Wednesday, 11 January 2017

More privacy protection?

Yesterday, the European Commission published its proposal (COM(2017) 10 final) for a Regulation on Privacy and Electronic Communications, which is meant to repeal the e-Privacy Directive (2002/58/EC). The Commission, on the basis of the conducted REFIT exercise, evaluates the current framework as still sound as to its objectives and principles. The need for review comes from the technological changes in the market, mostly the popularity of Over-the-Top communications services, which are not currently subject to regulation in e-Privacy Directive. The new Regulation is meant to be lex specialis to General Data Protection Regulation 'and will particularise and complement it as regards electronic communications data that qualify as personal data'. (p. 2 of the Proposal)

Some of the interesting provisions in the new draft Regulation (see more here):
  • it will apply also to provision of e-communications for free;
  • it uses the same definitions as GDPR and European Electronic Communications Code;
  • it protects both data and metadata (incl. traffic and location data);
  • conditions for consent are the same as in GDPR
  • consent may be expressed by 'using the appropriate technical settings of a software application enabling access to the internet' - for the purpose of consenting to processing and storage of personal data through terminal equipment of end-users 
  • withdrawal of consent needs to be possible - with reminders about this option being sent every 6 months, as long as the processing continues
  • software needs to offer the option to prevent 3rd parties from storing information on the terminal equipment of an end-user or processing information already stored there
  • upon installation end-users will need to be prompted to choose and consent to a privacy setting; with already installed software such consent will be required during the first update thereof - not later than 25 August 2018
  • right to compensation for material and non-material damage
  • administrative fines of up to 4% of global turnover
First concerned reactions of the press worried about the industry (!):
"Will this EU privacy proposal lead to a more trustworthy internet or a more annoying one?"
"WhatsApp, Facebook and Google face tough new privacy rules under EC proposal"

Friday, 23 December 2016

Lucky4All pyramid scheme in lotteries - CJEU in Nationale Loterij (C-667/15)

Last week, on December 15th, the CJEU also gave its judgment in a Belgian case Nationale Loterij (C-667/15) that concerned pyramid promotional schemes as unfair commercial practices. The black list in Annex I to the Unfair Commercial Practices Directive 2005/29/EC clearly marks in its point 14 as an unfair commercial practice, under any circumstances, 'establishing, operating or promoting a pyramid promotional scheme where a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products'.

Nationale Loterij organises public lotteries in Belgium and it filed a complaint against Lucky4All scheme as a prohibited pyramid promotional scheme. Lucky4All allowed lottery players of Nationale Loterij to form groups and play together, thus increasing their winning chances. Ultimately, through eight pyramid levels, 9841 combinations could be played at the same time. Existing members pay an initial contribution of 10 euro and a monthly contribution of 43 euro, allowing to purchase 10 lottery combinations a week. The purchase would be conducted by a representative of the scheme and he would also share the winnings, if any. 50% of the winnings would go to the member who came up with the winning combination, 40% would go to members in higher levels of the scheme (incl. Lucky4All scheme itself) and 10% would be reinvested. The winnings would be capped at 1 million euros. Belgian courts were not sure whether the last condition of the Annex I (also reiterated in previous 4finance judgment of CJEU, C-515/12) was met in this case, namely, whether compensation paid out to existing members of the Lucky4All scheme was primarily or mostly based on financial contributions of new members. This would depend on whether the link between contributions of new members and payment to existing members needed to be direct.

The CJEU is clear that also an indirect link suffices to recognise a pyramid promotional scheme. What is required is that members pay a financial contribution (para 27) and a link between contributions paid by new members and compensation of existing members (para 28). This link, however, does not need to be direct, as the UCPD does not specify such a condition (para 30) and introducing it would lead to easy evasion of this prohibition (para 31). While the assessment of the facts of this case is left to the national court, in para 32 the CJEU suggests that a financial link in this case appears to be 'indirect but certain', as the chances of winning are linked to the introduction of new players to Lucky4All scheme, and when chances of winning increase with the increase of number of players, the scheme introduces a capping of winnings.

