European Commission issues updated guidance on the application of the Unfair Commercial Practices Directive to protect consumers in the online world

The Commission wants to enable consumers to buy online as confidently as they would offline. As a response to current challenges, on 25 May 2016 it issued Updated Guidance on the application of the Unfair Commercial Practices Directive 2005 to clarify, amongst other things, what qualifies as an unfair commercial practice in the digital world.

The Updated Guidance highlights pan-EU questions such as the interplay between the Directive and other EU legislation and case law, and the application of the Directive to new and emerging business models. The Commissioner for Justice affirmed that this is “an important step to bring consumer protection up to speed with the online world and to give legal certainty to traders”.

The Updated Guidance is here and the Directive is here.

Background

The Directive constitutes the main piece of EU legislation regulating unfair commercial practices in B2C transactions – before, during and after the purchase. It was issued with the aim of boosting consumer confidence and making it easier for businesses to carry out cross-border trading. Any decision taken by a consumer concerning a purchase is considered by the Commission as a ‘transactional decision’. Even the simple fact of entering a shop falls within the scope of the Directive.

Efforts to assist in the correct and full enforcement of the Directive had already been made by the Commission in the past, with Guidance previously issued in 2009. However, the explanatory Communication published in 2013 here revealed that many issues were left unsolved.

Indeed, the study conducted by the Commission accompanying the 2013 Communication (here), showed that sectors where the EU Single Market’s growth potential is the highest – such as travel, digital, financial services and real estate – were not being exploited to their maximum level, meaning that European businesses were losing fruitful economic opportunities.

After two workshops organised with national enforcers focusing on the online sector (i.e. new advertising techniques on social networks and online comparison tools) and on travel and transport (i.e. price transparency, car rental, travel insurance and booking platforms) the Updated Guidance updates the 2009 Guidance.

Below is a useful table published by the Commission to help you assess whether your business complies with the Directive:

The Updated Guidance

The Updated Guidance is a guidance document only and does not change the existing legislation. It explains how the legislation can be applied in practice and gives examples of court cases and decisions by national enforcement authorities.

The Updated Guidance is part of the e-Commerce Package (here) published on 25 May 2016, by the Commission.

The three main themes of the Updated Guidance are:

• the interplay between the Directive and other EU legislation;
• an analysis of relevant EU and national case-law; and
• the application of the Directive to new and emerging business models.

(We do not discuss the analysis of relevant case-law in this article, but please contact us if you would like to know more.)

The interplay between the Directive and other EU legislation

The Updated Guidance clarifies that when applying the Directive, there is a complex interplay with other EU legislation, which must also be taken into account, namely:

• the Consumers Rights Directive;
• the Unfair Commercial Contract Terms Directive;
• the Misleading and Comparative Advertising Directive;
• the Services Directive;
• the e-Commerce Directive;
• the Audiovisual Media Services Directive;
• the Data Protection Directive;
• the e-Privacy Directive;
• the Treaty on the Functioning of the European Union; and
• the EU Charter of Fundamental Rights.

As a general rule, the Directive applies to the extent the issue at hand is not covered by one of the other Directives listed above because, whilst those directives relate to specific areas, the Directive has horizontal application. It is described in the Updated Guidance as “a “safety net” ensuring that a high common level of consumer protection against unfair commercial practices can be maintained in all sectors”.

The Updated Guidance includes, amongst other things, the following points:

• the Commission reflects on the interrelationship of various concepts, including the difference between pre-contractual information and an invitation to purchase, the transparency of the commercial practice, confusing marketing or the notion of average and vulnerable consumer;
• the recurrence of the unfair practice does not matter in terms of the assessment as to whether it is contrary to the Directive – one time is sufficient;
• companies must be aware that even their internal codes of conduct are relevant when applying the Directive; and
• the Commission points out that acting on behalf of another trader could lead to the establishment of joint liability, meaning that online platforms should be careful as to how they present third party sales.

The application of the Directive to new and emerging business models

The Commission dedicates a whole section of the Updated Guidance to the application of the Directive to specific sectors, with a focus on new and emerging business models including:

• environmental claims;
• the online sector;
• the travel and transport sector; and
• financial services and immovable property.

Businesses in any of these sectors in particular are urged to read the Updated Guidance to ensure that they continue to comply with the Directive.

The headlines include the following:

• Environmental sector: this relates mainly to environmental claims and, in particular, so-called ‘green-washing’, which happens when claims cannot be verified.
• Travel and transport sector: this part focuses on the issue of pre-contractual obligations and in particular information on prices. The Directive requires prices to be deconstructed so consumers can clearly understand what they are paying for.
• Finance and real estate: the Commission notices that consumers tend to invest in real estate as an alternative to pension funds, and reflects as to whether the concept of ‘trader’ should be applied to non-professional landlords.
• Online sector: the Updated Guidance clarifies how the Directive applies in the online sector and in particular how it applies to online platforms, app stores, search engines and social media:
  • the Updated Guidance now clarifies that any online platform that qualifies as a ‘trader’ and promotes or sells products, services or digital content to consumers must make sure that its own commercial practices fully comply with the Directive;
  • in some cases platforms must take appropriate measures to:
    • enable third party suppliers to comply with EU consumer and marketing law; and
    • enable users to understand with whom they are concluding contracts;
  • however, this does not mean that the platform has a general obligation to monitor the suppliers;
  • as regards ‘app-stores’, the Commission focuses on the issue of in-app purchases and the concept of ‘free’ games, linked to aggressive advertising on children and whether consent can be deemed as explicit;
  • as regards ‘marketplaces’, the Commission touches on the issue of liability for non-conformity or non-delivery of goods sold, specifying that the latter falls on the contracting party, which it is often assumed is the third party seller. However, marketplaces must be aware that the Directive imposes professional diligence and transparency requirements on them to clearly inform their users about the identity of the contracting party; and
  • finally, search engines will be pleased to know that the Commission has confirmed the possibility of implementing paid-for-placement and paid-for-inclusion. However, they must clearly distinguish this kind of placement or inclusion from natural search results.

What now?

Although the law has not changed, the Updated Guidance gives national enforcers a new tool to use when assessing the application of the Directive.

You should be aware of how the Updated Guidance affects your practices and make any necessary changes to ensure your business is compliant.