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Lectures on Nordic and European Consumer Law. Klaus Viitanen University of Helsinki October 2014. 1. INTRODUCTION. The main aims of these lectures 1) to give an overall picture on different legal

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lectures on nordic and european consumer law

Lectures on Nordic and European ConsumerLaw

Klaus Viitanen

University of Helsinki

October 2014

1 introduction

The main aims of these lectures

1) to give an overall picture on different legal

instruments used in consumer law, especially in EU consumer law and in the Nordic countries

2) a special attention will be given on the problems connected with consumer´s access to justice

1.1. Basic definitions:

Consumer law

the class of norms which are especially designated to protect the consumer in his or her dealings with a trader (direct protection)

Competition Law and Unfair Competition rules give only indirect protection to consumers


a natural person who is acquiring goods or services for an other use than business purposes

a new trend: from consumer protection to a more wider user or client protection ( e.g. passenger protection in air, railway, sea and road transport contracts)


a natural or legal person who is professionally selling goods or providing services to consumers in order to obtain economic benefit

Substantive Consumer Law

rules of consumer legislation which define the

rights and obligations of consumers and traders

Consumers' Access to Justice

different methods (often supervisory authorities and dispute settlement bodies) which aim is to ensure that consumers' rights are fulfilled also in practice

Access to justice –questions are in close relation to

substantive consumer law

without effective means for enforcement and consumer redress, the material improvements in consumer protection legislation will have little or no influence at all in a consumer's daily life

formal right to take a legal action in a court is not enough

consumer law questions may be roughly divided into two groups
Consumer Law -questions may be roughly divided into two groups:

1)protection of consumers' collective interests

  • interests where no individual consumer has a right to remedy when an infringement of these interests occurs
  • examples:
    • regulation and supervision of marketing
    • regulation and supervision of product safety

2)protection of individual rights

  • how consumer's rights are fulfilled in individual cases after a contract has been concluded and a consumer is dissatisfied with his purchase
  • examples:
    • contractual remedies when a product or service is defective
    • product liability
1 2 eu consumer law
1.2. EU Consumer Law

The legal basis and the main aims of EU Consumer

Law in The Treaty on the Functioning of The European

Union(former EC Treaty, originally Treaty of Rome):

1)Internal Market -argument

  • EU is entitled to adopt measures which have as their object the establishment and functioning of the internal market (art. 114)
  • aim is to abolish obstacles of free movement of goods and services

2)Consumer Protection -argument

  • in order to ensure a high level of consumer protection (art. 169)

Is there are a conflict between these two aims?

  • in theory no, but how about in practice!
the consumer images behind consumer law
The Consumer Images behind Consumer Law

The EU Consumer Law:

  • a consumer is an active and critical information-seeker, who is able to make rational choices on the basis of collected information (a rational consumer)
  • the main stress in the legal regulation is in the regulation of information: to ensure the accessibility and quality of information

The Nordic Consumer Law:

  • a passive consumer, who is neither able to collect information available nor to use it in order to make a rational choice (an irrational consumer)
  • regulation of information is not enough to ensure rational choices
  • there is also a need for effective protection of consumers´ individual rights, e.g. by means of contract law
Legal Instruments in EU Consumer Law


  • a traditional instrument in EU consumer law
  • have to be implemented to the national legislation
  • minimumdirectives
    • set only the minimumlevel of protection
    • MSsarefree to providebetterprotection in theirownlegislation
  • maximum directives
    • sets also the maximum level of protection
    • MSs are not entitled to provide better or weaker protection


  • are directly applicable in all MSs
  • there is no need to implement them to the national legislation
  • are becoming more popular in EU consumer law
the eu consumer law directives and regulations
The EU Consumer Lawdirectives and regulations

Regulation of Marketing

  • Misleading and Comparative Advertising Directive (1984, amended 1997, a codified version 2006/114/EC, OJ L 376, 27.12.2006)
    • in consumerissuesrelevantonly in comparativeadvertising
  • Unfair Commercial Practices Directive (2005/29/EC, OJ L 149, 11.6.2005)

Consumer Information and Contract Law

  • Package Travel Directive (90/314/EEC, OJ L 158, 23.6.1990)
    • proposal for a new directive (COM (2013) 512 final)
  • Distance Marketing of Financial Services Directive (2002/65/EC, OJ L 271, 9.10.2002)
  • Consumer Credit Directive (2008/48/EC, OJ L 133, 22.5.2008)
  • Timeshare Directive (2008/122/EC, OJ L 33, 3.2.2009)
  • Consumer Rights Directive (2011/83/EU, OJ L 306, 22.11.2011)
    • replacedformerdirectives on doorstep selling (85/577/EEC, OJ L 372, 31.12.1985) and distance selling (97/7/EC, OJ L 144, 4.6.1997)
Contract Law

Unfair Contract Terms Directive (93/13/EEC, OJ L 95, 21.4.1993)

Sale of Consumer Goods Directive(99/44/EC,OJ L 171, 7.7.1999)

Regulations on passenger´s rights in transport contracts:

Regulation on Air Passengers´ Rights on Denied Boarding and on Cancelled or Delayed Flights (EC N:o 261/2004, OJ L 46, 17.2.2004)

Regulation on Rail Passengers` Rights and Obligations (EC N:o 1371/2007, OJ L 315, 3.12.2007)

Regulation on Passengers` Rights on Bus Transport (EU N:o 181/2011, OJ L 55, 28.2.2011)

Regulation on Passengers` Rights on Maritime Transport (EU N:o 1177/2010, OJ L 334, 17.12.2010)

Safety of Products

Product Liability Directive (85/374/EEC, OJ L 210, 7.8.1985)

Product Safety Directive (01/95/EC, OJ L 11, 15.1.2002)

proposal for regulations concerning consumer product safety (COM (2013) 78 final) and market surveillance (COM (2013) 75 final)

Access to Justice

Protection of consumers´ collective interests

Injunctions Directive (98/27/EC, OJ L 166, 11.6.1998)

Cooperation Regulation (EC N:o 2006/2004, OJ L 364, 9.12.2004)

Protection of consumers` individual rights

Alternative Dispute Resolution (ADR) Directive (2013/11/EU, OJ L 165, 18.6.2013)

Consumer Online Dispute Resolution (ODR) Regulation (EU N:o 524/2013, OJ L 165, 18.6.2013)

EU Commission websites for further information


New Trend: Towards full harmonisation

The starting point: minimum directives

  • most consumer law directives between years 1985-2002 were minimum directives
  • there were only few exception, e.g., the product liability directive from 1985

The new trend from year 2005: maximum directives

  • Unfair Commercial Practices Directive 2005/29/EC
  • Timeshare Directive 2008/122/EC
  • Consumer Credit Directive 2008/48/EC
  • Consumer Rights Directive 2011/83/EU

The key questions:

1)whose interests does full harmonisation promote?

2)is full harmonisation in practice possible?

Who needs full harmonisation?

Official explanations:

1) full harmonisation promotes consumers´ confidence on internal market

  • assessment of this argument: do consumers really need exactly same rules in all MSs?

1)most sale of consumer goods takes still place inside MSs, cross-border shopping forms still only a small minority of the total sale

2)when cross-border shopping takes place, a certain minimum level of protection (e.g. at least two weeks cooling off -period in distance selling) is usually totally enough for consumers 3)instead more emphasis should be focus on the settlement of cross-border consumer disputes, where there are many problems

    • in practice many consumers avoid cross-border shopping due to the difficulties in potential disputes with traders domiciled in other countries
2)full harmonisation promotes traders´ willingness to cross-border marketing and sale
  • assessment of this argument:
    • are the differences in consumer law rules, e.g., concerning marketing or consumer contracts, in practice so relevant in cross-border marketing and sale compared to, e.g., rules on product design, content, package, or labelling?
    • if there are markets for a product, and a company has capacity for cross-border marketing, are the differences in marketing and contract rules really in practice any relevant obstacles to make business?
    • compare to the situation in United States!
2 regulation of marketing

2.1. General

Domestic Marketing (ch. 2 of these lectures)

  • marketing in which traders and consumers are domiciled in a same country

Cross-border Marketing (ch. 3 of these lectures)

  • marketing in which traders and consumers are domiciled in different countries

The regulation of marketing has usually two main aims

1)prohibition of unfair marketing practices

  • to prohibit unfair marketing practices, especially false and misleading advertising

2)disclosure of consumer information

  • to ensure that traders provide to consumers certain basic information during the marketing
prohibition of unfair marketing practices
Prohibition of unfair marketing practices

Different techniques to regulate:

1)general clauses

  • prohibits the use of all kinds of unfair marketing practices without clearly defining what marketing practices are unfair
  • whether a marketing practice is unfair or not, is decided by courts
    • it is question of delegation of legislative power from the Parliament to courts
  • a general clause is a flexible way to regulate, especially when new unfair marketing practices have been developed (e.g. marketing in internet)
    • whether the system is predictable, depends on the amount of case law and its accessibility in practice
2)specific detail rules

marketing practices which are regarded as illegal are defined by specific rules in legislation

benefit: detail rules make it for an advertiser easier to predict what kind of marketing practices may be regarded as illegal

defect: in case there is a need to interfere with a totally new kind of marketing practice, legislative changes have to be done first

