Happy New Year's!

I wanted to wish you all Happy New Year's. One of my resolutions is to continue with this blog and try to make the posts appear more regularly.

EUCFR, child-friendly justice and consumer law

Today, it is exactly 10 years ago that the European Parliament, the Council and the European Commission solemnly proclaimed the EU Charter of Fundamental Rights (EUCFR). Commissioner Viviane Reding commemorated this fact in a speech she gave this morning at the 'Fundamental Rights Conference 2010: Ensuring Justice and Protection for all Children'.

Reding emphasised the importance of the Charter for ensuring the compliance of EU legislation with the rights laid down in the now-binding document:

'This means in particular that rigorous and systematic assessment of the fundamental rights impact of new legislative proposals is crucial. For this purpose, the Commission has developed a special methodology, which is reinforced now by a "fundamental rights check list", which the Commission services will use to identify and evaluate the effect of policy options on fundamental rights. This analysis can therefore better inform policy makers throughout the EU legislative process of the way fundamental rights can be affected and lead to a stronger legal grounding of the final act.'

From the consumer law perspective, it may be expected that future initiatives in this field, such as an optional instrument for European Contract Law, will likewise be assessed in light of this 'check list'.

Furthermore, Reding considered:

'The Charter explicitly recognises children as citizens with their own rights. This recognition is essential towards seeing children not just as in need of protection but also as independent and autonomous holders of rights. The Lisbon Treaty is a remarkable step forward in this respect.'

In light of the broader European contract law debate, the protection of children's rights and autonomy seems to be of special importance in the digital context (on which an earlier post appeared on this blog). Many consumers of digital content products, such as ringtones, music and movies, are minors. This raises the question to what extent an optional instrument should explicitly regulate their interests.

From another point of view, finally, it may be asked to what extent European consumer law should take into account children's rights when assessing the validity of contracts: should it consider to be invalid contracts concerning the sale of products that were made by children (in developing countries)? A difficult topic, which one of our PhD researchers in Amsterdam is analysing (a working paper she prepared on this subject may be found here), and fundamentally engages the legal possibilities for (or law's limits to) fully 'ensuring child-friendly justice' within as well as across the European borders.

ECJ instructs businesses what NOT to publish on their website to keep operations domestic only - case C-585/08 Pammer & C-144/09 Hotel Alpenhof

7 December 2010: ECJ joined cases C-585/08 Pammer and C-144/09 Hotel Alpenhof

I've previously discussed the AG's opinion in these cases: "Does having a website mean you operate worldwide?". You, dear reader, may find the summary of the facts of these cases there as well as an introduction to the legal questions discussed.

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Have you read the previous post? No? I'll give you some more time.

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Now that we are ready to talk business: ECJ repeated most of the arguments of the AG in this case. However, certain detailed instructions to the national courts had been formulated differently so let's start with that.

The ECJ was asked:

"(...) on the basis of what criteria a trader whose activity is presented on its website or on that of an intermediary can be considered to be 'directing' its activity to the Member State of the consumer's doimicile (...)" (Par. 47)

The ECJ mentioned that:

"(...) development of internet communication, (...) makes it more difficult to determine the place where the steps necessary for the conclusion of the contract are taken and at the same time increases the vulnerability of consumers with regard to trader's offeres." (Par. 62)

On one hand the courts have to look at the intention of the traders to turn to citizens of a Member State in order to trade with them. That intention may be implicit in certain methods of advertising. (Par. 63-65) On the other hand, the ECJ recognizes that this intention is not always present in case of advertising online, since it automaticaly has a worldwide reach, regardless of the intention of the trader to target consumers outside the country it is established in. (Par. 68)

The national court needs to establish whether, before any contract with that consumer was concluded, there was evidence demonstrating that the trader was envisaging doing business with consumers domiciled in other Member States. (Par.76)

What is not indicative of the trader's intention to direct trade to other MS than the MS where it is established: (Par. 77, 79, 94)

• email address mentioned on the website
• geographical address mentioned on the website
• telephone number (without an international code) mentioned on the website
• whether the website is passive or interactive
• the sole fact that the website is accessible in another Member State
• use of language/currency which is also used in the MS in which trader is established

