Optimizing the Interplay between Codes of Conduct and the UCPD
Codes of conduct hold many (economic) advantages for traders. They are often coupled to accessible low-cost ADR schemes and constitute an effective marketing instrument. For legal-cultural reasons mainly, with the exception of the advertising sector, codes of conduct, however, do not contribute much to achieving the UCPD's twofold goal of consumer protection and harmonization. The directive and its implementation do, however, not sufficiently encourage such a contribution. How can the directive's potentially counterproductive effect on self-regulatory initiatives be prevented?
In the United Kingdom and the Netherlands, codes of conduct - not surprisingly -effectively add to the level of consumer protection. The case of the Dutch SMS Code, however, shows the necessity for public enforcement of the UCPD. The directive has been a welcome addition to the consumer protection arsenal, filling in the gaps left by existing law and failing self-regulation. But from the way codes have been fleshing out the directive's standards in the Netherlands, it appears that the balancing of consumers' and traders' interests might need further consideration. The purpose of this chapter is to ascertain how a further integration of codes of conduct into the UCPD, its interpretation and enforcement could both serve its consumer protection and harmonization goals and strike the delicate balance between consumers' and traders' interests.
Codes of Conduct and the Interpretation of the UCPD Standards
The directive should stimulate self-regulation by increasing its role in the interpretation of the fairness standard.
6.2.1 The breach of a code by a signatory
An infringement on a code to which the trader has publicly undertaken and indicated to be bound constitutes an unfair commercial practice because of the breach of consumer confidence it causes. While the breach of 'firm and capable of being verified' provisions is dealt with by article 6(2)(b), the infringement on open-ended code provisions is tackled with help of the general clause (as is shown by Dutch enforcement practice). To determine the latter infringement, public agencies and courts will have to interpret the code provisions. It will not always be clear whether a specific practice violates a code and consequently breaches the legal standard. Diverging views on the exact interpretation of firm provisions may arise as well.
To establish the breach of code of conduct, the public body should take the code sponsor's interpretation as a point of reference. If this 'private' meaning is not clear and the public body has no choice but to interpret the code, the following rules should apply. An ambiguous provision would have to be construed against the professional insofar as consumer organizations have not been involved into its drafting. Such a rule could provide an incentive for (representative) trade associations to engage in a proper mutual dialogue with (representative) consumer associations and to draft codes that are as clear and explicit as possible. 'Bilateral' codes should be construed objectively by explicitly balancing the interests of both parties in the light of the directive. By relying more evidently on the private interpretation of a code to determine a breach of commitment (and consumer trust), public agencies may increase the attractiveness of self-regulation.
Such reliance would not jeopardize the enforcement duties incumbent upon the public supervisory body since it still may tackle the (unfair) practice itself, independently from whether this practice infringes on a code. The legal standard may appear to be stricter than the private standard. Even if the private standard condones the practice, the public body may conclude that the code and as a matter of fact the commercial practice at issue contravenes the legal standard (as interpreted by the public body). Due to the openness of this standard, its interpretation by the public agency may more often than not be subject of debate. A decision to impose stricter standards than the self-regulatory ones should therefore be duly motivated. The public body should always thoroughly reason a decision to depart from a private standard.
6.2.2 Codes setting the fairness standard: Non-compliance with the fairness standard
Due to a lack of alternative benchmarks, codes of conduct often help define the expected level of professional diligence. Here again drawing a clear distinction between the public and the private standard would benefit private rule-making without compromising public enforcement duties. When code provisions are ambiguous, the above rules should apply and public enforcers should refrain from giving a consumer-friendly interpretation to an otherwise clear code provision. The content of a code should only fill in the legal fairness clause insofar as the private standard equals the UCPD standard. Enforcement authorities and courts should keep in mind that the UCPD is a minimum harmonizing instrument as regards codes of conduct and should thus explicitly acknowledge whether the level of protection afforded by the code matches the UCPD standard. Binding a non-member to a code that outreaches the legal standard (entailing stricter information duties or banning practices that are not listed) is not permitted in view of the directive's full harmonization goal. Although possibly justified from the perspective of consumer protection and legal security, codes fleshing out the professional diligence clause may not become a means to bypass the maximum standards laid down in the UCPD and to falsify competition.
In the event that private and public standards converge - in the sense that a practice both breaches a code and is deemed unfair - emphasis should be put on the fact that the self-regulatory rules are in line with the legal standard and that free-riding is not being tolerated. The widespread support for a code and the ''representativity'' of its drafting organization(s) are valid reasons to put a concrete private standard on an equal footing with an open-worded legal standard. This outcome should, however, also highlight the fact that the code sponsor has been unsuccessful in tackling this very practice and would hopefully exhort this sponsor to tighten its own enforcement procedure and to increase its effectiveness (section 6.3).
6.2.3 Codes setting the fairness standard: Compliance with the fairness standard
To increase the appeal of codes of conduct, a presumption of conformity should be put into place for concrete and firm commitments. Such commitments may even form safe harbours provided they have been endorsed by a national public enforcement authority or the European Commission (section 6.4). This endorsement should be made conditional upon consumer associations having been invited to participate into the self-regulatory process and again upon the ''representativity' of the parties to the dialogue'. The legitimacy of a code as a benchmark of fairness increases if factors attesting of a code's legitimacy - its endorsement, the involvement of stakeholders in their drafting or the wide support for a code - are explicitly taken into consideration by supervisory bodies and courts.
This presumption of conformity would offer determinate guidance and legal certainty to traders and foster the creation of new codes of conduct. It should, however, only be introduced insofar as the commitments are put in sufficiently clear and firm wordings. This may lead code owners to flesh out the code's open-textured provisions and to sharpen their commitments. The use of general clauses in national codes hinders harmonization as much as the use of such clauses in the UCPD itself. There will of course be a good deal of debate about just how concrete and firm a commitment is but guidance from the Commission or the CJEU may help draw the line.
-  Verbruggen (n 65) passim.
-  At the national level the UCPD has not succeeded in giving self-regulation a more prominent role in countries where there is no tradition of self-regulation. 'Those countries which lack a history of using soft law techniques are only likely to take it seriously if it forms part of the legal regime': Howells, 'Co-Regulation's Role' (n 24) 125.
-  In analogy with art 5 of Directive 93/13/EEC on unfair terms in consumer contracts (OJ 1993 L 95/29).
-  The other way around is conceivable as well: a practice contravening a code may, but need not, be unfair. This depends on the interpretation of the directive standards. The code standard may appear to be stricter than the directive standard.
-  Cafaggi (n 9) 122 puts forward the 'harmonise or explain' principle according to which a national regulator has duty to explain why, in its interpretation of professional diligence, it deviates from the common interpretation by self-regulatory bodies.
-  Cf. CFI Rotterdam 13 December 2012, ECLI:NL:RBROT:2012:BY6184, s. 15.4.4.
-  Cf. Hodges et al. (n 76) 414.
-  Collins (n 12) 34.
-  The prior approval by a relevant public body warrants that codes comply with legal standards: ibid 31.
-  Ibid 34.