Thursday, 22 December 2016

Effective judicial protection in unfair terms cases – mixed signals from Luxembourg

Also yesterday the Court of Justice delivered its ruling in case C-119/15 Biuro podróży Partner. The judgment may come as a surprise to some commentators as it markedly deviates from the opinion of Advocate General Saugmandsgaard Øe presented earlier this year (see our previous post here). The Court adopted a more consumer-friendly approach and accepted a national solution, according to which the use of terms equivalent to those included in the register of unfair clauses may lead to an imposition of administrative sanctions, even the term included in the register was declared unlawful in a different factual context. The Court made it clear, however, that effective judicial remedies must be available to traders, on whom the sanctions are imposed.

Underlying dispute and questions referred for a preliminary ruling

Reference for preliminary ruling came from the Court of Appeal in Warsaw, which examined an appeal from the decision of the Polish consumer protection authority (President of UOKiK) imposing a fine of PLN 27 127 (approx. EUR 4 940) on the travel agency Partner. Imposition of sanctions was based on the finding that supplier, in its contracts with consumers, made use of standard provisions equivalent to terms previously declared unlawful by a court and introduced into the public register of unfair terms. The referring court expressed doubts as to the interpretation of Directives 93/13/EEC (Unfair Contract Terms Directive) and 2009/22/EC (Injunctions Directive). It explicitly referred to the Invitel case (C‑472/10), in which the Court held, that its case-law that the effects of a judicial decision declaring unfair terms unlawful may be extended to all consumers having concluded a contract containing the same terms with the same seller or supplier, even if they did not participate in the proceedings brought against that trader. The referring court asked for clarification whether an analogous interpretation can apply to consumers who concluded a contract containing the same terms with a different seller or supplier.

The judgment

According to the Court, in light of Article 6(1) and Article 7 of Directive 93/13/EEC, read in conjunction with Articles 1 and 2 of Directive 2009/22/EC and in the light of Article 47 of the Charter of Fundamental Rights of the EU, the use of standard contract terms with content identical to that of terms which have been declared unlawful by a judicial decision having the force of law and which have been entered in a national register of unlawful standard contract terms can be regarded as an unlawful act also in relation to a seller or supplier which was not a party to the proceedings culminating in the entry in that register.

However, it is essential that the seller or supplier is provided with an effective judicial remedy against the decision which finds that contested terms are equivalent. In particular, the following two elements should be subject to a review:

a) the question whether, in the light of all relevant circumstances particular to each case, those terms are materially identical, having regard in particular to their harmful effects for consumers,
b) the amount of the fine imposed.


The judgement is noteworthy for several reasons. First of all, it elaborates on the role of the Charter of Fundamental Rights in the context of unfair contract terms. This time the Court explicitly referred to the Charter (paras. 23-27), although it had refrained from doing so in other important cases like Aziz (C-415/11). The Court also made it clear that not only consumers, but also the sellers and suppliers enjoy the fundamental right to effective judicial remedy which must be respected.

Secondly, the judgment sheds some light on the role of unfair contract terms registers, which can be adopted by Member States. The Court did not delve into the debate about the erga omnes effect of judgments, but appeared to have taken it for granted that lists of unfair terms may also be based on court rulings (para. 36), thus differing quite fundamentally from the Advocate-General's opinion (paras. 54-56 of the opinion). Instead of questioning the legitmacy of such registers, the Court focused on the way in which they work in practice and emphasised that not only the formation, but also management of such registers must comply with EU law. In particular, registers should remain transparent and up-to-date. Possible consequences of noncompliance with these requirements have not been specified, though. In case of a serious mishandling of unfair terms registers, initiation of infringement proceedings could perhaps be envisaged. It is worth mentioning that with respect to the abovementioned parameters, the Polish register – with more than 6500 often overlapping entries – left much to be desired. However, as we have already reported, legal framework in Poland has meanwhile undergone a substantial reform and no longer provides for an erga omnes effect of judgements entered into the register. Interestingly, the lack of transparency was mentioned as one of the reasons for the reform.

