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2022 | OriginalPaper | Chapter

6. EU Law on Unfair Commercial Practices

Author : Federico Galli

Published in: Algorithmic Marketing and EU Law on Unfair Commercial Practices

Publisher: Springer International Publishing

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Abstract

This chapter offers an introduction to EU unfair commercial law. The latter is centred around the Unfair Commercial Practices Directive, which prohibits commercial practices which, contrary to the requirements of professional diligence, are likely to distort the economic behaviour of the average consumer. The Directive dates back to 2005, has been applied extensively at the EU and national level, and has been—and currently is—the subject of intense debate among consumer lawyers and policy-makers. Its general scope and technology-neutral approach make it especially suitable for developing a discussion on commercial fairness in algorithmic marketing.

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Henning-Bodewig et al. (2013).

See Keirsbilck (2011) for a comprehensive comparative assessment of “fair trading” legislation before the process of harmonising national fair trading law.

Among these rights were the right to health and safety, the right to protection of economic interests, the right of redress, the right to information and education, and the right to representation (the right to be heard).

Council Resolution of 14 April 1975 on a preliminary programme of the European Economic Community for a consumer protection and information policy: OJ C 92, 25.4.1975, p. 1.

The shift was clearly explained in the programme: “practices which were once regarded in many countries as unfair solely in terms of competition between producers (misleading advertising, for example) are now also considered from the point of view of relations between producers and consumers.”

Unfair advertising was defined as “any advertising which (a) casts discredit on another person by improper reference to his nationality, origin, private life or good name, or (b) injures or is likely to injure the commercial reputation of another person by false statements or defamatory comments concerning his firm, goods or services, or (c) appeals to sentiments of fear, or promotes social or religious discrimination, or (d) clearly infringes the principle of the social, economic and cultural equality of the sexes, or (e) exploits the trust, credulity or lack of experience of a consumer, or influences or is likely to influence a consumer or the public in general in any other improper manner.”

Council Directive 84/450/EEC of 10 September 1984 relating to the approximation of the laws, regulations and administrative provisions of the Member States concerning misleading advertising: OJ L 250, 19.9.1984, pp. 17–20 (Misleading Advertising Directive).

Directive 97/7/EC on the protection of consumers in respect of distance contracts; OJ 1997 L1444/19.

Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers: OJ 1980 L80/27.

Directive 1999/44/EC on certain aspects of the sale of goods and associated guarantees: OJ 1999 L 171/12.

Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on Electronic Commerce), OJ L 178, pp. 1–16 (also e-Commerce Directive).

Commercial communication is defined by Article 2(f) as “any form of communication designed to promote, directly or indirectly, the goods, services or image of a company, organisation or person pursuing a commercial, industrial or craft activity or exercising a regulated profession.”

Article 5 of the e-Privacy Directive.

Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation EC No 2006/2004 of the European Parliament and of the Council, OJ L 149, 11.6.2005, pp. 22–39 (Unfair Commercial Practices Directive).

Article 6(2)(a) UCPD.

As is apparent from Recital 7 UCPD, the directive repealed Directive 84/450/EEC on misleading advertising, but only for business-to-consumer transactions.

Directive 2006/114/EC of the European Parliament and of the Council of 12 December 2006 concerning misleading and comparative advertising, OJ L 376 of 27.12.2006, pp. 21–27 (MCAD). It must be noted, however, that the provision on misleading advertising in this directive is crucial for consumers, too, who often stand to indirectly to benefit from its use by competitors. See Norbert Reich et al. (2014), p. 104.

Article 2(d) UCPD.

Article 4 UCPD.

Article 3 UCPD.

Article 5(2) UCPD.

Article 6 UCPD.

Article 7 UCPD. The prohibition on misleading omissions is tied to other EU consumer-protection directives that require traders to provide certain information to consumers before entering into a contract. Annex II provides a list of EU rules on advertising and commercial communications regarded as material.

Article 8 UCPD.

Case C-540/08, Mediaprint, ECLI:EU:C:2010:660, para. 97, and Case C-206/11, Köck, ECLI:EU:C:2013:14.

Howells et al. (2006), p. 119.