What is indicative of the trader's intention: (Par. 81, 83, 84)

• clear offer directed to other Member States designated by name
• disbursement of expenditure on an internet referencing service to the operator of a search engine in order to facilitate access to the trader's site by consumers domiciled in various MS
• international nature of the activity at issue offered by the website, such as certain tourist activities
• telephone numbers with the interational code
• use of top-level domain name other than that of the MS in which the trader is established
• use of neutral top-level domain names
• description of itineraries from one or more other Member States to the place where the service is provided
• mention of international clientele, e.g. by presentation of accounts written by such consumers
• websites permits to use different languages/currencies

The ECJ confirmed also the belief of the AG in the Pammer case that a boat excursion that had been subject matter of the contract in this case was a package travel contract. (Par. 45-46)

Behavioural Economics discussed by European Commission

Just a quick note to let you readers know that video clips and presentations of the conference in Brussels (Behavioural Economics, so What: Should Policy-Makers Care?, mentioned before on this blog) are now available online.

You may access them here.

When comparative advertising is not misleading to consumers: ECJ case C-159/09 Lidl v Vierzon

18 November 2010: ECJ case C-159/09 Lidl v Vierzon

Dear reader, if you had previously on this blog read my summary of the Advocate General's opinion in the ECJ case Lidl v Vierzon then you should be warned that the European Court of Justice followed closely on what the AG had said and you should not expect to be surprised by this judgment. Still, certain interesting (and VERY CLEAR) guidelines had been given as to what is allowed in the world of comparative advertising.

Brief reminder of the facts of the case: Lidl accused Vierzon from publishing a misleading advertisement in a French newspaper. It was misleading, according to Lidl, because it compared prices of certain goods (mostly food products) in a few supermarkets without naming the brands of the goods compared nor taking into account that these goods might have differed as to certain characteristics (as well, as that demand for them might have been different, due to the fact that consumers might have used them in various ways during the cooking process).

First decision of the ECJ in this case was that Article 3a(1) of the Directive 84/405 on misleading advertising (as amended by Directive 97/55) regulating requirements for comparative advertising should apply also to food products. ECJ noted that there is nothing in the wording of the provision that suggest an exclusion of these products from being covered by the protection of the Directive. Also, such a prohibition would lead to a considerable restriction on the scope of comparative advertising. (Par. 35-36) The prices of food products could be thus compared in an advertisement provided that these food products fulfill the requirement of a sufficient degree of interchangeability.

"(...) Article 3a(1)(b) of Directive 84/450 is to be interpreted as meaning that the fact alone that food products differ in terms of the extent to which consumers would like to eat them and the pleasure to be derived from consuming them, according to the conditions and place of production, their ingredients and who produced them, cannot preclude the possibility that the comparison of such products may meet the requirement laid down in that provision that the products compared meet the same needs or are intended for the same purpose, that is to say, that they display a sufficient degree of interchangeability." (Par. 39)

ECJ allows for a comparative advertising of food products provided that such an advertising is not misleading. When would it be misleading?

1. If it were misleading for an average consumer. (Par. 47)
"That court must, first, take into account the perception of an average consumer of the products or services being advertised who is reasonably well informed and reasonably observant and circumspect. As regards an advertisement such as that at issue, it is not disputed that it is addressed not to a specialist public but to end consumers who purchase their basic consumables in a chain of stores."

2. If the misleading character flows not only from the information contained in the advertisement but from all its features. (Par. 48)

3. Omission may render advertising misleading, as well. (Par. 49)
"The Court has also held that an omission may render advertising misleading, in particular where, bearing in mind the consumers to whom it is addressed, the advertising seeks to conceal a fact which, had it been known, would have deterred a significant number of consumers from making a purchase."