In the analysed case particular importance was attached to the trader’s possibility to challenge the decision. Emphasis was placed on two elements: assessment of the conduct itself (material equivalence) and the amount of the fine. In this respect the Court aligns, to a certain extent, with the Advocate General, who also stressed the need to analyse contractual terms in a broader context and to allow traders to present factual arguments. Nevertheless, the Court's understanding of the Polish system of judicial review differs rather significantly from the Advocate-General's view (see paras. 42-43 of the judgment and para. 65 of the opinion).

Notwithstanding these discrepancies, it seems justified to say that a system in which administrative sanctions are imposed based on the register of unfair clauses is only acceptable if the reviewing court is competent (obliged?) to analyse the case on the merits. In the Polish judicial practice several reviewing courts have expressed the view that conducting such an assessment should not be their task, as there is a separate procedure adopted specifically for this purpose. In the light of CJEU judgment, such an argument may be contested. According to the Court, assessment of material equivalence undertaken by the reviewing court is sufficient from the point of view of effective judicial protection. At the same time, the Court does not preclude the existence of stronger procedural guarantees for traders. In particular, it does not address the issue whether an alternative solution, in which every contractual term needs to be first assessed by the court in a dedicated procedure and only afterwards the trader can be subject to administrative sanctions, would undermine the effectiveness of EU consumer law.

The assessment of the second element – the amount of fines – has similarly been left to national courts. In this respect, however, the judgment is less controversial as it clearly refers to the well-established principle of proportionality (paras. 44-46).

Concluding remarks

The judgment in Biuro podróży Partner may be regarded as a development of Invitel jurisprudence. The Court seems to have accepted that a judicial ruling recognising particular contract terms as unfair may also produce, at least indirectly, legal effects vis-à-vis other sellers and suppliers. Nevertheless, this was not the main angle of the Court's analysis. While the CJEU acknowledged that administrative proceedings against different traders may be based on registers on unfair clauses, it did not attach much importance to the fact that the register in the case at hand was composed of clauses which had previously been declared unfair by courts in different individual cases. Emphasis was rather placed on the need to provide both consumers and traders with effective judicial remedies in light of Article 47 of the Charter. The Court provided some guidance as to the interpretation of this principle, although this can hardly be regarded as clear and comprehensive. The judgment also sheds some light on requirements concerning the management of unfair term registers, which should remain transparent and up-to-date. Furthermore, it clarifies that even if the administrative sanction is based on equivalence of contract terms, judicial review should seek to establish whether the terms are indeed materially – and not only formally – identical and sanctions are proportional.

Due to a recent reform of the Polish law on unfair terms, the judgment of the Court will be particularly relevant to a number of pending proceedings, initiated before the reform came into force, which were often stayed in anticipation of the CJEU ruling. In this context, it is crucial that the Court did not reject the consumer-friendly interpretation of the previous Polish scheme in its entirety. As regards the availability of effective judicial protection, the assessment has largely been left to national courts. Limited evaluation performed by the CJEU did not disclose any significant shortcomings of the analysed legal framework, contrary not only to the opinion of the AG, but also the part of Polish jurisprudence and academia. It will thus be very interesting to see the impact of the judgment on the ongoing proceedings.

Spanish 'floor clauses' (cláusulas suelo) - EU Court of Justice steps in: nullity is nullity

Judgment of the EU Court of Justice in Joined Cases C-154/15, C-307/15 and C-308/15 (Gutiérrez Naranjo v. Cajasur Banco, Palacios Martínez v. BBVA and Banco Popular Español v. Irles López)

Yesterday the EU Court of Justice gave its long-awaited judgment in the joined cases from Spain on the infamous 'floor clauses' (cláusulas suelo). It is a real Christmas present to Spanish consumers and house-owners: the CJEU has "overruled" national case law that limits the temporal effects of the declaration of nullity of an unfair term. Nullity is nullity. The impact of this judgment on the Spanish banking sector is huge: banks will have to pay back an estimated amount of 3.000 to 5.000 million euros (source: El País). The judgment has already been called a "formidable varapalo judicial a la banca", a tremendous judicial blow to the banks.

