Marketing and Advertising law in a Process of Harmonisation 9781509900671, 9781509900701, 9781509900688

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MARKETING AND ADVERTISING LAW IN A PROCESS OF HARMONISATION The law on marketing and advertising has undergone profound changes based on the EU directives on unfair commercial practices and misleading and comparative advertising. The legislation partially requires full harmonisation and contains a comprehensive blacklist of prohibited practices. However, in other areas only minimum harmonisation is required. A comprehensive case law from the CJEU has emerged but still many issues remain open, unclear and debated. The EU Commission has an active interest in the field and has published numerous reports on the question. In addition it has developed revised, comprehensive guidelines on business to consumer (B2C) marketing which are fully discussed here. Further Commission initiatives in the area on business to business (B2B) marketing are also in the making, underlining the importance of this new collection. Volume 70 in the Series Modern Studies in European Law

Modern Studies in European Law Recent titles in this series: The UK and European Human Rights: A Strained Relationship? Edited by Katja S Ziegler, Elizabeth Wicks and Loveday Hodson The European Union in International Organisations and Global Governance: Recent Developments Edited by Christine Kaddous Nudge and the Law: What Can EU Law Learn from Behavioural Sciences? Edited by Alberto Alemanno and Anne-Lise Sibony Fundamental Rights in EU Internal Market Legislation Vasiliki Kosta Uniformity of Customs Administration in the European Union Kathrin Limbach The Impact of Union Citizenship on the EU’s Market Freedoms Alina Tryfonidou Equal Citizenship and Its Limits in EU Law Päivi Johanna Neuvonen European Law on Unfair Commercial Practices and Contract Law Mateja Durovic The European Union’s External Action in Times of Crisis Edited by Piet Eeckhout and Manual Lopez-Escudero The Legitimacy of Family Rights in Strasbourg Case Law: Living Instrument or Extinguished Sovereignty? Carmen Draghici Strengthening the Rule of Law in Europe: From a Common Concept to Mechanisms of Implementation Edited by Werner Schroeder The Pluralist Character of the European Economic Constitution Clemens Kaupa Exceptions from EU Free Movement Law Edited by Panos Koutrakos, Niamh Nic Shuibhne and Phil Syrpis Reconceptualising European Equality Law: A Comparative Institutional Analysis Johanna Croon-Gestefeld For the complete list of titles in this series, see ‘Modern Studies in European Law’ link at www.hartpub.co.uk/books/series.asp

Marketing and Advertising Law in a Process of Harmonisation

Edited by

Ulf Bernitz and Caroline Heide-Jørgensen

OXFORD AND PORTLAND, OREGON 2017

Hart Publishing An imprint of Bloomsbury Publishing Plc Hart Publishing Ltd Kemp House Chawley Park Cumnor Hill Oxford OX2 9PH UK

Bloomsbury Publishing Plc 50 Bedford Square London WC1B 3DP UK

www.hartpub.co.uk www.bloomsbury.com Published in North America (US and Canada) by Hart Publishing c/o International Specialized Book Services 920 NE 58th Avenue, Suite 300 Portland, OR 97213-3786 USA www.isbs.com HART PUBLISHING, the Hart/Stag logo, BLOOMSBURY and the Diana logo are trademarks of Bloomsbury Publishing Plc First published 2017 © Ulf Bernitz and Caroline Heide-Jørgensen 2017 Ulf Bernitz and Caroline Heide-Jørgensen have asserted their right under the Copyright, Designs and Patents Act 1988 to be identified as Authors of this work. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. While every care has been taken to ensure the accuracy of this work, no responsibility for loss or damage occasioned to any person acting or refraining from action as a result of any statement in it can be accepted by the authors, editors or publishers. All UK Government legislation and other public sector information used in the work is Crown Copyright ©. All House of Lords and House of Commons information used in the work is Parliamentary Copyright ©. This information is reused under the terms of the Open Government Licence v3.0 (http://www.nationalarchives.gov.uk/doc/open-government-licence/version/3) except where otherwise stated. All Eur-lex material used in the work is © European Union, http://eur-lex.europa.eu/, 1998–2017. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library. ISBN: HB: 978-1-50990-067-1 ePDF: 978-1-50990-068-8 ePub: 978-1-50990-069-5 Library of Congress Cataloging-in-Publication Data Names: Bernitz, Ulf, editor.  |  Heide-Jørgensen, Caroline, editor. Title: Marketing and advertising law in a process of harmonisation / edited by Ulf Bernitz and Caroline Heide-Jørgensen. Description: Oxford [UK] ; Portland, Oregon : Hart Publishing, 2017.  |  Series: Modern studies in European law  |  Includes bibliographical references and index. Identifiers: LCCN 2016057790 (print)  |  LCCN 2016058887 (ebook)  |  ISBN 9781509900671 (hardback : alk. paper)  |  ISBN 9781509900695 (Epub) Subjects: LCSH: Trade regulation.  |  Marketing—Law and legislation.  |  Advertising laws.  |  Competition, Unfair.  |  Law—International unification. Classification: LCC K3842 .M37 2017 (print)  |  LCC K3842 (ebook)  |  DDC 343.08—dc23 LC record available at https://lccn.loc.gov/2016057790 Typeset by Compuscript Ltd, Shannon To find out more about our authors and books visit www.hartpublishing.co.uk. Here you will find extracts, author information, details of forthcoming events and the option to sign up for our newsletters.

Contents List of Contributors������������������������������������������������������������������������������������������������� xiii Table of Cases������������������������������������������������������������������������������������������������������������xv

1. Introduction: Marketing and Advertising Law in a Process of Harmonisation����������������������������������������������������������������������������������������������1 Ulf Bernitz and Caroline Heide-Jørgensen I. Introduction����������������������������������������������������������������������������������������������1 II. The Development of Unfair Commercial Practices Law/Unfair Competition��������������������������������������������������������������������������7 A. The Paradigm of Freedom of Commerce and the Historical Origins of Different National Traditions for Regulating Unfair Competition��������������������������������������������������7 B. Regulation by International Conventions—the Rules of the Paris Convention, the WIPO and the TRIPS on Unfair Competition and Self-regulation in the ICC������������������9 III. EU Regulation—Free Movement and Harmonisation�������������������������11 A. Foundation in TFEU and Case Law from CJEU on Free Movement���������������������������������������������������������������������������11 B. Harmonisation—from Protection of the Honest Entrepreneur to Protection of the Consumer��������������������������������12 (i) General Harmonisation—History and Development�������������������������������������������������������������������������12 (ii) Some Reflections on the Terms—Unfair Competition, Unfair Trade and/or Unfair Commercial Practices?����������������������������������������������������������16 (iii) Harmonisation of Special Areas��������������������������������������������16 IV. Problems and Challenges������������������������������������������������������������������������17 2. Commercial Speech and its Limits—Fundamental Rights and Comparative Constitutional Aspects�����������������������������������������������������19 Caroline Heide-Jørgensen I. Free Speech and Unfair Commercial Practices—Introduction�������������������������������������������������������������������������19 II. The Protection of Commercial Speech in the European Convention of Human Rights����������������������������������������������������������������21 III. Protection of Commercial Speech in the EU�����������������������������������������26

vi  Contents IV. Comparative Constitutional Aspects of Freedom of Commercial Speech����������������������������������������������������������������������������30 A. Protection of Commercial Speech in the USA�������������������������������30 (i) Introduction���������������������������������������������������������������������������30 (ii) Commercial Speech—Defining the Concept�����������������������31 (iii) The Distinction between Content-Neutral and Content-Based Regulation���������������������������������������������33 (iv) Summary of US Law of Freedom of Speech������������������������39 B. Protection of Commercial Speech in Germany�����������������������������39 V. Some Conclusions on the Protection of Freedom of Commercial Speech and Unfair Commercial Practices������������������������43 3. Ethics, Taste and Decency Considerations in Advertising���������������������������45 Frauke Henning-Bodewig I. Introduction��������������������������������������������������������������������������������������������45 II. ‘Ethics, Taste and Decency’: Lawyers on Treacherous Ground … �������������������������������������������������������������������������46 A. General Definitions��������������������������������������������������������������������������46 B. ‘Business Ethics’, ‘Public Policy Issues’, ‘Corporate Social Responsibility’ and the ICC Code���������������������������������������������������46 III. The Legal Framework for ‘Ethics, Taste and Decency’��������������������������49 A. Between Ordnungsethik and Handlungsethik���������������������������������49 B. Article 10bis Paris Convention��������������������������������������������������������50 C. European Law����������������������������������������������������������������������������������52 (i) No Comprehensive Regulation of Advertising���������������������52 (ii) Directive 2005/29/EC on Unfair Commercial Practices���������������������������������������������������������������������������������52 (iii) Directive 2010/13/EC on Audiovisual Media Services�����������������������������������������������������������������������53 D. National Legislation�������������������������������������������������������������������������54 (i) The Different Approaches to the Regulation of Advertising������������������������������������������������������������������������54 (ii) The German Act Against Unfair Competition— from 1909 to 2015�����������������������������������������������������������������55 IV. Ethics, Taste and Decency and the ‘Free Speech Doctrine’��������������������58 V. The Role of Enforcement������������������������������������������������������������������������59 VI. Concluding Remarks�������������������������������������������������������������������������������62 4. The Unfair Commercial Practices Directive: Full Harmonisation, Scope and Key Notions�������������������������������������������������������65 Jules Stuyck I. Introduction��������������������������������������������������������������������������������������������65 II. Background and Objectives of the Directive�����������������������������������������66

Contents vii III. The Directive’s Architecture: A Three Tier System�����������������������������68 IV. Scope�����������������������������������������������������������������������������������������������������69 A. Commercial Practices�������������������������������������������������������������������69 B. B2C Commercial Practices�����������������������������������������������������������70 C. Protection of Economic Interests of Consumers������������������������72 D. Personal Scope of Application������������������������������������������������������72 V. Full Harmonisation������������������������������������������������������������������������������74 VI. Key Concepts����������������������������������������������������������������������������������������75 A. The Grand General Clause�����������������������������������������������������������76 B. The Notion of Misleading Practice����������������������������������������������77 VII. Some Questions Relating to the Black List�����������������������������������������80 VIII. Concluding Remarks����������������������������������������������������������������������������83 5. Interpretation and Assessment under the Unfair Commercial Practices Directive—the ICC Code for Advertising and Marketing and the Commission’s Staff Working Document�������������������������������������������������������85 Jan Trzaskowski I. Introduction�����������������������������������������������������������������������������������������85 II. The Unfair Commercial Practices Directive���������������������������������������86 III. The Role of Self-regulation������������������������������������������������������������������90 IV. The ICC Code���������������������������������������������������������������������������������������93 V. The European Commission’s Staff Working Document��������������������94 A. The Scope of Application�������������������������������������������������������������97 B. National Assessment; Social, Cultural and Linguistic Factors�������������������������������������������������������������������������������������������98 C. Misleading Environmental Claims����������������������������������������������99 D. Invitation to Purchase�����������������������������������������������������������������100 E. Describing a Product as ‘Gratis’, ‘Free’, ‘Without Charge’ or Similar�������������������������������������������������������101 VI. Conclusions����������������������������������������������������������������������������������������102 6. The ‘Fitness Check’ of the MCAD and UCPD���������������������������������������������105 Bert Keirsbilck I. Introduction���������������������������������������������������������������������������������������105 II. The Two Main Objectives of the Fitness Check of EU Consumer Law������������������������������������������������������������������������������������107 III. Are the MCAD and UCPD Fit for Purpose?�������������������������������������109 A. Scope Ratione Materiae, Regulatory Approach and Degree of Harmonisation (‘Effectiveness’ and ‘Efficiency’)���������������������������������������������������������������������������109 B. Scope Ratione Personae (‘Relevance’)���������������������������������������114 C. Interplay with other EU Instruments (‘Coherence’)�����������������116 IV. Conclusion������������������������������������������������������������������������������������������118

viii  Contents 7. The Impact of the UCP Directive on National Fair Trading Law and Institutions: Gradual Convergence or Deeper Fragmentation?����������������������������������������������������������������������������119 Antonina Bakardjieva Engelbrekt I. Introduction������������������������������������������������������������������������������������������119 II. Constructing Coherence through the UCPD: An Unfinished Business?�����������������������������������������������������������������������121 A. Coherence-Enhancing Techniques�����������������������������������������������122 (i) Horizontal Approach�����������������������������������������������������������122 (ii) Full Harmonisation�������������������������������������������������������������122 (iii) Internal Market Clause��������������������������������������������������������123 (iv) Regulative Detail������������������������������������������������������������������123 B. Factors Sustaining Diversity����������������������������������������������������������124 (i) Substantive Issues: The Difficulty of Harmonisation through a General Clause�������������������������124 (ii) Systemic Positioning: The Distinction between B2B and B2C������������������������������������������������������������������������124 (iii) Institutional Aspects: Limited Guidance on Issues of Institutions and Procedures���������������������������������126 III. The Impact of the UCPD on National Fair Trading Law and Practice: Effects on Substantive Law���������������������������������������������127 A. Half-hearted Implementation of the UCPD��������������������������������128 (i) Germany and Sweden in an Effort to ‘Domesticate’ the Directive�������������������������������������������������129 (ii) A Tug-of-War with the Commission����������������������������������132 B. Methodologies of General Clause Interpretation and the Standard of Professional Diligence����������������������������������135 (i) Codes of Business Conduct�������������������������������������������������135 (ii) Breach of Statutory Duty as Unfair Commercial Practice�����������������������������������������������������������137 (iii) Agency Guidelines���������������������������������������������������������������144 IV. Systemic Effects�������������������������������������������������������������������������������������146 A. Dilemmas in Member States Preserving the Integrated Approach: Delineating the Domain of the UCPD��������������������������������������������������������������147 B. Dilemmas of the Divided Approach: Defining the Interface with Other Legal Domains��������������������������������������150 (i) Poland�����������������������������������������������������������������������������������150 (ii) Hungary��������������������������������������������������������������������������������151 (iii) Bulgaria��������������������������������������������������������������������������������152 C. The B2B Domain—Uncharted Waters?����������������������������������������153 V. Adapting Institutions and Enforcement����������������������������������������������155 A. A Shift to Public Enforcement?�����������������������������������������������������156

Contents ix B. The Many Guises of Public Enforcement����������������������������������158 C. The Tenacity of Private Enforcement����������������������������������������161 D. Repercussions on ‘Law in Action’�����������������������������������������������164 VI. Understanding and Working with Diversity�������������������������������������165 8. B2B and B2C Marketing Practices­—the Case for an Integrated Approach�������������������������������������������������������������������������������������171 Palle Bo Madsen I. Introduction���������������������������������������������������������������������������������������171 A. Looking Back�������������������������������������������������������������������������������171 B. Looking Ahead����������������������������������������������������������������������������172 II. The Split between B2B and B2C—Is It Working?����������������������������173 A. Communicating Vessels��������������������������������������������������������������173 B. The Scope of the Two Commercial Practices Directives As It Is������������������������������������������������������������������������174 III. The Confused Marketplace—Who’s Who? Or What To Do?���������������������������������������������������������������������������������������177 IV. The Primary Purpose(s) of Marketing Law vis-à-vis Competition Law—A Common Denominator?���������������179 V. Big Business and Small Business (SMEs)—One Size Fits All?����������������������������������������������������������������������������������������181 VI. Almost Quiet on the B2B Front?�������������������������������������������������������183 VII. Conclusion—or Wishful Thinking����������������������������������������������������184 PS���������������������������������������������������������������������������������������������������������185 9. Applying the UCP Directive in Practice: The Norwegian Experience������������������������������������������������������������������������������������������������������187 Tore Lunde I. Introduction���������������������������������������������������������������������������������������187 II. Enforcement Authorities��������������������������������������������������������������������188 III. The MCA, Section 20(2) and the Blacklist’s Paragraph 28��������������188 IV. The Market Council’s First Decision in the Justin Bieber Case—MR-2012-1245-1��������������������������������������������������������������������189 A. The Facts�������������������������������������������������������������������������������������189 B. The Legal Assessments����������������������������������������������������������������190 V. The Swedish Stardoll Case—MD-2012: 14���������������������������������������192 VI. The Market Council’s Revised Decision in the Justin Bieber Case—MR-2012-1245-2����������������������������������������������193 VII. Other Norwegian Cases���������������������������������������������������������������������195 A. MR-2013-207 Norsk Tipping—The Black List’s Paragraph 22����������������������������������������������������������������������195 B. MR-2013-1141—Teaser Advertisements�����������������������������������197 VIII. Final Remarks�������������������������������������������������������������������������������������200

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Contents

10. Enforcing Unfair Competition Law Cross Border: Cooperation Mechanisms and Consumer Redress—Does the System Work? ............201 Astrid Stadler I. Some General Remarks on the Enforcement of the Unfair Commercial Practice Directive and the Misleading and Comparative Advertising Directive .............................................201 A. Specifications of the Directives....................................................201 B. Variety of Enforcement Systems in the Member States ..............................................................................202 C. Coordination and Judicial Co-operation in the European Judicial Area.................................................................204 II. The Consumer Protection Cooperation (CPC) Network .................205 A. Directive 98/27/EC of 19 May 1998 on Injunctions for the Protection of Consumer Interests and Directive 2009/22/EC ...................................................................205 B. A Network of National Public Enforcement Authorities for Mutual Assistance ...............................................205 C. Functioning of the CPC Network ...............................................207 III. Judicial Enforcement of Injunctions and Private Damage Claims .......................................................................209 A. Jurisdictional Regime of the Brussels Ia Regulation...................209 (i) Jurisdictional Privilege for Consumer Contracts .........................................................209 (ii) Consumer Contracts with Traders or Service Providers Domiciled in a Third State ...............................210 (iii) Consumer Associations as Claimants ...............................211 B. Enforcement Regime of the Brussels Ia Regulation ...................211 C. B2B Situations: Cross-Border Enforcement of Injunctions ...............................................................................212 (i) Brussels I Regulation .........................................................212 (ii) Brussels Ia Regulation........................................................214 IV. Conclusion ...........................................................................................218 11. Unfair Competition Law: How Can It Work as an Important Complement to Intellectual Property Protection. Are There Missing Links? ............................................................................221 Per Jonas Nordell I. Introduction.........................................................................................221 II. The International Legislative Framework ..........................................221 III. The European Legal Framework .........................................................224 IV. The Relationship between Intellectual Property and Unfair Competition Law in EU Case Law ...................................227 V. Concluding Remarks ...........................................................................231

