Double compensation available in case of a delayed re-routing flight: case C‑832/18 Finnair

Earlier this week, the Court of Justice delivered a judgment in case C-832/18 Finnair. The case proceeded without written opinion from the AG and concerned the interpertation  of Regulation (EC) No 261/2004 on passenger rights in the event of denied boarding and of cancellation or long delay of flights. The judgment adds another major element to the pro-consumer case law of the Court of Justice.

Facts of the case

The dispute revolved around a Finnair flight from Helsinki (Finland) to Singapore, which encourtered multiple problems. Not only was the original flight cancelled due to a technical defect, but also the alternative connection, scheduled for the next day, was delayed by almost 19 hours. The applicants brought an action in a Finnish court seeking to have the airline ordered to pay them the sum of EUR 1200 each: covering EUR 600 on account of the cancellation of the original Helsinki-Singapore flight plus additional EUR 600 on account of the delay of the subsequent Helsinki-Chongqing-Singapore re-routing flight. While Finnair agreed to award compensation of EUR 600 in respect of the cancellation of original flight, it refused to grant the second compensation claim. According to Finnair, Regulation No 261/2004 did not impose an obligation of this kind and, even if it did, the delay of re-routing flight had been caused by extraordinary circumstances (defect of an ‘on condition’ part). Interestingly, unlike the Finnish court of first instance, the Court of Justice did not find the arguments of Finnair convicing and opted for a pro-consumer reading of applicable EU law.

Judgment of the Court

Double compensation

The Court began its analysis by recalling that, pursuant to Article 5(1)(a) of Regulation No 261/2004, read in conjunction with Article 8(1), in the event of cancellation of a flight, the passengers concerned should be offered the choice between three different forms of assistance, namely either reimbursement of the ticket and, where appropriate, a return flight to the first point of departure, or re-routing to their final destination at the earliest opportunity, or such re-routing at a later date at their convenience, subject to availability of seats. Passengers in the case at hand opted for the latter form of assistance, in the course of which, however, the encountered further difficulties.

Focusing on the scope of Regulation No 261/2004, the Court found that nothing in its Article 3 suggests that the regulation should not apply to air passengers who have been transferred by the air carrier, following the cancellation of a booked flight, on a re-routing flight to their final destination. On the contrary, Article 3(2)(b) explicitly referrs to passengers who have been transferred by an air carrier from the flight for which they held a reservation to another flight, irrespective of the reason. 

Furthermore, as noted by the Court in para. 27, Regulation No 261/2004 does not contain any provision intended to limit the rights of passengers who find themselves in a situation of re-routing. Broad reading of the scope of passenger rights was further supported by the purpose of that regulation, which is to address the serious trouble and inconvenience caused by denied boarding, cancellation or long delay of flights (in the case at hand experienced twice), as well as the effectiveness of an obligation to provide assistance in the form of re-routing under Article 8(1). Consequently, a possibility of claiming double compensation in analysed conditions has been accepted.

Extraordinary circumstances

Also in the second part of the judgment the Court did not clearly side the airline, even if its findings remain at a high level of generality. The Court appears to suggest that key elements of the notion of ‘extraordinary circumstances’ have already been explained in its prior case law and it is now the task of national courts to apply them to cases before them. The Court thus began by recalling that according to Article 5(3) of Regulation No 261/2004, read in the light of recitals 14 and 15, by way of derogation from Article 5(1), an air carrier is to be released from its obligation to pay passengers compensation under Article 7, if the carrier can prove that the cancellation or delay of three hours or more is caused by ‘extraordinary circumstances’ which could not have been avoided even if all reasonable measures had been taken or, where such circumstances do arise, that it adopted measures appropriate to the situation, deploying all its resources in terms of staff or equipment and the financial means at its disposal, in order to prevent that situation from resulting in the cancellation or long delay. In doing so, the Court referred to its previous case law, on which we reported in our earlier posts (see eg Runaway closure..., Loose screws...). The Court further recalled that events may be classified as ‘extraordinary circumstances’ if, by their nature or origin, they are not inherent in the normal exercise of the activity of the air carrier concerned and are outside that carrier’s actual control, both conditions being cumulative (para. 38). The notion, therefore, does not include technical shortcomings inherent in aircraft maintenance, considering that breakdowns of this kind, even premature, are, in principle, intrinsically linked to the operating system of the aircraft.