'Floor clauses' in mortgage loan agreements establish a minimum rate below which the variable rate of interest cannot fall. Until the Spanish Supreme Court (Tribunal Supremo) found them to be unfair in 2013 due to a lack of transparency, they were widespread. The biggest question for Spanish consumers after yesterday's judgment, which has been widely covered in Spanish media, is: how much money do we get back?

The reason why they ask this question, is the Supreme Court's decision to limit the temporal effects of its judgment to after the date of its publication, 9 May 2013, both in respect of collective actions for an injunction and individual actions by consumers claiming repayment. Only the amounts overpaid on the basis of 'floor clauses' after that date had to be paid back. One of the considerations of the Supreme Court was that retroactive (i.e. restitutory) effect of the invalidity of the clauses at issue would give rise to serious economic repercussions. Lower courts in Spain, however, doubted whether the Supreme Court's approach was compatible with Directive 93/13/EEC on unfair terms in consumer contracts. Last July, we reported on this blog that it was permissible in the opinion of the Advocate General. The CJEU has now decided otherwise, which means that Spanish consumers can also claim repayment of the amounts overpaid to the banks on the basis of 'floor clauses' during the period before 9 May 2013, from the beginning of their contract.

For the readers of this blog, the judgment may not be entirely unexpected. The CJEU refers extensively to its previous case law about the interpretation of "not binding on the consumer" under Article 6(1) of Directive 93/13. It reiterates that it is for the national court "purely and simply" to exclude the application of an unfair term (para. 57). The national court may not revise the content of unfair terms, "lest it contribute to eliminating the dissuasive effect of the straightforward non-application with regard to the consumer of those unfair terms" (para. 60). The determination of unfairness "must, in principle, have the consequence of restoring the consumer to the legal and factual situation that he would have been in if that term had not existed" (para. 61). Thus, the national court must impose the repayment of amounts that prove not to be due, which entails "a corresponding restitutory effect" (para. 62). The absence of such restitutory effect would call into question the dissuasive effect that Articles 6(1) and 7(1) of Directive 93/13 are designed to attach to a finding of unfairness.

The CJEU then proceeds to consider that national (case) law may not alter the scope and, therefore, the substance of the protection guaranteed to consumers by the Directive. The Supreme Court was entitled to hold that its judgment did not affect situations in which a judgment with the force of res judicata had been given. While it is compatible with EU law to lay down reasonable time-limits for bringing proceedings, only the CJEU can decide upon a temporal limitation of the effects of a rule of EU law. National (case) law may not aversely affect the substance of the right that consumers acquire under that rule. The temporal limitation made by the Supreme Court is tantamount to depriving any consumer having concluded a mortgage loan contract before 9 May 2013 containing a 'floor clause' of the right to obtain repayment in full of the overpaid amounts. The CJEU concludes that national case law, such as that following from the Supreme Court's judgment of 9 May 2013, ensures only limited protection for consumers. Such protection is incomplete and insufficient and does not constitute either an adequate or an effective means of preventing the continued use of 'floor clauses'.

The CJEU rejects the argument brought forward by, among others, the Spanish government that the question of the effects of the finding of unfairness as regards 'floor clauses' does not fall within the scope of Directive 93/13, because that finding would afford a higher level of consumer protection than guaranteed by the Directive. The review of the substantive unfairness of a clause relating to the main subject-matter of the contract, where the consumer did not have the necessary information on the conditions and consequences of that contract before entering into it, falls within the scope of the Directive.

The CJEU brushes aside the Supreme Court's considerations in one fell swoop. It does not matter whether the 'floor clauses' were in themselves lawful, that their use had long been tolerated on the market, that the banks had complied with the regulatory requirements for information, or that there could be serious economic repercussions. The judgment was a bombshell: "Ahora mismo sale gratis disparar contra la banca" ("Right now, the banks have been made fair game"; source ABC). It is perceived as yet another setback for the Spanish banking sector. A string of preliminary references to the CJEU, starting with the well-known Aziz case, has strengthened the judicial protection of consumers against unfair contract terms. Still, yesterday's judgment comes as a surprising end to a long-running battle between Spanish consumers and the banks, supported by the government. It remains to be seen how the European judgment will be implemented at the national level; most banks do not seem eager to accept an obligation to automatically repay all their clients.

