays and cancellations, as well as specific information, e.g. on possibilities of taking bikes on a train (see more here).

Administrative payment orders for airlines - CJEU in LOT (C-597/20)

On 29 September the CJEU issued another judgment on the interpretation of Regulation 261/2004 in the case LOT (C-597/20). This judgment refers to a less commonly referred to provision of this Regulation, its Article 16, obliging the Member States to assure the effective enforcement of its other provisions. Whilst it is clear from this provision that the Member States need to designate a body responsible for the enforcement, the measures that are at the disposal of this body are referred to only in general terms: measures necessary to ensure that the rights of passengers are respected. 

In the case at hand, the question was whether the designated body in Hungary was authorised to order an airline to pay out compensation for a delayed flight to passengers affected by this delay who have made individual complaints to that body. Previously, in the judgment Ruijssenaars and Others (see our comment No administrative fines for misbehaving airlines... and Air passengers denied compensation should go to court) the CJEU interpreted paragraphs 2 and 3 of Article 16 Regulation 261/2004 as not requiring designated bodies to act on any individual passenger complaints and not being required to issue administrative fines for each individual infringement of the Regulation (paras 24 and 25). This aimed at protecting the bodies from becoming overwhelmed by individual complaints and ensuring they have space to conduct their general market monitoring obligations. 

In the LOT judgment the CJEU had an opportunity to clarify that pursuant to Article 16 Regulation 261/2004 the Member States have discretion what powers to award to the designated bodies. This could mean that they choose to confer enforcement powers in individual passenger complaint cases on the designated body (paras 26-27). The national solutions must, however, provide for an option for passengers to seek further compensation for their losses before a court, pursuant to Article 12 Regulation (para 29). This means that the administrative procedure may not obstruct the passenger's or the air carrier's access to an effective, judicial remedy, giving effect to Article 47 of the Charter (paras 36-37).

This judgment is a welcomed clarification, as it may embolden the Member States to confer more powers on the bodies designated to enforce air passengers protection. The tricky part - how to avoid a flood of complaints - applies to both administrative bodies and courts, and could be helped by airlines complying more with the Regulation 261/2004 in the knowledge that passengers may claim sums owned them in various ways.

Norwegian Consumer Council - sheriff of online consumer protection

The Norwegian Consumer Council (Forbrukerrådet) has published two interesting news reports this month. 

 

First, on Jan 14 it has reported on potentially unfair commercial practices of Amazon, which make it difficult for consumers to cancel their Amazon Prime subscription (You can log out, but you can never leave). The Norwegian Consumer Council identified many of these practices as Amazon using dark patterns to manipulate consumers online, hindering them in making informed choices, trying to nudge them away from actually cancelling the subscription (by misdirection, visual interferences, confirmshaming). This may be achieved through making consumers go through many pages, asking them to confirm their choices in a manner that causes confusion with consumers, etc. Generally, the Norwegian survey looked into practices of digital service providers, where consumers would take out a subscription for services. Such subscriptions involve automatic payments, content is delivered online, and thus if consumers stop using a service they may forget about it, it becomes invisible to them. Therefore, it may be especially important to facilitate consumers' termination of such services. And yet, the survey found that 25% of respondents have experienced problems with cancelling such subscriptions due to a difficult process having been set up.

Today, it has reported that another Norwegian authority - Norwegian Data Protection Authority (Datatilsynet) - issued a fine of over 9.5 million Euro to the dating app Grindr (10% of their global annual revenue), following on the Norwegian Consumer Council's complaint from a year ago about infringements of privacy by this app (Historic victory for privacy as dating app receives gigantic fine). The breach of GDPR occurred due to the app collecting and sharing personal data without sufficiently informed and explicit users' permission to such practices (more in the report 'Out of control', on Grindr specifically as of p. 72).

The New Consumer Protection Agenda 2020-25

Last month, on November 13 2020 the EU Commission adopted its new Consumer Protection Agenda 2020-25 that will provide the strategic framework of consumer protection policy  for the next five years. The Agenda identified 5 key priority areas:

1) Green transition: empower consumers to behave 'green' to purchase sustainable and circular products.

2) Digital transformation: increase online consumer protection; this aim will entail the revision of several well established directives: General Product Safety Directive, Consumer Credit Directive and Distance Marketing of Financial Services Directive.

3) Effective enforcement and redress: places emphasis on the CPC Regulation. 

4) Consumer vulnerability: means addressing the needs of different groups, including debt advice and safety of products designed for children.

5) Consumer protection in the global context: aims to promote overall high level of protection, including the safety of products sold online. 

The strategy seems to have addressed the most pressing consumer protection issues of our everyday lives. Not surprisingly it is significantly influenced by the COVID pandemic and the ways in which it reshaped our lives.

