Cars with emissions’ systems infringing environmental protection – CJEU on non-conformity in Case C-145/20 DS v Porsche Inter Auto GmbH & Co. KG, Volkswagen AG

On July 14, 2022, in DS v Porsche Inter Auto GmbH & Co. KG, Volkswagen AG (Case C-145/20), the CJEU ruled on the non-conformity of a vehicle which, though EC type-approved, had an emissions’ regulating systems which did not comply with the regulation aimed at guaranteeing a high level of protection of the environment and at improving air quality within the EU. 

In 2013, a consumer bought in Austria a Volkswagen car, Euro 5 generation from a Volkswagen independent authorised dealer. The software operating the exhaust gas recirculation (EGR) worked in two modes (‘switch system’): the first one was activated exclusively in the laboratory, during the approval test; the second mode was activated under normal driving conditions. The switch system was not disclosed to the German authority which granted the type-approval, regulated under Regulation No. 715/2007 on type-approval of motor vehicles with respect to emissions from light passenger and commercial vehicles (Euro 5 and Euro 6). Receiving a type-approval certifies that a type of vehicle ‘(…) satisfies the relevant administrative provisions and technical requirements’ (Article 3(5) Directive 2007/46 establishing a framework for the approval of motor vehicles). Had the authority been aware of the system, the approval would have not been granted. However, the consumer would have nevertheless purchased the vehicle.

In 2015, the German authority ordered the producer (Volkswagen) the withdrawal of the switch system in order for it to be in compliance with Regulation No. 715/2007. In 2016, the same authority considered the software update carried out by the producer to be sufficient in order to restore conformity, thus not withdrawing or revoking the type-approval previously granted. The software update consisted in the following: the emission-reducing mode was activated under normal driving condition, ‘only when the external temperature was between 15 and 33 °C (‘the temperature window’)’ (para 34). In light of this, the consumer brought an action before the Regional Court of Linz requesting either the reimbursement of the price upon returning the vehicle, or a reduction of the price paid, or – finally – to have the seller and producer declare they are ‘liable for damages as a result of the presence of a prohibited defeat device [i.e., the updated software with the temperature window function] within the meaning of Article 5(2) of Regulation No 715/2007’ (para 35). Both the Regional Court of Linz, and the Higher Regional Court of Linz dismissed the action. The consumer appealed the decisions on a point of law before the Supreme Court of Austria which referred the case to the CJEU in 2020. 

Contrary to the courts of first and second instance, the Supreme Court considered the switch system to be a ‘defeat device’ thus in breach of Articles 3(10) and 5(2) of Regulation No 715/2007. Pursuant to Article 3(10) a ‘“defeat device” means any element of design which senses temperature (…) for the purpose of activating (…) the operation of any part of the emission control system, that reduces the effectiveness of the emission control system under conditions which may reasonably be expected to be encountered in normal vehicle operation and use’. Pursuant to Article 5(2), then, the use of defeat devices is prohibited, save for three exceptions related to technical matters. One of these exceptions (letter a)) is that the device’s existence ‘is justified in terms of protecting the engine against damage or accident and for safe operation of the vehicle’. Further, the Supreme Court considered in any case the vehicle to be defective under Austrian Law in that the defeat device had not been disclosed to the German authority in charge of the type-approval. 

The CJEU ruling is divided into three parts. 

1) To the question whether a car (that is authorised to go on the road because it has received the EC type-approval) can be considered in conformity to the contract (pursuant to Article 2(2)d of Directive 1999/44 on certain aspects of the sale of consumer goods and associated guarantees), the CJEU ruled as follows.

