HUMB60071 EU Law III Directive on Unfair Commercial Practises

7/31/2019 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 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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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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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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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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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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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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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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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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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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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



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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)



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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



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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.



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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



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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



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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)



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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



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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



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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



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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



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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.



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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


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


Black List


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Black List


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


Black List


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Black List


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


Black List


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Black List


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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Advertising to children

Asking children to persuade their parents to buy

see No. 28


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

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HUMB60071 EU Law III Directive on Unfair Commercial Practises

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