CMA pushes for refunds of cancelled holiday bookings

We have previously reported on the EU Commission's recommendation regarding cancelled flights (asking airlines to make vouchers an attractive alternative to consumers instead of a refund - see here) due to COVID-19, as well as the situation on cancelled events in Germany (entitling consumers to vouchers not refunds - see here). In the meantime, in the UK the Competition and Markets Authority (CMA) encouraged consumers to report (through an online form) if they had been affected by unfair cancellation terms as a result of COVID-19. So far this has resulted specifically in a closer investigation of the COVID-19 Taskforce (set up on March 20) as to holiday accommodation providers and their cancellation policies. Already one big provider - Vacation Rentals (responsible for Hoseasons and Cottages.com) - announced the reversal of their cancellation policy, which means consumers could expect a full refund (see here). The full refunds are due to consumers as it was unlawful to travel to the rented accommodation at the time and/or for the accommodation to be made available.

If you want to report on how the national enforcement authorities help with unfair cancellation policies in your country, please leave a comment!

Modernisation Directive adopted by the Council

The Council adopted the Modernisation Directive today, i.e. directive on the better enforcement and modernisation of EU consumer law (press release), which introduces changes to the Consumer Rights Directive, Unfair Commercial Practices Directive, Unfair Contract Terms Directive and Price Indication Directive and is part of the New Deal for Consumers legislative agenda. We have commented on the provisions of the draft directive before (see e.g. our previous posts here and here). The full text of the directive may be found on this website. 

To recall the main changes are as follows:

Consumer Rights Directive:

• broadening the scope of application to contracts where consumers pay with personal data
• traders' information duties have been adjusted to accommodate 
• modern communication means
• contracts for the provision of digital content and digital services 
• the need to inform consumers about personalised pricing
• contracts concluded on online marketplaces - new Art. 6a
• specifying trader's and consumer's obligations in case consumers withdraw from a contract providing them with digital content or digital services

Unfair Commercial Practices Directive:

• right to individual remedies for consumers - new Art. 11a
• incl. compensation for damage, price reduction and termination of contract
• the notion of a product encompasses digital services and digital content
• Member States are given more leeway in addressing aggressive and misleading off-premises selling in order to protect consumer interests
• marketing goods as identical to goods sold in a different Member State, when they differ in composition or on characteristics (dual quality goods) is a misleading action - new Art. 6(2)(c)
• not specifying whether the seller on an online marketplace is a consumer or a trader is a misleading omission - new Art. 7(4)(f)
• websites offering search function that presents consumers with an offer of products (but not online search engines) need to provide information on the ranking of products (parameters determining ranking and importance of these parameters)
• this information is material, and thus lack of its provision will result in finding of a misleading omission - new Art. 7(4a) 
• it does not matter whether the products are offered by traders or consumers
• websites offering consumer reviews need to inform consumers (material information) how they guarantee that these reviews were placed by consumers who used or purchased the product - new Art. 7(6)
• blacklist has new additions: 
• providing search results without disclosing paid adverts or payments for placement higher in the ranking
• resale of tickets, when acquired by automated means circumventing limitations on the number of tickets sold
• placing consumer reviews without taking reasonable steps to ensure they are placed by consumers who used or purchased products
• placing fake reviews

Unfair Contract Terms Directive:

• harmonisation of penalties for provision of unfair contract terms (and for breach of obligations under the Unfair Commercial Practices Directive, Price Indication Directive)
• Whilst previously Member States were obliged to assure effective, proportionate and dissuasive sanctions for breach of obligations to ensure consumer protection against unfair terms, this obligation has been further specified for all 4 directives. The level of penalties traders will be obliged to pay may depend on criteria specified in these provisions (such as the scale and gravity of infringement, repetitive character of infringing consumer law, etc.). 
• In respect of the UCTD, the harmonisation effect is weakened due to options left to the Member States to limit sanctioning traders with penalties to the infringement of black-listed terms or to situations when traders did not follow administrative decisions placed on them for the breach of the UCTD obligations.

Price Indication Directive: 

• more information on price reductions
• e.g. on the lowest price applied by the trader in 30 days (unless goods are perishable or were just introduced on the market) prior to the introduction of the price reduction

A call to improve enforcement of consumer law: BEUC Dieselgate report

The European Consumer Organisation BEUC has just published an interesting report summarizing the enforcement and policy-related actions in four years following the exposure of the Volkswagen emissions scandal (and subsequent reports of similar practices by other car manufacturers, see eg Commission investigates collusion...). The key message of the report concerns the flaws of the European enforcement system in the field of consumer law. The report notes that while multiple consumers around the world have already received compensation for the damage suffered, EU consumers are still waiting for car manufacturers to make amends.

Substantive rules

Source:  Pixabay

BEUC report begins with an overview of particular enforcement actions taken by its members in different types of proceedings. A reader who is less clued-up about the substantive legal rules may, however, find it useful to first have a look at later sections, which shed a bit more light on the legal background. As regards civil claims a distinction can be made between repair and compensation. This distinction is well illustrated by the settlement reached in the proceedings before the US court, in which affected car owners could, firstly, choose between a buyback or a free fix and, additionally, receive compensation ranging between $5,100 and $10,000 (p. 19). Aside from civil claims, a manufacturer, who installs defeat devices to manipulate emission results, can face monetary sanctions imposed by courts or administrative authorities. Much of BEUC criticism concerns the difficulties of the European consumers to receive compensation and the comparably low level of fines imposed by relevant authorities.

