Fact sheets
Duty to trade fairly
April 2003
Background to the Issue:
Commissioner Byrne produced a Green Paper on Consumer Protection in October
2001 – which is expected to lead to a proposal for a Directive to
improve an apparent lack of consumer confidence in cross-border trading
in goods and services, online or through traditional methods.
http://europa.eu.int/comm/consumers/policy/developments/fair_comm_pract/fair_comm_greenpap_en.pdf
Before proceeding with a Directive, the Green Paper has been followed
up with a Communication published 11 June 2002. Meanwhile the European
Parliament has yet to give its opinion on the original Green Paper although
Rapporteurs have been appointed and work has just begun. EPC wrote to
the President of the Parliament suggesting he request a standstill until
Parliament had given it’s opinion but he concurred with the view
of Commissioner Byrne that the delay wasn’t important as MEPs would
have plenty of time to give views on the draft legislation itself!
There were several important presumptions running through the original
green paper including:
- There are two markets: one for consumers and one for marketers;
- The existing “internal market” approach has not delivered
a consumer market; country of origin control helps business but does
not give consumers confidence;
- Business has failed to provide sufficient opportunities for consumers
to trade across borders and/or online;
- Consumers who do trade online or outside their home country are not
as confident as they might be because they are not clear about their
rights;
- A legally-defined and enforceable “duty to trade fairly”
would give these consumers the confidence they need;
- Certain forms of advertising are inherently unfair, like marketing
to children etc.
The Green Paper also discussed the opportunities for more flexible regulatory
models including:
- Co-regulation (where regulators define the public interest objectives
and identify the stakeholders who should thereafter negotiate a code)
and
- Self-regulation (which they believe must be based on European level
codes of practice, backed up by legal sanctions).
Latest State of Play
Follow-up Communication
to the Green Paper on EU Consumer Protection
The Communication on consumer protection which follows up the consultation
on the Green Paper on a Duty to Trade Fairly makes the case strongly for
a harmonising directive and claims that there is overwhelming support
for such an approach.
The Commission states:
- A majority of respondents accept the case for reform of EU consumer
protection legislation. The current status quo is holding back the internal
market for consumers and for businesses.
- A majority of respondents would like reform to proceed on the basis
of a framework directive on fair commercial practices. This should be
accompanied by the development of EU-wide self-regulation and other
mechanisms to provide legal certainty and adaptability.
A large majority endorses the Commission’s idea of developing a
legal instrument for cooperation between national enforcement bodies responsible
for consumer protection.
On self-regulation, the response was, not surprisingly mixed:
- A majority of businesses were against the idea of making voluntary
commitments binding. However, some supported the idea, with or without
reservations. The role of nationally based codes raised many questions,
especially from the UK, where codes are more established. There was
support for the Green Paper line that self-regulation should remain
genuinely voluntary but some argued in favour of Commission endorsement
of codes. Some concerns were expressed about making code-owners responsible
for their codes.
- Consumer groups and other respondents were cautiously positive, being
more strongly in favour of making commitments binding. The idea of defining
non-compliance with a commitment as unfair was a critical pre-condition
for their support for self-regulation.
- The Member States were mainly supportive of the use of self-regulation
in general. France called for further consultation. The Netherlands
and the UK supported the idea of self-regulation in consumer protection
in general. The UK argued strongly in favour of public endorsement of
codes. Belgium, Denmark, Sweden and France favour more public involvement
in the negotiation of codes.
Under the proposed framework directive (see below), self-regulation could
be defined in terms of voluntary commitments made public by companies
addressing business-consumer commercial practices. These commitments could
be adopted collectively by an industry sector or an association of companies
or an individual company. A code-owner would need to be defined as the
body responsible for the development of the code (e.g. an association
or the company itself in the case of an individual code). The decision
to join a code would also be voluntary. Further consultation is needed
on whether the framework directive should include an option for the endorsement
of codes by public authorities.
There is also a section on "non-binding guidance" which elaborates
the various options which were contained in the original green paper (also
known as co-regulation). Rules for "stakeholder participation"
are also set out.
The case for Harmonisation is based on a general clause, which could
consist of two core elements: the unfairness of the practice; and a “consumer
detriment test” (developed in the annex). The general clause would
have to be substantiated by a number of specific rules (the “fairness/unfairness
categories”) concerning different stages of the business to consumer
relationship. In order to illustrate and develop further the general clause
and categories, a non-exhaustive list of examples would be drawn up.
The framework directive - in more detail:
- The response to the questionnaire gives a sufficiently clear mandate
to the Commission to pursue the mixed approach and develop a proposal
for a framework directive. There is a strong case for further consultation
on the detail of a framework directive. Elements of a possible framework
directive are set out in the annex as a basis for consultation.
In the Commission’s view, a framework directive should bring about:
- Maximum harmonisation with a high level of consumer protection.
- Simplification and, where possible, deregulation of existing provisions
should be prioritised.
- A balance between legal certainty and adaptability to market circumstances.
For the former, it is essential that the legislation provides a sufficient
level of detail both to genuinely harmonise, and to provide certainty
for business and consumers. It should be clearly drafted to ensure that
questions of interpretation are kept to a minimum. On the other hand,
the legislation should be as ‘time-proof’ and technology-neutral
as possible.
- The scope of the legislation should be based on the concept ‘fair
commercial practices’ rather than the narrower concept of ‘misleading
practices’. It should also be phrased in terms of actions that
are unfair – in other words an obligation not to trade unfairly,
rather than a duty to trade fairly.
