The Blacklist of Unfair Commercial Practices: The Black Sheep, Red Herring or White Elephant of the Unfair Commercial Practices Directive?
Introduction: Buy a Pig in a Poke
The Unfair Commercial Practices Directive (UCP Directive), which aims at the full harmonization of the Member States' regulations prohibiting business-to-consumer (B2C) unfair commercial practices, was structured to comprise a general clause and specific provisions on misleading and aggressive commercial practices. Following the prohibitions in the core text of the UCP Directive and therefore almost inconspicuously, the European legislator has additionally attached as Annex I a list of commercial practices which are in all circumstances considered unfair. Due to the per se character of the prohibitions, Annex I is called, also by the Commission itself, the blacklist of unfair commercial practices. It is known as such in all the languages of the Member States, e.g., as Schwarze Liste der unlauteren Geschäftspraktiken in German or czarna lista nieuczciwych praktyk handlowych in Polish.
Meanwhile, notwithstanding its seemingly supplementary character, it is Annex I that has proved to be the key item of the UCP Directive. Despite having the strongest impact on the national laws on unfair competition and being the
Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 Concerning subject of 11 from 20 ECJ preliminary rulings concerning the UCP Directive, among which nine rulings highlight the consequences of the blacklist and only two in which the ECJ interprets a particular provision of Annex I, the blacklist remains enigmatic and misunderstood.
The European Blacklist: Dark Horse or Wolf in Sheep's Clothing
The blacklist is not a legislative surprise at the European level, although its concept has significantly evolved. The idea of a list of unfair commercial practices was introduced in the Green Paper on European Union Consumer Protection (2001). The Commission suggested a non-binding practical guidance in the form of recommendations or an indicative list. According to the Green Paper, such guidance, even if not legally binding, could, ensuring the common approach, enhance certainty and reduce the risk of fragmentation caused by the divergent interpretation by national courts. It was, moreover, praised for establishing a more formal link to the underlying legislation than this of the similar list used in the Unfair Contract Terms Directive. The Commission and the Member States were supposed to update that list by means of a regulatory committee.
The respondents to the Green Paper showed little enthusiasm for these plans. Whereas 61 participants were in favour of such guidance, 19 were against and 89 either did not express their opinion or requested further information. Of the then 15 Member States, 10 supported the use of the guidance. Even the consumer groups were divided (15 in favour, 1 against, 17 no view), and business associations even more (19 in favour, 17 against, 52 no view). The opponents feared that the guidance would not solve the problem of fragmentation and expressed concerns about how it would work in practice. Nevertheless, when formulating the elements of a potential directive, the Commission still emphasized the illustrative, non-exhaustive, but also non-binding character of the list.
Unexpectedly, the proposal for the UCP Directive (2003) did not contain a non-binding list of commercial practices, but an annexed blacklist, imposing an ex ante prohibition on some specific commercial practices which should be deemed to be unfair in all Member States. This solution was meant to contribute to legal certainty and consumer confidence.
The nature of the list as well as the form of an annex were maintained by recital 17 of the Preamble and Article 5(5) of the UCP Directive, according to which: 'Annex I contains the list of those commercial practices which shall in all circumstances be regarded as unfair. The same single list shall apply in all Member States and may only be modified by revision of this Directive.'
Both the principles of the blacklist and its formal expression seem to be relatively clear and simple. Firstly, all commercial practices from Annex I are considered to be unfair and are therefore prohibited without a case-by-case assessment against the provisions of Articles 5 to 9 of the UCP Directive. It is thus precluded to analyse the unfairness of a blacklisted commercial practice, in particular as regards its contrariness to the requirements of professional diligence and the existence of a material distortion of the economic behaviour of consumers, i.e., identifying whether it constitutes a misleading or aggressive practice. The duty to prohibit a blacklisted commercial practice irrespective of its influence on consumer decision is the most visible characteristic of Annex I. Its aim is to clear the market from 31 types of commercial practices even if they do not distort the behaviours of the addressed public. Secondly, the same blacklist shall apply in all Member States. Hence, national laws are to impose a prohibition on all of the 31 blacklisted commercial practices, but only and exactly the ones appearing on the blacklist. Thirdly, Annex I is meant to be a complete list of commercial practices banned per se. The exhaustive character of the blacklist is strengthened by the fact that it can be modified only through a revision of the UCP Directive. Consequently, the Member States are not empowered to amend Annex I by themselves and to apply the blacklist to similar, but not identical cases. And fourthly, any assessment will, in the first place, have to be made against the blacklisted prohibitions. Only if an evaluated commercial practice is not on the list, it may be examined with regard to its compliance with the small general clauses in Articles 6 to 9 of the UCP Directive. Should the analysed commercial practice be assessed neither as misleading nor as aggressive, it may finally be evaluated on the basis of the big general clause set out in Article 5 of the UCP Directive.