4. If advertisement convinces consumers that if by regularly buying their everyday consumer goods from the advertiser rather than from the competitor, they will save money or if it makes them believe that all of the advertiser's products are cheaper than those of his competitor. (Par. 50)

5. If food products compared in the advertisement are objectively different and the differences are capable of significantly affecting the buyer's choice. (Par. 51) E.g. in case products of two different brands are compared and one brand is significantly better-known for the consumers. (Par. 53) The same may be true as to other features of the products compared, e.g. composition, method or place of production. (Par. 54)
"The [consumer] may thus be led to believe that he will in fact obtain an economic advantage because of the competitive nature of the advertiser’s offer and not because of objective differences between the products being compared." (Par. 55)

Finally, the ECJ seems to suggest that the brand names should, after all be mentioned in the advertisement since the consumer should be able to identify the product mentioned in the advertisement when the consumer goes to the supermarket, in order that he can check whether the advertisement was correct. (Par. 62)

Transparent and comparable bank fees

Making banking fees more transparent and comparable for consumers. That's the way forward according to the European Commission when it comes to the promotion of a competitive single European market for banking services. This Monday the European Commission, together with the banking industry and consumer advocates, launched a self-regulatory initiative to achieve these aims.

The self-regulation should address the following problems:
(1) Complex bank fee terminology;
(2) Difficulty in comparing bank fees;
(3) Lack of basic consumer information on bank fees.

For more information, including reports identifying the problems on the internal market for consumer banking services, click here.

National courts need to do some legwork: ECJ case C-137/08 Pénzügyi Lízing

9 November 2010: ECJ case C-137/08 Pénzügyi Lízing

ECJ decided today also on a reference concerning assessment by the national court of its own motion whether a contractual term conferring jurisdiction is unfair in respect of the Directive 93/13/EEC on unfair contract terms.

Opinion of the Advocate General has been previously discussed here.

The facts of the case were as follows: Mr Schneider concluded a loan with Pénzügyi Lízing to finance the purchase of a car. When Mr Schneider stopped paying the loan back, Pénzügyi Lízing terminated the contract and brought a case before court demanding repayment of a debt with interest. Pénzügyi Lízing brought an application for a payment order before the court to which jurisdiction has been conferred in the loan agreement and not the court corresponding to the place where Mr Schneider lived. The payment order was issued without the parties having to enter into proceedings. Upon appeal by Mr Schneider (who did not mention any ground for that appeal), when the parties entered into proceedings, the court realized that Mr Schneider did not live within its territorial jurisdiction and questionned the fairness of the contractual term conferring jurisdiction.

Proceedings in this case has been stayed until Pannon case (C-243/08) was decided. In Pannon case ECJ answered some of the questions of the Hungarian court. However, upon Pannon case was decided, the Hungarian court referred a few other questions to the ECJ, asking for more explanations.

One of these additional questions asked was, whether the jurisdiction of the ECJ extends to the interpretation of the concept of 'unfair term' and to the criteria which the national court may or must apply when examining a contractual term in the light of the provisions of the Directive.

ECJ, in his answer, reminded that:
"Article 3 of the Directive merely defines in a general way the factors that render unfair a contractual term that has not been individually negotiated, that the Annex to which Article 3(3) of the Directive refers contains only an indicative and non-exhaustive list of terms which may be regarded as unfair and that Article 4 of the Directive provides that the unfairness of a contractual term is to be assessed taking into account the nature of the goods or services for which the contract was concluded and by referring, at the time of conclusion of the contract, to all the circumstances attending the conclusion of it." (Par. 42)

ECJ stated therefore, that while it has jurisdiction to the interpretation of the concept of 'unfair term' and to the criteria which the national court may or must apply when examining a contractual term, it leaves to the national court to determine, in the light of those criteria, whether a particular contractual term is actually unfair in the circumstances of the case.

Further questions referred to the ECJ sought to establish responsibilities of the national court, from the time when it begins to consider whether a contractual term conferring exclusive territorial jurisdiction may be unfair. Whether the national court is obliged to undertake, of its own motion, an investigation with a view to establishing the factual and legal elements necessary to assess whether a term is unfair, where the national procedure rules permit that only if one of the parties so requestes.

In her opinion the Advocate General stated here that there is no general obligation for the national courts to examine the unfairness of the contractual terms of their own motion. She mentioned that the national courts would have to assess unfairness of contractual terms only in case there would be an indication of possible unfairness on the basis of the arguments of the parties or other circumstances. The ECJ does not repeat this argument, however.

