‘General terms and conditions’ means ‘general terms and conditions’ – provision of information in C‑380/19

Case C‑380/19 (available here) concerned DAÄB – a German cooperative bank – and the way that it provides mandatory information to consumers. According to Article 13 of the Alternative Dispute Resolution (ADR) Directive, traders are obliged to inform consumers about the ADR entity by which the trader is covered, when the trader commits to or is obliged to use those entities to resolve disputes with consumers. According to the same provision, traders are obliged to provide this information on their website ‘when one exists’. In addition, ‘if applicable’, this information must be included in the general terms and conditions of contracts between the trader and the consumer. The problem in this case revolved around the fact that DAÄB’s terms and conditions (available on its website) do not include information on its willingness or obligation to take part in a dispute resolution procedure. That information appears, however, in another tab on DAÄB’s website, as well as in another document that is sent to the consumer when a contract is concluded. This document lists the services and prices offered by DAÄB. Besides, although DAÄB operates a website, it does not conclude any contracts with consumers via that website. The referring court therefore questioned the meaning of the terms ‘when one exists’ and ‘if applicable’ present in Article 13 of the ADR Directive. The court asked the CJEU whether the trader must provide the information regarding ADR on its website even if it does not use it to conclude contracts and, if so, whether it is sufficient that the trader provides the relevant information somewhere else on the website rather than on the terms and conditions available.

The CJEU claimed that the terms used by the legislator are unambiguous: if the trader has a website, the information must be provided on that website (para 24). Besides, the information must not only be provided on the website but specifically in the terms and conditions when they are available (para 29). To support this conclusion, the CJEU invoked the terms used in other language versions of the ADR Directive (such as the Polish, Spanish, English, Portuguese, Dutch and Italian – para 24). Therefore, the duty to inform present in Article 13 is not correctly performed if the trader provides the relevant information somewhere on its website or in a separate document but not in the terms and conditions, like the case in question. Furthermore, the CJEU invoked the Consumer Rights Directive to raise a point regarding the moment in time when the information should be provided to the consumer. According to the CJEU, a joint interpretation of Article 13(2) of the ADR Directive and of Article 6(1)(t) of the Consumer Rights Directive dictates that it is not sufficient that the consumer receives the information regarding ADR simply at the time of the conclusion of the contract, regardless of whether it is in the general terms and conditions or in another document. To ensure a proper understanding of the information and to protect the free formation of consent, the consumer must be given this information ‘in good time before the contract is concluded’ (para 33).

While this is a short and straightforward case, it is interesting for several reasons. First, the CJEU once again showed that the different language versions are relevant in the interpretation of EU law (see also, for example, case Amazon EU). Second, the CJEU seems to assume a unified and rather formal notion of general terms and conditions. It seems that general terms and conditions in the sense of the ADR Directive are only those terms that are included in a document titled ‘general terms and conditions’. There are other possible interpretations, such as the one adopted by the Regional Court of Düsseldorf regarding this case, which considered that terms and conditions can consist of different documents, regardless of their designation. Finally, the CJEU introduced a discussion on the timing of the provision of information and it distinguished between information to be provided before the conclusion of the contract and information to be provided upon the conclusion of the contract. These two moments are often left undistinguished in practice.

How concerned are Europeans about their privacy?

Under the European Commission’s request, the European Union Agency for Fundamental Rights recently prepared a report about the Europeans’ perspective on their online privacy and personal data (here). This report is based on a survey where 35 000 Europeans were asked about their views on privacy and about their awareness of the GDPR. The survey is from pre-pandemic times (January-October 2019), but its conclusions are highly relevant in a time where several European countries consider using technology to track the spread of COVID-19. For example, the Netherlands will soon launch an app that will keep track of who the app holder was in contact with, so as to quickly notify them in case of a possible contact with a COVID-19 infected person (see more about this here).

