4. REGULATION 2006/2004—NATIONALISATION (VERSTAATLICHUNG) OF LAW ENFORCEMENT

Transborder Law Enforcement—Does it Exist? 245

enforcement, the European Commission was already preparing the next regulatory ‘coup’. The Injunctions Directive aimed at strengthening private enforcement, mainly through consumer organisations. The Regulation on Consumer Protection Cooperation relies on cooperation between competent public authorities. ‘Significantly [to] improve’ the protection of the legal interests of the consumer in cross-border transactions and thus to increase the ‘efficiency of the internal market’ the Commission wants to have appointed central authorities in Member States which challenge crossborder infringements by way of mutual cooperation. This means that the European Commission is now trying to overcome territorial restrictions through enhanced cooperation of national administrations.

The International Marketing Supervision Network as founded by the OECD, which was recently renamed the International Consumer Protection Enforcement Network (ICPEN), served as a model for the Commission. For more than 20 years this informal body has been made up of representatives of public authorities consumers and organisations from the OECD countries. It meets twice a year to discuss problems which arise in connection with unfair commercial practices. The Commission seeks to respond to insufficient cross-border law enforcement. The idea had already been mentioned in the Green Book on Consumer Protection.32 It passed smoothly through the legislative process. From the Austrian and the German points of view there is one notable exception. Austria and Germany have been opposed to the nationalisation (Verstaatlichung) of law enforcement. As a result, both countries may delegate the rights and duties under the Regulation to consumer and trade associations.

(a) The Objective and Contents of the Regulation

The Regulation came into effect in part on 29 December 2005. However, administrative cooperation has been postponed to 29 December 2006.

The Regulation does not purport to establish new authorities, or to replace controlling structures with new ones. Nor does it purport to take away the competence from Member States and to give it to the Commission. It relies on the possibility of further development of existing control structures in such a way that cooperation and transborder law enforcement can be improved. Therefore, the Regulation on Consumer Protection Cooperation is said not to interfere with the Consumer Injunctions Directive.33

The Regulation applies only to economic consumer protection as defined in Annex 1, which lists the relevant consumer law directives. Article 16

32J Glöckner in H Harte–Bavendamm and F Henning–Bodewig, Gesetz gegen den unlauteren Wettbewerb (Munich, CH Beck, 2004), Introduction B No 199 ff.

33COM(2001)531 final.

248 Hans W Micklitz

sense of putting national enforcement into the hands of consumer organisations and transborder enforcement into the hands of public agencies.

Soft law means will be substituted for hard law enforcement. One might argue that the more or less complete failure of the Injunction Directive legitimises such a policy shift. This seems even truer if one takes into account the complex legal setting in transborder injunctive actions. However, the shift equally affects the sharing of tasks between consumer organisations and public agencies. Consumer as well as trade organisations have to go to court and request the cessation of unfair commercial practices. They may negotiate the cessation just as public agencies, but the difference in terms of legitimacy and regulatory powers persists. Consumer and trade organisations are not acting on behalf of the state. In neither Austria nor Germany was the legislator willing formally to delegate statutory tasks to private organisations. This means they may get involved in law enforcement, but they are not legally obliged to take action.36 The increased role and importance of soft law is even strengthened by the lack of powers to oblige the requested agency to take action. As the comitology procedure enhances the regulatory role of the Commission, it may work as a deterrent and inhibit Member States from delegating decision-making to the European level. It fits into the down-grading of consumer organisations that, unlike the draft Regulation,37 the adopted version no longer provides for the possibility of inviting so-called ‘qualified bodies’ under the Injunction Directive, which means authorised or competent organisations, to participate in the comitology procedure.

On reflection, one might raise the question whether the European Community acquires more of the shape of a traditional international organisation, ie fewer powers to the European Commission and more powers to the Member States, less hard law and more soft law, less judicial action and more administrative action.

5. THE FUTURE—COLLECTIVE ACTIONS TO RECOVER

ILL-GOTTEN GAINS?

Whilst the European Community has frozen the set of available European remedies to injunctive action alone, the Member States go on developing remedies beyond mere injunctions. Of particular interest are all those efforts which aim at skimming off profits which result from unfair commercial practices and which are said to be ‘unjust’. Ill-gotten gains are hard to measure. Duchesne v OFT indicates that the company must make a lot

36The issue came up in the legislative process leading to Regulation 2006/2004: see the position paper of the European Consumer Law Group, The Regulation on Consumer Protection Co-operation ECLG/021/04 Apr 2004, available at www.europeanconsumerlawgroup.org.

37COM(2003)443 final.

Transborder Law Enforcement—Does it Exist? 249

of money out of its sales campaigns otherwise it would not fight so hard against the OFT’s efforts to put a stop to these practices.