ECJ made it clear that the Directive's aim is to protect the consumer as a weaker contractual party, both on account of his weaker bargaining power and his level of knowledge. (Par. 46) It is because of that weaker position of the consumer that Art. 6(1) of the Directive provides that unfair terms are not binding on the consumer. This is a mandatory provision which aims to replace the formal balance which the contract establishes with an effective balance which reestablishes equality between the parties. (Par. 47) That imbalance between consumer and the professional party may be, according to the ECJ, corrected only by positive action unconnected with the actual parties to the contract. (Par. 48) Therefore:

49 Thus, in the exercise of the functions incumbent upon it under the provisions of the Directive, the national court must ascertain whether a contractual term which is the subject of the dispute before it falls within the scope of that Directive. If it does, that court must assess that term, if necessary, of its own motion, in the light of the requirements of consumer protection laid down by that Directive.

50 As regards the first stage of the examination to be carried out by the national court, it appears from Article 1 in conjunction with Article 3 of the Directive that it applies to any term conferring exclusive territorial jurisdiction which was not individually negotiated appearing in a contract concluded between a seller or supplier and a consumer.

51 In order to safeguard the effectiveness of the consumer protection intended by the European Union legislature, the national court must thus, in all cases and whatever the rules of its domestic law, determine whether or not the contested term was individually negotiated between a seller or supplier and a consumer.

After giving these guidelines as to the first stage of the test, the ECJ reminds that as far as the second stage of the test is concerned (assessment of the unfairness) that has been already explained in its verdict from the Oceano case (C-240/98) stating that a term conferring territorial jurisdiction must be regarded as unfair in so far as it causes, contrary to the requirement of good faith, a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer. (Par. 53)

The ECJ concluded here categorically that the national court must investigate of its own motion whether a term conferring exclusive territorial jurisdiction in a contract concluded between a seller or supplier and a consumer, which is the subject of a dispute before it, falls within the scope of the Directive and, if it does, assess of its own motion whether such a term is unfair. (Par. 56)

It is interesting to see that the ECJ ignored prepared by the AG arguments on the 'legal and factual elements necessary' to assessing the unfairness of a contractual term of the court's own motion. It gives the impression that the ECJ wanted to ensure the high level of consumer protection against unfair contract terms despite national courts' worries that had been expressed after publication of ECJ's earlier judgments. Whenever a court receives a copy of the contract in which there is a clause conferring territorial jurisdiction, that national court is obliged to inquire whether that clause had been individually negotiated and if it had not been, then it has to assess its fairness. The national courts have to some legwork here. They are not allowed to wait until the parties point out the jurisdiction clause in the contract or until it is being brought to their attention otherwise. They have to check whether such a clause was added to the contract and what was its status.

Can we add a bonus to the goods we have for sale so as to attract more consumers? ECJ case C-540/08 Mediaprint

9 November 2010: ECJ case C-540/08 Mediaprint

This judgment concerned interpretation of the Directive 2005/29/EC on unfair commercial practices, its maximum harmonisation and the subject of combined offers.

The opinion of the Advocate General in this case has been discussed in an earlier post.

As a short reminder, the facts of the case were as follows: The dispute was between two Austrian newspaper publishers. One of them organised the election of the 'footballer of the year' and invited the public to join in that competition, by internet or by means of a voting slip appearing in the newspaper. Participation in that competition carried the prize of dinner with the footballer chosen.

Austrian law lays down a general prohibition on sales with bonuses, which is aimed at ensuring both the protection of consumers and the maintenance of effective competition. Pursuant to that provision it was an unfair commercial practice.

The questions were:
1. Whether the general prohibition in Austrian law is compatible with the regulation of the Directive on unfair commercial practices?

ECJ upheld the view of the AG in this case. Austrian law is incompatible with the Directive enforcing a general prohibition on sales with bonuses.