The report showed some interesting results, particularly a difference between the level of trust in private and public bodies. While 23% of respondents claimed that they do not want to share any personal data with public bodies, 41% do not want to share personal data with private companies. The results also show that the willingness to share personal data depends on the specific data to be shared: for example, while 63% of willing-to-share respondents would share their home address with public bodies, a mere 7% would share their political views.

The report also touched upon another well-known issue: people do not read terms and conditions before agreeing to them. Surprisingly, in this study, 22% of respondents claim to always read terms and conditions (approx. one in five) and 44% claim to read them sometimes. This means that in total 66% of respondents read at least sometimes the terms and conditions of the products or services they acquire. While still far from ideal, these numbers are higher than those reported in other similar studies (see, for example, the study by the Behavioural Insights Team on which we reported here). More worrying is the percentage of respondents who read the terms and conditions but do not understand them (27%). There are, however, relevant differences between Member States: for example, while in Belgium 47% of respondents do not read terms and conditions, in Estonia that number drops to 22%.

Finally, there is a high number of respondents who are aware of both the GDPR and of their national data protection supervisory authority (around 70%). 60% of respondents are aware that they are legally entitled to access their personal data held by public administrations (although this number decreases to 51% regarding private companies). Moreover, most respondents stated that they are aware of privacy settings on their smartphones (72%), although the results are not as positive regarding the privacy settings of specific apps (31%).

Towards clearer Terms and Conditions... again

Be it pre-contractual information in terms and conditions or information on the processing of personal data in privacy policies, the truth is that the way businesses provide information to consumers generally leaves a great deal to be desired. In order to prevent this, and to better inform the informers, the Behavioural Insights Team (BIT) published a ‘Best Practices Guide’ on improving consumer understanding of contractual terms and privacy policies. These evidence-based guidelines are aimed at businesses and focus on ‘how’ to present information, rather than on the ‘what’. 

This study had a dual-focus: consumer comprehension of online contractual terms/ privacy policies and consumer engagement (i.e. the opening of full contractual terms or privacy policies). The study produced interesting, although not surprising, findings. In fact, the shortcomings of the information paradigm have been repeatedly studied and analysed, both at a practical and at a normative level. See, for example, what we previously reported here, here and here.

From the 18 measures tested, 6 proved to be effective, meaning that they showed evidence of increased consumer understanding or increased consumer engagement. The most effective measures are the display of important or unusual terms as Frequently Asked Questions (which increased comprehension in 36%), the use of icons combined with summaries to explain key terms (which increased comprehension in 34%) and telling customers how long it will take to read the policy (which increased opening rates of full terms and policies in 105%). Other effective measures include the use of illustrations and comics to explain step-by-step actions and processes, telling customers when it is their last chance to read information before they make a decision and showing customers the terms in a scrollable text box instead of requiring a click to view them. Also noteworthy is the fact that while BIT’s research showed that reducing a policy’s reading age level did not change comprehension levels for general customers, it showed evidence that such a measure helped people with lower levels of qualifications (increased comprehension by 16.9%).

Funnily enough, considering social media trends, adding emojis to contractual terms is amongst the measures that have no supportive evidence of increased understanding or engagement. Besides, well-known techniques like shortening the terms and conditions, using simpler language or resorting to summaries showed mixed evidence, which means that although they worked in some cases, they did not work in others. For example, presenting key points in a summary table increased comprehension of terms included in the summary, but it also decreased comprehension of terms not included in the summary. These findings show that a mere language simplification-based solution is not enough to fix consumer disinformation: measures such as simple language and summaries must be combined with visualization.

The study – which was commissioned by the UK Government – also demonstrates how regulators are well-aware of the consumer disinformation problem. However, it is rare to see a legislative instrument (both at national and EU level) incorporating explicit measures dealing with these (or with similar) findings. The only recent exception at EU level is the General Data Protection Regulation, which explicitly calls for ‘standardized icons’ and visualization as a means to increase transparency in the pre-contractual stage. This study is another reminder of the need for lawyers to work with information designers in order to increase and improve visualization of their terms and conditions.