From the entry into force of the UCPD to 2021, the Court of Justice of the European Union (CJEU) decided 50 cases in connection with it. CJEU’s judgments on the Misleading and Comparative Advertising Directive (MCAD) are four. Prior to the entry into force of the MCAD, the cases decided by the CJEU concerning misleading advertising (Directive 84/450/EEC) were 26, while those concerning Directive 97/7/EC were 12.

Communication from the Commission to the European Parliament, the Council and the European Economic and Social Committee on the application of the Unfair Commercial Practices Directive Achieving a high level of consumer protection Building trust in the Internal Market, COM/2013/0138 final.

Commission Staff Working Document Guidance on the Implementation/Application of Directive 2005/29/EC on unfair commercial practices accompanying the document Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions A comprehensive approach to stimulating cross-border e-Commerce for Europe’s citizens and businesses: SWD/2016/0163 final (hereafter, the UCPD Guidance).

Directive of the European Parliament and of the Council amending Council Directive 93/13/EEC of 5 April 1993, Directive 98/6/EC of the European Parliament and of the Council, Directive 2005/29/EC of the European Parliament and of the Council and Directive 2011/83/EU of the European Parliament and of the Council as regards better enforcement and modernisation of EU consumer protection rules COM/2018/0185 final—2018/090 (COD) (Omnibus Directive).

Article 7 of the Omnibus Directive.

Collins (2010).

Abbamonte (2005).

Article 4 UCPD.

Exclusions from the directive’s scope of application are listed in Article 3. These include rules on the validity, formation, and effect of contracts (Art. 3(2) UCPD); health-and-safety issues relating to the product (Art. 3(3)); specific Community rules regulating specific aspects of unfair commercial practices (Art. 3(4)); (d) conditions of establishment or authorisation regimes for regulated professions (Art. 3(8)); and financial services as defined in Directive 2002/65/EC and immovable property (Art 3(9)).

See Stuyck et al. (2006), providing one of the first commentaries on the newly adopted piece of legislation.

Micklitz (2016).

Literally, “the purpose of the UCPD is to contribute to the proper functioning of the internal market and achieve a high level of consumer protection by harmonising the laws of the Member States on unfair commercial practices harming consumers’ economic interests.”

Article 162, Consolidated Version of the Treaty on the Functioning of the European Union, OJ C 326, 26.10.2012, pp. 47–390 (TFEU).

Article 38, Charter of Fundamental Rights of the European Union, OJ C 326, 26.10.2012, pp. 391–407 (EU Charter).

Gomez (2006).

Howells et al. (2006), pp. 91–96.

As argued by Stuyck (2015), the CJEU has frequently overstepped, giving national courts specific guidance on how the UCPD can be applied to the facts of the case in a dispute that led to a referral.

Reich (2012).

Anagnostaras (2010).

Howells (2007).

Micklitz highlights the circular feedback loop between the economy and consumer policy. Any revision needs to pass through a political majority in the European Parliament. Micklitz (2019).

Article 5 UCPD.

Howells et al. (2006); Weatherill (2007), pp. 9–19.

Case C-210/96, Gut Springenheide and Tusky v Oberkreisdirektor des Kreises Steinfurt, ECLI:EU:C:1998:369.

Case C-220/98, Estée Lauder, ECLI:EU:C:2000:8.

Other cases in which the CJEU has developed the image of the informed consumer are Case C-362/88, GB-INNO-BM v Confédération du Commerce Luxembourgeois, ECLI:EU:C:1990:102; Case C-126/91, Schutzverband gegen Unwesen i.d. Wirtschaft v Rocher, ECLI: EU:C:1993:191; Case C-470/93—Verein gegen Unwesen in Handel und Gewerbe Köln v Mars, ECLI:EU:C:1995:224.

Recital 18 UCPD.

As noted by Weatherill (2007), p. 135, the project of harmonising legislation on fair trading entailed “an attempt to navigate a course between the rich diversity of actual consumer behaviour and the need for an operational regulatory benchmark.”

This benchmark allows for a more focused assessment of the fairness of a practice targeting a specific group of consumers. However, it does not clarify whether the average targeted member should be attributed the exact characteristics of the average consumers (reasonably informed, observant, and circumspect).

Howells et al. (2006), p. 111.

Incardona and Poncibò (2007) and Trzaskowski (2011).

