Who: European Commission
Where: European Union
When: 25 May 2016
Law stated as at: 7 June 2016
The European Commission has revised its guidance on the Unfair Commercial Practices Directive (2005/29/EC) (“UCPD”) which was implemented in the UK by the Consumer Protection from Unfair Trading Regulations (SI 2008/1277) (“CPUT). The UCPD is the main source of rules which govern advertising, including those in the CAP and BCAP Codes.
The new guidance forms part of the EC’s Digital Single Market Strategy. The guidance is wide ranging and covers topics such as the interaction between the UCPD and other EU law and the application of UCPD to financial services and the travel and transport sectors. Perhaps most importantly for marketers, the EC uses this new publication to give guidance on how the UCPD applies to online platforms and the interaction between the UCPD and the intermediary exemption under the e-Commerce Directive and this article concentrates on this aspect of the guidance.
UCPD guidance on online platforms
The EC has clarified how to assess whether the UCPD applies to an online platform.
Firstly the platform provider must qualify as a “trader” for the UCPD to apply. A trader is a natural or legal person acting for purposes related to his trade and, in relation to online platforms, a provider may be classified as a trader if it charges commission on transactions between suppliers and users on its platform, it provides paid for services or obtains revenue from targeted advertising.
Secondly the trader must engage in business to consumer commercial practices.
The guidance goes onto clarify the relationship between the UCPD and the intermediary exemption under the e-Commerce Directive. Under the e-Commerce Directive an intermediary providing hosting services is not liable for illegal information stored on it provided that it does not have actual knowledge of the illegal information and, when notified, acts quickly to remove it.
The new guidance states that, if the online platform is considered a trader and the UCPD therefore applies, then it must act with a degree of professional diligence and not mislead its consumers either through action or inaction. An online platform should introduce procedures to ensure that it complies with these principles, including:
- Introducing a mechanism to the platform to enable third party traders to indicate that they act as traders;
- Informing consumers that they only benefit from EU consumer laws when they contract with traders; and
- Developing the platform so that the traders can present information to consumers in a way that is compliant with the UCPD.
The guidance goes onto discuss specific points to note in relation to different types of online platform, namely:
- E-commerce platforms (marketplaces) – the guidance states that there can be difficulty in ascertaining who is responsible for non-conforming goods and non-delivery. The EC has reinforced that the responsibility lies with the seller (i.e. the entity with which the consumer contracts). However, to comply with the UCPD, online platform providers who are traders should make it clear to consumers who will be the contracting party and that the consumer will only benefit from EC consumer law if they contract with suppliers who are acting as a trader (rather than consumers). In addition e-commerce platform providers should take care not to mislead consumers by allowing brand name keywords to be used as this can be deceptive in relation to the identity of the trader offering the goods.
- Collaborative economy platforms. The EC states that it will adapt a Communication on the Collaborative economy in June 2016 and that this will include guidance on how the UCPD applies to the collaborative economy business model. The guidance does stress that collaborative economic platform providers should enable relevant third party traders to inform users that they are traders. The platform providers should also inform consumers of any criteria used to select the third party suppliers operating on the platform and of any checks that it performs on such third parties.
- Search engines. The EC states that consumers expect search engines to display “natural” results. Although the UCPD does not prohibit paid-for search results or ranking, search engine providers should enable consumers to clearly differentiate paid for results from natural search results as failure to do so will put the search engine provider in breach of the UCPD.
- Comparison tools. The guidance states that comparison tool platforms will be assessed on a case by case basis as to whether they comply with the UCPD and matters which will be considered during the assessment include the coverage of the comparison (for example the number of traders), the criteria applied when making the comparison and the frequency of updates. Other key points are that when making claims about “best” deals, the platform provider must state the criteria applied and where good or services compared are not identical then this should be made clear to the consumers.
- User review tools. The guidance clarifies that the UCPD will apply to many user review tools if they qualify as traders. The guidance states that the platform must not mislead consumers as to the origin of the review and should not suggest that they come from “real” users unless they are able to verify this. Verification could include technical means (e.g. requiring reviewers to register), checking the IP address used to submit the review and requiring additional information from the reviewer (e.g. a booking number). In addition user review platform providers should either display all reviews, good and bad, or clearly inform consumers if they do not post all relevant reviews.
- Social media. The guidance states that social media platforms can qualify as traders and should take care with facilitating and selling paid “likes”, unfair contract terms and presenting the social media as “free” when the platform requires consumers to exchange their personal information in order to access the information.
The guidance also comments on various pricing practices and the impact of the UCPD. As an overall comment, the guidance states that traders have freedom to determine prices but consumers must be informed and not mislead on how they are calculated.
The guidance states that dynamic pricing could be defined as unfair under UCPD if, for example, the price is increased after the product has been placed in a shopping basket. In addition there is a general prohibition against price discrimination.
Why this matters:
The UCPD is of crucial important to marketers and advertisers, not only in the UK but also within Europe as a whole. As such, this update guidance will give marketers and advertisers some useful pointers and interpretations of this important legislation.