humb60071 eu law iii directive on unfair commercial practises
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Lecture
European Law of Unfair Competition:EU, Germany, and other selected
Member StatesWinter Semester 2011/2012
Humboldt-University, Berlin
Prof. Dr. Jan Bernd Nordemann, LL.M.
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Directive 2005/29/EC
on Unfair Commercial Practices
Until implementation of the Directive, Member States have their own, diverging
law on unfair competition practices:
- discrepancies between Member States
- consumers unsure about their rights in cross-border transactions
- consumers do not take advantage of the European Internal Market
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Directive 2005/29/EC
on Unfair Commercial Practices
Directive enables harmonization of unfair trading laws in all Member States and
brings mutual recognition
- clarification of consumers rights
- simplification of cross-border trade
- efficient control is of advantage for legitimate business
- scope of protection: economic interests of consumers; EU and MemberState rules concerning health or safety aspects of products, intellectual
property rights, contract law, competition law are not affected (Rec. 8),
e.g. no liberalization of national restrictions on advertising of certain
products, such as alcoholic beverages, food high in fat, sugar or salt to
children, as far as based on health concerns and proportionate
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Directive 2005/29/EC
on Unfair Commercial Practices
Member States are allowed to continue to ban commercial practices
for reasons of taste and decency, even if they do not limit theconsumers freedom of choice (Rec. 7), e.g. advertising showing
topless women may be prohibited on national level for reasons such as
human dignity, taste and decency
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Example
Alcoholic beverages labelled Tit Gripper or Slip StrikerNot illegal due to a potential to influence consumers decision to buy on a
relevant scale (average consumer = reasonably well-informed and
reasonably observant and circumspect)
Prohibition under German law as molesting the consumer due to reasonsof human dignity, taste and decency
See BGH GRUR 1995, 592, 594 Busengrapscher
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Example
Advertisement by clothing retailerBennetton (Shocking Advertisements)
Unfair competition under German lawheld by:
OLG Frankfurt GRUR 1993, 130- Benetton-Werbung
BGH GRUR 1995, 600 f.- HIV Positive
BGH GRUR 2002, 360- HIV Positive II: Breach of rightto human dignity
Fair competition due to freedom ofspeech
German Constitutional Court(BVerfG) GRUR 2001, 170, 172- Schockwerbung
BVerfG GRUR 2003, 442- Benetton-Werbung II
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Directive 2005/29/EC
on Unfair Commercial Practices
amends amongst others, as far as business-to-consumer relation is
concerned: Dir. 84/450/EEC (misleading advertisement, now Directive2006/114/EC), 97/7/EC (protection of consumers in relation to distance
contracts) and 2002/65/EC (distance selling of financial services); e.g.
scope of Dir. 84/450/EEC is limited in B2C scenarios to advertising
without potential to influence consumers decisions on a relevant scale
Example: illegal comparative advertisement due to denigration
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Directive 2005/29/EC
on Unfair Commercial Practices
adopted on 11 May 2005
published in Official Journal on 11 June 2005 (OJ L 149, 11.06.2005),
entry into force: 12 June 2005
implementation of legislation at national level by 12 June 2007 at the
latest (Art. 19); in Germany: implementation in 2008
application across the EU by 12 December 2007 at the latest (Art. 19)
however until at least 12 June 2010 Member States may continue to
apply more protective national rules deriving from European Directives
if necessary and proportionate (maximum harmonization), Art. 3 (5)
See http://ec.europa.eu/consumers/rights/ for overview on national
implementation
http://ec.europa.eu/consumers/rights/http://ec.europa.eu/consumers/rights/ -
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Directive 2005/29/EC
on Unfair Commercial Practices
Scope of application, Art. 3 (1):
business-to-consumer commercial practices
personal scope of application practical scope of application
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Directive on Unfair Commercial Practices
Scope of application, Art. 3 (1): business-to-consumer
personal scope of application definition of consumer in Art. 2 (a):
any natural person who, in commercial practice covered by the
Directive, is acting for purposes which are outside his trade, business or
profession
enforcement by persons and organizations with legitimate legal interest in
combating unfair commercial practices, including competitors
Art. 11 (1): Directive does not apply to business-to-business transactions
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Directive on Unfair Commercial Practices
commercial practices: practical scope of application
definition in Art. 2 (d):
any act, omission, course of conduct or representation, commercial
communication including advertising and marketing, by a trader, directly
connected with the promotion, sale or supply of a product to consumers
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Directive on Unfair Commercial Practices
this includes commercial practices before, during and after conclusion of
contractual relationship
Example for commercial practices afterconclusion of the contractual
relationship:
See Black List No. 27: Requiring a consumer who wishes to claim on an insurance policy
to produce documents which could not reasonably be considered
relevant as to whether the claim was valid, or failing systematically
to respond to pertinent correspondence, in order to dissuade aconsumer from exercising his contractual rights.