The Member States’ initiatives are not limited to unfair competition law. More and more they are considering adopting skimming off procedures in cartel or antitrust law. The well-known Ashurst study38 has revealed that the Member States’ remedies securing private enforcement are still deficient. These findings have brought the European Commission to the fore, as discussed below. Any European initiative dealing with ill-gotten gains in antitrust law will certainly affect European remedies to fight unfair commercial practices.

(a) The German Model in Unfair Commercial Practices Law

The German legislator granted trade and consumer organisations the right to skim off ‘unjust profits’ (Unrechtsgewinnabschöpfung) in the new law on unfair commercial practices passed in 2004.39 Consequently, in the case of wilful acts of unfair competition by virtue of which a profit is obtained to the detriment of a large number of customers, the party committing the infringement can be forced to hand over such profit to the Ministry of Finance under section 10 of the Unfair Competition Act (UWG). The infringing party is also obliged to hand over the profits made as a result of the violation in case of so-called ‘widespread’ damage, where the individual party concerned often shies away from taking legal action because of the high costs and risks associated with the proceedings—the aim being to stop unfair competition from ‘always being worthwhile’. There is not much practice available to inspect. However, the two leading claimants have launched test cases in order to find out whether the new remedy is a feasible instrument. As the Supreme Court had not yet had the chance to decide the issue it is too early to assess the feasibility of the German approach—although lower court decisions are not at all promising.40

Similar rules exist in a number of Member States and the US.41 However, in France and Spain the available remedies are not particularly designed to recover ill-gotten gains. In these countries collective compensation claims

38Above n 22. Available at the homepage of the DG Competition, available at http://ec.europa. eu/comm/competition/ antitrust/others/actions_for_damages/comparative_report_clean_en.pdf.

39See for a full account of the new law A Stadler and HW Micklitz, ‘The Development of Collective Legal Action in Europe, especially in German Civil Procedure’ [2006] European Business Law Review (forthcoming).

40See the statement of P von Braunmühl in Bundesministerium für Ernährung, Verbraucherschutz und Landwirtschaft (ed.), Kollektive Rechtsdurchsetzung—Chancen und Risiken (results of the second Bamberger Verbraucherrechtstage 20/21 Münster, Landwirtschaftsverlag, 2006, forthcoming).

41See A Stadler and HW Micklitz, Das Verbandsklagerecht in der Informationsund Dienstleistungsgesellschaft (Münster, Landwirtschaftsverlag, 2005).

250 Hans W Micklitz

equally apply to the type of law infringements at stake here. Sweden and the United States, however, have designed particular remedies in order to be able to skim off unjustified profits of the wrongdoer.

(b) A European Initiative on Private Enforcement against Antitrust Injuries?

The question of private enforcement has to be placed in context. With the adoption of Regulation 1/2003,42 the European Commission introduced an extensive reorientation of its policy, characterised by two main points. First, the monitoring of antitrust law is to be decentralised, with the Commission relinquishing a number of areas of competence. Instead, the Member States’ agencies are to be urged to accept greater responsibility in order to help European antitrust law gain acceptance, at the same time raising the supremacy claimed by antitrust law. Secondly, decentralisation is increasing the pressure to strengthen private enforcement, something expressly documented by the Commission in Recital 7.43 Up to that time, private enforcement, understood as the activities that professional traders, entrepreneurs and consumers develop individually or collectively, played only a secondary role in most Member States. Traditionally, the idea of private legal entities able to help antitrust law to become more effective comes from the Anglo-American legal framework. Regulation 1/200344 can therefore also be embedded in a wider context of the reorientation of commercial law by the European Community.45

The Commission’s policy shift comes at a time when the European Court has pointed the way ahead with the so-called ‘Courage’ doctrine. As long ago as 1993, Advocate General van Gerven raised in Banks46 the question whether and to what extent an entitlement to compensation for professional traders could be derived from Article 81 of the EC Treaty. It took seven years for this problem to reach the European Court again. In Courage, Advocate General Mischo47 not only supported the establishment of entitlement to compensation arising from Article 81; he also clearly emphasised that, in addition to entrepreneurs, consumers can, potentially, also be considered

42[2003] OJL 1/1.

43See the criticism of this with regard to the division of powers in H Weyer, ‘Schadensersatzansprüche gegen Private kraft Gemeinschaftsrecht’ [2003] Zeitschrift für Europäisches Privatrecht 318 at 323; amplified by AA Alvizou, ‘Individual Tort Liability for Infringements of Community Law’ (2002) 29 Legal Issues of Economic Integration 177.

44Above n 42.

45Cf J Keßler and HW Micklitz, Anlegerschutz in Deutschland, Schweiz, Großbritannien, USA und der Europäischen Gemeinschaft, Volume 15 of the VIEW series (Baden-Baden, Nomos 2004).

46Opinion of 27 Oct 1993, in Case 128/92 Banks [1994] ECR I–1209, paras. 36–45.

