Are contract summary templates transparent? - feedback opportunity

The European Commission asks for feedback on the draft contract summary template, which all consumers must receive from e-communication service providers. Commission aims to make this template 'clear and understandable' and to facilitate comparison of services of different providers, thus transparency is definitely one of the key points that should be considered during the evaluation. Feedback may be submitted until 9 September on this website.

Time to let go of the services/goods distinction? - CJEU in X (C-360/15 & C-31/16)

In an interesting judgment (X, joined cases C-360/15 and C-31/16) the CJEU has decided to broaden the scope of application of the Services Directive (Directive 2006/123), by encompassing within its scope activities of retail trade in goods, such as shoes and clothing. Traditionally, the sale of goods and the provision of services have been kept separate (hence also different legislative measures are applicable to these two types of commercial activities), even though modern transactions often combine elements of both provision of services and sale of goods. In the internal market of the EU there are also two separate freedoms guaranteeing traders their fundamental rights separately in the area of provision of services and movement of goods. 

Whilst this case is not a consumer law case, it could potentially have implications for the understanding of the provision of services to consumers, as well. The Court interprets in this judgment the definition of a 'service' contained in article 4(1) of the Directive, which states that a service is 'any self-employed economic activity, normally provided for remuneration'. This definition of the service applies under the TFEU providing for the freedom of provision of services as well as under this Directive. Its general notion of economic activity provided for remuneration is easily applicable to retail trade in goods, esp. as the Court points out due to the recital 33, which mentions services provided both to businesses and to consumers, such as distributive trades (paras 89 and 91). Whilst most of the Court's comments clearly refer to a possibility of an autonomous interpretation of 'services', just for the purposes of this Directive, paragraph 95 of the judgment makes a more general statement:

"Any such analysis would, moreover, cause particular difficulties with regard to the retail trade in goods, given that that trade nowadays encompasses not only the legal act of sale/purchase but also an increasing range of activities or services that are closely inter-related and that are intended to induce a consumer to conclude that sale/purchase with one economic operator rather than another, to provide advice and assistance to the consumer at the time of that sale/purchase or to provide after-sales services, which may vary considerably according to the trader concerned."

This comment reflects very well the difficulties that nowadays exist in separating the sale of goods activities from the provision of services, which could justify finally abolishing this distinction and e.g. setting one timeframe for calculating the right of withdrawal or one set of remedies for non-performance, regardless the type of transaction. We can see such overarching provisions in the proposal for a directive for the supply of digital content, but not in the provisions of the new proposal for a directive for the sale of goods (originally, online and other distance sale of goods). Which still states that in case of a mixed contract for the sale of goods and provision of services, the directive should apply only to the part of the contract related to the sale of goods. Is it not the time to let go of the services/goods distinction?

Temptation of subscriptions

In the UK the organisation Citizens Advice conducted a study of consumers subscribing to various services and discovered that on average consumers pay ca 160GBP over a period of three months for unwanted services. These would include subscriptions to gyms, insurance, online streaming, TV channels - that would not end up being used. The message to consumers is to be aware of their usage habits and not to be too easily tempted to conclude yet another service at a seemingly attractive price, with an easy subscription process. Reading contract terms before signing up is always a good idea. A simple subscription process makes consumers easily sign in, but the sign-out process may be more complex and conditional. Citizens Advice reports on 9 out of 10 consumers being initially refused cancellation, in practice. This indicates the need for more inquiry into the terms and conditions of these services providers and the fairness of their provisions on terminating the contract. Still, even if termination is possible, consumer behaviour biases mean we tend to overestimate our future behaviour (how many times we will make use of the gym subscription, for example) and may be unlikely to timely cancel a contract we don't benefit from. An attractive price still may mean paying money for something that we end up not using at all, which profits service providers not consumers. 

Services provided by Uber are services in the field of transport, not information society services - Advocate-General says

Earlier today, the long-awaited opinion of Advocate-General Szpunar in case C‑434/15 Uber Spain was published. The analysis concerns one of the two cases brought before the CJEU in connection with the controversial mobile app. The key question addressed in both cases is whether services provided by Uber should be classified as information society services or as transport services. This categorization is of paramount importance from the point of view of EU law.

The opinion is bad news to Uber Technologies Inc. and its European subsidiaries. The Advocate-General took the view that services provided by Uber do not constitute information society services, but should rather be regarded as services in the field of transport. Consequently, the activity of Uber falls outside the scope of both E-Commerce Directive and Services Directive. Such an interpretation would allow Member States to subject Uber to a number of sectoral requirements.

The opinion is based on several factual assumptions about the practical operation of the analysed business model. Primary focus remains on the service marketed as UberPOP. These factual elements are, of course, for the national court to verify. More importantly, however, the opinion also includes a more abstract interpretation of the legal issues at hand. If followed by the Court of Justice, the framework proposed by the AG could be used in the assessment of other digital business models. 

The essential part of the opinion concerns the notion of an information society service. By way of reminder, the term refers to "any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services" (Article 2(a) of Directive 2000/31/EC in connection with Article 1(2) of Directive 98/34/EC). Since the business model at hand involves both electronically and non-electronically supplied services, the following questions have arisen: 1) which services are actually provided by Uber and 2) are these services provided at a distance and by electronic means.