Friday, 9 December 2016

Camera, Camera, on the Wall...

The latest issues of INsights #18 contains a short article by Joasia Luzak 'Camera, Camera, on the Wall...' which introduces to the general public a previous joint publication by P. Lewinski, J. Trzaskowski and J. Luzak 'Face and Emotion Recognition on Commercial Property under EU Data Protection Law' published in Psychology & Marketing, vol. 33, issue 9, pp. 729-746. If you are interested in issues of privacy and how new technologies may challenge it, it's worth it to give it a read.

Thursday, 8 December 2016

Rescheduling credit NOT free of charge if payment for credit recovery agency added - CJEU in VfK (C-127/15)

In July we've mentioned an opinion of AG Sharpston in Verein für Konsumenteninformation case (C-127/15), which concerned debt collection agencies and a possibility of them being recognised as credit intermediaries (Debt collection agencies as ... - in this post we present the facts of the case in details). Today the CJEU issued a judgment in this case.

The CJEU shared AG Sharpston's opinion that the credit rescheduling agreement concluded between consumers and Inko, acting as a credit collection agency on behalf of the lender, could not be recognised as a 'free of charge' agreement, if it obliged consumers to repay the total amount of the credit and to pay interests and costs that were not agreed on in the initial contract. The concept of a 'credit agreement' is broad and covers also agreements on rescheduling of repayments of existing debts (para 30), incl. when these are concluded by credit intermediaries acting on behalf of the lender (para 32). Since in the given case, consumers would be obliged to pay first Inko's costs, and then remaining capital due and interest, they had a new obligation placed on them, which was not agreed in the initial contract - to pay the costs of a credit recovery agency (para 38-39). Therefore, the credit rescheduling agreement could not be seen as concluded free of charge.

While the CJEU further agrees that debt collection agency, such as Inko, should be perceived as a 'credit intermediary' (under Art. 3(f) of the Consumer Credit Directive), it doesn't, however, share the view of AG Sharpston that this would place any pre-contractual information obligations on the agency. While credit intermediaries have a duty to inform, this obligation does not stretch to 'credit intermediaries in an ancillary capacity' pursuant to Art. 7 of the Consumer Credit Directive, and this category encompasses such persons who are not credit intermediaries as their main purpose of trade, business or profession (para 47). If the referring court then determines that Inko only acted as a credit intermediary in an ancillary capacity, they would not be found negligent in not providing pre-contractual information to consumers. However, in this case the lender would need to ensure that such information reaches consumers (para 52).

The last part of the judgment is somewhat disappointing, considering that when debt collection agencies contact consumers they won't have an obligation to provide pre-contractual credit information, as long as they would maintain debt collection as only part of their trade. Banks (lenders) might not always be immediately aware that such a contact has occurred, which might hinder their performance of duty to inform.

Monday, 21 November 2016

Addressing financial innovation: the launch of a New Task Force on Financial Technology

Last week the Commission has launched a Task Force on Financial Technology focusing on the FinTech sector (see the press release here). FinTeach refers to new applications, processes, products or business models in the financial services industry such as peer-to-peer lending and crowdfunding. The new Task Force brings together the expertise of the Commission staff in several areas including competition and consumer protection, financial and digital services and digital innovation and security. It will assess the state of the sector in the EU and develop strategies for addressing the potential challenges that this sector poses, in line with the Commission's goal to develop a comprehensive strategy on FinTech. The work of this Task Force is potentially very important for protecting consumers of financial services, given that FinTech challenges the 'traditional' consumer protection rules, including for example the definitions of a consumer and a creditor. The task force will engage with stakeholders and present policy recommendations in the first half of 2017. We will be anxiously waiting for this report.