Finally, it is important to stress that even though the effective measures led to an increase in consumer understanding and consumer engagement, the final numbers did not go above 58% and 34%, respectively. In other words, according to this study, around 40% of consumers still do not understand terms and conditions, while 66% of consumers do not open the full policies, even after the tested measures are implemented. This means that in order to reach an almost complete comprehension of pre-contractual information – or to guarantee that everyone understands what they are binding themselves to - we need additional solutions and new approaches.

Commission guidance note on Unfair Terms Directive

The European Commission adopted today a guidance note on unfair contract terms. It is intended to ensure that consumer associations and legal practitioners, including judges, will be better equipped to protect EU consumers from unfair contract terms. The guidance note is based on the case law of the EU Court of Justice on Directive 93/13. As a complement to the guidance note, European businesses organisations have drawn up recommendations on how mandatory consumer information as well as terms and conditions can be presented to consumers in a more user-friendly and transparent way.
Both initiatives follow up on the REFIT Fitness Check of EU consumer and marketing law, as announced in the Commission’s Communication on a New Deal for Consumers.

Source: https://www.pubaffairsbruxelles.eu/fighting-unfair-contract-terms-commission-issues-guidance-to-better-protect-consumers-eu-commission-press/ 

Beyond B2C: proposed regulation on fairness and transparency in platform-to-business relations

Earlier today the Commission took further steps to advance its hotly debated initiative on platform-to-business relationships and proposed a regulation on promoting fairness and transparency for business users of online intermediation services. The declared aim of the new rules is to "create a fair, transparent and predictable business environment for smaller businesses and traders when using online platforms". This includes, in particular, businesses such as hotel owners, sellers of goods or developers of mobile applications who rely on online intermediation services to reach consumers. By proposing rules targeting this specific type of B2B relationships, the Commission - already second  time this month (cf. the proposed directive on unfair trading practices in the food chain) - departs from the usual, consumer-oriented approach to the regulation of fairness in commercial transactions and steps upon a legal minefield. 

Two approaches

Aside from the business-to-business dimension addressed, the rules proposed for the platform economy and for the food sector do not seem to have much in common. For a start, the rules tabled today would not be contained in a directive requiring implementation, but in a directly applicable regulation with elements of a co-regulatory approach. The substantive provisions of both initiatives are also fundamentally different. Rather than providing for a black or grey list of unfair trading practices, the proposed regulation on platform-to-business (un)fairness lays down obligations for providers of online intermediation services and, in certain respects, online search engines to provide business users and corporate website users, respectively, with appropriate transparency and to offer them certain redress possibilities. 

Content of the proposal

Particular attention in the instrument presented today is devoted to standard terms and conditions used by providers of online intermediation services. In this respect the proposal does not provide for a general fairness test, such as the one found in the Directive 93/13/EEC on unfair terms in consumer contracts, but rather focuses on the way T&Cs are drafted (in clear and unambiguous language - Article 3(1)(a)) and made available (easily and at all stages of the commercial relationship, including the pre-contractual stage - Article 3(1)(b)). Further provisions referring the specific terms and conditions to be determined by providers of online intermediation services are also found throughout the instrument. Only one of them, however, is mentioned as a direct follow-up to the rules on transparency and availability - one related to the suspension or termination of online intermediation services.

Indeed, pursuant to Article 3(1)(c) providers of online intermediation services shall ensure that their terms and conditions set out the "objective grounds" for decisions to suspend or terminate, in whole or in part, the provision of their online intermediation services to business users. The placement within the proposal is not insignificant considering that, pursuant to Article 3(2), "terms and conditions, or specific provisions thereof, which do not comply with the requirements of paragraph 1 shall not be binding on the business user concerned where such non-compliance is established by a competent court". Additionally, Article 4 of the proposal provides that the business users affected by suspension or termination should be provided with a "statement of reasons".

