30 Giuseppe B Abbamonte

contained in codes of conduct by which the trader has undertaken to be bound, where:

(i)the commitment is not aspirational, but firm and is capable of being verified, and

(ii)the trader indicates in a commercial practice that he is bound by the code.54

By recognising the value of codes of conduct as marketing tools, this provision creates a direct link between the provisions on misleading advertising and the failure by traders to honour the promises set out in codes of conduct. It will be particularly significant when the commitment in the code goes beyond the legal requirements. For example, a European timeshare association undertakes in a code of conduct to give a reflection period of 14 days, during which consumers may exercise their right of withdrawal. This period may be longer than the minimum (eg 10 days) under the legislation of certain Member States. If the code is used by a trader as a marketing tool (eg if the code is available or distributed to consumers visiting the commercial premises of the trader) and the trader subsequently refuses to abide by the 14-day commitment, this will be misleading under Article 6.

7. ENFORCEMENT

The Directive fully harmonises the substantive laws of the Member States related to unfair commercial practices. It does not harmonise the enforcement mechanisms that are in place in the Member States to combat these unfair practices. Member States must organise their own enforcement system, designate the persons and bodies having the right to bring legal actions under the Directive, and determine the sanctions for infringement of the provisions of the Directive.

Effective enforcement is critical to achieving the full potential of the Directive. For this reason, it would be desirable if the Member States delegated all necessary powers to enforce the Directive to one public agency. Only an effective system of public enforcement can provide the necessary guarantees in terms of impartiality and independence that private enforcement by definition cannot ensure. Moreover, under some circumstances, only a public agency has the incentive and the powers to carry out certain enforcement actions.55 These considerations are even stronger in the light

54Art 6(2)b of ibid.

55This is demonstrated by the disappointing experience with the application of the Injunctions Directive in cross-border cases. Most of the organisations designated by the Member States under the Directive are consumer associations. To date none of these associations has sought an injunction abroad. The only case that has been brought so far is Duchesne, above n 31.

3

The Unfair Commercial Practices Directive: Its Scope, Ambitions and Relation to the Law of Unfair Competition

ULF BERNITZ

1. SOME BASIC FEATURES

THE NEW UNFAIR Commercial Practices Directive (UCPD)1 constitutes a major new piece of European legislation. Few directives in the consumer law field have such a broad scope of application

and represent such a high level of legislative ambition. This chapter will discuss primarily certain aspects relating to the legislative model chosen, among them the maximum harmonisation model and the fundamental decision to limit the scope of the Directive to business-to-consumer (B2C) transactions. As is well-known, business-to-business transactions (B2B) have been left out of the Directive,2 and in this area the far less ambitious 1984 Directive on Misleading Advertising will continue to apply, however including its comprehensive addition of 1997 on Comparative Advertising.3

This solution has been and still is the object of much criticism. It is in particular contrary to the German concept of a unitary unfair competition

1Directive 2005/29/EC [2005] OJ L 149/22. The Directive is to be implemented in the Member States by 12 Dec 2007 (Art 19 of the Directive). See for a comprehensive presentation, J Stuyck et al, ‘Confidence through Fairness? The New Directive on Unfair Business-to- consumer Commercial Practices in the Internal Market’ (2006) 43 CMLRev 107.

2Recital 6 of the Directive states that the Directive neither covers nor affects the national laws on unfair commercial practices which harm only competitors´ economic interests or which relate to a transaction between traders.

3Directive 84/450/EEC [1984] OJ L 250/17, as amended by Directive 97/55/EC [1997] OJ L 290/18.

34 Ulf Bernitz

law which has been largely accepted in a substantial number of Continental EU countries.4 Historically, the German unfair competition concept has focused on protection against unfair practices in B2B transactions, but it has gradually been widened and the new German Unfair Competition Act of 2004 aims at offering B2B and B2C protection on the same level, balancing conflicting business and consumer interests, when necessary. Also in the Scandinavian countries the marketing practices legislation has comprised both B2B and B2C protection, albeit with a more pronounced emphasis on protection of consumers than has been the case in Germany. However, there are other models within Europe, eg the solution to include legislation against unfair marketing practices in a broadly framed consumer code. This is the model of the French Code de la Consommation of 1992. In England, on the other hand, there has never developed any coherent legal principle of unfair competition, and consumer legislation on unfair practices is scattered and lacking systematisation.5

Against this background and contrary to many of my countrymen, I think the Commission has taken a wise decision when limiting the new directive to B2C transactions. It is worth remembering that the original study and drafting work for the Commission was conducted during the 1960s by the Max Planck Institute for Intellectual Property and Competition Law in Munich (the Ulmer project)6 on the assumption that the traditional German unfair competition law should serve as the primary model. In my opinion, the fairly quick and smooth acceptance by the European Parliament and the Council of the Commission's proposal for such a comprehensive directive is a remarkable achievement. A primary explanation why the Commission was able to succeed so well is probably the decision taken not to follow the model of any particular EU country but to found its proposal for the Directive7 on a new systematic formation, based on functional considerations fitting EC law.