According to Directive 2007/46, with the EC type-approval Member States certify ‘that a type of vehicle (…) satisfies the relevant administrative provisions and technical requirements’ laid down in said Directive (Article 3(5)). Only the vehicles which comply with the Directive may be sold, registered or put into service within the EU (Article 4(3)). Manufacturers must demonstrate compliance with the type-approval (Article 4(1) Regulation No. 715/2007) and must deliver a certificate of conformity to the consumer, together with the vehicle (Article 18(1) Directive 2007/46). In light of this, it is evident that a consumer who receives such certificate can reasonably expect compliance with Regulation No. 715/2007 and that, failing that compliance, Article 2(2)(d) shall be interpreted as meaning that the vehicle ‘does not show the quality and performance which are normal in goods of the same type and which the consumer can reasonably expect, given the nature of the goods’ (para 55). The fact that the EC type-approval has been granted does not change this outcome, in that, pursuant to Directive 2007/46, once an unlawful element of a vehicle has been discovered after approval, the latter can be withdrawn from the authority or a new type-approval can be granted after consultation of the Member State with the manufacturer. 

2) Asked whether the defeat device was in place for safety reasons and thus whether it may be considered an exception to the prohibition laid down in Article 5(2) of Regulation No. 715/2007, the CJEU then observed the following. 

The defeat device ‘which guarantees (…) compliance with the emission limits (…) only in the temperature window (…) can be justified under that provision only where it is established that that device strictly meets the need to avoid immediate risks of damage or accident to the engine, caused by a malfunction of a component of the EGR system, of such a serious nature as to give rise to a specific hazard when a vehicle fitted with that device is driven’ (para 81). The CJEU thus excluded the application of Article 5(2)(a) to all switch systems operating in a temperature window, otherwise allowing the constant derogation to the prohibition. It observed that ‘a defeat device which, under normal driving conditions, operated during most of the year in order to protect the engine from damage or accident and ensure the safe operation of the vehicle could not fall within the exception provided for in Article 5(2)(a)’ (para 81). 

3) Finally, the referring court asked whether the defeat device may be considered a minor lack of conformity within the meaning of Article 3(6) of Directive 1999/44 which would have not stopped the consumer from purchasing the car. 

The CJEU noted that because Directive 1999/44 does not define what a minor lack of conformity is, this shall be determined by referring to ‘everyday language, while also taking into account the context in which it occurs’ (para 88). A lack of conformity shall thus be, first of all, of ‘minor importance’ (para 89). Secondly, as regards the context: provided that a vehicle with such defeat device cannot be approved and cannot comply with the emission limits laid down in Regulation No. 715/2007, it is clear that the presence of the device ‘cannot be regarded as being a minor lack of conformity within the meaning of Article 3(6) of Directive 1999/44’ (para 96). 

The CJEU thus found that the vehicle, though having received the EC type-approval and hence being authorised to be used on the road, was not in conformity with the contract in that the system to control emissions did not comply with the rules on the guarantee of environmental protection and improvement of air quality in the EU. Provided that the lack of conformity was not of minor importance, the consumer is in principle entitled to any of the four legal remedies: repair or replacement of the car, the reduction of the price paid or even the rescission of the contract. The evaluation is left to the national court.

Consumer protection extended to mixed-purpose contracts - CJEU in S.V. (Immeuble en copropriété) (C-485/21)

Last Thursday in the case S.V. (Immeuble en copropriété) (C-485/21) the CJEU provided us with new guidance as to the scope of the notion of a consumer.

Image by Spencer Wing from Pixabay    

In the given Bulgarian case, an owner of an apartment in a building of a housing association (in co-ownership) concluded a contract with a company that was to provide management and maintenance of the communal areas of that building. The contract included terms on late payment fees, which ended up being contested as to their fairness (excessive amounts and lack of transparency) under the UCTD. The question was whether consumer protection framework was applicable at all to this situation.