Contents xi 12. The Road Ahead—Present Status and Need for Reform���������������������������233 Ulf Bernitz I. The UCPD and its Objectives������������������������������������������������������������233 II. The Structural Formation������������������������������������������������������������������237 III. Assessing the Black List����������������������������������������������������������������������240 IV. The Level of Consumer Protection against Misleading Commercial Practices�������������������������������������������������������������������������243 V. Role and Importance of the General Clause in the UCPD��������������246 VI. The B2B Protection Indirectly Offered by the UCPD����������������������248 VII. Is the System of Enforcement and Remedies Satisfactory?��������������251 VIII. Revision of the MCAD?���������������������������������������������������������������������253

Index�����������������������������������������������������������������������������������������������������������������������257

xii 

List of Contributors Antonina Barkadjieva Engelbrekt is Professor of European Law at the Faculty of Law, University of Stockholm. She is the holder of the Ragnar and Torsten ­Söderberg Chair in Legal Science 2015–2018. Ulf Bernitz is Professor of European Law at the Faculty of Law, University of Stockholm, Senior Research Fellow, St Hilda’s College, Oxford. Caroline Heide-Jørgensen is Professor of Competition Law and Unfair ­Competition at the Faculty of Law, University of Copenhagen, Director of the Centre for European Studies in Economic Law, and Professor II at the Faculty of Law, University of Bergen. Frauke Henning-Bodewig is Affiliated Senior Research Fellow at the Max Planck Institute for Innovation and Competition in Munich and Honorary Professor at the University of Erlangen/Nuremberg. Bert Keirsbilck is Associate Professor of Law at the Faculty of Law of the KU Leuven (since 2011), a co-director of Consumer Competition Market at the KU Leuven (since 2013) and the Brussels campus dean (since 2016). He is also of counsel with the law firm Eubelius, Brussels (since 2015). Tore Lunde is Professor of Law, Faculty of Law, University of Bergen. Palle Bo Madsen is Professor of Law, at the School of Business and Social Sciences, Aarhus University. Per Jonas Nordell is Professor of Private Law at the Faculty of Law, University of Stockholm, Director of the Institute of Intellectual Property and Market Law. Astrid Stadler is Professor of Law, Faculty of Law, University of Konstanz. Jan Trzaskowski is Associate Professor of Marketing Law, Department of Law, Copenhagen Business School. Jules Stuyck is Professor Emeritus at the KU Leuven and of counsel at the law firm Liederkerke, Brussels.

xiv 

Table of Cases Belgium Hof Brussel TBH 2005, 694��������������������������������������������������������������������������������������������������215 Bulgaria Zagorka Case���������������������������������������������������������������������������������������������������������������������������62 CJEU Case C-74/69 Hauptzollamt Bremen-Freihafen EU:C:1970:58��������������������������������������������95 Case C-21/76 Mines de potasse [1976] ECR 1735��������������������������������������������������������������215 Case C-120/79 Denilauler [1980] ECR I-01553������������������������������������������������������������������212 Case C-286/81 Oosthoek EU:C:1982:302������������������������������������������������������������������������������70 Case C-106/89 Marleasing v Comercial Internacional de Alimentación EU:C:1990:395������������������������������������������������������������������������������������������������������������������135 Case C-41/90 Höfner and Elser EU:C:1991:161��������������������������������������������������������������������73 Case C-89/91 Shearson Lehmann Hutton EU:C:193:15�����������������������������������������������������211 Joined Cases C-159/91 and C-160/91 Poucet and Pistre EU:C:1993:63������������������������������74 Joined Cases C-267/91 and C-268/91 Keck and Mithouard Judgments EU:C:1993:905 and EU:C:1993:160��������������������������������������������������������������154 Case C-68/93 Shevill [1995] ECR I-415�������������������������������������������������������������������������������216 Case C-441/93 Pafitis EU:C:1996:92������������������������������������������������������������������������������������135 Case C-470/93 Verein gegen Unwesen in Handel und Gewerbe Köln v Mars EU:C:1995:224������������������������������������������������������������������������������������������������������������������245 Case C-337/95 Christian Dior EU:C:1997:517��������������������������������������������������������������������227 Case C-391/95 Van Uden EU:C:1998:543��������������������������������������������������������������������� 213–14 Case C-35/96 Commission v Italy EU:C:1998:330����������������������������������������������������������������73 Case C-99/96 Mietz [1999] ECR I-2277������������������������������������������������������������������������������213 Case C-210/96 Gut Springenheide and Tusky v Oberkreisdirektor des Kreises Steinfurt EU:C:1998:369��������������������������������������������������������������������87, 244–45 Case C-7/97 Bronner EU:C:1998:569��������������������������������������������������������������������������� 179–80 Case C-63/97 BMW EU:C:1999:82��������������������������������������������������������������������������������������227 Case C-220/98 Estée Lauder Cosmetics v Lancaster Group EU:C:2000:8��������������������������������������������������������������������������������������������������������������� 244–45 Case C-376/98 Germany v European Parliament and Council EU:C:2000:544��������������������������������������������������������������������������������������������������������������������28 Case C-405/98 Consumer Ombudsman v Gourmet International Products EU:C:2001:135����������������������������������������������������������������������������������������������������17 Case C-74/99 The Queen v Secretary of State for Health and Others, ex parte Imperial Tobacco Ltd and Others EU:C:2000:547����������������������������������������������28 Case C-112/99 Toshiba EU:C:2001:566�������������������������������������������������������������������������������227

xvi  Table of Cases Case C-96/00 Gabriel EU:C:2002:436����������������������������������������������������������������������������������211 Case C-44/01 Pippig Augenpoptik EU:C:2003:205�����������������������������������������������66, 228, 254 Case C-206/01 Arsenal Football Club plc v Matthew Reed EU:C:2002:651������������������������������������������������������������������������������������������������������������������229 Case C-218/01 Henkel EU:C:2004:88��������������������������������������������������������������������������������� 211 Case C-245/01 RTL Television v Niedersächsische Landesmedienanstalt für privaten Rundfunk EU:C:2003:580������������������������������������������������������������������������������28 Joined Cases C-264/01, C-306/01 and C-354/01 Krankenkassen�����������������������������������������74 Case C-355/01 AOK Bundesverband EU:C:2004:150�����������������������������������������������������������74 Case C-421/07 Damgaard EU:C:2009:222�����������������������������������������������������������������������������29 Case C-71/02 Karner EU:C:2004:181�������������������������������������������������������������������������������������28 Case C-262/02 Commission v France and Case C-429/02 Bacardi France v Télévision Francaise 1 (TF 1) et al EU:C:2004:431 and 432������������������������������17 Case C-380/03 Germany v European Parliament and Council EU:C:2006:772��������������������������������������������������������������������������������������������������������������������29 Case C-48/05 Opel EU:C:2007:55����������������������������������������������������������������������������������������229 Case C-381/05 Malheure EU:C:2007:230����������������������������������������������������������������������������230 Case C-533/06 O2 EU:C:2008:339���������������������������������������������������������������������������������������228 Joined Cases C-261/07 and C-299/07 VTB-VAB EU:C:2009:244���������������������������������������������������������������������������� 14, 69–71, 75, 86, 123, 242 Case C-299/07 Galatea v Sanoma Magazines Belgium NV EU:C:2007:484����������������������������������������������������������������������������������������������������14, 123, 242 Case C-487/07 Lancôme parfums et beauté & Cie SNC, Laboratoire Garnier & Cie v Bellure NV EU:C:2009:378���������������������������������������� 228–29 Case C-304/08 Plus Warenhandelsgesellschaft EU:C:2010:12�������������������� 14–15, 71, 75, 123 Case C-522/08 Telecomunikacja Polska EU:C:2010:135�������������������������������������������������71, 75 Case C-540/08 Mediaprint EU:C:2010:660�������������������������������������������� 14–15, 69–71, 75, 79, 83, 87–88, 174, 235, 246 Joined Cases C-585/08 and 144/09 Pammer and Alpenhof EU:C:2010:740������������������������������������������������������������������������������������������������������������������210 Joined Cases C-509/09 and 161/10 eDate advertising and Martinez EU:C:2011:685������������������������������������������������������������������������������������������������������������������216 Case C-122/10 Ving Sverige EU:C:2011:299��������������������������������������������������������������������87, 96 Case C-288/10 Wamo EU:C:2011:443���������������������������������������������������14–15, 71, 87, 174–75 Case C-453/10 Pereničová and Perenič EU:C:2012:144�����������������������������������������������79, 246 Case C-523/10 Wintersteiger EU:C:2012:220����������������������������������������������������������������������215 Case C-126/11 Inno EU:C:2011:851������������������������������������������������������������ 14–15, 71, 86, 174 Case C-190/11 Mühlleitner EU:C:2012:542������������������������������������������������������������������������210 Case C-206/11 Köck EU:C:2013:14�������������������������������������������������������������������� 14, 71, 75, 242 Case C-419/11 Feichter EU:C:2013:165�������������������������������������������������������������������������������211 Case C-428/11 Purely Creative and Others EU:C:2012:651�����������������������������������������������������������80, 87, 90, 101, 194–95, 200, 241, 245 Case C-435/11 CHS Tour Services EU:C:2013:634���������������������������������������������������������������� 78–79, 89, 174, 193, 195, 243, 246 Case C-559/11 Pelckmans Turnhout EU:C:2012:615���������������������������������������������69, 86, 175 Case C-59/12 BKK Mobil EU:C:2013:634������������������������������������������������� 73–74, 83, 174, 234 Case C-218/12 Emrek EU:C:2013:666���������������������������������������������������������������������������������210 Case C-256/12 Citroën Belux EU:C:2013:498�����������������������������������������������������������������72, 87

Table of Cases xvii Case C-281/12 Trento Sviluppo EU:C:293:859�������������������������������������������������76–77, 88, 241 Case C-343/12 Euronics Belgium EU:C:2013:154�����������������������������������������������������������15, 71 Case C-391/12 RLvS EU:C:2013:468�������������������������������������������������������������������������69–70, 77 Case C-421/12 Commission v Belgium EU:C:2014:2064���������������������������������������������87, 242 Case C-483/12 Pelckmans Turnhout EU:C:2014:304�����������������������������������������������������������70 Case C-515/12 4Finance UAB EU:C:2014:211������������������������������������������������ 81, 90, 101, 200 Case C-231/13 Deckmyn and Vrijheidsfonds EU:C:2014:2132������������������������������������������135 Case C-352/13 CDC Hydrogen Peroxide EU:C:2015:335�������������������������������������������215, 217 Case C-375/13 Kolassa EU:C:2015:37����������������������������������������������������������������������������������217 Case C-388/13 UPC Magyarország EU:C:2015:225�������������������������������� 68, 98, 174, 176, 234 Joined Cases C-544/13 and 545/13 Abcur v Apoteket Farmaci and Apoteket EU:C:2015:481�������������������������������������������������������������������������������17 Case C-157/14 Neptune EU:C:2015:823��������������������������������������������������������������������������������29 Case C-547/14 Phillip Morris Brands and Others EU:C:2016:325��������������������������������������29 Case C-13/15 Cdiscount EU:C:2015:560�����������������������������������������������������������������������������175 Case C-310/15 V Deroo-Blanquart v Sony Europe EU:C:2016������������������������������������������242 European Court of Human Rights Barthold, ECtHR 90, 23 March 1985�������������������������������������������������������������������21–23, 25, 58 Casado Coca, ECtHR 285-A, 24 February 1994��������������������������������������������������������22–25, 43 Colman, ECtHR 258-D���������������������������������������������������������������������������������������������������� 23–24 De Geillustreerde Pers NV v Netherlands, Appl No 5178/71�����������������������������������������������21 Handyside, ECtHR Series A, No 24 (1976)����������������������������������������������������������������������������19 Jacubowski v Germany, ECtHR 291-A����������������������������������������������������������������������22–23, 25 Krone Verlag, ECtHR No 39069/97��������������������������������������������������������������������������������� 23–25 Markt Intern Verlag, ECtHR No 10572/83����������������������������������������������������������������22–25, 29 Stambuk, ECtHR No 37928/97 (Sect 3) (Eng), 17 October 2002����������������������������23–25, 43 Tierfabriken No 1 and 2, ECtHR Nos 24699/94 and 32772/02������������������������������������������������������������������������������������������������23, 25–26, 28–29, 43 VGT Verein gegen Tierfabriken v Switzerland, No 24699/94 (Sect 2), ECtHR 2001-VI����������������������������������������������������������������������23, 25–26, 28–29, 43 Von Hannover, ECHR 061 (2015) 19 February 2015������������������������������������������������������������59 France Cour d’appel Orléans RCDIP 93 (2004), 139����������������������������������������������������������������������214 Cour d’appel Paris, Clunet 131 (2004), 492�������������������������������������������������������������������������215 Tribunal de Grande Instance Nanterre, JCP éd E, 1999, 954����������������������������������������������215 Germany Benetton cases��������������������������������������������������������������������������������������� 3, 32, 40–42, 55–57, 60 BGH BeckRS 2013, 03164����������������������������������������������������������������������������������������������������������215 BGHZ 153, 82ff, 91�����������������������������������������������������������������������������������������������������������214 GRUR 1980, 858 Asbest-Importe���������������������������������������������������������������������������������������57 GRUR 1998, 419 and 945�������������������������������������������������������������������������������������������������214 GRUR 2000, 1076 Abgasemmissionen�����������������������������������������������������������������������������139

xviii  Table of Cases GRUR 2002, 825 Elektroarbeiten�������������������������������������������������������������������������������������139 GRUR 2007, 890, Jugendschützende Medien��������������������������������������������������������������������57 GRUR 2013, 1161, Hard Rock Café,��������������������������������������������������������������������������������250 GRUR 2013, 631, AMARULA/ Marulablu,����������������������������������������������������������������������250 GRUR 2014, 1009 pharmacies�����������������������������������������������������������������������������������������140 GRUR 2015, 283����������������������������������������������������������������������������������������������������������������140 GRUR 2015, 286����������������������������������������������������������������������������������������������������������������140 GRUR 2015, 507������������������������������������������������������������������������������������������������������������������56 GRUR 2015, 916����������������������������������������������������������������������������������������������������������������140 GRUR 2015, 1019 mobile accounting service�����������������������������������������������������������������140 GRUR 2015, 1025��������������������������������������������������������������������������������������������������������������140 GRUR 2015, 1033��������������������������������������������������������������������������������������������������������������140 GRUR 2015, 1237��������������������������������������������������������������������������������������������������������������140 NJW 1988, 1466����������������������������������������������������������������������������������������������������������������214 NJW 2005, 1435����������������������������������������������������������������������������������������������������������������214 NJW 2006, 689������������������������������������������������������������������������������������������������������������������215 NJW 2015, 72����������������������������������������������������������������������������������������������������������������������56 BVerfG 7, 377, Apothek�������������������������������������������������������������������������������������������������������������������20 40, 371, parking advertising vehicles����������������������������������������������������������������������������������40 Court of Appeals Frankfurt MMR 2001, 751ff��������������������������������������������������������������������������������������������������������������215 Court of Appeals Munich NJW 2002, 611������������������������������������������������������������������������������������������������������������������215 WRP 2008, 380��������������������������������������������������������������������������������������������������������������������57 BeckRS 2008, 00744����������������������������������������������������������������������������������������������������������214 Norway Justin Bieber MR-2012-1245-1/2���������������������������������������������������������������������������������� 189–95 Norsk Tipping MR-2013-207���������������������������������������������������������������������������������195–97, 199 Teaser advertisements MR-2013-1141������������������������������������������������������������������������ 197–200 Sweden MD 2000:19 ��������������������������������������������������������������������������������������������������������������������������143 MD 2000:21 ��������������������������������������������������������������������������������������������������������������������������143 MD 2001:19���������������������������������������������������������������������������������������������������������������������������143 MD 2002:15 and 2002:16������������������������������������������������������������������������������������������������������143 MD 2003:30���������������������������������������������������������������������������������������������������������������������������143 MD 2004:17 STOP Scandinavian TV Organisations against Piracy����������������������������������143 MD 2001:8 KO v TV 4 (Pokémon)��������������������������������������������������������������������������������������143 MD 2003:27 COMHEM, Viasat et al v Flashback���������������������������������������������������������������143 MD 2004:25 KO v 3 Call Aktiebolag������������������������������������������������������������������������������������143 MD 2005:37 KO v Optimal Telecom������������������������������������������������������������������������������������143 MD 2006:20 KO v CitiFinancial Europe������������������������������������������������������������������������������145 MD 2007:17 KO v Mobillån Sverige 12�������������������������������������������������������������������������������142 MD 2009:10 Canal Digital, COMHEM v Teknikkedjan�����������������������������������������������������142