Thursday, 17 November 2016

AG Szpunar: after-sales helplines should be available at the cost of standard calls

Case C-568/15 Zentrale zur Bekämpfung unlauteren Wettbewerbs Frankfurt am Main is a sign that one of the most recent EU legal acts in the field of consumer protection - the Consumer Rights Directive 2011/83/EU (CRD) - is gradually making its way before the Court of Justice. The opinion of Advocate-General Szpunar, delivered on 10 November, has just been published in multiple language versions. Full text of the opinion can be found here

The case concerns the concept of ‘basic rate’ contained in the Consumer Rights Directive. Article 21 CRD obliges Member States to ensure that “where the trader operates a telephone line for the purpose of contacting him by telephone in relation to the contract concluded, the consumer, when contacting the trader is not bound to pay more than the basic rate”. The directive leaves it open, however, which of the following factors is decisive for the application of Article 21: 
  • the charges, which consumers incur when contacting the trader by telephone, i.e. charges should not exceed a certain threshold, in particular the costs of a standard call at normal market prices, or 
  • the profit, which the provision of non-geographic telephone lines generates, i.e. traders should not make profit through the telephone helpline and the overall cost of such calls is irrelevant.
Note that Article 21 only refers to the provision of after-sales telephone lines. A distinction should therefore be made between communication means used for the conclusion of the contract, where the trader is only required to inform the consumer about the costs higher than the basic rate – Article 6(1)(f), and telephone lines used after the contract is concluded, which are of direct relevance to the case at hand. 

Facts of the case 

The defendant, a German company, provided consumers with an after-sales-service telephone line available at a special (non-geographic) number containing the prefix 0180, which is used in Germany for support-oriented services at a single national rate. This rate, however, exceeded the normal market charges for standard calls, i.e. the costs which consumers typically incur, according to their contracts with telecommunications service providers, when they call a standard (geographic) fixed or mobile number. Zentrale zur Bekämpfung unlauteren Wettbewerbs, a consumer association, questioned the legality of this practice and brought an action for an injunction before the German court. The defendant maintained that the German legislation does not prohibit traders from providing helplines at a cost exceeding the cost of standard calls, provided that it is the telecommunications service provider and not the trader who profits from this practice. Literally speaking, such an interpretation was supported by the wording of Paragraph 312a of the Bürgerliches Gesetzbuch (German Civil Code, BGB), according to which consumers should not pay for anything else than for the mere use of the telecommunications service. BGB does not specify the type of the telecommunications service, though. Following this interpretation, the fact that consumers calling an after-sales telephone line have to pay more to telecom operators, has no bearing on the assessment of the trader's practice. 

AG’s opinion 

AG Szpunar did not share the argument of the defentant and proposed a pro-consumer interpretation of Article 21 CRD. According to the Advocate-General, consumers calling the after-sales telephone line of the trader must not incur charges higher than the normal costs which they would incur for calling a standard (geographic) fixed or mobile number. Who ultimately receives the remuneration payable by the consumer is legally irrelevant. But how did the AG arrive at this conclusion?

Having established that the literal and comparative interpretation of the term ‘basic rate’ does not provide necessary clarification, the Advocate-General turned to the schematic, teleological and historical reasoning. 

Schematic interpretation: Article 6(1)(f) and Article 21 

An essential part of the Advocate-General's analysis referred to the general scheme, purpose and regulatory context of the directive, and in particular the relationship between Article 6(1)(f) and Article 21 CRD. AG Szpunar noted that pursuant to Article 6(1)(f), interpreted a contrario, the trader is not required to inform consumer about the costs of the means of direct communication unless they exceed the basic rate. He further agreed with the observation of the European Commission that if the charges incurred by consumers were irrelevant to the interpretation of the concept ‘basic rate’, consumers would also be unable to estimate the costs arising from the use of the telecommunications service at a pre-contractual stage. Such an interpretation of Article 6(1)(f) would clearly undermine the rationale of this provision. In the context of Article 6(1)(f) the term 'basic rate' should therefore be understood as the costs of a normal standard (geographic) fixed or mobile telephone call. According to the AG, for reasons of systemic coherence as well as further arguments stated below, the same should apply to the interpretation of Article 21. 