47Opinion of 22 Mar 2001, in Case C–453/99 Courage v Crehan Ltd [2001] ECR I–6314, para 38 .

Transborder Law Enforcement—Does it Exist? 251

as holders of compensation entitlements under antitrust law. The European Court’s ruling was more cautious, in that it did not speak of consumers, referring to ‘any individual’ instead.48 Since the adoption of ‘Courage’, a discussion has flared up in the Member States which is also associated with the reorientation of European antitrust law in Regulation 1/2003. Private enforcement in antitrust law is the requirement of the moment; but there is considerable uncertainty as to how this process should be organised. This stems not least from the substantial legal uncertainty which is exacerbated further by diverging regulations in the Member States. The Ashurst Study49 in its executive summary of the comparative report on the laws of the 25 Member States as delivered to the European Commission in August 2004 comes to the following conclusions: ‘[t]he picture that emerges from the present study on damage actions for breach for competition in the enlarged EU is of one of astonishing diversity and underdevelopment’.

The Green Paper on private enforcement in competition law adopted in December 200550 invites all parties interested in the field to comment on a series of questions which all aim at discovering whether additional means to secure private enforcement are needed and whether consumers and consumer organisations shall also be given the right to claim compensation for antitrust injuries. The Commission will probably come up with a proposal to take action in the field of antitrust law. Any solution will have effects well beyond cartel law and may very well spill over to unfair commercial practices.

(c) Skimming Off Remedies in the Transborder Context—to the Benefit of Private Persons, of Consumer and Trade Organisations and/or Statutory Agencies?

Introducing new remedies raises a whole series of very sensitive questions which can only be touched upon. They all focus around a pure national perspective. The transborder implications of a remedy that implies compensation are not even discussed. The reason may be that skimming off remedies at the national legal level is far from being well established.

The first question is whether the remedy is to be put into the hands of the competent agencies or whether trade and, in particular, consumers’ organisations is also to be granted standing. There is no easy answer. It has been

48Judgment 20 Sept 2001, in Case C–453/99 Courage v Crehan Ltd [2001] ECR I–6314, paras 25–27, for comment see N Reich, ‘The Courage Doctrine: Encouraging or Discouraging Compensation for Antitrust Injuries?’ (2005) 42 CMLRev 35.

49Available at the homepage of DG Competition, http://ec.europa.eu/comm/competition/ antitrust/others/actions_for_damages/comparative_report_clean_en.pdf.

50COM(2004)672 final.

252 Hans W Micklitz

argued that continental legal systems as well as common law systems start from the premise that where there are statutory agencies there is no need to grant equal powers to consumers’ organisations. Private enforcement is said to be rooted in the United States’ enforcement policy, which does not have specialised agencies to the same extent as Europe and where private enforcement serves to compensate for the lack of statutory control.51

The second issue concerns the question of who shall benefit from the money which is taken from the companies. There seems to be a growing trend in Europe towards using ill-gotten gains or cartel fines to establish a fund to be used to finance the work of consumers’ organisations. Italy has taken the lead here,52 whereas other Member States remain reluctant, although there is a certain temptation to solve the problem of public funding of consumers’ organisations ‘for ever’.

Once these major problems are solved the question remains what a transborder skimming off remedy should look like and who should take action, maybe not in support of the consumers of one country alone.

6. TRANSBORDER LAW ENFORCEMENT—A NEVER–ENDING

STORY?

It seems that transborder law enforcement has not gained the importance it deserves, politically and legally. The European Commission has adopted two far reaching pieces of regulation in less than 10 years. So far, mainly various types of promotional games and even sales promotion measures have been the focus of interest, mostly all sorts of promotional games or even broader of sales promotion, measures have been the focus of interest. The network of European legislative measures has become ever more complicated, but the European Commission has failed to adopt a European fair trading law which fully covers sales promotion measures. Member States’ laws differ considerably in the degree to which they allow or prohibit these sorts of commercial practices.53

But even if EC law was to bring about common standards on all sorts of unfair commercial practices a number of issues remain unsolved even

51FJ Säcker, Die Einordnung der Verbandsklage in das System des Privatrechts (Munich, CH Beck, 2006); M Andenas, B Hess and P Oberhammer (eds), Enforcement Agency Practice in Europe (London, British Institute of International and Comparative Law 2005).

52In Italy, fines resulting from antitrust injuries are put in a fund which serves to finance consumer organisations.

53See R Schulze and H Schulte-Nölke (eds), Analysis of National Fairness Laws Aimed at Protecting Consumers in Relation to Precontractual Commercial Practices and the Handling of Consumer Complaints by Business (Munster, June 2003, unpublished manuscript), a study undertaken on behalf of DG Sanco, European Commission, available at http://ec.europa.eu/consumers/cons_int/safe_shop/fair_bus_pract/green_pap_ comm/studies/unfair_practices_en.pdf.