Table of Cases xix MD 2009:29 KO v Expert�����������������������������������������������������������������������������������������������������142 MD 2009:33 Cederroth���������������������������������������������������������������������������������������������������������143 MD 2009:38 Elgiganten��������������������������������������������������������������������������������������������������������136 MD 2009:8 KO v Fordronsvärderingen i Skåne������������������������������������������������������������������143 MD 2010:14 KO v TeliaSonera���������������������������������������������������������������������������������������������143 MD 2010:28 L’Oreal��������������������������������������������������������������������������������������������������������������136 MD 2010:30, 2014:7; MD 2014:18 KO v Elgiganten�����������������������������������������������������������143 MD 2010:30, MD 2014:7 KO v MediaMarkt�����������������������������������������������������������������������145 MD 2010:8 Volvo������������������������������������������������������������������������������������������������������������������136 MD 2011:5 KO v Spendrups�������������������������������������������������������������������������������������������������145 MD 2012:17 PSW v KO������������������������������������������������������������������������������������������������������� 143 MD 2012:8 Nordic Drugs�����������������������������������������������������������������������������������������������������143 MD 2012:14 KO Stardoll����������������������������������������������������������������������������������������������� 192–93 MD 2013:16 Bauhaus������������������������������������������������������������������������������������������������������������136 MD 2014:14 KO v Swedish Match�������������������������������������������������������������������������������143, 145 MD 2014:4 KO v Berntsonsbrands (Jägermeister)�������������������������������������������������������������143 MD 2015:2 KO v Swedish Online Services (SOS)���������������������������������������������������������������143 MD 2015:7 KO v The Wine Company�������������������������������������������������������������������������143, 145 MD 2016:1 KO v Eniro���������������������������������������������������������������������������������������������������������143 United States Bad Frog Brewery, Inc v NY State Liquor Authority, 134 F3d (2d Cir 1998)�����������������������������������������������������������������������������������������������������������������������33 Bates v Arizona State Bar, 433 US 350 (1977)�����������������������������������������������������������������������36 Board of Trustees of the State Univ of NY v Fox, 492 US 469 (1989)����������������������������32, 38 Breard v Alexandria, 341 US 622 (1951)��������������������������������������������������������������������������������31 Central Hudson 447 US 557 (1980)���������������������������������������������������������������������������32, 34–39 Florida Bar v Went for it, 515 US 618 (1995)������������������������������������������������������������������������36 Greater New Orleans Broadcasting Ass’n, Inc v United States 527 US 173 (1999)��������������������������������������������������������������������������������������������������������������38 Kaske v Nike Inc, California Supreme Court, 45 P 3d 243 (Cal 2002)����������������������������������������������������������������������������������������������������������������33, 51, 58 Liquormart, Inc v Rhode Island, 517 US 484������������������������������������������������������32, 34, 37–38 Lorillard Tobacco Co v Reilly, 533 US 525 (2001)�����������������������������������������������������������������38 Ohralik v Ohio State Bar, 436 US 447 (1978)������������������������������������������������������������������������36 Posadas de Puerto Rico Assocs v Tourism Co 478 US 328 (1986)���������������������������������������37 Primus, In re, 436 US 412 (1978)�������������������������������������������������������������������������������������������36 Riley v National Fed of the Blind of NC Inc, 487 US 781 (1988)�����������������������������������������32 Shapero v Kentucky State Bar, 486 US 466 (1988)����������������������������������������������������������������36 Sorrel v IMS Health, 131 S Ct 2653 (2011)����������������������������������������������������������������������32, 39 Thompson, Secretary of Health and Human Services, et al v Western States Medical Center et al, judgment of 29 April 2002, Case 01–344�����������������������������38 United States v United Foods Inc, judgment of 25 June 2001, Case 00–276�������������������������������������������������������������������������������������������������������������������������32 Valentine v Chrestensen, 316 US 52 (1942)���������������������������������������������������������������������������31 Virginia State Board of Pharmacy v Virgnia Citizens Consumer Council, 425 US 748 (1976)�����������������������������������������������������������������������������������20, 31, 34

xx 

1 Introduction Marketing and Advertising Law in a Process of Harmonisation ULF BERNITZ AND CAROLINE HEIDE-JØRGENSEN

I. INTRODUCTION

D

IRECTIVE 2005/29/EC CONCERNING unfair commercial practices (UCPD)1 has had enormous influence on the European law on unfair commercial practices. The directive is the culmination of the harmonisation of national regulation of unfair commercial practices to date. The UCPD is based on full harmonisation and has as its purposes the creation of uniform EU rules and the development of fairness in commercial practices for the protection of consumers. The traditional European harmonisation process in this field of law has been that of minimum harmonisation. By the introduction of full harmonisation in this area, the UCPD aims to fully harmonise the European law on unfair commercial practices. This book is primarily about the UCPD and the harmonisation process. European harmonisation has come a long way from its outset of the harmonisation of misleading advertising with the 1984 Directive2 and from the classic European understanding of the word unfair competition towards a more and more consumer-oriented harmonisation as seen in the UCPD. Since consumer protection started to play a larger role in this area of law, the field has grown more and more in a consumer-oriented direction. Today, harmonising of this area of law can also be seen as a part of the growing European consumer law.3 However,

1  In full Directive 2005/29/EC of the European Parliament and the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (Unfair Commercial Practices Directive) [2002] OJ L149/22, also referred to as UCPD. 2 Directive 1984/450/EEC of 10 September 1984 concerning misleading advertising [1984] OJ L250/17. 3  In S Weatherill and U Bernitz, The Regulation of Unfair Commercial Practices under EC Directive 2005/29. New Rules and New Techniques (Oxford, Hart Publishing, 2007) 3 it is explained that the EU

2  Ulf Bernitz and Caroline Heide-Jørgensen despite many years of harmonising, many problems and questions are still open for debate. The latest development in the field, launched by the European Commission in 2016, is a ‘fitness check’ of European consumer law, with the UCPD being part of that fitness check.4 Also, in May 2016, the Commission published a new and heavily expanded version of its Guidance to the implementation of the UCPD.5 However, marketing and advertising law is not solely about consumer protection. Another aim is to protect traders against misleading advertising and similar unfair practices. This is often called B2B (business-to-business) protection, as opposed to B2C (business-to-consumer) protection. Many marketing practices are unfair both from the viewpoint of competitors and other business firms and from a consumer protection perspective. In this regard, the UCPD also offers B2B protection to a certain extent, albeit indirectly. There is also another EU directive within marketing and advertising law, the Misleading and Comparative Advertising Directive (MCAD) of 2006.6 This directive comprises two distinctly separate parts. The first part consists of provisions on misleading advertising B2B. These provisions are based on the old 1984 Directive, mentioned above, and aim at a certain minimum harmonisation of the field. The other part of the directive consists of provisions on comparative advertising. These provisions aim at full harmonisation, are applicable to both B2B and B2C advertising, and spell out the conditions for comparative advertising to be permitted. The Commission fitness check launched in 2016 includes the MCAD.7 This book brings together chapters from leading scholars in the field. The chapters are the result of an international research conference held at the Faculty of Law at the University of Copenhagen in January 2015 under the title ‘A Common Law of Unfair Competition—Europeanization and Integration. From Harmonizing Misleading Advertising to Unfair Commercial Practices’, organised by Ulf Bernitz and Caroline Heide-Jørgensen. The chapters discuss various core problems within the field and the harmonisation process. The book is divided into four parts. The book starts out in part one by presenting some general perspectives as a background and putting the subject matter in perspective. After this introduction, which also includes an overview of the legal evolution in the field, Caroline harmonisation programme in consumer law also stretches to advertising law. The same view is to be found in S Weatherill, EU Consumer Law and Policy, 2nd edn (Cheltenham, Edward Elgar, 2013) 25 and ch 8. See also N Reich, H-W Micklitz, P Rott and K Tonnner, European Consumer Law, 2nd edn (Cambridge, Intersentia, 2014), where an entire chapter is dedicated to unfair commercial practices and misleading advertising. 4  The Regulatory Fitness and Performance Programme (REFIT) was launched in January 2016 and is expected to result in a report in the second half of 2017. For further information see http://ec.europa. eu/consumers/consumer_rights/review/index_en.htm. 5  ‘Commission Staff Working Document Guidance on the Implementation/Application of Directive 2005/29/EC on Unfair Commercial Practices (UCPD Guidance)’, COM (2016) 320. 6  In full Directive 2006/114/EC of the European Parliament and the Council of 12 December 2006 concerning misleading and comparative advertising (codified version) [2006] OJ L376/21. 7  REFIT, above n 4.

Introduction 3 Heide-Jørgensen writes in Chapter 2 on the foundation in ‘Commercial Speech and its Limits—Fundamental Rights and Comparative Constitutional Aspects’. The chapter starts out by placing commercial expression in a freedom-of-speech context. No fixed definition of commercial speech exists in Europe, but the term covers not only advertising (the right to advertise and the content of advertising), but also broader marketing measures or commercial communication than traditional advertising. Special attention is given to the European Court of Human Rights (the ECtHR) and its established case law on the protection of commercial speech and the case law from the CJEU. The commercial speech doctrine in Europe is not as developed as that in the USA, where protection of commercial speech is an integral part of the First Amendment doctrine and thus has a constitutional basis. Germany also has well-established case law on protection of commercial speech, but in all systems less fundamental rights protection is offered to commercial speech than to political speech. Nevertheless, protection of commercial speech forms an important basis for the regulation of unfair commercial practices. In Chapter 3, ‘Ethics, Taste and Decency Considerations in Advertising’, Frauke Henning-Bodewig analyses why European rules on unfair commercial practices normally only deal with misleading, surreptitious or denigrating advertising, while questions on ethics, taste and decency are normally left to self-regulation. This is also the case with the UCPD, which acknowledges the right for Member States to impose legal requirements related to taste and decency but explicitly refrains from harmonising them. Henning-Bodewig goes through the International Chamber of Commerce (ICC) Code8 and the legal framework for ethics, taste and decency, considerations at the European level and in different national legal systems, with a special focus on the German system and its important case law, in particular the Benetton cases. She focuses on the reasons for the reluctance of, among others, the European legislature to deal with ‘indecent’ advertising, and concludes that it stems from constitutional and practical reasons. The role of enforcement can also play a crucial part, as the German example shows. Having set the scene with these general perspectives, part two of the book analyses the European legislation in the field. It contains four chapters on the UCPD and the MCAD, and issues of interpretation and incorporation of the UCPD. Jules Stuyck deals in Chapter 4, ‘The Unfair Commercial Practices Directive: Full Harmonisation, Scope and Key Notions’, with the UCPD and some of the core issues of its interpretation and scope. Stuyck explains how, in its rather short history, the UCPD has given rise to a number of interesting legal issues, and, with reference to the growing case law from the CJEU, he focuses on some of the key notions of the directive, such as ‘professional diligence’, ‘commercial practice’ and ‘misleading practice’. Stuyck shows how many of the key concepts of the UCPD are open for interpretation and need to be clarified by the CJEU. He also discusses the full harmonisation character of the UCPD and its scope, which only covers B2C. 8  In full the Consolidated ICC Code on Advertising and Communication Practice from 2011, available at the ICC website. The first ICC Code was issued in 1937.

4  Ulf Bernitz and Caroline Heide-Jørgensen In Stuyck’s view, the UCPD does not completely fulfil its objectives, one major question being whether full harmonisation and a high level of consumer protection can be achieved through a mixture of general provisions and the Black List when general clauses can be interpreted differently by the various Member States, while the Court of Justice can only interpret concepts and cannot instruct national judges about how precisely to apply these concepts in the case at hand. Jan Trzaskowski discusses the role of soft law in the interpretation and application of the UCPD in Chapter 5, ‘Interpretation and Assessment under the Unfair Commercial Practices Directive—the ICC Code for Advertising and Marketing and the Commission’s Staff Working Document’. The focus of the chapter is on the guidelines laid down in the ICC Code for Advertising and Marketing Communication Practice and in the UCPD Guidance. Trzaskowski discusses the role of soft law in the interpretation and assessment of the UCPD. Due to the flexible nature of marketing law and the reference to ‘professional diligence’, soft law, including in particular the ICC Code, is likely to play a role in the assessment of traders’ market behaviour. Even though the UCPD Guidance is not binding, it is likely to have a bearing on both the interpretation of the UCPD and the assessment of its standards. According to the author, several interpretations found in the document are presented with an authority that cannot be justified by means of legal methodology. Thus there is a risk that the UCPD Guidance will become a political tool with inherent democratic implications. Trzaskowski favours a more transparent and accountable process that allows for expression of doubt/uncertainty. This will help traders, authorities and judges to better understand the issues, and may better funnel relevant cases to the CJEU for faster and more reliable interpretation. Bert Keirsbilck writes in Chapter 6 about the ‘Fitness Check’ of the MCAD and UCPD, launched by the Commission.9 He discusses the background of the ‘fitness check’ and its main objectives, which are: (i) to determine whether the consumer protection and market integration objectives aimed at with the six directives that are part of the check have been effectively achieved, and whether they have been achieved in the most cost-effective manner; and (ii) to assess the complexity and potential for simplification of the current regulatory framework and to explore whether and to what extent a potential codification or recast of EU consumer law into a horizontal EU instrument could bring added clarity, remove overlaps and fill any gaps. The EU’s ‘general marketing law’ is part of the check as well as part of the EU’s ‘general’ consumer contract law. In Keirsbilck’s view, it seems that the Commission is willing to reopen the debate on the future of ‘general’ EU marketing law and to reconsider certain policy options that were already set aside in the MCAD and in the UCPD Guidance, which is to be welcomed. In Chapter 7, ‘The Impact of the UCP Directive on National Fair Trading Law and Institutions: Gradual Convergence or Deeper Fragmentation?’, Antonina Barkadjieva Engelbrekt asks whether the UCPD has achieved its ambitious goals to put an end to fragmented national rules and replace them with uniform regulative 9 

See above n 4.

Introduction 5 standards, and whether the directive has brought about the harmony and coherence in European fair trading law that was its aim. Bakardjieva Engelbrekt first provides a general, abstract analysis of the UCPD and its main features, while distinguishing, on the one hand, those characteristics that enhance the uniformity and coherence of the regulative framework (the horizontal approach, the general clause and the regulatory detail) and, on the other hand, the features and regulative techniques that may work in the opposite direction (the difficulty of harmonising through a general clause, the distinction between B2C and B2B and institutional aspects). She then undertakes a more concrete analysis of the effects of the directive on substantive law, with special focus on implementation and interpretation of the general clause. While some Member States—such as the UK—chose to implement the UCPD more or less verbatim in special laws, others—such as Germany and Sweden—chose a more half-hearted approach and tried to domesticate the directive, which led the Commission to open up infringement proceedings. Bakardjieva Engelbrekt next discusses the challenges to find an appropriate systemic place for the directive in the fabric of national law, one of the major problems being the distinction between B2C and B2B. The influence of the UCPD on institutional choice and design in Member States is analysed, with the author finding that the patterns of actual enforcement practices of fair trading law are far from similar across Member States. Bakardjieva Engelbrekt points to different conclusions, including that there are many examples of resistance to change despite clear obligations set out in the directive. But ten years is only a short period of time in legislative terms, and it is still too early for conclusive assessments. Palle Bo Madsen discusses the issue of possible integration of B2C and B2B in Chapter 8, ‘B2B and B2C Marketing Practices—the Case for an Integrated Approach’. Madsen points to the fact that, since the adoption of the UCPD, the European law concerning unfair competition has been divided into a B2B model and a B2C model, leaving the advertising part of the MCAD to deal with B2B matters only. He discusses this development and favours the view that it has not altogether been a success, though, according to the recent Communications from the Commission—COM (2012) 702 and COM (2013) 138—the split will be kept unchanged. Madsen argues in the chapter that B2B and B2C should be integrated in the same regulation. Part three of the book is devoted to enforcement issues. In Chapter 9, ‘Applying the UCP Directive in Practice: The Norwegian Experience’, Tore Lunde explains how the UCPD is part of the EEA agreement and therefore has been implemented into Norwegian law. Norway has chosen an implementation that is very close to the provisions in the UCPD and the chapter deals with the Norwegian experience, and particularly the relationship between the UCPD’s Black List and other provisions. Norwegian law has seen cases on the protection of children and surreptitious advertising, and these cases illustrate the challenges in interpreting the Black List’s clauses. Increasing legal certainty was the aim of introducing a blacklist, but Lunde questions whether this aim will be achieved since applying the prohibitions in the Black List requires a process of interpretation, as many of them are

6  Ulf Bernitz and Caroline Heide-Jørgensen rather vague and open-textured. This and various national methods of applying the Black List may challenge the uniform interpretation and effective enforcement of the UCPD. Case law from the CJEU also demonstrates the importance of interpreting the Black List’s clauses, thereby showing that the viewpoint ‘unfair per se’ is not as certain as it seems to be. The question of cross-border enforcement is at the heart of creating an effective European law in this field, and in Chapter 10, ‘Enforcing Unfair Competition Law Cross Border: Cooperation Mechanisms and Consumer Redress—Does the System Work?’, Astrid Stadler presents the results of the enforcement co-operation so far. Stadler points to the fact that the enforcement of the UCPD and the MCAD will depend on the enforcement systems of the individual Member States and that, over the years, the Member States have developed quite different traditions with respect to the enforcement of consumer rights and the repression of unfair commercial practices. There is no uniform approach regarding whether public or private enforcement should prevail in this sector, and some Member States have public enforcement whilst others are renowned for their tradition of private enforcement by strong and active consumer associations and trade organisations. Such differences call for enforcement co-operation across the EU, and Stadler writes about the co-operation within the Consumer Protection Cooperation (CPC) and the enforcement regulations enacted in the Brussel 1 and 1a Regulations. The question posed in the chapter—‘Does the system work?’—cannot be answered by a simple ‘Yes’ or ‘No’. The CPC network needs further improvement and, since the projects of the European Commission to establish a harmonised system of collective redress instruments throughout Europe have failed, consumers will continue to depend on the existence of effective procedural tools such as class action proceedings or representative actions for the recovery of damage at the national level. This section of the book is closed by Chapter 11, ‘Unfair Competition Law: How Can it Work as an Important Complement to Intellectual Property Protection. Are There Missing Links?’, in which Per Jonas Nordell writes on the important question on the interrelation between unfair competition law and intellectual property law, with a special emphasis on trade mark law. Nordell first focuses on the international framework of unfair competition law and its impact on national and European intellectual property law, then moves on to the European legislation on unfair competition law, its interrelationship with intellectual property law and how it has been interpreted in EU case law. Nordell criticises the CJEU’s interpretation of the concept of unfair commercial practices. In his view, the UCPD ought to be transformed into a general EU directive. The final part of the book presents conclusions to the problems presented in the book within Chapter 12, ‘The Road Ahead—Present Status and Need for Reform’, where Ulf Bernitz writes on the future perspectives in this area of law. Bernitz starts by touching on the objectives of the UCPD and highlighting that the UCPD should be regarded as an important piece of European legislation. It is built on a new systematic formation and does not follow the legislative model of any particular

Introduction 7 Member State, eg Germany. Few directives in the consumer law field have such a broad scope and represent such a high level of legislative ambition. Even though the UCPD aims at full harmonisation, the contributions of this book have shown that the full harmonisation prescribed in the UCPD is not as complete as one might think. Many notions used in the statutory text of the directive and its recitals are rather vague and open. In its case law, the CJEU seems rather reluctant to provide a detailed assessment in order to offer guidance to the national courts on the application of the UCPD in connection with the circumstances of individual cases. Both the UCPD and the MCAD have dual objectives, and one major question is how the respective dual objectives should be evaluated. Another important question is the structural formation of the UCPD; here, again, the split between B2C and B2B is a major issue. Bernitz then assesses the Black List and mentions many of the interpretation problems in this respect, concluding that the creation of this blacklist was an innovative and successful move. The level of consumer protection against misleading commercial practice and the well-known problem of what constitutes an ‘average consumer’ are also major issues, as is the importance of the general clause. The author concludes that the potential of the UCPD general clause remains unexplored. The indirect protection of B2B offered by the UCPD raises the question why the directive does not offer B2B protection directly. This problem is discussed later in the chapter, where Bernitz predicts that it is likely that the split will be kept for a number of reasons. As it stands at present, the UCPD is weak in the area of enforcement, and there is a clear discrepancy between the full harmonisation provided for in the area of substantive law and the meagre provisions on supervision and enforcement. According to Bernitz, European marketing practices law will develop into an important subdiscipline of European law. However, it is still in a rather early stage.