In the case at hand Finnair contended that technical defect it was faced with should nonetheless be qualified as an extrordinary circumstance, considering that the affected rudder steering servo was a so-called ‘on condition’ part, which is only replaced by a new part when it becomes defective. The airline appears to have stocked up on the spare part, but a delay - related to repair itself - was nonetheless unavoidable. The Court did not expressly endorse such an interpretation, however. Rather, according to the Court, the failure of an ‘on condition’ part, which the air carrier has prepared to replace by permanently stocking a spare part, constitutes an event which, by its nature or origin, is inherent in the normal exercise of the activity of the air carrier concerned and is not outside its actual control, unless such a failure is not intrinsically linked to the operating system of the aircraft, which it is for the referring court to determine.

Ex-officio powers of national courts in enforcing Directive 2008/48/EC: the CJEU in C-679/18 OPR-Finance

Earlier today the European Court of Justice (CJEU) delivered its judgment C-679/18 OPR-Finance s.r.o. v GK on the interpretation of Articles 8 and 23 of Directive 2008/48/EC on Consumer Credit (CCD).

The facts

In April 2017 the consumer concluded a revolving credit agreement with OPR Finance for 192 EUR. After defaulting on payment of due installments, the creditor started enforcement action infront of the District Court of Ostrava (Czech Republic), claiming 307 EUR plus statutory interest. It appeared to  be clear for the referring court that OPR Finance did not claim they have assessed the consumers creditworthiness prior to granting the loan, and it was also clear that the consumer did not raise the objection of nullity  of the contract, the applicable penalty for failing to assess creditworthiness under Czech law.

The legal issues

The referring national court was unsure whether Article 8 on creditors obligation to assess consumers creditworthiness read in conjunction with Article 23 on the obligation of Member States to provide for effective, proportionate and dissuasive penalties for the breach of national provisions adopted pursuant to the CCD, provides for the national courts ex officio obligation to act i.e. obligation of national courts to examine on their own motion whether the creditors have complied with their obligation to assess consumers creditworthiness and ex officio obligation to apply the appropriate penalties provided by national laws.

At second instance, the national court asked whether the national provisions that provide for an obligation of consumers to raise the objection of nullity of the credit agreement within a 3 year time limit are contrary to the said provisions.

The ruling

The first question the CJEU answered positively, ruling that there is an ex officio obligation of national courts to examine whether creditors have complied with their obligation to assess consumers creditworthiness. Not only that national courts must assess ex officio whether the duty of creditworthiness assessment has been complied with but they should also apply the appropriate penalties ex officio, provided they are compliant with Article 23.

In its reasoning the CJEU referred to its previous case-law on establishing an obligation of national courts to rule ex officio on infringements of EU consumer law (para. 18), reinforcing the justification for such approach the weaker position of consumers vis-a-vis businesses in their contractual relationships (para. 19). It has also considered the importance of ex officio powers for achieving the objectives of the CCD. Importantly, it has highlighted that the purpose of Article 8(1) is to make creditors accountable for their lending decisions and to prevent them from providing consumers with unaffordable credit (para. 20). Moreover, the CJEU emphasized the importance of ex officio powers for the protection of consumers against the risks of over-indebtedness and bankruptcy and for the emergence of a well-functioning internal market in consumer credit with a high level of consumer protection (para. 21).

The CJEU further ruled that where national courts find the infringement of Article 8 on their own motion, they should also apply the appropriate sanctions without waiting for consumers to make applications to that effect, provided that national provisions on penalties are compliant with Article 23 and the associated CJEU on its interpretation (paras. 25-27). As mentioned above, under the applicable provisions of Czech law, the penalty of nullity of the contract only applied under the condition that consumers raised an objection of nullity within the limitation period of 3 years. The sanction of nullity itself relieved consumers from paying interest and associated costs to the credit, only requiring the repayment of the principle sum borrowed (para. 29). The CJEU examined the these requirements from the aspects of equivalence and effectiveness (paras. 32-33) and concluded that they are contrary to principle of effectiveness (para. 36). The said conditions make the sanction impossible or excessively difficult to operate in practice. Importantly, the CJEU dismissed the relevance of administrative penalties of competent supervisory authorities, emphasizing the separation of civil and administrative penalties for breaches of consumer credit law (para. 37), given that such penalties have no effect on harmed consumers, consumers to whom the credit was granted in the infringement of Article 8 of the CCD (para. 38).

