Fair Codes

Table of Contents:
4.3.1 Bringing codes of conduct in conformity with the UCPD

Based on article 10 UCPD, Member States may, in addition to ensuring effective enforcement of the directive (as required by article 11), encourage the control exercised by code owners on unfair commercial practices. Code owners can only exercise this control as long as their codes are attuned to the directive's standards. Moreover, a code can only serve as a benchmark of fairness to courts applying the UCPD provided its content can be deemed 'fair'. The fairness of a code of conduct hinges on the extent to which national code owners have internalized the UCPD standards. The scope of the general duty applies to trade associations and other organizations that make recommendations on trading practices and draw up codes.

The UCPD has broadened the standards by which commercial practices are judged.[1] The UCPD obviously affects advertising rules and information duties most but all the practices that influence the consumer's ability to make an informed decision about a commercial transaction (before, during and after the conclusion of a contract) must at least match the UCPD standard (but may provide for a higher level of protection than the UCPD). So after-sales practices, complaint handling schemes and warranties have to fit the legal standard. This standard, however, is vaguely worded and the directive's open-textured nature makes compliance uncertain. The formulation of some of the commitments laid down in a code can be as vague as the directive itself.[2] The available guidance (including that issued by the Commission) and case law do not prevent diverging interpretations.

Most national and European codes of conduct that focus on B2C commercial practices at the national and European level have integrated the directive provisions.[3] There is considerable variation in the way and extent to which the UCPD norms have been internalized by code owners. Some codes of conduct include a general duty to trade fairly or a prohibition on misleading practices (most advertising codes). In the field of advertising, self-regulatory bodies have been keen to ensure compliance with the UCPD misleading clauses.[4]Another way for code owners to implement the directive's standards is to lay down the obligation to interpret the code in conformity with the directive.[5] In many cases, the 'transposition' of the UCPD into codes of conduct is badly visible and does not consist of the transcription of the directive's general clauses. Some sectoral codes put down rules that (supposedly) meet the directive's standards, such as comprehensive information duties and 'fair' promotional practices.[6] Many codes do not literally transpose nor explicitly refer to the UCPD. This is a reason why enforcement agencies refrain from establishing equivalence between codes of conduct and the UCPD when it comes to defining fair behaviour.[7] In some Member States, advertising bodies still do not cover all commercial practices covered by the UCPD. The Austrian and German codes for instance lack a broad concept of unfair commercial practices. The Austrian code does not even include 'misleading' advertising.[8]

The directive's enactment has not led to the spontaneous adjustment of all existing codes.[9] The Dutch SMS Code of Conduct (2003) has only been updated following pressure from public authorities. In 2008 and 2010, this Code was adjusted to tackle (unfair) practices many consumers were complaining of: them not being aware of subscribing to a SMS premium service, ignoring the costs and finding it difficult to unsubscribe from the service.[10] To spur traders to integrate the UCPD standard into their codes, national regulators and enforcement bodies have different, more or less intrusive methods at their disposal. The directive leaves the choice of those methods to the Member States. In the United Kingdom code owners are often subject to scrutiny or formal supervision by a public regulatory body which for example sits on the Code of Conduct Committee.[11]

Committee of Advertising Practice (BCAP) carried out a consultation in July 2008 on proposed changes to bring the codes entirely into line with the new requirements set out in the CPR 2008. The CAP code - the non-broadcast arm of the ASA - is based on ICC codes and has been updated to reflect the requirements of the new consumer regulations. The ICC itself integrated the UCPD into its codes.

4.3.2 The carrot approach

National enforcement authorities can stimulate the compliance of codes with the UCPD by providing guidance[12] or publicly endorsing fair codes. Statutory endorsement schemes do not exist in the Netherlands or in France but are common in the United Kingdom.[13] A carrot approach such as the granting of a public approval to codes of conduct is not provided for by the UCPD. One of the core criteria for consumer codes of practice to obtain OFT approval is compliance with the UCPD standards as far as the advertising and marketing rules are concerned.[14] The British system of (voluntary) approval of codes of conduct has, however, not been boosted by the CPR 2008. The expected spur to obtain OFT approval[15] did not occur.[16] Although OFT approval not conferring a shield may have decreased its appeal to traders, the very relative success of the OFT scheme may above all be explained by its long and relatively labour-intensive application process. The scheme has been criticized for being bureaucratic and inflexible, and evidence of strong consumer recognition of - and trust in - the OFT approval logo was limited.[17] Meanwhile, the Trading Standards Institute (TSI) has established a successor scheme to the Consumer Codes Approval Scheme on a self-funding basis.[18]

4.3.3 The stick approach

If a soft approach proves ineffective, a more drastic line may be needed. One obvious strategy would be to threaten the sector failing to adjust its code with formal regulation. The Dutch SMS premium services sector has constantly been facing government's threats to legislate. The SMS Code and its adjustments have, however, not prevented the Dutch legislator to tighten the legal regulations for SMS services in 2011. A similar legislative intervention occurred in the field of predrawn sweepstakes, where a code of conduct failed to address misleading practices. Member States, though, do not dispose of a great margin of manoeuvre in view of the maximum harmonization scope of the UCPD.[19] They are not allowed to prohibit practices that are not listed in the directive's first annex.[20]