II.  THE DEVELOPMENT OF UNFAIR COMMERCIAL PRACTICES LAW/UNFAIR COMPETITION

A. The Paradigm of Freedom of Commerce and the Historical Origins of Different National Traditions for Regulating Unfair Competition The law of unfair competition/unfair commercial practices as we know it today has its origin in the development of unfair competition law10 as a counterbalance to the laissez-faire principle in trade.11 Today, this origin/‘branch’ meets the efforts by the EU to create a modern level European playing field in this area that is based much more on consumer protection. The very first unfair commercial practices rules can be found in the reactions to the ­introduction of freedom of 10 

See section III.B(iii) below about the terms ‘unfair competition’ and ‘unfair commercial practices’. insight is common within this area of law, but the concrete and very precise expression can be found in F Henning-Bodewig (ed), International Handbook of Unfair Competition, Introduction (Munich, CH Beck, 2013) 1. 11  This

8  Ulf Bernitz and Caroline Heide-Jørgensen commerce in continental Europe, mainly during the nineteenth ­century. This was a ­milestone in the regulation of commercial life. Both intellectual property law, particularly trade mark law, and the law of unfair competition have their origins in the closely r­ egulated commercial life that was the norm before there was freedom of commerce. Freedom of commerce is part of the philosophical idea that is generally attributed to the period of Enlightenment, the French Revolution of 1789 and, prior to that, the American Declaration of Independence of 1776. Freedom of commerce and free competition were introduced into European countries in the course of the nineteenth century, as economic liberalism triumphed across the continent. It was mirrored by the development of the legal discipline of unfair competition law as a counterbalance to the principle of laissez-faire in trade.12 The need to regulate competition was dealt with in different ways in different countries, and it is ­possible to distinguish different legal schools or families within this area. The more EU harmonisation develops and the more common European law of unfair ­competition law is created, the more the original national differences within the EU Member States recede into the background. But the different national­ traditions still play a role as they can explain some of the difficulties and challenges in actually creating a future common European law of unfair competition.13 In continental Europe the main distinction is between the French school, with its origin in tort law, and the German school, where the first law against unfair competition was introduced in 1896 and replaced in 1909 with the Gesetz gegen den unlauteren Wettbewerb (UWG), which, among other things, introduced a general clause on guten Sitten (good faith). The UWG was very successful and remained in force until 2004, when it was replaced by a new UWG. It has since been reformed further two times. The practice of the courts developed so that the general clause became one of the most important rules of German unfair competition law. The development of the law in Germany has been of great importance. For example, it has created a school of thought for legal development in a number of continental European countries, such as Germany’s immediate neighbours Austria, Hungary, Poland and Czechoslovakia. It has also influenced the development of the law in the Nordic countries. One could describe the development of the law in the Nordic countries as part of the German school. However, over time, consideration for the protection of consumers has become so prominent that it is reasonable to deal with the development of the law in the Nordic countries separately.14 The legal developments in the Nordic countries were very much inspired by the German legal tradition, but around 1970, when the Nordic countries formulated their modern laws on unfair marketing practices, the protection of the consumer was given much more ­prominence. 12 ibid.

13  Many have pointed to this, including the Commission, eg ‘EU Green Paper on Consumer Protection’, COM (2001) 531 final, 6–7. 14  Ny marknadsföringslag, SOU 1993:59, Stockholm 1993, 179.

Introduction 9 As a result of the 1970s revisions of their laws, the Nordic countries established Consumer Ombudsmen to enforce the law. The 1970s laws are still the basis today, having been amended and expanded to implement various EU initiatives. English law is not directly comparable with that of continental Europe. In England, as in France, unfair trade law was originally seen as being derived from the law of compensation (tort). In England, the development of the law was different from the developments in continental Europe, as in England there were no statutory rules on unfair commercial practices of a general character. Instead, England has had several different statutes on misleading description of goods and also some common law instruments, but England does not have a system of unfair competition law like the one seen in Germany.15 Protection can be found under the headings of various common law torts, particularly the law of passing off, according to which no party has a right to pass off their goods as the goods of another. In addition, self-regulation has played an important role in English law, in particular by the Advertising Standard Authority (ASA).16

B. Regulation by International Conventions—the Rules of the Paris Convention, the WIPO and the TRIPS on Unfair Competition and Self-regulation in the ICC The international regulation has its focus on the protection of intellectual property rather than the repression of unfair competition. Concerning inclusion of provisions against unfair competition, the focus has been on the protection of the honest entrepreneur. This can be seen in the oldest regulation in the field, the Paris Convention for the Protection of Industrial Property of 20 March 1883,17 which was the first international convention on intellectual property. It focuses on the protection of patents, utility models, trademarks and designs, as well as trade names and indications of origin.18 The original Paris Convention did not contain any rules on unfair competition; however, such rules have been included in the convention since 1900 in its Article 10bis.19 The Paris Convention reflects the continental European view of 15  Henning-Bodewig (n 11) 4 and § 25; B Keirsbilck, The New European Law of Unfair Commercial Practices and Competition Law (Oxford, Hart Publishing, 2011) 145. 16  Keirsbilck (ibid) 146. 17  The Convention was most recently amended in Stockholm in 1967 and before that in Brussels, in Washington, in The Hague, in London in 1934 and in Lisbon in 1958. 18  Henning-Bodewig (n 11) 11. 19  Article 10bis of the Paris Convention reads as follows: (1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition. (2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition. (3) The following in particular shall be prohibited: (i) all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; (ii) false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor;

10  Ulf Bernitz and Caroline Heide-Jørgensen unfair competition20 and it focuses on the protection of the honest entrepreneur, although it also contains provisions on misleading allegations about one’s own product, the forerunner for modern provisions on misleading unfair commercial practices. For the last two decades, the World Intellectual Property Organization (WIPO), the administrative body of the Paris Convention, has proposed a modernisation of the Paris Convention, and in 1996 the WIPO published its Model Provisions for Protection against Unfair Competition. The Model Provisions are neither binding law nor soft law; rather, they are merely a model for law-making activities without any legal commitment.21 The WIPO Model Provisions also focus on the protection of the honest entrepreneur by proposing provisions on risk of confusion, disparagement and misleading, damaging goodwill or reputation and the protection of trade secrets, but, as a novelty compared to the old Paris Convention, it also points to the protection of consumers.22 The TRIPS23 includes many provisions not present in the Paris Convention, although not with regard to unfair competition. Unfair Competition as such is not mentioned in the TRIPS, but both trade secrets and indications of origin are, which in some Member States are considered part of unfair competition law in a wider sense.24 The TRIPS does, however, include a general reference to the Paris Convention and the question remains whether this general reference also includes Article 10bis of the Convention or whether the reference in the TRIPS to unfair competition is restricted to cases involving indications of origin and undisclosed information.25 The first and only international regulation of unfair competition is the Paris Convention. It has influenced the design of national regulations on unfair competition, but always primarily in commercial matters (B2B). The future of this area of law in an European context could, however, lie within the EU system, as will be discussed in this book.26

(iii) indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods. 20  U Bernitz, Marknadsrätt (Stockholm, Jurist- och samhällsvetareförbundets Förlag, 1969) 468; Henning-Bodewig (n 11) 12–13. 21  Henning-Bodewig (ibid) 29. 22  Henning-Bodewig (ibid) also points out that there is no longer a need for a competitive relationship between the parties but merely a requirement for an industrial or commercial activity, which must be interpreted roughly and must also include activities of the media, professionals and non-profitmaking activities. 23  The Agreement on Trade-Related Aspects of Intellectual Property Rights. 24  Henning-Bodewig (n 11) 32. 25  ibid 36. 26  Apart from the plans of the Commission to transfer the model from the UCPD to the B2B area, Directive 2016/943 EU of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrects) against their unlawful acquisition, use and disclosure should be mentioned, see COM (2013) 813. The directive must be implemented by June 2018.

Introduction 11 A final remark in this context should be made with regard to the ICC Guidelines. The ICC has published self-regulatory guidelines since 1937, with enormous effect in the area of advertising/commercial communication. Self-regulatory instruments based on the ICC Guidelines have also been common in many European countries.

III.  EU REGULATION—FREE MOVEMENT AND HARMONISATION

A.  Foundation in TFEU and Case Law from CJEU on Free Movement The base in primary community law for the development of a European law on unfair competition/commercial practices is to be found in the TFEU articles on free movement of goods and, to some extent, services.27 The case law on free movement is overwhelming and has been developed over many years—as has the literature on it.28 Basically, two problems predominate: (i) what constitutes a trade barrier according to Article 34 TFEU and (ii) what is the scope for justification of national measures that are qualified as barriers to trade?29 Primary Community law on the free movement of goods and services constitutes the standard by which the legality of secondary Community law is measured.30 In cases of minimum harmonisation, as seen in the MCAD, there is a possible collision between Article 34 TFEU and the remaining national competence.31 This should not be the case with maximum harmonisation. The purposes of the UCPD are to contribute to the proper functioning of the internal market and to achieve a high level of consumer protection by approximating the law. As stated in Article 4 of the UCPD, Member States are not permitted to restrict the freedom to provide services or to restrict the free movement of goods for reasons falling within the field approximated by the directive. The focus of this book is not on the free movement of goods and services, but rather on various aspects of the harmonisation process. The book is therefore concerned with the interpretation of the UCPD and MCAD, and the possible problems for the integration of the EU Community law on free movement, rather than the importance of that law as such.

27 

TFEU, Art 34 et seq. For the pre UCPD case law see eg Keirsbilck (n 15) ch 1. 29  Weatherill (n 3) 36. 30  HW Micklitz, ‘Unfair Commercial Practices and Misleading Advertising’ in Reich et al (n 3) 74. 31 ibid. 28 

12  Ulf Bernitz and Caroline Heide-Jørgensen B. Harmonisation—from Protection of the Honest Entrepreneur to Protection of the Consumer (i)  General Harmonisation—History and Development EU harmonisation in the field started in the 1960s, when the Commission asked the Max Planck Institute for Innovation and Competition in Munich to draw up a comparative review of the development of the law of unfair competition in the Member States of the EC, and to make proposals for harmonisation at the EC level.32 The result was the now classic work by Eugen Ulmer et al, Das Recht des unlauteren Wettbewerbs in den Mitgliedstaaten der Europäischen Wirtschaftsgemeinschaft.33 Ulmer34 had a number of suggestions for a possible harmonisation, not as ready formulated rules, but as suggestions for how common European rules on unfair competition should be structured. The starting point for Ulmer was Article 10bis of the Paris Convention. From this, he proposed a common European set of rules based on a definition of unfair competition, including a general clause on good practice. In general, the proposals were based on the traditional Central European view, and the original idea was that not only should there be a general clause (see Article 10bis(2) of the Paris Convention supra), but also provisions on misleading and disparaging advertising, rules on trade secrets, the protection of designations of origin, and rules on ‘free’ gifts and discounts. The Commission worked on such ideas in its first internal draft.35 The growing consumer protection movement and the enlargement in 1973 of the EC with Denmark, Ireland and the UK posed challenges to the harmonisation work.36 The original ideas were, in any case, too ambitious to be implemented, and the approach was changed. A first draft for a directive was put forward by the Commission in 1978. This was based on the ICC Code, and it was proposed to cover misleading advertising and unfair competition, including certain parts of comparative advertising. The result was Directive 84/450/EEC relating to the approximation of the laws, regulations and administrative provisions of the Member States 32  The work of harmonisation is discussed by several authors, eg F-K Beier, ‘The Law of Unfair Competition in the European Community’ [1985] European Intellectual Property Review 284; A Bakardjieva Engelbrekt, Fair Trading in Flux?, 383ff; C Heide-Jørgensen, Advertising Law (DJØF Publishing, 2013) 86ff; F Henning-Bodewig, ‘Vergleichende Werbung—Liberalisierung des deutschen Rechts?’ [1999] Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil 385; Keirsbilck (n 15) 69ff and 139ff; Micklitz (n 30) 70ff; G Schricker,’ European Harmonisation of Unfair Competition Law—A Futile Venture’, IIC 1991.788-801. 33  E Ulmer et al., Das Recht des unlauteren Wettbewerbs in den Mitgliedstaaten des Europäischen Wirtschaftsgemeinschaft (Munich, CH Beck/Cologne, Carl Heymanns, published in six volumes 1965–73). 34  ibid, vol I, ch 3, 247ff. 35 G Schricker, ‘Die Arbeiten zur angleichung des Rechts des unlauteren Wettbewerbs in den Ländern der Europäischen Wirtschaftsgemeinschaft’ [1974] Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil 141, 142ff. See also F-K Beier, ‘Entwicklung und gegenwärtiger Stand des Wettbewerbsrechts in der Europäischen Wirtschaftsgemeinschaft’ [1984] Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil 61, 69. 36  Micklitz (n 30) 71.

Introduction 13 concerning misleading advertising. It only covered misleading advertising; the harmonisation of the Member States’ rules on comparative advertising was postponed to another occasion.37 The many years of discussion of the first harmonisation directive illustrate the difficulties in harmonising this area.38 It took several more years to harmonise comparative advertising. The first proposal for what became Directive 97/55/EC39 amending Directive 84/450/EEC concerning misleading advertising so as to include comparative advertising, now seen together in the consolidated version in Directive 2006/11440 (MCAD), was put forward in 1991. The Member States’ traditions in comparative advertising differed widely, and the proposal was given an especially rough reception in Germany.41 The discussion went on for several years and there were many changes between the original proposal in 1991 and the final proposal in 1997, which was adopted as Directive 97/55/EC.42 However, the two directives on misleading and comparative advertising did not constitute the complete regulatory framework for unfair commercial practices that was the original ambition of the Commission.43 The UCPD was meant to achieve this goal. The first steps were taken with the Green Paper on Consumer Protection in 2001,44 then the first proposal for the later UCPD in 200345 and the final proposal in 2004.46 The work took several years to complete and gave rise to substantial disagreements between the Member States on some points, but culminated in the adoption of Directive 2005/29/EC (UCPD).47 The ambitious plans were modified somewhat along the way. The result was full harmonisation in the form of the prohibition of unfair commercial practices (Article 5), as defined in more detail as misleading acts (Article 6) and misleading omissions (Article 7). Taste and decency were left outside the scope of the Directive.48 The UCPD 37  See the sixth recital in the preamble to Directive 84/450/EEC. On the developments, see Bakardjieva Engelbrekt (n 32) 393ff. 38 ibid. 39  Directive 1997/55/EC amending Directive 84/450/EEC concerning misleading advertising so as to include comparative advertising [1997] OJ L250/17. 40  The proposal was published in COM (91) 147 final ([1991] OJ C180/14). The need for the Directive was stated in its preamble as harmonised these differences in national regulation. 41  Both the individual provisions of the draft and the whole idea of harmonising the Member States’ rules on comparative advertising were sharply criticised by legal writers, and there was an intense debate about comparative advertising in the 1990s. 42  The deadline for transposition was in 2000. 43  Micklitz (n 30) 75. 44  COM (2001) 531. This ambitious task was initiated by a study undertaken by the DirectorateGeneral for Health and Consumer Protection from 2000. See Micklitz et al, Study on the Feasibility of General Legislative Framework on Fair Trading, vols I–III (Institut für Europäisches Wirtschafts- und Verbraucherrecht eV, 2000). A follow-up was published as COM (2002) 289 final. 45  COM (2003) 356 final. 46  COM (2004) 753 final. 47  The history of the formation of the Directive and the ideas and different proposals at different stages are discussed in many different works, including A Bakardjieva Engelbrekt, ‘EU and Marketing Practices Law in the Nordic Countries—Consequences of a Directive on Unfair Business-to-Consumer Commercial Practices’, Report for the Nordic Council Committee on Consumer Affairs (2005); Weatherill and Bernitz (n 3); Heide-Jørgensen (n 32) 86ff; Henning-Bodewig (n 11) 48ff; Keirsbilck (n 15) 139ff; Micklitz (n 30) 75; Weatherill (n 29) 238. 48  See Recital 7 of the preamble, which also refers to other areas that are not covered by the Directive.