According to the AG, the decisive question in this respect is whether the service which is not supplied by electronic means is economically independent of the service which is provided by that means. The relevant framework of assessment is set out in para. 35, which reads as follows:

"Where the provider of the service supplied by electronic means is also the provider of the service not supplied by such means or where he exercises decisive influence over the conditions under which the latter service is provided, so that the two services form an inseparable whole, it is necessary to identify the main component of the supply envisaged, that is to say, the component which gives it meaning in economic terms. For a service to be classified as an information society service, this main component must be performed by electronic means."

Assessment of the Uber business model led the Advocate-General to believe that, in that factual context, the connection of passengers and drivers is neither self-standing, nor the main supply in relation to the supply of transport. Consequently, the service provided by Uber cannot be classified as an ‘information society service’. The opinion cites the examples of other digital services, such as platforms for the online sale of goods (para. 36) and platforms for the purchase of flights or hotel bookings (paras. 57-60), and draws a distinction between operators of such platforms an Uber. The AG also points to the difference between Uber and ride-sharing platforms, but does not elaborate on that aspect any further (para. 42). He similarly distances himself from competition and labour law issues.

The overall line of argumentation along with the conclusions reached are summarised in paras. 71-72 of the opinion.

71. (...) In the case of composite services, consisting of a component provided by electronic means and another component not provided by such means, the first component must be either economically independent of the second or the main component of the two in order to be classified as an ‘information society service’. Uber’s activity must be viewed as a whole encompassing both the service of connecting passengers and drivers with one another by means of the smartphone application and the supply of transport itself, which constitutes, from an economic perspective, the main component. This activity cannot therefore be split into two, for the purpose of classifying a part of the service as an information society service. Consequently, the service must be classified as a ‘service in the field of transport’.

72. I therefore propose that the Court should answer the first and second questions referred for a preliminary ruling as follows:

– Article 2(a) of Directive 2000/31, read in conjunction with Article 1(2) of Directive 98/34, must be interpreted as meaning that a service that connects, by means of mobile telephone software, potential passengers with drivers offering individual urban transport on demand, where the provider of the service exerts control over the key conditions governing the supply of transport made within that context, in particular the price, does not constitute an information society service within the meaning of those provisions.

– Article 58(1) TFEU and Article 2(2)(d) of Directive 2006/123 must be interpreted as meaning that the service described in the preceding point constitutes a transport service for the purposes of those provisions.

On a final note

The same Advocate-General is drafting the opinion in the second case involving Uber, namely C-320/16 Uber France, which leaves the American company with little grounds for optimism. Publication of the other opinion is scheduled for 4 July. Since opinions of AGs are not binding on the Court, Uber can, however, still hope that the CJEU will not follow the proposed line of argumentation.

* The author carries out a research project on consumer protection in the collaborative economy, financed by the National Science Centre in Poland on the basis of decision no. DEC-2015/19/N/HS5/01557.

Ban on advertising of dental practices contrary to EU (not consumer) law - CJEU in Vanderborght (C-339/15)

It is not the first time that the CJEU has to assess the compliance with EU law of Belgian law and its tendency to absolutely prohibit certain commercial practices. In the Vanderborght case (decided last Thursday, 4 May; case C-339/15), it was the ban on advertising of dental practices that was at stake.

Mr Vanderborght offered and advertised his dental services in Belgium, the latter by installing "a sign consisting of three printed faces, stating his name, his designation as a dentist, the address of his website and the telephone number of his practice", as well as by advertising in local newspapers. On his website he provided information on various treatments he offered. A professional association of dentists (Verbond der Vlaamse Tandartsen) was concerned about his advertising practices as pursuant to Belgium law advertising relating to oral and dental care is prohibited, in order to protect public health and dignity of the profession of dentist. Mr Vanderborght claimed that such a general ban on advertising was contrary to EU law, among other things, to the provisions of the Unfair Commercial Practices Directive (2005/29/EC).

The CJEU points out that the UCPD allows the Member States to introduce other rules that aim at protecting health and safety of consumer products, as well as codes of conduct related to upholding "high standards of integrity on the part of the professional" (para. 26-27). Therefore, EU consumer law will not stand in the way of imposing a general ban on advertising regulated services, which ban is motivated by concern for public health and safety of products. However, such a general ban on advertising may infringe the freedom of movement of services - art. 56TFEU and provisions of the E-Commerce Directive (2000/31/EC), considering also advertising via websites falls within the scope of this ban.

Complex pricing in TV and other adverts - CJEU in Canal Digital Danmark (C-611/14)

Clearing up our backlog, on 26 October 2016 the CJEU issued a judgement on the interpretation of Art. 6 and 7 of the Unfair Commercial Practices Directive in the case Canal Digital Danmark (C-611/14).

Canal Digital provides television services to consumers in Denmark, offering them various TV packages. In many of its advertisements in 2009 promoting various TV subscriptions it could have confused consumers as to the real price for its services, considering that it separately showed the monthly price (made more visible by e.g. the use of a bigger font) and the additional six-month 'card service' charge and the full commitment period price (for one year). The last two prices were showed in smaller font, often in white against a light background, at the bottom of the advert, with consumer attention likely being drawn to the monthly price.