Concluding thoughts 

This seems to be a well reasoned judgment that provides additional important protection for consumers against the risks involved in borrowing and raises the responsibility of creditors for complying with their obligation to assess consumers creditworthiness. It is now important that national courts follow the judgment and use their powers where appropriate.

Health claims and the value of an asterisk for the average consumer: case C-524/18 Dr. Willmar Schwabe

Back in January the Court of Justice delivered a noteworthy judgment in case C-524/18 Dr. Willmar Schwabe, on which we have not had a chance to comment so far. The case concerned the interpretation of Article 10(3) of Regulation (EC) No 1924/2006 on nutrition and health claims made on foods and arose from a dispute between two competing producers of food supplements in Germany: Dr. Willmar Schwabe and Queisser Pharma, concerning the alleged misleading packaging of a ginseng-based supplement marketed by the latter.

To recall, Regulation No 1924/2006 harmonises national provisions relating to nutrition and health claims used in the labelling, presentation and advertising of foods placed on the EU market. Besides not being false, ambiguous or misleading, the use of nutrition and health claims should comply with a number of more specific conditions. Notably, the presence, absence or reduced content of a substance in respect of which the claim is made must have been shown to have a beneficial nutritional or physiological effect, as established by "generally accepted scientific evidence" (Article 5(1)(a)). What is more, reference to general, non-specific benefits of the nutrient or food for overall good health or health-related well-being may only be made if accompanied by a specific health claim from the lists of permitted health claims in the Union Register (Article 10(3)). Under Commission's implementing Decision 2013/63/EU food business operators are responsible to "demonstrate the link" between specific claims included on the list and the general references made in relation to their products.

Visual link between general and specific claims

Source: apotheke-adhoc.de

Core question in the case at hand revolved around the necessary link between general and specific claims. Specifically, the question was whether a general statement "B vitamins and zinc for the brain, nerves, concentration and memory" made on the front side of the packaging was sufficiently linked to the more specific health claims included on the reverse side, considering that no visual link was established between the two.

The Court addressed the question referred using literal, systematic and teleological reasoning. Included in the analysis were among others: the use of the word "accompanied" in Article 10(3) of Regulation No 1924/2006, the regulation's purpose of providing "a high level of consumer protection", and the need to interpret derogations from the general prohibition of health claims in Article 10(1) strictly. Considering these factors together, the Court found that specific health claims should not only specify the content of general claims, but also the location of those two claims on the packaging of the product should enable an average consumer to understand the link between those claims. Accordingly, the concept of "accompanying" referred to in Article 10(3) must be interpreted as including both a substantive and a visual dimension (para. 40), the latter referring to an "immediate perception by the average consumer ... of a direct visual link between the reference to general, non-specific health benefits and the specific health claim" (para. 47). Interestingly, according to the Court, such a link requires, in principle, spatial proximity or immediate vicinity between the reference and the claim, yet the relevant requirement could exceptionally be satisfied by means of an explicit reference, such as an asterisk (*). The chosen method should ensure, in a manner that is "clear and perfectly comprehensible to the consumer", that, in spatial terms, the content of the health claims and the reference match (para. 48).

Evidential requirements for general claims

Applying a similar interpretative toolkit, the Court went on to analyse whether ‘general’ health claims, such as the ones made on the front of analysed packaging, should also be justified by scientific evidence in accordance with Articles 5(1)(a) and 6(1) of Regulation No 1924/2006. In this regard the Court opted for a reading which reduced the burden placed upon the food business operators. Thus, although the response to the second question referred was generally an affirmative one, the Court went on to conclude that the evidential requirements for general claims are satisfied when such claims are accompanied by specific health claims that are supported by generally accepted scientific evidence which has been verified and authorised and have been included in the Union register.

Overall, while the first part of the judgment applies a rather strict benchmark, the second part restores the balance for food business operators. Although the notion of an average consumer, who is reasonably well informed and reasonably observant and circumspect,  features prominently in the judgment, the requirement to interpret exceptions strictly lends support to the application of a strongly protective test in the first part of the analysis. Importantly, food business operators should bear in mind that the use of an asterisk may, but does not necessarily have to, satisfy the requirement of sufficient visual link, and was accepted only exceptionally, due to large size or length of the specific health claims invoked. Whenever possible, spatial proximity or immediate vicinity between general and specific claims should be ensured. As long as the conditions of Article 10(3) are fulfilled, evidential requirements of Article 5(1)(a) are also satisfied.