14  Ulf Bernitz and Caroline Heide-Jørgensen includes harmonisation of the concept of the ‘average consumer’ (Article 6(1)). Calculated from the adoption of the Directive on Misleading Advertising, it took 20 years to reach the Commission’s original ambition for a legal framework to cover unfair commercial practices. But there are several remaining problems. First and foremost, the UCPD introduces maximum—or full—harmonisation in a field of law where minimum harmonisation used to be the general rule. It is therefore part of the ‘new’ approach, whereby the Commission favours the adoption of full harmonisation directives in the consumer area in order to deepen the level of market integration.49 With full harmonisation, Member States cannot uphold national legislation that does not conform to European standards, irrespective of whether this means a higher or lower level of consumer protection than the Member State may have had before the adoption of full harmonisation. This means that, at least in principle, directives entailing full harmonisation create a common European standard in a given area of law and a uniform level of consumer protection throughout the EU. In comparison with the problems of the minimum harmonisation approach—where different rules in the Member States are allowed—this should make it easier for both businesses and consumers to engage in cross-border activities. Full harmonisation should therefore enhance EU integration. This means that, in principle, there should no longer be scope for national peculiarities. The full harmonisation process therefore typically leads to harmonisation of key concepts and sometimes even the creation of new ones.50 Full harmonisation is the general trend in European consumer law51 and is favoured by the Commission, but this approach can be criticised from a general perspective. One general criticism is that full harmonisation is problematic from the point of view of consumer policy since it prohibits Member States from introducing stricter rules.52 The adoption of the Unfair Commercial Practices Directive was one of the first examples of the new policy of full harmonisation.53 The full harmonisation in the UCPD is combined with the Black List system, and the emerging case law from CJEU has given the full harmonisation of the UCPD a dramatic impact on the interpretation of the directive and Member States’ national regulation—far greater than many expected.54

49 

Micklitz (n 30) 40; Weatherill (n 29) 242. MBM Loos, Full Harmonisation as a Regulatory Concept, 6. Keirsbilck (n 15) 182; Reich et al (n 3) 40–41. 52  Reich et al (n 3) 41. 53  There are other examples in Directive 2008/48/EC on consumer credit, Directive 2011/83/EU on consumer rights and Directive 97/7/EC on distance selling. 54  Jules Stuyck deals with these questions in chapter 4; see also Ulf Bernitz in chapter 12. See the case law in Joined Cases C-261/07 and 299/07 VTB-VAB NV v Total and Galatea v Sanoma Magazines Belgium NV, EU:C:2009:244; Case C-304/08 Zentrale zur Bekämpfung unlauteren Wettbewerbs v Plus Warenhandelsgesellshaft mbH, EU:C:2010:12. Later case law seem to confirm the line: Cases C-540/08 Mediaprint, EU:C:2010:660; Case C-288/10 Wamo, EU:C:2011:443; Case C-126/11 Inno, EU:C:2011:851; Case C-206/11 Köck, EU:C:2013:14. 50  51 

Introduction 15 Secondly, the UCPD has a very broad scope, since it covers all ‘commercial practice’ and regulates all aspects of unfair commercial practices (Article 3 and Recital 12). The concept of unfair practices is further subcategorised into misleading and aggressive practices. The directive also introduces other broad, openly textured concepts, such as ‘material distortion of the economic behaviour of the average consumer’, ‘invitation to purchase’ and ‘undue influence’ (Article 1). Thirdly, broad as it may be, the scope of the UCPD is nevertheless limited. The directive does not cover so-called ‘taste and decency’ aspects, and it also marks an important split between B2B and B2C, with the UCPD regulating B2C and the MCAD regulating B2B relations but also B2C comparative advertising. It may be argued that the UCPD has grown out of the idea of national unfair competition laws originally meant to protect the interests of the competitors, and by leaving B2B relations outside the directive many core questions about the scope of the directive have been left open. Until the UCPD, harmonisation made no distinction between B2C and B2B practices. Having created a split between B2B and B2C, one of the most burning questions is how B2B relations should be treated at the European level.55 The CJEU has interpreted the scope of the UCPD very broadly, by extending it to cover mixed regulation of B2C and B2B practices,56 but there will still be B2B relations that are not covered by it. Some EU Member States handle both B2C and B2B matters in the same law, while others have different laws/ rules for B2C and B2B. At the same time, EU Member States have implemented the UCPD and the MCAD quite differently. The split of B2B and B2C is not necessarily working well in the EU Member States, since many have a tradition of integration of B2C and B2B within the same regulation, and there have been discussions about how B2B relations should be protected at the EU level. In 2012, the Commission launched a communication on B2B practices (Com (2012) 702), and in 2013 it launched the long-awaited report on the application of UCPD (Com (2013) 139). In the accompanying communication (Com (2013) 138), the Commission concluded that the UCPD is proving to be a valuable tool to increase the consumer welfare. It has simplified the regulatory environment and helped eliminate obstacles to cross-border commerce … The Commission considers that it would be inappropriate to amend the Directive at this stage … The Commission will now focus its attention on the coherence or the implementation of the Directive, taking concrete actions to make enforcement work better in key areas to the benefit of consumer confidence and growth.

A revision on the MCAD was originally on the Commission’s working programme for 2015,57 but the latest development in the area is the announcement of the Commission’s intention to do a ‘fitness check’ with an overall evaluation of EU 55 

Palle Bo Madsen writes about this in chapter 8. C-304/08 Plus, EU:C:2010:12; Case C-540/08 Mediaprint, EU:C:2010:660; Case C-288/10 Wamo, EU:C:2011:443; Case C-126/11 Inno; Case C-343/12 Euronics Belgium CVBA v Kamera Express BV. See also Jules Stuyck in chapter 4. 57  COM (2014) 910, Annex III, No 59. 56  Case

16  Ulf Bernitz and Caroline Heide-Jørgensen Consumer Law in 2016 and 2017.58 The intention of the check is to clarify whether or not EU consumer rules still offer adequate protection. Both the UCPD and the MCAD are part of the fitness check.59 (ii) Some Reflections on the Terms—Unfair Competition, Unfair Trade and/or Unfair Commercial Practices? The UCPD concerns unfair commercial practices, and the term is defined in Article 2(d) of the directive. The term was unknown in European law before the UCPD. It seems that the original European term—at least in Germany—was ‘unfair competition’,60 and this term covers not only B2C matters, as in the UCPD, but also B2B matters and perhaps even some IP law aspects, and was originally concerned with protection of the honest entrepreneur.61 ‘Unfair commercial practices’ is to some extent broader, in that it covers all commercial practices, and to some extent perhaps narrower, as it does not cover B2B relations. Unfair competition and unfair commercial practices are not necessarily identical in every respect, and this may be part of the problem when trying to create a truly common European regulatory framework in this field of law. (iii)  Harmonisation of Special Areas Apart from the general regulation in the UCPD and the MCAD, there are also a number of other directives which co-ordinate Member States’ legislation in special areas of advertising/marketing, like pharmaceuticals, tobacco and audiovisual media services (radio and television), as well as the harmonisation of consumer aspects outside unfair commercial practices. Two directives lay down harmonisation rules for special product areas. Since the mid-1960s, pharmaceuticals have been subjected to comprehensive harmonisation measures with regard to their content and the approval of products. With Directive 92/28/EEC on the advertising of medicinal products for human use, this harmonisation was extended to cover advertising for medicines. This has now been consolidated, together with the other directives in the area of medicines, in Directive 2001/83/EC on the community code relating to medicinal products for human use. Regulation of the advertising of tobacco products exists in Directive 2003/33/EC on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products. Food marketing is regulated by Council Regulation No 1924/2006 on 58  The roadmap to the evaluation was published in January 2016 and is available from the Commission’s website. 59  Six directives are to be evaluated, namely the Unfair Commercial Terms Directive, the Price Indication Directive, The Sales and Guarantee Directive, the UCPD, the MCAD and the Injunctions Directive. Bert Keirsbilck deals with the fitness check below in chapter 6. 60  Henning-Bodewig (n 11) 5. 61  ibid; Keirsbilck (n 15) 3.

Introduction 17 nutrition and health claims. The AVMS Directive (Directive 2010/13/EU on audiovisual media services) regulates the important area of television, including special provisions on TV and broadcasting advertising.62 The UCPD is without prejudice to EU or national rules relating to the health or safety aspects of products.63 Examples are national provisions in relation to alcohol, tobacco, pharmaceuticals and food products. Thus, the directive does not address specific advertising bans in Member States, provided they relate to health and safety. However, such bans must be legitimate under primary EU laws on free movement of goods and services. It follows from the case law that such national provisions must satisfy three primary tests: that they are truly non-discriminatory; that they pursue important public health or safety interests; and that they are proportionate, ie they are appropriate to ensure their aim and do not go beyond what is necessary to achieve that objective.64 In the case of conflict between the UCPD provisions and other secondary EU law rules regulating specific aspects of unfair commercial practices, the latter prevail and apply to those specific aspects.65 Thus, in this field, EU law applies the principle lex specialis derogat lex generalis. Important examples are the Audiovisual Media Services Directive66 and the e-Commerce Directive.67 However, the UCPD functions as a safety net complementing such specific regulations by being applicable to aspects of commercial practice not covered by the sector-specific provisions, such as aggressive behaviour by a trader.68 This has recently been clarified by the CJEU in the Abcur case69 on the relation between the Directive on Advertising Practices Related to Medical Products70 and the UCPD. Dependent on provisions of national law, the legislation of unfair commercial practices might allow competitors and other actors standing in court when specific regulations do not. Such was the situation in the Abcur case.

IV.  PROBLEMS AND CHALLENGES

The origin and development of the different legal schools in this area have implications for how the common European law of unfair commercial practices evolves

62 

It is outside the scope of this book to cover these special areas of harmonisation. UCPD, Art 3(3). 64  Note, in particular, Case C-405/98 Consumer Ombudsman v Gourmet International Products, EU:C:2001:135; see also the Bacardi cases, Case C-262/02 Commission v France and Case C-429/02 Bacardi France v Télévision Francaise 1 (TF 1) et al, EU:C:2004:431 and 432. 65  UCPD, Art 3(4). 66 2010/13/EU. 67 2000/31/EC. 68  UCPD Guidance 2016, para 1.4.1. 69  Joined Cases C-544/13 and 545/13 Abcur v Apoteket Farmaci and Apoteket, EU:C:2015:481, paras 78–82. 70  Directive 2001/83/EC. 63 

18  Ulf Bernitz and Caroline Heide-Jørgensen and how well the new European framework works within the different Member States. There are many potential problems, but one very important one concerns the purpose of the regulation. The regulation and harmonisation in this area has grown out of the original aim to protect the honest entrepreneur and moved towards greater and greater consumer protection as the EU harmonisation has evolved. This development has led to a change in approach such that the traditional understanding of unfair marketing practices law as a means to regulate the relationship between competitors has become less relevant, with consumer protection against misleading—and initially unfair—advertising being focused on instead. With the adoption of the Directive of Unfair Commercial Practices and the split of the directives with the UCPD legislating for B2C and the MCAD legislating for B2B, new problems have emerged, since the split does not necessarily work well in all Member States—especially those that have a tradition of integrating both B2C and B2B within the same regulation. The following chapters explore some of these challenges.

2 Commercial Speech and its Limits—Fundamental Rights and Comparative Constitutional Aspects CAROLINE HEIDE-JØRGENSEN1

I.  FREE SPEECH AND UNFAIR COMMERCIAL PRACTICES—INTRODUCTION

T

HE REGULATION OF unfair commercial practices, and in particular advertising, raises the question of the interplay between such regulation and fundamental rights—and more specifically, the protection of commercial speech. Commercial free speech is part of the broader concept of freedom of speech, but there is no fixed definition in the case law of the European Court of Human Rights (ECtHR).2 Commercial free speech (or commercial freedom of expression) refers to: (i) the right to advertise; and (ii) the content of advertising statements, including broader forms of commercial communication other than merely traditional advertising.3 Freedom of expression is a classic right, and one of the foundation stones of any democratic society.4 It is a fundamental right,5 and one of the political freedoms protected in all national constitutions and international conventions that are based on the intellectual inheritance of the Enlightenment. However, it is political freedom of expression—in other words, the right to express one’s personal and

1 

The author thanks Professor Ulf Bernitz for his valuable comments on an earlier draft. C Heide-Jørgensen, Advertising Law (Copenhagen, DJØF Publishing, 2013) 118 for definitions. See also V Kosta, Fundamental Rights in EU Internal Market Legislation (London, Bloomsbury, 2015) 166. Neither the European Court of Human Rights nor the CJEU has ever provided a definition of the term ‘commercial expression/speech’. 3 Shiner, Freedom of Commercial Expression (Oxford, Oxford University Press, 2003) 8. 4  Handyside, ECtHR Series A, No 24 (1976), para 23. 5  The term ‘fundamental right’ encompasses: (i) human rights stemming from the European Convention on Human Rights; (ii) constitutional protection at the national level; and (ii) EU fundamental rights now expressed in the Charter. 2  See

20  Caroline Heide-Jørgensen political convictions—that has given the modern world protection of freedom of expression: the right to say what one thinks without suffering unpleasant consequences from the state. It is this idea, based on a liberal view of natural law, which is the origin of the modern protection of freedom of expression. In a ­European context, free speech is protected in national constitutions, in the European Convention on Human Rights (hereinafter the Convention) and in the Charter of Fundamental Rights of the European Union (hereinafter the Charter). In all systems, whether national-, human rights- or EU-based, the problem with substantive freedom of expression in general is the question of striking the right balance between consideration for freedom of expression on the one hand and consideration for other values regarded as being worthy of protection on the other, either by general legislation or at a constitutional level. The question of commercial freedom of expression and its proper extent involves the same kind of weighing of opposing interests. It was only in the latter part of the twentieth century that it began to be accepted, both in various European national legal orders and in decisions made pursuant to the Convention, that commercial speech is entitled to protection as part of the wider protection of freedom of expression. Commercial freedom of expression is not obviously justifiable in the same way as political freedom of expression, as the following review shows. The first decisions recognising a constitutional right to advertise date from 1958 in Germany,6 with the first case that accepted that restrictions on the right to advertise are a constitutional problem, and later in the USA in 1976,7 with the first US decision recognising commercial freedom of expression. This view has now spread to other countries. But differences can still be seen between a traditionally very strong protection in USA and Germany and a less strong approach to the protection of commercial speech in many other countries. In the following, the protection of commercial speech is analysed from different fundament rights angles. The two most important sources of protection in contemporary Europe are the protection offered by the Convention (see Section II below) and the protection given by the EU system of fundamental rights (the Charter; Section III below). However, the protection given by national constitutions is also important and, in order to give a fuller picture of the fundamental rights protection of commercial speech, some comparative constitutional aspects are also included (Section IV). There follows an assessment of advertising regulation from a fundamental rights perspective at the European level and some conclusions (Section V).

6 

The decision in BVerfGE 7, 377, the Apothek case. The decision in Virginia State Board of Pharmacy v Virgnia Citizens Consumer Council, 425 US 748 (1976); see section VI of this chapter for more detail. However, in German theory Peter Lerche had put the argument that advertising is protected by freedom of expression already nearly 10 years before in his work Werbung und Verfassung (Munich, Verlag Beck, 1967). 7 

Commercial Speech and its Limits 21 II.  THE PROTECTION OF COMMERCIAL SPEECH IN THE EUROPEAN CONVENTION OF HUMAN RIGHTS

It is settled case law that commercial speech is protected by the general provision on freedom of expression in Article 10 of the Convention. This protection is by no means unlimited or absolute. Under Article 10, the main rule is that any person has a right to express themselves, without the intervention of a public authority. However, this is only the main rule. In the same way as in European constitutional systems of fundamental rights, freedom of expression can be limited if other conditions are fulfilled. Protection of commercial speech was originally rejected by the ECtHR,8 but it has been recognised in case law of the ECtHR since 1985.9 Different forms of expression are given different levels of protection. A distinction is made between information about facts and information about ideas or subjective assessments. It must be possible to verify facts, but this is not the case with ideas or subjective assessments. The ECtHR looks closely at the background of expressions and their purpose, including whether the aim is to stimulate debate or to give information on a matter of public interest.10 The core area of protection is for expressions on political subjects and other matters of public interest. Political expressions are given the most extensive protection under Article 10. Traditionally the courts have been more prepared to restrict commercial speech than political expressions because of their commercial nature. Freedom of expression can be restricted under Article 10(2) of the Convention, as long as this is done in one of the ways and for one of the reasons stated in the provision. This follows the approach to the exercise of other similarly formulated rights in Articles 8–11 of the Convention. First, there is an examination of whether the main rule is applicable at all, ie whether there is a restriction of one of the rights protected by the provision (prescribed by or in accordance with the law). If there is a restriction, there is then an examination of whether the restriction can be justified by a lawful interest (legitimate aim). Finally, there is then an examination of whether the restriction is necessary in a democratic society. It is often the examination of whether a restriction is necessary in a democratic society that is decisive in cases on the justification for restrictions under Articles 8–11 of the Convention, including in cases on freedom of expression. The state has a margin of appreciation that must be exercised in accordance with the proportionality principle. The margin of appreciation gives states broader scope, while the proportionality principle restricts their scope. The proportionality principle is a key issue for the ECtHR, and cases are often decided on this point, though only after an intense examination. In general, the ECtHR examines very closely whether Convention States have overstepped the limits of the permissible.11 8 

It was rejected in 1977 in the De Geillustreerde Pers NV v Netherlands, Appl No 5178/71. With the Barthold case; see below. 10  P van Dijk et al, 794ff; B Rainey, E Wicks and C Ovey, Jacobs, White & Owey, The European Convention on Human rights, 6th edn (Oxford, Oxford University Press, 2014) 326ff. 11  See Van Dijk et al (ibid) 340ff on the margin of appreciation and the proportionality principle. 9 

22  Caroline Heide-Jørgensen The protection of commercial freedom of expression first came before the ECtHR in 1985 in the Barthold case,12 when the ECtHR acknowledged for the first time that commercial speech can be covered by the protection of Article 10 of the Convention, though these are not the words used in the judgment. The case was followed by the Casado Coca case in 1994,13 when the ECtHR took the same view on advertising by the liberal professions. The Casado Coca case concerned the Spanish prohibition of advertising by lawyers. Despite the prohibition, the lawyer Casado Coca published an advertisement in various newspapers in 1982–83, and the local law society imposed disciplinary measures on him. When the case came before it, the ECtHR ruled that Article 10 of the Convention was applicable. But the ECtHR had some reflections on the condition of necessity in a democratic society, and included a reference to the margin of appreciation (paragraph 50 of the judgment). In paragraph 51 of the judgment, it stated that advertising may sometimes be restricted, especially to prevent unfair competition and untruthful or misleading advertising. In some contexts, even the publication of neutral advertisements may be restricted in order to ensure respect for the rights of others, but any such restrictions must be closely examined by the Court. The Casado Coca case concerned the latter form of neutral advertisement, as Casado Coca had simply given information about his name, address, etc. The ECtHR referred to the fact that the rules governing the professions, particularly in the sphere of advertising, vary from one country to another, but that in most countries there had been a tendency to relax the rules governing advertising by the liberal professions. The wide range of regulations indicated the complexity of the issue, and the ECtHR believed that the national courts were in a better position than an international court to determine how to strike the right balance in the test of proportionality. In view of this, the ECtHR found unanimously that Article 10 was applicable and, by a majority of seven to two, that it had not been infringed.14 Casado Coca is still the leading case on the protection on commercial speech under the Convention. Since 1994, there has been no doubt that commercial freedom of expression, including advertising, is protected under Article 10 of the Convention, but it remains to be seen where the precise limits to this freedom lie. Casado Coca opens the way for quite intense regulation of commercial speech, and it is usually assumed under the Convention that commercial speech does 12  ECtHR 90, 23 March 1985. Dr Barthold, who was a veterinary surgeon in Hamburg, had in an interview said that, in contrast to his competitors, his clinic was open at night. With reference to the German rules for the profession and the German Law on Marketing, Barthold was prohibited by the German courts from making similar statements in the future. The ECtHR thus agreed with Barthold that his freedom of expression had been infringed by the German court’s finding against him on the ground of the newspaper article. There was a similar finding in the 1989 case Markt intern Verlag GmbH and another v Germany, ECtHR 165, 20 November 1989, concerning a publishing business set up and operated by journalists, publishing newsletters focusing particularly on information about chemical and beauty products. 13  ECtHR 285-A, 24 February 1994. 14  The same approach was taken in the same year—1994— in Jacubowski v Germany, ECtHR 291-A, in which the ECtHR ruled that Art 10 does cover commercial freedom of expression.

