The Consumer protection in the European Union system An overview by Alfredo Rizzo

1. Workshop on Building Consumer Protection Rights INT MARKT 34153 organised in co-operation with Institution of Ombudsman for Consumer Protection The Consumer protection in the European Union system An overview by Alfredo Rizzo ISFOL (Ministry of Welfare – Italy) Legal adviser at the It. Ministry of Foreign affairs Mostar – May 4° 2010

2. 1)The Consumer protection in the Treaty of Rome • Paris Summit in 1972 • First action program on consumer policy [Official Journal C 92, 25.04.1975]. • Five categories of fundamental rights which are the basis for Community legislation in this area.: • the right to protection of health and safety; • the right to protection of economic interests; • the right to damages; • the right to information and education; • the right to representation. • 1 July 1987, ESA: • Notion of the consumer into the Treaty. • Article 100a entitles the Commission to propose measures designed to protect consumers, taking as a base a "high level of protection". • This notion has not been precisely defined. However, this Article provides the foundation for a legal recognition of consumer policy. • Moreover the Single Act repealed the unanimity rule for the adoption of directives in numerous areas directly or indirectly having to do with consumer protection.

3. Luxembourg European Council (December 1997), • the production and supply of safe food must be one of the European Union's policy priorities. • The Treaty of Amsterdam • New Article 129a (Article 153 after renumbering), main aims: • protect the health, safety and economic interests of consumers, • In the agricultural policy consumer’s protection deals with • Phitosanitary and veterinary policy. • In Italy, for instance, as far as food quality and connected health policies (animal and plants health, mainly) are concerned, the Minsitry of Health has established the UVAC (Uffici Sanitari per gli Ademmpienti comunitari, Health Agencies for community commitments) and the PIF (Posti di ispezione frontaliera veterinaria, Veterinary inspections posts) which have the specific aim of implementing relevant EC legislation in this area. • Rural development policy, Council Regulation (EC) No 1257/1999 of 17 May 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) • Particularly under Chapter VI (Agri-environment and animal welfare • Chapter VIa (Food quality) both food quality and health protection are put in strict connection with the so called “third pillar” of the CAP , • The rural developments objectives represent the main future for the agricultural activities, whose financing must be aimed at giving protection to environmental and consumers aspects (the “integration principle” again). The objectives of the tourism policy development should not be forgotten. • promote their right both to information and education • organise consumers in order to safeguard their interests. • Other provisions of the Treaty, especially in the public health sphere, are designed to give consumers greater protection. • New priorities faced with enlargement • consumers need simpler and more uniform rules, • a high common level of consumer protection; • the effective enforcement of consumer protection rules; • and the involvement of consumer organisations in EU policies.

4. 2) The EC policies in view of granting an effective Consumer protection • Other fields touching consumer’s protection: • Environmental protection • Agricultural (see above, i.e. rural development policy) • Precautionary principle • Integration principle (policies integrated one with the other) • Freedom to provide services and free movement of capital • Tourist’s protection • Financial services legislation • Free movement of goods • Safety measures regarding products • Pricing activities and controls • Packaging and labels on products • Technical information on products • Please, take note that • As a funding freedom of the EU, any kinds of obstacles to it are presumably in contrast with EU law • Consumer’s protection (as well as the protection of other interests, i.e. in the public health or environmental sector) can represent a “well founded” obstacle to f.m.g. • It applies as an indistinctly applicable obstacle that can be reasoned only on grounds of protection of general interest and be proportionate to the underlying objective it pursues. • It applies on grounds of art. 30 ECT (now art. 36 TFEU), dealing with derogations approved at EU level until an uniform legislation on the relevant field (i.e. environmental or consumer protection) is not adopted at that level.

