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Home arrow Law arrow The European Unfair Commercial Practices Directive

Requirements of EU law

According to the general principle of national procedural autonomy, in the absence of harmonized Union law governing the matter, it is for each Member State to lay down the detailed procedural rules governing actions to ensure the compliance of Union law.[1] However, in regard to the UCP Directive the general principle of national procedural autonomy is limited by some requirements.

Public and/or Private Enforcement: Articles 11-13 of the UCP Directive

Articles 11-13 of the UCP Directive provide for different rules in regard to remedies of unfair commercial practices. Article 11 provides which instruments of enforcement shall be available in national law. Article 12 regulates the competences of national courts and administrative authorities in regard to the substantiation of claims. Article 13 of the UCP Directive specifies which penalties for infringements of national provisions adopted in application of the UCP Directive Member States should lay down. Articles 11 and 13 of the Directive are interesting in this context.

2.1.1 Enforcement

Article 11(1)(3) of the UCP Directive stipulates that it shall be for each Member State to decide which of the enforcement instruments named in Article 11(1)(2) shall be available in national law.[2] According to Article 11(1)(2) of the UCP

Directive, persons or organizations regarded under national law as having a legitimate interest in combating unfair commercial practices need to be able to take legal action and/or to bring unfair commercial practices before an administrative authority. The first alternative stands for private enforcement, whereas the second alternative illustrates public enforcement. Similar demands were formulated in Article 4(1)(2) of Directive 84/450/EEC of 10 September 1984: Member States are to ensure that those affected could combat misleading or inadmissible comparative advertising by taking legal action or bringing such advertising before a competent administrative authority. The UCP Directive extended this rule to all cases of unfair commercial practices.

The wording 'and/or' in Article 11(1) (2) of the Directive makes it clear that both an exclusively private or public enforcement as well as a combination of the two are permissible. Member States can also require recourse to an obligatory mechanism of self-regulation prior to civil or administrative proceedings (Article 11 [1] [3] of the UCP Directive). In this case civil courts and public authorities respectively act as 'enforcers of last resort'.[3] Thus Article 11 of the UCP Directive declares civil proceedings initiated by competitors, consumers or private associations as essentially equivalent to public enforcement and permissible when used alone or in combination with the latter.[4] With this, the Directive leaves it up to Member States whether to provide public or private instruments to enforce unfair commercial practices law.[5] That coincides with the general principle of national procedural autonomy.[1] So far the UCP Directive does not go beyond the Council Directive 84/450/EEC concerning misleading and comparative advertising.

2.1.2 Penalties

Article 13 of the UCP Directive stipulates that Member States shall lay down penalties for infringements of national provisions adopted in application of this Directive and shall take all necessary measures to ensure that these are enforced. These penalties must be effective, proportionate and dissuasive. This wording goes

back to ECJ judgements[7] and other directives.[8] As a consequence of the procedural autonomy of the Member States, Article 13 does not require Member States to provide for specific penalties. However, the UCP Directive essentially leaves the national procedural autonomy and the current diversity of sanctioning systems among Member States intact only provided that effectiveness, proportionality and dissuasiveness are guaranteed. If this is not the case by applying an existent national system, Member States concerned must either choose another system of penalties that satisfies those criteria, adapt its existing system or introduce a special system in order to meet the requirements.[9]

a) Meaning of penalty

In contrast to other directives, the UCP Directive in its English version uses the word 'penalty' instead of 'sanction'.[10] The use of different words appears to indicate a different meaning. But the wording of the UCP Directive in other languages is the same as in other directives: In German it is 'Sanktionen', in French it is 'sanctions'. Moreover, the ECJ often uses these terms as synonyms.[11] To that extent, there is no difference in the meaning of Article 13 of the UCP Directive to the wording used by the ECJ in its decisions and of that in other directives. Accordingly, the wording 'penalty' or 'sanction', respectively, is not restricted to criminal sanctions or administrative fines but also covers civil liability.[12] According to Article 13 of the UCP Directive, Member States are basically free to choose between criminal, administrative or purely civil penalties as long as they are effective, dissuasive and proportionate.

