Addressing consumers' concerns

The Internal Market and Consumer Protection Committee of the European Parliament adopted a nonbinding resolution this Tuesday in which it points out to the failures of the internal, single market that prevent consumers from using their rights effectively. The Committee addressed 20 main consumers' concerns based on the independent survey that was conducted in 2011 (The Single Market through the lens of the people: A snapshot of citizens' and businesses' 20 main concerns). The European Parliament is scheduled to vote on this proposal in October. (Member States must stop dragging their feet...) Some of the main concerns that it argues should be handled and solved by the European Commission are:

• administrative problems consumers face while importing cars from one Member State to another (suggested solution: MS should recognise each other's technical controls and simplify car registration process)
•  complicated procedures of opening a bank account (solution: universal access to basic banking services for European citizens)
• difficulties with having one's professional qualifications recognised (solution: European professional card)
• lack of information about the single market (solution: regular European interactive, informative campaigns)

New European rules on medical devices

The commission has issued today two regulation proposals with the intention to replace existing- and apparently obsolete- directives :

• A proposal for a Regulation on medical devices (to replace: Directive 90/385/EEC regarding active implantable medical devices and Directive 93/42/EEC regarding medical devices);
• A proposal for a Regulation on in vitro diagnostic medical devices (to replace Directive 98/79/EC regarding in vitro diagnostic medical devices).

The objective is to enlarge and clarify the scope of EU legislation, improve the functioning of assessment bodies, achieve more transparency and match the regulation to the current state of science while revising manufacturers' rights and duties. The commission also seeks to foster international trade by "alignment to international guidelines". 

Health and Consumer Policy Commissioner John Dalli said "Just a few months ago, everybody was shocked by the scandal involving fraudulent breast implants which affected tens of thousands of women in Europe and around the world. As policy makers, we must do our best never to let this happen again. This damaged the confidence of patients, consumers and healthcare professionals in the safety of the devices on which they rely every day. The proposals adopted today significantly tighten the controls so as to ensure that only safe devices are placed on the European Union's market at the same time, they foster innovation and contribute to maintaining the competitiveness of the medical device sector."

If you are curious to know more about how the regulations should fulfill this daunting functions, please have a look here and here.

More justice (and money) for consumer protection?

This month BEUC published an interesting position paper on Re-directing Justice. This paper encourages the European Commission to redirect portions of fines that it collects when monitoring infringements in EU competition law. Some of this money should go to consumer organisations and consumer-related projects, it is being argued. It is an interesting concept that definitely deserves further consideration. There is a causal link between infringement of competition law rules and negative influence thereof on consumers. It makes sense to penalise parties infringing consumer protection by making them pay for further enhancement thereof. That could solve some of the problems of inadequate funding of consumer policy as well as, partially, fill in the gap that the lack of EU collective redress mechanisms left. Since there are no EU collective redress mechanisms, consumers cannot effectively claim compensation from the parties infringing their rights. At this moment, only the administrative fines may discourage the parties from infringing the competition law rules but all the collected fines are used within the Community budget. Redistribution of these funds to consumer organisations would still not compensate the victims of the infringements but could possibly contribute to strengthening of consumer protection and diminish the number of future infringements. Currently, certain Member States (e.g. Italy) allow in their national laws for such a redistribution of part of the administrative sanctions in competition proceedings to projects that would benefit consumers (e.g. Italian consumer information site was funded through money gained from such sanctions). Such national measures are still, however, exceptional and definitely do not fill the gap at a European level.

Consumers and food

The minutes from a May meeting of the group Diet, Physical Activity and Health - A European Platform for Action are now available online. During the meeting the preliminary results of the annual report 2012 Platform monitoring have been presented, which show that the members of the platform promoted physical activity, worked on food reformulation (e.g., in line with the EU salt reduction framework) as well as introduced stricter definition of advertising to children. 

