236 Hans W Micklitz

in the sense of criminal sanctions. That is why Member States may provide for civil sanctions as well.4 These penalties must be—and this has become a standard formula in consumer law directives—‘effective, proportionate and dissuasive’. In short the body of law with regard to enforcement remains underdeveloped.5 Particular rules on transborder enforcement do not exist.

However, this is not yet the end of the story. The subject is transborder enforcement of unfair commercial practices. Here at least two other pieces of EC legislation come into play, Directive 98/27/EC6 on injunctions and Regulation 2006/2004 on consumer protection co-operation.7 In taking these three pieces of EC legislation all together I will try to show first that the European Community tried to privatise transborder law enforcement by granting rights and remedies in particular to consumer organisations. This is Directive 98/27/EC. In the light of the nearly complete failure of this approach,8 the European Commission now relies on statutory agencies. The Regulation on consumer protection co-operation nationalises (verstaatlicht) transborder law enforcement; private organisations are more or less excluded from law enforcement. Agencies have to handle transborder conflicts and solve them through conciliation or as a last resort through injunctive action. This is the second message. However, the question remains whether Regulation 2006/2004 will lead to the envisaged results. I start from the hypothesis that a third step is needed to make transborder enforcement work. Without additional remedies, such as collective claims for compensation and without integrating lawyers and law firms into collective transborder law enforcement, the system will be neither proportionate, nor effective, and certainly not dissuasive.

2. THE STORY BEGINS—DISTANT SHOPPING (SWEEPSTAKES I)

In the early 1990s the German Verbraucherschutzverein (now the Bundesverband Verbraucherzentrale) and the French Union Fédérale des Consommateurs (UFC) tried to get to grips with misleading cross-border advertising by German-based distance selling firms which addressed French

4See J Stuyck, E Terryn and T van Dyck, ‘Confidence Through Fairness ? The New Directive on Unfair Business-To-Consumer Commercial Practices in the Internal Market’ (2006) 43 CMLRev 107 at 136.

5See C Alexander, ‘Die Sanktionsund Verfahrensvorschriften der Richtlinie 2005/29/EG über unlautere Geschäftspraktiken im Binnenmarkt, Umsetzungsbedarf für Deutschland’ [2005] GRUR Int 809.

6[1998] OJ L 166/51.

7[2004] OJ L 364/1.

8U Docekal, P Kolba, HW Micklitz and P Rott, ‘Die Umsetzung der Richtlinie 98/27/EG in den Mitgliedstaaten’ Vienna, Republic of Austria, (forthcoming).

Transborder Law Enforcement—Does it Exist? 237

consumers, in French, by mailshots (so called sweepstakes) from German territory.9 The French consumer organisations were quite successful in obtaining a favourable decision before French courts both under criminal law and under private law. The endless efforts to get these two French judgments executed in Germany are a story in itself. Despite the Brussels Convention, the consumer organisations met nearly insurmountable barriers and finally gave up.10

The German consumer organisations were approached by the French consumer organisations via the European consumer organisation (Bureau Européen des Unions de Consommateurs). The European Commission was willing to sponsor a test case. It wanted to know whether transborder law enforcement is possible and, if not, what the barriers are. I confess that the consumer organisations asked me to write the evaluation report addressed to the European Commission. The difficulties the German consumer organisations faced can be grouped around a number of issues:

—Correct address and jurisdiction: Distant Shopping had sent out the sweepstakes under a post box address. The German consumer organisation had to ask the then German Bundespost who was hiding behind the address. In the meantime consumer organisations were given a legal right to require that sort of information under the revised German law on unfair commercial practices. Then it had to be clarified whether German courts are competent under the Brussels Convention where the company consists of a post box.

—Translation: getting the French advertising translated into German. This was necessary as the action for an injuction had to be filed before a German court.

—Differences in the legal concept of misleading advertising: under the then French law misleading advertising had to be presumed to exist even if it remained an abstract danger, whereas the German concept required concrete evidence, ie the German consumer organisations had to convince the German court that the danger was real in the sense that consumers had ordered products as they wanted to win the prize.11 French consumer organisations were obliged to provide evidence that French consumers had been misled and to make that information available to their German counterparts.

—Standing: do German consumer organisations have legal standing to protect French consumers?

—The applicable law: what is the applicable law where the infringement is felt in France but initiated in Germany? Does the so-called ‘market

9See for a more complete analysis, HW Mickitz, ‘Cross-Border Conflicts—A French– German Experience’ (1993) 16 Journal of Consumer Policy 435.

10This part of the story is reported in ibid.

11The ECJ has made it clear in the meanwhile that abstract protection is not compatible with EC law: see Case 303/97 Sektkellerei Kessler [1999] ECR I–513.