3)combination of general clause and specific rules

by using this model, benefits of general clause and specific rules may be achieved at the same time

in the Nordic countries the combination of general clauses and more detail rules have traditionally been used in the regulation of unfair marketing practices

however, in the Nordic countries the main focus has always been in the use of general clauses

due to this, most principles on unfair marketing practices in the Nordic countries may be found in the case law instead of the written law

duty to disclose consumer information
Duty to Disclose Consumer Information

Detail regulation

  • has shown to be much more effective than general clauses
  • defines quite precisely what information a trader is obliged to give to consumers during the marketing
  • is used in several EU consumer law directives: they oblige MSs to adopt rules which set to traders duties to give certain, specific information to consumers concerning:

1) cooling-off period

  • consumers are not able to use this right, if they are not aware of its existence
  • see, e.g., Timeshare Directive, art. 5.4.
2)other essential information, for example

a) Package Travel Directive, art. 3.2. and 4.1.

the identity of the trader (name, address, etc.)

the legal rights of consumers

the main features of the product or service marketed

all relevant information connected to the price of the product or service (including taxes, extra expenses, etc.)

b) Consumer Credit Directive, art. 4

the annual percentage rate (the total cost of credit to a consumer per an year)

2.2.Unfair Commercial Practices Directive

replaced Misleading and Comparative Advertising Directive 84/450/EEC in consumer matters, but not in unfair competition matters (a codified version in year 2006)

but how is comparative advertising regulated at this moment?

on the contrary to the most earlier consumer law directives, UCPD is a full harmonisation directive

taste and decency –questions

e.g. discriminatory (sex, ethnic background, religion) advertising has been left outside of the scope of the directive (recital 7)

is based on a combination model

general clause (art. 5)

more specific rules (art. 6-9)

black list of always forbidden practices (Annex I)

General clause (art.5)on unfair commercial practices

commercial practice, which

a)is contrary to the requirements of professional

diligence (fairness test, e.g. false or misleading advertising)


b)it essentially distorts or is likely to distort the economic behaviour of the average consumer (effect test),

is regarded as unfair (art. 5.2)

protection of vulnerable consumers

commercial practices which are directed to a clearly identifiable group of particular consumers (e.g. children, sick or elderly people) are assessed from the perspective of the average member of that group (art. 5.3.)

Supplementary specific rules:

Misleading commercial practices (art.6-7):

A commercial practice shall be regarded misleading if

a) it contains false information and is therefore



b) it misleads or is likely to mislead the average

consumer even if the information is factually correct


c) it omits certain relevant information that the average

consumer needs


in all three alternatives this practice causes or is likely to cause

a consumer to take an economic decision that he would not have

taken otherwise

Aggressive commercial practices (art.8-9):

A commercial practice shall be regarded as aggressive


a) it by harassment, coercion, including the use of

physical force, or undue influence

b) significantly impairs or is likely to significantly impair the average consumer´s freedom of choice and thereby

c) causes or is likely to cause him to take economic

decision that he would not have taken otherwise

The flexible nature of the general clause

the specific rules in art. 6-9 on misleading or aggressive commercial practices clarify, what practices may especially be regarded as unfair

the general clause may be used in cases

1)which fall under the scope of the specific rules,

but also in cases

2)which do not fall under the scope of art. 6-9

The black list

annex I of the directive contains a list of commercial practices which are in all circumstances unfair, so called typically unfair practices (fairness or effect test is not needed)

Supervision of marketing

should be organised in the MSs as during the former Misleading and Comparative Advertising Directive: state authorities or consumer organisations are entitled to start court or administrative procedure (art.11)

Problematic questions in the UCPD

1)what is the expected level of knowledge of

average consumers?

  • the case law of the ECJ: average consumer is a reasonable well-informed and reasonable observant and circumspect
  • a clear conflict between the common meaning of word average and this definition: an average consumer is certainly not reasonable well-informed and observant
  • implementation in the Nordic countries:
    • the main stress has been given to the common meaning of word “average” and the word average itself has been left away from the law text
    • remember the different consumer images in EU and Nordic consumer law (an active information-seeker v. a passive , irrational consumer)
    • this implementation may cause different interpretations in MSs, as many MSs adopted also the word average to their law text
2)when the condition ”is likely to essentially distort the

economic behaviour of consumers” is met?

  • different wording is used in articles 6-9: “is likely to cause him to take an economic decision that he would not have taken otherwise”
    • different wording – different meaning?
    • the latter definition seems to require more stronger effect to the behaviour of consumers
  • should we assess the effect of, e.g., false information
    • separately, when it is hardly never decisive from the viewpoint of consumer´s decision-making procedure (separate effect)
    • together with all other marketing information which effects on consumers (common effect)
    • the choice between these two alternatives might have serious consequences
      • example: claims on environmental friendliness of marketed products
3)the effect of the taste and decency -restriction
  • matters related to taste and decency were left outside of the scope of the directive (recital 7)
  • these differ greatly among European countries, e.g., concerning discriminatory (sex, ethnic background, religion) advertising
  • sometimes these values are overlapping with the protection the economic interests of consumers (which is the main target of the directive)
  • example: marketing to minors in schools
    • protection of economic interests: minors do not expect to face marketing at schools, especially marketing in which teachers are involved
    • social values: schools should be marketing-free zonesin a world which is coming more and more commercial
2.3. Regulation of Marketing in Finland

I. Former regulation

  • relevant act: Consumer Protection Act 1978, ch. 2
  • the former general clause in the Finnish Consumer Protection Act, ch. 2, art. 1:

“Conduct that is contrary to good practice or that is otherwise unfair from the viewpoint of consumers is not allowed in marketing”

  • specific articles, e.g., ch. 2, art. 2:

”False or misleading information shall not be conveyed in marketing”

  • whether marketing had impact on the economic behaviour of consumers in the target group, was not relevant from the viewpoint of law text
  • but was it an implied term which fulfillment was necessary before these rules could be applied?
II. Implementation of the UCPD in Finland
  • amendments to chapter 2 of the CPA (561/2008) entered into force on 1 October 2008
  • a new general clause (ch.2, art. 1)

”Marketing which

(a)is contrary to good practice or

(b)is unfair from the viewpoint of consumers,

is not allowed in marketing”

  • new separate general clauses on

1) marketing contrary to good practice (ch.2, art. 2)

    • based on the taste and decency –restriction

2) unfair marketing practices (ch.2, art. 3)

    • based on the idea to prevent the distortion of consumers´ economic behaviour
  • in addition, (3) the CPA contains new and old specific rules on unfair marketing practices

1) Marketing contrary to good practice

  • a new general clause (ch.2, art 2):

”..is in clear conflict with generally accepted social values, especially if

a)it infringes human rights or religious or political persuasions

b)it contains discrimination on the basis of sex, age, ethical or geographical origin, etc.

c)it shows in a positive light activities where health, general safety or environment are put in danger”

  • former Finnish case law on the protection of social values in marketing was based only on the interpretation of the general clause on the consequence that the competence of Consumer Ombudsman and Market Court was sometimes questioned
    • the implementation of UCPD solved this problem and there is now a clear legal basis: CPA ch. 2, art. 2
Some examples from the former case law

a) violence in marketing

Market Court decision 1998:18

The Raisio Group was forbidden from showing a TV commercial called Gone with the Winchester, where a soldier was shot in the back. According to the Court, violence is not an acceptable way of attracting attention in advertising, especially when violence has no connection with the product being advertised (in this case food stuff).

b)discrimination based on sex

Market Court decision 2001:6 (Lola –case)

MaskunKalustetaloOy was marketing sofas by using ex-Miss Finland who was lying in one of sofas dressed with her bikinis only. The advertisement contained, e.g. following text: ”Lola is not included in the price!”The court stated, that the use of half-naked woman in an advertisement may, as such, not be regarded as unfair. However, the ad may be considered as insulting due to a way how woman is treated in it. In this case the campaign was regarded as discriminative and unfair.

2) Unfair marketing practices
  • a new general clause (ch. 2, art. 3), which scope of application covers also the specific rules (ch. 2, art. 4-14)
  • the general clause is rather identical to art. 5 of the UCPD: according to ch.2 art 3: unfair marketing is marketing, which is
    • contrary to the requirements of professional diligence and
    • is likely to distort the economic behaviour of consumers who belong to its target group
  • one relevant difference: average consumer is not mentioned at all!
    • according to Government´s Proposal (HE 32/2008), the concept of average consumer is equivalent to the concept of ordinary consumer on the consequence that there is no need to mention it in the law text
  • similar choice has been made also in the other Nordic countries
  • effects from the viewpoint of full harmonisation?
Protection of vulnerable consumers

UCPD: a special attention should be given to the target group in the assessment of legality of a marketing campaign

CPA contains now in its general clause a clear provision on the protection of vulnerable consumers (minors, elderly people etc)

the protection of vulnerable consumers was in the Nordic countries possible also before the law reform, but it was based on case law only

marketing aimed at minors provides here a good example

main principle: marketing to minors is in principle allowed, but it must comply with much more stricter rules than marketing to adults

Market Court 2000:12: Distribution of advertising magazine in schools and day-care centres

Family 2000 -magazine was a publication intended for children and young people which contained marketing mainly in the form of articles. The Market Court banned the distribution of the magazine in schools and day-care centres without parents' permission

3) Specificrules in ch. 2 of the CPA

Identification of marketing (ch.2., art.4)

  • consumers should always be able to make difference between commercial and non-commercial material and to identify the person behind marketing
  • this rule it is not based on the UCPD, but was initially created in case law already in 1980´s, and was added to CPA in year 2002
  • Market Court decision 1997:6: Commercials must be distinct from programming

Kiss FM radio station was forbidden from broadcasting com-mercials unless they are distinguished from other prog-ramming by, for example, a distinctive tune used both before and after commercial breaks.