b) Effectiveness, dissuasiveness and proportionality

Whether a penalty is effective, proportionate and dissuasive within the meaning defined by Article 13 of the UCP Directive 'must be analysed by reference to the role of that provision in the legislation as a whole, including the progress and special features of the procedure before the various national authorities, in each case in which that question arises'.[13] Accordingly, the peculiarities of the national system of each Member State have to be taken into account. Moreover, the fact that the UCP Directive is a measure of full harmonization has to be taken into account.

aa) Effectiveness

The need for effective sanctions follows from the fundamental principle of effectiveness based on Article 4(3) TEU.[14] According to Advocate General Kokott 'rules laying down penalties are effective where they are framed in such a way that they do not make it practically impossible or excessively difficult to impose the penalty provided for.[15] Advocate General van Gerven emphasized 'that the Member States must endeavor to attain and implement the objectives of the relevant provisions of Community law'.[16] According to either definition, sanctions are ineffective if they provide for conditions that are either unrealizable or incapable of proof.[17] For competitors for example it might be difficult to prove their actual loss caused or the profit of the trader generated by an unfair commercial practice. If due to the principle that the party bringing the action must provide evidence for its claim it is practically impossible or excessively difficult to claim damages, the Member States have to implement law providing for a lighter burden of proof or easier access to information and evidence held by the defendant. Moreover, the German skimming-off procedure is a 'good' example of an ineffective sanction because currently there is almost no incentive for the entitled organization to initiate a skimming-off procedure (see III. 2. c). Lastly, individual rights to claim damages might be also ineffective in the field of unfair commercial practices if individuals have suffered dispersed and relatively low-value damage because they are often deterred from bringing individual actions for damages.

bb) Dissuasiveness

A penalty is dissuasive if it prevents an individual from infringing the rules laid down by Union law, here namely the national provisions adopted in application of this Directive. Therefore, the penalty must be sufficiently strict, regard being had to the objectives pursued by the UCP Directive.[18]Since compliance with the law on unfair commercial practices imposes direct or indirect costs on businesses, the potential benefits of unfair commercial practices should not outweigh the penalties incurred.[19] A penalty has a preventive effect especially if it makes it economically unattractive to infringe the law.[20] The dissuasive effect depends firstly on the nature and the level of the penalty.[21] Private enforcement mechanisms can deter unfair commercial practices forbidden by the UCP Directive. Especially private claims for damages may serve as dissuasive sanctions. Secondly, the dissuasive effect depends also on 'the likelihood of its being imposed'.[22] Anyone who commits an infringement must fear that the penalty will in fact be imposed on him. Insignificant or hypothetical penalties are not dissuasive.[19] There is an overlap here between the criterion of dissuasiveness and that of effectiveness.

cc) Proportionality

Effectiveness and dissuasiveness require a certain minimum standard of sanctioning, whereas the latter requirement, that is proportionality, places limits on the extent of penalties. The principle of proportionality is a fundamental principle of European Union law (Article 5(4) TEU).[24] It is to ensure that penalties are not so disproportionately heavy as to disrupt the market. A penalty is proportionate if it General Kokott, para 89; Case C-326/88 Hansen [1990] ECR I-2911, Opinion of Advocate General van Gerven. is effective and dissuasive and also necessary.[25] The level of sanctioning has to be ascertained on a case-by-case basis regarding the severity of the infringement. It would be disproportionate for example to sanction for infringement of a procedural requirement as severely as if, in addition to this procedural failure, substantive conditions had also been breached.[26] Moreover, the effects of the penalty on the person sanctioned must be proportionate to the aims pursued. If there a choice between several equally effective and dissuasive penalties, recourse must be had to the least burdensome.[27] Therefore, criminal penalties shall only serve as ultima ratio sanctions, provided that there is a particularly severe infringement. To avoid disproportionate sanctioning Member States must be able to decide not to impose penalties under certain circumstances.[28]

In the context of proportionality, a specific aspect in regard to the UCP Directive has to be taken into account: the intention of full harmonization. Whereas too strict sanctions do not impede the attainment of minimum harmonization, they might be problematic for the full harmonization approach of the UCP Directive. According to this, Member States are not allowed to impose requirements which are more restrictive or prescriptive than the UCP Directive in the field which it approximates. Bearing in mind that the level of sanctioning may also influence the standard of compliance with the prohibition of unfair commercial practices, disproportionately heavy sanctions might impede the achievement of full harmonization. If for example every unfair commercial practice is sanctioned by criminal penalties traders might forego even legal commercial practices only because there may be a risk to be liable to a criminal sanction.