A few new national initiatives have been presented. And so, in France in the period 2012-2013 'Increasing vending choice to promote healthy eating habits' initiative is to be implemented. The French Vending Association introduced a 'Feel Good' label in November 2011 that is being assigned to vending machines and not to the products. Vending operators may volunteer to participate in the program and they will get the label if they offer a specific minimum number of products from four categories: beverages, cereals, fruit and vegetables, and milk products. At this point ca 3.000 vending machines (out of ca 50.000) in France qualify for receiving the label and are able to offer more healthy choices to consumers. This development was possible due to new technological possibilities for vending machines sustaining different temperatures in various parts thereof. It will be interesting to see whether this initiative will be picked up by other Member States. 

In Denmark specific action was undertaken to encourage industry to participate in the strategy of reducing salt intake by consumers. The goal is to reduce the daily salt intake by 3g by 2014. Aside the European framework and European-wide actions, the Danish government is looking into strengthening criteria for obtaining a keyhole label, which can be placed on 'healthier' products in terms, e.g., of salt. Special information campaigns are being conducted by the government, as well. Restaurants and catering in Denmark are being monitored to reduce the salt usage. Finally, industry of processed foods reported salt levels in their products and intends to adopt the lowest 40% fractile as its benchmarking target.

The BEUC announced during this meeting that it is looking into increasing consumer awareness about nutrition information in 'out of home' settings. Many consumers indicate that they would be interested in receiving this information, e.g., on calories, when they are eating out in a restaurant. The representatives of the European Modern Restaurant Association pointed out, however, that the European market for eating out is not uniform. In general, only 15% of European meals are consumed in restaurants. It differs by Member States whether consumers eat out in chain restaurants or SMEs. These differences may require different approach to providing consumers with proper information. Additionally, conducted empirical research shows that only 15% of consumers use calories information and there is no sufficient evidence that it changes consumer preferences. 

A research conduced by the European Food Information Council in 6 countries showed that almost all surveyed consumers checked the price and 'use by' date of the product, but only 30% looked at the portion information. Many consumers think that a portion is the amount a person should eat and what a person is likely to eat and often perceive it as either of a right or small size. Another research showed that 46% consumers know how many calories per day a person needs, with women being more knowledgeable than men. Many consumers wrongly believed that children's energy requirements were higher than adults'. Most consumers underestimate energy expenditure, as well. Consumers perceive high calorie-high fat products as the most unhealthy. (How do consumers respond to portion information on food and drink labels?)

Additionally, information was presented on whether more attractive labelling of food could contribute to better knowledge of nutrition information. The results of a survey show that while well-designed labels can attract attention, that is not enough to increase consumers' motivation to read labels. Consistency and familiarity are more important than adoption of a particular format. It was recommended to put the information on the front of product packaging. (Nutrition labelling can guide consumers but a lack of motivation and attention stand in the way of healthier food choices)

Making the Small Claims Procedure effective

Since 1 January 2009, the European Small Claims Procedure is in force. Its aim is to improve access to justice by simplifying cross-border small claims litigation in civil and commercial matters and reducing costs and especially to help consumers enforce their rights in cross-border cases.

It concerns claims amounting to maximum €2,000 excluding interest, expenses and disbursements . The consumer can choose whether to bring suit in his country of residence or in the country of the defending company. The decision is directly enforceable in the country of the losing party and in any other EU country. The procedure is conducted mostly in writing using pre-defined forms and it does not require the involvement of a lawyer.

Simple and useful, but... In 2010, a research led by ECC Italy, European Consumer Centres (ECCs) in the 27 EU Member States found that the procedure is relatively unknown – not only among consumers but among judges as well. Although the European Small Claims Procedure itself is in principle straightforward and free of charge, the enforcement of the judgement resulting from this procedure is often protracted by the losing party. As a consequence, only a minority of the positive rulings made by the courts in consumers' home countries, are actually enforced across borders.

Since, even in domestic markets, around 20% of European consumers report having encountered a problem in the past 12 months with a good, service, retailer or provider (with an average estimated loss of €375 per case), the Commission is working to improve the effectiveness of the Small Claim Procedure.