If a code offers less protection than the UCPD by promoting non-compliance with legal requirements, a Member State may also decide to enable a legal action against the code owner (article 11[1][b] UCPD). Such a legal facility was created both in the Netherlands (article 305d[2] of Book 3 of the Dutch Civil Code)[21] and in the United Kingdom (Regulation 4) - not in France - but without a potentially discouraging criminal offence being attached to it. Any enforcement action, if needed, will be taken through the civil route. Enforcement bodies are likely to rely on this prohibition where the promotion takes the form of a statement in the code of conduct and altering the code of conduct looks like a more effective method of dealing with the unfair practice than taking action against any individual trader or traders who are engaging in the practice. No actions have been brought against unfair code owners as of today.

  • [1] Most of the behavioral norms laid down in the UCPD, however, already applied to traders or at least embrace more specific norms that could effectively be enforced (under the Doorstep Selling Directive for example) and had been processed in existing codes.
  • [2] Art 2.1 of Seldia's code of conduct towards consumers and art 3(a) of the Code of Practice for consumers of the UK Direct Selling Association stipulate that direct sellers shall 'not use misleading, deceptive or unfair practices'. Art 1 of the Code of Practice of the British Association of Removers (BAR) for example obliges trader to act 'fairly and responsibly'.
  • [3] Codes and recommendations pertaining to direct and distance marketing contributed to implementing the UCPD in Europe as is shown by the European Code of Conduct towards consumers drafted by Seldia (art 2.12) and the EASA Best Practice Recommendation on Online Behavioral Advertising.
  • [4] The Dutch Stichting Reclame Code had implemented the UCPD long before the directive was implemented into Dutch law. In the United Kingdom, the Broadcast
  • [5] The Irish Commission for Communications Regulation devised a Code of Practice for Premium Rates Services stating the practices it lies down 'are to be interpreted and understood in light of the provisions of the Unfair Commercial Practices Directive'.
  • [6] See the Code déontologique du e-commerce et de la vente à distance that has recently been enacted by the FEVAD.
  • [7] BAC opinion (n 50) s. 3.5.
  • [8] European Parliament, 'Misleading Advertising on the Internet' (n 59) 17.
  • [9] FEDMA is currently still revising the Code of Conduct for E-Commerce and Interactive Marketing.
  • [10] The adjustments did, however, not suffice according to the Dutch Ministry of Economic Affairs since vulnerable consumers would still not get enough protection.
  • [11] Ch JS Hodges, I Benôhr and N Creutzfeldt-Banda, Consumer ADR in Europe (Hart Publishing, 2012) 264 and 329 (Trading Standards sit on the Travel Association Code Committee, which reviews the content of the Code).
  • [12] The OFT has for example published guidance for second-hand car dealers on compliance with the CPR 2008.
  • [13] Alternatives to the OFT scheme are the TrustMark scheme of the Department for Business, Innovation and Skills (BIS) (building repair, maintenance and improvement sector) and the local authority assured trader schemes run by local Trading Standards services.
  • [14] OFT, 'Consumer Codes Approval Scheme - Core Criteria and Guidance' (March 2008) 15, ftc.gov/sites/default/files/documents/public_events/ enforceable-codes-conduct-protecting-consumers-across-borders/oft-code-scheme.pdf.
  • [15] Twigg-Flesner et al. (n 19) 8.
  • [16] To date, 10 codes of practice have been approved with a further 10 working towards approval. BIS, 'Consumer Landscape Review: Impact Assessment' (June 2011) 13, https://gov.uk/government/uploads/system/uploads/attachment_data/file/31395/11-981-consumer-landscape-review-impact-assessment.pdf.
  • [17] Ibid 28.
  • [18] tradingstandards.gov.uk/advice/ConsumerCodes.cfm. The potential costs associated with lack of consumer confidence due to removal of the OFT consumer code approval scheme are expected to be negligible: ibid 2. Under the UK Government's proposals to create a single Competition and Markets Authority (CMA), the OFT will be merged into the new body which will have a principal focus on competition and markets. For the same, debatable, reasons why the Commission is not empowered to endorse European codes of conduct, a continuing role in consumer codes approval is not deemed appropriate for the CMA: BIS, 'Empowering and Protecting Consumers: Consultation on Institutional Changes for Provision of Consumer Information, Advice, Education, Advocacy and Enforcement' (June 2011) 8, https://gov.uk/government/uploads/system/uploads/ attachment_data/file/31394/11-970-empowering-protecting-consumers-consultation-on-institutional-changes.pdf.
  • [19] CfWH van Boom, 'Wetsvoorstel doorverkoop toegangskaarten: nuttig en nodig?' (2011) 5 Tijdschrift voor Consumentenrecht en Handelspraktijken 183 (n 37).
  • [20] Joined Cases C-261/07 and C-299/07 VTB-VAB and Galatea [2009] ECR I-2949.
  • [21] Amendments made to the enforcement mechanism for the UCPD, however, seem to prevent public authorities from getting access to this facility.
< Prev   CONTENTS   Next >