Unfair Commercial Practices Directive

On 18 June 2003, the European Commission published a proposal for a directive on unfair business-to-consumer commercial practices (the "Directive"). The aim of the Directive is to replace the various national provisions currently regulating business-to-consumer ("B2C") unfair commercial practices with common provisions at Community level.

Under the Directive a number of specified misleading and aggressive B2C commercial practices will be banned EU-wide. Furthermore, it sets out the criteria for assessing whether other types of commercial practices are unfair and as such would also be prohibited.

The Directive was published in the Official Journal on 11 June 2005.

The Directive will prohibit unfair B2C commercial practices. A B2C commercial practice is defined as "any act, omission, course of conduct or representation, commercial communication including advertising and marketing, by a trader, directly connected with the promotion, sale or supply of a product to consumers". Business-to-business commercial practices, health and safety aspects of products and contract law do not fall within the scope of the Directive.

Member States are permitted to continue to apply for eight years certain national provisions, for example in respect of timeshares, which are more restrictive than those set out in the Directive. Member States are required to notify the Commission of these national provisions. Where there is a conflict between the provisions of the Directive and existing Community legislation the specific legislation would take precedence.

The Directive contains a list of 30 practices which will be prohibited, including:

• creating the false impression that the consumer has already won, will win or will win on doing a particular act, a prize or other equivalent benefit when in fact either
• there is no prize or other equivalent benefit
• taking any action in relation to claiming the prize or other equivalent benefit is subject to the consumer paying money or incurring a cost

• including in an advertisement a direct exhortation to children to buy or to persuade their parents or other adults to buy advertised products for them. This provision is without prejudice to Article 16 of the television without frontiers Directive

• claiming in a commercial practice to offer a competition or prize promotion without awarding the prizes described or a reasonable equivalent
• promoting a product similar to a product made by a particular manufacturer in such a manner as deliberately to mislead the consumer into believing that the product is made by that same manufacturer when it is not.

The Directive sets out the general criteria for assessing whether other commercial practices, not included in the list of prohibited practices, should also be considered as unfair. A commercial practice would be regarded as unfair, if:

• it is contrary to the requirements of professional diligence
• it materially distorts or is likely to materially distort the economic behaviour with regard to the product of the "average consumer" whom it reaches or to whom it is addressed or of the average member of the group when a commercial practice is directed to a particular group of consumers.

However, where a commercial practice is likely to materially distort the economic behaviour of a clearly identifiable group of consumers who are particularly vulnerable to the practice, due to, for example, their age, and the trader could "reasonably be expected to foresee this", then the standard would be adjusted and assessed from the perspective of the average member of this group.

Two particular types of unfair commercial practices are explained further in the Directive: those that are misleading or aggressive.

An aggressive commercial practice includes harassment, coercion or undue influence that "significantly impairs or is likely to significantly impair the average consumer's freedom of choice or conduct in respect of the product, and which causes or is likely to cause the consumer to take a transactional decision that he would not have taken otherwise".

Misleading commercial practices include both misleading actions and misleading omissions. A misleading omission will occur where "material information" is omitted which the average consumer needs in order to be able to take an informed decision. Such information includes the geographical address and identity of the trader, the main characteristics of the product and the price.

A misleading omission would also occur where a trader hides or provides the material information in an "unclear, unintelligible, ambiguous or untimely manner". Information requirements established by Community law in relation to commercial communications are also regarded as material. A non-exhaustive list of these provisions is annexed to the Directive.

A misleading action will occur if the commercial practice contains false information or deceives or is likely to deceive the average consumer in relation to certain key elements, such as the main characteristics of the product, which causes or is likely to cause the consumer to take a transactional decision he would not otherwise have taken.

The misleading advertising Directive (84/450) will be amended so that it only relates to business-to-business practices.

Under the Directive, Member States will be allowed to "encourage" the control of unfair commercial practices by codes provided that this is in addition to court or administrative proceedings. The court or administrative authority will be able to require the trader to produce evidence to show the accuracy of a factual claim and to consider the claim as inaccurate in the event that the trader fails to produce this evidence.

Organisations and/or persons (including competitors) who are regarded under national law as having a "legitimate interest" will be allowed to take proceedings in relation to unfair commercial practices.

Member States are obliged to adopt national implementing legislation by 12 June 2007 and to apply these provisions by 12 December 2007. Draft national legislation will in due course be published and stakeholder consultations will be launched in some Member States. The Commission has indicated that it intends facilitating the implementation of the Directive.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.