From a private law perspective, a particularly interesting part of the BEUC report concerns "a comprehensive comparative table" prepared by the organisation, analysing among others the concept of damage and the grounds for breach of contractual and non-contractual obligations (p. 16). According to BEUC, the analysis revealed significant correspondence of private law across the EU in all relevant aspects: the notion of compensation loss, such as the lower value of the car, the higher fuel consumption, repair costs or lesser performance; the grounds for breach of contractual obligations, such as non-conformity, fraud and error; and the grounds for breach of and non-contractual obligations, such as tort, misleading practices and unjust enrichment. This is appears to be a broad-brush approach as important differences emerge when each of the listed matters is analysed in more detail (e.g. tort liability in Germany and France, remedies for unfair commercial practices in different Member States). All in all, however, it is true that consumers across EU can rely on a diverse menu of options in order to claim compensation, and that some of them are connected to EU law.

Private enforcement

According to BEUC, the experiences made by its members demonstrate the ineffectiveness of collective redress mechanisms in most European countries. The report discusses particular collective proceedings initiated by national consumer organisations. What certainly stands out is the legal framework in Belgium and Portugal where collective redress is based on an 'opt-out' system. The report further discusses the proceedings in Italy and Spain, where an 'opt-in' mechanism appears to be in place. Austrian example is discussed somehow separately, although is is clear that important enforcement efforts are also put in there. According to the report, the Austrian consumer organisation VKI had brought "16 group actions in front of 16 courts representing a total of 10,000 consumers". The dispute currently revolves around jurisdictional matters, on which earlier this year a request for a preliminary ruling was directed to the Court of Justice.

The report also elaborates on the state of play in Germany - where, of course, Volkswagen and other important car makers are established. Most noteworthy development is a declaratory court action (Musterfeststellungsklage) brought by the consumer organisation vzbv. More than 430,000 consumers are reported to have joined the action to date (compared to 75,000 consumers in the Italian proceedings and 7,500 in the Spanish case). The proceeding, however, only allows the court to declare that VW infringed the law and damaged consumers, on which subsequent claims for compensation can be based.

BEUC also reports on several developments in the Member States where consumer organisations have no feasible options to engage in collective redress. Slovenia provides an interesting example: here consumer organisation ZPS has reportedly teamed up with a law firm which brought claims of Slovenian consumers before a German court (in a different type of proceeding than Musterfeststellungsklage, apparently). Importantly, the fact that certain countries are not mentioned in the report does not mean that no significant developments regarding VW case can be observed there; it rather suggests that the relevant consumer organisations are not involved. This seems to be the case for Poland, where law firms have taken the initiative from the very beginning. For example, after Polish courts had found to have no jurisdiction in some early proceedings, thousands of Polish consumers joined the declaratory court action brought by vzbv in Germany.

Public enforcement

A significant part of BEUC report concerns public enforcement. In this respect, indeed, VW has so far managed to avoid major blows (particularly compared to the numbers overseas). The highest sanction so far - totaling €1 billion - was imposed in a case brought by public prosecutors in Germany. There are also ongoing criminal cases in other Member States, among others France and Poland.

BEUC appears to be particularly disappointed with the (lack of) action of the European consumer protection authorities, including as part of the Consumer Protection Cooperation (CPC) network. It describes the dialogue carried out by the European Commission with VW and its very modest achievements. More severe measures have only been taken by consumer authorities in Italy and the Netherlands, which hit VW with the highest possible fines of €5 million and €450,000 respectively.

Concluding thought

The report is set against the background of ongoing EU developments. It welcomes the review of the CPC framework and the relevant type-approval/market surveillance system. Most importantly perhaps, the report comes at a time when the European legislators are still working on the proposed directive on representative actions for the protection of the collective interests of consumers. The negotiations on this file have remained controversial as, indeed, the proposal seems difficult to reconcile with many Member State traditions. Whether an improvement of consumer law enforcement can truly be achieved with amendments that are currently discussed remains an open question. Without doubt, however, the state of play of consumer law enforcement leaves much to be desired.

CJEU judgment in Salvoni: no extra consumer protection in cross-border enforcement

In May we reported on this blog on AG Bobek's Opinion in C-347/18 Salvoni v Fiermonte. The referring Italian court that was requested to issue a Certificate for the cross-border enforcement of an order for payment against a consumer in Germany under the Brussels I Regulation (Recast). The order appeared to be in breach of the Regulation's jurisdiction rules; the consumer was domiciled in Germany, not in Italy. Should the court review and rectify the order, or inform the consumer of the possibility to challenge its enforcement? In this respect, the court referred to the CJEU's case law on Article 47 EUCFR and the Unfair Contract Terms Directive. According to AG Bobek, however, such an "extra layer of protection for consumers" could not be read into the provisions of the Regulation.