5. Creation of a European Contract Law, in particular on sale practices • Directives on the Sale of Consumer Goods, • Unfair Contract terms • Distance Selling and Doorstep Selling • Public contracts legislation to be included into this framework • Competition law rules • Right of Access to public services and to services of general interests • Comparative advertising

6. The main ECJ views on Consumer protection’s policy. • Any individual can rely on a breach of Article 85(1) of the Treaty before a national court even where he is a party to a contract that is liable to restrict or distort competition within the meaning of that provision (Case Courage) • The national court is obliged, when it applies national law provisions predating or postdating the said Directive, to interpret those provisions, so far as possible, in the light of the wording and purpose of the Directive. The requirement for an interpretation in conformity with the Directive requires the national court, in particular, to favour the interpretation that would allow it to decline of its own motion the jurisdiction conferred on it by virtue of an unfair term (of a contract, in the framework of Directive 93/13, case Oceano Grupo Editorial).

7. 3)The EC policies in view of granting an effective Consumer protection The European Community policy on consumer’s protection comprises several fields already covered by EC competence • Co-operation on civil law matters. • Regulation 44/2001 (Brussels I): co-operation between national judges • Main objectives of the Regulation (dual subject-matter) • A) assessment of judicial competence in civil and commercial matters. • B) recognition of decisions from judges in the relevant fields. • It covers civil and commercial matters • Everything that deals with mutual obligations and each of the parties involved act outside the exercise of an authoritative power conferred to them by the law; • Exception made for: status or legal capacity of natural persons, rights in property arising out of a matrimonial relationship, wills and succession; bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous

8. Jurisdiction matters. Civil actions can be sought in the • Forum where the defendant is domiciled • Irrespective of the citizenship of the person. • If the person to be sued isn’t domiciled in any of the EU Member States = • lex fori of each State where an action must be brought, exception made for • exclusive fora • immovable property rights • Companies and other legal persons • Registration of acts • IPR and • the forum generalis can be derogated on the basis of the forum prorogatum criterion • According to mutual agreement (voluntas) of the parties by means of express clause • The forum selected on mutual agreement is exclusive .

9. International (non-EU) aspects. • Art. 4 of Regulation 44/2001: If a party is domiciled outside the EU – in a non-EU country , he or her cannot be sued before an EU court in accordance to the regulation, but • a decision concerning such a person or party – not domiciled in the EU - can be recognised or executed in accordance to articles 32 ff. Regulation 44/2001 • Art. 2 Reg. Brussels I: • As above stated, Reg. doesn’t apply if the person to be sued is not domiciled in one of the Member States, but Regulation applies also in cases where • The person to be sued is domiciled into one of those States and the plaintiff is domiciled in a third country • To make regulation applicable, it suffices that the connection element (the domicile of the defendant) is located in one of the Member States • Discrimination: regulation should be applicable also to defendants that are domiciled outside the EU.

10. Forum generalis = the defendant’s domicile (person to be sued) • Art. 5 = special jurisdictions • Contractual matters • Place of performance criterion: • the identification of an obligation is essential for the application of art. 5 n.1, since the jurisdiction of the national court is determined in matters relating to a contract by the place of performance of the obligation in question • Mutual agreement - voluntas - criterion • Art. 5(1) presupposes the establishment of a legal obligation freely consented to by one person towards another and on which the claimant’s action is based. • i.e. translatio of “purely” contractual matter into consumer protection matter (art. 13 Brussels conventions = art. 15 Brussels regulation). See Gabriel case • Other exceptions to forum generalis Art. 6 • tightly connected claims

11. The Brussels I Regulation foresees specific criteria to protect weak counterparts in civil and commercial issues • Art. 15 of Regulation 44/2001 deals with • contract concluded by a person, the consumer, for a purpose which can be regarded as being outside his trade or profession, jurisdiction shall be determined (…) if: • (a) it is a contract for the sale of goods on instalment credit terms; or • (b) it is a contract for a loan repayable by instalments, or for any other form of credit, made to finance the sale of goods; or • (c) in all other cases, the contract has been concluded with a person who pursues commercial or professional activities in the Member State of the consumer's domicile or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities. • 2. Where a consumer enters into a contract with a party who is not domiciled in the Member State but has a branch, agency or other establishment in one of the Member States, that party shall, in disputes arising out of the operations of the branch, agency or establishment, be deemed to be domiciled in that State. • 3.  This Section shall not apply to a contract of transport other than a contract which, for an inclusive price, provides for a combination of travel and accommodation.