Misleading omission and disclosure medium 

The CJEU refers to the requirements of Art. 7(1) and (3) of the UCPD to determine whether a particular information should have been provided to consumers in order not to mislead them. It is, therefore, necessary to consider what method of communication has been used to convey information to consumers, as it could have placed limitations of time and space.  If this is the case, it is necessary to consider whether and what other means trader has used to convey material information to consumers. (par. 35) Art. 7(4) UCPD contains an exhaustive list of material information that has to be provided to consumers when inviting them to purchase, but even if all this information is provided, this does not exclude that this invitation to purchase would be considered as a misleading commercial practices either under art. 6(1) or art. 7(2) UCPD. (par. 71) It seems that the Court suggests that e.g. despite the price being a material information that needs to be provided, it could still be given to consumers in a misleading way if e.g. an important element of this price would not be mentioned or would be confusingly or in an unclear way mentioned, as in this particular case.

In case of TV adverts, consumers  cannot demand the same level of detail as with some other advertisements, and are also given a limited time to assess this information. (par. 60) If not all material information could be provided, commercial information could mention only some of it and the rest could be placed on the website. It is for the national court to ascertain what measures has the trader taken to provide material information to consumers, but it could be considered a misleading omission if the trader splits the price into two elements and only makes one of them visible in marketing materials, if this causes consumers to take transactional decisions, they would not have otherwise taken (par. 64).

Misleading pricing

Could it be consider misleading if the trader chooses a pricing strategy for a subscription that splits the charge into a monthly and six-monthly components, with only the monthly charge being highlighted in marketing, and the six-monthly charge either omitted or inconspicuously presented? Yes, as this would be likely to give average consumers false impression of a favourable price, contributing to consumers taking transactional decisions they otherwise would not have taken, which is for the national court to ascertain (but the CJEU suggests a positive answer to this test referring to the price as a determining factor in the mind of an average consumer - par. 46; esp. if the omitted price component was a significant part of the price - par. 47). The CJEU mentions that offers of TV service providers are often highly structured, both in terms of cost and content - "resulting in a significant asymmetry of information that is likely to confuse consumers." (par.41) Interestingly, for the test of misleading action, contrary to misleading omission, there is no exception made in the UCPD based on the advertisement being made through a limited as to time or space communication medium (par. 42).

Online 'free' newspapers also subject to national libel and defamation rules - CJEU in Papasavvas and Others (C-291/13)

11 September 2014: CJEU judgment in case Papasavvas and Others (C-291/13)

Over a week ago the CJEU issued an important judgment in this case concerning interpretation of the e-Commerce Directive (2000/31/EC). While e-Commerce Directive is not per se a consumer protection measure, its provisions regulating the legal aspects of electronic commerce have a significant impact on European consumers, as well.

In this case from Cyprus Mr Papasavvas claimed damages against a newspaper company for what he considered to be defamation through articles published in the daily newspaper, which were published online on two websites. One of the questions raised was whether the e-Commerce Directive should apply at all in this case, since the websites of the newspaper were free for Mr Papasavvas to access and peruse and they only generated income from the advertisements placed on them. The question was whether the Directive should only apply to such 'information society services' that have been provided against a remuneration from the recipient? The positive answer to this question would significantly lower the level of protection granted online to internet users since many websites nowadays earn their money through advertisements rather than through financial contributors of their readers. The CJEU confirms that the 'service' does not need to be paid by the person for whom it is performed (Par. 28-30) to fall under the scope of the e-Commerce Directive, even if the definition refers to a service 'normally provided for remuneration' (Par. 27). It is sufficient that this remuneration is being paid by someone else than the recipient.

This broader scope of application could allow the online newspaper to rely on Articles 12 and 14 of the Directive in order to escape liability for the posted content (incl. defamation) if it could prove that it was 'merely' a 'conduit'. In this case the online newspaper could not be qualified as such. For these articles to apply the service provider would have to have no knowledge or control over the information that was transmitted or stored, which was not the case here. (Par. 40) (this and following articles refer also to the Google France case)

The e-Commerce Directive allows for the Member States to keep on applying their rules on civil liability (incl. for defamation) to information society service providers, as long as this does not restrict the freedom to provide them from another MS. (Par. 33-34) Since in the given case the services originated in Cyprus, the rules on civil liability for defamation could be applicable.

However, if the Cyprus did not implement the provisions of the Directive in time its provisions may not be directly invoked by the parties. The Directive does not have a direct horizontal effect, which means that the national service providers could only rely on the national provisions implementing it and not on the rights granted to them by the Directive itself. Failing the timely interpretation, the national court is obliged to the consistent interpretation of the national law with the EU law. (Par. 54-56)

Transparency in energy supply contracts - AG Wahl's opinion in Schulz (C-359/11 and C-400/11)

8 May 2014: AG Wahl's opinion in Schulz (C-359/11 and C-400/11)

During the liberalisation of the energy market, the European legislator tried to introduce a high level of consumer protection. To that end, consumers are supposed to be well-informed by their service providers as to the energy prices, their usage thereof, and they should also be protected from the threat of disconnection. In Germany, gas and electricity suppliers need to provide consumers with a standard rate for energy supply, but it was not quite certain whether they could then unilaterally vary prices. As a result, consumers started bringing up claims for reimbursement of the raised energy prices, claiming that the price increases were unreasonable. (Par. 21) German courts thought that whether the energy suppliers had a right to adjust prices unilaterally would depend on the interpretation of the provisions of the Electricity and Gas Directives, which require that contractual terms and conditions must be transparent. (Par. 1-2) The specific question is whether it is sufficiently transparent for the supplier to inform consumers about the price increase with an adequate notice and providing consumers with a right to terminate contracts. (Par. 30)