The CJEU confirms this in its judgment of 4 September. First, it found that the Certificate-procedure under the Brussels I Regulation can be qualified as judicial in the sense of Article 267 TFEU. Therefore, the preliminary reference was admissible. Secondly, it held that the court that issues the Certificate does not have to (re-)examine (ex officio) the jurisdiction of the court that has given the underlying judgment, even if it involves a consumer. The CJEU made a distinction between jurisdiction (see e.g. Article 17(1) of the Regulation for specific rules on consumer contracts) and recognition and enforcement. In the latter phase, it is the party against whom enforcement is sought who must oppose it. Because jurisdiction is one of the opposition grounds, there is no violation of Article 47 EUCFR. The CJEU's case law on the Unfair Contract Terms Directive does not apply in the context of the Brussels I regulation, which contains rules of a procedural nature. 

As we pointed out earlier, this outcome is understandable in light of the Regulation's framework, which aims to enhance the free movement and rapid enforcement of judgments within the EU, in the light of mutual trust based on legal certainty. From a consumer protection perspective, it possibly leads to a gap in the effective judicial protection of consumers. Not only is a court that has failed to apply mandatory jurisdiction rules (ex officio) in violation of the Regulation not allowed to rectify this; it is not allowed to subsequently inform the consumer of her defence possibilities either.  

When CJEU case law travels from Spain to Slovenia: C-407/18 Addiko Bank

What happens when a Slovenian court asks the EU Court of Justice a question to which the answer should already clearly follow from previous case law on Directive 93/13? Then the Advocate General might not give an Opinion, but in Case C-407/18 Kuhar v Addiko Bank the Court provides a concise overview of its case law pertaining to, in particular, Spain and Poland, and explains what this means for Slovenia. Thus, the Court seems to understand what the referring court was looking for: back-up for its interpretation of Slovenian procedural law.

To readers of this blog, the case will look familiar: it reminds us of e.g. Banesto, Aziz, Profi Credit Polska and PKO Bank Polski. The CJEU also refers to Banco Popular Español, ERSTE Bank Hungary and Finanmadrid. What these cases have in common with Addiko Bank, is that they all concern the (limited) role of the court in expedited debt-collection procedures, i.e. mortgage enforcement or order-for-payment proceedings. The court only performs a formalities check and cannot assess the merits of the claim. It is the debtor who must initiate a contentious debate by challenging the claim or opposing the enforcement, and it is the (consumer-)debtor who must apply for a declaration of nullity of allegedly unfair contract terms and/or the loan agreement. The court cannot review unfair terms ex officio, and the enforcement is not automatically suspended. As the CJEU recalls, there is a real risk that consumers are unaware of their rights, especially if they do not receive legal aid and lack the financial means for legal representation. In Slovenia, an additional problem is that (consumer-)debtors must provide security for the payment of the debt when they apply for suspension of the enforcement. For a summary of the restrictive procedural conditions at issue, see para 50 of the judgment.

In paras 53-63, the CJEU elaborates why the constellation of procedural rules runs counter to the effectiveness of the Unfair Contract Terms Directive. The link with the Directive is that the mortgage loan agreement at hand appeared to contain an unfair foreign currency clause. In the enforcement proceedings, however, the emphasis was on the debtors' duty to meet their payment obligations rather than the question whether the enforcement was based on unfair terms. Whilst notaries can have a "preventive" role in respect of unfair terms in mortgage loan agreements and notarial deeds, the right of consumers to effective judicial protection must be observed by giving them the opportunity to exercise their rights under reasonable procedural conditions, in particular in respect to time-limits and costs. The mere existence of a means of recourse is not sufficient, as the Slovenian rules at issue show. If there is no ex officio control of unfair terms in the enforcement proceedings, and unfair terms control only takes place at a later stage, consumers will only be protected ex post. Financial compensation will not prevent the loss of their family home.

The Court does not only provide a synthesis of its case law on effective judicial protection in the context of the UCTD; it also discusses Slovenian procedural law in detail. Apparently, the Spanish and Polish cases (still) do not give enough guidance as to what level of procedural protection is required in light of the Directive. What happens in Spain, stays in Spain, and is not 'translated' to other jurisdictions - certainly not Slovenia, and as Padraic Kenna has pointed out, not in Ireland either. The CJEU has repeatedly urged national courts to apply their national laws in such a way as to ensure the full effect of the Directive (reiterated in paras 65-66 of the judgment), but Addiko Bank demonstrates this may not happen without CJEU back-up. The CJEU's case law must 'travel' from Spain and Poland to Slovenia first. Hopefully, the judgment will signal once again that effective judicial protection requires a genuine opportunity for consumers to exercise their rights, not a mere formality; and that the CJEU's case law on unfair terms control (ex officio) in mortgage enforcement proceedings transcends specific EU Member States.

