Private and Public Enforcement in Cross-Border Cases

Some cases initiated by German and French consumers' associations have revealed the difficulties which arise in cross-border enforcement. The question in these cases was mainly whether a German consumer association is entitled to make use of its right to take action in Germany in order to protect French consumers.^[1] This experience triggered the adoption of the Consumer Injunctions Directive and later the Regulation (EC) 2006/2004 on consumer protection cooperation.

2.2.1 Directive 2009/22/EC on Injunctions for the Protection of Consumers' Interests

The Directive 2009/22/EC on Injunctions for the Protection of Consumers' Interests ('Consumer Injunctions Directive') obliges Member States to allow proceedings commenced by qualified entities seeking injunctions. The Consumer Injunctions Directive establishes minimum standards in regard to the entitlement of foreign-registered associations to take legal actions and the procedure. Qualified entities include private consumer protection bodies within the meaning of Article 3(b) and/ or public bodies responsible for consumer protection. They are entitled to seek an injunction, inter alia, in case of a breach of the UCP Directive in order to 'protect the collective interests of consumers'.^[2] Courts or administrative authorities shall be competent especially to rule an order requiring the cessation or prohibition of any infringement or in so far as the legal system of the Member State concerned so permits, an order against the losing defendant for payments into the public purse or to any beneficiary designated in or under national legislation.

2.2.2 Regulation on Consumer Protection Cooperation

While the Consumer Injunctions Directive is intended to strengthen enforcement mainly through private consumer associations, the Regulation (EC) 2006/2004 on consumer protection cooperation promotes cooperation between competent national authorities. This regulation has brought a substantial change in the national enforcement of unfair commercial practices - at least for those Member States which, like Germany, relied exclusively on private enforcement.^[3] The vital importance of undistorted competition for the general public and the considerable damage to the confidence of consumers caused by unfair commercial practices have given rise to the consideration of introducing regulatory supervision in addition to private enforcement.^[4] Accordingly, by adopting Regulation (EC) 2006/2004, the European Commission considerably strengthened the public enforcement of unfair commercial practices. The Regulation applies to intra-Union infringements of the directives listed in the Annex - including the UCP Directive (see Article 3[a] Regulation on Consumer Protection Cooperation) - if the collective interests of several consumers are harmed (Article 3[k] Regulation on Consumer Protection Cooperation).^[5] The Regulation on Consumer Protection Cooperation is aimed at improving the cooperation of national competent authorities with each other and with the Commission. The Regulation emphasizes the ability of competent authorities to cooperate by exchanging information, detecting and investigating intra-Union infringements of provisions protecting consumer interests in order to promote the smooth functioning of the internal market and enhance the protection of consumers (see Article 1 and recital No. 7). According to Article 4(1) of the Regulation, Member States shall designate the competent authority and a single liaison office responsible for the investigation and enforcement. The adoption of the Regulation on consumer protection cooperation was induced, inter alia, by the apparent lack of effective enforcement of consumer protection provisions when it came to cross-border infringements.^[6] Neither private nor public enforcement mechanisms were sufficiently adapted to the challenges of the internal market. According to the European Commission, even though consumers and consumer associations will continue to have an essential enforcement role to play, a fully functioning consumer internal market can only be guaranteed if public consumer enforcement authorities act as enforcers of last resort to supplement private enforcement.^[7] This is said to be the only possibility of preventing infringements before they occur, without being dependent on time-consuming legal procedures. Moreover, the enforcement authorities of Member States are said to enable decentralized but coordinated market surveillance.^[8] Linked to this is the expectation that, compared to civil courts, special public authorities would be better equipped for the cross-border enforcement of provisions with more expertise as well as with instruments suitable and necessary. Centralized public enforcement at the Union level - as it is being operated in competition law - was, however, refused by the European Commission. The Commission explained that it lacked the necessary resources in this respect and that there was no corresponding competence in the EC Treaty.^[9]

The enforcement model of the Regulation on Consumer Protection Cooperation is based on the cooperation of the Member States' consumer protection authorities, which entails that each public authority from one Member State provides mutual assistance on request of and for authorities of other Member States. Yet the opening clause contained in Article 4(2) (2) and Article 8(3) of the Regulation still allows Member States to designate bodies that have a legitimate interest in the cessation or prohibition of infringements to take all necessary enforcement measures available according to national law. In particular, Article 8(3) of the Regulation enables designated private consumer protection associations to act if they are instructed by public authorities. However, this possibility does not exonerate Member States from the duty of designating a competent administrative authority. Member States - like Germany - that operate an exclusively private law enforcement model have been required by the Regulation to set up special administrative authorities that are responsible for enforcement in cross-border cases albeit they may fulfil their obligations by instructing a private body. With this, EU law has been becoming more inclined to enforce unfair commercial practices law using public (in addition to private) means.^[10]

