The Legal Questions in Perenicova and Invitel

Impact on Misleading Unfair Commercial Practices (Incorrect Statement on the Annual Percentage Rate) and of a Collective Action on Unilateral Price Amendment Terms on Individual Contracts

The Perenicova case dealt with the control of unfair commercial practices required in Directive 2005/29/EC and its impact on the validity of an incorrect statement on the annual percentage rate (58,76 per cent instead of the indicated 48,63 per cent) in the context of an individual dispute relating to a B2C credit agreement under

Slovakian law. I will come later to the differences between contract terms in individual contracts and standardized contract terms. The relevant EU law on consumer credit of the old Directive 87/102/EEC and the new Directive 2008/48/ EC does not, despite its excessive information obligations, cover the essential question of the legal consequences of omitted or incorrect information.^[1] In both cases before the national courts and the ECJ, the total amount of the interest rate played no role. This is even more striking with regard to the fact that the inflation rate in Slovakia amounted to 8.4 per cent in 2003, but dropped rapidly thereafter. According to a German or Austrian understanding, the legally admissible limits are exceeded to a distinctive extent here. Thus the level of the interest rate advertised for might have had an indirect influence on the court's decision to link the details of the interest rate to the question of the invalidity of the credit agreement. What is at stake is the degree to which unfair commercial practices might have an impact on the validity of individual and maybe even standardized contractual relations.

The Invitel case deals with a collective action of the Hungarian National Consumer Protection Office against a telecommunications services provider, which used a unilateral price amendment clause without a valid reason and without explicitly describing the method by which prices could vary. The consequences of a potential prohibition of the collective action on individual contracts with the defendant business company are of particular interest. Most contract lawyers might consider the problem as being commonly known. What is at stake? Judgments are binding inter partes only. In the case the parties are the consumer agency and a company, the final judgment of the competent court might bind only these two parties. But what about the potential effect of the collective action, the action for injunction, on individual contracts which contain exactly the term which has been declared void in the collective action? Invitel raises a number of new legal questions on the interplay between individual and collective action from an entirely European perspective, which give reason to reflect. The most recently decided Putz/Weber case vividly showed the considerable extent to which the ECJ is willing to break new ground in private law.^[2] It will have to be shown that there is a link between Putz/Weber and Invitel.

Unfair Commercial Practices and Contract Law - Divided or United?

The first issue revolves around the dominating idea of a clear dissociation of contract law from the law on unfair commercial practices. The referring court only

indirectly made this clear in the question referred.^[3] The division leads basically to a shortening of individual legal redress, since the consumer who, influenced by the advertisement, concludes a contract will have de facto no possibility to disengage himself from the contract. The de jure alternative - to complain about the defectiveness of the object purchased because it does not comply with the advertising - plays just as limited a role in practice as the right to withdraw from the contract by asserting a potential claim according to § 280 BGB in Germany;^[4] to claim mistake or fraud in the common law systems^[5] is hard to prove in practice.^[6] For the consumer there remains the possibility of relying on those institutional players which are regarded as qualified entities under European directives on unfair terms and unfair commercial practices, be it public bodies in the vast majority of the Member States, or private trade and consumer organizations - which are the only ones that have standing in Austria, Germany and Slovenia. Partly owing to German pressure, individual legal redress to the benefit of consumers, although promoted by the European Commission,^[7] was not integrated in the final text of Directive 2005/29/EC. This is left to Member States.

• [1] H-W Micklitz, N Reich and P Rott, Understanding EU Consumer Law (2009) at 5.17.
• [2] ECJ, Judgment of 16.6.2011, Case C-65 + 87/09, ECJ 2011 I-nyr; see in this context Purnhagen, EuZW 2011, 626 and the subsequent decision of the BGH, NJW 2012, 1073.
• [3] '1. Is the scope of consumer protection under Article 6(1) of [...] Directive 93/13 [...] such as to make it possible, where unfair contractual clauses are found in a consumer contract, to conclude that the contract as a whole is not binding on the consumer, if that is more advantageous to the consumer? Are the criteria determining what is an unfair commercial practice in accordance with [...] Directive 2005/29 [...] such as to permit the conclusion that, if a supplier quotes in the contract a lower [...] APR [...] than is in fact the case, it is possible to regard that step by the supplier towards the consumer as an unfair commercial practice? If there is a finding of an unfair commercial practice, does Directive 2005/29 [...] permit there to be any impact on the validity of a credit agreement and on the achievement of the objective in Articles 4(1) and 6(1) of Directive 93/13, if invalidity of the contract is more advantageous for the consumer?'
• [4] Art 280 concerns a compensation claim. The damage, however, in such a case is the contract which the consumer had been pulled into via unfair commercial practices.
• [5] S Whittaker, 'Form and Substance in the Reception of EC Directives into English Contract Law' (2007) ERCL 381.
• [6] Some Countries like the Netherlands are discussing to reverse the burden of proof at least in exceptional cases.
• [7] COM (2002) 289 final at 18.