The CJEU reminds that the notion of a 'consumer' is objective in nature and should be assessed by reference to a functional criterion (para 25). This means that is only relevant to consider whether the contract was concluded in the course of activities outside a trade, business or profession. Consequently, what is required of national courts it to establish whether the party in the given case, a natural person, 'does not use that apartment for purposes which fall exclusively within her trade, business or profession', as that would exclude that party from the scope of consumer protection (para 27). This is a welcomed confirmation that the 'consumer' notion applies broadly in mixed-purpose contracts, that is when consumers use goods for a mix of personal and professional purposes. The CJEU in this paragraph seems to imply that any mixed-purpose contract could be covered by consumer protection framework (by referring to 'exclusive' use for professional purposes). Further, in paragraph 32 of the judgment the CJEU specifically mentions situations where natural persons could use an apartment 'constituting his or her personal home for professional purposes also, such as in the context of salaried teleworking or in the exercise of a liberal profession'. Again, this is a great example of a modern, progressive approach to the interpretation of the notion of a 'consumer', considering the current realities of many goods being used simultaneously or alternatively for personal and professional purposes. 

Another interesting observation of the CJEU is that it is irrelevant whether some of the activities of a provider of services or a seller 'are the result of the need to comply with specific requirements relating to safety and town and country planning, laid down by the applicable national law' (para 30). Contractual terms reflecting such mandatory statutory provisions may not be tested for unfairness, pursuant to Article 1(2) UCTD, but that exclusion does not stretch as far as to encompass the contract as a whole. Consequently, other terms in that contract may be subject to the unfairness test (para 31). This is consistent with the past narrow interpretation of various UCTD's exceptions to its scope of application.

Digital Services Act published

For anyone trying to look up the status of the Digital Services Act, please note that it has been published on 27 October 2022 in the Official Journal L 277, page 1. 

OECD report on Dark Patterns

 Yesterday, aka 26 October 2022, the OECD has released a report on Dark Patterns which had been in the making for almost two years. LLM students who would like to write about the topic or just about anyone looking for a clear intro to the subject - this report is your friend! It contains not only a helpful classification of different types of dark patterns but also a quite comprehensive review of relevant regulatory frameworks/interventions, known case-law and much (if not all, and if arguably too US-centred and English-based) of the literature you may also want to look at, including... Joasia's 2019 JCP paper The Transparent Trap! Kudos there.

A working definition is provided at the outset which may or may not gain traction in the field: dark patterns, accordingly, are 

"business practices employing elements of digital choice architecture, in particular in online user interfaces, that subvert or impair consumer autonomy, decision-making or choice. They often deceive, coerce or manipulate consumers and are likely to cause direct or indirect consumer detriment in various ways, though it may be difficult or impossible to measure such detriment in many instances."

[The first part of the report, where dark patterns are typified and their impact assessed, I skip for now - but you can find it all online!]

The report acknowledges that more enforcement is necessary in the EU, while ultimately praising the UCPD's relative ability to address the problem in comparison with other instruments: if on the one hand resonance with the black listed items in the annex makes it possible to address certain black patterns with a degree of legal certainty, the report observes, the "principle-based" prohibition of unfair commercial practices works quite well to cover technological and commercial developments like the ones at hand. 

One critical point that is (thankfully) mirrored in the report is known criticism of the average consumer standard: this standard is hard to square with consumers' apparent vulnerability to dark patterns & other online perils &, the report observes, seems particularly problematic in the context of increasing online personalisation. The report also highlights criticism of disclosure rules, in particular as a way of preventing consumers from falling for dark traps: it turns out, the report concludes, that all experiments trying to measure the effects of disclosures in this area failed to detect any serious improvement. Hence the relevance of information may be limited to broader education campaigns and possibly to a limited set of dark patterns. 

The report also interestingly reviews examples of technical supports that are being developed - essentially, dark pattern-blockers for one's browser. These are, apparently, useful in some cases but less so when the dark patterns is not to be "written away" in code (p 47). I would like an app like that though!