AG Wahl believes that the question as to what should be understood as a transparent contractual term and condition should NOT be answered on the grounds of the test established by the Directive on Unfair Contract Terms, in its Art. 3 and 5. (Par. 3) Instead, the AG argues for an independent assessment in light of different objectives pursued by these instruments, especially due to the fact that these energy contracts are not really governed by the freedom of contract principle, since suppliers are limited in their options to refuse to conclude a contract or to terminate it (Par. 34). AG Wahl argues therefore against using the judgment of RWE Vertrieb (see our discussion thereof here) as a guideline to solve the issue at hand (see Par. 38-47 for more details on this point). Still, the AG recognizes that in order to ensure effective level of consumer protection, consumers need to be guaranteed two rights: to terminate the contract and to challenge the reasonableness of the price increase. The second right demands that consumers are given sufficient information "concerning the reason for the price increase and the method of its calculation" (Par. 60). Moreover, the need to disclose such information may in AG's opinion deter some suppliers from unjustifiably increasing energy prices. (Par. 66) As a result, the AG advises the Court to determine that German legislator should oblige energy suppliers to disclose not only what the price adjustment will be, but also the "grounds, preconditions and scope of the price adjustment at the latest by the time that the customer is informed of the adjustment". (Par. 78)

No to unlimited shopping: CJEU in Pelckmans (C-483/12)

Today, the CJEU held in Pelckmans Turnhout II that the Belgian requirement for businesses to observe one day of rest per week cannot be contested on the basis of EU law. 

The facts of the case were simple: Garden centers were kept open seven days per week. Their owners argued that the Belgian provision prescribing one day of rest were contrary to EU law as they discrimintated businesses established outside railway stations, airports, port areas etc, where exceptions to the rule applied. Amongst others, they based their claim on the UCP-Directive. With its judgement of 4 October 2012 (Pelckmans Turnhout I), the CJEU had already decided that the UCP-Directive did not apply to the contested national legislation as the latter 'does not pursue consumer protection objectives'. 

In today's decision, the Court held that the princliples of equality and non-discrimination weren't applying either, the reason for this being that the subject matter didn't have any connections with EU law (paras 17-23). This point of the judgment is highly interesting as it concerns the question of when Member States are implementing EU law. Only then the Charter of Fundamental Rights is adressed to them (Art 51(1) Charter). The outcome is surprising, as the CJEU usually finds ways to 'bring' the referred questions under its jurisdiction. 

The Court recaps its case law stating that the treaty provisions on the free movement of goods do not apply to (non-discriminatory) national rules concerning the closure of shops (para 24). The same is true for the treaty provisions of the freedom to provide services (para 25), which is why the Court didn't have jurisdiction to answer the question referred to it. As a consequence, the Belgian law on the closure of shops is still applicable and shops generally must be kept closed for one day per week!

A fair balance? - CJEU judgment in Case C-314/12 UPC Telekabel Wien

While the authors of this blog were enjoying the consumer law conference in Oxford (more on this in a later post), the CJEU handed down its judgment in the intriguing case of UPC Telekabel Wien v Constantin and Wega last Thursday. For a summary of the facts of the case and Advocate-General Cruz's opinion, please refer to an earlier post on this blog ('Ius est ars aequi et boni').

The UPC case concerned the topical and difficult question of how to strike a balance between the rights of copyright holders (on films, in this case), consumers / internet users and internet service providers. Can providers be assigned the responsibility to take action to prevent the infringement of copyright by internet users to which they offer their services, considering that they do not have any direct contractual relationship to the copyright holders and it might be very burdensome (if not impossible) to take adequate measures to prevent users from illegally accessing copyright-protected material?

The CJEU's judgment in general seems to be in the affirmative, or at least not in the negative, though the Court takes great care to outline the conditions under which internet service providers are to be held to this responsibility.

In a first step, the Court considers that internet services providers fall within the scope of Article 8(3) of the Copyright Directive, which states that ‘Member States shall ensure that rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right’ (para. 30 of the judgment). The lack of a contractual relationship does not affect this conclusion:

'Neither the wording of Article 8(3) nor any other provision of Directive 2001/29 indicates that a specific relationship between the person infringing copyright or a related right and the intermediary is required. Furthermore, that requirement cannot be inferred from the objectives pursued by that directive, given that to admit such a requirement would reduce the legal protection afforded to the rightholders at issue, whereas the objective of that directive, as is apparent inter alia from Recital 9 in its preamble, is precisely to guarantee them a high level of protection.' (para. 35)

In a second step, then, the Court establishes that it remains mostly a matter for national laws to regulate court injunctions prohibiting internet service providers from allowing their customers to illegally access copyright-protected material. EU law does not (!) preclude an injunction that 'does not specify the measures which that access provider must take and when that access provider can avoid incurring coercive penalties for breach of that injunction by showing that it has taken all reasonable measures, provided that (i) the measures taken do not unnecessarily deprive internet users of the possibility of lawfully accessing the information available and (ii) that those measures have the effect of preventing unauthorised access to the protected subject-matter or, at least, of making it difficult to achieve and of seriously discouraging internet users who are using the services of the addressee of that injunction from accessing the subject-matter that has been made available to them in breach of the intellectual property right, that being a matter for the national authorities and courts to establish.' (para. 64)