Violent passengers = extraordinary circumstances - AG Pikamäe in Transportes Aéreos Portugueses (C-74/19)

Last week, on 27 February, AG Pikamäe issued an opinion in a relatively weird as to facts air travel case - Transportes Aéreos Portugueses (C-74/19). A passenger in this case had a flight reservation with TAP airlines (Portuguese airlines) for a journey between Fortaleza (Brazil) and Oslo (Norway) with a connection in Lisbon (Portugal). The first flight has been delayed, as the plane, which was intended to travel between Fortaleza and Lisbon first had to make a trip from Lisbon to Fortaleza. On that journey there was, ahem, a problematic passenger who proceeded to bite (!) and attack other passengers, as well as the crew. Consequently, the flight was diverted to Las Palmas (Spain) to remove the problematic passenger. Due to the delay of that flight, the whole travel schedule of the given passenger was uprooted, and they ended up arriving in Oslo more than 24 hours after the planned arrival time.

Aggressive passenger behaviour may be seen as extraordinary circumstances

AG Pikamäe draws attention to the importance of a safe flight for EU legislator, which is both mentioned in Recital 14 of Regulation 261/2004 (unexpected flight safety shortcoming are an example of an extraordinary circumstance) and in its Article 2(j) pursuant to which denied boarding may be justified by safety concerns (paras. 30-31). Whilst aggressive behaviour of passengers has not been enumerated in any provision as a cause for safety concerns, it could fall within the scope of general safety notions of this Regulation. Moreover, Regulation 2015/2018 introduces a list of occurrences that need to be reported as they may cause a serious risk in civil aviation, amongst others in Annex I point 6(2) it mentions 'difficulty in controlling intoxicated, violent or unruly passengers' (para. 33). Regulation 2018/1139 further obliges a captain of an airplane to take any measures to minimise the consequences on the flight of a disruptive passenger's behaviour (Annex 5 point 3(g)) (para. 34). Therefore, EU legislation has previously considered aggressive consumer behaviour as a safety risk. The AG mentions also other air safety rules, which all indicate that as aggressive consumer behaviour may be considered a serious risk to air safety, it could be considered an extraordinary circumstance in the meaning of Art. 5(3) Regulation 261/2004. After all, educating or punishing of violently acting passengers should not be seen as falling within the scope of a normal activity of air carriers (paras. 41-46). Further, the air carrier has a limited option, if any, to control the behaviour of passengers on the plane (paras. 49-50). Still, AG Pikamäe indicates that if the crew was aware of the problems with the passenger's behaviour before the flight had started, then possibly the air carrier could not claim the need to divert the plane and remove the aggressive passenger as an extraordinary circumstance (para. 51). Instead, they could have denied boarding to the aggressively acting passenger.

AG Pikamäe further emphasises that already on the basis of previous case law (Peškova and Peška case as well as Germanwings case), it was apparent that the extraordinary circumstance does not have to pertain to the delayed/cancelled flight of a given passenger (para. 57 and further). A causal link between the extraordinary circumstance and the delayed/cancelled flight is sufficient (para. 59).

Does this mean that the passenger in the given case may not claim compensation? Not all is yet lost. Namely, the air carrier needs to take all reasonable measures to ensure that the extraordinary circumstance does not impact the passenger's flight (Art. 5(3) Regulation 261/2004). Here, it could perhaps not be required from TAP that they have additional planes on hold in Brazil to step in, when the original aircraft is delayed. However, AG Pikamäe draws attention to the fact that the longer the delay in reaching the final destination, the more flexibility seems to be there for the air carrier in trying to mitigate the consequences of an extraordinary circumstance, e.g. by increasing the speed of the aircraft, re-routing the passenger either within TAP or allied air carriers (here, Star Alliance) (para. 73).

Free and informed consent required to accept an unfair term - AG Saugmandsgaard Øe in Ibercaja Banco (C-452/18)

On 30 January 2020 AG Saugmandsgaard Øe issued his opinion in another case concerning 'floor clauses' used by a Spanish bank (C-452/18 Ibercaja Banco). See previously our discussion of this problem and explanation what 'floor clauses' are e.g. when we commented on the Gutierrez Naranjo case (Spanish 'floor clauses'...).