As a scholar who reads Law & Econ work with a mix of interest and skepticism, I was less impressed by the report's discussion of nudges on page 37, under "Digital choice architecture". The title reflects a trend that has been going on for a long time of course; the report, however, brings together under one technique concerns that may need to be kept separated. "Privacy by design", that is mentioned as example, is not the same as a "bright pattern" based on extrapolating "welfare enhancing" choices from supposed "preferences or expectations". While the report necessarily gives a limited overview on each issue, conflating privacy protection with "consumertarian" views and hard-core nudge advocates is to my mind quite problematic.

Anyway, this is really a good starting point but also, as far as I can tell, a fairly comprehensive restatement that those already in the debate will also benefit from. Recommended read!

18th International Association of Consumer Law Conference (IACL)

IACL conference is back in 2023! After the pandemic, the International Association of Consumer Law is picking back up its activity and organising its 18th event - in Hamburg on July 19-21. The call for papers is open until December 16th, and you may find more details on it on the attached photos as well as here.

2nd Annual Digital Consumer Event of the European Commission

The European Commission organises the 2nd Annual Digital Consumer Event on November 21st. The event will be held in English and streamed online thus it will be relatively easy for our readers to participate in it. You may register here: Commission website.

Three panels will be devoted to various concerns related to the digital environment: online consumer vulnerabilities; virtual traps and possible addiction triggers of online purchases; unfair terms and lack of transparency in online contracting.

Administrative payment orders for airlines - CJEU in LOT (C-597/20)

On 29 September the CJEU issued another judgment on the interpretation of Regulation 261/2004 in the case LOT (C-597/20). This judgment refers to a less commonly referred to provision of this Regulation, its Article 16, obliging the Member States to assure the effective enforcement of its other provisions. Whilst it is clear from this provision that the Member States need to designate a body responsible for the enforcement, the measures that are at the disposal of this body are referred to only in general terms: measures necessary to ensure that the rights of passengers are respected. 

In the case at hand, the question was whether the designated body in Hungary was authorised to order an airline to pay out compensation for a delayed flight to passengers affected by this delay who have made individual complaints to that body. Previously, in the judgment Ruijssenaars and Others (see our comment No administrative fines for misbehaving airlines... and Air passengers denied compensation should go to court) the CJEU interpreted paragraphs 2 and 3 of Article 16 Regulation 261/2004 as not requiring designated bodies to act on any individual passenger complaints and not being required to issue administrative fines for each individual infringement of the Regulation (paras 24 and 25). This aimed at protecting the bodies from becoming overwhelmed by individual complaints and ensuring they have space to conduct their general market monitoring obligations. 

In the LOT judgment the CJEU had an opportunity to clarify that pursuant to Article 16 Regulation 261/2004 the Member States have discretion what powers to award to the designated bodies. This could mean that they choose to confer enforcement powers in individual passenger complaint cases on the designated body (paras 26-27). The national solutions must, however, provide for an option for passengers to seek further compensation for their losses before a court, pursuant to Article 12 Regulation (para 29). This means that the administrative procedure may not obstruct the passenger's or the air carrier's access to an effective, judicial remedy, giving effect to Article 47 of the Charter (paras 36-37).

This judgment is a welcomed clarification, as it may embolden the Member States to confer more powers on the bodies designated to enforce air passengers protection. The tricky part - how to avoid a flood of complaints - applies to both administrative bodies and courts, and could be helped by airlines complying more with the Regulation 261/2004 in the knowledge that passengers may claim sums owned them in various ways.

Different airlines, but connecting flights - CJEU in flightright (C-436/21)

A week ago, on October 6, the CJEU issued a judgment in the case flightright (C-436/21) on the concept of 'connecting flights' in Regulation 261/2004 on air passenger rights. This concept has been used e.g. in Article 2(h) of the Regulation, where the 'final destination' has been defined as 'the destination on the ticket presented at the check-in counter or, in the case of directly connecting flights, the destination of the last flight (...)'. 