The CJEU supports this conclusion by pointing out that an injunction restricts the service provider's freedom to conduct a business (protected under Article 16 of the EU Charter of Fundamental Rights), but does not touch upon its essence - the internet provider can choose the means to prevent users from illegally accessing copyright-protected works and may avoid liability by proving to have taken all reasonable measures. Regarding the measures to be taken, the Court observes:

'In that regard, in accordance with the principle of legal certainty, it must be possible for the addressee of an injunction such as that at issue in the main proceedings to maintain before the court, once the implementing measures which he has taken are known and before any decision imposing a penalty on him is adopted, that the measures taken were indeed those which could be expected of him in order to prevent the proscribed result.'

'None the less, when the addressee of an injunction such as that at issue in the main proceedings chooses the measures to be adopted in order to comply with that injunction, he must ensure compliance with the fundamental right of internet users to freedom of information.'

'In this respect, the measures adopted by the internet service provider must be strictly targeted, in the sense that they must serve to bring an end to a third party’s infringement of copyright or of a related right but without thereby affecting internet users who are using the provider’s services in order to lawfully access information. Failing that, the provider’s interference in the freedom of information of those users would be unjustified in the light of the objective pursued.' (paras. 54-56)

In this respect, the role of national judges is underlined:

'It must be possible for national courts to check that that is the case. In the case of an injunction such as that at issue in the main proceedings, the Court notes that, if the internet service provider adopts measures which enable it to achieve the required prohibition, the national courts will not be able to carry out such a review at the stage of the enforcement proceedings if there is no challenge in that regard. Accordingly, in order to prevent the fundamental rights recognised by EU law from precluding the adoption of an injunction such as that at issue in the main proceedings, the national procedural rules must provide a possibility for internet users to assert their rights before the court once the implementing measures taken by the internet service provider are known.' (para. 57)

Finally, copyright holders might face continuing (minor) infringements of their copyright, insofar as measures to prevent access may be circumvented and copyright is not an absolute right. Still, 'the measures which are taken by the addressee of an injunction, such as that at issue in the main proceedings, when implementing that injunction must be sufficiently effective to ensure genuine protection of the fundamental right at issue, that is to say that they must have the effect of preventing unauthorised access to the protected subject-matter or, at least, of making it difficult to achieve and of seriously discouraging internet users who are using the services of the addressee of that injunction from accessing the subject-matter made available to them in breach of that fundamental right' (para. 62)

While one cannot but admire the Houdini-like turns the Court takes in order to avoid chaining itself to a fixed balancing of the rights of all stakeholders involved, this judgment leaves many questions unanswered. The judgment re-emphasises EU law's strong right-based approach to access to films and other works through the internet, which is debatable in light of ongoing developments in the digital world. Furthermore, the Court's detailed considerations on the various aspects national judges have to take into account when considering the responsibilities of a service provider in a specific case hardly give any guidance as to the actual measures that may meet all the criteria - neither to national judges nor to internet providers. True, this is to a large extent a technical matter. Yet, it seems that the main burden of finding adequate and reasonable measures to prevent illegal access to information is now put on the internet service providers (and, indirectly, on judges assessing their cases). It may be questioned whether that outcome reflects a 'fair balance' in light of the EU Charter…

For a summary of the judgment, see also the CJEU's press release.

Measuring progress in the construction sector

Last week the European Economic and Social Committee announced that its Single Market Observatory is conducting a survey on the implementation of the Services Directive in the construction sector. The results of this survey are to be made public in April this year. The Services Directive is relatively new (from 2006) and it will be interesting to see what issues are there with its application in practice and whether it changed the relations between services providers and its recipients in the construction sector.

Music makes the EU come together

Last week, 4 February, the European Parliament also approved the new Directive on collective management of copyright and related rights and multi-territorial licensing - that are supposed to allow for easier streaming of music across the EU, exempting online music providers from having to apply for a license in every country they play music. Since only one of 500 licensed digital music services is available in all EU member states, these new rules may make this market more attractive for smaller competitors. (Licence to thrill...) This provided the online music provider will obtain a license from a collective management organisation representing authors' rights across borders. To facilitate this process national collective management organisations will be able to request other organisations to represent their repertoire (under the same conditions as applicable to their own repertoires) in countries for which they were not authorised to issue such licenses. The artists will need to be guaranteed their royalties not later than nine months from the end of the financial year in which the rights revenue was collected. Since the Directive was already informally agreed with the Council, the following Council's vote should just be a formality. (Copyright: cross-border licences for online music services)

What do consumers complain about? Prices' and services' differentiation.

