Codes of Conduct as Benchmark of Fairness
2.3.1 Compliance with a code
The breach of a firm commitment in a code constitutes a misleading practice for it deceives the consumer and breaches his trust. The question is to what extent, according to the directive, codes also help define the (un-)fair content of a trade practice, irrespective of a trader's adherence to them. To what degree can codes flesh out the directive's general clauses?
The general fairness clause is built upon two concepts. According to article 5(2) an unfair commercial practice is contrary to the requirements of professional diligence [... and ...] materially distorts or is likely to materially distort the economic behaviour with regard to the product of the average consumer whom it reaches or to whom it is addressed, or of the average member of the group when a commercial practice is directed to a particular group of consumers.
The professional diligence requirement is defined in article 2(h) as 'the standard of special skill and care, which a trader may reasonably be expected to exercise towards consumers, commensurate with honest market practice and/or the general principle of good faith in the trader's field of activity'.
The professional diligence requirement is founded on a combination of customary and normative criteria. The normative criteria ensure that the business community does not itself determine the minimum content of the honest market practice standard. In the build-up to the UCPD, the Commission relinquished the regulatory technique consisting of offering codes of conduct the status of 'safe harbor' (unlike the 'New Approach' to technical standards). Under the directive, compliance with a code of conduct does not entail (virtual) immunity against the charge of unfair commercial practice. It does not even lead to a 'presumption of conformity' with the legal standard. It has been suggested that a presumption of conformity would not be feasible for codes of conduct anyway, since compliance with the open-textured standards of a code cannot easily be measured and controlled.
Not even codes that have been devised in consultation with consumer organizations or approved by a relevant public authority are presumed to be fair. There are no provisions that lay down criteria 'fair' codes of conduct should meet. Neither are there any directive provisions that tackle unfair codes as such (whilst the trader subscribing to the code would himself be immune from legal challenge). The directive does not hold accountable a trade association that devises a code that promotes or contains unfair practices. It leaves it to each Member State to decide 'whether legal facilities may be directed against a code owner where the relevant code promotes non-compliance with legal requirements' (article 2nd section [b]). The Commission thereby meant to avoid the risk that trade associations would become reluctant to draft codes.
Compliance with a code (and definitely with a publicly approved, widely established and reputable code) nevertheless provides strong evidence of compliance with the duty to trade fairly. This is expressed in recital 20 of the preamble to the directive.The Court of Justice of the European Union (CJEU)
Recital 20 suggests that consumer organizations be involved in the drafting of codes of conduct. Arguably, the involvement of consumer organizations in the drafting of codes would confer legitimacy upon them has not yet provided for an autonomous interpretation of the professional diligence requirement but the Commission Guidance states that high standards, which are widely supported and largely complied with, 'may be a useful term of reference for national authorities and courts in assessing whether, in a concrete case, a commercial practice is unfair'.
2.3.2 Non-compliance with a code
In 2006, Howells expected codes to prove more 'useful' in providing evidence that a practice is unfair than in establishing its fairness and clearing the trader whose practice is being investigated. According to him, it is indeed more acceptable for code owners to set the 'minimum standards' consumers may reasonably expect than 'to set a cap on what the law accepts'. Since under the directive, code owners may apply their own higher standards and are most likely to do so, codes will however generally entail everything but a low standard. Compliance with a code of conduct may well not exonerate the trader, but non-compliance does inversely not automatically incriminate him. A trader failing to comply with a code of conduct he has not undertaken and indicated to be bound to will not necessarily breach the requirements of professional diligence. This trader might still behave in accordance with the legal standard. Codes are not subjected to full harmonization and may reflect more stringent views on what the fairness standard entails. The purpose of most codes of conduct is to set out good trading practices towards consumers that exceed legal requirements. Code owners are allowed and even spurred to raise the level of protection required by the UCPD.
Although consumers and code-abiding traders would largely benefit from this approach, requiring traders to follow the most demanding private standards would have anti-competitive effects and bar new entrants from the market. It is therefore not allowed to hold uncommitted traders to a self-regulatory ban on certain practices, without testing their commercial practices against the UCPD clauses. Public supervisory bodies and courts using a code as a benchmark of fairness should, in light of the maximum harmonizing and exhaustive nature of the directive black list, always evaluate the level of protection granted by the code in comparison to the UCPD standard. This, admittedly, is a very difficult, nearly impossible assessment to make considering the openness of the directive standards and the lack of European guidance. This assessment may also have some drawbacks as regards self-regulation's appeal. The finding that a code is more restrictive or prescriptive than is required by the UCPD and hence not binding on a trader who has not publicly undertaken to be bound by it, may threaten the very existence of the self-regulatory rules instead of inciting traders to fill in the professional diligence clause. But this assessment is what it takes to strike the balance between fair competition and consumer protection.
-  Collins (n 12), 30.
-  H-W Micklitz, 'A General Framework Directive on Fair Trading', in H Collins (ed.), The Forthcoming EC Directive on Unfair Commercial Practices (Kluwer Law International, 2004) 83-84.
-  A code owner is any entity, including a trader or group of traders, which is responsible for the formulation and revision of a code of conduct and/or for monitoring compliance with the code by those who have undertaken to be bound by it (art 2[g]).
-  Collins (n 12), 31.
-  Ch Twigg-Flesner et al., An Analysis of the Application and Scope of the Unfair Commercial Practices Directive. A Report for the Department of Trade and Industry (2005), 8, dti.gov.uk/files/file32095.pdf.
-  Cf. European Commission, 'Explanatory Memorandum Proposal for a Directive Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market and Amending Directives 84/450/EEC, 97/7/EC and 98/27/EC', COM (2003) 356 final, s. 73.
-  European Commission, 'Guidance on the Implementation/Application of Directive 2005/29/EC on Unfair Commercial Practices' SEC (2009) 1666, 20.
-  Howells, 'Codes of Conduct' (n 10), 213.
-  Howells, 'Codes of Conduct' (n 10), 213. For instance, the Dutch Financial Markets Authority (AFM) considers the standard laid down in the Code of Conduct of the Dutch Home Shopping Organization (NTO) as a reasonable basis for assessing whether the expenses of a consumer credit are responsible under section 4:34(2) of the Financial Supervision Act. 'In the case of consumer credit, the AFM considers the NTO's Code of Conduct as a minimum supplement to the open standards for prevention of excessive borrowing in accordance with the Wft': afm.nl/en/nieuws/2011/jan/boete-l-easy.aspx.
-  G Howells, 'Co-Regulation's Role in the Development of European Fair Trading Laws', in H Collins (ed.), The Forthcoming EC Directive on Unfair Commercial Practices (Kluwer Law International, 2004) 122.
-  The Office of Fair Trading (OFT) for example only approves and promotes codes that are shown to safeguard and promote consumers' interests beyond the basic requirements of the law. It has been empowered to endorse codes of conduct meeting core criteria since 2002.
-  Twigg-Flesner et al. (n 19), 8.