As noted in Reisch and Zhao (2017), the penetration of behavioural sciences into consumer-protection policy is one of the most hotly debated topics at present. The European Commission has proposed many behavioural studies, but no legislative agenda for behaviourally informed policymaking has been presented. It is somewhat unclear to what the CJEU is willing to follow behavioural findings in interpreting the concept of the average consumer (Schebesta and Purnhagen 2019).

Howells (2005), Sibony and Helleringer (2015), Purnhagen (2015) and Straetmans (2016).

Sibony (2014).

Article 5(2) UCPD.

Article 2(h) UCPD.

Howells et al. (2006), pp. 114–118.

See the Commission’s Communication, Follow-up Communication to the Green Paper on EU Consumer Protection, COM (2002) 289 final, pp. 3 and 6.

Follow-up Communication to the Green Paper on EU Consumer Protection (Communication) COM (2002) 289 final, p. 11.

Verbruggen (2013). The decisive role of private regulation in advertising is owed to the equally essential role that consumers play in advertising, meaning that if advertisers lose the ability to persuade consumers, the companies whose business if being advertised lose credibility, and hence the ability to turn a profit.

EASA’s Best Practice Recommendations for advertising practices can be divided into two main categories: operational recommendations, which offer guidance on the operation, structure, and procedures of self-regulatory organisations, and blueprint recommendations, which guide the remit and codes of quasi-regulatory organisations. The content of any best practice recommendation needs to be agreed on by the entire advertising ecosystem and by all self-regulatory organisations at the European level.

European Advertising Standard Alliance (2015).

European Advertising Standard Alliance (2016). The recommendations were updated in 2021. They contain eight principles, crucial among which are the principle of notice and the principle of choice.

Federation of European Data and Marketing (FEDMA) (2020). The FEDMA Code aims “to contribute to the growth of an e-commerce environment conductive to online direct marketing and at the same time protective of consumer interests.” This code forms part of FEDMA’s trust mark system (the e-commerce “Ring of Confidence”), with a guarantee seal that companies adhering to the are allowed to display on their website.

IAB Europe (2020). In particular, IAB Europe has adopted the Transparency and Consent Framework (TCF) for the programmatic advertising industry, which provides technical standards for complying with the notice-and-consent mechanisms set up under the GDPR and the ePrivacy Directive.

Article 10 UCPD.

Article 6, para 2, lit (b).

Pavillon (2012), p. 17 speaks about a “stick and carrot” approach.

Verbruggen (2013), pp. 76–132.

Howells et al. (2006), pp. 209–232.

European Advertising Standards Alliance (2020).

The potential role of unfair commercial practices law in the context of algorithmic practices has not gone unnoticed in the current literature on law and technology. Arguably, however, it has often been treated peripherally. The role of the unfair practice law in regulating algorithmic practice has been only mentioned by Helberger et al. (2017) and by Wagner and Eidenmuller (2019). A more detailed discussion is contained in: Helberger (2016), Galli (2020, 2021), Helberger et al. (2021) and Hacker (2021).

Brownsword (2019).

Article 2(d) UCPD.

Proposal for a Directive of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the Internal Market and amending directives 84/450/EEC, 97/7/EC and 98/27/EC (the Unfair Commercial Practices Directive) SEC (2003) 724, COM/2003/0356 final—COD 2003/0134.

UCPD Guidance, p. 109.

Abbamonte GB (2005) The Unfair Commercial Practices Directive: an example of the new European consumer protection approach. Colum J Eur Law 12:695

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European Advertising Standard Alliance (2016) Best Practice Recommendation on Online Behavioural Advertising. https://www.easaalliance.org/sites/default/files

European Advertising Standards Alliance (2020) Google Joins the European Advertising Standards Alliance – the First Digital Pure Play Company Member of the Alliance. EASA Press Release. https://www.easa-alliance.org/news/easa/google-joins-easa

Federation of European Direct Marketing (FEDMA) (2020) European Code of Practice for the use of personal data in direct marketing. https://www.eesc.europa.eu/sites/default/files/resources/docs/57-markt-2003-fedma-personal-data-in-direct-marketing.pdf

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Title: EU Law on Unfair Commercial Practices
Author: Federico Galli
Publisher: Springer International Publishing
Book: Algorithmic Marketing and EU Law on Unfair Commercial Practices
Print ISBN: 978-3-031-13602-3

Electronic ISBN: 978-3-031-13603-0

Copyright Year: 2022
DOI: https://doi.org/10.1007/978-3-031-13603-0_6