Crossing Paths: AG Bobek on jurisdiction in consumer cases under Regulation 1215/2012 and Directive 93/13

Yesterday, Advocate-General Bobek published his Opinion in a case where the Brussels I Regulation (Recast) and the Unfair Contract Terms Directive cross paths (C-347/18 Salvoni v Fiermonte). The case concerns the question what happens if a national court fails to check - ex officio - whether the rules on jurisdiction over consumer contracts have been observed in a cross-border dispute and the court issues an order for payment, even if there are indications that the consumer involved lives abroad? Once the order becomes final, can judicial review still take place in the country of origin before the order is enforced in another Member State?

When the defendant is a consumer, only the courts in the Member State where the consumer is domiciled have jurisdiction under the Brussels I Regulation (Article 18). In the case at hand, the consumer involved - Ms Fiermonte - appeared to live in Hamburg, Germany, which would mean that the Italian court where the order-for-payment procedure was brought did not have jurisdiction. In so far as Ms Fiermonte did not enter an appearance, the court should have declared of its own motion that it had no jurisdiction (Article 28). And if she did appear in court, she should have been informed of her right to contest jurisdiction (Article 26(2) of the Regulation).

Source: e-justice.europa.eu

The court in Milan nevertheless issued an order for payment against Ms Fiermonte, who did not oppose it. The court was subsequently requested to issue a so-called 'Article 53 Certificate'. Under the Regulation such a Certificate is necessary for cross-border enforcement (i.e. in Germany) to demonstrate that the order is enforceable in the country of origin (i.e. in Italy). The court then concluded that it should have verified its jurisdiction.
It found - ex officio - that the order in question was based on a legal relationship between a consumer and a professional. Thus, the order was issued in breach of the jurisdiction rules in the Regulation. The court asked the CJEU whether it should rectify this in the course of the Certificate-procedure. In this respect, it referred to the CJEU's case law on effective consumer protection under the UCTD and pointed out that the automatic issue of the Certificate might deprive Ms Fiermonte of an effective remedy as guaranteed by Article 47 of the EU Charter of Fundamental Rights.

Before we discuss AG Bobek's Opinion, let us briefly recall that in the context of the UCTD, the CJEU has repeatedly held - e.g. in Océano, Pénzügyi Lízing, and most recently Aqua Med - that costs or distance may deter consumers from taking legal action or exercising their rights of the defence. This would be the case where proceedings are brought before a court which is very far away from the consumer's place of residence (see Aqua Med, para 54). If this is already the case in domestic disputes, it applies all the more strongly in cross-border disputes. Moreover, the CJEU has held that rules conferring final and binding effect (res judicata force) on a decision must still meet the requirements of equivalence and effectiveness; see e.g. Finanmadrid. For instance, short time-periods to oppose an order for payment or to challenge its enforcement are problematic, also from the perspective of Article 47 Charter; see e.g. Profi Credit Polska.

Against this background, the referring court's question whether it should review the order and/or inform the consumer of the possibility to challenge its enforcement in Germany is not so strange. In addition, it was unclear whether the documents were properly served and thus, whether Ms Fiermonte had had an actual opportunity to oppose the order for payment. In a domestic situation, it would therefore be questionable whether the requirements of effectiveness and Article 47 Charter are complied with. The court responsible for the enforcement may operate as a last resort.

However, AG Bobek makes a strict separation between the CJEU's case law on the UCTD and the system of the Regulation. In his view, judicial review (ex officio) in the course of the Certificate-procedure is neither permitted nor required by EU law. It would run against the logic and spirit of the Regulation, which is aimed at the rapid and efficient enforcement of judgements abroad. The court must issue the Certificate automatically when the formal conditions are satisfied. It cannot re-evaluate the underlying judgment on points of substance and jurisdiction. This would compromise the Regulation's effectiveness.

Whereas AG Bobek's view is understandable in light of the Regulation's framework, his explanation of the distinction between the Regulation and the UCTD seems a bit artificial. On the one hand, he states that the Regulation lays down rules of a procedural nature, which are not as result-oriented and far-reaching as the (substantive) provisions of the UCTD. Yet, the rationale of the CJEU's case law on the UCTD is that consumers must be enabled to exercise their rights and that, because of their weaker (procedural) position in terms of knowledge and financial means, courts fulfil a compensatory role.
On the other hand, Bobek submits that the Regulation recognises that consumers are worthy of specific protection as defendants and that it contains additional procedural guarantees for that reason. Doesn't this mean that courts should play a role in enabling consumers to exercise their rights under the Regulation as well? It might be true that Ms Fiermonte can make an application for refusal of enforcement of the order in Germany on the grounds of lack of jurisdiction or the absence of due service of documents, but this depends on her initiative (Articles 45 and 46 of the Regulation). To what extent will it be taken into account that Ms Fiermonte is a consumer who might not be aware of her rights or not be able to pay lawyer's fees? (Ironically, the case was about unpaid lawyer's fees.) Shouldn't she at least be informed of her defence possibilities?
Bobek observes that it would be strange for the court to issue a Certificate for enforcement of the order while simultaneously pointing out its allegedly erroneous nature. This would be contrary to the principle of legal certainty. It would also undermine the principle of fair trial if the court would take on the role of the defendant's legal counsel.