Consequences of non-compliance with other provisions related to the specifics of T&Cs such as the parameters of ranking (Article 5 - applicable also to search engines; for a consumer protection perspective see our ealier post: New Deal for Consumers: proposals on online transparency; note the differences between the addressees of the rules), conditions of differentiated treatment (Article 6) and of access to personal and other data (Article 7) as well as restrictions to offer different conditions through other means (Article 8) are not directly apparent. In this respect business users could either rely on the abovementioned rules on transparency and availability or try to address their concerns by means of internal complaint-handling systems (Article 9) or mediation (Articles 10-11). Both solutions do not seem unviable.

Furthemore, the proposal establishes a notification requirement of providers of online intermediation services regarding modification of their T&C. On the face of it, the requirement seems to be similar to the one known from regulated network markets. The proposed regulation, however, does not aim to allow business users to terminate the contract upon notice of changes in contractual conditions (cf. Article 20(4) of Directive 2002/22/EC and Article 98(3) of the proposed European Electronic Communications Code). Rather the failure to comply with requirements of proposed Article 3(3) would render the relevant modifications null and void. 

Last but not least, the proposal also opens avenues for injunctive relief (Article 12), which deserve an analysis of their own, particularly in the light of new initiatives devoted to consumer law enforcement.

Concluding thought

The basic premise regarding the role on online platforms - with regard both to professional users and the non-professional ones - seems to hold. Admittedly, one may argue that this is only true for some of the major players. Whether the extent of the issue calls for a response of the kind proposed today, and not, for example, within competition law, is only a part of controversy, however. The proposal on platform-to-business (un)fairness touches upon other highly divisive issues such as the distinction between B2B and B2C and the broader questions of Intenet governance. Even though, as for now, the future of the proposal remains uncertain, advancing the discussion on (some of) these matters would already bring value of its own. 

Burden of proof of fulfilment of pre-contractual information duties on credit provider - CJEU judgment in Case C-449/13 CA Consumer Finance

Today, the Court of Justice of the EU delivered its judgment in the case of CA Consumer Finance v Bakkaus and Bonato, concerning the pre-contractual obligations of credit providers. For a summary of the facts of the case, I refer to an earlier blog post on AG Wahl's opinion in the case ('Evidence of disclosure in consumer cases').

In line with the AG's opinion, the Court places the burden of proof of having fulfilled pre-contractual information duties on the credit provider. Moreover, the credit provider cannot shift the burden of proof to the consumer through a standard term. 

The Court rules:

'1.      The provisions of Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC must be interpreted to the effect that:

–        first, they preclude national rules according to which the burden of proving the non-performance of the obligations laid down in Articles 5 and 8 of Directive 2008/48 lies with the consumer; and

–        secondly, they preclude a court from having to find that, as a result of a standard term, a consumer has acknowledged that the creditor’s pre-contractual obligations have been fully and correctly performed, with that term thereby resulting in a reversal of the burden of proving the performance of those obligations such as to undermine the effectiveness of the rights conferred by Directive 2008/48.

2.      Article 8(1) of Directive 2008/48 must be interpreted to the effect that, first, it does not preclude the consumer’s creditworthiness assessment from being carried out solely on the basis of information supplied by the consumer, provided that that information is sufficient and that mere declarations by the consumer are also accompanied by supporting evidence and, secondly, that it does not require the creditor to carry out systematic checks of the veracity of the information supplied by the consumer.

3.      Article 5(6) of Directive 2008/48 must be interpreted to the effect that, although it does not preclude a creditor from providing the consumer with adequate explanations before assessing the financial situation and the needs of that consumer, it may be that the assessment of the consumer’s creditworthiness means that the adequate explanations provided need to be adapted, and that those explanations must be communicated to the consumer in good time before the credit agreement is signed, without this, however, requiring a specific document to be drawn up.'

See also the CJEU's press release.

What you don't negotiate can't hurt you?