In this particular case a consumer concluded in 2011 a mortgage loan agreement with Caja de Ahorros with a variable interest rate, establishing that the interest rate will never exceed 9.75% and will not drop below 3.25% (floor clause). In 2014 the bank Ibercaja substituted Caja de Ahorros in the loan agreement and concluded an additional agreement with the consumer titled 'novation contract changing the loan'. The latter contract lowered the floor clause to 2.35%. It also included a term confirming the validity and application of the loan agreement, its terms, and having parties waive their rights to make any claims based on the loan agreement, also in regard of the payments that have already been made under the loan agreement. That novation contract had an added in consumer's handwriting note, signed by the consumer, attesting to the consumer's awareness and understanding of the fact that the interest rate will never drop below 2.35%. 

It is, therefore, clear that the Ibercaja bank tried to protect itslef from the floor clause being declared as unfair, following the judgment of the Spanish Supreme Court in 2013 on this matter, by asking consumers to explicitly acknowledge the floor clauses in the contracts in a novation contract (see also paras 21-22). This action preceded the Gutierrez Naranjo judgment, where the CJEU confirmed the unfairness of the floor clauses and did not allow Spanish courts to limit consequences for the banks of the use of such unfair terms. The question then in this case is whether the consumer could still claim the floor clause to be unfair despite the novation contract and the consumer attesting to the awareness and understanding of the consequences of the loan agreement?

AG Saugmandsgaard Øe first notes that the classification of the contract concluded between the consumer and bank Ibercaja should be left to the national law to determine. There is indeed a dispute in Spanish law whether such an agreement is a novation contract or a settlement, but as this classification has no link to EU consumer law, it is not for the CJEU to solve this query (para. 28).

A novation contract MAY validly change an unfair term

The main point highlighted in the opinion is that pursuant to the CJEU's case law, the consequence of an unfair term being not binding for the consumer, does not mean that the term is void but rather that it is voidable (paras. 37-38). In Banif Plus Bank case the CJEU has already declared that the consumer may decide to stay bound by a contract containing an unfair term provided that consumer's decision follows from a 'free and informed consent' (paras. 39-40). This leads AG Saugmandsgaard Øe to infer that if consumers freely and on an informed basis decide to novate a loan agreement and waive their rights to claim unfairness of floor clauses, they should have a right to do so (para. 41), whether this decision is made as a result of a court informing them of their rights or on a contractual basis (para. 42). Of course, this may only occur after the problem with the terms in the contract has already arisen and not beforehand (paras. 43-44). However, AG Saugmandsgaard Øe is not blind to the possibility that consumers signing such a novation contract might have not had all information to their disposal that would allow them to make such a free and informed choice or might not have had an actual choice to negotiate the contract terms (para. 51). Therefore, the national court needs to consider this on the circumstances of the given case, especially whether the bank did not impose the term on the consumer, acted in good faith, provided transparent terms and did not skew the contractual balance between the parties (para. 54).

Consumer ACTIVELY contributes to the adoption of the term

AG Saugmandsgaard Øe emphasises that there is a rebuttable presumption that any standard terms that have been pre-drafted by a trader are not individually negotiated terms and it is the trader who has the burden of proof of the contrary, whilst with all other terms it is the consumer who has to prove that the term was not individually negotiated (para. 61).

To prove that the term is individually negotiated, the bank here would not only need to prove that it conducted discussions with the consumer about the contractual terms, but also that the consumer took an active part during these discussions in setting the content of the term (para. 63). AG Saugmandsgaard Øe suggests that it would not be a sufficient proof of the conducted negotiations for the bank to claim that the floor clause in a given contract was set at a level lower than in other loan agreements (para. 64).