The ECC-Net published a report "Enhanced Consumer Protection - the Services Directive 2006/123/EC. Analysis of Article 20.2 and Article 21 related consumer complaints reported to ECC-Net between 2010 and 2012". This network gives consumers free professional advice related to their problems with cross-border transactions within the EU (incl. Norway and Iceland). As the name suggests this report analyses two years worth of reports on consumer complaints submitted with regards to the cross-border transactions they concluded. While the aim of the EU is to create a more uniform European internal market where consumers would be able to benefit from deals not only in their own home countries but also in other European Member States, in order to achieve this objective the same level playing field needs to be created for consumers. This means that consumers should not be discriminated based on their nationality or place of residence (e.g., if you want to buy a good in Poland, you should be offered it under the same price whether you reside in Poland or in Greece). That being said, 74% of the received complaints concerning services showed that consumers were offered different prices (based mostly on their residence ) while buying goods online (167 cases of different treatment out of 222 reported to ECC-Net), 21% complaints were related to services in the tourism industry and 5% in the rental and leasing services. The service providers mostly introduce differences in providing their services and in their prices by either redirecting consumers to national websites for limited access to retail goods, or by tailoring offered services to the consumer's country of residence. Consumers mostly complained about the refusal to supply, price differentiation and difference in other conditions of access (e.g. requirement to have a bank account in a given country). 72 cases out of 222 (32%) required active intervention on behalf of consumers with a nearly 50% rate of success. Only 12 cases were reported to relevant enforcement authorities with only one decision having been made by these authorities. More data can be found in the report, but the ECC-Network signalises that more should be done to make the Services Directive effective for consumer protection.

Ius est ars boni et aequi - Opinion of AG Cruz Villalón in Case C-314/12 UPC Telekabel Wien

What responsibilities do digital service providers have towards copyright holders? Can an internet provider be required to block access to a website on which movies are made available without the consent of the film industry?

Case C-314/12 UPC Telekabel Wien v Constantin Film Verleih & Wega Filmproduktionsgesellschaft, which is currently pending before the Court of Justice of the EU, gives a clear illustration of the problem. The case concerns the access to a website on which more than 130,000 (!) movies were made available for streaming and downloading without permission of copyright holders. The owners of the website, which was taken offline after criminal investigation, were prosecuted in Germany. The present case regards the legal responsibility of an internet service provider whose services allowed Austrian users to access the illegal website. The question at issue is whether the internet provider, who had no (contractual) relation at all to the makers of the website, was under a legal duty to prohibit users from accessing the website.

In a nuanced Opinion in this case, Advocate General Cruz Villalón submits that it is not compatible with EU law to impose a general prohibition on an internet provider to allow its users to view a website that violates copyright law, without giving any specific guidance as to concrete measures that should be taken so as to prevent access to the site. According to the AG, moreover, this is not different in case a provider may avoid sanctions by demonstrating to have taken all reasonable measures to uphold the prohibition.

Still, in AG Cruz's opinion, a national measure specifically requiring a certain provider to block access to a designated website is not as a matter of principle disproportionate for the sole fact that it requires the service provider to incur not inconsiderable costs, while users may easily circumvent the technical measures taken by the service provider. It remains the task of national judges to strike the delicate balance of parties' rights in specific cases.

The AG bases his conclusions on the balancing of fundamental rights within the ambit of what is 'fair and equitable' and 'proportionate' in the sense of Article 3 of Directive 2004/48 on the enforcement of intellectual property rights. The balance involves the right to protection of intellectual property (Article 17(2) of the EU Charter of Fundamental Rights) and, on the service provider's side, freedom of information (Article 11 of the Charter) and freedom to conduct a business (Article 16 of the Charter). As AG Cruz points out, imposing a general obligation de résultat on the service provider to prevent access to websites that violate copyright law does not reflect a fair balance of these rights. Giving a service provider the possibility to avoid sanctions by showing to have taken all reasonable measures does not restore the balance, as it pushes back the consideration of relevant fundamental rights argumentation to the second stage of the assessment. Moreover, while a copyright holder has strong claims in hand, a digital service provider who is not infringing copyright himself would hardly have any defence against the imposition of a burdensome general measure aimed at preventing the abuse of intellectual property rights by third parties to which the provider has no contractual relationship.

In sum, the complex task of balancing the interests and rights involved in cases of massive copyright infringements through the internet would remain a task of national judges in specific cases.

See also the CJEU's press release (which, interestingly, leaves out most of these nuances of its heading).

Restrictions on hazard

Online gambling is quite a controversial service in Europe. In general, European countries are allowed to put restrictions on provision of online gambling within their borders, due to public interest objectives (such as consumer protection, fraud prevention etc.). However, the justification for applying such restrictions needs to be real and concrete, and applied consistently, since otherwise freedom of provision of services within EU should prevail (see e.g. out post on recent AG's opinion in the CJEU case Pfleger). During the last year, the European Commission was evaluating current national provisions restricting online gambling. Yesterday, it was announced that at the moment Sweden does not apply its national restrictions systematically. While national rules give exclusive rights to certain service providers for providing online betting services and online poker services, the compliance with these restrictions is questionable (at the same time, Finland was seen as properly having enforced compliance). Some other countries were asked to provide more information on possible restrictions and licensing procedures with regards to online gambling services. (see more: Commission requests Member States to comply with EU law when regulating gambling services)

Building a house? Online disclosure on construction products' performance

I have written my PhD about various fall-traps that consumers may stumble into while having someone construct their house. Notwithstanding that it is often a long, costly and technologically complicated process, consumers usually have to deal with various service providers who may not all be quite as reliable as necessary. Additionally, it is hard for consumers to overview the project and materials used, since their usability and effectiveness may not be immediately clear, upon a glance. It was then interesting to see that the European Commission decided to take certain legal measures to protect European consumers with regard to potentially defective, inferior construction products. The Commission proposes namely that manufacturers of construction products upload digital 'declarations of performance' on their websites, disclosing essential characteristics (e.g., fire resistance, mechanical strength, energy efficiency) of every product they sell. At the moment instead of having these documents publicly available, clients need to individually request them, which makes making comparisons between products more difficult. (Online information about construction products to save time and money) These changes should supplement the recently implemented Construction Products Regulation (in force as of 1 July 2013), which aims at providing accurate information on the performance of construction products by harmonising the language used by construction manufacturers.