Misleading or false marketing (ch.2., art. 6-7)
  • prohibition to give

a)misleading information


b)false information


b)omit relevant information

which is likely to cause a consumer to take a transactional decision that he would not have taken otherwise

  • rather identical to art. 6-7 of the UCPD
  • once again, the concept of the average consumer is not at all mentioned in the law text
Duty to disclose information (ch.2, art.8)
  • corresponds article 7.4. of the UCPD
  • marketing of individualizedproducts or services should always

contain at least the following information:

1) the main features of a product and service in a scale which is


(a)when taking into account the marketed product or service


(b)the used marketing tool

      • different requirements for TV and newspaper adds!

2) trader´s – or his agent´s - name and geographical address

3) price information: the total price of the product or service

including all taxes

the most important information for a consumer is normally the total price of the product or service

it does not matter, whether the procedure to count the total price would in practice be rather easy, the price informed to consumers in marketing has to be always the total price

Market Court decision 1992:11: Price splitting in advertising of cruise prices

Oy Viking Line Ab had marketed its cruise prices without mentioning the passenger tax. The Court stated, that passenger tax is a part of the price which consumers must pay for a cruise. From the viewpoint of the consumer it makes no difference that the business which sells the cruise forwards part of the price to the state in the form of tax. It is important for consumers that ads clearly indicate the total price charged by the business. Marketing, which do not contain the total price of the product or service is regarded as unfair.

Additional benefits (ch.2, art.12) and benefits based on

chance (lotteries etc.) (ch.2, art. 13-14)

are accepted in marketing only if the following two conditions are fulfilled:

1) benefits should not have a dominant role in the marketing

this condition is based on the general clause, not on the specific rules above

2) the means of getting additional benefits should be clearly explained in the marketing

3) a former requirement until year 2011: consumers´ right to take part on lottery or in other kind of competition could not be connected to the fact whether he was purchasing a product or not

change in June 2011: purchase may now be put as a condition to participate

reform was argued on basis of ECJ recent case (C-304/08)

but was the case misunderstood in Finland?

Market Court decision 1995:25: Free gifts and lotteries

in the direct marketing of timeshares

Helsingin Resort Marketing Oy was direct marketing of timeshares by inviting consumers to a special meeting. The predominant focus of an invitation letter sent out by the company to a presentation and sales meeting was on free gifts and lotteries. Based on this information, consumers had difficulty in assessing the true nature of the meeting in question. Many of the consumers arriving at the meeting did so mainly to collect the free gift promised. The marketing was regarded to be in conflict with the general clause because the promised benefits had a dominant position in the marketing.

Otherspecificnorms in ch.2 of the CPA:
  • comparative or other marketing may not cause confusion between products of different traders (art.5)
    • the former article concerning comparative advertising was moved to Unfair Competition Act
    • what is the role of this moved article in consumer protection?
  • prohibition to use aggressive selling methods (art. 9)
  • prohibition of inertia selling (art. 10)
    • it is prohibited to deliver a products or a service without an express order in case a consumer is expected to pay it in case he does not clearly refuse or return the good
  • the price should not be announced as being reduced more than it actually has been (art. 11)
    • the promised discount should always be real
2.4. Case Law
  • many leading principles of the Finnish marketing law have been created by the Market Court since 1978 in cases where the former general clause were applied
  • during the years, for informative reasons many of these principles have been added as new specific rules into ch. 2 of the CPA
  • however, there are still many principles which have not been codified, but are still based on the case law only
  • many of them are closely connected to the prevention of misleading and false marketing

1) The principle of general impression

  • lawfulness of marketing is evaluated on the basis of what kind of general impression consumers do get after a reasonable short acquaintance of advertisements
  • relevant information may not be presented by small letters at the end of an advertisement
  • Market Court 2001:9.

In TV commercial subscription costs of mobile phones were shown at the bottom of the screen in very small print, while the call time and trade-in offer was spread across the screen. If a specific subscription is advertised, typical user costs must be indicated clearly. The commercial was regarded as unfair.

  • the significance of the new effect test to the principle of general impression?
2)The principle of trader´s burden of proof

a trader must always be able to prove facts he presents in his marketing

however, relevant is the difference between facts and matters of taste

“cheapest in the town” is a fact which must be proven

“best service in town” is matter of taste which cannot be proven

this principle may also be found in art. 12 of the UCPD, which mean that it will remain also in the future

Market Court decision 1997:2: Unproven Price Claims/

Price Guarantee

OyPC‑Superstore used in its marketing, e.g., the following texts:

a)Finland’s cheapest computer chain store

b)Price guarantee: we will pay you back the price difference at time of purchase if you could buy the same product at a lower price from another shop.”

The company produced no proof that its products were cheaper than similar products marketed by its competitors. According to the Court, claims concerning a ‘lowest price’ are not proven merely by the fact that the advertiser promises to pay the customer the difference if he can find the same product on sale more cheaply somewhere else. The Court regarded marketing to be in conflict with the CPA.

3) Comparative advertising

may not be false or misleading

one may compare only products which have a similar purpose of use

comparison has to be objective

only relevant features may be compared, e.g., price

the use of test results is accepted if the following conditions are fulfilled:

tests itself have been made by objective third parties

only relevant features have been tested and compared

Market Court 2003:5 Use of EuroNCAP –test

Veho Ltd was marketing: “Mercedes Benz is safer than the most safest Volvo on the basis of a recent EuroNCAP –test.” However, the cars which had been tested by EuroNCAP belonged to different classes. According to EuroNCAP-rules cars from different classes may not be compared with each others due to different technical and other features, e.g., weight. Because this rule had been infringed and the cars were not directly comparable with each others, the advertising was regarded as unfair.

4) Claims on environmental friendliness of marketed product

Consumer Ombudsman´s decision in 1999: Marketing

of green electricity.

Kainuu Electricity had marketed eco‑electricity using slogans “Eco‑electricity is the choice of families who care about the environment”. However, in fact electricity with an eco‑label formed only 43% of the company’s total sales. The danger was that the entire company’s electricity production will be given an eco‑label in consumers’ eyes. Emphasizing the environmental effects of consumers choice of electricity was therefore misleading and was regarded as unfair.

the influence of effect test in environmental claims?

5) The use of word “guarantee” in marketing

guarantee should always mean that a consumer receives a certain benefit compared to his legal rights which are based on the law

Market Court 1994:14 Satisfaction guarantee

A mailorder company used in its marketing concept ”satisfac-tion guarantee” which gave to consumers one week cooling off –period. Due to the fact, that consumers already had the same right on the basis of CPA ch. 6, the use of word guarantee in marketing was regarded as unfair.

2.5. Supervision of marketing

1. General

Different models to supervise

  • in principle there are different possibilities to organise supervision of marketing:

1)supervision may be taken care by:

a)state authorities or

b)consumer organisations or

c)self-regulatory bodies

2)supervision may be taken care by only one of these alternatives (single model) or more than one at the same time (combined model)

3)decision whether a marketing practice is unfair or not, may in principle be made (a) in administrative procedure or (b) in court procedure

Supervision according to the EU consumer law:

Unfair Commercial Practices Directive obliges(as the Misleading

and Comparative Advertising Directive before it) Member States to

ensure that:

1)state authorities and/or consumer organisations are entitled to start

2)court procedure or administrative procedure in order to prohibit unfair commercial practices (art. 11)

self-regulatory bodies - based on business self regulation - are accepted only as a supplementary, but not as the only supervisory system (art. 10)

2.The Nordic Model in the Supervision of Marketing
  • enforcement of consumers´ collective interests in the Nordic countries is taken care by a special state authority, called as the Consumer Ombudsman (CO)
  • CO is a state authority, whose task is to protect consumers´ collective interests by

1)supervising marketing practices

2)supervising the use of standard contract terms

3)promoting consumer interests in general

  • these authorities were established in all four countries between years 1971‑1978
  • the activities of the CO are in Sweden connected to the National Consumer Agency, and in Denmark and Finland (in the latter from January 2013) to the combined Competition and Consumer Agency
The most relevant acts in force which regulate the

activities of the Nordic COs, are

  • in Denmark the Marketing Practices Act 2012
  • in Finland the Consumer Protection Act 1978
  • in Norway Marketing Control Act 2009
  • in Sweden the Marketing Act 2008

English translations of these acts are available in the

following internet-pages:

  • Danish National Consumer Agency (http://www.forbrug.dk)
  • Finnish National Consumer Agency (http://www.kuluttajavirasto.fi)
  • Norwegian Consumer Ombudsman (http://www.forbrukerombudet.no)
  • Swedish National Consumer Agency (http://www.konsumentverket.se)
The competence of the Nordic Consumer Ombudsmen

in the supervision of marketing

1)preventive methods:

  • an extremely typical feature for the supervision of marketing in the Nordic countries is the frequent use of preventive actions
  • the aim is to prevent any infringements of law by providing information for the traders who are preparing new advertising campaigns
  • often these preventive actions are not based on the law, but have been created in practice during the years
Different preventive methods