Commercial Speech and its Limits 23 not enjoy as extensive protection as other forms of expression, in particular the protection of political expression which is the origin of freedom of expression. Restriction of freedom to advertise can be more readily conceived than restriction of freedom of political expression.15 The decisions of the ECtHR on the protection of commercial freedom of expression so far16 can be classified as: (i) commercial freedom of expression, including the right to advertise by the liberal professions (so far this has concerned health professionals, including veterinary surgeons and lawyers,17 and a single case on national rules on misleading advertising);18 (ii) commercial speech, understood as critical expressions about others, including the freedom of expression of researchers in commercial situations;19 and (iii) (television) advertising with political or religious undertones.20 The ECtHR does not yet appear to have addressed the question of the permissibility of advertisements for dangerous products, about which there are regularly cases in the USA. American cases on commercial speech normally distinguish between content-neutral rules and content-based rules on restrictions on commercial speech, with the latter normally being perceived as stricter than the former.21 The ECtHR does not use the same terminology and, while there are similarities, case law is not as developed as in the USA. In assessing whether restriction of commercial speech is justified, the ECtHR uses the same approach as in other cases on freedom of expression. First, it examines whether the principle is at all applicable, ie whether there is a restriction of one of the protected rights. If so, it examines whether the restriction can be justified by regard for a legitimate interest, whether the restriction has a legal basis and whether the restriction is necessary in a democratic society. The more an advertisement expresses an opinion (mixed speech) and the more similar it is to a political expression, the greater the requirement for justifying a restriction. In recent years, several judgments have been handed down on different aspects of commercial freedom of expression which clarify to some extent where the boundaries of permissible regulation lie. In the case law, it is usually the question of whether a regulation is necessary in a democratic society that causes problems. As mentioned in Article 10(2) of the Convention, the measure must be necessary in a democratic society and, as already stated, the protection of commercial freedom of expression has traditionally been assumed to be weaker than the protection of other forms of freedom of expression, 15 As seen in the established case law, eg recently in the case of VGT Verein gegen Tierfabriken v Switzerland, No 24699/94 (Sect 2), ECtHR 2001-VI, paras 66–67. 16  An overview of the case law can be found in Heide-Jørgensen (n 2) 182ff. 17  The cases of Colman (ECtHR 258-D), Casado Coca (n 13) and Stambuk (ECtHR No 37928/97 (Sect 3) (Eng), 17 October 2002). 18  Krone Verlag, ECtHR No 39069/97. 19  Barthold, ECtHR 90; Stambuk (n 17); Markt Intern Verlag, ECtHR No 10572/83; Jacubowski (n 14). 20  Tierfabriken No 1 and 2, ECtHR Nos 24699/94 and 32772/02; Animal Defenders, ECtHR No 48876/08; Murphy, No 44179/98 (Sect 3), ECtHR 2003-IX (extracts). 21  See section IV below. See also Heide-Jørgensen (n 2) 259ff.

24  Caroline Heide-Jørgensen particularly political expression. Therefore, according to the established practice of the ECtHR, Member States’ margin of appreciation for restriction of commercial speech is wider than with restrictions of other forms of expression. Thus the condition of necessity is easier to satisfy with restrictions on commercial freedom of expression than with other freedoms. This still seems to be the practice of the ECtHR. However, while Member States have a wider margin of appreciation, there is still the need for a close examination of whether there has been an infringement. This can clearly be seen in the cases of advertisements by the liberal professions. In these cases, decisive weight is attached to the state’s margin of appreciation, and it is found to be ‘particularly essential in the complex and fluctuating area of unfair competition. The same applies to advertising.’22 In other words, the ECtHR has been reluctant to intervene in the cases of actual advertisements, and in none of the cases so far referred to the ECtHR on traditional commercial advertisements has there been found to be an infringement of the Convention, as the national regulations have had a reasonable scope of intensity of regulation and have not gone further than was necessary. These cases have primarily concerned restrictions on advertising by the liberal professions, and in none of them has an infringement of the Convention been found.23 The only case so far on restrictions under the rules on misleading advertising, the Krone Verlag GmbH v Austria (No 3) case,24 shows that there is substance to the ECtHR’s right to examine the interventions of national authorities. Here, the ECtHR found that the national measure was too extensive. The ECtHR’s intervention concerned the national application of the rules on misleading advertising rather than their existence as, according to the ECtHR case law, such rules were entirely acceptable. The case illustrates that it is possible for the ECtHR to intervene in this area if national rules are applied too extensively or disproportionately. In the Krone Verlag case, an Austrian newspaper had advertised that a subscription for it was cheaper than for another named newspaper. The Austrian authorities banned the advertisement, which was found to be misleading under the Austrian Law on Marketing (UWG). The point at dispute was that the advertisement did not draw attention to the difference between the two newspapers with regard to their style and reporting, including the fact that one was a quality newspaper and the advertising newspaper was not, as was made clear in the decision of the Austrian courts (paragraph 12), and it was therefore prohibited from repeating the advertisement without drawing attention to these differences between the two newspapers. At the same time, the Austrian courts noted that the two newspapers were competitors. This inconsistency of the argument seems to have been relevant

22  The statement about the wide margin of appreciation dates back to Markt intern Verlag (n 12) para 33, and has been repeated in subsequent cases. The addition that the same applies to advertising comes from the Casado Coca case (n 13) para 50. 23  Apart from the Casado Coca case (n 13), cases have been decided in Colman (n 17, Commission decision) and Stambuk (n 17). 24  No 39069/97 (Sect 1), ECtHR 2003-XII, 11 December 2003.

Commercial Speech and its Limits 25 for the ECtHR’s judgment of the case, as the ECtHR did not find that the requirement that the restriction should be necessary in a democratic society had been fulfilled (paragraphs 28ff, especially paragraph 32). The ECtHR found that the restriction was too extensive and imposed too strict conditions for advertisements with price comparisons. While the Austrian court had imposed the prohibition in order to protect consumers from misleading advertising and to protect the competitor’s reputation, the ECtHR nevertheless found that the prohibition was too broad and the Austrian court had exceeded the margin of appreciation. Article 10 of the Convention had thus been infringed. The ECtHR is usually very reluctant to overrule the states margin of appreciation, as also shown by the Casado Coca case, but the Krone Verlag case is an example that it can be done. With commercial speech other than actual advertisements, the ECtHR is not so reticent as in the area of the liberal professions, and here a much more comprehensive protection of commercial expression can be seen. There are a couple of cases on expression by practitioners in the liberal professions concerning their businesses that were not actually advertising. In this area, the practice of the ECtHR dates back to 1985 and the Barthold case.25 It was found that Article 10 of the Convention had been infringed after a close examination of the proportionality of the restriction in relation to what Barthold had done. This approach was upheld in the Stambuk case.26 In an interview, Dr Stambuk, who was an oculist, had spoken about a method using laser technology to treat nearsightedness. For that, he was fined for breach of the prohibition of advertising. The ECtHR found that the German authority’s very strict interpretation of the prohibition of advertising by the medical profession and the requirement for objectivity of information was not compatible with commercial freedom of expression, and Article 10 was thus infringed. A couple of cases on expression of a commercial nature about the businesses of ­others has shown the ECtHR to be reluctant to find that there has been an infringement. Neither in Markt intern Verlag GmbH and another v Germany27 nor in Jacubowski v Germany28 did the ECtHR find that Article 10 had been infringed; in both cases there had been publication of critical comments about named undertakings and in both cases the ECtHR found that the national authorities involved had assessed the various interests involved within their margin of appreciation. The cases on commercial speech other than advertising do not show the same reticence to questions concerning the Convention States’ exercising their margin of appreciation as in the cases on advertising. In contrast to the cases on advertising, Convention States have been found to infringe the Convention in several cases on commercial speech other than advertising.29

25 

See n 12 above. Above n 17. 27  Above n 12. 28  Above n 14. 29  The ECtHR has not been so reluctant in cases on advertising with a political content. Rather, it closely scrutinised the conditions in Art 10 in the cases of VGT Verein gegen Tierfabriken (n 15) 26 

26  Caroline Heide-Jørgensen III.  PROTECTION OF COMMERCIAL SPEECH IN THE EU

The Charter has an express provision on freedom of expression and information in Article 11.30 The Charter has had binding force since 2009 and forms part of EU primary law, having the same legal value as the EU treaties. This is clearly stated in Article 6(1) TEU. Article 11 of the Charter reads: 1. Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers. 2. The freedom and pluralism of the media shall be respected.

Article 11 of the Charter corresponds closely to the first sentence of Article 10(1) of the Convention, discussed in Section II above. The Charter does not contain a counterpart to Article 10(2) of the Convention, which sets out various restrictions on the exercise of freedom of expression. However, Article 52(1) of the Charter accepts that, subject to certain conditions, there are limits to the freedoms ­recognised.31 Pursuant to Article 52(3) of the Charter on the scope and interpretation of the Charter rights, the meaning and scope of the rights are the same as those guaranteed by the Convention as far as the Charter rights correspond to the Convention rights. Thus the limits which may be imposed on freedom of expression under the Charter may not be more extensive than those provided for in Article 10(2) of the Convention. On the other hand, EU law is not prevented from providing more extensive protection (Article 52(3), last sentence). Today, the Charter constitutes the primary expression of the fundamental rights protection offered by EU law. However, the human rights as guaranteed by the Convention have since long before the enactment of the Charter been regarded as part of Union law, having the status of general principles of EU law. Article 6(3) TEU confirms this is still the case. In addition, the Preamble of the Charter expressly ‘reaffirms’ the case law of the ECtHR.

and VGT Verein gegen Tierfabriken No 2, ECtHR [GC], No 32772/02, 2009, and the more recent case decided in 2013, Animal Defenders v UK, Appl No 48876/08, decided by the Grand Chamber. If there is a moral issue, like in Murphy (n 19), the ECtHR are more willing to respect the state’s margin of appreciation. In Murphy, the Irish Faith Centre had sought to have a radio advertisement accepted that advertised for a video which the Centre had produced on the historical facts about Jesus. The advertisement was not accepted, by reference to the prohibition under Irish law of religious advertising on television. In the examination of the proportionality condition, the ECtHR referred to the wider margin of appreciation for Convention States to restrict freedom of expression in the areas of morality and religion, and it was this that distinguished Murphy from VGT Verein gegen Tierfabriken (n 15). 30 

S Peers et al, The EU Charter of Fundamental Rights. A Commentary (Oxford, Hart, 2014) 311ff. The full text of Art 52(1) of the Charter reads: ‘Any limitation on the exercise of the rights and freedoms recognized by this Charter must be provided for by law and respect the essence of those rights and freedoms. Subject to the principle of proportionality, limitations may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others.’ 31 

Commercial Speech and its Limits 27 The scope of the Charter is not as wide as the scope of the Convention. While, according to its Article 1, the Convention offers human rights protection to ‘everyone’ within the jurisdiction of the participating states, the applicability of the Charter is limited to activities of the European institutions and to the Member States to the extent that they are implementing EU law (Article 51(1) of the Charter). However, taking into regard the very wide scope of the EU directives in the advertising and marketing area, eg the UCPD32 and the MCAD,33 the practical importance of this limitation on EU law applicability should be small. According to Article 6(2) TEU, the European Union shall accede to the Convention. However, the negotiations on accession have been halted, for the time being, by Opinion 2/13 of the CJEU, delivered on 18 December 2014,34 in which the CJEU found the Draft Agreement on the European Union’s accession to the Convention to be incompatible with EU law for a variety of reasons. This means there will be no possibility for the CJEU to ask the ECtHR for its opinion on specific questions on the interpretation of the Article 10 of the Convention. If the state of convention law is unclear on a certain point, it will be for the CJEU to reach its conclusions on the correct interpretation independently. The case law of the CJEU had already been developed before the Charter became binding primary law, primarily based on Convention law applied as general principles of EU law. The same line of reasoning still seems to be followed in relation to commercial speech. So far there is not much relevant case law on Article 11 of the Charter, and the CJEU’s case law on freedom of expression is not very comprehensive. Freedom of expression has been relevant in cases on freedom of movement (primarily in media law), where the CJEU has held that the possibilities for restricting free movement—whether based on Treaty-based exceptions or on the doctrine of the overriding public interest—must be interpreted with due regard for freedom of expression. The right of freedom of expression can restrict a Member State’s exercise of its discretion to restrict freedom of movement.35 But none of these decisions has concerned aspects of freedom

32 

Directive 2005/29/EC concerning unfair commercial practices. Directive 2006/114/EC of the European Parliament and the Council of 12 December 2006 concerning misleading and comparative advertising (codified version) [2006] OJ L376/21. 34 EU:C:2014:2454. 35  This was so in Case C-260/89 Elliniki Radiophonia Tiléorassi EU:C:1991:254, on the Greek radio and television monopoly which, it was argued, was a restriction on the freedom to provide services. Any discriminatory effect of this television monopoly had to be justified under the provisions of Arts 56 and 66 of the Treaty (now Arts 52 and 62 TFEU), according to which the discriminatory effects of a measure can only be justified by the considerations listed in the provision (public policy, public security or public health). The CJEU stated that limits imposed on the power of the Member States to apply the provisions on the fundamental rights on grounds of public policy, public security and public health must be appraised in the light of the general principle of freedom of expression embodied in Art 10 of the European Convention on Human Rights. This view on restrictions is also seen in later cases, among others Case C-112/00 Schmidberger EU:C:2003:333, where the CJEU summarised its previous decisions in paras 71–74, stating that fundamental rights form an integral part of the general principles of law the observance of which the Court ensures. 33 

28  Caroline Heide-Jørgensen of expression in a ­commercial context. The CJEU’s first opportunity to consider commercial ­freedom of ­expression as part of the EU’s fundamental rights was in a case on the annulment of the original Directive on Tobacco Advertising,36 Directive 98/43/EC on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products,37 in which an English court made a reference for a preliminary ruling on various matters, including the argument that Directive 98/43/EC was invalid because it overruled freedom of expression. However, the CJEU found that it was not necessary to rule on the question referred because Directive 98/43/EC was annulled because of lack of authority by another judgment of the same date.38 Given that the usual practice of the CJEU on freedom of expression is to refer to decisions made under the Convention, it would be natural to expect the CJEU’s case law in this area to develop in the direction of the practice under the Convention. The decisions of the CJEU confirm this. The development started with the RTL Television case,39 where the CJEU found a German ban on advertising breaks in television programmes was justified on the basis of arguments on free movement. The issue of commercial freedom of expression was implicit in the case, as RTL argued that the German ban was contrary to the fundamental rights, but this view was not accepted. The CJEU’s ruling on the question of freedom of expression is in paragraphs 67ff of the judgment, where the CJEU briefly states that the restriction was justified by Article 10(2) of the Convention, and in paragraph 73 the CJEU refers to the fact that it is clear from the case law of the ECtHR that national authorities have the discretion to decide whether there is a pressing social need capable of justifying a restriction on freedom of expression, and that such a discretion is essential in commercial matters and especially in a field as complex and fluctuating as advertising; the CJEU then referred to the judgment of the ECtHR in the VGT Verein gegen Tierfabriken case.40 The Karner41 case followed the same lines, but with more comprehensive reasoning, and it is now the leading case. The case concerned the UWG, which included a general prohibition of giving information in a commercial context that could mislead the public, and had a special provision prohibiting public statements or notifications from being addressed to larger groups of persons. The claim was that these rules prohibiting the making of public statements were contrary to Article 10 of the Convention. The CJEU addressed the issue of freedom of expression in 36  Case C-74/99 The Queen v Secretary of State for Health and Others, ex parte Imperial Tobacco Ltd and Others EU:C:2000:547. 37 Annulled by the CJEU in Case C-376/98 Germany v European Parliament and Council EU:C:2000:544. 38 ibid. 39 Case C-245/01 RTL Television v Niedersächsische Landesmedienanstalt für privaten Rundfunk EU:C:2003:580. 40  See n 15 above. 41  Case C-71/02 Karner EU:C:2004:181.

