The EU Sales Promotion Regulation may be at death’s door but Europe’s marketers should be wary of its one time stablemate, the Unfair Business to Consumer Commercial Practices Directive. We report on disturbing moves towards this becoming law.
Topic: Consumer Protection
Who: The EU Council of Ministers
When: November 2004
The EU Council of Ministers has given its approval to the latest draft Directive concerning unfair business to consumer commercial practices in the internal market. This Directive was first proposed in October 2001 at the same time as was tabled the draft Sales Promotion Regulation ("SPR").
In its initial version the "Unfair Business to Consumer Commercial Practices" Directive ("UBCPD") made a number of references to the SPR and it was expected that the two would run in parallel through the approval process and be signed off at around the same time.
This was not to be, however, and as things currently stand, the SPR looks to be a dead duck, a high-level debate on the measure at the EU Competitiveness Council due on 25 November 2004 having been indefinitely postponed at the last moment. Things have gone better for the UBCPD, however, and now that it has got over this latest hurdle, it will go back to the European Parliament for a second reading and the hope is that it will be signed off finally in early 2005.
The scheme of the UBCPD is to introduce an umbrella prohibition on "unfair commercial practices" as defined. Then within that blanket prohibition, two particular types of unfair commercial practice ("UCP"), namely "misleading" and "aggressive" UCPs are given special attention and definitions. There is also an annex with particular commercial practices which will automatically be regarded as either misleading or aggressive. Member states are required by the Directive to have local laws in place that forbid and punish all UCP's.
Automatically misleading commercial practices will include:
- claiming that a product has been approved, endorsed or authorised by a public or private body when it has not (this is a new introduction since September 2004);
- displaying a trust mark or equivalent without having obtained the necessary authorisation (again a new provision);
- falsely stating that a product will only be available for a very limited time in order to elicit immediate decisions and deprive the consumer of sufficient opportunity or time to make an informed choice (this sounds interesting);
- using editorial content in the media to promote a product when a trader has paid for the promotion without making it clear in the content or by images (another very interesting one);
- running a prize promotion without awarding the prizes described or a reasonable equivalent (new drafting and again one to watch);
- claiming a product is free, without charge or gratis if the consumer has to pay anything other than the unavoidable cost of responding to the commercial practice and collecting or paying for delivery of the item (again a new piece of drafting).
Automatically aggressive commercial practices will include:
- making persistent or unwanted solicitations by telephone, fax, e-mail or other remote channel;
- including in an advertisement a direct appeal to children to persuade their parents or other adults to buy the advertised products for them; and
- creating the impression that a consumer has already won a prize without needing to make a purchase when in fact the opportunity to win the prize is dependent on the consumer buying a product.
"Average consumer" definition dumped
Another recent change to the UBCPD has been the deletion of the definition of the term "average consumer", which read "a consumer who is reasonably well informed and reasonably observant and circumspect".
The "average consumer" term is key because it appears in the definition of "unfair commercial practice". A commercial practice will be regarded as unfair if it is contrary to the requirements of professional diligence (defined as a "standard of special skill and care which a trader may reasonably be expected to exercise towards consumers, commensurate with honest market practices and/or the general principle of good faith in the trader's field of activity") and it materially distorts the economic behaviour, with regard to the product, of the average consumer whom it reaches or to whom it is addressed or of the average member of the group when a commercial practice is directed to a particular group of consumers.
Given some of these very wordy definitions, the now deleted definition of "average consumer" seemed pretty concise and helpful. Why has it been taken out? We are told that it is because the concept of the average consumer must be allowed to evolve in line with European Court of Justice jurisprudence. However, there is further reference to the term in the preamble to the Directive. This tells us that the average consumer test is not a statistical one and national courts and authorities will have to exercise their own judgement, having regard to European Court of Justice case law, to determine the typical reaction of the average consumer in a given case. Very helpful.
Vulnerable group protected
Another new section in the Directive also requires protective laws where the distorting effect in question may be not on the average consumer but on a particularly vulnerable group because of their mental or physical infirmity, age or credulity in a way which the trader could be reasonably expected to foresee. More protection for children here.
This is without prejudice, however, "to the common and legitimate advertising practice of making exaggerated statements or statements which are not and are not meant to be taken literally".
A historical moment: statutory recognition for advertising puff!
Yet another new section in the UBCPD is a definition of "transactional decisions". This is important because to be a misleading commercial practice, the effect of a false or deceptive communication, whether by omission or otherwise, must be to make the average consumer make a "transactional decision" that he would not have taken otherwise.
"Transactional decision" is defined as any decision taken by a consumer concerning whether, how and on what terms to purchase, make payment in whole or in part, retain or dispose of a product or to exercise a contractual right in relation to the product, whether the consumer decides to act or refrain from acting.
Another amendment recently inserted is the inclusion of the "geographical address of the trader" in the list of disclosures whose omission, subject to the medium being used, may be regarded as rendering the communication in question automatically a misleading commercial practice.
Another potentially significant change introduced in September 2004 was the deletion of a provision specifying that the law of the country where the trader is established is and will always be the applicable law in any dispute. There was concern that consumers could be disadvantaged by this provision, so it has come out and the Courts will have to decide on the basis of the existing law which countries' law should apply in any particular case. Not particularly helpful.
Why this matters:
This development is significant.
If the Directive is approved in early 2005, traders will have until 2007 to prepare for its introduction across the European Union. Whether it will require any changes to current UK law is still unclear and the concern has to be that unlike the SPR, the Directive will introduce yet another layer of red tape when the real rogues will be caught just as easily by existing laws.