Still, one cannot help but wonder why "an extra layer of protection for consumers" as proposed by the referring court could not "be ‘read into’ the provisions of Regulation No 1215/2012". That would be a true crossing of paths.

Confusing Grand Chamber judgment on 'accelerated repayment clauses' in mortgage loan contracts (C-70/17 and C-179/17)

Yesterday the Grand Chamber of the EU Court of Justice gave judgment in two Spanish cases on so-called 'accelerated repayment clauses' (vencimiento anticipado): Joined Cases C-70/17 and C-179/17, Abanca v García Salamanca Santos and Bankia v Lau Mendoza. We have discussed Advocate-General Szpunar's extensive Opinion in these cases in an earlier blog post.

Summary of the preliminary references

In short, both cases pertain to the consequences of a finding of unfairness of a clause allowing for the early termination of a mortgage loan contract - also referred to as an 'acceleration clause' or 'early maturity clause'. Spanish procedural law provides that on the basis of such a clause, the bank can call in the entire loan and initiate enforcement proceedings against the debtor. After Aziz, the minimum time period for access to mortgage enforcement proceedings was changed to 3 months instead of 1 month. Early termination is still allowed, if agreed by the parties. Thus, it is not a default provision.

The question the Spanish Supreme Court put before the CJEU in Abanca was whether the national court could consider only the 1-month period as unfair, so the rest of the 'early maturity clause' would remain valid. In that event, the bank could still claim the full amount in the enforcement proceedings, as long as it respected the statutory 3-month period.

In Bankia, a Court in First Instance in Barcelona questioned the case-law of the Supreme Court that allowed continuation of the enforcement proceedings, because this was arguably more favourable to consumers. According to the Barcelona Court, the enforcement proceedings should be terminated after the clause was found to be unfair. The bank could only claim termination of the contract in ordinary court proceedings, which would possibly result in a favourable outcome for consumers.

Thus, the preliminary reference in Bankia challenged the Supreme Court's approach. The Spanish Government even contested the admissibility, on the ground that the Supreme Court had already made a preliminary reference on this issue.

Summary of AG Szpunar's Opinion

AG Szpunar's clear and elaborate analysis of the issue led to his conclusion that it is not possible for the national court to "replace" the 1-month period in the 'early maturity clause' with the statutory 3-month period. Once the clause is found to be unfair, it must be struck out in its entirety. This would mean there is no longer a basis for enforcement of the full amount and therefore, the bank no longer has access to mortgage enforcement proceedings. However, the decision should ultimately be left to the consumer, who can then decide if she wants to avail herself of the protection offered to her.

As we have noted in our blog post, AG Szpunar rightly observed that when the 'early maturity clause' is struck out, this does not extinguish the creditor's rights. The loan agreement is still valid. The creditor can still claim unpaid instalments due and/or seek termination of the agreement in ordinary court proceedings.

The CJEU's judgment: rejection of the Spanish Supreme Court's approach?

Yesterday's preliminary ruling is a Grand Chamber judgment, yet it is much less clear than the AG's Opinion. On the one hand, the CJEU holds that the mere removal of the 1-month period from 'early maturity clauses' is "tantamount to revising the content of those terms by altering their substance", which undermines the dissuasive effect (para 55).

On the other hand, the CJEU expressly leaves the door open for substitution with the statutory 3-month period, if the consumer would otherwise be exposed to unfavourable consequences (para 61). What makes this part of the judgment confusing, is not only that it is doubtful whether the use of an ordinary procedure rather than the special mortgage enforcement procedure does entail "a deterioration of the procedural position of the consumer" (para 62).

[NB: In this respect, it is confusing that the CJEU refers to "the ordinary enforcement procedure", where a declaratory action is meant (cf. para 35).]

Source: bufeterosales.es

Also and more strikingly, the judgment seems to be based on the erroneous presumption that removal of the 'early maturity clause' could potentially mean that the continued existence of the mortgage loan contract is no longer possible (para 60). It seems obvious that the invalidity of the clause at stake does not require the national court to annul the contract in its entirety. Whilst the CJEU reinforces its case law on the modification, revision or replacement of unfair contract terms, in particular Kásler (paras 53-60), it is not relevant for the present cases. The exception of Kásler does not apply here, as - again - AG Szpunar already observed.

The only way forward for the national court is to exclude the application of the terms at stake (cf. para 63). The CJEU's judgment suggests that in that event, the supplementary application of the 3-month period is not possible, and the Spanish Supreme Court's approach must be rejected. We hope this will be clarified in another case on this issue that is still pending: C-486/16.
The 'early maturity clause' must be removed in its entirety, unless the consumer objects. The role of the consumer, who must be consulted in the matter, is indeed an important point. The consumer must be heard in case of non-application of unfair terms, as well as - presumably - in case of substitution of unfair terms, although the CJEU does not say this explicitly. As noted in our previous blog post, the consumer can be informed by the court about the advantages and disadvantages of the mortgage enforcement procedure vs. the ordinary procedure. She can then consent to maintaining the 'early maturity clause', although this seems to be an unlikely scenario.