Hazardous resolution

On 10th of September the European Parliament adopted a resolution "Online gambling in the internal market" calling upon the European Commission to better regulate online gambling in the EU. As we have mentioned before, online gambling is one of the fastest growing services in the EU. (see post: Easy money) Currently, online gambling' rules differ across the EU, since many European countries have different approaches to gambling in general due to morality issues and different ideas on what's needed to protect public order. It is not quite clear to me what measures the EP expects the Commission to take, since on one hand they argue for more harmonisation of online gambling in the internal market, but on the other they insist that Member States should be able to uphold aforementioned national barriers to market entry. What could be optimised, according to the MEPs, is a good exchange of information among the Member States that could contribute to the European list of banned operators (black list) or licensed operators (white list), European codes of conduct, uniform tax rates, and uniform recognition rules so that operators recognised in one Member States could conduct business in other Member States, as well (unless these specific, national market barriers would oppose that?). Another curious point is the call for a European ban of certain types of wagers that pursuant to the MEPs are more prone to lead to fixing risks in sports, e.g., live sports betting, wagers such as awarding yellow cards, throw-ins, corner kicks etc.

Less TV ads in the consumers' interest - CJEU in Sky Italia (C-234/12)

18 July 2013: CJEU in case Sky Italia (C-234/12)

One of the goals of the Audiovisual Media Services Directive (2010/13/EU) is to protect consumers as television viewers from excessive television advertising. Therefore, the Member States are allowed to set their own rules and also differentiate in broadcasting rights granted to TV broadcasters under their jurisdiction. (Recital 83 Directive, Par. 17 judgment) In Italy, pay-TV broadcasters were given shorter hourly advertising limits than those of free-to-air broadcasters. (Par. 6) In the case in front of the CJEU the Italian court asked whether such a distinction was compatible with the principle of equality, rules of free movement of services and the principle of pluralism in media. (Par. 10)

The CJEU notices that the Directive is of a minimum harmonisation character and where it requires the Member States to set the limit of broadcasted advertisements to 20% of a given clock hour (Art. 23(1) Directive), this limit could be lowered on national levels in the interest of consumers as television viewers, as long as the EU principles are observed. (Par. 14) The interests of pay-TV broadcasters and free-to-air broadcasters are not seen as comparable by the CJEU which means that the infringement of the principle of equal treatment cannot be invoked: "Whilst the former generate revenue from subscriptions taken out by viewers, the latter do not benefit from such a direct source of financing, and must finance themselves either by generating income from television advertising, or by other sources of financing." (Par. 20) This difference could justify other rules for hourly broadcasting limits on television advertising. (Par. 23) While the provision of services by pay-TV broadcasters could be limited by such a special treatment, the need for the protection of consumers' interests could take precedence here, as long as the adopted rules were seen as proportional, which is for the national courts to determine. (Par. 25) There was not enough material submitted to the CJEU to determine whether such a national rule could distort competition on the media market. (Par. 32)

Follow up: RWE v Verbraucherzentrale NRW

Dear readers, 

some of you will remember a post from the spring concerning unfair contract terms in the German energy retail market.
In that decision, the CJEU had laid a set of conditions for the validity of terms allowing long-term providers to unilaterally increase the product or service's price; it had also suggested, we inferred, that the specific term involved in the case under scrutiny was likely to be invalid. Such invalidity, it was submitted, would have easily paved the way for a series of reimbursement requests from some (hundred thousand) RWE customers, who had been subject to a long series of price increases over a not so long timespan.
Today, the Bundesgerichtshof (case Az.: VIII ZR 162/09) awarded the original plaintiffs, 25 consumers supported by the Verbraucherzentrale, restitution rights for a total of 16.128,63 Euro. It is easy to imagine that more requests will be filed in the coming weeks, granting the concerned provider a really heated August.

Mandatory statutory or regulatory rules on what? (RWE Vertrieb AG v Verbraucherzentrale Nordrhein-Westfalen e.V.,)

Yesterday, the Court of Justice delivered an important and complex judgement on (unfair) general terms and conditions in a very special sector, namely that of gas supply. 

The post which this decision originated is *very* long, so for less adventurous readers here is a synthesis of the decision's two main points:

1) providers which choose to supply gas under a "free market" regime can not automatically adopt the same contract terms that they are authorised to use under regulated tariff regime, since different market conditions demand (or can demand) different balancing exercised; even provisions of law, taken out of their original context, can lose their immunity under Directive 93/13;

2) in long-term services, it is normal that prices will be amended over time and that the provider reserves to do so; however,

a) to comply with European law in the field of gas supply, the conditions under which changes will take place need to be made clear in the contract;

b) customers must be given an effective right to terminate the contract if they do not want to accept price variations; in particular, the fact that they are contractually entitled to do so is not sufficient when factual conditions (not idiosyncratic to the consumer) make the termination impossible.