238 Hans W Micklitz

rule’ (Marktwirkungsregel) apply or should the law of the country of origin, ie where the advertising was initiated come to bear?12

The German Verbraucherschutzverein managed after all to bring the case before German courts, but lost after two years of litigation. The Federal Supreme Court confirmed German jurisdiction, left the issue of standing undecided but held that French law applied due to the fact that the mailouts were addressed to French consumers. The lesson to be learned can be summed up as follows: French consumer organisations failed to protect French consumers before French courts due to major problems in getting a favourable French judgment executed in Germany. German consumer organisations failed to protect French consumers. German courts were not willing to grant German consumer organisations standing in order to protect French consumers against misleading advertising emanating from German territory. This was done in a rather awkward way.13 The Supreme Court opted for the application of French law. It applied the Marktwirkungsregel. The rules on standing under German unfair practices law, however, provided for standing only if German law was infringed. As the German consumer organisation had not referred to French law as the applicable law, the German court left the question open whether the German rules on standing cover violations of the French law on unfair commercial practices.

A year later the Supreme Court made it definitively clear that German consumer organisations have no standing to protect Irish consumers against advertising measures emanating from Germany. This loophole will be closed in the envisaged plans of the German government to implement Regulation 2006/2004.14 The draft explicitly extends standing to protect foreign EC consumers as long as the company starts its activities from Germany. Another 10 years have passed.

3. DIRECTIVE 98/27/EC—PRIVATISATION OF TRANSBORDER LAW

ENFORCEMENT

The experiences gained from Distant Shopping legitimated the European Commission’s decision to take action to improve the enforcement of consumer law,15 by this time against misleading advertising and nowadays

12See for an early discussion of the interrelationship between international private law and European law, N Reich, ‘Rechtsprobleme grenzüberschreitender irreführender Werbung im Binnenmarkt’ (1992) 56 Rabels Zeitschrift für ausländisches und internationales Privatrecht 444.

13BGH, 28 Nov 1997, Az I ZR 148/95—Gewinnspiel im Ausland [1998] Neue Juristische Wochenschrift 1227.

14Entwurf eines Gesetzes über die Durchsetzung der Verbraucherschutzgesetze bei innergemeinschaftlichen Verstößen vom Februar (2006, not yet published).

15See Recitals 3 and 4, above n 6.

Transborder Law Enforcement—Does it Exist? 239

against unfair commercial practices. Directive 98/27/EC on injunctions for the protection of consumers’ interests pursues as an objective access to justice by consumers in the respective Member States and in transborder litigation before foreign Member States’ courts, the free movement of injunction orders and the approximation of procedural law provisions. It relies heavily on consumer organisations, ie on the organisation of societal interests to overcome the territorial boundaries of jurisdiction.

(a) Mutual Recognition of Standing to Sue

Seen in the light of the experience with Distant Shopping, the Directive’s major purpose is to enable so-called qualified entities registered on a Commissionrun list to file actions for injunctions before Member States’ courts. Therefore the Directive provides for the establishment of a register to which all Member States have to notify those entities which they regard as protecting the legitimate interests of consumers, be they statutory agencies and/or private consumers’ organisations. Member States are then obliged mutually to recognise the standing to sue of the registered entities. Member States’ courts retain residual powers to examine whether the qualified entities are acting in the interest of consumers in the concrete case at issue. Based on French law,16 the Directive draws a distinction between the qualité d’agir (standing to sue)— which is presumed to exist to the benefit of the registered entities and the intérêt pour agir (Rechtsschutzinteresse, which means whether eg a consumer organisation which specialises in tenant protection can defend the interests of consumers in sales promotion techniques). The European Commission published a first list of qualified entities in 200317 which was updated in February 200618 and now covers the new Member States as well.

The Directive guarantees the protection of national consumer interests before courts in other EC Member States. It neither deals—at least not directly—with the protection of consumers in other EC member States by way of national consumer organisations, nor defines who is legitimately defending the consumer’s interest, although legal doctrine deduces some minimum requirements from the existing body of EC directives granting standing to consumer/trade organisations and public agencies. The Directive affects matters of procedural law alone. It leaves the question of the applicable law to the Member States’ international private law ie to the envisaged EC regulation on extra-contractual obligations (Rome II).19

16See J Calais-Auloy and F Steinmetz, Droit de la Consommation (Paris, Dalloz, 2003)

583.

17[2002] OJ C 30/2.

18[2006] OJ C 39/2.

19Com(2003)427 final.

242 Hans W Micklitz

that promotional games were heavily discussed in the draft regulation on sales promotion; however, whether or not they are covered by Directive 2005/29/EEC is the subject of controversy.23 So far a clear understanding is missing.