2.1.3 Relationship between enforcement and penalties

Although the UCP Directive distinguishes clearly between enforcement and penalties there is still a close relationship between Article 11 and Article 13 of the UCP Directive: Enforcement and penalties are inseparably linked to each other. Administrative fines as a possible penalty under Article 13 of the UCP Directive can only be imposed in a proceeding before an administrative authority (see Article 11 [1] [2b] of the UCP Directive). In contrast, civil liability as an alternative penalty within the framework of Article 13 of the UCP Directive requires legal action initiated by persons or organizations regarded under national law as having a legitimate interest in combating unfair commercial practices (see Article 11 [1] [2a] of the UCP Directive). Even the UCP Directive itself does not sharply distinguish between enforcement and penalties. Therefore the question of enforcement cannot be answered without recourse to penalties and vice versa.

2.1.4 Implications for Member States

The UCP Directive leaves it to Member States whether they rely primarily on public or private enforcement or a combination of them. According to the principle of subsidiarity and the principle of national procedural autonomy, Member States are free to choose sanctions which appear to them to be appropriate.[29] Full implementation of the UCP Directive does not require any specific form of sanction for unfair commercial practices. The Member States may basically decide whether they provide for administrative fines, criminal sanctions or civil liability. First and foremost in pursuance of the general principle of effectiveness, Member States are obliged to guarantee an effective enforcement system and to implement effective, dissuasive and proportionate sanctions. Compared to directives with a minimum harmonization approach the full harmonization approach influences especially the requirement of proportionality. In so far the national procedural autonomy is more restricted. But whether public authorities or private persons or associations should have the competence to enforce legislation based on the UCP Directive should basically be decided by each Member State itself. Nevertheless, the principle of national procedural autonomy is also restricted to that extent by some minimum standards to be complied with.