Advance opinion

is an opportunity (but naturally never an obligation) for an individual advertiser to check beforehand whether a planned marketing campaign is infringing the marketing law or not

on request, the CO will give an oral or written statement regarding his view of the lawfulness of the planned marketing arrangement

once the CO has shown “green light”, he will not interfere on his own initiative with an arrangement covered by the advance opinion and implemented within a reasonable time of its delivery

Marketing guidelines

COs have issued during the years non-binding marketing guidelines in several sectors of business

they are mainly based on the existing case law

their purpose is to inform traders what kind of marketing practices are infringing the law

a new trend: CO and branch organisations have prepared guidelines together

2) repressive methods

In case infringements of law are observed:

a) in the first step, CO tries to persuade a trader to abandon in a

voluntarily way marketing which is regarded as unfair

b) in case persuasion fails CO is entitled to impose an injunction

order together with conditional fines in cases which do not have

major importance

if the trader resists, this injunction becomes void except in Norway, where the trader has to appeal in case he resists

temporary injunction orders in urgent cases are available in all four countries

c) take legal action against a trader in the court

special courts have jurisdiction to decide whether marketing is infringing the law or not

The Nordic Market Courts

Special courts whose jurisdiction is limited to a certain

areas of law only

in Finland: the Market Court (collective consumer law, unfair competition, competition law, and from year 2013 also IPR- issues) http://www.oikeus.fi/markkinaoikeus/index.htm

in Sweden: the Market Court (collective consumer law, unfair competition, competition) http://www.marknadsdomstolen.se

in Norway: the Market Council (collective consumer law, unfair competition law) http://www.markedsradet.no

in Denmark: the Maritime and Commercial Court of Copenhagen (alsomaritimelaw and othercommerciallaw) www.shret.dk

If the Nordic Market Courts regards marketing practice

as unfair, the following sanctions are available:

1) injunction order

  • the purpose of this order is to prohibit the trader to carry on its illegal activities
  • the injunction order is strengthen with a conditional fine (which has to be paid only if the same infringement is repeated)

2) corrective advertising

  • an obligation to correct the information given in unfair marketing, normally by a totally new advertisement
  • in practice the significance of corrective advertising has been rather small, because marketing campaigns have in practice ended a long ago before the judgment is given
3) market disruption fee
  • has been available in Sweden since year 1996
  • available if the trader acts intentionally or if he by carelessness violates the detail rules of the Swedish Marketing Act
  • the ordered fee may be from SEK 5 000 to 5 000 000, (the latter about EUR 500 000), but not more than ten percent of the trader´s annual turnover.
  • disruption fee is an alternative sanction to an injunction order
  • it should be used in serious cases only, and in practice it has been used rather seldom

No criminal sanctions or compensation of damages

  • these questions are dealt in general courts only
  • in practice criminal sanctionshave been used very seldom
3. Evaluation of the Nordic enforcement system
  • from the viewpoint of effective consumer protection

1) in the beginning of the establishment of the Nordic consumer protection system, serious attention was paid, not only to substantive law, but on the enforcement of consumers´ collective interests

2) enforcement of consumer protection has been the sole task of the Nordic ombudsmen and consumer authorities

    • so far there have been no fear that the fulfilment of other tasks, especially, enforcement of competition law, would have started to dominate their activities by using majority of the available resources
    • what is going to happen in Denmark and Finland where consumer and competition authorities have been merged?

3) the channeling of consumers´ collective protection -cases to special courts instead of general courts has created more consumer –friendly case law

4) the wide use of soft law –methods has in practice been very successful
  • most of the traders are willing to change their marketing practices voluntarily, especially in clear cases, in order to avoid bad publicity caused by a potential procedure in the Market Court

5) soft law need hard law as a backing

  • without the possibility to use sanctions if necessary, the persuasive methods would not be so successful as they have been now in practice

6) the lack of other sanctions than injunction makes the system sometimes rather toothless

  • it is possible for unscrupulous traders to continue - at least for a while - and repeat the infringements in some similar, but also unfair form

7) larger competence to issue injunction orders?

  • should Cos have larger competence to issue injunction order without a need to start a court case in Market Court?
3 regulation and supervision of cross border marketing
3. Regulation and Supervision of Cross-border Marketing

3.1. General

Cross-border Marketing means marketing in which

  • a trader is marketing consumer goods or services

from one country (source country)

  • to consumers who are domiciled in an other country or countries (target country)

The basic problems in cross-border marketing:

1) the differences between the substantive rules in source and target countries

    • even in areas, where EU has adopted consumer law directives, the aim has been to set a common minimum standard of protection, not to harmonise national laws
    • marketing which is full in accordance with the laws of the source country, may infringe the laws of the target country
2) the marketing may be directed only to consumers domiciled in other countries than where the trader is domiciled

the consumer authorities/organisations in the source country do not have interest to interfere in such marketing

3) there are often differences between MSs how actively the consumer authorities/organisations are supervising marketing

these differences are based on supervisory traditions, level of motivation, available resources, etc.

4) the consumer authorities/organisations in the target country are often powerless: in practice it may be difficult to enforce remedies against a foreign trader

two opposite models of regulation and supervision
Two opposite models of regulation and supervision

There exists two opposite models to regulate and to supervise

cross-border marketing. These systems do not have to exclude

each others; they may also be parallel or supplementary

The home country principle (principle of the country of origin)

  • the level and substance of regulation is determined by the country in which the trader is domiciled (the source country)
  • also the compliance of regulation is supervised by the authorities and/or organisations of the source country
  • political background: internal market -argument

The target country principle

  • the level and substance of regulation is determined by the country or countries where the effects of marketing may be seen (the target country)
  • also the compliance of regulation is supervised by the authorities or organisations situated in the target country
  • political background: consumer protection -argument
3.2. Satellite advertising

TV directive (89/552/EEC, OJ N:o L 298, 17.10. 1989)

The transmitting state principle

  • is one application of the home country principle
  • art.2.1.: transmitting Member State must ensure that all television broadcasters under its jurisdiction comply with the law on that State
  • art.2.2.: receiving Member State must ensure the freedom of reception and it is not allowed to restrict retransmission of television broadcasters from other Member States, for reasons which fall within the fields coordinated by the directive
De Agostini -case: C-34/95 in the ECJ

Facts of the case:

  • De Agostini -company was using services of a British company which broadcasted television programmes by satellite from the UK to Denmark, Sweden and Norway
  • De Agostini -company advertised a kids magazine which was published in series, each consisting of several issues
  • with each issue came a part of a model dinosaur: in order to build one dinosaur, all issues of one series had to be collected
  • the Swedish CO took legal action against the De Agostini- company in the Swedish Market Court for two reasons:

1)television advertising to children under 12 years was

forbidden according to the Swedish Broadcasting Law

2)advertising was misleading because it did not contain

information how many issues belong to each series and what

was the total price of one series and one model dinosaur:

it contained only the price of one individual issue

  • the Swedish Market Court asked ECJ to a give a preliminary ruling
Decision of the ECJ was quite predictable:

1) the TV-directive allows advertising to children in case certain basic conditions are fulfilled

the Swedish authorities were not allowed to totally forbid cross-border television advertising which was directed to children

2) the TV-directive did not prevent the consumer authorities in the target country to take legal action against cross-border television advertising in those fields which were not coordinated by the TV-directive

as the TV-directive was not regulating misleading advertising, the Swedish authorities were entitled to take legal action against cross-border misleading advertising

So, in the satellite advertising the both principles may

be used at the same time:

1) the home country principle in those fields which are coordinated by the TV-directive

2) the target country principle in those fields, which are not coordinated by the TV-directive

Audiovisual Media Services Directive (AVMSD)

(2007/65/EC, OJ L 332, 18.12.2007)

  • is in fact a revised version of TV-directive 1989
  • its scope of application was expanded to cover also the so called on-demand AVM -services
  • surprisingly, the content of the transmitting state principle was not changed, or even clarified!
  • this means that DeAgostini case has not lost its significance
  • target countries have still right to take legal actions against cross-border TV-advertising in those fields which are not coordinated by the AVMSD-directive
  • a codified version of the AVMSD-directive was published in year 2010 (2010/13/EU, OJ L 95, 15.4.2010)
3.3. Cross-border e-commerce

Electronic CommerceDirective (2000/31/EC, OJ L 178,


  • is mainly based on the home country principle (art.3.1.-3.2.)
  • however, the target country may take measures against cross-border electronic marketing in case two conditions are fulfilled:
    • measures are necessary in order to protect, e.g., public order, public health or consumers (art. 3.4.)
    • the target country has asked - without adequate results - the home country to take measures against illegal marketing (art.3.4)
3.4. Different methods to develop regulation

and supervision of cross-border marketing

Problems in enforcement

  • even if we adopt the target country principle in the

regulation and supervision of marketing, one central

problem still remains:

    • how the authorities in the target countries may in practice enforce sanctions against companies domiciled in other countries?

Different alternatives to improve enforcement

1)the principle of entity

2)free movement of actions for injunction

3)cooperation between the national supervisory bodies

4)harmonisation of the substantive marketing law

1)The Principle of Entity
  • originates from competition law:
    • all companies belonging to the same multi-national group of companies are liable for infringements of law caused by any of its parent or subsidiary companies
  • has already been used at least in Finland

The Finnish Market Court 1987:13. McDonalds was marketing its products via satellite television from Britain to Finland. The Finnish CO took legal action in the Finnish Market Court against the Finnish subsidiary company of the multinational company in question – McDonalds Osakeyhtiö. The court stated that the Finnish CPA was applicable in the case due to the fact that marketing was intentionally targeted also to the Finnish consumers. The injunction order with a conditional fine was imposed to McDonalds´ Finnish subsidiary company.