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Directive on Unfair Commercial Practices
no requirement of subjective element such as intent of trade promotion
But: necessary that directly connected with the promotion, sale or supply of aproduct to consumers.
Such a direct connection is questionable in the following scenarios:
Editorial publications in the press, on TV, on the internet or in other media;but not: advertisements in such media
Products tests by consumer organizations; but not: organization paid by
product manufacturer for test
Scientific works, e.g. journal articles by scientists; but not: articles paid byindustry
Public administration, in case they fulfill their public duties
Di ti U f i C i l P ti
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Directive on Unfair Commercial Practices:
Structure
Structure of the Directive:
I. General prohibition on unfair commercial practices, Art. 5 (1)
II. Particular unfair commercial practices, Art. 5 (4)
1. Misleading commercial practices, Section 1 (Art. 6, 7)
Misleading actions, Art. 6
Misleading omissions, Art. 7
2. Aggressive commercial practices, Section 2 (Art. 8, 9 )
III. Black list, Annex 1
Enumeration of certain misleading and aggressive practices which are in all circumstances
regarded as unfair
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Directive on Unfair Commercial Practices
General clause, Art. 5 (1):
General prohibition on unfair business-to-consumer commercial practices, Art.
5 (1) and Art. 3 (1)
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Directive on Unfair Commercial Practices
Legal requirements for unfairness, Art. 5 (2)
a) commercial practice is contrary to the requirements of professional diligence
professional diligence is the standard of special skill and care which a trader may reasonable be
expected to exercise towards consumers, commensurate with honest market practice and/or the
general principle of good faith in the traders field of activity, Art. 2 (h)
concept of professional diligence mirrors the concept of honest market practice and good
faith
corresponds to the notion of good business conduct
and
b) the practice is at least likely to materially distort the economic behavior of average consumer
targeted
criteria to materially distort the economic behavior of average consumer means using a
commercial practice to appreciably impair the consumers ability to make an informed decision,
thereby causing the consumer to take a transactional decision that he would not have taken, Art. 2
(e)
Example CJEU Plus
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Example CJEU Plus
Warenhandelsgesellschaft
Example for a national not in line with Art. 5 (2) lit. b)
4 No. 6 German Act on Unfair Competition: Prohibition to link the buying of
good or service to the possibility for consumers to take part in a price draw by
the manufacturer of the product
CJEU 2010 Plus Warenhandelsgesellschaft:
German law may not declare such linking illegal irrespective of any
appreciably impediment of such a linking to the consumers decision tobuy the product
Such a potential relevant influence may not be regarded in any case of
such linking
Example CJEU Plus
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Example CJEU Plus
Warenhandelsgesellschaft
Directive on Unfair Commercial Practices:
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Directive on Unfair Commercial Practices:
Average Consumer
Assessment in the light of the average consumer, Art. 5 (2) (b)
in accordance with the CJEU, the average consumer is reasonablywell-informed and reasonably observant and circumspect, taking
into account social, cultural and linguistic factors (Rec. 18)
if commercial practice is directed at particular group of consumers,then average member of that group is benchmark for the assessment
of fairness/unfairness, Art. 5 (2) (b)
Directive on Unfair Commercial Practices:
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Directive on Unfair Commercial Practices:
Average Consumer
Vulnerable consumer groups: Commercial practices which are likely to
materially distort the economic behavior of only one clearly identifiable
group of consumers who are particularly vulnerable to the practice orthe product because of their mental or physical infirmity, age or
credulity (e.g. children or the elderly) in a way that the trader could
reasonably foresee, shall be assessed from the perspective of the
average of that group, Art. 5 (3)
Average consumer test is no statistical test; national courts and
authorities will have to exercise own judgment to determine typical
reaction of a reasonable consumer in a given case
Directive on Unfair Commercial Practices:
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Directive on Unfair Commercial Practices:
Misleading Action (Art. 6)
Misleading actions in commercial practices, Art. 6
An action is misleading if it:
contains false information and is therefore untruthful, or
in any way, including overall presentation, deceives or is likely to
deceive the average consumer in relation to one or more elementslisted in Art. 6 (1) (a)-(g), even if the information is correct
and
causes or is likely to cause the average consumer to take a
transactional decision that he would not have taken otherwise.