By concentrating on the consumer protection aspect, the Commission was able to establish a strong connection to other consumer law directives, eg the E-Commerce Directive8 and make it part of the developing European consumer law. In line with these Directives, the Unfair Practices

4See in particular on national unfair commercial practices law in the EU Member States, R Schulze and H Schulte-Nölke, ‘Analysis of National Fairness Laws Aimed at Protecting Consumers in relation to Commercial Practices’ (June 2003), a study for the EU Commission (with further references), available at caption ‘Consumer’, www.ec.europa.eu The study includes a number of national reports, among them my own Report on Sweden. See also, eg, H Micklitz and J Kessler, Marketing Practices and Consumer Protection in the EC Member States and the US (Baden-Baden, Nomos, 2002).

5S Weatherill, ‘United Kingdom Report’ in Schultze and Schulte-Nölke, above n 4, and S Weatherill EU Consumer Law and Policy (Cheltenham, Edward Elgar, 2005) 191.

6Das Recht des unlauteren Wettbewerbs in den Mitgliedstaaten det EWG.

7COM(2003)356 final, 18 June 2003.

82000/31/EC [2000] OJ L 178/1.

Scope, Ambitions and Relation to Unfair Competition Law 35

Directive limits the scope of the concept of a consumer to natural persons acting for non-business purposes.9 In addition, by using a new systematic approach, the Commission was able to adapt its model to the particular need of removing barriers to cross-border advertising and marketing, thus furthering European integration. For obvious reasons, this aspect is lacking in the different national legislative models, but was also largely lacking in the original proposals of the Max Planck Institute.

The successful enactment of the Directive is all the more remarkable considering the breadth of its coverage. The Directive gives a broad definition of what is a commercial practice, including all types of advertising, marketing and commercial communication.10 It requires full harmonisation on the basis of Article 95 EC (functioning of the internal market), aiming at creating a single regulatory framework regulating all aspects of unfair commercial practices across the EU.11 This is claimed to create a high common level playing field of consumer protection12 and eliminate the barriers stemming from the present fragmentation of the rules on unfair commercial practices.13 Thus, the Directive is compelling Member States to bring their legislation fully into line with the provisions of the Directive, a fundamental difference compared to the present 1984 Directive on Misleading Advertising.

In order to reach this result, the Commission had to compromise and drop its original proposal to introduce the country of origin principle into the marketing practices field. The main thrust of the original Green Paper on Commercial Communication in the Internal Market of 199614 was the liberalisation of commercial communication and promotion of free movement of advertising and marketing services throughout the Community, using the country of origin and mutual recognition principles as the main instruments. As is well-known, this principle has been accepted in the E-Commerce Directive: ‘Member States may not, for reasons falling within the coordinated field, restrict the freedom to provide information services from another Member State’.15 However, although kept in the Green Paper of 2001 on EU Consumer Protection16 and in the proposed text of the Directive as first presented, the country of origin principle stumbled on massive criticism from certain Member States wanting to have the possibility to enforce stricter national standards. As the Directive prescribes

9Art 2(a).

10Art 2(d).

11Recital 12.

12Recital 11.

13Recital 12.

14COM(96)192 final.

15Art 3.2 of the E-Commerce Directive, above n 8.

16COM(2001)531 final.

36 Ulf Bernitz

maximum harmonisation, there should be no room for such differences except in cases in which differences can be established between Member States in consumers’ perception or understanding of a certain type of marketing practice.17 However, the realities may be somewhat different. I will return to the issue of full harmonisation in the concluding part of this chapter.

The Directive is limited to unfair commercial practices harming consumers’ economic interests (Article 1); a limitation well in line with its primary harmonisation object. Thus, the Directive excludes practices affecting matters of taste and decency where the requirements are said to vary widely between the Member States.18 Obviously, the latter area has been considered more difficult to harmonise.

Basically, the architecture of the substantive provisions of the Directive is based on a division into four parts:

(I)A general clause prohibiting unfair commercial practices contrary to the requirements of professional diligence, provided the practice is able to distort consumers’ economic behaviour (Article 5),

(II)A prohibition on misleading commercial practices, divided into two statutory provisions, one on misleading actions (Article 6) and another on misleading omissions (insufficient information: Article 7),

(III)A prohibition on aggressive commercial practices, likewise divided into two statutory provisions, one directed against the use of aggressive commercial practices (Article 8) and the other against the use of harassment, coercion and undue influence (Article 9),

(IV) A black list comprising 31 types of commercial practices considered to be prohibited as unfair in all circumstances (Annex I). Thus, the blacklisted practices are prohibited per se and do not require an assessment of their effects in the individual case.

The prohibited practices described under II–IV are particularly important examples of unfair commercial practices. It seems somewhat unclear to what extent the general clause in Article 5 is intended to be independently applicable to practices which fall outside the scope of the specific prohibitions, in particular in relation to cases where the commercial practice would be of a different type. This is probably an issue which has to wait for clarification by the ECJ. Primarily, the general clause can be expected to cover practices which are well in line with such practices that fall under any of the two prohibitions on misleading and aggressive practices or the blacklisted practices, but do not fully fit the specific criteria of these provisions. However, it will be perfectly possible for the ECJ to find the general clause

17The issue is discussed in Stuyck et al, above n 1, at 115. Possible derogations and exemptions will be discussed in part 4, below. As pointed out by Stuyck, the interpretation of Art 4 remains unclear.

18Recital 7.