As regards the formal concept of the blacklist, its specific nature is reasonably expressed in its being a separate piece only annexed to the UCP Directive. Originally proposed as a short blacklist of 19 prohibitions, Annex I has expanded during the legislative process. The Member States have managed to blacklist a remarkable number: 31 commercial practices. Yet, the long Annex I is divided into two parts covering 23 misleading and 8 aggressive practices. The distinction between misleading and aggressive practices is an evident consequence of the structure of the UCP Directive - only these forms are prohibited by the specific provisions of Articles 6 to 7 and Articles 8 to 9 of the UCP Directive, respectively. The uniform character of Annex I has, however, not been disturbed by this division due to the uniform and continuous numbering of the practices from 1 to 31.
Thus, the simplicity of the blacklist of unfair B2C commercial practices is deceptive. Annex I has revealed diverse confusing features and consequences.
The presumption that the blacklisted commercial practices always materially distort the decision making of average consumers and are contrary to the requirements of professional diligence means that protection is in fact provided to each consumer, not to the average one. Yet, it is the standard of the average consumer, derived from the judgments of the ECJ, which was meant to serve as a benchmark for the UCP Directive. Subsequently, protecting all consumers in general might not be in line with the principle of proportionality, and does not necessarily guarantee an effective application of the law. Surely, some commercial practices would not have been prohibited if the material distortion test was applied. It means that some practices would have remained fair if an assessment was possible. Some room is, however, left for the application of a case-by-case assessment as it was moved from the evaluation of unfairness to the appraisal of the facts of the case.
Furthermore, the idea of a single and exhaustive list can easily lead to focusing the attention only on the method of modifying Annex I. There is, however, the other side of the coin. The legislative competences of the Member States have been notably limited in the area covered by the UCP Directive. The rule that Annex I may be changed only in the same way as the rest of the UCP Directive not only precludes the adoption of new blacklisted practices or the modification of the existing ones by the Member States, but also has a strong impact on other national regulations, even those that seem to be far removed from the law on unfair B2C commercial practices. To prove the importance thereof it is sufficient to mention that almost all of the ECJ judgments following the preliminary questions of national courts were dealing with exactly this effect of the UCP Directive and its Annex I. The ECJ has repeatedly confirmed that the blacklist precludes Member States from applying national regulations which prohibit a commercial practice without a case-by-case assessment against the provisions of Articles 5 to 9 of the UCP Directive, except for the blacklisted ones. Moreover, such regulation will be seen as contrary to the UCP Directive, irrespective of the exceptions contained therein, as they do not eliminate the necessity of conducting an unfairness test in a particular case. The national court also may not order the cessation of a commercial practice not listed in Annex I only on the grounds that the practice has not been the subject of prior authorization by the competent administrative authority. Additionally, it has to be noticed that a national regulation falls within the scope of that rule even if it aims at protecting the interest of consumers from unfair B2C practices only partly, in parallel with other aims. The problem requires serious consideration as all national provisions that the ECJ found to be non-compliant with the UCP Directive imposed per se prohibitions on various forms of combined offers or announcements about price reductions and sales, not necessarily for reasons limited to consumer protection. The Member States claimed that they wanted to protect competitors or even to maintain the pluralism of the press. It is evident both from the similarity of the national regulations and the frequency of the appearance of such provisions that the problem cannot be simply put down to a country-specific attitude to unfairness.
In light of the above, the doubts concerning the formal aspect of the blacklist may seem to be relatively unimportant. Yet, their impact on everyday practice should not be underestimated.
The choice to include the blacklist in the form of an annex cannot be excessively criticized, even though this way it is easy to simply overlook it at first. However, the rather lengthy list in Annex I which covers 31 per se prohibitions brings back the question whether the B2C unfairness has not been overregulated and whether all of the practices mentioned there deserve to be blacklisted. The question why per se prohibitions were imposed on these particular commercial practices also raises doubts. One could argue that the EU legislator wanted to prohibit the most important, the most common or the most unfair B2C commercial practices. Some blacklisted practices occur very frequently indeed, e.g., describing a product as 'gratis', 'free', 'without charge' or similar if the consumer has to pay anything other than the unavoidable cost of responding to the commercial practice, which is prohibited by point 20 of Annex I. But then again, no comparable importance can be attributed to some types of commercial practices, like those related to the language of the after-sales service, prohibited under point 8, or those concerning the presentation of rights given to consumers in law as a distinctive feature of the trader's offer, which are banned under point 10 of the blacklist.
Misleading and aggressive practices, as distinguished in the blacklist, are not the only forms of unfair commercial practices. It is the purpose of the general clause to identify and prohibit commercial practices, which irrespective of being non-misleading and non-aggressive may still be considered unfair. The blacklist neglects this problem and by prohibiting only misleading and aggressive practices creates the impression that those are the only unfair forms of unfair competition. Moreover, although all blacklisted commercial practices must be considered unfair without a case-by-case assessment, the classification of a given commercial practice as being either misleading or aggressive is not irrelevant, at least from the point of view of the ECJ. The misleading character of the commercial practice prohibited under point 31 was strongly contested in an extensive reasoning of the ECJ.
Furthermore, the impression that the obligation to implement a uniform list of prohibitions automatically leads to a uniform application of Annex I is of illusory nature. The minutely detailed prohibitions contain many unclear and undefined notions. The problem is strengthened by the fact that national blacklists implement Annex I in various ways. Not only does it cause uncertainties in applying a blacklisted prohibition to a particular case but it also creates difficulties in determining the factual limits of the per se prohibitions. A wide interpretation would expand the blacklist to other commercial practices, which it is not allowed at the national level. Moreover, the wording used in Annex I does not preclude the need to assess a case in accordance with the understanding of an average consumer, even though, as stated above, the blacklist theoretically protects each consumer. Although the material distortion test is not a relevant precondition to ban a blacklisted commercial practice, the use of the average consumer's standard is necessary to determine whether a prohibited practice has actually taken place, i.e., whether an impression has been created. Because of the dissimilar application of the average consumer test, the same commercial practice might be banned by some national enforcers and at the same time be permitted by others.
The concept of Annex I to the UCP Directive has, thus, resulted in the creation of an exceptionally strong and, at the same time, extremely equivocal legal instrument that serves both as a starting and a reference point for the national blacklists.
-  The research leading, inter alia, to this article has been financed by the National Science Centre (Narodowe Centrum Nauki) in Poland on the basis of decision No DEC-2011/01/B/HS5/00509.
-  Unfair Business-to-Consumer Commercial Practices in the Internal Market and Amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council ('Unfair Commercial Practices Directive') (2005) OJ L149/22.
-  Commission, 'Guidance on the Implementation/Application of Directive 2005/29/EC on Unfair Commercial Practices' (2009) SEC 1666, 51.
-  Rulings concerning Annex I: Joined cases C-261/07 and C-299/07 VTB-VAB and Galatea  ECR I-2949; case C-304/08 Plus Warenhandelsgesellschaft  ECR I-217; case C-522/08 Telekomunikacja Polska  ECR I-2079; case C-540/08 Mediaprint Zeitungs- und Zeitschriftenverlag  ECR I-10909; case C-288/10 Wamo (ECJ, 30 June 2011); case C-126/11 Inno (ECJ, 15 December 2011); case C-428/11 Purely Creative (ECJ, 18 October 2012); case C-206/11 Köck (ECJ, 17 January 2013); case C-343/12 Euronics Belgium (ECJ, 7 March 2013); case C-391/12 RLvS (ECJ, 17 October 2013); case C-515/12 4finance (ECJ, 3 April 2014). See for more on the rulings concerning Annex I Monika Namyslowska, 'Trifft die Schwarze Liste der unlauteren Geschäftspraktiken ins Schwarze? Bewertung im Lichte der EuGH-Rechtsprechung' (2010) GRUR Int. 1033.
-  Commission, Green Paper on European Union Consumer Protection. COM (2001) 531 final.
-  Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts  OJ L95/29.
-  COM (2001), 531 final, point 4.5.
-  Commission, 'Follow-up Communication to the Green Paper on EU Consumer Protection' COM (2002) 289 final, point 18, Annex I points II and IV, Annex II.
-  Commission, 'Proposal for a Directive of the European Parliament and of the Council Concerning Unfair Business-to-Consumer Commercial Practices' COM (2003) 356 final, 9.
-  See e.g., Thomas Wilhelmsson, 'Misleading Practices', in Geraint Howells, Hans-Wolfgang Micklitz, Thomas Wilhelmsson, European Fair Trading Law: The Unfair Commercial Practices Directive (Ashgate, 2006) 159; Frauke Henning-Bodewig, 'Die Richtlinie 2005/29/EG über unlautere Geschäftspraktiken' (2005) GRUR Int. 629, 631. Compare with the ruling of the German Supreme Court (Bundesgerichtshof) I ZR 134/10 -Auftragsbestätigung (17 August 2011); Inge Scherer, 'Zum Anwendungsbereich von Nr. 29 des UWG-Anhangs ("Schwarze Liste")' (2012) WRP 139.
-  SEC (2009) 1666, 62.
-  COM (2003) 356 final, point 30, 9.
-  Hugh Collins, 'Harmonisation by Example: European Laws against Unfair Commercial Practices' (2010) 73 Modern Law Review 89, 96.
-  SEC (2009) 1666, 9.
-  Recital 18 of the Preamble of the UCP Directive.
-  Jochen Glöckner, Frauke Henning-Bodewig, 'EG-Richtlinie über unlautere Geschäftspraktiken: Was wird aus dem "neuen" UWG?' (2005) WRP 1311, 1323.
-  Joined cases C-261/07 and C-299/07 VTB-VAB and Galatea, paras 61-62; case C-304/08 Plus Warenhandelsgesellschaft, paras 49-51; case C-522/08 Telekomunikacja Polska, para 31; case C-540/08 Mediaprint Zeitungs- und Zeitschriftenverlag, para 35; case C-288/10 Wamo, para 38; case C-126/11 Inno, para 31; case C-206/11 Köck, para 35; case C-343/12 Euronics Belgium, para 29.
-  Joined cases C-261/07 and C-299/07 VTB-VAB and Galatea, paras 64-65; case C-304/08 Plus Warenhandelsgesellschaft, paras 53-54; case C-540/08 Mediaprint Zeitungs- und Zeitschriftenverlag, paras 39-40.
-  Case C-206/11 Köck, para 50.
-  Case C-304/08 Plus Warenhandelsgesellschaft, para 38.
-  Case C-540/08 Mediaprint Zeitungs- und Zeitschriftenverlag, para 39.
-  Jules Stuyck, Evelyne Terryn and Tom Van Dyck, 'Confidence through Fairness? The New Directive on Unfair Business-to-Consumer Commercial Practices in the Internal Market' (2006) 43 CMLRev. 107, 130.
-  Bert Keirsbilck, The New European Law of Unfair Commercial Practices and Competition Law (Hart Publishing, 2011) 387.
-  Particular prohibitions of Annex I are named "paragraph" in English (e.g., judgment in case C-428/11 Purely Creative and Others), "number" (e.g., SEC (2009) 1666) or "item" (e.g., Database https://webgate.ec.europa.eu/ucp). At present, however, the notion "point" prevails.
-  See https://webgate.ec.europa.eu/ucp for numerous decisions of national courts and authorities on e.g., point 20 of Annex I.
-  Stuyck, Terryn, Van Dyck (n 22) 132; Rogier W. de Vrey, Towards a European Unfair Competition Law. A Clash Between Legal Families (Martinus Nijhoff Publishers, 2006) 70; Fernando Gomez, 'The Unfair Commercial Practices Directive: A Law and Economics Perspective' (2006) 2 ERCL 4, 23.
-  Keirsbilck (n 23) 397-398.
-  See more in point 4.
-  Christopher Wadlow, 'The Emergent European Law of Unfair Competition and Its Consumer Law Origins' (2012) IPQ 1, 5.
-  See more in point 4.
-  For example, when assessing an advertisement as compliant or not with point 17 of Annex I, which prohibits the practice of falsely claiming that a product is able to cure illnesses, dysfunction or malformations, the Competition Council of the Republic of Lithuania has stated that an average consumer links a doctor's recommendation with the use of medicines rather than cosmetics. See the decision of the Competition Council of the Republic of Lithuania (11 February 2010) National ID: 2S-5, https://webgate.ec.europa.eu/ ucp.
-  E.g., points 9, 21, 22 of Annex I to the UCP Directive.