New Deal for Consumers - update on the legislative process

In the course of last years we reported multiple times on the "fitness check" of EU consumer law undertaken by the European Commission and the follow-up legislative actions marketed as the "New Deal for Consumers" (see e.g. New Deal for Consumers: proposals on online transparency).  To recall, the package of proposed reforms consisted, on the one hand, of amendments to the four consumer law directives: Directive 93/13/EEC (unfair terms), Directive 98/6/EC (price indication), Directive 2005/29/EC (unfair business-to-consumer commercial practices; UCPD) and Directive 2011/83/EU (consumer rights; CRD) and, on the other hand, of a proposed directive on representative actions, replacing Directive 2009/22/EC (injunctions). Earlier this month the Council presented its position on the former proposal, introducing some amendments to Commission's original text. The position will now form the basis for the upcoming negotiations with the European Parliament. It is foreseen that the amending directive could still be adopted in this term of the EP, together with the regulation on fairness and transparency in platform-to-business relations (P2B regulation), on which an inter-institutional compromise has already been reached (for a background see Beyond B2C...).

Sanctions and remedies

The declared objectives of reforming the four consumer law directives are improved enforcement of consumer rights and modernisation of existing rules, taking into account the outcomes of the fitness check exercise. As regards the former, the Council's compromise text shows that Member States are not quite willing to limit their procedural autonomy in the name of enhanced consumer protection. Many of the Commission's proposals on particular remedies available to consumers or specific criteria for imposing penalties were watered down, leaving Member States with a broader leeway. For example, in all four amended directives a clear statement was made that the list of criteria to be considered when imposing a penalty is merely an non-exhaustive and indicative one. Additionally, some criteria proposed by the Commission, for example the intentional or negligent character of the infringement, were altogether removed.

Right to withdraw

A controversial aspect of the originally proposed amendments to the Consumer Rights Directive concerned limitations to the consumers' right of withdrawal. According to the Commission, certain elements of this framework, such as trader's obligation to accepts returned goods even if the consumer had used these goods more than necessary to inspect them or to reimburse the price paid by the consumer even before receiving the goods back, were disproportionately burdensome for the trader. The Council, however, rejected the respective proposals and considered traders' rights to sue for damages to be sufficient. Similarly, whenever, for the sake of consistency, the Commission proposed to leave out an information duty, the Council rather opted for the duty to be repeated (see e.g. the proposed amendments to Article 7(3) and Article(8) of the CRD).  

Digital market

Many of the proposed amendments, especially the ones to the CRD and UCPD, were designed for digital markets. Following the original proposal, the Council text seeks to extend the scope of the Consumer Rights Directive to cover also contracts under which the trader supplies a digital service to the consumer, in exchange for which the consumer provides personal data. Data-related consequences of a consumer's withdrawal from the contract were also specified in the proposed Article 13(5) of the CRD. Moreover, the Council text maintains an additional information duty imposed on the providers of online marketplaces, which were slightly redefined as "services which allow consumers to conclude distance contracts with other trader or consumers using software, including a website, part of a website or an application that is operated by or on behalf of the trader" (Article 2(19)). The scope of specific information duties of such providers was elaborated on as well. Under the Council's text it would cover not only information about the status of consumer's counterparty (trader or not) and information that consumer law does not apply to C2C transactions, but also information about the allocation of contractual obligations in three-party settings (where applicable). A more general information duty imposed on the providers of online marketplaces would further concern the main parameters determining ranking of offers presented to consumers as a result of search queries and the relative importance of those parameters as opposed to other main parameters. The Council text further specifies that this information should be provided "in a specific section of the online interface that is directly and easily accessible from the page where the offers are presented". Such a clarification is certainly well-intended, although not as technologically neutral as the remaining parts of the reform. This is somewhat surprising because, on other occasions, the Council explicitly takes account of services in which offers are not presented on the "pages", such as voice operated shopping assistants. Overall, this minor inconsistency does not seem to result in a protection gap. Transparency about ranking parameters seems to be one of the most extensively covered topics in the whole reform, also forming part of the proposed Article 7(4b) of the UCPD and in Article 5 of the proposed P2B regulation. Additionally, the provisions of the CRD on online marketplaces are meant to introduce only a minimum level of harmonisation, which means that Member States can potentially impose further requirements, including those specifically addressing voice assistants.

Concluding thought

Less than one year after the New Deal for Consumers was presented by the Commission, the proposed reform of four consumer protection directive appears to gradually take its final shape (in contrast to the second file on representative actions). In January the IMCO committee adopted the report on the proposal and the European Parliament decided to enter into negotiations with the Council on the basis of that report. The most important aspect of the report seems to be the lack of support for any of the proposed changes to the right of withdrawal - a subject which the Council appears to also see this way. Negotiations may be a bit more difficult with respect to the EP's proposed additions to the list of commercial practices prohibited in all circumstances (Annex I to the UCPD) as well as further details for transparency on online marketplaces, including issues such as personalised pricing and collection of consumer reviews.