Directive on Unfair Commercial Practices:
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Directive on Unfair Commercial Practices:
Misleading Action (Art. 6)
Criteria are objective, so that no need to prove that consumer was
actually mislead;
possibility of deception is sufficient for misleading character, if the
other elements are present:
proof of financial loss not required
Directive on Unfair Commercial Practices:
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Directive on Unfair Commercial Practices:
Misleading Omissions (Art. 7)
Misleading omissions in commercial practice, Art. 7
It is misleading to:
omit material information that the average consumer needs, according
to the context, to take an informed transactional decision,
hide or provide material information in an unclear, unintelligible,
ambiguous or untimely manner,
fail to identify the commercial intent of the commercial practice if not
already apparent from the context
Directive on Unfair Commercial Practices:
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Directive on Unfair Commercial Practices:
Misleading Omissions (Art. 7)
Misleading omissions in commercial practices, Art. 7
The effect of the commercial practice has to be considered in itsentirety, including the presentation;
obscure presentation is equivalent to an omission to inform;
material information is not listed in Directive, Annex II contains non-
exhaustive list of EU provisions containing material informationrequirements;
limitations of space or time due to the medium used to communicate
the commercial practice, have to be taken into account;
in the case of invitations to purchase (as defined in Art. 2 (i)), alimited umber of core information items are listed, Art. 7 (4) (a)-(e)
Directive on Unfair Commercial Practices:
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Misleading Omissions
BGH GRUR 1999, 1122 EG-Neuwagen I
- A car retailer importing its car fromanother member state of the EU,guarantee has already started torun due to registration of the car inthat other member state
- BGH: No misleading omission ifnot mentioned in case thedifference in time for theguarantee is not greater than 2weeks compared to cars bought
with the original guarantee- Arg: creation of single Europeanmarket and the free movement ofgoods (Art. 28 EC) allows for amore generous application ofunfair competition law
Directive on Unfair Commercial Practices:
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Misleading Omissions
BGH GRUR 1999, 1125 EG-Neuwagen II
- Car retailer advertising cars with one dayregistration (Tageszulassung), importedfrom another EU member state, but thesecars do not have the same standardequipment as cars initially marketed inGermany, i.e. no passenger airbag and noseparable backseat, retailer did not mentionEU import and difference in standard
equipment- BGH: no misleading omission, as not self-
evident equipment and information giventhat one day registration
- Arg: creation of single European market andthe free movement of goods (Art. 28 EC)allows for a more generous application ofunfair competition law
- But: if standard equipment is missing whichconsumer sees as self-evident (to gowithout saying) to be included, then retailermust give this information to consumer
Directive on Unfair Commercial Practices:
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Aggressive Commercial Practices (Art. 8, 9)
Aggressive commercial practices, Art. 8, 9
Regulation of aggressive commercial practices is new at EU level
Directive on Unfair Commercial Practices:
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Aggressive Commercial Practices (Art. 8, 9)
Aggressive commercial practices, Art. 8, 9
A commercial practice is considered aggressive if is at least likely tosignificantly impair the average consumers freedom of choice and
conduct, Art. 8
Directive on Unfair Commercial Practices:
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Aggressive Commercial Practices (Art. 8, 9)
Aggressive commercial practices, Art. 9
Art. 9 of the Directive mentions criteria for determination whether a commercial practice
uses harassment,
coercion, including physical force, or
undue influence
Definition of undue influence in Art. 2 (j):
exploiting a position of power in relation to the consumer so as to apply pressure,
even without using or threatening to use physical force, in a way which significantly
limits the consumers ability to make an informed decision
Example for undue influence: consumer is already indebted to a trader and behindwith payments, trader says he will reschedule the debt if consumer buys other
product;
No undue influence is to offer an incentive to consumers, such as shuttle to an out-of-
town store, refreshments while shopping or sales promotion the consumers ability to
make an informed transactional decision is not impaired.
Directive on Unfair Commercial Practices:
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Black List
The Black List, Annex I
Commercial practices mentioned in the Black List are unfair in all
circumstances
No case-to-case assessment against other provisions of the Dir.
Modification of the list exclusively at EU level by revision of the Dir.
Structure:
No. 1 23 misleading commercial practices
No. 24 31 aggressive commercial practices
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Example
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Example
Directive on Unfair Commercial Practices:
Bl k Li
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Black List
The Black List, Annex I Some Examples
No. 22: Falsely representing private activity
Example:
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Example:
Example:
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a p e
Example:
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p
Directive on Unfair Commercial Practices:
Black List
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Black List
The Black List, Annex I Some Examples
No. 7: Falsely stating that a product will only be available for a limitedtime
Advertising: rest of stock; only few items left; in case that storage
room is still full
Directive on Unfair Commercial Practices:
Black List
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Black List
The Black List, Annex I Some Examples
No. 20: Falsely describing a product as free, gratis etc.
Common example: only the free element of a bundle is advertised,
but not the (costly) rest
Examples:
Advertising internet access with 0 telephone fees, but basic fee
has to be paid
Advertising a free gift of 5 books without mentioning a compulsorymembership
Directive on Unfair Commercial Practices:
Black List
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Black List
The Black List, Annex I Some Examples
Creating impression that store may not be left without conclusion ofcontract (see No. 24)
Refusal to leave apartment after instruction to do so (No. 25)
Example
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Examples:
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The Black List, Annex I Some Examples
Advertising to children
Asking children to persuade their parents to buy
see No. 28
Directive on Unfair Commercial Practices:
Enforcement
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Enforcement
Enforcement
No harmonization of enforcement measures on national level; MemberStates have to ensure adequate and effective means to enforce
compliance with the Dir.
In accordance with Dir. 84/450/EEC on misleading and comparativeadvertising