12. Consumer is a concept which must be strictly construed • party deemed to be the economically weaker party: • Reference must be made to • the position of the person concerned in a particular contract, • having regard to the nature and aim of that contract, • and not to the subjective situation of the person concerned • the self-same person may be regarded as a consumer in relation to certain transactions and as an economic operator in relation to others • contracts concluded for the purpose of satisfying an individual's own needs in terms of private consumption • no consumer to be protected if we deal with contracts having the purpose of trade or professional activity, • Even if the trade or professional activity is only planned for the future, • since the fact that an activity is in the nature of a future activity does not divest it in any way of its trade or professional character.

13. Art. 15 works as a lex specialis by comparison with art. 5 n.1 (lex generalis) • The contract must be concluded. • The term “conclusion” has a wider scope by comparison with art. 5 n.1 and previous art. 13 Brussels convention ‘68 • i.e. it suffices that only one of the parties involved in a transaction commit herself by declaring her acceptance of an offer (since the latter is clearly stated in order to produce mandatory effects on the offering party without any further requirements). • In order to enact art. 15, consumer’s activities – i.e. acceptance of an offer - must be performed in one of the EU Member States where the consumer has his/her domicile: • The professional or commercial activity can be performed even outbound the EU, but must be addressed to a consumer domiciled in the EU • NB: art. 6 Regulation 593/2008 (so called Rome I Regulation on contractual obligations) applies the habitual residence of the consumer for the law applicable to consumers’ contracts, provided that the professional: • (a) pursues his commercial or professional activities in the country where the consumer has his habitual residence, or • (b) by any means, directs such activities to that country or to several countries including that country and the contract falls within the scope of such activities • Wider substantial scope • i.e. real estates’ offers or selling of financial instruments and assets also by means of financial loans and credits

14. According to article 16 the consumer has a double choice: • he may bring proceedings against the other party to a contract Either • in the courts of the Member State in which that party is domiciled or • in the courts for the place where the consumer is domiciled (see art. 6 Rome I Reg. above mentioned). • On the contrary, the other party (person performing the businesses) may bring an action against a consumer only • in the courts of the Member State in which the consumer is domiciled.

15. According to Article 17 • the abovementioned mandatory requirements in order to lodge an action where the consumer is a complainant or a defendant can be derogated (forum prorogatum) • by means of an agreement if • such an agreement is entered into after the dispute has arisen • the agreement allows the consumer to bring proceedings in courts other than those indicated in this Section; or • the agreement is entered into by the consumer and the other party to the contract, both of whom are at the time of conclusion of the contract domiciled or habitually resident in the same Member State, and which confers jurisdiction on the courts of that Member State, provided that such an agreement is not contrary to the law of that Member State.

16. Other instruments for s.c. private enforcement of consumer protection • Directive 98/27/EC on injunctions for the protection of consumers' interest • It has a stricter meaning than that of, i.e. art. 139 ff. Italian Single Act on consumer protection (s. c. consumer’s code) as it deals only with acts listed in the annex • Whereas the mentioned article of Italian law involves also • product safety issues (now covered by Reg. 864/2007 on non-contractual obligations) as well as • infringements of EC and national laws on competition having effects on consumers’ rights (i.e. art. 2 Italian cons. Code ). • Regulation 864/2007 on law applicable to non contractual obligations • Art. 2 includes injunctive measures into the scope of the regulation • Art. 5 covers liability on product safety issues • Art. 6 covers competition and unfair commercial practices aspects (already covered by directive 2005/29