Lawrence Solum's Legal Theory Blog pointed our attention to an interesting new paper by Tess Wilkinson-Ryan presenting 'A psychological account of consent to fine print'. The abstract reads as follows:

'The moral and social norms that bear on contracts of adhesion suggest a deep ambivalence. Contracts are perceived as serious moral obligations, and yet they must be taken lightly or everyday commerce would be impossible. Most people see consent to boilerplate as less meaningful than consent to negotiated terms, but they nonetheless would hold consumers strictly liable for both. This Essay aims to unpack the beliefs, preferences, assumptions, and biases that constitute our assessments of assent to boilerplate. Research suggests that misgivings about procedural defects in consumer contracting weigh heavily on judgments of contract formation, but play almost no role in judgments of blame for transactional harms. Using experimental methods from the psychology of judgment and decision-making, I test the psychological explanations for this disjunction, including motivated reasoning and reliance on availability heuristics. Many commentators have argued that even though it is true that disclosures are probably ineffective, they “can’t hurt.” I conclude with a challenge to that proposition — I argue that the can’t-hurt attitude may lead to overuse of disclosures that do not affect consumer decision-making, but have implicit effects on the moral calculus of transactional harms.'

To the lighthouse

Would you know exactly how much you spend on energy (gas and electricity) and if there are any more convenient offers available? European consumer organisation BEUC observes that the energy market is still very intransparent to a large group of consumers in Europe. In a position paper that was published this week, BEUC highlights the following action points for legislators and enforcement authorities:

'- Access to energy is not guaranteed to all EU consumers. As for electricity, gas should also be part of the universal service concept and Member States should ensure that there are effective procedures in place to minimise the risks of disconnection. 

- Consumers should receive objective and reliable information on the offers available in the market and have the possibility to compare such offers through independent comparison tools. 

- The terms and conditions governing the contractual relationship between consumers and providers should be transparent and fair. This includes adopting specific measures to help consumers understand complex contracts, for example via a standardised summary of the contract.

- Consumers should also be protected against misleading and aggressive marketing practices, in particular in off-premises contracts. Effective enforcement of the Unfair Commercial Practices Directive and the Consumer Rights Directive is urgently needed. 

- The single point of contact and consumer checklist established by the Third Energy Package should help consumers to access information about their rights in the energy market. However, effective scrutiny is necessary to assess how consumer can best use them. 

- Consumers should be able to assess and, where appropriate, change their consumption patterns. To do so, access to understandable consumption information and clear information on bills is essential. Additionally, the effective implementation of the Energy Efficiency Directive will also help consumers to manage their consumption while reducing costs.

- Switching should be easier and faster for consumers. Specific measures at national and EU level need to be implemented in order to help consumers change suppliers if they wish to do so (e.g. on switching period and renewal or termination of contracts).

- Finally, better enforcement by national authorities and consumers’ access to effective means of redress in case of disputes between consumers and service providers is essential to build trust in the energy sector.'

Documentary: Terms and conditions may apply

This blog and its authors spend a considerable amount of time reasoning on terms and conditions, privacy online and possible combinations of the two. Of course, this is a matter that non-lawyers might also be interested in seen how it concerns the lives of more or less everybody- at least among those living in richer, hyperconnected countries. 

In this case, film director Cullen Hoback has worked three years to produce a documentary on internet services terms of use and the way companies make profits (which, is, by the way, their legitimate reason for existence) out of apparently "free" services.

The documentary both reflects on "hot" issues such as the instrumentalisation of information held by service providers to governmental ends (think of Prism!) and shows less scary-but nonetheless grotesque- aspects of the phenomenon.
Interviewed for an Italian magazine, mr. Hoback recalled for instance that in 2009 GameStation added mentions to the user's "immortal soul" being involved in the contract- a detail that went long unnoticed. Still today, again according to the director, Apple disclaims liability in case their products are used in the context of "nuclear war".

On the other hand, the film shows how serious threats to individual liberties can originate from intelligence and security service's ability to access personal (yet public) communications on social networks, stimulating awareness on the way we tend to thoughtlessly disclose information to an unidentified audience. 

Curious? You can find more info here.