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Home arrow Law arrow The European Unfair Commercial Practices Directive

Striving for Individual Rights against Unfair Commercial Practices

Gaps in the Enforcement of Unfair Commercial Practices

When it comes to remedies in contract law, the reach and content of individual remedies are at the forefront of the analysis. This is different in the field of unfair commercial practices due to the traditional understanding of unfair commercial practices as public law meant to regulate the behaviour of market participants. It is then for public authorities or associations with a quasi-public mandate to survey the market.

If any, an independent legal remedy could be deduced from Article 5(1) of Directive 2005/29/EC, maybe in conjunction with Article 7(4) which in my understanding grants the consumer an individual right.[1] The potential effects of such a right would be rather limited, though, as they remain bound to the requirements of Article 7(4) - the so-called existence of an invitation to purchase.[2]

The remedial gap in the protection of individual rights existing between Directive 2005/29/EC on unfair B2C commercial practice and Directive 93/13/ EEC on unfair terms in consumer contracts can be closed by reverting to the European Union's fundamental rights. Let us recall where the problem lies: under EU law the consumer who is a victim of an unfair commercial practices has no

European remedy to get out of a contract in which he or she was drawn into. The common understanding is that it is for the Member States to designate the appropriate remedies to the consumer. In practice this may lead to a situation where the consumer has difficulties applying national contractual remedies to constellations in which the true problem results from misleading or unfair commercial practices. Collective redress via an action of injunction does not help him or her as the consumer does not benefit from a court decision which declares a particular commercial act as misleading or unfair. He or she remains largely dependent on the national laws and the degree to which they allow the recovery of the ill-gotten gains which result from unfair terms or unfair commercial practices.

I will first embark on individual rights of a consumer affected by a misleading and unfair commercial practice in this contractual commitment before I will address the much more complicated issue of if and how an action for injunction against unfair and misleading advertising might affect the contractual rights of individual consumers - the transfer of Invitel to the field of unfair commercial practices.

Constitutionalization of Remedies

Constitutionalization concerns the concretization of the European Union's principle of effectiveness with a view to EU consumer law remedies. In Article 47 of the Charter, which since 1.12.2009 has the same legal value as the EU treaties (Article 6(1) TEU), it is formulated as follows: [3]

(1) Everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this Article.

This is completed by Article 19(1) 2 TEU:

Member States shall provide remedies sufficient to ensure effective legal protection in the fields covered by Union law.

According to Article 51 of the Charter, fundamental rights apply with respect to all measures of the European Union and Member States when they are implementing EU law. In case of the interpretation of EU law by the Member States' courts, they have to be taken into consideration.[4]

The principle of effectiveness of Article 47 of the Charter has already found its concretization in more recent decisions of the ECJ. It applies in all fields where EU law creates individual rights. The principle ibi ius ibi remedium4 was confirmed, but what it means in concerto depends on a whole variety of factors. Hence it was of consequence when the ECJ invoked Article 47 to develop legal remedies at the EU level even before the EU Charter on Fundamental Rights became formally valid.[5] This was, for example, the case with regard to the Unibet decision concerning legal standing in 2007[6] and the 2008 Kadi decision concerning the legal redress of so-called terrorists incriminated by the UN Security Council.[7] The subsequent decisions in Alassini of 2010[8] concerning the shaping of out-of-court settlements to enforce consumer rights in the field of telecommunications, Mono-Car-Styling[9] regarding the enforcement of the employees' right to information in case of collective redundancy and DEB[10] relating to legal aid already show a tendency towards a 'constitutionalization of legal remedies'. EU consumer law benefits from this too: According to Article 24(1) of Directive 2011/83/EC on consumer rights[11] and in terms of the positively interpreted principle of effectiveness, '(t) he penalties provided for must be effective, proportionate and dissuasive'. This wording belongs to the standard repertoire of the EU legislative authority.

