Brussels, 18 May 2004
"This directive creates a triple-win situation: for consumers, businesses and Europe's economy. Unfair business practices are recognised as a problem in all EU countries and harm consumers as well as respected companies with established business practices. They also undermine confidence in markets. This proposal seeks to tackle unfair practices in a simpler and more effective way," said Health and Consumer Protection Commissioner David Byrne.
Consumers need to be convinced that their rights will be protected if they are to take advantage of the potential benefits of the Internal Market. Several pan-European surveys confirm that unfair commercial practices undermine consumer confidence if they are not addressed by effective consumer protection (see e.g. Eurobarometer 57.2 and Flash Eurobarometer 128).
The European Advertising Standards Alliance concluded in its 2002 annual report that "cross-border complaints overwhelmingly concern the activities of 'rogue traders' and other fringe operators, who deliberately set out to exploit the loopholes between national regulatory systems". This hurts legitimate traders as well as consumers.
The text of the directive on which the Council reached political agreement provides for full harmonisation: as soon as traders comply with the provisions of the directive they do so not just in their own national context but on EU-level. There is no need for mutual recognition, the same rules apply in all EU Member States.
Once adopted, the Commission will actively monitor the implementation of the Directive.
Details of the proposed Directive
The Directive lays down rules for determining whether a commercial practice is unfair and defines a limited range of "sharp practices" which are prohibited EU-wide. This leaves room for business to innovate in developing new fair commercial practices.
Member States will have a duty to ensure the rules on unfair commercial practices are enforced and that traders in their jurisdiction who break them are punished. The duty to pursue "rogue traders" applies equally whether the consumers targeted live in the Member State or another part of the EU.
General prohibition of unfair commercial practices
The Directive establishes two general conditions to apply in determining whether a practice is unfair:
The benchmark consumer to be considered in assessing the impact of a practice is generally the ‘average’ consumer – but there are also measures to prevent the exploitation of consumers, such as children, who may be particularly vulnerable to particular practices. The Council agreed on this average consumer benchmark. Commissioner David Byrne said: “It is essential to codify clearly in the Directive what is already Community law established by the European Court of Justice in several judgements in the fields of misleading advertising and intellectual property. This Directive is now bringing about harmonisation. We therefore need to codify the average consumer benchmark. It is the only way to ensure that the same criteria are used EU-wide by courts and enforcers to consider, for example, whether an advertisement is misleading. The Directive will give guidance as to how to do so, while retaining flexibility based on social, cultural or linguistic factors, as already set out by the Court.”
Misleading and aggressive commercial practices
Two specific types of unfair commercial practice are defined in more detail - "misleading" and "aggressive" practices.
The Directive incorporates the provisions of the misleading advertising Directive which currently protects consumers and clarifies that a commercial practice may mislead either through action or omission. The Directive lays down a limited number of core information items that should be regarded as the ‘material’ information a customer needs to know before making a purchase. These include the main characteristics of the product, the price inclusive of taxes and, where appropriate, delivery charges and the existence of a "right of withdrawal" where one exists. If this information is not apparent from the context, the trader will need to disclose it.
The Directive describes three ways in which a commercial practice can be aggressive, namely harassment, coercion and undue influence. Criteria are set out to be applied in differentiating between aggressive practices on the one hand and legitimate marketing on the other.
Specific unfair commercial practices prohibited by the Directive
The Directive contains an Annex listing some specific types of unfair commercial practice that are banned in all circumstances. These include:
The Commission’s legislative proposal was made following several years of consultation with consumer groups, businesses and governments. It was accompanied by an extended impact assessment, one of the first ever conducted by the Commission.
For further information about the proposed Directive, as well as on the consultations and studies that led to it see: