Legal Certainty within the UCP Directive
The objective of legal certainty through market integration is strongly enshrined in the UCP Directive. This objective is even the key justification for the European Union's preference for maximum over minimum harmonization, as the Preamble of the Directive clearly confirms:
The laws of the Member States relating to unfair commercial practices show marked differences which can generate appreciable distortions of competition and obstacles to the smooth functioning of the internal market. [...] These disparities cause uncertainty as to which national rules apply to unfair commercial practices harming consumers' economic interests and create many barriers affecting business and consumers. [.] These obstacles can only be eliminated by establishing uniform rules at Community level which establish a high level of consumer protection and by clarifying certain legal concepts at Community level to the extent necessary for the proper functioning of the internal market and to meet the requirement of legal certainty.
Consequently, the unfairness standard laid down in the Directive is intended to replace all pre-existing national standards with a uniform EU standard in order to promote the security and predictability of business-to-consumer commercial transactions. It is in this sense that the multi-facetted notion of legal certainty is used throughout the UCP Directive. Article 3(5) confirms that Member States will only be able to maintain in force 'national provisions within the field approximated by this Directive which are more restrictive or prescriptive than this Directive and which implement directives containing minimum harmonization clauses' for a transition period of six years as of 12 June 2007 and provided that they are 'essential to ensure that consumers are adequately protected against unfair commercial practices' and 'proportionate to the attainment of this objective'. The transition period expired on 12 June 2013. Furthermore, by virtue of the internal market clause contained in Article 4 of the UCP Directive, Member States cannot restrict the free movement of goods or services for reasons falling within the field it harmonizes. There are only two areas explicitly identified in the Directive where Member States may impose requirements which are more restrictive or prescriptive: financial services and immoveable property. How does the Directive fare in light of this rhetoric? The assessment will distinguish the general clauses of unfairness and the black list of unfair commercial practices.
The General Clauses of Unfairness as a Source of Fragmentation?
The Directive is extremely broad in scope in that it prohibits all business-to-consumer commercial practices before, during and after a commercial transaction. It is 'horizontal in nature' and 'covers the totality of business-to-consumer transactions whether offline or online involving both goods and services'. The ambition is clear: to establish a uniform level playing field.
Nevertheless, the general unfairness clause and the two sub-clauses remain open to interpretation: what should be the standard of special skill and care to be expected from a trader? What constitutes an honest market practice and conduct in good faith? The use of general clauses is not unheard of in EU consumer law, and it should not necessarily be a cause for concern. It remains that the use of such loose concepts raises serious doubt as to whether the UCP Directive will suppress the fragmentation of consumer protection rules on unfair commercial practices in the European Union, irrespective of the fact that it is a measure of maximum harmonization. The degree of fragmentation may be reduced over time if the Court is called upon to interpret key notions of the UCP Directive and provides the necessary guidance to national authorities. In theory, concepts such as unfairness, professional diligence or good faith could be interpreted in a way that would allow (and even oblige) national courts to apply them uniformly from one Member State to another. It is, however, unlikely to be so, first because of the decentralized application of EU law by national courts or other competent authorities and secondly because of the reluctance the Court has shown to date to provide detailed guidance in preliminary rulings.
In effect, the Court's case law suggests that the interpretation of the general unfairness clause and the two sub-clauses on misleading and aggressive practices will continue to vary significantly from one Member State to another, depending on pre-existing rules and traditions in place at national level. For example, after holding in Mediaprint that Austrian law did not fit within the regulatory framework set up by the UCP Directive, the Court was called upon to determine whether the commercial practice under review could be regarded as unfair. The Court repeated that a practice could only be regarded as unfair after a specific assessment in light of the criteria set out in Articles 5 to 9 of the UCP Directive and stated:
The fact that, for at least part of the public concerned, the possibility of participating in a competition represents a determining factor in the purchase of the newspaper constitutes one of the factors which the national court may take into account when making such an assessment.
That fact may lead the national court to consider that the commercial practice in question materially distorts or is likely to materially distort the economic behaviour of the consumer, within the meaning of Article 5(2) of the Directive.
However, that fact does not in any way lead in itself to the conclusion that a sale with a bonus constitutes an unfair commercial practice within the meaning of the Directive. For that purpose, it must also be verified whether the practice in question is contrary to the requirements of professional diligence within the meaning of Article 5(2) of the Directive.
The Court did not provide further guidance on the scope of the general unfairness clause in this case; it simply stated the obvious: to be held unfair, not only should a practice materially distort or be likely to materially distort the economic behaviour of the average consumer, but it should also be contrary to the requirements of professional diligence.
More recent case law indicates similar trends. For example, in its ruling in Köck, which involved the Austrian legislation requiring that prior authorization be obtained before announcing a clearance sale, the Court ruled that the Directive must be interpreted as precluding a national court from ordering the cessation of a commercial practice not covered by Annex I to the Directive on the sole ground that the practice had not been the subject of prior authorization by the competent administrative authority, without itself carrying out an assessment of the unfairness of the practice in question against the criteria set out in Articles 5 to 9 of the Directive. However, the Court did not engage at all with the extent to which requiring a prior authorization for clearance sales could constitute an unfair commercial practice, leaving the matter to be exclusively determined by the national referring court.
In its decisions involving what would constitute a misleading commercial practice more specifically, the Court has appeared slightly more forthcoming. In Ving, which involved the interpretation of Article 7 of the Directive on misleading omissions, the Swedish Consumer Ombudsperson initiated court proceedings against the travel agency Ving on the ground that one of its commercial communications advertising a trip to New York was an invitation to purchase containing a misleading omission insofar as it did not provide sufficient information on the main characteristics of the trip, including the price. The national court referred seven questions to the Court, and asking in particular whether Article 7(4) (a) meant that it was sufficient or only certain of a product's main characteristics to be given and for the trader to refer in addition to its website, on condition that on that site there was essential information on the product's main characteristics, price and other terms in accordance with the requirements in Article 7(4). After noting that this Article referred to the main characteristics of the product without defining that notion or providing an exhaustive list, the Court stated that it was for the national court to assess, on a case-by-case basis, taking into consideration the context of the invitation to purchase, the medium of communication used and the nature and characteristics of the product, whether a reference only to certain main characteristics of the product enabled the consumer to take an informed transactional decision. Even though the Court gave more guidance in Ving than it did in Mediaprint, it remains that its lack of detailed guidance is unlikely to foster a uniform application of the UCP Directive across the European Union.
In its recent CHS Tour Services judgment, the Court has clarified that if a commercial practice satisfies all the criteria expressly set out in the provisions of the UCP Directive specifically governing misleading practices, it is not necessary to determine whether such a practice is also contrary to the requirements of
professional diligence as referred to Article 5 of the Directive in order for it legitimately to be regarded as unfair and, therefore, prohibited. This is because the misleading nature of a commercial practice derives solely from the fact that it is untruthful inasmuch as it contains false information or that, generally, it is likely to deceive the average consumer in relation to, inter alia, the nature or main characteristics of a product or a service and that, therefore, it is likely to cause that consumer to take a transactional decision that he would not have taken if there had been no such practice. Thus, the constituent features of a misleading commercial practice are in essence expressed with reference to the consumer as the person to whom unfair commercial practices are applied. This judgment is helpful to determine the relationship between the general clause of unfairness and the two general sub-clauses on misleading and aggressive practices. However, it does not explain how notions such as unfair, misleading or aggressive should be interpreted and therefore only contributes to a limited extent to reducing the uncertainty stemming from the use of general clauses.
One may ask whether this lack of certainty really matters. EU consumer policy has always been characterized by a certain degree of fragmentation. Fragmentation is not necessarily problematic in itself. One may even argue that such fragmentation may be seen as an expression of the principle of subsidiarity, that is, a way to strike a balance between national diversity and the demands of the internal market. An alternative way to look at the problem may be to argue that the application of the fairness criteria to specific cases is a question of fact, rather than a question of law. As De Vries has argued:
it is unrealistic to assume that general clauses will be interpreted similarly in all Member States. However divergent national interpretations of a directive do not necessarily conflict with the aim for maximum harmonization. The statement that full harmonization cannot be established due to divergent national applications is [.] based on a misperception of what constitutes maximum harmonization. First, [...] the Commission's notion of maximum harmonization is highly a political statement, expressing an aspiration rather than a legal reality. Furthermore, it is posited that maximum harmonization establishes a legal framework that offers a uniform legal benchmark for all Member States but does not harmonize the content of this benchmark. The legal framework is uniform in the sense that it prescribes all relevant legal criteria. However, it is primarily up to the national courts to decide on the content of these criteria.
This view may at first sight help resolve the question as to whether it is a contradiction in terms to harmonize fully the law of business-to-consumer unfair commercial practices through the use of general clauses. However, De Vries' argument brings a few comments to mind. Firstly, it is difficult to suggest that the Commission's explicit choice for maximum harmonization is a political aspiration rather than a legal reality, bearing in mind the changes that the UCP Directive has led to in national laws across the European Union. One only needs to read the Court's case law in cases such as VTB, Plus Warenhandelsgesellschaft, Mediaprint or Köck to grasp the very practical consequences for Member States' legal systems of the move from minimum to maximum harmonization. Secondly, and directly related to our argument, if the Court is not willing to engage more thoroughly with the interpretation of the general clauses and its two sub-clauses, the promises of the UCP Directive are bound to remain empty promises. The Directive was supposed to herald a new era, where different national rules would be replaced by a unique EU standard. One may therefore argue that the Court's reluctance to provide detailed guidance to national courts is somewhat at odds with the fact that it has otherwise embraced the intention of the EU legislature to reduce regulatory fragmentation. It is true that the mechanism of maximum harmonization is intended to constrain national authorities by preventing them from adopting more protective standards at national level, without necessarily constraining the Court itself. Moreover, one could argue that expecting the Court to determine how the general clauses should apply to specific cases could lead to an unmanageable multiplication of preliminary references. Nevertheless, if the objective of the UCP Directive to reduce market fragmentation and thereby increase business and consumer confidence is to be achieved, one may legitimately expect the Court to give far more detailed guidance to national courts entrusted with the application of its provisions than it would have done for a text of minimum harmonization. This does not necessarily mean that the Court should engage in applying the legal concepts on which the uniform interpretation of the Directive rests to specific cases. This is the role of national courts. Rather, it is suggested that the Court should help delineate the scope of these overtly loose concepts and provide the interpretative guidance which national courts and other national authorities need to apply the Directive as consistently across Member States as possible. Member States, traders and consumers should know what the meaning of a specific rule is if maximum harmonization is to have any practical advantage (that is, cutting down on transaction and legal costs when engaging in cross-border transactions). Clarity and predictability are two inherent components of legal certainty. The question of how likely it is that maximum harmonization may be achieved through the use of general clauses remains. Even though the general clauses of the UCP Directive only play a subsidiary role in the assessment of the compatibility of a national measure with its provisions, the Court's case law to date tends to confirm that they are likely to constitute an obstacle to the fulfillment of the Commission's expectations that:
[h]armonisation will considerably increase legal certainty for both consumers and business. Both consumers and businesses will be able to rely on a single regulatory framework based on clearly defined legal concepts regulating all aspects of unfair commercial practices across the EU. The effect will be to eliminate the barriers stemming from the fragmentation of the rules on unfair commercial practices harming consumer economic interests and to enable the internal market to be achieved in this area.
-  Recitals 3 to 5. Emphasis added.
-  Art 4. The significance of this clause is difficult to define, as discussed by A Bakardjieva-Engelbrekt, EU Marketing Practices Law in the Nordic Countries: Consequences of a Directive on Unfair Business-to-Consumer Commercial Practices (Helsinki: Nordic Council of Ministers Committee on Consumer Affairs, January 2005) 14-23, and by H Micklitz, 'Minimum/Maximum Harmonisation and the Internal Market Clause', in G Howells, H Micklitz and T Wilhelmsson, European Fair Trading Law: The Unfair Commercial Practices Directive (Aldershot: Ashgate, 2006), 27.
-  Art 3(9). In its First Application Report, the Commission considered that there was 'no case for removing this limitation, whether in relation to financial services or in relation to immoveable property', see (n 1) 4.
-  Art 3(1).
-  First Application Report (n 1) 2.
-  For example, art 3(1) of Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts  OJ L95/29, provides that 'a contractual term which has not been individually negotiated shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer'.
-  It is arguable that the risk of divergences is exacerbated in the Member States that have entrusted the implementation, the interpretation and the application of the UCP Directive in national law to a multitude of administrative authorities alongside national courts.
-  Case C-540/08 Mediaprint  ECR I-10909.
-  At paragraphs 44 to 46.
-  Case C-206/11 Köck, judgment of 17 January 2013, at paragraph 50.
-  Case C-122/10 Ving  ECR I-3903.
-  At paragraphs 50 to 59.
-  Case C-435/11 CHS Tour Services GmbH v Team4 Travel GmbH, judgment of 19 September 2013.
-  The documents published by the Commission since the Directive was adopted leave no doubt as to how important it regards 'uniformity' for legal certainty and the functioning of the internal market. The publicly accessible EU database the Commission has developed may be useful in this quest, but it cannot compensate for the lack of detailed guidance from the Court: https://webgate.ec.europa.eu/ucp.
-  A De Vries, 'The Aim for Complete Uniformity in EU Private Law: An Obstacle to Further Harmonization' (2012) 20(4) European Review of Private Law 913, at 923.
-  Joined Cases C-261 and 299/07 VTB-VAB  ECR I-2949.
-  Case C-304/08 Plus Warenhandelsgesellschaft  ECR I- 217.
-  Case C-540/08 Mediaprint  ECR I-10909.
-  Case C-206/11 Köck, judgment of 17 January 2013.
-  For a similar argument, see I Otken Eriksson and U Oberg, 'The Unfair Commercial Practices Directive in Context', in S Weatherill and U Bernitz (eds), The Regulation of Unfair Commercial Practices under EC Directive 2005/29: New Rules and New Techniques (Oxford: Hart Publishing 2007) 100. One may therefore add the level of harmonization pursued by an EU harmonizing measure to the list of criteria very usefully identified by Tridimas to distinguish between what he calls 'deference cases', 'guidance cases' and 'outcome cases' in the context of preliminary rulings: T Tridimas, 'Constitutional Review of Member State Action: The Virtues and Vices of an Incomplete Jurisdiction' (2011) 9 International Journal of Constitutional Law 737.
-  See also to this effect S Whittaker, 'Unfair Contract Terms and Consumer Guarantees: The Proposal for a Directive on Consumer Rights and the Significance of Full Harmonisation' (2009) 5 European Review of Contract Law 244.
-  Recital 18, UCP Directive.