17. Directive 98/27 field of application • Protection of collective consumers’ interests • It deals with protection of interests pertaining to a general category i.e. the consumers all over the EU and inside EU boundaries • The relevant producers’ behaviour • must entail an infringement of such interests and • Infringe relevant EU law acts annexed to the directive • It doesn’t deal with compensation of individual consumers’ interest • even if addressed by means of s. c. “class actions”. • Injunction must be interpreted also in the light of art. 7 of directive 93/13 on unfair contractual terms or practices • Any action aimed at preventing even only potential unfair or abusive terms of contracts to be applied towards consumers into the internal market • It aims at redressing any obstacle existing at national level to injunctive actions brought across EU internal borders (internal-market scope), this also by means of • mutual recognition of national “qualified entities” having the consumer protection as their main statutory scope • NB: those entities are only those recognised at national level • Consequently: such entities are entitled to lodge actions for the protection of collective interests of the consumers for which they are enabled to act at national level unless such entities may receive mandatum ad litem from other qualified entities of other M.S. • harmonisation of national (procedural) laws

18. Dir. 98/27 doesn’t cover judicial competence and applicable law issues • Henkel case-law • NB: this case was registered before dir. 98/27 entered into force. • preventive action brought by a consumer protection organisation for the purpose of preventing a trader from using terms considered to be unfair in contracts with private individuals is a matter relating to tort, delict or quasi-delict within the meaning of Article 5(3) of Brussels I Regulation: • In other words: • Article 15 ff. of such a Regulation do not apply to similar actions – i.e. brought by consumers’ associations - as the latter are related to non contractual obligations. • Art. 5(3) Brussels I • “In matters relating to tort, delict or quasi-delict , a person domiciled in a Member State may, in another Member State, be sued (…) in the courts for the place where the harmful event occurred or may occur” • In any case, legal person which acts as assignee of the rights of a private final consumer, without itself being party to a contract between a professional and a private individual, cannot be regarded as a consumer in the meaning of art. 15 ff. Brussels I regulation.

19. Take note: art. 5(3) conforms to “ubiquity” criterion: • the complainant – i.e. the consumers’ association - have a choice between the judges of the place either • where the harmful behaviour has been adopted • Producers’ domicile • where the harmful conducts or products at stake have been decided (conceived) or produced (i.e. deceptive products). or • where the damage occurred : • Since, in cases related to injunctions raised by consumers’ associations, the latter cannot be considered as “injured” or “harmed” parties, following ECJ reasoning in the Henkel case • Eventus damni covers “the undermining of legal stabilityby the use of unfair terms which is the task of associations to prevent”. • This concept recalls art. 6 of Regulation 864/2007, according to which “non-contractual obligation arising out of an act of unfair competition shall be the law of the country where (…) collective interests of consumers are, or are likely to be, affected”.

20. Regulation 864/2007 on law applicable to non contractual obligations • so called “affected market” or “market-place” rule • Law applicable to unfair competition practices (i.e. Directive 2005/29/EC) • Art. 6(1), the law applicable to similar practices is the law of the place (country) where the harmful or negative consequences (including for the consumers) of these practices occur • Consequently, an injunction on “qualified entities” side (as referred into directive 98/27) can be submitted before a court of such a country • Law applicable to anti-competitive practices (art. 81 ECT, now art. 101 ff. TFEU) • Art. 6(3) “law of the country where the market is, or is likely to be, affected”. • Please take note that: • Market-place rule makes every national law applicable to cases where an unfair or anti-competitive practice is addressed to several EU countries (i.e. the practice performs its effects on collective consumers’ interests in those countries) • i.e. the injunction on “qualified entities” side may be lodged before the courts of each of these countries

21. In particular: policies related to competition rules. • Misleading and comparative advertising • 1) Directive 84/450/EEC - The aim of the Directive is to control misleading advertising in the interests of consumers, competitors and the general public. In order to determine whether advertising is misleading in nature, the following factors are taken into account: • the characteristics of the goods or services; • the price; • the conditions governing the supply of the goods or the provision of services; • the nature, qualities and rights of the advertiser. • In order to control misleading advertising, the Member States will ensure that those persons or organisations with a legitimate interest may • bring a court action against misleading advertising and/or • bring the advertising before a competent administrative body to rule on the complaints or to institute the appropriate legal proceedings.