2)The free movement of actions for injunction

The directive on injunctions for the protection of consumers‘

interests (injunction directive) (98/27/EC, OJ N:o L 166, 11.6.1998)

(a codified version 2009/22/EC, OJ N:o L 110,1.5.2009)

The main content of the injunction directive

  • traditionally the right to take legal action against traders have been reserved only to the consumer authorities/organisations in the same country where trader is domiciled
  • MSs are obliged to ensure that also qualified entities (which may be consumer authorities, consumer organisations or trade organisations) in target countries are entitled to take legal actions for injunction in source countries when an infringement affects to the interests of consumers in the target country where the qualified entity has its domicile
  • the right to bring an action for injunction is limited to those consumer issues where the EU has adopted consumer law directives (as transposed into the internal legal order of the MSs)
Evaluation of the injunction directive:

1) the injunction directive does not solve problems which are

based on differences in substantive law between the MSs

the right to bring an action for injunction in the source country is useless when the substantive rules or the case law are stricter in the target country than in the source country (as it was in De Agostini-case)

2) who finances the cross-border actions?

legal expenses cause an economic risk which in practice prevents cross-border litigation in a quite effective way when authorities and organisations are working with limited financial resources

3) practical relevance of this directive

how many times it has been used in practice?

3)Cooperation Between National Supervisory Bodies

I. Informal cooperation

  • the International Consumer Protection and Enforcement Network (ICPEN) (www.icpen.org)
  • was established in 1992
  • it consists of national, normally supervisory bodies from more than 40 different countries
  • exchange of information, collaboration (e.g. sweep days in internet), yearly meetings, etc.
  • no obligation to give assistance to colleagues in other countries
  • may be used between all countries, not only between the EU Member States
  • most helpful in cross-border marketing problems which have global effects
II. Formal collaboration

Regulation on Consumer Protection Cooperation (N:o 2006/2004,

OJ N:o L 364, 9.12.2004)

every MS must have a consumer authority, who has jurisdiction to deal with cross-border marketing

indirect effect in some countries, e.g., in Netherland 2006

consumer authority in the source country (requested authority) is obliged, on the request of consumer authority in the target country (applicant authority), to take all necessary measures to cease illegal cross-border marketing in the source country (art. 8.1.)

the requested authority may, however, determine which measures will be taken (art. 8.2.)

in case legal action in a court is taken, the applicant authority has to pay the legal expenses which the plaintiff is liable to pay to the defendant if the case is lost (art. 15.1.)

4)Harmonisation of the Marketing Law

The starting points

1) collaboration between supervisory bodies is useless if cross-border marketing which infringes the law of the target country is in accordance with the laws of source country

2) directives which are based on minimum harmonisation do not eliminate the differences in substantive rules between the MSs

One possible alternative: Full harmonisation of legislation on

unfair marketing practices

  • first effort: Unfair Commercial Practices Directive 2005
  • shows the new trend in the EU Consumer Law
    • instead of minimum clauses (and minimum level of protection), the aim is now full harmonisation (and abolishment of the differences between the national legislation of the MSs)
  • in case it works, the choice between home and target country principles becomes less important than nowadays
UCPD: will its aims be achieved?

1) is it really possible to harmonise national rules concerning

marketing by using general clauses?

general clauses are legal instruments which delegate the decision-making power from the Parliament to courts

general clauses will be applied by the national courts in 27 different MSs

when taking into account (a)unclear concepts used in the UCPD (e.g., average consumer, effects on consumers’ economic behaviour) and (b)differences in cultural and legal traditions of the MSs, it is more than obvious that the case law (created by national courts) will differ between MSs

the consequence: the differences between the substantive laws of the Member States may not be abolished by the UCPD

2) is it really possible to ensure that the supervision of marketing would in practice be at the same level in all Member States?

the efficiency of supervision often depends on motivation

and available resources of the supervisory bodies

most probable there will be remarkable differences

3) if full harmonisation of the national legal rules may not be achieved, the choice between home and target country principle still remains relevant from the viewpoint of consumer protection

in the home country principle the lawfulness of marketing may be determined by a country in which the level is lowest if the trader is domiciled in that country

4) is UCPD based on home or target country principle?

Commission´s first proposal (COM (2003) 356 final)

Traders shall only comply with the national provisions of the Member State in which they are established (art. 4.1.)

Member States shall neither restrict the freedom to provide services nor restrict the free movement of goods for reasons falling within the field approximated by this Directive (art. 4.2.)

due to resistance of many MSs the article 4.1 was dropped away and only article 4.2 was left to the final Directive

what does it mean?Is the home country principle the only

possible principle of regulation and supervision or may target

countries also take measures against cross-border marketing

which infringes the laws of target countries?

this issue will be decided later on by the ECJ

4 consumer contract law

Traditional view how contracts are concluded:

  • basic presumption: (1)equal parties (2) agree individually each contract terms (3)after negotiations
  • pactasundservanda: a contract binds both parties according to its terms
  • the legitimacy of pactasundservanda –principle is based on the presumption of equal parties
Reality in consumer contracts:

Consumers and traders, are in most cases unequal

1) the lack of information: consumers do not in the most cases have enough information (quality, price, other terms) which is necessary to conclude a good contract

2) the unbalanced negotiation power: even if well informed, consumers do not have as much as influence on the content of contract terms than traders

good example: the wide use of standard contract terms in practice


the presumption on equal parties does not correspond with the reality

consumers need protection in their contractual relations with traders

different methods to provide protection in consumer contracts
DifferentMethods to ProvideProtection in Consumer Contracts

1) Cooling off -periods

  • definition:

a) consumer's right to withdraw from a contract

b) with in a certain time

c) without penalty and

d) not having to give any reason

  • cooling off- periods, based on the law, are normally provided in those types of contracts in which it is typical that:

a) consumers do not have the possibility to compare the price and quality of the marketed product with other similar products before making their decision (doorstep selling)

Consumer Rights Directive, art. 9

b) consumers do not have an opportunity to check

the product before the contract is made (distance selling)

Consumer Rights Directive, art. 9

c) aggressive methods of marketing are often used

Timeshare Directive, art. 6

d) there is a risk of consumer´s over-indeptedness

Consumer Credit Directive, art. 14

the length of cooling off-period in these directives

normally 14 days, but depends on whether or not the trader has inform the consumer about his right to withdraw the contract

in case this obligation has been neglected, the maximum time to use cooling off -period is 12 months

Cooling off -periods based on a contract

cooling off -periods based on law should not be confused with cooling off -periods based on an individual contract only (latters are usual, e.g., in big department stores)

2) Mandatory provisions of consumer contract law


a) the parties are not entitled to conclude individual contracts

b) imposing worse terms

c) regarding to the weaker party

d) than is provided by the mandatory provisions of law

Sale of Consumer Goods Directive (99/44/EC)

especially in the sale of goods the essential questions on consumer contracts have often been regulated by mandatory provisions of law. These question are, for example:

a) goods conformity with the contract

when a product is defective

Sale of Consumer Goods Directive, art. 2

b) burden of proof concerning when the lack of conformity exists

Sale of Consumer Goods Directive, art. 5.3.:

any lack of conformity which becomes apparent within six months of delivery is presumed to have existed at the time of delivery, unless proved otherwise (so called legal guarantee)

c) rights of the consumer (remedies) in the case of a lack of conformity

Sale of Consumer Goods Directive, art. 3.:

in the first place, repair free of charge or replacement

if not possible or if not done, reduction of price or the right to have the contract rescinded (the latter only in case the lack of conformity is not minor)

d) minimum time limit for liability

Sale of Consumer Goods Directive, art. 5.1.:

at least two years from the delivery of the goods

in Finland there is no maximum time for seller´s liability

however, consumer has the burden of proof whether a four years ago bought product was defective already at the time of delivery

e) minimum time limit for complaining

Sale of Consumer Goods Directive, art. 5.2.:

consumer must inform the seller within two months from the date on which he detected the lack of conformity (in Finland no exact time limit, only in reasonable time)

However, it is not possible or even sensible to regulate all

potential contract terms by mandatory provisions

a wide area of different kind of questions will always stay at the parties to agree

that is why, there is also a need for other methods to balance the contractual relationship between the parties

3) Prohibition to use unfair contract terms in consumer contracts

the main aim: to prevent the use of unfair terms in

consumer contracts

Unfair Contract Terms Directive (93/13/EEC)

Definition: unfair contract term is

a) a contractual term

b) which causes a significant imbalance

c) in the parties´ contractual rights and obligations

scope of application:

only standard contract terms, not individually negotiated

co called core terms, included price terms, stays out of the scope of directive

the MSs have a right to choose whether to regulate unfair contract terms by (1) a general clause or

(2) more specific rules or by (3) a combination model

The annex of Unfair Contract Terms Directive

it contains so called grey list of contract terms which may be regarded as unfair

typically unfair contract terms in the list are often connected to the following items:

trader has a right to make changes to the contract terms including the price without consumer´s approval

trader has excluded or limited his legal liability in case he breaches the contract

sanctions which are available for consumer´s breach of contract are very hard

arbitration clause which excludes access to the courts

Supervision: Unfair Contract Terms Directive, art. 7:

MSs are obliged to ensure that adequate and effective means exist in order to prevent the use of unfair contract terms in standard contracts

the choice between different supervision systems has been left to the MSs: they may give to authorities and organisations

1)a right to take legal action against a trader who is using unfair terms in standard contracts (court procedure)


2)only a right to complain to an authority which task it is to decide whether a contract term is unfair or not (administrative procedure)

supervisory system is similar to the UCPD

In the Nordic countries the system to regulate and supervise

unfair contract terms is rather similar than in the marketing:

1) the fairness of contract terms is mainly regulated by general


no combination model has been used here

case law is in practice the main source of information

2) the Consumer Ombudsman tries to prevent the use of unfair contract terms

a) the CO first tries to persuade a trader to abandon the use of

unfair contract terms

b) in case persuasion fails, the CO may issue a permanent

(in case trader does not resist) or a temporary (in urgent

cases) injunction order

c) finally the CO is entitled to take legal action against trader in

the Market Court

3) negotiations with branch organisations

a preventive method

is not based on the law, but has been created in practice during the years

standard contract terms have been negotiated between CO and branch organisations in several branches of business

example in Finland: Package Travel Contract Terms

Benefits connected to these negotiations:

a) from traders´ point of view:

the probability that CO would take actions against negotiated contract terms is in practice quite small

b) from consumers´ point of view:

by negotiations it is possible to add to the standard contracts new terms which improve consumers´ contractual position compared to the earlier used terms, and even compared to the mandatory provisions of consumer contract law

example: consumer´s right to withdraw from a package travel contract with rather small expenses

4) voidness and adjustment of unfair contract terms in

individual contracts

it is a repressive control method

Unfair Contract Terms Directive, art. 6.1:

unfair contract term do not bind on a consumer in an individual contract

however, in disputed cases the consumer has to take the case to a court or another dispute settlement body, which will consider the unfairness of a contract term

weakness of this method is that

1) the consumer has to be aware of the unfairness or a contract


2) the consumer has to be active - and sometimes wealthy

enough - to take the case to a dispute settlement body

3) decision has directly legal effect (res judicata) on the

disputed case only: other similar unfair terms in contracts

made by other (passive) consumers stays still valid

Two possible legislative alternatives when a contract

term is regarded as unfair:

a) the court or an other dispute settlement body declares the unfair contract term as void

b) the court or an other dispute settlement body may adjust the unfair contract term

Adjustment of a contract term:

a court or an alternative dispute resolution body changes the content of an individual contract term

is a typical feature to the Nordic consumer law

even the so called core terms including the price of the product may be adjusted in the Nordic countries

5) transparency and interpretation of contract terms

Unfair Contract Terms Directive, art. 5:

1) contract terms must always be drafted in plain and

intelligible language

2) in case there is any doubt about the meaning of a

standard contract term, the interpretation which is

most favourable to the consumer prevails (in dubio

contra stipulatorem)

Future of EU Consumer Contract Law
  • review of the former consumer protection rules (so called consumer acquis)
  • all former contract law directives have been based on minimum clauses
  • the review of the consumer acquis is based on the idea of full harmonisation
  • those MSs who have used their right to provide better protection to their consumers (especially the Nordic countries) are afraid that new directives will mean weaker consumer protection in the future
  • a good example here: the proposal for Directive of Consumer Rights in October 2008 (COM(2008) 614 final)
    • was based on full harmonisation
    • its aim was to replace four former minimum directives from years 1985-1999 (Sale of consumer goods (99/44/EC), Unfair contract terms (93/13/EC), Distance selling (97/7/EC) and Doorstep selling (85/577/EC))
The main problems in the proposal

1) from the viewpoint of consumer protection: the proposal was

mainly based on the former minimum directives without any

bigger changes

  • minimum level of protection had suddenly became also the maximum level of protection!
  • how did this fulfil the requirement of EC Treaty: high level of protection to consumers?
  • those countries who had used the opportunity to give better protection to their citizens, would have been forced to lower down their former level of protection

2) from the viewpoint of internal market: many relevant contract

law issues (e.g. right to compensation), which harmonisation

would have been utmost essential had been left totally open in

the proposal

Full harmonisation of Consumer Contract Law

Is it desirable?

  • this is naturally a highly political question

Is it possible?

1) principal problems: differences between the Members States in

legal traditions, social values, etc.

  • even full harmonisation directives are implemented in a way which fits to their legal system, correspond their social values, and enforced in way that fits to their traditions

2) practical problems: poor quality in law drafting

  • the new full harmonisation directives are not based on careful preparation
  • they contain a lot of unclear definitions, which will be most probable interpreted differently in the MSs
  • they contain a lot of unregulated questions (e.g. tort law), which will be still regulated differently in MSs
  • experiences from the new UCPD do not convince
5 safety of products

Basic division: product safety and product liability

I. Product Safety

  • legislation and supervisory activities which aim is to prevent that dangerous products are sold to consumers
  • is a part of the protection of the consumers´ collective interests

General product safety:

  • all areas of product safety which are not regulated by sectoral legislation

Special product safety:

  • product safety regulation which scope of application is limited to a certain consumer goods only (e.g. toys, cosmetics, medicines, electrical appliances)
General Product Safety

Product Safety Directive (2001/95/EC, OJ N:o L 11, 15.1. 2002)

producers may place on the market only safe products (art.3.1)

directive sets rules for market surveillance

prior acceptance given by authorities

is only needed in the Member State where the product was first placed on the market

this principle is not mentioned in the directive, but is based on the case law of the ECJ (Cassis de Dijon –principle)

Member States are obliged to:

1)establish or nominate authorities which task it is to

take care of the supervision (art.6.2)

the supervisory task may not be left to consumer organisations alone

2)take care that these supervisory authorities have necessary measures available in case they suspect (checks, information, samples) or notice unsafe products in the market (sale prohibition, recall, etc.)(art.6.2., art. 7, art.8)

the authorities are entitled to make by themselves a decision whether a product is dangerous or not without a need to take legal action in a court

compare the system to the supervision of unfair marketing and unfair contract terms!!

II. Product liability
  • it is a part of the protection of consumers´ individual rights
  • is a part of tort law
  • it is question of
    • liability for damages caused by a defective product
    • to a person or other property than the defective product itself

Product Liability Directive (85/374/EEC)

  • it is a full harmonisation directive
  • scope of application:

a) personal injuries caused by defective products irrespective whether the product was in private use or not

b) damages to property other than the defective product itself if the defective product was meant for private use or consumption and primarily used for such purposes

The liable parties:

1)a producer, who is domiciled in one of the MSs

2)if the product has been produced outside the internal market,

the trader who has imported it to the internal market

3)a trader, who presents himself as its producer by putting, e.g.,

his trade mark on the product

The injured person has to prove:

1)the damage or injury

2)the causal relationship between the defect in the product and

the injury or the damage

3)the lack of safety in the defective product: the product is not as

safe as consumers may reasonable expect

producer´s liability is strict: negligent behaviour from his side is no more needed

importer´s and seller´s liability is still based on negligence

The Cross-border Nature of Product Liability Cases
  • a person who has suffered damages may have to start a cross-border litigation in case he prefers to claim compensation on the basis of strict liability
  • for example, an Estonian consumer has bought in Estonia an electrical appliance, which has been made in Italy. In case this appliance causes an accident in Estonia due to its poor quality, the Estonian consumer has to take legal action against the Italian producer instead of Estonian seller or importer
  • the court procedure may take place in Estonia, but the judgment has to be enforced in Italy
  • it might be a better idea to take legal action against the Estonian seller or importer on the basis of negligence
case studies product liability and tobacco
Case studies: Product Liability and Tobacco

Two Finnish court cases - is a producer of tobacco

products responsible for personal injuries caused by

his products?

The first case: PenttiAho v. RettigOy and Suomen


  • the case started already in 1988 (being the first tobacco case in Europe), two years before the Finnish Product Liability Act (PLA) and strict liability entered into force: at that time producer´s liability was still based on negligence
  • the plaintiff smoked from year 1941 to 1986 and got several serious diseases which are typical for heavy smokers, including cancer
  • he died of these diseases during the procedure in 1992, but his inheritors continued the case
Before the PLA plaintiff had burden of proof on

negligence of the tobacco companies

causal relationship between smoking and his diseases

damage and its size


the medical relationship between smoking and cancer was statistically clear already in 1950´s

the advertising of tobacco products was banned in Finland by the Tobacco Act 1976 and warning labels in cigarette boxes came compulsory in 1986

before year 1976 tobacco companies had advertised their products decades without warning their customers about the dangers connected to their products

The Helsinki Court of First Instance dismissed the case

in 1992 for the following reasons:

1)the tobacco companies had not act in negligent way

a)because selling tobacco products had been legal

during all these years

b)tobacco companies had not been shown to infringe

the rules which regulated advertising of tobacco

products before advertising of tobacco products was

totally banned in 1976 (the CPA into force in 1978)

2)because the existence of negligence was a basic

condition for liability, the Court did not study att all

the causal relationship between plaintiff´s smoking

and his diseases

The Helsinki Court of Appeal dismissed the case in

1998 :

1)the tobacco companies had mislead consumers – and had been

negligent – because they had not informed consumers on the

health risks connected to the smoking

2)however, the plaintiff had not been able to prove the individual

causal relationship between smoking and his diseases

The Supreme Court dismissed the case in 2001:

1)the causal relationship between smoking and the diseases of

the plaintiff had been shown by a strong statistical relationship

2)in spite of the fact that advertising of tobacco products had

been misleading, the tobacco companies had not acted in a

negligent way, because the plaintiff had been aware of the health


Assessment of the first tobacco case

1)The causal relationship between smoking and cancer:

what amount of evidences is in practice needed to proof the causal relationship in tobacco liability cases?

smoking is not the only possible reason for these diseases, although it is the most probable reason when the patient has been a heavy smoker

in individual cases it may be in practice impossible to prove that smoking has been the main reason for the plaintiff´s cancer

relevant questions in this context:

should the case be dismissed always when there is even a small possibility that a cancer has not been caused by tobacco

should the evaluation of evidences be based more on the fact which reason has been most probable?

the Finnish Supreme Court chose the latter alternative in 2001: a strong statistical relationship was enough

2)The significance of smoker´s contributory negligence

smoker´s do nowadays certainly know that smoking may cause cancer because of health education and warning labels in each cigarette box

should the compensation be totally or partly denied because of this reason?

the Finnish Supreme Court in 2001: smoker´s own behaviour was a reason to deny the compensation totally

interesting questions in this context are:

how does the smoker`s impression on the size of risk correspond with the real size of the risk?

smoking causes a strong addiction especially after long and continuous use. Is a heavy smoker in a position where he/she is able to make totally free choices any more?

this latter question was not dealt at all in the first case!

