Enforceable Codes of Conduct

Table of Contents:
4.4.1 Private enforcement

To raise the level of consumer protection, 'fair' codes of conduct need to be compulsory for their members and to be enforceable through independent, nonlegal, both preventive (guidelines, certification[1]) and oppressive instruments (redress schemes with sanctions). Code owners must oversee enforcement of codes on their members. At the European level, between the purely voluntary schemes and the genuinely compulsory schemes, there are lots of mixed schemes.[2]

The same applies to the national level. Consumer complaint schemes coupled to sanctions for non-compliance and/or prescriptions for redress play an essential role in enforcing codes of conduct. Consumer ADR is quite effective in the three Member States under scrutiny, especially in the United Kingdom and in the Netherlands.[3]

In the United Kingdom, most codes of conduct are enforced through consumer complaint schemes (self-regulatory structures are usually based on codes of conduct[4]). The OFT-approved codes of conducts all have user-friendly and prompt procedures for dealing with customer complaints and bestow access to low-cost, independent advice to resolve disputes. Some codes even have independent redress schemes (the Travel Association ABTA for example). In the Netherlands, the two-sided GTC are systematically coupled to bilateral dispute committees, which solve individual disputes related to the compliance with the GTC. In France many sectors and major companies have mediators at their disposal who can best be compared to what is called an 'ombudsman' in many Member States.[5] Consumer ADR is less often than in the Netherlands and the United Kingdom tied to a code of conduct promoting fair commercial practices. An example of an independent complaint scheme enforcing a code of conduct is the Commission Paritaire de Mediation de la Vente Directe. Another independent board upholding breaches of a code is the Jury for Advertising Deontology (JDP), which has handled complaints regarding advertising since 2008.[6]

4.4.2 Public enforcement

The UCPD stimulates public enforcement bodies acting as the 'enforcer of last resort' (article 10).[7] There are two reasons why public enforcement is necessary and self-regulatory systems cannot substitute legal enforcement. First, codes of conduct do not always contain appropriate and effective mechanisms for monitoring and enforcing their members' compliance. Nor are codes always coupled to consumer complaint schemes.[8] A code's strongest sanction is to end membership, and few code owners have pro-active compliance monitoring schemes. The enforceability of private regulation remains its weaker component since it proves difficult for code owners to act against their own members. Enforcement possibilities that work independently of any influence from their members are often lacking.

Even if an independent redress mechanism is available, public authorities may have to intervene to force compliance with a code of conduct and following on from this, with the directive's standards.[9] Individual dispute resolution schemes are moreover not apt to cope with unfair practices that only marginally affect individual consumers - who will then refrain from employing those schemes. Neither are those schemes adapted to deal with large-scale infringements.

Second, the interpretation of the UCPD by self-regulatory bodies may not always be the right one. Private bodies are interpreting and enforcing the directive rules, which have been integrated into their codes.[10] The Dutch administrative court responsible for enforcing the Directive has on the one hand very clearly stressed that decisions by private enforcement bodies are not conclusive as to the fairness of a commercial practice.[11] In the United Kingdom, on the other hand, courts seem quite reluctant to interfere with decisions of specialized bodies like the Advertising Standards Authority (ASA).[12]

4.4.3 Misleading claims to abide by a code

Article 6(2)(b) UCPD is meant to strengthen self-regulatory practice by providing public authorities with a tool to enforce code compliance. In the Netherlands, this article was transposed into article 193c(2)(b) of Book 6 of the Civil Code. This article, it is fair to say, has secured the ACM's position as enforcer of last resort in the past years. The public body actively cracks down on misleading claims to abide by a code of conduct99 or two-sided GTC (which are considered to be codes of conduct).[13] The ACM has taken a firm line on the enforcement of codes of conduct since the UCPD was implemented. It has imposed a €1.2 million fine on an SMS services provider who kept pushing the boundaries of the code it had signed up to.[14]

The French provision implementing the 'misleading practice' - article L 121-1 Consumer Code - does not refer to the misleading claim to live up to a code of conduct. The reason why the directive provision has been left aside is not clear as it was not explicitly motivated during the transposition process. Maybe the legislator figured article L 121-1 would cover the practice described in article 6(2)(b). The case of French price comparison website proves him correct (section 3.2). I however doubt whether those articles would achieve the clarity and precision needed to meet the requirement of legal certainty the CJEU expects implementing provisions to fulfil.[15]

Regulation 5(3)(b) transposes article 6(2)(b) in the United Kingdom. Breaching this provision does not constitute a criminal offence according to regulation 9, to not discourage self-regulation. Prior to the UCPD, the practice consisting of a misleading claim to abide by a code already fell within the ambit of the Control of Misleading Advertisements Regulations 1988 (CMAR 1988). Such practices were also caught by the Trade Description Act 1968. A motor dealer was found to have breached section 14 TDA 1968 for falsely claiming that he complied with the Motor Industry Code of Practice.[16] The new regulation has, however, not yet been applied and tested before court. The OFT will generally seek to obtain compliance by education, giving advice and guidance in the first instance.[17] A close cooperation with the public enforcement body helps traders escape administrative and judicial scrutiny.