  • [1] Case C-126/97 Eco Swiss China Time Ltd v Benetton International NV [1999] ECR I-3055, Opinion of Advocate General Saggio, para 48.
  • [2] For detail on this see Christian Alexander, 'Die Sanktions- und Verfahrensvorschriften der Richtlinie 2005/29/EG über unlautere Geschäftspraktiken im Binnenmarkt - Umsetzungsbedarf in Deutschland?' (2005) Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 809 et seq.
  • [3] Commission, 'European Union Consumer Protection' (Green Paper) COM (17) 531 final COM 17, 2 October 2001.
  • [4] Similarly Susanne Augenhofer, 'Individualrechtliche Ansprüche des Verbrauchers bei unlauterem Wettbewerbsverhalten des Unternehmers' (2006) Wettbewerb in Recht und Praxis 169, 170.
  • [5] Helmut Gamerith, 'Der Richtlinienvorschlag über unlautere Geschäftspraktiken -Möglichkeiten einer harmonischen Umsetzung' (2005) Wettbewerb in Recht und Praxis 391, 403; Alexander, 'Die Sanktions- und Verfahrensvorschriften der Richtlinie 2005/29/ EG' (n 12) 813.
  • [6] Case C-126/97 Eco Swiss China Time Ltd v Benetton International NV [1999] ECR I-3055, Opinion of Advocate General Saggio, para 48.
  • [7] Case C-382/92 Commission v United Kingdom [1994] ECR I-2435, para 55; see Case C-7/90 Criminal Proceedings against Paul Vandevenne [1991] ECR I-4371, para 11; Case C-326/88 Anklagemyndigheden [1990] ECR I-2911, para 17; Case 68/88 Commission v Hellenic Republic [1989] ECR 2965, para 24.
  • [8] See Council Directive (EC) 2000/43 Implementing the Principle of Equal Treatment between Persons Irrespective of Racial or Ethnic Origin [2000] OJ L180/22 art 15; Directive (EC) 2000/31 of the European Parliament and of the Council on Certain legal Aspects of Information Society Services, in Particular Electronic Commerce, in the Internal Market [2000] OJ L178/1 ('Directive on Electronic Commerce') art 20.
  • [9] Commission, 'Communication from the Commission to the Council and the European Parliament' (n 4) 3.
  • [10] See Council Directive (EC) 2000/43 implementing the principle of equal treatment (n 18) art 15; Directive on Electronic Commerce Art 20.
  • [11] See for example Case C-387/02 Berlusconi [2005] ECR I-3565.
  • [12] See for example Case 50/76 Amsterdam Bulb BV v Produktschap voor Siergewassen [1977] ECR 137, paras 32 et seq.; Case C-7/90 Vandevenne and others [1991] ECR I-4371, Opinion of Advocate General van Gerven, para 8; also Case 14/83 Sabine von Colson and Elisabeth Kamann v Land Nordrhein-Westfalen [1984] ECR 1891, para 23 et seq.; Case C-177/88 Elisabeth Johanna Pacifica Dekker v Stichting Vormingscentrum voor Jong Volwassenen Plus [1990] ECR I-03941, paras 23 et seq. In favour of a broader meaning also Hans-W Micklitz 'Legal Redress', in Howells, Micklitz and Wilhelmsson, European Fair Trading Law (n 7) 217, 230.
  • [13] Case C-387/02 Berlusconi [2005] ECR I-3565, Opinion of Advocate General Kokott, para 91.
  • [14] Case C-201/02 Delena Wells [2004] ECR I-723, para 67, with further references, and Case C-312/93 Peterbroeck [1995] ECR I-4599, para 12.
  • [15] Case C-387/02 Berlusconi [2005] ECR I-3565, Opinion of Advocate General Kokott, para 88. On the principle of effectiveness in general, see Case 45/76 Comet [1976] ECR 2043, paras 11 and 18; Case C-312/93 Peterbroek [1995] ECR I-4599, para 12; Case C-261/95 Palmisani [1997] ECR I-4025, para 27; Case C-90/94 Haahr Petroleum [1997] ECR I-4085, para 46; Case C-231/96 Edis [1998] ECR I-4951, para 19; Case C-260/96 Spac [1998] ECR I-4997, para 18; Case C-88/99 Roquette Frères [2000] ECR I-10465, para 21; Case C-126/97 Eco Swiss [1999] ECR I-3055, Opinion of Advocate General Saggio, para 48.
  • [16] Case C-326/88 Hansen [1990] ECR I-2911, 2923, Opinion of Advocate General van Gerven, para 8.
  • [17] Alexander, 'Die Sanktions- und Verfahrensvorschriften der Richtlinie 2005/29/ EG' (n 12) 811.
  • [18] See Case C-387/02 Berlusconi [2005] ECR I-3565, Opinion of Advocate
  • [19] Commission, 'Communication from the Commission to the Council and the European Parliament' (n 4) 2.
  • [20] For art 228(2) EC (now: art 260(2) TFEU), Case C-304/02 Commission v French Republic [2005] I-6263, Opinion of Advocate General Geelhoed, para 10.
  • [21] Case C-354/99 Commission v Ireland [2001] ECR I-7657, para 47; Opinion of Advocate General Geelhoed (ECR I-7660), para 27. See also Case C-382/92 Commission v United Kingdom [1994] ECR I-2435, paras 56-58 and Case C-383/92 Commission v United Kingdom [1994] ECR I-2479, paras 41 and 42.
  • [22] Case C-387/02 Berlusconi [2005] ECR I-3565, Opinion of Advocate General Kokott, para 88.
  • [23] Commission, 'Communication from the Commission to the Council and the European Parliament' (n 4) 2.
  • [24] Christian Calliess, in Christian Calliess and Matthias Ruffert (eds), EUV/AEUV, Kommentar (Munich: C.H. Beck, 2011) art 5 EUV, paras 44 et seq.
  • [25] Case C-253/00 Munoz [2002] ECR I-7289, Opinion of Advocate General Geelhoed, para 54; Alexander, 'Die Sanktions- und Verfahrensvorschriften der Richtlinie 2005/29/EG' (n 12) 811.
  • [26] See Case C-348/04 Boehringer Ingelheim [2007] ECR I-3391, Opinion of Advocate General Sharpston, para 76.
  • [27] Case C-387/02 Berlusconi [2005] ECR I-3565, Opinion of Advocate General Kokott, para 90.
  • [28] Case C-253/00 Munoz [2002] ECR I-7289, Opinion of Advocate General Geelhoed, para 54.
  • [29] Case 50/76 Amsterdam Bulb BVv Produktschap voor Siergewassen [1977] ECR 137, para 33.
 
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