Material transparency and consequences of its lack

When assessing whether a contractual term on the basis of which parties waived their rights to make claims was transparent, AG Saugmandsgaard Øe elaborated on what is required to determine it materially transparent. The following should be tested: whether an average consumer would have been aware of the legal issue related to the floor clause, as well as of rights they had as a result thereof on the basis of UCTD, and whether they knew of the choice to either sign the novation contract or refuse it and go to court instead, as well as whether they knew they were waiving that last right (para. 79). It is also relevant whether consumers were given a reasonable time to make their decision (para. 81). Here, the consumer was not given the draft of the novation contract in advance of the meeting nor given a chance to take it home and think about it before signing it. Looking at the particular case, the AG also emphasises the broad scope of the waiver agreement and the possibility that the consumer was completely not aware of the unfairness of floor clauses when signing the novation contract (para. 80). The fact that there was a general knowledge, according to the Spanish Supreme Court, of the problem of unfairness of floor clauses and of its judgment in that case, should not release the bank from giving individualised information about this to the consumer. Moreover, the fact that there was a handwritten note confirming consumers awareness and understanding of a floor clause, might not be sufficient to evidence actual understanding of a consumer, esp. if that handwritten note was dictated by the bank (para. 82). Even more interestingly, the AG then follows in stating that just the lack of transparency could amount to unfairness in this case, as it would take away a possibility of consumers providing free and informed consent for contract novation (para. 83).

Cancellation of connecting flights: whom to sue and where? Case C-606/19 flightright

On 13 February the Court of Justice delivered an order in case C-606/19 flightright concerning jurisdiction over the claim for compensation brought against an air carrier in charge of the final leg of the journey divided into several legs, confirmed in a single booking.

The case involved two passengers who booked a journey from Hamburg (Germany) to San Sebastian (Spain) via London and Madrid, comprising of connecting flights operated by different carriers. The problem faced by the passengers was cancellation of the third flight of the journey, operated by Iberia. The question to be addressed was whether a claim against Iberia could be brought before the court in Hamburg. Pursuant to Article 7(1)(a) of Regulation No 1215/2012 (Brussels I bis) in matters relating to a contract, a person domiciled in a Member State may be sued in another Member State in the courts for the place of performance of the obligation in question. The subsequent provision explains that in the case of the provision of services the place of performance of the obligation in question is generally the place in a Member State where, under the contract, the services were provided or should have been provided.

It was already clear from the previous case law that both the place of departure and that of arrival must be considered as the principal places of the provision of services under a contract for carriage by air, which in turn gives the person bringing a claim for compensation on the basis of Regulation No 261/2004 a choice of jurisdiction. This is the case for both direct flights and, mutatis mutandis, situations in which the journey with connecting flights consisting of a confirmed single booking for the entire journey comprises two legs. In the latter case, the passenger can also choose to bring the claim before the court or tribunal which has territorial jurisdiction over the place of departure of the first leg or one having jurisdiction over the place of arrival of the second leg.

The present case dealt with a similar legal matter yet with relation to a multi-leg flight, operated by different carriers. According to the Court none of this affected the procedural position of the passenger experiencing a cancellation or delay. First of all, the Court stressed that a contract for carriage by air consists of a confirmed single booking for a three-leg journey establishes the obligation for an air carrier to carry a passenger from a point A to a point D. The place of performance, within the meaning Article 7(1) of Regulation No 1215/2012, can therefore be the place of departure of the first leg of the journey (point A).

What is more, the rule of special jurisdiction for matters relating to a contract set out in that provision does not require the conclusion of a contract between two persons, but the existence of a legal obligation freely consented to by one person in respect of another on which the claimant’s action is based.  This is the case for an air carrier performing obligations under Passenger Rights Regulation No 261/2004 on behalf of another carrier having a contract with a passenger, in line with Article 3(5) of that regulation. Consequently, even though there were no complications on the first leg of the trip and the Hamburg-London flight was not operated by Iberia, the claim against the carrier could be brought in the Hamburg court.

‘Paying’ with personal data – what rights do consumers have?

The recently approved Directive on the modernization of consumer protection rules (available here) explicitly extended the scope of the Consumer Rights Directive to contracts where the consumer ‘pays’ with data, or contracts where the consumer provides personal data in exchange for a digital content product or a digital service. This extension means that consumers who ‘pay’ with their personal data have specific information rights stemming from Article 6 and the new Article 6a of the Consumer Rights Directive, such as the right to get information on the possibility of recourse to a complaint mechanism. Furthermore, these consumers are now entitled to the right to withdraw from the contract, even if they do not pay a monetary price. The advantage of this right when it comes to contracts where consumers ‘pay’ with data is evidently more limited than when consumers pays with money. Nevertheless, this is the latest move by the EU to better protect consumers’ personal data.