Here are the next steps to be taken:

• work with court authorities to promote awareness of the procedure;
• issue a guide providing practical advice to consumers and legal practitioners;
• raise awareness of the existing standard forms and make information available online in 22 official EU languages, through the European e-Justice Portal, to make it easier to register a claim and see how the procedure works;
• work with ECCs to actively promote the procedure among consumers and judges;
• encourage the ECCs to give concrete assistance to consumers to use the European Small Claims Procedure in individual cases;
• present an evaluation report on the operation of the procedure (including court fees, the speed and the ease of use of the procedure) and if necessary revise the European Small Claims Procedure to make it work more effectively for consumers by, for example, increasing the threshold of €2,000 to cover bigger claims or further simplifying the standard forms used to make a claim.

 Additionally, as of 2013, consumers in around 5-6 pilot countries will be able to complete the small claims forms and carry out the whole court procedure online, via the e-Justice portal.

It's a slippery slope from 'contain' to 'may contain'

Last week we mentioned on the blog that new rules on labelling food products have been accepted by the European Parliament (New regulations on food labelling coming up...). It seems that at least some Parliament's members are still not happy with the state of the European legislation concerning food labels. The main issue that was raised at this week's event that was hosted by the European federation of allergy and airways diseases patients' association (EFA) concerned the 'may contain' labelling and cross contamination information on food product packaging. The problem is the lack of a specific definition of 'may contain' label at a European level. (EU food labelling rules do 'not go far enough') There should be some yardstick according to which regulators and producers could measure the risk of a certain ingredient appearing in a product. Currently, consumers may either unnecessarily follow the 'may contain' labels (when producers cover their backs by including almost any known allergen on the list of what their product may contain) or ignore them, disregarding the potential risk that may be higher than just a mere possibility of the food being contaminated with a given allergen (the disbelief in such warning labels will likely follow excessive, untrue disclosures). There are also no clear rules about disclosing the risk of accidental contamination to consumers, which is often the case of allergens finding their way to some products.

Label on this salmon salad informs us under 'allergy information' not only as to what it contains (fish, mustard, etc.) but also that it may negatively influence attention and concentration of children! Is that something we should be allergic to?

Signing your name under a contract does not automatically make you a consumer - opinion of AG Sharpston in Česká Spořitelna (C-419/11)

20 September 2012: Opinion of AG Sharpston in Česká Spořitelna (C-419/11)

This case concerned interpretation of provisions of the Regulation No. 44/2001 on jurisdiction and recognition and enforcement of judgements in civil and commercial matters. Articles 15 and 16 of this Regulation set specific rules as to jurisdiction over consumer contracts.   

In the given case, a company - Feichter-Cz - having its seat in the Czech Republic entered into an overdraft agreement with Česká Spořitelna, also domiciled in the Czech Republic. The loan was provided for business purposes. The promissory note was signed by Mr Feichter, both in his capacity as a managing director of the Feichter-Cz as well as an individual. Mr Feichter was shareholder of 60% of shares in this company. The promissory note was later not honoured by the borrower. Česká Spořitelna started proceedings seeking payment with interest before Prague City Court. Mr Feichter objected to the jurisdiction of this court, since he claimed he was a natural person who had his domicile in Austria and any proceedings seeking to enforce payment under the promissory note would be subject to Articles 15 and 16 of the Regulation and should take place in the Member State of his domicile.

AG Sharpston observes in this case that it is a common lending practice to demand a guarantee by one or more of the individuals who owns and/or manages the business that is looking to obtain extra funds, especially if it is a start-up business. (Par. 23) For Articles 15 and 16 of the Regulation to apply to the current case two conditions need to be fulfilled cumulatively: the contract needed to be concluded by a consumer and had to fall within one of the categories mentioned in Article 15(1). (Par. 27) The AG has no doubts under the circumstances of the case that the first requirement has not been fulfilled. (Par. 34) Mr Feichter entered into a contract to support the business with which he was closely connected. Therefore, the aval given by a natural person to a promissory note in such a situation has to be treated as having been given for the purposes of trade or professional activity. (Par. 41)