- A framework directive should be based on a general clause, which could
consist of two core elements: the unfairness of the practice; and a
“consumer detriment test” (developed in the annex).
- The general clause would have to be substantiated by a number of specific
rules (the “fairness/unfairness categories”) concerning
different stages of the business to consumer relationship. In order
to further illustrate the general clause and categories, a non-exhaustive
list of examples would be drawn up.
- Possible elements of fairness categories include:
– A prohibition on business from engaging in commercial practices
that are misleading or likely to mislead the consumer;
– A duty to disclose to the consumer all material information
which is likely to affect the consumer’s decision;
– A prohibition on the use of physical force, harassment, coercion
or undue influence by business;
– Effective information disclosure and complaint-handling in the
after-sales period.
The Commission states that the primary focus should be on unfair practices
that cause detriment to the interests of consumers as a whole, rather
than individual cases. The legislation should provide that injunctions
could be taken to ensure such unfair practices are withdrawn rapidly.
The legislation would also be linked to the Injunctions Directive.
On the question of country of origin and mutual recognition, the document
says that if an adequate level of harmonisation was achieved, the principles
of mutual recognition and country of origin could also be enshrined in
the framework directive, with the consequence that the Member States would
be prevented from prohibiting commercial practices from other Member States.
The document we’ve seen includes the draft directive in annex and
suggests that further consultation on the questions that remain open should
proceed on the basis of working documents during the rest of the year.
This document is still subject to consultation internally within the Commission.
Not surprisingly some DGs are challenging some of the research findings
as well as the concepts.
Timing:
The Communication, which will allow for further consultation
on a number of key issues which emerged during consultation on the Green
Paper.
A final outcome of the consultation phase is expected in the first half
of 2003 when Greece takes over the EU Presidency. Greece has highlighted
the Duty to Trade Fairly framework document as one of its consumer issue
priorities during its presidency.
EPC Position:
The Commission states in the Communication that there is majority support
from the Member States for a framework directive based on maximum harmonisation.
The fact that Member States are apparently prepared to undertake a radical
overhaul of extensive national consumer protection legislation could lead
to a considerably simpler legal framework in which consumers and business
would operate. This we would support so long as this process was ultimately
de-regulatory as we would not wish to see the imposition of an additional
tier of regulation as the result of a new framework directive. Many of
the existing rules, which masquerade as consumer protection, merely serve
to reinforce various levels of national protectionism rather than delivering
genuine protection for consumers. An important part of a framework directive
would be to remove these.
Our initial support in principle for a general framework directive, based
on maximum harmonisation would be contingent upon the following:
- That it includes a mutual recognition clause so that publishers may
continue to operate according to the rules of their country of origin.
- A radical overhaul of national provisions leads to some de-regulation
and simplification of rules and not further complication and restriction
on businesses’ ability to trade.
- Advertising self-regulation should be recognised as a central part
of delivering a fair trading environment.
- That existing systems of advertising self-regulation may continue
to operate under the auspices of national self-regulatory organisations,
coordinated at the European level through EASA, based primarily on the
global International Chamber of Commerce (ICC) Codes of Practice.
- That there is no mandatory endorsement procedure for codes of practice.
- In the field of advertising, backstop legal powers should be limited
to ‘misleadingness’.
- There should be no attempt to legislate on taste and decency in advertising.
- The directive does not increase the overall level of statutory advertising
restrictions which already apply to advertisers and the media or which
are well covered by self-regulatory rules. In particular in the areas
of advertising to children and advertising of particular product
categories, for example alcohol or over the counter medicines.
- The consumer detriment test should be limited to economic detriment
and should not be applied in such a way as to justify severe restrictions
or a total ban on advertising for any product category, or marketing
to any target group.
- That lists of categories defining fairness/unfairness are strictly
limited.
- The directive does not impose additional liability on publishers for
advertising content that already exists under the eCommerce directive
and national laws and self-regulatory systems.
- That classified advertising and business-to-business advertising are
excluded from the scope of a framework directive.
- That comitology is very strictly limited and completely transparent.
In particular we oppose the establishment of a group which had delegated
powers to embellish rules in the framework directive or elaborate additional
rules (such as the “Article 29” Committee set up under the
1995 Data Protection Directive).
The EPC has joined an ad hoc coalition to voice its concerns on this
proposal.
EPC Position papers available on request from
angela.mills@epceurope.org.
Key players:
Commissioner Byrne
DG SANCO – Corina Thornblom and David Mair
DG Markt – Jean Bergevin
European Parliament Rapporteur: Aileen McCarthy, MEP
Further Links:
Consumer Policy Strategy (2002-2006)
http://europa.eu.int/comm/consumers/policy/intro/consumer_policy_strategy_de.pdf
Responses to the Discussion document "Ideas for a Consumer Policy
Strategy"
http://europa.eu.int/comm/consumers/policy/intro/responses/index_en.html
Fair Commercial Practices
- Responses to the Green Paper on Consumer Protection (updated)
http://europa.eu.int/comm/consumers/policy/developments/fair_comm_pract/responses/responses_en.html
For further information
FOR JOURNALISTS on this or other topics, please contact Heidi Lambert
Communications on Tel: +44 1245 476 265 or
heidilambert@hlcltd.demon.co.uk.
FOR EPC MEMBERS AND GENERAL ENQUIRIES please contact Angela Mills on
Tel: +44 1865 310 732 or angela.mills@epceurope.org.
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