Commercial Speech and its Limits 29 paragraphs 48ff of its judgment. First, the CJEU recalled that, according to settled case law, fundamental rights form an integral part of the general principles of law which the CJEU protects, and that for that purpose the CJEU draws inspiration from the constitutional traditions common to the Member States as well as from the decisions of the ECtHR (paragraph 48). Next, where national legislation falls within the field of application of EU law, in a reference to a preliminary ruling, the CJEU must give the national court all the guidance to interpretation necessary to enable it to assess the compatibility of that legislation with the fundamental rights whose observance the CJEU ensures (paragraph 49). Further, the CJEU referred to the fact that freedom of expression is not an absolute right, but is subject to certain limitations justified by the public interest; see Article 10(2) of the European Convention on Human Rights (paragraph 50). As regards the exercise of the discretion by the Convention States in relation to restrictions on freedom of expression, the CJEU referred to the decisions of the ECtHR, including the decisions in the Markt Intern Verlag case42 and the VGT Verein gegen Tierfabriken No 1 case. When freedom of expression does not contribute to a discussion of public interest and it arises in a context in which the Member States have a certain amount of discretion, review is limited to an examination of the reasonableness and proportionality of the restriction. This holds true for the commercial use of freedom of expression, particularly in a field as complex and fluctuating as advertising (paragraph 51).43 There is no reason to believe that the Charter will change this, meaning that both the UCPD and the MCAD in general—although they must be regarded as restrictions to freedom of speech—are in conformity with the protection of freedom of speech.44 As already mentioned, the Charter contains a general rule of r­ eference

42 

See n 19 above. This line of reasoning has been confirmed in later case law, ie Case C-380/03 Germany v European Parliament and Council EU:C:2006:772 on annulment of Directive 2003/33/EC on tobacco advertising; Case C-421/07 Damgaard EU:C:2009:222, which among other things, concerned the definition of ‘advertising’ in Directive 2001/83/EC on the Community code relating to medicinal products for human use. Damgaard was a journalist and on his website he had given some information about a ‘natural’ medicine for which the Danish authorities charged him. As for Damgaard’s argument that this infringed his right to freedom of expression, the CJEU noted that, while freedom of expression ‘constitutes one of the fundamental pillars of a democratic society’ (para 26), it can nevertheless be restricted when certain conditions are fulfilled, and this is the case for the commercial use of freedom of expression, particularly in a field as complex and fluctuating as advertising; see para 27, which refers to Karner (n 41). A couple of newer cases confirm this approach of leaning carefully on the Convention. In Case C-157/14 Neptune EU:C:2015:823, on labelling on mineral water, the CJEU referred to the Charter and carried out a very careful proportionality test. The most recent case, Case C-547/14 Phillip Morris Brands and Others EU:C:2016:325, reaffirms this. This latter case concerned different aspects of the Second Tobacco Directive (Directive 2014/40/EU), including a question about whether restrictions on labelling constituted restrictions on the commercial freedom of expression, which would be in the affirmative if this violated Art 11 of the Charter. The CJEU refers to the Convention, stressing that the Charter ‘has the same meaning and scope as the freedom guaranteed by the Convention’ (para 147), then moves on with the same line of reasoning as seen in the earlier case law. It is interesting to note that the CJEU seems to be very thorough in its proportionality test. 44  See Heide-Jørgensen (n 2) 196 and Kosta (n 2) 168 for possible concrete conflicts. 43 

30  Caroline Heide-Jørgensen in Article 52(3) according to which, where rights in the Charter correspond to rights guaranteed by the Convention, the meaning and scope of those rights are the same as those laid down by the Convention. According to the commentaries on the rules, this includes freedom of expression. There is also a reference to the Convention in the preamble to the Charter and, in contrast to the wording of Article 52(3), the preamble also refers to the case law of the ECtHR, which it ‘reaffirms’ as being a source of the rights. What this is going to mean in practice remains to be seen. It can be interpreted as if the ECtHR has the last word. Apart from the democratic and political objections that can be made to such a solution, the problem with the rule of reference is that, among other things, the decisions of the ECtHR must sometimes be interpreted, and since the Charter does not provide for the CJEU to ask the ECtHR for its opinion on specific questions, as with references for preliminary rulings in EU law, the CJEU must sometimes adopt its own independent interpretations, as necessary.45

IV.  COMPARATIVE CONSTITUTIONAL ASPECTS OF FREEDOM OF COMMERCIAL SPEECH

Constitutional protection of commercial speech is well known in some countries. For example, the USA and Germany both have a tradition of giving strong constitutional protection to freedom of speech in general and more specifically to commercial speech. However, even in these jurisdictions there generally seems to be less protection for commercial speech than for political speech. In both the USA and Germany, the protection of commercial speech is derived from the general protection of freedom of expression, and, especially in the USA, there is comprehensive case law on constitutional protection of commercial speech.

A.  Protection of Commercial Speech in the USA (i) Introduction The USA has a long and strong tradition for protection of free speech, based on the First Amendment to the US Constitution. The legal literature and the case law on the First Amendment are overwhelming, containing great numbers of decisions, a wealth of detail and detailed categorisation of the cases. The US case law on freedom of expression is more complex than is seen in many other countries, among other things because of the many different theories that have been formulated over time by the US Supreme Court and because the US case law on this issue has a longer history than many other systems. 45  K Lenaerts and E de Smitjer, ‘A “Bill of Rights” for the European Union’ [2001] Common Market Law Review 272, 295–96.

Commercial Speech and its Limits 31 As in other constitutional and fundamental rights systems, political freedom of expression has a special position, and the press enjoys a special status and protection under US law.46 A number of different forms of expression have given rise to cases in US law. Some of these categories are considered to have lower value, and can be restricted more easily. These categories concern the nature of the expression involved. Commercial freedom of expression is one of these categories. Originally, US law rejected protection of commercial speech,47 but in 1976, in the Virginia State Board of Pharmacy v Virginia Citizens Consumer Council, Inc case,48 US law recognised for the first time that commercial speech is protected by the First Amendment. The Virginia State Board of Pharmacy case does not lay down any limits to or criteria for the protection of commercial speech, and following the decision there was considerable uncertainty about its scope.49 However, many decisions have been given since, and new cases are constantly coming before the courts. Over time, a modern commercial speech doctrine has been developed in US law; however, it is ever evolving and many questions still remain unclear. (ii)  Commercial Speech—Defining the Concept In contrast to other legal systems, including the case law from the ECtHR and the CJEU, US law actually considers how to define ‘commercial speech’. On the face of it, one might have thought that any advertisement would automatically be covered by the term ‘commercial speech’. US Supreme Court case law refers from the very beginning to commercial speech as ‘speech doing no more than proposing a com­ mercial transaction’.50 This has been repeated in subsequent cases, but apart from this the criteria for deciding whether or not there is commercial expression are not clear, and it can be difficult to decide in specific cases whether or not there is commercial expression.51 In particular, problems arise with modern advertising and the concept of commercial speech. Much modern advertising does not explicitly seek to sell anything specific but to sell values or attitudes or to create a mood. It is difficult to fit such advertising into the concept of commercial expressions with the original criterion of ‘no more than proposing a commercial transaction’. 46  JE Nowak and RD Rotunda, Constitutional Law, 8th edn (St Paul, MN, West) 1312ff and 1099ff; Rosden, The Law of Advertising (New York, Matthew Bender, 2005–13) § 5.02. 47  With the decision of Valentine v Chrestensen, 316 US 52 (1942), in 1942. This was followed in Breard v Alexandria, 341 US 622 (1951). 48  425 US 748 (1976). 49  Rosden (n 46) vol 1, § 6.02, 6-8. 50 Farber, The First Amendment, 155; Nowak and Rotunda (n 46) 1356. The criterion is used in several cases, from Virginia State Board of Pharmacy (n 7) on. 51  Rosden (n 46) vol 1, § 6.03, 6-32 mentions no fewer than six issues to consider when defining commercial speech in concrete cases, namely: (i) does the speech in question propose a commercial transaction; (ii) is an advertisement involved; (iii) does the speech make a reference to a specific product; (iv) is there an economic motivation behind the speech; (v) is the activity being advertised itself protected by the First Amendment; and (vi) does the speech discuss important public issues? Not all questions need be answered in the affirmative for speech to be considered commercial, and the answer to the question may not be clear.

32  Caroline Heide-Jørgensen As with other legal systems that protect commercial speech, the US case law has traditionally given less protection to commercial expression than to other forms of expression,52 and it is frequently argued in a given case that the matter does not concern commercial speech but some other form of speech which enjoys full protection under the First Amendment.53 This distinction between different kinds of ‘speech’ that are given different levels of protection has been criticised in dissenting judgments in the Supreme Court.54 Problems also arise in cases where an expression has both a commercial and a non-commercial character. When this is the case, without there otherwise being an expression of an opinion on social or political matters, what is decisive is whether the mix has been made voluntarily.55 If so, the speech is regarded as being commercial and the application of the Central Hudson test becomes necessary (see more on this test below).56 The US Supreme Court has not yet decided on a situation similar to that in the German Benetton cases (see Section IV.B below), where the mixing of the

52  Nowak and Rotunda (n 46) 1356. This might be changing: see the case of Sorrel v IMS Health, 131 S Ct 2653 (2011), where the US Supreme Court struck down a Vermont statute that restricted the sale, disclosure and use of records that revealed the prescribing practices of individual doctors because it violated the First Amendment. The judgment has been widely discussed and views on it are divided. There are those who argue that the case in reality overrules Central Hudson and introduces the same protection for commercial speech as for other kinds of speech: see TR Piety, ‘A Necessary Cost of Freedom? The Incoherence of Sorrel v IMS Health’ (2012) 64 Alabama Law Review 1; and there are those who think that Central Hudson is still good law: see in this direction EA Young, ‘Sorrel v IMS Health and the End of the Constitutional Double Standard’ (2012) 36 Vermont Law Review 903, 923 (also available on SSRN). Finally, some commentators refers to the test as a ‘zombie’, stressing that the Sorrel case has introduced a higher level of scrutiny in commercial speech cases while still applying the Central Hudson test, with the effect that lower courts fall back on the Central Hudson test: see O Shik, ‘The Central Hudson Zombie: For Better or Worse, Intermediate Tier Review Survives Sorrell v IMS Health’ (2015) 25(2) Fordham Intellectual Property, Media and Entertainment Law Journal Art 5. 53  Rosden (n 46) vol 1, § 6.03, 6-33. 54  See the references in Case 00–276 United States v United Foods Inc, judgment of 25 June 2001, where the Supreme Court once again refused to dispense with the distinction between commercial expression and other kinds of expression. See also Mr Justice Thomas’s dissenting judgment in Case 517 US 484 (1996), 44 Liquormart, Inc v Rhode Island, 517 US 484, discussed below in the review of the Central Hudson test. 55  There have also been examples in US law where such a mix has not been made voluntarily, as legislation has required a particular mode of action by business people, eg that professional fundraisers should state in their announcements how large a percentage of the money they collect goes to charitable causes; see Riley v National Fed of the Blind of NC Inc, 487 US 781 (1988). In such a situation the whole expression is regarded as being non-commercial because it is ‘inextricably entwined’, Rosden (n 46) vol 1, § 6.03, 6-33. 56  See the case of Board of Trustees of the State Univ of NY v Fox, 492 US 469 (1989), where a group of students at a university who had arranged a home party with a sales demonstration which included non-commercial discussions on financial advice and how to manage a reasonable housekeeping budget. This mix of commercial and non-commercial expressions was entirely voluntary. The university had prohibited commercial activities on campus and refused entry to the representative of the company. The case thus concerned commercial expression. The university’s prohibition did not infringe commercial freedom of expression under the Central Hudson test; see below. The Supreme Court does not appear to have decided on this question subsequently, but there is a lot of case law from the lower courts in which the question has been discussed: see the survey in Rosden (n 46) vol 1, § 6.03, 6-28, fn 29.

Commercial Speech and its Limits 33 c­ ommercial and non-commercial aspects consists of expressing an opinion about some other issue, but there has been a case in California concerning the firm Nike. Nike responded in the press to accusations about the mistreatment and underpayment of workers producing goods for the company in some less developed countries. The California Supreme Court found that this was commercial expression, while the US Supreme Court, which considered the question on a writ of certiorari in June 2003, rejected the case and therefore did not decide the question. The California Supreme Court gave judgment in 2002.57 The political activist Marc Kasky had sued Nike before the ordinary courts in California for breach of the state’s Unfair Competition Law, and Nike sought to respond to the criticism of its treatment of workers in less developed countries. Kasky’s argument was that Nike had only expressed itself for a commercial purpose in order to maintain or increase the sales of the company’s products. When the case reached the California Supreme Court, it was dismissed and ‘remanded for further proceedings’, but the California Supreme Court did state that: because the messages in question were directed by a commercial speaker to a commercial audience, and because they made representations of fact about the speaker’s own business operations for the purpose of promoting sales of its products … [the] messages are commercial speech.58

It was this that persuaded the US Supreme Court to take the case up on a writ of certiorari.59 However, for several reasons, the case was dismissed without the US Supreme Court deciding on the substance of the case: first, the California Supreme Court had not delivered its final judgment; secondly, the question was not a matter of Federal law. The third reason was the question of the extent of the First Amendment on this point, and here it was argued that this question was too important to be decided by the Court without it having full knowledge of the case.60 There is a sense that there is some pressure to abandon the distinction between commercial speech and other forms of speech—as known in the European ­context—whereby commercial speech is given less protection than other forms of speech. (iii)  The Distinction between Content-Neutral and Content-Based Regulation In general, US constitutional law recognises a distinction between different types of regulation of advertising, even though the legal basis for any regulation of 57  27 Cal 4th 939 (2002). In its decision of 22 May 2002, the California Supreme Court refused to take the case any further. Frauke Henning-Bodewig also mentions the Nike v Kasky case in chapter 3 in this book. 58  Quoted from the US Supreme Court decision of 26 June 2003 in Nike v Kasky. 59  US Supreme Court decision of 26 June 2003 in Nike v Kasky. 60  See also the case in Bad Frog Brewery, Inc v NY State Liquor Authority, 134 F3d (2d Cir 1998), in which beer labels were considered to be commercial expressions, and the fact that a frog on the label made an obscene gesture did not transform the expression into a social commentary entitled to full First Amendment protection.

34  Caroline Heide-Jørgensen advertising is the First Amendment. General constitutional theory makes fundamental distinctions that are used to assess the regulation of advertising, though with special formulations for commercial expression. First, the concept of time, place and manner restrictions is used, ie the regulation of advertising that is not concerned with the content of a commercial speech, but only regulates the time, place and manner in which there can be advertising (also called content-neutral regulation). Such content-neutral regulation complies with the Constitution as long as it serves an important public interest and leaves open other channels of communication for those who wish to express themselves.61 Next, there is a group of advertising regulations that are intended to regulate the content of an advertisement.62 Such content-based regulation63 complies with the Constitution as long as it fulfils the conditions of the Central Hudson test (see below). The distinction between content-neutral and content-based regulation is used also on commercial speech. (a)  Content-Neutral Regulation of Advertising The general constitutional rule on content-neutral regulation was first applied to commercial speech in the Virginia State Board Pharmacy case.64 It is a condition for allowing such regulation of time, place and manner that the regulation should serve an important public interest and that alternative channels of communication are available for those who wish to express themselves. This principle has been followed in subsequent cases.65 Under this test, it is not a requirement for an intervention to be the least restrictive possible.66 However, there are various problems associated with applying the test. First, if a regulation totally prohibits an activity, there will be no alternative channel of communication, so such a regulation cannot be assessed under this category of content-neutral regulation.67 Next, there can be problems if a regulation regulates different kinds of commercial speech differently; in this case, the state must be able to give very precise reasons for such distinctions, as the regulation will otherwise be judged to be content-based. According to the case law, there must a neutral reason, which must be framed with regard to the consumers.68

61 

Rosden (n 46) vol 1, § 6.03, 6-20.

62 ibid.

63  The distinction between content-neutral and content-based regulation does not appear to be based on any international consensus about which is which. Some of the regulatory mechanisms used in US law with regard to content would presumably be used in relation to Art 12 of the German Constitution (see below), which primarily concerns the right to advertise. This distinction may seem reasonable, but is not without problems, at least from a comparative point of view. 64  425 US 748 (1976). 65  Rosden (n 46) vol 1, § 6.03, 6-21, fn 7. 66  Rosden (n 46) vol 1, § 6.03, 6-24. 67 ibid. 68  Rosden (n 46) vol 1, § 6.03, 6-24. The requirement that a regulation must be framed with regard to consumers is seen in 44 Liquormart (n 54), part IV, second para.

Commercial Speech and its Limits 35 (b)  Content-Based Regulation—the Central Hudson Test If a regulation totally prohibits a specific form of non-misleading advertising, or prohibits such advertising on the grounds of its content, the examination of its constitutionality will be stricter. This is because such regulation of advertising typically excludes communication of information which is, by definition, truthful information, as it does not apply to misleading advertising, and because such regulation will often serve other interests of the state than mere regard for consumers.69 The distinction between content-neutral and content-based regulation is known from general constitutional law, but in the context of advertising the case law of the US Supreme Court has developed a special test for deciding whether or not a content-based restriction of commercial freedom of expression is justified. The test is called the Central Hudson test, after the leading case in 1980 in which it was developed.70 The Central Hudson test sets up four conditions that must be satisfied for a regulation of commercial expression not to be found unconstitutional: 1. The expression must not be misleading and must concern activity that is lawful. 2. The regulation must serve an important state interest. 3. That interest must be directly advanced by the regulation. 4. The regulation must not go further/be more extensive than is necessary to achieve this aim. On the first condition, that the expression must not be misleading and must concern activity that is lawful, it must in the first instance be decided whether there is an expression that is protected by the First Amendment. This involves considering whether there is in fact a commercial expression. Next, there must be non-misleading and truthful information about a lawful activity. This means that regulations on misleading advertising are not unconstitutional,71 nor are regulations preventing advertising for unlawful activities.72 There is no constitutional bar to such regulations. Only truthful, non-misleading advertising of legal activities benefit from First Amendment protection. It is also assumed that advertising containing obscene material loses First Amendment protection.73 Even truthful and non-misleading advertising can be regulated without this conflicting with the First Amendment if conditions 2–4 of the Central Hudson test are fulfilled, ie if the regulation serves an important state interest, this interest is directly advanced by the regulation and the regulation does not go further than is necessary to achieve the legitimate aim.