The passenger in this case travelled from Germany to the US via Switzerland. Their journey required 3 flights, which were purchased together from a travel agency. American Airlines was mentioned on the single electronic ticket that the passenger received as the operating air carrier, even though the first flight was performed by Swiss International Air Lines. The whole journey had a single reservation number and the passenger received an invoice showing a single price for the return flights. In this case the last of the connecting flights, taking place within the US, was delayed by more than 4 hours. The passenger assigned their claim for compensation of 600 Euro from American Airlines to flightright.

The passenger would fall within the scope of Regulation 261/2004 only if their journey was deemed to have started in the territory of the EU (Germany). The issue was that the first flight was carried out by Swiss International Air Lines between Germany and Switzerland. American Airlines operated the second and third flight, but the second flight departed from outside the EU - from Switzerland. Swiss International Air Lines and American Airlines have no specific legal relationship and their flights have been combined for the purposes of this passenger by the travel agency. Should American Airlines then have to pay compensation under Regulation 261/2004 if their records might not have reflected that the passenger would have started their journey within the EU and therefore could be covered by Regulation 261/2004?

The CJEU says yes, referring to the previous judgment on defining 'connecting flights' as flights booked as a single unit (Wegener - see our comment Bad news for airlines...) (para 20). As the passenger's ticket seems to have confirmed that their reservation was for the entire journey, it would qualify as a single unit (para 26). The CJEU highlights further that Regulation 261/2004 does not require connecting flights to be performed by operating air carriers who are in a particular legal relationship (para 28). American Airlines seems, therefore, liable in this case for paying out the compensation to passengers. They could, however, try to seek recourse on the tour operator who has booked the journey, if they failed to fulfil their obligations (para 30).

Food imitating products: risks need to be likely, not certain - Get Fresh Cosmetics (Case C-122/21)

by Marta Dzedyshko

We do not often discuss Directive 87/357/EEC on the approximation of the laws of the Member States concerning products which, appearing to be other than they are, endanger the health or safety of consumers (Directive on food imitating products). The main purpose of this Directive was to ensure that children who most easily could mistake various consumer products for foodstuffs if they would resemble them, are protected from risks of suffocation, poisoning etc. 

Recently, the Lithuanian consumer protection authority found it difficult to apply the rules of this instrument and the matter was referred to the CJEU for elaboration (C-122/21). Get Fresh Cosmetics made bath bombs, which could be mistaken for food. However, when the Lithuanian consumer protection authority claimed that they were not compliant with Directive 87/357/EEC, the company demanded proof of not only possible consumers' confusion as to the character of the product but also of dangers that such confusion could bring about. For example, lab evidence as to whether the products could be broken and posed danger of poisoning when placed in mouth, sucked on or swallowed (para 19). This risk was presumed by the authority (para 20) on the basis of the fact that 'cosmetic products are not intended for consumption'.

The question was then what burden of proof this Directive required as to the causal link between the product's characteristics and risks caused by a product that could be mistaken for foodstuff by consumers. Would the consumer protection authority need to collect and present 'objective and substantiated data' of a hazardous nature of the product at stake?

The CJEU does not interpret Directive 87/357/EEC as requiring such a far-reaching burden of proof, whilst simultaneously also not seeing in it a presumption of a hazardous nature of products that appear to be other than they are (para 29, 35). Thus, the Lithuanian consumer protection authority has to substantiate why they think a given product could bring about risks to consumers by resembling foodstuff (paras 40-41). It can, however, do this by other evidentiary means than presenting 'objective and substantiated data', thus instead of certainty of the risk arising it is enough to prove its likelihood (para 45). The assessment should focus on objective characteristics of the product, e.g. materials and composition (para 42), vulnerability of targeted consumers (para 43)

Conference 'User protection against discrimination on sharing economy platforms'

Please find details of the conference on 'User protection against discrimination on sharing economy platforms' that takes place on June 20th at UCLouvain (Belgium). However, if you were interested in participating in it, you could also join online. The registration/conference details are here. Programme - below.