Teleological interpretation: full harmonisation and a high level of consumer protection 

Having pointed to the full harmonisation approach adopted the CRD, along with its aim to achieve a high level of consumer protection, AG Szpunar turned his attention to the teleological analysis of Article 21. He noted that the existance of special telephone lines, with call rates higher than normal market rates, may prompt consumers to avoid telephone contact with the trader for fear of incurring excessive costs. This, in turn, could discourage consumers not only from discussing the details of their purchase, but also from asserting their contractual rights or seeking legal remedies. Article 21 CRD would thus lose its effectiveness if the protection of the consumer from premium call rates depended on whether or not the trader receives part of the charges paid. 

Legislative history 

Advocate-General also paid some attention to the historical evolution of the interpreted provision. He referred to the amendments proposed by the European Parliament and, assertedly, accepted by co-legislators as well as to the DG Justice Guidance Document. Based on this analysis, the AG concluded that the aim of EU legislature was to protect consumers from additional or excessive communication costs. An interpretation to the effect that the concept of ‘basic rate’ covers all costs of the telecommunications service, irrespective of the amount of these costs, would contradict these objectives. 

Final remark 

Attention of the reader should finally be drawn to the following statement in the AG's opinion: "it is clear from the general scheme of the directive that there is an irrebuttable presumption that the telephone assistance service is included in the parties’ expectations and therefore in the price already paid by the consumer. The use of a premium rate number would amount to making the consumer pay additional costs for the same service" (para 37). This argument appears rather tenuous. Reference to the price already paid by the consumer implies the internalisation of costs by the trader and could, in fact, support the contested German interpretation, according to which the (lack of) profit made by trader remains of relevance to the assessment. Overall, however, the pro-consumer interpretation of Article 21 CRD presented by Advocate-General Szpunar is well justified on other grounds and as such should be welcomed. 

Tuesday, 15 November 2016

Complex pricing in TV and other adverts - CJEU in Canal Digital Danmark (C-611/14)

Clearing up our backlog, on 26 October 2016 the CJEU issued a judgement on the interpretation of Art. 6 and 7 of the Unfair Commercial Practices Directive in the case Canal Digital Danmark (C-611/14).

Canal Digital provides television services to consumers in Denmark, offering them various TV packages. In many of its advertisements in 2009 promoting various TV subscriptions it could have confused consumers as to the real price for its services, considering that it separately showed the monthly price (made more visible by e.g. the use of a bigger font) and the additional six-month 'card service' charge and the full commitment period price (for one year). The last two prices were showed in smaller font, often in white against a light background, at the bottom of the advert, with consumer attention likely being drawn to the monthly price.

Misleading omission and disclosure medium 
The CJEU refers to the requirements of Art. 7(1) and (3) of the UCPD to determine whether a particular information should have been provided to consumers in order not to mislead them. It is, therefore, necessary to consider what method of communication has been used to convey information to consumers, as it could have placed limitations of time and space.  If this is the case, it is necessary to consider whether and what other means trader has used to convey material information to consumers. (par. 35) Art. 7(4) UCPD contains an exhaustive list of material information that has to be provided to consumers when inviting them to purchase, but even if all this information is provided, this does not exclude that this invitation to purchase would be considered as a misleading commercial practices either under art. 6(1) or art. 7(2) UCPD. (par. 71) It seems that the Court suggests that e.g. despite the price being a material information that needs to be provided, it could still be given to consumers in a misleading way if e.g. an important element of this price would not be mentioned or would be confusingly or in an unclear way mentioned, as in this particular case.
In case of TV adverts, consumers  cannot demand the same level of detail as with some other advertisements, and are also given a limited time to assess this information. (par. 60) If not all material information could be provided, commercial information could mention only some of it and the rest could be placed on the website. It is for the national court to ascertain what measures has the trader taken to provide material information to consumers, but it could be considered a misleading omission if the trader splits the price into two elements and only makes one of them visible in marketing materials, if this causes consumers to take transactional decisions, they would not have otherwise taken (par. 64).