22. Misleading and comparative advertising • 1) Directive 84/450/EEC (follow up) • The Member States may authorise their courts or administrative bodies to demand publication of: • the decision to withdraw the misleading advertising; • an amendment. • Administrative authority • legal means of redress against any improper or unreasonable exercise of the administrative authority's powers. • Voluntary control of misleading advertising by self-regulatory bodies • only in addition to the court or administrative proceedings. • Courts or administrative bodies are enabled, in civil or administrative proceedings, to: • demand, if necessary, that the advertiser provide proof of the material accuracy of the facts contained in the advertising; • consider facts to be inaccurate if the proof demanded is lacking or insufficient.

23. In particular: policies related to competition rules. • Misleading and comparative advertising • Directive 97/55 Notion of comparative ads: "any advertising which explicitly or by implication identifies a competitor or goods or services offered by a competitor". • Comparative advertising is permitted if the following conditions are met: • It is not misleading; • it compares goods or services meeting the same needs or intended for the same purpose; • it objectively compares one or more material, relevant, verifiable and representative features of those goods or services, which may include price; • it does not create confusion in the market place between the advertiser and a competitor; • it does not discredit or denigrate the trade marks, trade names or other distinguishing signs of a competitor; • for products with designation of origin, it relates to products with the same designation; • it does not take unfair advantage of the trade mark or other distinguishing sign of a competitor; • it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name. • The provisions for controlling misleading advertising apply also to illicit comparative advertising. • The Directive provides for the establishment of a system for dealing with cross-border complaints in respect of comparative advertising

24. In particular: policies related to competition rules • Unfair Commercial Practices Directive‘ (Directive 2005/29/EC) • It applies to all business-to-consumer transactions whereby the consumer is influenced by an unfair commercial practice which affects decisions • on whether or not to purchase a product, • on the freedom of choice in the event of purchase and • on decisions as to whether or not to exercise a contractual right. • It comprehensively harmonises legislation in this field by creating a general prohibition. • Member Sates do not have the option of using the minimum clauses provided for by other directives to impose additional provisions in the area coordinated by this Directive. • This Directive integrates provisions on the business-to-consumer transactions covered by the directive on misleading advertising . • The “average” consumer is the average consumer as defined by the Court of Justice. • This criterion is adjusted when a commercial practice specifically targets a particular group (e.g. children) in which case the average member of this group becomes the reference point. • It does not apply • to business-to-business transactions. • to matters relating to taste and decency, health and safety, or contractual law.

25. In particular: Unfair commercial practices directive (follow up) • General criteria for determining whether a commercial practice is unfair, in order to establish a limited range of dishonest practices prohibited throughout the EU. These criteria apply if the practice is contrary to the requirements of professional diligence and if it materially distorts or could materially distort the behaviour of the average consumer. It also establishes the difference between misleading practices and aggressive practices and describes the criteria for identifying such practices. • Misleading practices: a commercial practice may mislead by commission or by omission. • A practice is misleading by omission if it fails to provide the minimum information or factual information that the average consumer needs prior to purchase. It accordingly establishes a list of the information the consumer needs before purchasing, e.g. the main characteristics of the product, the price (inclusive of taxes), delivery costs (where applicable) and the right of withdrawal. • A practice is misleading by commission if it gives false information or deceives or is likely to deceive the average consumer, even though the information given may be factually correct. • Aggressive practices The Directive also sets out criteria to determine whether or not a commercial practice is aggressive: i.e. practices using harassment, coercion and undue influence. • Black list of prohibited practices Annex I contains the list of those commercial practices which must in all circumstances be regarded as unfair throughout the EU, in a sort of "blacklist" of unfair practices, e.g. pyramid schemes, unsolicited supply or use of bait advertising (when the low-priced product is not available) or the use of advertorial (an advertisement written in the form of editorial copy). This list can be modified only by revision of the Directive. • Vulnerable consumer groups Consumer groups considered to be "vulnerable" receive a higher level of protection. • Children, for instance, are protected against advertising directly encouraging them to buy. • The "average consumer" criterion is adjusted when a commercial practice specifically targets a particular group (e.g. children), in which case the average member of this group becomes the reference point.