UNFAIR COMMERCIAL PRACTICE Marko Baretić Faculty of Law University of Zagreb

UNFAIR COMMERCIAL UNFAIR COMMERCIAL PRACTICEPRACTICE

Marko BaretićMarko Baretić

Faculty of LawFaculty of Law

University of ZagrebUniversity of Zagreb

DEVELOPMENTDEVELOPMENT

Directive 84/450/EEC on misleading Directive 84/450/EEC on misleading advertisingadvertising

Directive 97/55/EC amending Directive 97/55/EC amending Directive 84/450/EEC to include Directive 84/450/EEC to include comparative advertisingcomparative advertising

Directive 2005/29/EC (unfair Directive 2005/29/EC (unfair commercial practice)commercial practice)

Directive 2006/114/EC on misleading Directive 2006/114/EC on misleading and comparative advertisingand comparative advertising

MAIN CHARASTRISTICSMAIN CHARASTRISTICS Innovative rulesInnovative rules

• CONCEPTUALY, IN TERMS OF CONTENT, CONCEPTUALY, IN TERMS OF CONTENT, TERMINOLOGY AND STILE – EXTREMELY TERMINOLOGY AND STILE – EXTREMELY COMPLEX REGULATIONCOMPLEX REGULATION

State imposed rules – part of a legal State imposed rules – part of a legal systemsystem

Horizontal rulesHorizontal rules Public law rules – market regulationPublic law rules – market regulation Rules with preventive functionRules with preventive function General rulesGeneral rules

INNOVATIVE CONCEPTINNOVATIVE CONCEPT

New concept of regulation aiming at New concept of regulation aiming at creating:creating:• an overall regulationan overall regulation

Horizontal rulesHorizontal rules

• an all-European autonomous regulationan all-European autonomous regulation which departs from well-established national which departs from well-established national

concepts of unfair practices regulationconcepts of unfair practices regulation autonomous terminologyautonomous terminology

• Inescapable and “future-proof” Inescapable and “future-proof” regulationregulation

STATE IMPOSED RULESSTATE IMPOSED RULES Regulation of unfair commercial practices:Regulation of unfair commercial practices:

• VoluntaryVoluntary Industry levelIndustry level Commercial community levelCommercial community level

• Mandatory Mandatory National levelNational level Supranational levelSupranational level

Directive 2005/29/EEC is aimed at creating Directive 2005/29/EEC is aimed at creating mandatory public law rules (state imposed mandatory public law rules (state imposed rules), at the European levelrules), at the European level• These rules are without prejudice to voluntary These rules are without prejudice to voluntary

rules (deontological codes of conduct) of rules (deontological codes of conduct) of regulated professionsregulated professions

HORIZONTAL RULESHORIZONTAL RULES

Rules of the Directive 2005/29/EC apply to:Rules of the Directive 2005/29/EC apply to: every productevery product every serviceevery service every commercial sectorevery commercial sector eevery industry sector very industry sector eevery type of practicevery type of practice eevery type of communicationvery type of communication eevery mode of trading very mode of trading

PREVENTIVE RULESPREVENTIVE RULES

Rules aimed at preventing traders from Rules aimed at preventing traders from using unfair commercial practicesusing unfair commercial practices

Irrelevant whether the practice have Irrelevant whether the practice have caused any harm to any consumer or caused any harm to any consumer or whether it actually caused any consumer whether it actually caused any consumer to take wrong transactional decisionto take wrong transactional decision• The possibility to ban even the practice which The possibility to ban even the practice which

is likelyis likely to materially distort economic to materially distort economic behaviour of consumersbehaviour of consumers

GENERAL RULESGENERAL RULES

Rules embodied in the Directive Rules embodied in the Directive 2005/29/EEC should apply only if 2005/29/EEC should apply only if there are no specific community there are no specific community rules on unfair commercial practicerules on unfair commercial practice• In the case of conflict between the In the case of conflict between the

provisions of this Directive and other provisions of this Directive and other Community rules regarding specific Community rules regarding specific aspects of unfair commercial practices, aspects of unfair commercial practices, the latter shall prevail and apply to the latter shall prevail and apply to those specific aspects.those specific aspects. (Art. 3/4) (Art. 3/4)

AUTONOMOUS EUROPEAN AUTONOMOUS EUROPEAN REGULATIONREGULATION

New type of regulation which should by applied and New type of regulation which should by applied and interpreted autonomously, without recourse to national interpreted autonomously, without recourse to national legislation, national concepts, national traditionlegislation, national concepts, national tradition