The more general provision of Article 5(1) of the Regulation that determines jurisdiction in contract matters is applicable in the given case, pursuant to AG Sharpston. (Par. 48) For the applicability of this provision, it is sufficient that there was a contract between a lender and a borrower and that Mr Feichter by giving the aval under the promissory note consented to take a legal obligation upon himself. It does not matter that the promissory note was in incomplete form. (Par. 45-46) The AG Sharpston considers that it is the place of payment that will be determinative for establishing of jurisdiction in this case (which was Prague). (Par. 49)

Are consumers entitled to check their electricity usage or does that depend on their neighbours' ethnicity? - opinion of the AG Kokott in Belov (C-394/11)

20 September 2012: Opinion of the AG Kokott in Belov (C-394/11)

Mr Belov lives in a Bulgarian city in one of its districts known as 'Roma districts'.  Throughout his city, Montana, the electricity meters are placed at a height of up to 1.70m, usually in the consumer's home or on the outside walls of the building, or on surrounding fences. However, in these two Roma districts the electricity meters were attached to electricity poles at a height of 7m. As a result, consumers living in these neighbourhoods cannot easily check the electricity meters and their usage data. The electricity company enables consumers to make an indirect visual check on condition of a written request submitted three days in advance by facilitating a use of a special vehicle with a lifting platform, free of charge. If a consumer in these districts wants to have a meter installed in his house, he can obtain it upon paying an installation fee. Mr Belov argued in his and other Roma name that they were being discriminated against on the basis of their ethnic origin.

1. Scope of the Directive - does it cover providing electricity meters to consumers free of charge?

The AG Kokott reminds in this case that Article 3(1)(h) of the Directive 2000/43 on equal treatment prohibits discrimination based on racial or ethnic origin with respect to the supply of electricity. The electricity meters are being provided by the electricity supplier according with its general contract conditions, which means they are part of the agreement on the supply of electricity. (Par. 59) The provision of the Directive should not be understood as only applying to the provision of the electricity per se, and not elements associated with it, like the meters. (Par. 60)

"Imagine if a public transport company earmarked different seats on buses according to the gender, colour or ethnic origin of passengers. Even though all passengers were transported and thus undoubtedly benefited from the transport service as such, it would be obvious that the specific conditions under which they are transported are not equal." (Par. 61)

While the Directive applies only to service provided for consideration and electricity meters are supplied free of charge, it is likely that the price thereof has been included in the price of the supply of electricity. (Par. 65)

2. Compatibility of national law - adding another requirement to recognise discrimination

The other set of questions asked by the Bulgarian court concerned the compatibility of the Bulgarian law with the Directive. Bulgarian law requires an infringement of rights of interests defined in law to take place in order to recognise the existence of discrimination. The Directive does not pose such a requirement - it is sufficient that a person is treated less favourably than another is, has been or would be treated. (Par. 72) The Bulgarian law by adding another, stricter requirement is incompatible with the Directive. (Par. 76) In the opinion of the AG Kokott, the Bulgarian court should try to apply and interpret Bulgarian provisions in accordance with the Directive. (Par. 78) If this is not possible, then Mr Belov may not invoke protection of the Directive directly, since directives do not have a horizontal effect. (Par. 79) The national court should, however, disregard the national legislation which is contrary to the prohibition of discrimination established as a fundamental right in Article 21 of the Charter. (Par. 80)

3. Burden of proof - 'presumption' or 'conclusion' of discrimination? Form of discrimination?

The AG Kokott decides based mostly on the linguistic interpretation of the Directive, that the burden of proof whether there was discrimination takes place after the party who considers themselves discriminated presents facts that allow for a 'presumption' of discrimination. (Par. 88) In the given case, the electricity company would likely have to present facts that would justify a commercial decision (made long time ago) to install electricity meters in the Roma districts differently than is normal in Bulgaria. This is justified by the fact that the relevant information should be in their sphere of control. (Par. 93)

The facts that have been presented to the CJEU point, pursuant to AG Kokott, at indirect discrimination, since:

"It is clear, however, that the two districts concerned are inhabited predominantly by people belonging to the Roma community. Consequently, the practice of attaching electricity meters at a height of 7 m is liable, in principle, to affect members of that ethnic group in a particular way and to put them at a disadvantage, since it makes it virtually impossible or at least excessively difficult for them to make visual checks of the relevant electricity meters." (Par. 99)

The submitted evidence suggests that the measure of installing electricity meters at a height of 7m was taken because of a large number of unpaid electricity bills and in response to many cases of illegal interference with electricity supply infrastructure, manipulation and illegal electricity extraction in these two districts. The national court has to determine whether the measure taken to prevent future fraud and abuse (legitimate aim) was proportional. (Par. 101-102)

EU needs to better "monitor this new reality"

Yesterday, the European Economic and Social Committee in its plenary session adopted two opinions that argue for introducing more measures that would protect children against harmful advertising and damaging online content.

"More and more often, children, including very young children, have access to a television and the internet alone and unsupervised. 38% of children between the ages of 9 and 12 already have an online profile, and this figure rises to 78% for 13-16 year olds. We need to monitor this new reality" said Jorge Pedago Liz, who was the rapporteur for the EESC on the opinion on advertising aimed at young people and children. (EESC slates harmful ads and pushes for balance of e-commerce and kids' safety)

The EESC believes that the EU should introduce a coherent framework that would protect young Europeans by introducing certain restrictions on advertising directed at them (not only in audio-visual media but also in online advertising), with special attention being placed on food advertising (due to concerns about children obesity and eating disorders). Advertising aimed at children is seen as having a potential of harming their physical, mental or moral health (e.g., by encouraging children to over-consumption, which could lead to debt and consumption of harmful products). One of the EESC' recommendations is to set at the European level a universal minimum age for advertising specifically aimed at children. The EESC advises also to enrich the current school curricula by teaching children how to interpret advertising messages and how to properly use information technologies.

The second opinion focuses exclusively on the protection of children online. The European Strategy for a Better Internet for Children calls for stricter rules, especially in case of infringements having been discovered. The sanctions should include closure of the infringing websites and withdrawal of licenses (e.g., if data protection rules were breached or the website promoted child pornography) and cannot be left to the market to self-regulate. The EESC is worried that the European Commission in pursuing its Digital Agenda will place more importance on the business growth instead of on making sure that the highest level of children protection online is assured. This could be seen in the previous Communication of the European Commission (COM(2012) 196 final) where only generic commitments have been made.

The full texts of the opinions may be found here.

Men drive car insurance prices up

Last month we mentioned that the new interpretation of the Gender Directive of 2004 forces the insurers to abandon their current rules on calculating insurance premiums on the basis of gender. (Is living longer still worth it?) While women could and should be worried that their life insurance premiums are likely to rise, the change is likely to reach further. At this point women car insurance policies are often set lower than men policies. Why? Statistics show that male drivers under the age of 22 are ten times more likely to have a serious crash than female drivers of the same age. (Google car insurance comparison service threatens moneysupermarket and confused.com) Since the car insurance companies will not be able to take gender into account anymore in calculating the premiums and will have to balance the amounts, it is likely that the car insurance premiums for women will rise, as well.

Interestingly, Google decided to launch a price comparison service for car insurance in the UK, which entices internet users with promises of transparency (e.g., it doesn't take into account extras such as courtesy car by default, which is said to reduce the risk of a consumer buying a policy that doesn't match his needs) and privacy (e.g., ca 120 insurers won't be selling the data acquired from visitors to Google's comparison website to third parties). Google promises to monitor the truthfulness of the data provided by the insurer on its website as well as to introduce a code of conduct that all the insurers would have to abide by. While Google is not an amateur in this area, this service follows already existing services for price comparison of credit cards and bank accounts, its neutrality as a price comparison website can be questioned. After all, it puts itself now at the top of the google search results when you enter 'car insurance' into Google UK. The not long ago reported need for a regulatory oversight of price comparison websites remains valid. (Spoiled for choice or well-informed?)