Taking counsel: Unfair commercial practices directive 's advantage for consumers or burden for businesses?

  • 2007-05-09
  • by Paulius Zapolskis [Jurevicius, Balciunas & Bartkus]
On May 11, 2005 the Euro-pean Parliament and the Council adopted Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market (the "UCPD"). The UCPD is a market law instrument aimed at preventing unfair commercial practices that may cause detriment to consumers (and indirectly competitors).

The directive applies to both goods and services, to all sectors and all marketing and sales methods. Member states must organize their own enforcement system and determine sanctions for infringements. The UCPD has to be implemented in all member states by June 12, 2007. In Lithuania a draft of the new law on unfair business-to-consumer commercial practices is currently under coordination procedures.

General Clause on Unfair Commercial Practices. Under the UCPD regime, unfair commercial practices are prohibited per se. The general unfairness clause contains two conditions for determining whether a practice is unfair. These conditions are cumulative: 1) the practice must be contrary to the requirements of professional diligence, and 2) the practice must materially distort or be likely to materially distort the economic behavior of the average consumer whom it reaches or to whom it is addressed.
Material distortion means that the consumer's ability to make an informed decision is appreciably impaired, thereby causing the consumer to make an economic decision that he or she would not have made otherwise. Thus it is the consumer's autonomy that must be impaired in order to prove a certain practice unfair.

However, such an unfairness test raises a significant question: how do we distinguish between "appreciable impairment" and simple consumer persuasion? It is obvious that all commercial practices aim to influence consumers' decisions. The explanatory memorandum of the UCPD's proposal commission reiterates that incentives such as free tea or coffee would not qualify as appreciable impairment.
But what happens if, for example, the incentive is relatively valuable, such as a free flight? It could happen that the national courts of 27 member states will come up with conspicuously different interpretations and thereby the UCPD might experience difficulties bringing out maximum harmonization.

Misleading and Aggressive Commercial Practices. In addition to the general prohibition, the UCPD regulates particular categories of unfair commercial practices: aggressive in terms of Articles 8 and 9 (harassment, coercion, including the use of physical force, and undue influence) or misleading in terms of Article 6 (misleading actions) and Article 7 (misleading omissions). For example, discount airline companies will have to indicate the airline ticket price inclusive of taxes, or if the price cannot reasonably be calculated in advance, the manner in which the price is calculated.
Unlike under the general clause, misleading and aggressive practices are inherently contrary to the requirements of professional diligence so there will be no need for separate proof. However, it will be necessary to prove that these practices cause, or are likely to cause, the average consumer to make a decision that he or she would not have taken otherwise.
The Black List. Annex I of the UCPD provides an exhaustive list (31 practices) of commercial practices which are in all circumstances considered unfair. These unquestionably unfair practices will be prohibited in all member states.

The examples are the following:
- falsely stating that a product will be available only for a very limited time;
- falsely claiming that a product is able to cure illnesses, dysfunction or malformations;
- describing a product as "gratis," "free," "without charge" 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;
- creating the impression that the consumer cannot leave the premises until a contract is formed etc.
A single extensive list of per se unfair commercial practices will definitely increase legal certainty in all 27 member states. However, an automatic unfairness presumption also raises an interesting problem: even if no consumer is influenced by the blacklisted practice, it will still be considered unfair and the trader will suffer punitive sanction.

Paulius Zapolskis is associate advocate of the law firm Jurevicius, Balciunas & Bartkus, a member of Baltic Legal Solutions, a pan-Baltic integrated legal network of law firms including Teder Glikman & Partnerid in Estonia and Kronbergs & Cukste in Latvia, dedicated to providing a quality "one-stop shop" approach to clients' needs in the Baltics.