The German Consumer Protection Enforcement Act (EG-Verbraucherschutz durchsetzungsgesetz, acronym: 'VSchDG') which implements the Regulation in German law makes use of Article 4(2) and gives precedence to private enforcement by qualified entities which can initiate legal proceedings. In German law the public authority is ultimately responsible for the combat of cross-border infringements covered by the Regulation. Hereby, the 'public authority model' complements and is subsidiary to the private enforcement system. After more than five years, the experience in Germany with the Regulation on Consumer Protection Cooperation has been generally positive. In particular, maintaining the private enforcement mechanisms has made it possible to utilize long-standing and well-founded experience and knowledge of the private entities. However, there are also some practical problems with the cooperation between public authorities and private associations: First of all, the time-consuming process of coordination is an issue. Communications between public authorities and the designated association take time and may delay the enforcement procedure. Another issue is the difficulty to deal with different languages and policies in different Member States.^[11]

• [1] See in detail Hans-W Micklitz, 'Cross-Border Consumer Conflicts - A French German Experience' (1993) 16 Journal of Consumer Policy 411 et seq.
• [2] Directive (EC) 98/27 of the European Parliament and of the Council on Injunctions for the Protection of Consumers' Interests [1998] OJ L 166/51.
• [3] Cf. Hans-W Micklitz, 'Transborder Law Enforcement - Does It Exist?', in Stephen Weatherill and Ulf Bernitz (eds), The Regulation of Unfair Commercial Practices under EC Directive 2005/29 (Oxford: Hart Publishing, 2007) 235 et seq.
• [4] Recital no 2 of the Regulation (EC) 2006/2004 on Cooperation between National Authorities Responsible for the Enforcement of Consumer Protection Iaws (the Regulation on Consumer Protection Cooperation) [2004] OJ L364/1. Already discussed by Carl Baudenbacher, 'Die Revision des schweizerischen UWG - Bemerkungen zum Entwurf der Expertenkommission' (1981) Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 162, 168; followed by Jochen Glöckner, Europäisches Lauterkeitsrecht (Munich: C.H. Beck, 2006) 611.
• [5] Mainly civil law regulatory areas are covered: competition law, contracts negotiated away from business premises, package travel law, distance contracts, the law of standard terms and conditions of business, distance marketing of consumer financial services, consumer credits.
• [6] Recital no 2 of the Regulation (EC) 2006/2004 on Consumer Protection Cooperation. Cf. on this BGH, Case I ZR 148/95, GRUR 1998, 419 et seq. -Werbegewinnspiel im Ausland.
• [7] Commission, 'European Union Consumer Protection' (n 13) 17: 'enforcers of last resort'.
• [8] Commission, 'European Union Consumer Protection' (n 13) 17.
• [9] Commission, MEMO/01/307 'Questions and Answers on the Green Paper on Consumer Protection', 2 October 2001: 'The Commission has neither the resources, inclination or Treaty mandate to assume the Fair Trade Commission role as a public enforcement body in this area.'
• [10] Before implementing the Regulation on Consumer Protection Cooperation, some scholars already inferred such a Union law obligation requiring Member States to create a special public authority in charge of enforcing the Directive from art 11 of the UCP Directive, which states that 'Member States shall ensure that adequate and effective means exist to combat unfair commercial practices in order to enforce compliance with the provisions of this Directive in the interest of consumers' (Frauke Henning-Bodewig, 'Richtlinienvorschlag über unlautere Geschäftspraktiken und UWG-Reform' (2004) Gewerblicher Rechtsschutz und Urheberrecht, Internationaler Teil 183, 193). It is argued that since the term 'means' covers individual possibilities of those affected to bring legal proceedings, the additional mentioning of 'compliance with the provisions of this Directive' could thereby only be understood as imposing an additional obligation on Member States to create a public body or organization responsible for combating unfair commercial practices (Henning-Bodewig, 'Richtlinienvorschlag' [see above] 193).
• [11] Report by the German Federal Government on the effectiveness of § 7 of the German Consumer Protection Enforcement Act ('VSchDG'), BT-Drs. 17/8982, 6.