The application of these principles to the interplay between the law on unfair commercial practices and law on unfair contract terms results in the claim that a consumer, who has been the victim of an unfair commercial practice, has to have the right to free himself from any disadvantageous contractual consequences. Otherwise there would be no 'effective legal redress' in terms of Article 19(1) 2 TFEU. Thus it concerns a kind of claim of confiscating unlawful profits,[12] though in the form of individual redress. Within the limits of the promoted coherent interpretation the distinction between contract law and unfair commercial practices can be overcome. In Invitel in recitals 42-43 the ECJ focuses on the principle of effectiveness:

42 National courts which find that a term included in [the] GBC is unfair are required under Article 6(1) of the Directive to draw all the consequences that follow under national law, so that the consumer is not bound by that term (see Perenicova and Perenic, paragraph 30 and case law cited).

43 It follows that, where the unfair nature of a term included in the GBC of consumer contracts has been recognised in an action for an injunction, such as that here at issue in the main proceedings, the national courts are required, of their own motion, and also as regards the future, to draw all the consequences provided for by national law in order to ensure that consumers who have concluded a contract to which those GBC apply will not be bound by that term.

The broad wording could be considered as an implicit claim for remedial action that allows for eliminating the potential effects of the unlawful commercial act. However, eliminating the effects relate to the 'non-binding' part - so payments made on the basis of an invalid term must be paid back. Such restitutionary remedies do not constitute necessarily actions for skimming off similar to skimming off in e.g., competition law. The ECJ is not advocating the introduction of a fully-fledged skimming off of profits derived from partially invalid contracts, all that can be deduced from the relevant ECJ judgments is that the Member States must introduce some sort of payback system. Such a remedy has to be arranged by national law, but it cannot be completely rejected. This is the logical and binding consequence of the invalidity of the incriminated term and thus a concretization of Article 47 of the Charter in conjunction with Article 19(1)2 TEU.

  • [1] See Münchener Kommentar zum UWG-Micklitz (2nd edition to be published 2013), art 11 Rndr. 18 under reference to Apostolopoulos WRP 2004, 841.
  • [2] The ECJ has already provided its understanding of art 7(4) in Case C-122/10 -Konsumentombudsmannen nnr.
  • [3] As to the general meaning cf. N Reich, Individueller und kollektiver Rechtsschutz im EU-Verbraucherrecht, Schriften der Juristischen Studiengesellschaft Hannover Nr. 51, Baden-Baden: Nomos 2012, 19 et seq.
  • [4] ECJ, Judgment of 27.6.2006, Case C-540/03 EP v Rat, ECR 2006 I-5769 recital 105 concerning the Directive 2003/86/EC of 22.9.2003 on the right to family reunification.
  • [5] The EU Charter on Fundamental Rights became formally valid with the coming into force of the Lisbon Treaty on 1.12.2009.
  • [6] ECJ, Judgment of 13.3.2007, Case C-432/05 Unibet v Justiekansleren, ECR 2007, I-2271 recital 37.
  • [7] ECJ, Judgment of 3.9.2008, Case C-402 + 415/05P, Kadi et al v Rat der EU, ECR 2008, I-6351 recital 335.
  • [8] ECJ, Judgment of 18.3.2010, Case C-317-320/08 Rosalba Alassini et al. v. Telecom Italia, ECR 2010, I-2213 recital 61.
  • [9] ECJ, Judgment of 16.7.2009, Case C-12/08, ECR 2009 I-6653, para 47.
  • [10] ECJ, Judgment of 22.12.2010, Case C-279/09 DEB Deutsche Energiehandelsund Beratungsgesellschaft mbH v Bundesrepublik Deutschland [2010] ECR I-nyr recital 31.
  • [11] Official Journal of the EU, No L 304/64 of 22.11.2011.
  • [12] In this context see H-W Micklitz, before § 1 UKlG recital 43, § 1 UKlaG recital 5/6 with reference to the 'effet utile' of Directive 93/13/EEC and Klocke, loc. cit.
 
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