In fact, the Digital Content Directive (also recently approved and available here) was the first to 'innovate' in this area, by acknowledging the need for consumer protection in contracts where the consumer ‘pays’ with data. The Digital Content Directive extended the remedies already provided by the Consumer Sales Directive (applicable to the sale of goods and now replaced by the Sale of Goods Directive) to digital content contracts, both where the consumer pays a monetary price and where the consumer ‘pays’ with personal data. According to Article 14, in case of lack of conformity, consumers who provide their personal data in exchange for a digital content product or a digital service are entitled to have the product or service brought into conformity (for example, through an update). Furthermore, consumers are entitled to terminate the contract in case of any lack of conformity (regardless of how minor). In case of termination, the rights in the GDPR must be respected, particularly when it comes to the right to be forgotten (Article 17 GDPR) and the right to data portability (Article 20 GDPR).  

The increasing efforts by the EU to protect the consumer who ‘pays’ with data are an acknowledgement of the importance that similar data-based business models will play in the contracts of the future. However, the treatment of personal data as a contractual counter-performance is not uncontroversial. For example, although the (previous) European Data Protection Supervisor welcomed the protection of data subjects through consumer law, the EDPS also vocally opposed the treatment of data as a counter-performance. Nevertheless, given the increase in the number of contracts concluded in exchange of (personal) data (think of Spotify, Facebook and other similar platforms that provide digital services), it seems important to develop (and adjust) a general contract law framework applicable to these contracts. This must be done alongside – and not in opposition to – the data protection framework.

500 online businesses do not comply with consumer rights

Recently, the European Commission released the results of a screening (or ‘sweep’) of 481 retail e-shops (press release available here). The main finding was that more than 2/3 of the screened online businesses do not comply with EU consumer rights legislation (particularly the Consumer Rights Directive). This number means that consumers are not properly informed on their rights in 2 out of 3 shops.  

Article 6 of the Consumer Rights Directive establishes that in distance contracts consumers should be given a long list of information, including on the withdrawal right, on the legal guarantee and on the total price of the product. Furthermore – and most importantly -, this information must be given in a clear and comprehensible manner. However, according to the screening, more than 1/4 of the analyzed websites did not inform consumers about how to withdraw from a contract. This breaches Article 6(1)(h) of the Consumer Rights Directive. Furthermore, nearly 1/2 of the analyzed websites did not provide such information in a clear manner (particularly regarding the 14 days’ time limit). This breaches Article 6(1) of the Consumer Rights Directive. The failure to inform the consumer about the right to withdrawal is ‘punished’ by the Consumer Rights Directive with an extension of the period of withdrawal from 14 days to 14 days and 12 months (Article 10(1)).

The sweep also found a frequent breach of the pre-contractual duty to inform on the total price of the purchase. In fact, in over 1/5 of the consulted websites the price initially shown did not include additional charges such as delivery or postal charges. This breaches Article 6(1)(e) of the Consumer Rights Directive. Other findings show that over 1/3 of the analyzed businesses did not inform consumers about the 2-year legal guarantee to have a good repaired, replaced or reimbursed in case of a defect at the moment of delivery. This breaches Article 6(1)(l) of the Consumer Rights Directive.

The lack of adequate pre-contractual information is one of the biggest challenges faced by consumers, and one that the EU legislator has spent quite some time working on. Of course, one of the main problems of the information paradigm in EU consumer law is its lack of enforceability. Even though businesses often breach their duty to provide information in a clear way, it is (ironically) unclear what the legal and practical consequences for such a breach are. The Commission, however, promises an ‘in-depth investigation of the above-mentioned irregularities’ at national level and the subsequent request for traders to correct and improve the information they provide to consumers.

From the news: Amazon and unsolicited shippings

As sustainable - and unsustainable! - consumption becomes increasingly topical in consumer law and policy, news from the UK suggest Amazon is not ready to change their game to face their responsibility viz the climate emergency. Incidentally, in doing so they also provide quite bad consumer service. 

What is the story? According to reporting by the Guardian, Amazon uk has more than once been in controversies with customers over unsolicited deliveries. While some mistakes can happen when a company arranges millions of shipments per year, several customers have been met by refusal when asking Amazon to take back what had been wrongly delivered - with the company suggesting that the consumers simply dispose of the (new, perfectly functioning) goods. 

In the latest news item, the mistaken delivery concerned an excercise bike weighting 28 kilos. An elderly customer from Bristol received the bike after having ordered a completely different product. 

