Unfair Practices Directive
The Unfair Commercial Practices Directive prohibits a wide range of potentially unfair practices.
The unfair commercial practices directive applies to all business for consumer transactions in which the consumer is influenced by an unfair commercial practice which affects the decision as to whether or not to purchase the product or freedom of choice in the event of purchase on decisions as to whether or not to exercise a right under the contract.
The legislation harmonises rules across the EU. There is a general prohibition on unfair commercial practices. The directive operates in tandem with the directive on misleading and comparative advertising.
The matter is looked at from the perspective of the average consumer. Where the products target a particular group, an average member of this group is the reference point. e.g. children.
The directive sets the criteria for determining whether a commercial practice is unfair. The criteria apply if contrary to the requirements of professional diligence, it materially distorts and could materially distort the behaviour of the average consumer. It distinguishes between misleading and aggressive practices.
A commercial practice may be misleading by commission or omission. It is misleading by omission if it fails to provide the minimum information or factual information the average customer needs prior to purchase. The directive establishes a list of information the consumer requires before purchase such as main characteristics of the product, price, delivery costs, right of withdrawal and others.
A practice is misleading by omission if it gives false information or deceive or is likely to deceive the average consumer even though it may be technically correct.
There are also criteria for determining whether or not a commercial practice is aggressive. This may include sales under harassment, coercion or undue influence.
Consumer groups which are vulnerable are deemed to require higher protection. Children are protected against advertising encouraging them directly to buy. The average customer is viewed in the context of the target such as children.
Unfair Contract Terms
The Unfair Contract Terms legislation seeks to ensure that consumer contracts are in clear language and do not contain substantively unfair terms and conditions. An unfair term is one, which contrary to the requirement of good faith causes a significant imbalance in the parties\’ rights and obligations to the detriment of the consumer. The legislation contains a non-exhaustive list of unfair contract terms.
The unfair terms contracts apply to contracts between businesses and consumers. A non-negotiated term is unfair when it creates a significant imbalance to the detriment of the consumer in the rights and obligations of the parties. The legislation provides a list of terms that are deemed unfair.
Account is taken of the nature of the goods and services, the circumstances of the contract and other terms when assessing whether it is unfair. Where there is a doubt on the matter it is to be interpreted most favourably to the consumer. Consumers are not bound by unfair terms in a contract signed with a business.
(EU) 2019/2161 adds a requirement for Member States to ensure that consumers have the right to individual remedies (e.g. compensation, a price reduction, etc.) when they are harmed by unfair commercial practices.
EU Member States must introduce effective, proportionate and dissuasive penalties to punish traders who break national rules on unfair commercial practices.
Amending Directive (EU) 2019/2161 introduces criteria to be applied when imposing penalties. It requires Member States to provide for fines of at least 4% of the trader’s turnover or €2 million when information about the turnover is not available in cases where national authorities of several countries are working together on major cross-border infringements affecting consumers in several Member States.
In 2021, the European Commission issued updated guidance on the implementation and application of Directive 2005/29/EC. It explains key concepts and rules and gives practical examples taken from the case-law of the Court of Justice of the European Union and from national courts and administrations to make enforcement easier for national authorities and to ensure greater legal certainty for traders. The guidance covers the amendments introduced by Directive (EU) 2019/2161.
Misleading advertising is that which potentially or misleads or affects the judgment of the consumer. The following factors are considered
- the characteristic of the goods and services; price; conditions of supply
- nature, qualities, and rights of the advertiser.
Comparative advertising is that which explicitly or by implication identifies a competitor. Comparative advertising is potentially permissible if it is not misleading if it
- compares goods or services meeting the same needs and for the same purposes.
- objectively compares one or more materials relevant, verifiable, and representative features of the goods which may include price
- does not cause confusion in the marketplace between advertisements and competitors
- does not discredit or denigrate trademarks, trade name, or distinguishing signs
- does not take unfair advantage of the trademark or other distinguishing sign
- does not present goods or services as imitations or replicas of goods bearing a protected trademark or trade name.
Remedies re Misleading Advertisement
States must ensure that persons with a legitimate interest may bring a court action against misleading comparative advertising. They are entitled to bring complaints before a competent administrative body to rule on them or institute the legal proceeding.
Courts or administrative bodies must have the power to
- order the withdrawal of all misleading advertising or illicit comparison advertising or institute the appropriate procedures of that end.
- prohibit misleading advertising or illicit comparative advertising whose publication is imminent or institute appropriate proceedings to that end without proof of loss or intentional negligence.
The courts or administrative bodies must be entitled to demand publication of the decision to withdraw an advertisement or amendment. Voluntary self-regulatory bodies may be permitted, but the means of redress must be in addition to court or administrative proceeding.
Administrative or court bodies must be entitled to require the advertiser to provide proof of the accuracy of the facts in the advertisement. They are entitled to consider them to be inaccurate unless the contrary is proved.