There is no doubt that: "Promotional campaigns, such as those at issue in the main proceedings, which enable consumers to take part free of charge in a lottery subject to their purchasing a certain quantity of goods or services, clearly form part of an operator’s commercial strategy and relate directly to the promotion thereof and its sales development. It follows that they constitute commercial practices within the meaning of Article 2(d) of the Directive and, consequently, come within its scope (Case C-304/08 Plus Warenhandelsgesellschaft [2010] ECR I-0000, paragraph 37 and case-law cited)." (Par. 18)

The Austrian government argued that national provisions at issue did not fall withing the scope of the Directive in that they were established to maintain pluralism of the press in Austria. However, it was proven during the proceedings that aside that purpose these provisions were to give additional protection to consumers, as well. (Par. 23) Since the Directive introduces full harmonisation measures, Member States are not free to offer more protection to the consumers in their national laws. (Par. 30) This led the ECJ to concluding:

"(...) it is undisputed that practices consisting in offering consumers bonuses associated with the purchase of products or services do not appear in Annex I to the Directive. Therefore, they cannot be prohibited in all circumstances, but can be prohibited only following a specific assessment allowing the unfairness of those practices to be established." (Par. 35)

As far as the second question was concerned:
2. "whether sales with bonuses must be regarded as unfair commercial practices within the meaning of Article 5(2) of the Directive, merely on the ground that the possibility of gain represents, for at least part of the public concerned, the deciding factor which causes it to buy the main product."?

The ECJ reminded that the Directive contains a test for the unfair commercial practices and all elements of this test have to be fulfilled in order for a commercial practice to be prohibited as unfair.

"The fact that, for at least part of the public concerned, the possibility of participating in a competition represents the factor which determines the purchase of a newspaper constitutes one of the factors which the national court may take into account when making such an assessment.

That fact may lead the national court to consider that the commercial practice in question materially distorts or is likely materially to distort the economic behaviour of the consumer, within the meaning of Article 5(2)(b) of the Directive.

However, that fact does not in any way lead in itself to the conclusion that a sale with a bonus constitutes an unfair commercial practice within the meaning of the Directive. For that purpose, it must also be verified whether the practice in question is contrary to the requirements of professional diligence within the meaning of Article 5(2)(a) of the Directive." (Par. 44-46)

ECJ concluded then by saying that possibility of participating in a prize competition, linked to the purchase of a newspaper, does not constitute an unfair commercial practice simply on the ground that, for at least some of the consumers concerned, that possibility of participating in a competition represents the factor which determines them to buy that newspaper.

Consumers and the big bad wolf (aka internet)

European Comission has recently been paying more and more attention to the fact that online contract law is not sufficiently regulated (that might have something to do with the European Parliament calling for more actions to increase e-confidence of consumers, read more: here). Most of the directives and regulations currently in force have been introduced back in 80's and 90' when internet commerce was just beginning to be developed and no one dreamed of the necessity to protect consumers who would start using this tool daily as one of the common means to conclude contracts. Moreover, cybercrime, like stealing identities, or marketing based on online preferences did not seem very profitable nor likely then. As a result, the laws protecting consumers online badly need an update.

A report on digital content services and how they are regulated in various Member States have been commissioned by the EU and is being prepared by the Centre for the Study of European Contract Law (CSECL) and the Institute for Information Law (IVIR) of the University of Amsterdam as we speak. There is a hope that after the national reports have been analyzed, the EU will see a need for an instrument and would introduce European level regulation of that sector.

A public consultation has also just started on the Commission's comprehensive approach on personal data protection in the EU. One of the issues raised is whether consumers/individuals have their personal data sufficiently protected online (e.g. the right to have their personal data permanently deleted after having them first submitted on a social networking site, the right not to have their personal data gathered while they are browsing online world by e.g. use of cookies).

If you want to take part in this public consultation (citizens, organisations, public authorities are encouraged to do so) you may contribute to it here up to 15 January 2011.

Also: BBC published an article 'EU aims to boost web privacy safeguards' by Ben Shore on Thursday, 4 Nov 2010 on the EC public consultation.

Conference: The Role of Legal Translation in Legal Harmonisation

On 21 January 2011 the Centre for the Study of European Contract Law and the Amsterdam Circle for Law & Language (ACLL) organise an international interdisciplinary one-day conference on the Role of Legal Translation in Legal Harmonisation.

I'm mentioning this interesting conference on this blog because many times within European Consumer Law we struggle with consumers being victims not only of different regulations but also of different understanding of the same (or at least 'the same-sounding') regulations.

The programme of this conference and full description you may find here.