After having found out where Duchesne has its registered office—which was according to the OFT a hard job—the OFT sent a letter to Duchesne on 19 February 2004 informing it that it had received a series of complaints from consumers about advertising mail-outs in the United Kingdom. On 4 March, Duchesne was summoned to appear before the President of the Commercial Court of Brussels hearing an urgent application. In his judgment of 6 December 2004, the first judge held that the sales promotion measure violated the Control of Misleading Advertising Regulations 1988 and ordered cessation of the acts thus recorded and the advertising material in which those were contained, on pain of a fine of € 25,000 per contravention ascertained as from the date when the judgment was reported. On 9 December 2005 the Chamber of the Appeal Court of Brussels upheld the first decision. There are a number of points to be underlined:

(1)The plaintiff is a public agency and not a private organisation. Distant Shopping demonstrated that substantial resources are needed to prepare and to execute a transborder injunctive action. Consumer organisations are generally short of money. Distant Shopping was made possible through additional funds granted from the European Commission. The OFT acted on its own. However, it seems even a public agency is unable systematically to pursue transborder violations of consumer law due to scarce resources.24

(2)The OFT filed an action in Belgium and not in the UK, so it circumvented the problems faced by the German and French consumers’ organisations in Distant Shopping which both intended to protect

French consumers from their national home base. The French consumers’ organisations wanted to protect French consumers against German-based unfair commercial practices. They did not consider filing an action for an injunction in Germany. German consumers’ organisations were trying to strike down unfair commercial practices at their origin, ie in Germany. They argued in favour of a source responsibility (Quellverantwortung)25 of the Member State in which the company was based and from which the commercial practices originated.

(3)The Belgian courts did not call into question the OFT’s standing to sue a Belgian company. This might underline the need mutually to recognise

23See Stuyck, Terryn and van Dyck, above n 4, at 149.

24See Statement of M Haley, Office of Fair Trading, at the Vienna conference on collective redress, 24 Feb 2006 (papers to be made available by the Austrian presidency soon).

25Reich, above n 12.

Transborder Law Enforcement—Does it Exist? 243

standing as provided for under Directive 98/27/EC. However, one might wonder whether the Belgian courts would have confirmed the standing of a registered national consumers’ organisation in the same way or whether they would have challenged the competence of the consumers’ organisation to deal with transborder unfair commercial practices under Article 4(1) (3) of Directive 98/27/EC.26

(4)The Belgian courts regarded commercial practices as extra-contractual obligations, which is in line with the Rome II project.27 According to Article 5 claims arising from unfair competition or other harmful marketing practices are assessed under the law of the country in which the unfair competition or other practice affects competitive relations or the collective interests of consumers. Rome II will therefore codify the socalled ‘market rule’ (Marktwirkungsregel), eg applicability of the law of the market where the competitive relations or collective consumer interests are affected.28 Article 5 is very much in line with the general policy of Rome II as laid down in Article 3, which acknowledges the lex loci delicti commissi, ie where the damage arises or is likely to arise (usually the place of residence of the victim). Hitherto the Belgian courts would have had to apply UK law. Surprisingly the Court of Appeal decided to apply Belgian law instead. Contrary to the first instance it did not consider the country where the effects of the advertising are felt as the one which defined the applicable law, but instead chose the country of origin where the advertising measures come from. The judgment might be read as a late confirmation of efforts in legal doctrine to stop unfair commercial practices at their point of origin.29

(5)The Belgian courts did not differentiate between the average British and the average Belgian consumer. Duchesne argued British consumers are more robust than continental consumers, which may not be factually correct but which is very much in line with predominant cultural prejudices.30 At the same time the Court of Appeal rejected the OFT’s argument that the advertising measures were particularly dangerous to vulnerable consumers as the OFT did not manage to provide evidence of that. It is common ground that the distinction between the average and the vulnerable consumer as inserted in the

26See for a closer analysis of the meaning of Art 4(1)(3), HW Micklitz and P Rott in E Grabitz and M Hilf, Kommentar zum europäischen Sekundärrecht (Munich, CH Beck, 2006) Art 4 Rn 17 ff.

27COM(2003)427 final.

28See for a critical account of the market rule H Muir Watt, ‘Integration and Diversity: The Conflict of Law as a Regulatory Tool’ in F Cafaggi (ed), The Institutional Framework of European Private Law (Oxford, Oxford University Press, 2006) 191.

29See, for a deep analysis of the strange effects of the market rule, Ibid.

30See, for a legal analysis of the different consumer images, T Lettl, Der lauterkeitsrechtliche Schutz vor irreführender Werbung in Europa (Munich, CH Beck, 2004) 81 ff, 218 ff.