All in all, the texts proposed by both the Council and the European Parliament are more consumer-friendly than the original proposal of the Commission. This will surely be welcomed by consumer organisations, which have criticised the proposal for its insufficient level of ambition. The question remains to what extent further-reaching and more forward-looking proposals of the European Parliament will be reflected in the final draft.

German regulator restricts Facebook data sharing

On 07.02.2019, Bundeskartellamt, the German competition regulator, issued a decision against Facebook restricting its processing of user data. 

The Bundeskartellamt points out that Facebook is in a dominant position with a market share of 95%. The closure of Google+, one of the competitors of Facebook, has intensified its dominance. Other companies, such as Twitter or Linkedin are considered to only operate in part of Facebook's market.

The decision states that the way Facebook collects, merges and uses data between its subsidiaries ammounts to abuse of dominant position, under competition law. One of the most troubling practices employed by Facebook is that it collects third-party data on users in an almost unlimited way and attaches all of these data to the users' facebook accounts. Data is being collected not only by other Facebook owned services, but by any website that has an embedded facebook button. It is worth noting that the data of the users was collected even if they would not interact with the facebook buttons (even if they  didnt 'like' a page).

What is even more concerning is that data is collected even if there is no kind of facebook sign on the page, when the website is using facebook analytics. This widespread collection of data allows facebook to form very detailed profiles of its users. 

With its decision, the Bundeskartellamt forbids this practice. Facebook, Instagram and Whatsapp will still be able to collect data on their users. However, Facebook will be prevented from assigning this data to a single facebook account, unless they have the voluntary consent of the users. However, the consent of the users is already required for third-party websites. The decision requires Facebook to make changes to its terms of service and data processing. The processing of data from third parties without the consent of users needs to be substantially limited. Facebook will have to come up with proposals on how to achieve that.

This decision comes after the publication of the first reports on the Code of practice against disinformation, signed by Facebook and other large online companies such as Google, Twitter and Mozilla. Facebook has to strengthen its commitments to empower consumers and boost cooperation with fact-checkers. However, if Facebook is serious about making their platform a fertile ground for those who seek to spread disinformation, it should first and foremost protect its users and their data from those who want to abuse them.

The decision is not yet final, as Facebook will have one month to appeal in German courts. It remains to be seen whether Facebook will challenge the decision. This decision serves to point out the increasing intersections between consumer law, data protection law and competition law. The Bundeskartellamt points out that their investigation required close cooperation with data protection authorities.

This is the dawn of a new age where the traditional compartmentalisations of law may not serve us as well  as in the past. Consumer law will also have to adapt in order to address challenges arising from novel business models, and especially in relation to data protection.

More transparency on hotel booking websites?

The UK's Competition & Markets Authority (CMA) announced yesterday that it has finalised its investigation into commercial practices of hotel booking websites (Hotel booking sites to make major changes after CMA probe). Under investigation were such well-known online companies as: Expedia, Booking.com, Agoda, Hotels.com, ebookers and trivago. Concerns that were raised and had been investigated pertained to a possibility of pressure selling, misleading discount claims, hidden charges and a suspicion that commission that these websites receive may impact the order, in which hotels are being shown on their websites. Overall, various online commercial practices might have misled consumers to believe that a certain hotel accommodation was either more popular or cheaper than the reality warranted. It was, therefore, questioned whether these companies might have been infringing the Consumer Protection from Unfair Trading Regulations 2008, which implemented the Unfair Commercial Practices Directive in the UK.

Since all of the above-mentioned companies co-operated with the CMA and agreed to voluntary undertakings, this means that the CMA did not proceed with its findings of any breaches of consumer law. Instead, the voluntary undertaking taken by these companies signifies their commitment to ensure in the future that certain principles will be observed, without admitting any fault in past dealings. All the promised changes should be made before 1 September 2019 and the CMA will expect these actions to be taken also by other websites in the same sector, who were not under investigation at the moment. The agreed on principles are as follows:

• search results: clarifying whether the order of results is influenced by the amount of commission a hotel pays to the website;
• pressure selling: currently, when using hotel booking websites, we often see information that other consumers are looking at the same hotel as we are and that there is only 1 room left, as well as showing us hotel accommodation that has already been sold out. This tactic may pressure consumers to rush with making a transactional choice, creating a scarcity condition. It can additionally be misleading, if other consumers are looking at the same hotel indeed but at renting rooms in it on other dates. This practice should now cease;
• discount claims: ensuring that all discount claims are based on non-misleading criteria and are actually available. This prevents hotel booking websites from offering 'discounts' based on comparing the offered price for a given room to the price of a more luxurious room in the same accommodation, or to a price for the same room but in high season;
• hidden charges: showing all compulsory charges up front, incl. taxes and fees.

The question remains whether we can expect these hotel booking websites to change their online practices more generally, not just for the UK consumers. This is something to pay attention to and re-check after September 2019.