To that purpose To that purpose • autonomous terminologyautonomous terminology

Consumer, trader, productConsumer, trader, product B2C commercial practicesB2C commercial practices ““to materially distort the economic behaviour of to materially distort the economic behaviour of

consumers”consumers” Professional diligenceProfessional diligence Invitation to purchaseInvitation to purchase Undue influenceUndue influence Transactional decisionTransactional decision Average consumer Average consumer

• Autonomous concept of unfairness of commercial Autonomous concept of unfairness of commercial practicespractices

DEFINITION OF UNFAIR DEFINITION OF UNFAIR COMMERCIAL PRACTICECOMMERCIAL PRACTICE

Autonomous definitionAutonomous definition Inescapable and “future-proof” Inescapable and “future-proof”

definitiondefinition Conceptually complex definitionConceptually complex definition

• Three levels of definitionThree levels of definition GENERALGENERAL GENERICGENERIC SPECIFIC (CASUISTIC)SPECIFIC (CASUISTIC)

DEFINITION – GENERAL LEVELDEFINITION – GENERAL LEVEL

A commercial practice is unfair if:A commercial practice is unfair if:• It is contrary to the requirements of It is contrary to the requirements of

professional diligenceprofessional diligence• It materially distorts or is likely to materially It materially distorts or is likely to materially

distort the economic behaviour with regard to distort the economic behaviour with regard to the product of the average consumer whom it the product of the average consumer whom it reaches or to whom it is addressed, or of the reaches or to whom it is addressed, or of the average member of the group when a average member of the group when a commercial practice is directed to a particular commercial practice is directed to a particular group of consumersgroup of consumers


Four elements of the general level of Four elements of the general level of the definitionthe definition• Commercial practiceCommercial practice• Practice contrary to the requirements of Practice contrary to the requirements of

professional diligenceprofessional diligence• Material distortion of the economic Material distortion of the economic

behaviour of consumerbehaviour of consumer• An average consumerAn average consumer


Commercial practiceCommercial practice

Any act, omission, course of conduct or Any act, omission, course of conduct or representation, commercial communication representation, commercial communication including advertising and marketing, including advertising and marketing, by a by a tradertrader, , directly connecteddirectly connected with the with the promotion, sale or supply of a product promotion, sale or supply of a product to a to a consumersconsumers


Practice contrary to the requirements of Practice contrary to the requirements of professional diligenceprofessional diligence

Professional diligence – the standard of Professional diligence – the standard of special skill and care which a trader may special skill and care which a trader may reasonably be expected to exercise towards reasonably be expected to exercise towards consumers, commensurate with honest consumers, commensurate with honest market practice and/or general principle of market practice and/or general principle of good faith in the trader’s field of activitygood faith in the trader’s field of activity


Material distortion of the economic behaviour of Material distortion of the economic behaviour of consumerconsumer

To materially distort the To materially distort the economic behavioureconomic behaviour of of consumers’ means using a commercial practice to consumers’ means using a commercial practice to appreciably impair the consumer’s ability to make an appreciably impair the consumer’s ability to make an informed decision, thereby causing the consumer to informed decision, thereby causing the consumer to take a transactional decision that he would not have take a transactional decision that he would not have taken otherwisetaken otherwise

Transactional decision means any decision taken by a Transactional decision means any decision taken by a consumer concerning whether, how and on what consumer concerning whether, how and on what terms to purchase, make payment in whole or in part terms to purchase, make payment in whole or in part for, retain or dispose of a product or to exercise a for, retain or dispose of a product or to exercise a contractual right in relation to the product, whether contractual right in relation to the product, whether the consumer decides to act or to refrain from acting the consumer decides to act or to refrain from acting


Material distortion of the economic Material distortion of the economic behaviour of consumerbehaviour of consumer• This rule is without prejudice to the common This rule is without prejudice to the common

and legitimate advertising practice of making and legitimate advertising practice of making exaggerated statements exaggerated statements

• Gillette – the best for the menGillette – the best for the men or statements which are not meant to be taken or statements which are not meant to be taken

literallyliterally• Red Bull – gives you the wings Red Bull – gives you the wings


The concept of average consumerThe concept of average consumer• Abstract conceptAbstract concept• Objective evaluationObjective evaluation

To be evaluated in accordance with the To be evaluated in accordance with the interpretations of the ECJinterpretations of the ECJ