 For hard core fans of unfair terms control, however, here is the unabriged version

As many will know, energy is very often (or used to be) supplied outside a pure freedom-of-contract regime, with universal service obligations and other special rules. In the case considered by the Court in

RWE Vertrieb AG v Verbraucherzentrale Nordrhein-Westfalen e.V., however, the parties had concluded a "special contract", exempt from administrative tariff regulation. The provider, nonetheless, had chosen to reproduce in the contracts which it supplied to its customers some terms used in its regulated contracts- in particular, those on price increases. 

The incorporated terms referred to the applicable (to non-special contracts) legislation, which "allowed the supplier to vary gas prices unilaterally without stating the grounds, conditions or scope of the variation, while ensuring, however, that customers would be informed of the variation and would if appropriate be free to terminate the contract." (par. 18)

In other words, from a formal point of view the contract made legal rules on standard tariff contracts applicable to non-standard tariff ones. From a substantive point of view, the terms allowed the provider to increase its prices with no restrictions, provided that the customers would be duly notified and authorised to terminate their subscription. 

After a consumer organisation brought before German courts a request that the concerned consumers be reimbursed of the amounts paid as a consequence of four price increases implemented within 26 months, the terms just mentioned came to be investigated by the German Supreme Court in civil matters, the Bundesgerichtshof, which raised two questions:

1) whether the terms are subject to scrutiny under the Unfair Terms Directive (93/13 EEC);

2) whether, were the Directive applicable, terms which allow a supplier to change the price of the good/service without determining "the grounds, conditions and scope of a change"can still be considered fair if the customers are duly informed of the variation when it takes place and given a right to terminate the contract.

Both questions are extremely interesting in the context of unfair terms control. 

As concerns question number one, Directive 93/13 excludes from its scope (art. 1(2)) all terms "which reflect mandatory statutory or regulatory provisions". We have seen that the terms included in the contract reproduced legal provisions, though not directly applicable to the contracts concerned. Should this operation guarantee immunity from control? According to the court, the answer is no. 

The rule's underlying assumption is that "it may legitimately be supposed that the national legislature struck a balance between all the rights and obligations of the parties to certain contracts." (par 28); on the other hand, when certain rules have been made applicable to one group of contracts, "[a]n intention of the parties to extend the application of those rules to a different contract cannot be equated to the establishment by the national legislature of a balance between all the rights and obligations of the parties to the contract" (par. 29), and does not deserve the same deference. Affirming this principle is necessary to avoid providing suppliers a "safe heaven" made of patchwork application of rules conceived for different domains than the one concerned (par. 31).

In this case, it was clear that German law had deliberately subjected "special" contracts to a different regime compared to standard tariffs, so the equilibria found in the latter context could not be simply transposed to the former (par. 37)

Coming to the second question, the Court first reaffirms that it is not within its competence to decide on the unfairness of specific terms.What it can do, though, is provide the referring court with guidelines to evaluate the terms in light of the concrete circumstances. In the context of gas supply, the evaluation has to take into account the high standards set by Directive 2003/55, which requires Member States to "adopt measures to ensure that those terms and conditions are fair and transparent, are stated in clear and comprehensible language and are notified to consumers before the contract is concluded, and that consumers receive transparent information on applicable prices and tariffs and on standard terms and conditions." (par. 45)

In particular, while the suppliers are not required by any legal rule to justify the adoption of a price increase, courts should ascertain two elements. The first concerns the agreement itself; concerned courts should check "whether the contract sets out in transparent fashion the reason for and method of the variation of the charges for the service to be provided, so that the consumer can foresee, on the basis of clear, intelligible criteria, the alterations that may be made to those charges" (par. 49). 

The obligation to give notice in due time of the change (and the related termination right) is additional to the duty to correctly inform the consumer about the terms and conditions under which the service is provided and can in principle not compensate deficiencies in the transparency of the original agreement (par 51-52). 

The other fundamental component of the evaluation is that "consumers [must] have the right to terminate the contract if the charges are in fact altered". In particular, "it is of fundamental importance [...] that the right of termination given to the consumer is not purely formal but can actually be exercised" (par. 54). This requires courts to take into account market conditions, termination costs and other possible factors which may hinder the realisation of the consumer's right to terminate. 

... in other words, it seems to this author that the Court is implying that the terms might, indeed, be unfair. What do you, esteemed readers, think?

What seems sure is that the German Government (and, indeed, the gas company) will not be enthusiastic about this judgement. To this respect, it might not help that they both had asked the Court, should the terms be found not to "satisfy the requirements of European Union law" (par 56), postpone the effects of the judgement by 20 months to avoid the financial costs of a "retroactive" unfairness declaration. The Court denied the request by considering that the terms unfairness will not descend of its decision, but of the national court's findings. The hot potato is thus in the hands of the Bundesgerichtshof, but the impact of the case might go well beyond the German boundaries.

P.S. meanwhile, BEUC's twitter account announced the decision as a "milestone".