Misleading pricing
Could it be consider misleading if the trader chooses a pricing strategy for a subscription that splits the charge into a monthly and six-monthly components, with only the monthly charge being highlighted in marketing, and the six-monthly charge either omitted or inconspicuously presented? Yes, as this would be likely to give average consumers false impression of a favourable price, contributing to consumers taking transactional decisions they otherwise would not have taken, which is for the national court to ascertain (but the CJEU suggests a positive answer to this test referring to the price as a determining factor in the mind of an average consumer - par. 46; esp. if the omitted price component was a significant part of the price - par. 47). The CJEU mentions that offers of TV service providers are often highly structured, both in terms of cost and content - "resulting in a significant asymmetry of information that is likely to confuse consumers." (par.41) Interestingly, for the test of misleading action, contrary to misleading omission, there is no exception made in the UCPD based on the advertisement being made through a limited as to time or space communication medium (par. 42).

If it talks like a seller... - CJEU in Wathelet (C-149/15)

Last week the CJEU also issued a judgement in the Wathelet case (C-149/15) concerning interpretation of the Consumer Sales Directive (CSD) with regard to a sale of a second-hand vehicle in Belgium.

Ms Wathelet has purchased a second-hand vehicle for 4.000 Euro as a consumer from a professional garage and did not obtain any receipt, proof of payment or a sales invoice for this purchase. The garage paid for the roadworthiness test, while Ms Wathelet paid for the registration of the vehicle. The car has promptly broke down, before the consumer received the invoice for the purchase. The garage found that the fault was with the engine and charged Ms Wathelet for 2.000 Euro for its repair. She has refused to pay this repair price, claiming that the garage as the seller of the vehicle was responsible for this fault. At this point, Ms Wathelet was informed that the garage has never owned the car and has sold it on behalf of Ms Donckels, another consumer. Ms Donckels has, however, never received the full purchase price, as the garage withheld 800 Euro to credit repairs that have been conducted on the vehicle. The garage sent then a letter to Ms Wathelet, confirming its capacity as an intermediary, stating that the engine failure is an 'ordinary risk' when buying a second-hand car from another consumer, and attached an invoice for the purchase price of 4.000 Euro on which it was handwritten that Ms Donckels was the seller. The invoice only had the signature of Ms Donckels. The garage refused to return the car until the repair price of 2.000 Euro is paid in full and brought proceedings against Ms Wathelet for payment of this invoice. Ms Wathelet counter-claimed demanding termination of the contract of sale and damages.

The Court of Appeal in Liege, Belgium, finds that there is strong evidence that Ms Wathelet was never informed that it was a private sale and, therefore, asks the CJEU whether the notion of a 'seller' encompasses not only professional traders who transfer ownership of consumer goods to consumers, but also traders acting as intermediaries for private parties, and whether the answer would differ depending on whether they are remunerated for their services and whether the consumer was informed of the fact that the sale was a C2C sale.

The CJEU first determines that the notion of the seller should be interpreted autonomously for the purposes of the Consumer Sales Directive, considering its objectives. The notion does not cover intermediaries (par. 33), however, that does not mean that it could not cover traders who act as intermediaries (regardless of whether they are remunerated for their services - see par. 43) but present themselves as professional sellers to consumers, giving consumers false impression that they are concluding a B2C contract (par. 34). The CJEU states that literal interpretation of art. 1(2)(c) of CSD does not prevent such an interpretation, teleological arguments - supporting high level of consumer protection - strengthen it (par. 35-36). It is essential for consumers to know the identity of the seller, and whether it is a professional party, as they will only have remedies for non-conformity of the purchased goods from a professional seller under CSD (par. 37). The consumer should have, therefore, been informed that the owner was a private individual, eliminating information imbalance between the parties. (par. 39-40)

"Therefore, in circumstances such as those at issue in the main proceedings, in which the consumer can easily be misled in the light of the conditions in which the sale is carried out, it is necessary to afford the latter enhanced protection. Therefore, the seller’s liability, in accordance with Directive 1999/44, must be capable of being imposed on an intermediary who, by addressing the consumer, creates a likelihood of confusion in the mind of the latter, leading him to believe in its capacity as owner of the goods sold." (par. 41)

"...The degree of participation and the amount of effort employed by the intermediary in the sale, the circumstances in which the goods were presented to the consumer and the latter’s behaviour may, in particular, be relevant in that regard in order to determine whether the consumer could have understood that the intermediary was acting on behalf of a private individual." (par. 44)