4.4.4 Filters

The effectiveness of well-functioning private enforcement mechanisms eventually depends on official bodies handing them over some responsibility. The enforceability of codes of conduct can be enhanced by introducing filters that encourage the use of complaint schemes run by code owners. Article 11(1) UCPD enables Member States to decide whether the courts or administrative authorities are allowed to require prior referral to other established means of dealing with complaints (including code complaints schemes) before pursuing legal remedies.[18] There are, at the national level 'strong differences between the way [self-regulatory organizations in the field of advertising] may derive a degree of legitimacy from public law or public actors'.[19]

Public enforcers in the United Kingdom advocate compliance by the most appropriate means, in line with their enforcement policies, priorities and consistent with available resources.[20] Civil and criminal enforcement come the very last in the order of priority. Relationships have been developed with 'established means' to resolve breaches of the CPR 2008. The OFT could already require prior referral to code complaints schemes in cases of misleading advertising.[21] The CPR 2008 have extended the scope for the use of 'established means' to all behaviours covered by the directive (regulation 19[4]).[22] Public bodies and consumer organizations (Citizens Advice, for example) actively promote extra-judicial complaint handling and direct individual consumers to ADR where this is available.

In the Netherlands, referral is the expected norm too.[23] The cooperation between different established means is being formally addressed by means of so-called samenwerkingsprotocolen. The Dutch Consumer Protection Enforcement Act allows for such cooperation protocols to be agreed upon by the administrative authorities responsible for enforcing the UCPD and self-regulatory bodies. A protocol regulates among other things the exchange of information and the cross-referrals between the public and the private enforcement body. In the field of advertising, the ACM yields its enforcement task to the Stichting Reclame Code (SRC) according to such a protocol. A samenwerkingsprotocol has also been signed between the ACM and the aforementioned bilateral dispute committees. Those committees handle individual complaints arising in the many sectors making use of bipartisan GTC whilst the ACM tackles practices violating collective consumer interests.

In France, the collaboration between public and private enforcement bodies is less formal. Even if a self-regulatory compliance mechanism has been set into motion, the administrative agency may decide to simultaneously and independently undertake an action of its own.[24] The DGCCRF leaves it to the consumer where to file a complaint and does not specially recommend ADR. Independent B2C mediation and conciliation are steadily turning into established means of complaint but these forms of ADR often result from public regulation. Privately initiated mediation and conciliation are only seldom coupled to a code of conduct that contributes to enforce the UCPD. The consumer has found his way to the JDP[25] but remains free either to file his complaint at a public agency or to go to court instead.[26]

As concerns judicial recourse by (groups of) consumers or professionals, courts in all three scrutinized Member States are fully free to not demand referral and hear the matter directly. In Italy and East and Central European states collaborative arrangements do not even exist.[27]

Concluding Remarks

In Member States with a tradition of self-regulation not much has changed after the UCPD was enacted. In the United Kingdom and in the Netherlands, self-regulation assists in raising the level of consumer protection. Free complaints schemes are very effective in handling individual complaints. Responsibility is being handed over to those private bodies that have effective (fair) codes of conduct. Self-regulation is, however, not always successful and the Dutch ACM plays a substantial role in enforcing compliance with codes of conduct and two-sided GTC. Article 6(2)(b) provides a useful tool to this end. The long-term effects of the far-reaching public control on self-regulation are, however, not clear: it may either raise or lower the attractiveness of self-regulation.

The UCPD, however, did not 'lift' self-regulation and consumer organizations have little faith in the benefits of self-regulation in terms of the enforcement of the UCPD.[28] The importance of national advertising self-regulatory bodies for example still strongly differs from one Member State to another.[29] The directive also fell short of evidently increasing the number of self-regulatory initiatives in other areas than the already harmonized fields of advertising and e-commerce.[30]

Many existing codes have integrated the UCPD and have been geared towards addressing new developments (new media) and complaints (SMS services providers) but overall few new codes of conduct were devised since the directive took effect, even in those Member States where self-regulation is well-developed. The reliance on codes is still very much confined to advertising, where a positive interaction exists between the UCPD and self-regulation.

With regard to minor violations of the UCPD a report commissioned by the European Parliament concludes it could be an option to envisage a more developed cooperation between advertising self-regulatory bodies and enforcement bodies in the European Union.[31] Self-regulatory bodies could help prevent misleading commercial practices in the first place by promoting compliance with codes of conduct and by issuing guidelines.[32] They could also concern themselves with 'easier' cases, helping national enforcement authorities to save time and costs.[33] The interaction between private and public bodies is working rather well in those countries where this interaction has been institutionalized. For now, the possibility for code owners to enforce their codes by means of ex ante tools (aiming at prevention) and/or ex post schemes (aiming at redress) is not sufficiently being supported by the directive.

  • [1] Since 2009, all Thuiswinkel.org members (a Dutch distance selling association) applying the Thuiswinkel Code of Conduct are obliged to get certified every year.
  • [2] P van der Zeijden and R van der Horst, Self-Regulation Practices in SANCO Policy Areas (Final Report 2008), 20-21, ec.europa.eu/dgs/health_consumer/self_ regulation/docs/self-reg-SANCO-final.pdf.
  • [3] Hodges et al. (n 76) passim.
  • [4] Ibid 263.
  • [5] Ibid 37.
  • [6] The Mediator of the French Federation of Insurance Companies upholds the Code of Good Conduct some insurance companies have agreed upon: gema. fr/sites/all/files/pdf/Recueil.AFA_.2011.juillet.pdf. Advertising self-regulatory bodies have mainly focused on the ex-ante control of advertisements (before their publication). The Jury is meant to strengthen the ex-post control.
  • [7] COM (2001) 531 final (n 7) 14.
  • [8] To cite but an example the FEVAD-code of conduct (e-commerce and distant selling) in France.
  • [9] The OFT for example 'worked with The Travel Association (ABTA) in 2007 on misleading pricing of holidays which resulted in ABTA requiring its members to address the issue or face action under their Code of Conduct': consultations/self-regulation#.U6HIg_mSwqQ.
  • [10] Self-regulatory bodies may also enforce UCPD rules not laid down in a code but applying to the practice the consumer is complaining about.
  • [11] CFI Rotterdam 19 April 2012, ECLI:NL:RBROT:2012:BW3358, s. 23.3.
  • [12] R (On the Application of Coys of Kensington Automobiles Ltd) v ASA [2012] EWCH 902 (QBD).
  • [13] In Keukenkampioen and Keukenconcurrent (cases 426 and 427, 19 November 2009) followed by CFI Rotterdam 19 January 2010, ECLI:NL:RBROT:2010:BK9796 and ECLI:NL:RBROT:2010:BK9798 and CFI Rotterdam 14 April 2011, ECLI:NL:RBROT:2011:BQ1281 two kitchen selling companies - both members of the Living Central Trade Association (CBW) - were sentenced for infringing on the CBW's bilateral GTC. Grando Retail on its turn has undertaken to stop acting in breach of the CBW code (cases 317 and 318).
  • [14] Celldorado (case 510, 17 June 2010). The CA and the AFM are entitled to sanction and to fine traders breaching the UCPD rules.
  • [15] Case C-144/99 Commission v Netherlands [2001] ECR I-3541.
  • [16] V.G. Vehicles (Telford) Ltd [1981] 89 Monthly Review 91.
  • [17] OFT, 'Guidance on the UK Regulations Implementing the Unfair Commercial Practices Directive' (OFT Guidance May 2008), 51, https://gov.uk/government/ uploads/system/uploads/attachment_data/file/284442/oft1008.pdf.
  • [18] Courts and administrative authorities cannot be forced to refer a matter to a code complaint scheme.
  • [19] Verbruggen (n 65) xiii.
  • [20] OFT Guidance May 2008 (n 104) 51.
  • [21] The CMAR 1988 empowers the Director General of Fair Trading (now the OFT) to require that a reasonable opportunity has been allowed for self-regulatory bodies to deal with the complaint in question: regulation 4(3)(3). See Verbruggen (n 65) 128-130.
  • [22] The OFT also held a public consultation on a draft set of principles that it proposed to apply when working with its partners to maximize compliance with the CPR: OFT, 'Compliance Partnerships. An OFT Consultation on Developing the Use of "Established Means''' (December 2008), oft1043con.pdf and 'Compliance Partnerships. Response to Consultation' (July 2009),
  • [23] The need for administrative bodies to show some restraint while self-regulatory solutions are sought was emphasized during the directive's transposition process: Minutes of the Upper House 2008/09, No 1, 31. The CA undertook enforcement actions in the Celldorado case only after self-regulatory measures had failed: BAC opinion (n 50) s. 5.18.
  • [24] Both the JDP and the DGCCRF tackled the misleading practices used by the Repertoire des societies et des indépendants (RSI): CA Paris 8 November 2011, No 11/16050 and JDP decision of 8 July 2011, jdp-pub.org/RSI,230.html.
  • [25] As appears from the report 'Un an d'activité en chiffres', jdp-pub. org/Statistiques,103.html.
  • [26] The DGCCRF only has had the power to enforce the prohibition on misleading advertising since 2007.
  • [27] Verbruggen (n 65) 130-131.
  • [28] BEUC, 'Answer to the European Commission's Questionnaire on the Application of Directive 2005/29/EC', 18, beuc.eu/publications/2011-09895-01-e.pdf.
  • [29] European Parliament, 'Misleading Advertising on the Internet' (n 59) 15.
  • [30] See for example: V Valce, 'Codes of Conduct and Unfair Commercial Practices' (2012) 1 Bancaria 95-97: As regards the banking sector, 'the legislative indications in
  • [31] European Parliament, 'State of Play' (n 61) 18.
  • [32] Ibid 21.
  • [33] European Parliament, 'Misleading Advertising on the Internet' (n 59) 17.
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