A consumer who is reasonably well-informed and A consumer who is reasonably well-informed and reasonably observant and circumspect, taking into reasonably observant and circumspect, taking into account social, cultural and linguistic factors (18 of account social, cultural and linguistic factors (18 of the Preamble) the Preamble)

• To be determined with regardTo be determined with regard The consumers whom the practice reachesThe consumers whom the practice reaches The consumers to whom the practice is addressedThe consumers to whom the practice is addressed The consumers who are average member of the The consumers who are average member of the

group to which the practice is directed group to which the practice is directed

DEFINITION – GENERIC LEVELDEFINITION – GENERIC LEVEL

Formed on the basis of past Formed on the basis of past experience with unfair practicesexperience with unfair practices

Two types of unfair practicesTwo types of unfair practices• Misleading commercial practicesMisleading commercial practices• Aggressive commercial practicesAggressive commercial practices

Ill-adapted to changes of commercial Ill-adapted to changes of commercial practicepractice


Misleading commercial practiceMisleading commercial practice• Misleading actions Misleading actions

If it contains false information and is therefore If it contains false information and is therefore untruthful or in any other way deceives or is likely to untruthful or in any other way deceives or is likely to deceive the average consumer, even if the deceive the average consumer, even if the information is factually correctinformation is factually correct

• Misleading omissionsMisleading omissions If it omits material information that the average If it omits material information that the average

consumer needs, which makes him to take consumer needs, which makes him to take transactional decision that he would not have taken transactional decision that he would not have taken otherwiseotherwise

• Account shall be taken of all features of practice and Account shall be taken of all features of practice and circumstances including the limitations of the circumstances including the limitations of the communication mediumcommunication medium


Aggressive commercial practicesAggressive commercial practices• If it by harassment, coercion and undue influence it If it by harassment, coercion and undue influence it

significantly impairs or is likely to significantly impair the significantly impairs or is likely to significantly impair the average consumer’s freedom of choice or conduct with regard average consumer’s freedom of choice or conduct with regard to the product and thereby causes him or is likely to cause him to the product and thereby causes him or is likely to cause him to take a transactional decision he would not have taken to take a transactional decision he would not have taken otherwiseotherwise

Use of harassment, coercion and undue influence in Use of harassment, coercion and undue influence in practice – shall be determined taking into account:practice – shall be determined taking into account:• timing, location, nature and persistence timing, location, nature and persistence • the use of threatening or abusive language or behaviourthe use of threatening or abusive language or behaviour• the exploitation by the trader of any specific misfortunethe exploitation by the trader of any specific misfortune• onerous or disproportionate non-contractual barriers imposed onerous or disproportionate non-contractual barriers imposed

by the trader where a consumer wishes to exercise rights by the trader where a consumer wishes to exercise rights under the contractunder the contract

• any threat to take any action that cannot legally be taken any threat to take any action that cannot legally be taken

DEFINITION – SPECIFIC LEVELDEFINITION – SPECIFIC LEVEL

Black list of Black list of Misleading commercial practicesMisleading commercial practices

• Claiming to be a signatory of conduct when the trader is notClaiming to be a signatory of conduct when the trader is not• Claiming that the trader is about to cease trading or move Claiming that the trader is about to cease trading or move

premises when he is notpremises when he is not• Falsely claiming that a product is able to cure illnesses, Falsely claiming that a product is able to cure illnesses,

dysfunction or malformationsdysfunction or malformations• ……

Aggressive commercial practicesAggressive commercial practices• Creating the impression that the consumer cannot leave the Creating the impression that the consumer cannot leave the

premises until a contract is formedpremises until a contract is formed• Conducting personal visits to the consumer’s home ignoring Conducting personal visits to the consumer’s home ignoring

the consumer’s the consumer’s request request to leaveto leave• Explicitly informing a consumer that if he does not buy the Explicitly informing a consumer that if he does not buy the

product or service, the trader’s job or livelihood will be in product or service, the trader’s job or livelihood will be in jeopardyjeopardy

• ……

PROHIBITION OF UNFAIR PROHIBITION OF UNFAIR COMMERCIAL PRACTICECOMMERCIAL PRACTICE

Unfair commercial practices shall be Unfair commercial practices shall be prohibitedprohibited

EnforcementEnforcement• Collective protection of consumersCollective protection of consumers

civil or administrative proceedingscivil or administrative proceedings

• Penalties for infringementsPenalties for infringements must be effective, proportionate and must be effective, proportionate and

dissuasivedissuasive

Documents

UNFAIR COMMERCIAL PRACTICE Marko Baretić Faculty of Law University of Zagreb