The second case: the light cigarette case

four light cigarette smokers took legal action against Amer-YhtymäOyj and British American Tobacco Nordic Oy in March 2005

the plaintiffs claimed that the defendants had, by marketing light cigarettes, given intentionally an impression that smoking of light cigarettes was less dangerous than smoking of ordinary cigarettes

concerning time period after September 1991, these cases are based on Product Liability Act and on strict liability

Finnish Product Liability Act (694/1990)

“This Act applies to the compensation for injury or damage caused by a product

a)to a person

b)property meant for private use and primarily used for such purposes by the injured party” (Art. 1)

“Compensation shall be paid for an injury or damage in case the product has not been as safe as could have been expected” (Art. 3)

Government´s Proposal on Product Liability Act


“an injured person may not claim compensation for damages caused by well-known dangers, such as smoking of tobacco products”

Parliament´s Second Law Committee (II LaVM 4/1990)

because tobacco industry still denies that smoking has negative consequences on health and has not warned consumers on the base of its own initiative, the official warnings (labels in tobacco packets) may not release producers from their liability

attention should also be paid to the strong addiction

caused by continuous smoking

Conclusions on the basis of Law Committee

tobacco is without any doubts a product which is meant in Product Liability Act art. 1 and the Act is applicable also to tobacco products

still open question: is tobacco always a product which is meant in art.3. :”a product which is not as safe as could have been expected (lack of safety)”

The Helsinki Court of First Instance dismissed the case in 2008 for

the following reasons:

1) the plaintiffs were able to prove the causal relationship between smoking and their diseases

2) the lack of safety did not exist as consumers must have been aware of the dangers connected to tobacco products at least starting from 1970´s

3) for the same reason, they had taken a conscious risk by continuing smoking

4) light cigarettes are less dangerous than normal cigarettes, so the marketing of light cigarettes had not been misleading

5) nicotine addiction makes its more difficult to stop smoking, but not impossible

the Helsinki Court of Appeal dismissed the case in May 2010

the plaintiffs sent a leave to appeal to the Supreme Court in August 2010, but cancelled it when they agreed with the tobacco companies that both parties would take care of their own expenses they have had in the previous instances of court

What happens if a plaintiff wins next time?

the general effects may remain quite small, because the so called punitive damages are not known in Finland

tobacco companies have to take into account in their economic calculations the possibility of other similar cases in the future, which might rise the prices of tobacco products

however, it is obvious that the amount of court cases will be quite small because the risk of legal expenses (which in these kinds of principal cases are normally very high)

the public health care system reduces the need to seek monetary compensation by court actions

are the court actions a right way to distribute the costs of tobacco deceases or are other methods, e.g., taxation, more effective?

6 the settlement of individual consumer disputes

6.1. General

Different types of consumer disputes:

1)individual consumer disputes: one consumer against one trader

2)mass consumer disputes : several individual consumers have disputes in which both the facts and norms are identical (mainly against the same trader)

3)domestic and cross-border disputes: the disputing parties have their domicile in the same country (domestic dispute) or in different countries (cross-border dispute)

Domestic Consumer Disputes

consumer disputes in which consumers and traders have their domicile in the same country

in principle there are two alternative ways to settle

individual consumer disputes if the two-party

negotiations between a consumer and a trader have failed:

1) normal civil procedure in a court

2) alternative dispute resolution (ADR) mechanisms,

mainly some kind of out-of-court procedures

civil procedure
Civil Procedure

The basic problem in the normal civil procedure in courts: the

ordinary civil court procedure is in most cases inapplicable for the

settlement of consumer disputes for the following reasons:

1)expenses: the high costs of litigation especially when

compared to the economic interest of the case

  • the cost rules: a losing party is often obliged to pay also the legal expenses of the winner

2)the slowness of the procedure

  • especially because of the appeals to the higher instances

3)psychological barriers: many people are not willing to

participate in a court procedure even if the legal expenses stay

in a moderate level

4)inapplicability to solve mass consumer disputes: in a traditional

system all consumers who want to obtain redress have to take

part in the trial

6 2 alternative dispute resolution
6.2. Alternative Dispute Resolution
  • means alternative to a normal civil procedure, in most cases some kind of out-of court procedure
  • it is possible to identify several different ADR -models in the EU Member States, e.g., the following ones:

1) the Nordic model: public dispute boards

  • established and financed by the state
  • decisions of these boards are only recommendations and cannot be put into force (except in Norway)
  • general jurisdiction: theyhandlecomplaintsconcerningmostsectors of business, includingnon-organisedtraders
  • no firm and fastrulesconcerninghow the procedureshouldbecarried out
  • the procedure is totallywritten: no oralhearings
  • the number of decisionscompliedwith: between70-75 per cent
  • ensuringthatdecisionsareobeyed: the use of badpublicity (Finland), guaranteesgivenbytradeorganisations, etc. (Sweden), enforceabledecisions (Norway): the bestalternative!
2)the Dutch model: the co-operative sectoral boards

the system consists of separate boards in several branches of business

these boards have been established and are run by trade and consumer organisations together

there is a common umbrella organisation, e.g. to issue minimum procedural standards and to distribute economic resources

boards accept only complaints against organised traders

oral hearings usual and the decisions are enforceable

3)the Common law model: simplified court procedure

special simplified procedures in ordinary courts of first instance or totally new and separate courts for small claims

often called as small claims courts or tribunals

originates and still most popular in common law -countries

basic idea: there is no need for lawyers, parties should be able to appear in a court without a legal assistant

in Britain, Ireland and Malta

nowadays possible also in Denmark and Norway

The common features of these courts:
  • the procedure has been made simpler and more informal in comparison to the normal civil procedure
  • the no-cost rule has been adopted
  • the judge should try to mediate in order to achieve a conciliation
  • the possibility of appealing to higher courts is restricted
  • the procedure is available in most civil law disputes, but only if the amount involved does not exceed a certain sum of money

Disappointing experiences concerning small claims courts:

  • they are mainly used in collecting debts by traders
  • attorneys are frequently used in these courts, largely by traders
  • court personnel do not advise the ordinary citizens enough
  • judges find it difficult to change from a passive to an active role

Legal reforms in some countries (at least in Ireland, Australia, New

Zealand and in some states in the USA):

  • the use of attorney's has been prohibited in small claims courts
  • the use of small claims courts in normal debt collecting by traders has been prohibited
4) the Iberian model: consumer arbitration procedure

special arbitration procedure for consumer disputes, especially used in Spain and Portugal

decisions are enforceable

procedure covers only those traders

a)who are members of a certain branch organisation or

b)who have given their acceptance to the procedure in some other way

5) the Central-European model: private sectoral boards

private, sectoral boards established and financed mainly by trade organisations only

common, e.g., in Germany, Belgium and Austria

6) the Baltic model

consumer disputes are solved by administrative bodies, who also has task to protect consumer´s collective interests

administrative fines may be imposed to traders who neglect to comply with the decisions

used in Estonia, Latvia, Lithuania


the quality of ADR –bodies varies a lot between various MSs

one of the biggest problems has been the coverage of ADR-

system: in many countries there exists several branches of

business where consumers have no access to any ADR -body

EU initiatives

in 2013 EU adopted ADR -directive(2013/11/EU, OJ L 165, 18.6.2013)

the purpose of this directive is

oblige MSs to establish an ADR-system which covers all consumer disputes (by using the already existing system, if desired)

small claims courts are not regarded as ADR -bodies

make certain procedural minimum requirements binding (previously regulated only by two recommendations)

the ADR -bodies do not to have to produce enforceable decisions (recommendation or even conciliation is enough)

effects on Nordic countries are much smaller than to the MSs where the ADR-system is based on private, sectoral boards

6 3 group action for compensation
6.3. Group Action for Compensation

Group action is a court action in which

1) a plaintiff, either a member or a non-member of a specified


2) brings a legal action in a court for the benefit of a specified


3) without the express permission of the group members, and

4) this results in a judgement that is binding both for and against

all the members of the group

Based on who the plaintiff may be, group actions may be divided

into three different types:

1) class actions (plaintiff is a private person)