"After finding his way through the maze of the Amazon website he says he eventually found a number to call where a very helpful person agreed to replace his missing logs. But when these arrived the second driver also refused to take the bike away." 

When Amazon instructed him to dispose of the particularly bulky good as he liked, the customer approached the Guardian. Amazon changed their mind after the newspaper got involved, accepting to take back the bike and sending amenities to the puzzled customer.

The company's original reply is broadly in line with article 28 of the Consumer Rights Directive - providing that in case of unsolicited supply of goods or services consumers are not required to pay (but, the rule implies, may keep what has been delivered). However, in case of numerous wrong deliveries or bulky items such as a training bike, inviting consumers to dispose of the good is both highly questionable in terms of sustainability and oblivious of consumer interest. As the Bristol consumer observes in the Guardian article, if he was instructed to keep the bike, this likely means that another customer, who had originally ordered the bike, was probably delivered another widget. 

Can we really not do better than this?

Data protection (violations) by default: stakeholder views and new developments in enforcement

Last weeks brought some interesting new developments in the implementation of the EU rules on data protection, such as the conditions for a valid consent to the processing of personal data and the principles of data protection by design and by default. As we observed numerously on this blog, the developments in data protection are of direct relevance to consumer law and policy, considering that business practices in the digital economy are often connected to the processing of consumer data and, as such, can come within the purview of both fields.

One of the major topic in the ongoing data protection debate concerns default settings. As readers may recall, several months ago we reported on the judgment of the Court of Justice in case C-673/17 Planet49 (CJEU confirms stricter requirements for valid cookie consent...). The case confirmed that - just like in the GDPR - consent referred to in Articles 2(f) and 5(3) of the E-Privacy Directive cannot validly be obtained by way of a pre-ticked checkbox, which the user must deselect to refuse his or her consent. 

Pre-ticked checkboxes and similar mechanisms of collecting consumers' "consent" by default are unfortunately still very present in the digital market. Furthermore, by applying the so-called dark patterns businesses can steer consumer behaviours in the direction they desire, even without the use of default settings (for an illustration see: Google tracks every step you take). Fortunately, practices of this kind not only attract attention of consumer organisations, but are also gradually engaged with by the law enforcers. Last week a higher regional court in Germany - Kammergericht Berlin - ruled on the case brought against Facebook by the national association of consumer organisations (vzbv). The case concerned a total of 26 alleged violations of consumer and data protection law, many of which were confirmed by the court. Default "consent" to location tracking, sharing a link to the users’ profile with search engines and the use of name and profile picture for commercial purposes have all been found to violate the applicable rules on data protection. By contrast, Facebook’s marketing claims that its services "are free and always will be" have not been considered misleading under national provisions implementing the UCPD.

On the latter point, one which turns around the question whether or not personal data constitutes a price, the emerging court practice is not entirely coherent. Just two weeks before the Berlin ruling, the Administrative Court in Lazio (Tribunale Amministrativo Regionale) partially upheld the decision of the Italian Competition and Market Authority (Autorità Garante della Concorrenza e del Mercato, AGCM) which considered an analogous slogan, directed at Italian users, to qualify as an unfair commercial practice. The AGCM has meanwhile launched proceedings against Facebook for the company's non-compliance with the prior decision.

All of this comes at a time of a broader discussion about the interplay of data protection law and consumer law and the application of the - often broadly framed - provisions of both the GDPR and the UCPD. A certain convergence of views appears to be forming between consumer organisations and data protection bodies, even if the relevant overlap is not always complete. It seems that consumer organisations are willing to accept the economic role of data whenever it is beneficial to consumers (like in the case of potentially misleading "free" claims). The European Data Protection Supervisor, however, has been arguing against any direct analogies between data and price, as illustrated by his position on the recent modernisation of the EU consumer rules (and previously on the digital content directive). When it comes to the data protection by design and by default the alignment between the two stakeholder groups seems even stronger. Last November the European Data Protection Board published Guidelines 4/2019 on Article 25 GDPR, which have largely been supported by the association of European consumer organisations - BEUC. The organisation welcomes the operationalisation of both principles, including through the proposed selection of performance indicators as well as the illustrative case studies. Nonetheless, the achievement of effective protection of consumer data in the digital economy has still a long way to go. Limited personal scope of Article 25 GDPR, which only imposes an obligation on controllers, and the lack of clarity on the role and responsibility of developers/processors have been mentioned as the major gaps to be filled.