2) actions by organizations (plaintiff is, e.g.,

a consumer or environmental organization)

3) public actions (plaintiff is a state or municipial authority)

In the area of consumer protection, group action can be used:

a) action for injunction

in most European countries action for injunction is available as

a method to protect consumer´s collectice interests

b) action for compensation

at this moment this kind action is still quite rare in Europe outside the Nordic countries

more common outside Europe (the United States, Canada and Australia as most famous examples)

Nordic group actionsfor compensation

1) The Swedish Group Action Act (SFS 2002: 599)

  • entered into force in January 2003
  • more than 10 cases altogether

2) The Norwegian Group Action

  • chapter 35 of the new Norwegian Act on Civil Procedure
  • entered into force in January 2008

3)The Finnish Group Action Act (444/2007)

  • entered into force in October 2007
  • so far no cases

4) The Danish Group Action

  • entered into force in January 2008
  • so far at least one pending case
Scope of application:
  • is in most Nordic countries general: group action is possible in all kinds of civil disputes on the condition that they fulfil the general requirements of group actions, e.g.,

1)it is question of disputes where the facts are identical or at least identical and

2)it is sensible to handle these disputes together in one trial

  • in Finland scope of application is restricted to only mass consumer disputes

Types of group action available

  • in Denmark, Norway and Sweden the plaintiff may be a member of the group (class action), an organisation, who is protecting the interests of a certain group of citizens (action by organisation), or state authority, as the Consumer Ombudsman (public action)
  • in Finland only a public action, in which the CO acts as a plaintiff, is possible
How the group is formed?
  • in group actions judgements have legal effect for all members of the group, although they are not parties to the case
  • there are two opposite ways how the group may be formed: opt out or opt in
  • opt out:
    • all persons who fill certain requirements become automatically members of the group
    • those, who do not want to be members of the group have to use their right to opt out
  • opt in:
    • only those persons, who have joined the group by registration, will be members of the group and will be covered by the judgement.
  • in Sweden and Finland only opt in –alternative is available
  • in Norway and Denmark (in the latter country in public actions only)also opt out -alternative is possible in mass disputes, where individual court actions are not sensible, e.g., due to the fact that the monetary interest of individual cases is so low
The costs of litigation
  • in all Nordic countries the main ruleis that the losing party is obliged to pay the legal expenses of the winner
  • in Finland and Sweden only the parties in the group action are responsible for the costs
  • in Denmark and Norway the members may become partly responsible of the legal expenses
    • the ceiling of members´ liability will be decided by the court already in the beginning of the trial
    • in case the ceiling is individual and not collective, this makes it possible for the potential members of the group to assess, whether it is economically sensible to opt in or not
Evaluation of the Nordic group actions

1) who has afford to a group action for compensation?

The major obstacle to the use of group action for compensation in

the Nordic countries is the high costs of litigation

  • so far there have been rather few cases, e.g., in Sweden only 1-2 new cases per year since 2003

Several possible ways to reduce the high costs of litigation:

a)no members liability as it is now possible in Denmark and


b)ceiling for liability to pay the legal expenses of the winner

c)no-cost rule (so called American rule)

d)conditional fee -payment (no results, no payment -system)

e)public or private funding systems (e.g. in Canada)


2) long duration of the procedure

  • seems also to be one the main problems connected to these actions
  • in Sweden many of the started group actions are still pending cases
  • usual tactics for defendants: a plea of trial and separate appeal on the procedural requirements
  • central questions:
    • whether the defendant should have a right to make a separate appeal in the beginning of the procedure if his plea of trial concerning the preconditions for a group action has been rejected in the District Court
    • whether there should be some kind of priority system in the Courts of Appeal, when these kinds of actions are dealt with

3) the problem of low-value claims

  • in spite of the fact that the combined monetary interest in the mass disputes can be millions of euro, the damages suffered by individual consumers may be rather low
  • this will often discourage consumers to register when a group action is based on opt in -model only
  • one alternative would be the adoption of opt out -model at least when it is question of low-value claims also in Sweden and Finland
  • however, even opt out -model seems to be rather ineffective when the damages caused to individual group members are, e.g., only 100 euro or even less.
  • second alternative: group action for collective compensation of damages (instead of distribution of the profit, the plaintiff e.g. a consumer organisation would keep it in order to finance future actions)
Initiatives in the EU -level

Green Paper on Consumer CollectiveRedress (COM (2008) 794)

the problem to solvemassconsumerdisputeswasclearlyrecognised

severalalternativelegislative option werepresentedfrom no action to bindinglegislation

in laterhearingsconsumerorganisationswere in favour of bindinglegislation, but business representativeswereagainst

CommissionRecommendation on CollectiveRedressMechanisms (2013/396/EU, OJ L 201, 26.7.2013)

collectiveredressmechanisms for compensationactionsshouldbeavailable in allMSs at latest on summer 2015

theseproceduresshouldfollowcertainbasicprinciples set out in the recommendation

attention is paid on the financing of actions, but on a waywhichwillprobablyrise the threshold to start an action instead of loweringit

e.g. the use of no-costrule is forbidden

6 4 cross border consumer disputes
6.4. Cross-border Consumer Disputes

Cross-border consumer disputes:

  • disputes, where a consumer and a trader are domiciled in different countries

Typical problems in cross-border consumer disputes:

1)communicative problems

    • language problems, identification of the trader, etc.

2)what is the applicable law?

3)what dispute settlement bodies are available and have jurisdiction in case the parties do not reach a settlement in two-party negotiations

the applicable law in cross border consumer contracts
The Applicable Law in Cross-Border Consumer Contracts

The Rome I Regulation n:o 593/2008

  • enteredinto force in December 2009
  • replaced the Rome Convention on the Law Applicable to Contractual Obligations from year 1980
    • except in UK and Denmark
  • includes an article concerning consumer contracts (art. 6). According to it, if the trader

1)is carrying on business activities in the country


2)is directing such activities to that country where the consumer has his habitual residence

the contract is governed by the law of that same country

  • a trader cannot deprive the protection given by the Regulation by using a choice-of-law clause
jurisdiction of courts in cross border consumer disputes
Jurisdiction of Courts in Cross-Border Consumer Disputes
  • the starting point: court decisions are traditionally not enforceable in other countries

The Regulation N:o 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (OJ L 12, 16.1.2001)

  • contains a provision (art. 15) which gives protection to consumers if:

1)it is question of credit or instalment contract connected to the sale of goods


2)it is question of consumer contract and the contract has been concluded with a trader who

a) is carrying on business activities


b) is directing such activities

to the Member State where consumer is domiciled

In case one of these conditions is fulfilled:

1) a consumer is entitled to take legal action against a trader in the courts of the Member State where he is domiciled (art. 16.1.)

2) proceedings may be brought against a consumer only in the courts of that Member State where he is domiciled (art. 16.2.)

3) judgment given by the court of the Member State where the consumer is domiciled may be enforced in an other MS where the trader has his domicile or property

European Small Claims Procedure Regulation (EU N:o 861/2007, OL L 199, 31.7.2007)

as a regulation national implementation is not needed

available for cross-border disputes (not necessarily consumer disputes) where the interest does not exceed 2000 euros

legal action is started by filling a special standard form (found in the annex of regulation) and lodging it to the competent court (determined by Bryssel I -regulation) together with the relevant written evidences


1)procedure is written, but an oral hearing has to be arranged if one of the parties insists (art. 5.1.)

2)the standard form should be filled in the language of the court (art. 6.1.)

3)loser pays all expenses –cost rule is applied (art. 16)

due to these problems the practical relevance of this regulation is - for cost reasons - more or less questionable

the european consumer centres network ecc net
The European Consumer Centres Network (ECC-Net)
  • the starting point: in cross-border litigation the costs are normally much higher than in purely domestic litigation and thus form a much higher obstacle to the use of ordinary court procedure
  • ECC-Net started in the beginning of year 2005
  • replaced the former European Extra-Judicial Network (EEJ-Net) which started as a pilot program in October 2001

The ECC -network is based on

1)at least one European Consumer Centre in each

Member State

2)ADR- bodies in all Member States

  • the effects of the new ADR-directive: will the gaps be fulfilled?
The tasks of European Consumer Centres

1)to give legal advice to consumers who have faced cross-border consumer problems

2)to give assistance in the settlement of disputes by clarifying the facts and mediating between the disputing parties

3)to serve as a special clearing house in unsettled cases

a)to find out competent out-of-court dispute settlement

body in MS where trader has his domicile

b)to translate consumer´s complaint and send it to the

competent dispute settlement body in an other MS

the idea is that cross-border disputes will be settled in some of the out-of-court procedures in the Member State where the trader is domiciled

the existing ADR-bodies in MSs may be found in a database which is updated by the Commission:


the out of court settlement of e commerce disputes
The out-of-court settlement of e-commerce disputes

Consumer Online Dispute Resolution (ODR) Regulation (EU N:o 524/2013, OJ L 165, 18.6.2013)

  • will enter into force from the beginning of year 2016
  • is applicable for domestic and cross-border consumer disputes caused by online shopping
  • the EU Commission will establish a special European ODR platform in order to help the settlement of e-commerce disputes
  • ODR -platform is an interactive website which serves as a single point of entry
  • each MS should nominate on ODR -contact point (e.g. their ECC)
  • a special electronic complaint form will be available
  • problems:

1) parties have to agree which ADR-body will solve the case

2) also the chosen ADR-body should agree to solve the case

3) language problems?