69 

Rosden (n 46) vol 1, § 6.03, 6-26. 447 US 557 (1980). 71  Rosden (n 46) vol 1, § 6.03, 6-49ff. 72  ibid 6-56ff. 73  ibid 6-60. See also the case referred to above in section VI.C(iv)(b) on the obscene frog. 70 

36  Caroline Heide-Jørgensen Conditions 2 and 3, on the existence of a legitimate state interest that is advanced by the regulation in question, seldom give rise to problems in practice.74 In this, the US case law is similar to that of the ECtHR (see Section II above), where the corresponding provisions also do not cause much debate in practice because they are interpreted so broadly. However, in more recent cases, the third condition, requiring that regulations directly advance state interest, has been applied more strictly. The state needs only to show that the regulation makes some significant progress to advance the state’s interest. If the state’s interest is too vague or remote, the regulation will be invalidated, so the state must be able to point to some reason in which the regulation materially helps achieve its goals.75 The fourth condition, that the regulation must not go further than is necessary to achieve the legitimate aim, causes the greatest problems in practice, again as reflected in the cases before the ECtHR, where the corresponding provision is the most problematic (see Section II above). A regulation will not be upheld if it goes further than is necessary with regard to the interest that it protects. On the other hand, a regulation that does not go further than necessary to serve the interest of the state will be upheld. It is typically in the analysis of this that problems arise. The US Supreme Court generally closely examines the regulation of commercial expression if the underlying activity is protected by the Constitution.76 Previously the starting point was that if an activity can be entirely prohibited, so can advertising for it. As grounds for this, reference was made, among others, to the first part of the Central Hudson test, according to which advertising for unlawful activities is not protected under the First Amendment. Traditionally in this area a constitutional question first arose when an activity was not prohibited but the right to advertise it was restricted.77 The US Supreme Court has considered this issue in a number of cases. The question is thus whether the fact that the activity which is advertised is lawful means that the commercial expression constituted by the advertisement is entitled to exactly the same protection as all other forms of expression. Alternatively, if the state has authority to prohibit an activity entirely, should public bodies have a right to regulate and restrict even truthful

74 

Rosden (n 46) vol 1, § 6.03, 6-34 and 6-38. Rosden (n 46) vol 1, § 6.03, 6-39–40. 76  One of the areas in which the test has been used in a number of cases concerns advertising by the liberal professions, in practice mostly advertising by lawyers: see Bates v Arizona State Bar, 433 US 350 (1977); Ohralik v Ohio State Bar, 436 US 447 (1978); In re Primus, 436 US 412 (1978); Shapero v Kentucky State Bar, 486 US 466 (1988); Florida Bar v Went for it, 515 US 618 (1995). This case law is considered generally applicable. US practice has developed from originally having a total ban on advertising by lawyers, as was the norm in many legal systems in the world, to the regulation of different kinds of advertising rules. The cases show that the prohibition, by a local professional organisation, of the advertising of prices is prohibited as an infringement of commercial freedom of expression. On the other hand, the Constitution cannot be used to protect clear ‘ambulance chasing’. Unsolicited, sometimes direct, personal address to potential clients has been the subject of several cases, and the regulation of this kind of advertising, which has varied from state to state, can be unconstitutional according to case law: see Shapero, Ohralik and Went for it (all ibid). 77  Farber (n 50) 163. 75 

Commercial Speech and its Limits 37 non-­misleading advertising in the interests of consumers, on the grounds that greater includes the lesser (a fortiori argument)?78 The classic answer to this question has been that a restriction of the right to advertise for products that are associated with risk was permissible a fortiori. This practice also implicitly recognises that commercial speech has a lower level of protection than other kinds of speech. This so-called greater-includes-the-lesser argument was first presented in the Posadas de Puerto Rico Assocs v Tourism Co case,79 but the precise extent of it is still not clear.80 On this particular point, the case law of the Supreme Court still seems to be fluid. The decision in 44 Liquormart, Inc v Rhode Island,81 decided after the Posadas case, seems to show that the application of the test with the greaterincludes-the-lesser argument, as in the Posadas case, does not automatically apply to subsequent cases on such questions, and that the balance of the constitutional protection of commercial speech may therefore be tipping away from the classic position, where states are regarded as being entitled to regulate even truthful nonmisleading advertising, to a more modern doctrine where it is accepted that the constitutional protection of commercial speech covered by the First Amendment is the same for all forms of expression. The counter-argument to such a development is based on consideration for consumer protection.82 In US legal theory, this development has been referred to as the ‘rise and fall of the “vice” exception’, which concerns the restriction of advertising for harmful products and services.83 Both points of view are present in the Liquormart case. On the one hand, there is the traditional Central Hudson test; on the other hand, there are judges who propose an intensification of the Central Hudson test, so the state must show that the conditions of the test are satisfied, rather than there being a presumption that they are satisfied. It was also proposed that the greater-includes-the-lesser ­argument should be abandoned; under this argument, the state can prohibit an activity

78 

ibid 159. 478 US 328 (1986). 80 The Posadas de Puerto Rico Assocs v Tourism Co case was about a regulation which permitted casino gaming but only allowed advertising of the gaming to tourists and not to the local population. The US Supreme Court applied the Central Hudson test to the regulation. It was the 4th condition that caused the problems. The regulation was found to not be unconstitutional because the state could have prohibited the activity entirely and because, as the greater includes the lesser, it could also prohibit the advertising: ‘in our view, the greater power to completely ban casino gambling necessarily includes the lesser power to ban advertising of casino gambling’. See also Nowak and Rotunda (n 46) 1367; Rosden (n 46) vol 1, § 6.03, 6-43ff. 81  517 US 484 (1996). The case concerned state prohibition of advertising the prices of alcohol other than at the point of sale, which was found to be unconstitutional. However, the US Supreme Court was much divided, with several dissenting views on important subordinate questions about the method of analysis and the grounds for the Court’s decision, so it is doubtful what the case actually shows. First, in part III, the majority of the Court gave an instructive review of the Court’s previous decisions in the area. Next there was the question of whether the greater-includes-the-lesser argument still applies. The Court was divided. 82  Farber (n 50) 159, asks the question and points out that some judges have expressed the view that it should not be possible to suppress truthful advertising, and that such advertising should have the same constitutional protection as all other kinds of expression. 83  K Sullivan, Constitutional Law, 18th edn (New York, Foundation Press, 2013) 922. 79 

38  Caroline Heide-Jørgensen (the greater), then it can prohibit advertising for that activity (the lesser). If this part of the judgment is followed, so the greater-includes-the-lesser argument is abandoned, this could lead to a significantly stricter assessment of restrictions on advertising under the First Amendment, as it would be more difficult for a state to justify a restriction of the right to advertise. Thus, how advertising is to be regarded in a constitutional perspective may be that, once it is accepted that commercial speech is protected by the First Amendment, it must be treated in the same way as all other forms of expression. If this happens, the idea that commercial expression should have a lower level of constitutional protection will no longer apply. The protection of commercial speech under the First Amendment is ever evolving, but the Central Hudson test is still the basis and has been further developed, eg with the Greater New Orleans Broadcasting Ass’n, Inc v United States case,84 where a prohibition of radio and television advertising for casinos was found to be unconstitutional and the greater-includes-the-lesser argument was rejected. The Greater New Orleans Broadcasting case seems to distance itself from the dissenting judgments in the Liquormart case which, more or less expansively, proposed extending the First Amendment protection, and it must therefore be assumed that the decision in the Greater New Orleans Broadcasting case means that the Central Hudson test still applies to restrictions on the right to advertise, but that the test has been intensified in the sense that it is not enough for a state to say that it has the authority to prohibit an activity entirely and is therefore free to regulate the right to advertise. Precise reasons must be given for a restriction on advertising. This case law has been carried forward in subsequent cases on tobacco advertising,85 and the Central Hudson test is under pressure with regard to the requirement for proportionality. There are developments similar to those seen in connection with the Convention (see Section II above) on the examination of restrictions on freedom of expression and the requirement for proportionality. Such examination is becoming increasingly stricter, and the states’ margin of appreciation is becoming narrower and narrower. Some US Supreme Court justices are of the view that, in principle, the state ought not to suppress truthful and non-misleading commercial information at all.86 Thus, in subsequent cases, the Central Hudson test has been refined87 from its original position, where restrictions must be shown to be

84 

527 US 173 (1999). There are also some decisions on restriction of the right to advertise for compounded drugs. The regulation of commercial expressions for compounded drugs was a task for the states, and in Case 01–344 Thompson, Secretary of Health and Human Services, et al v Western States Medical Center et al, judgment of 29 April 2002, a state prohibition of commercial expressions relating to compound drugs was overruled as being unconstitutional, because it did not fulfil the conditions of the Central Hudson test. See also Lorillard Tobacco Co v Reilly, 533 US 525 (2001) on outdoor advertising for smoke-free tobacco and cigars. 86  See Mr Justice Thomas’s dissenting judgment in Thompson, Secretary of Health and Human Services (ibid). 87  Board of Trustees v Fox, 492 US 469 (1989); see the discussion in Farber (n 50) 156–57; Nowak and Rotunda (n 46) 1144–45. 85 

Commercial Speech and its Limits 39 necessary, to a position where restrictions need not be the least restrictive possible. The evidence required of a state is to show that a restriction of commercial speech is narrowly tailored to protect a legitimate state interest. A restriction is not necessarily invalid because the court could conceive of a different and less restrictive method for achieving the purpose. On the other hand, if it is obvious that there could be a different and less restrictive method of regulation, it is unlikely that the regulation will be upheld. The important Sorrel v IMS Health case,88 where the Court struck down a Vermont ruling that restricted the sale, disclosure and use of records that revealed the prescribing practices of individual doctors because it violated the First Amendment, is one of the most recent examples of this development. In the Sorrel case, the US Supreme Court introduced a new standard for ‘heightened scrutiny’, when a restriction imposes ‘more than an incidental burden on protected expression’, which was found to be the case. The state’s argument that the law was a mere commercial regulation was rejected by the court. The US Supreme Court then applied the Central Hudson test and found that Vermont had not demonstrated that the law directly advanced a substantial state interest. The Court therefore rejected Vermont’s claim that the law was necessary to protect medical privacy and improved public healthcare. What the Sorrel case will mean for the future development in this area is not completely clear, but it is certainly another example of the pressure on the Central Hudson test and the development towards more protection for commercial speech. (iv)  Summary of US Law of Freedom of Speech US law gives strong protection to freedom of speech, and there is so much case law that it is reasonable to speak of a modern commercial speech doctrine in the USA. Commercial freedom of speech is now an established part of the freedom of expression protected by the First Amendment. However, the scope of this right is still evolving. Modern First Amendment protection of commercial speech is still based on the Central Hudson test, and with the distinction between content-based and content-neutral regulation, US law provides a basic tool for analysing restrictions on commercial speech. Also, the debate about what constitutes commercial speech is interesting from a European point of view.

B.  Protection of Commercial Speech in Germany Like the US, Germany has an important body of case law on commercial speech and its constitutional protection. The Federal Constitutional Court (Bundesverfassungsgericht) in Karlsruhe has handed down a number of important decisions

88  131 S Ct 2653 (2011); see also n 52 above. The judgment is widely discussed and the views on it are divided.

40  Caroline Heide-Jørgensen on the constitutional protection of commercial speech. German theory and practice offer interesting examples not only of constitutional rulings on commercial freedom of expression, but also on the conflict between regulation under constitutional law and regulation under marketing law. The right to advertise is dealt with in Article 12 of the German Grundgesetz (GG) on occupational freedom, while the content of expression is dealt with under Article 5 GG on freedom of expression. In Germany, there have been cases involving Article 12 GG and restrictions on advertising dating back to the late 1970s, while cases on the content of expression first began to arise in number in the 1980s and 1990s, with clarifying cases in the famous Benetton I and II cases from 2000 and 2003. As in the USA, the original position in German law was that advertising was not covered by the constitutional protection of freedom of expression.89 However, the Federal Constitutional Court has gradually become more open to recognising protection under Article 5(1) of the German Constitution,90 and since the Benetton I case in 2000 it has been firmly established that Article 5 of the German Constitution also covers ‘kommerzielle Meinungsäusserungen sowie reine Wirtschaftswerbung, die eine wertenden, meinungsbildenden Inhalt hat’ (vgl. BVerfGE 71, 162).91 The Benetton cases have had a major influence on attitudes in German law to constitutional censorship of advertising in general, but especially on attitudes to ‘emotional advertising’. The cases arose from the finding of the Federal Supreme Court that three of Benetton’s advertising images (pictures of child workers,92 a duck covered in oil93 and a HIV-positive person)94 were contrary to the general clause in the UWG, section 1 because they played too strongly on consumers’ feelings of sympathy and impotence while, in the view of the Court, the aim of the pictures was basically to increase awareness of the company. This triggered an appeal to the Federal Constitutional Court which overruled the decisions of the Federal Supreme Court in 2000 in the Benetton I case95 because in the view of the 89  The classic work in German law on advertising and fundamental rights is Peter Lerche’s Werbung und Verfassung (n 7, 76–77). Lerche stated that the general view both in theory and in practice was that advertising does not enjoy constitutional protection under Art 5 GG because advertising claims cannot constitute ‘opinions’ in the sense of Art 5. This view has been abandoned more recently, and it is now accepted that advertising claims can be ‘opinions’. The view that advertising did not benefit from constitutional protection had been disputed in the legal literature, but was supported by a decision of the Federal Constitutional Court in Case BVerfGE 40, 371(382) on a prohibition of parking advertising vehicles outside, which rejected the constitutional protection of advertising. The Basic Law does protect advertising, but seemingly under Art 12. Göpelt, Das Spannungsfeldt zwischen der Meinungsfreiheit und den Vorschriften zum Schutz vor unlauterem Wettbewerb aus nationaler und EG-rechtlicher Sicht, 34, fnn 83 and 84 draws attention to the distinction. 90  See Göpelt (ibid). 91  Cases 1 BvR 1762/95 and 1 BvR 1787/95 Benetton I, judgment of 12 December 2000, para 40; A Baumbach and W Hefermehl, 23rd edn (Munich, CH Beck, 2003) 545, fn 1.57; H Köhler and J Bornkamm, Gesetz gegen den unlauteren Wettbewerb UWG, 34 edn (Munich, CH Beck, 2016) 209, fn 1.18 and 698, fn 1.65. 92 [1995] Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil 595. 93 [1995] Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil 598. 94 [1995] Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil 600. 95  Above n 91.

Commercial Speech and its Limits 41 Federal Constitutional Court they were wrongful applications of the possibility to restrict freedom of expression allowed by the general clause in the UWG, section 1. The cases were referred back to the Federal Supreme Court, but the case with the picture of a HIV-positive person was again condemned96 and prohibited in December 2001.97 This triggered yet another constitutional appeal, which resulted in the Benetton II decision in March 2003,98 in which, remarkably, the Federal Constitutional Court again overruled the Federal Supreme Court. The Benetton decisions have established that shock advertising and other image advertising fulfil the requirements for being considered as ‘opinion’ within the meaning of Article 5 of the Constitution. Accordingly, it is irrelevant for the purposes of constitutional protection whether the immediate aim of an advertisement is to promote sales or to draw attention to social, political or other current issues of society.99 However, there is a question as to whether the scope of constitutional protection is the same for all kinds of advertising. In German law, shock or image advertising, as in the Benetton cases, appears to have been promoted from having the lowest level of protection, given to purely commercial advertising, to having, to some extent,100 the stronger protection given to political expression. In the Benetton I case,101 on the question of the extent to which there was an opinion within the meaning of Article 5, there was a reference to the case law of the Federal Constitutional Court102 when considering the existence of an opinion; commercial statements and pure advertisements that include a value-based content that expresses an opinion are within the scope of protection of Article 5(1) GG. If an advertisement or advertising image expresses a value or some specific point of view, it also falls within the scope of Article 5, and even ‘in besonderem Masse’.103 This was the situation for the three advertising images in the Benetton I case, which in various ways drew attention to social problems. The images were thus within the scope of protection of Article 5(1). This finding was not altered by the fact that Benetton’s advertising images were presented in the framework of an image advertising campaign which contained no commentary, but merely the company logo, and in this connection one could not automatically assume that Benetton was only intent on creating awareness of itself and that it did not also

96  In a press release of 6 December 2001 No 92/2001 on BVerfGE it appears that the second constitutional appeal, covering the cases concerning child workers and the duck covered in oil, was dropped. 97 [2002] Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil 360. 98  Decision of 11 March 2003 in Case 1 BvR 426/02. 99  Von Mangoldt, Starck and Klein, Das Bonner GG I, Art 5.1.2, fn 25; Wassermeyer, ‘Schockierende Werbung’ [2002] Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil 126, 129. 100  Fezer, ‘Dis­kriminierende Werbung—Das Menschenbild der Verfassung im Wettberwerbsrecht’ [1998] Juristenzeitung 265, 268. 101  Above n 91, paras 39–43 of the online version, available at www.bverfg.de/e/ rs20001212_1bvr176295.html. 102  BVerfGE 30, 336 (352) and BVerfGE 71, 162 (175). 103  Para 52 of the online version.

42  Caroline Heide-Jørgensen have an opinion. This argument was confirmed, and perhaps even more strongly emphasised, in the Benetton II case,104 as it was stated that Benetton’s expressive advertising images were covered by the concept of an ‘opinion’ in Article 5(1), regardless of the advertising context, and even though Benetton had refrained from commenting. One could not automatically conclude that an image was merely intended to generate awareness of the company. It has not only been Benetton’s advertisements that have drawn attention to social or political problems or expressed a company’s attitude to social phenomena, even though Benetton’s have been among the most widely discussed in recent years. It has become increasingly usual to use opinion-based advertisements as part of image advertising, where an advertisement includes a message which is not directly related to the product of the advertiser, but instead creates awareness of a problem or perhaps states the advertiser’s attitude to a controversial social issue which becomes part of the image of the company. The main problem in this context is whether such attitudinal advertisements, which do not have exclusively commercial goals, can be restricted in the same way as traditional commercial speech, or whether they should have stronger protection in the same way as political expression—the public debate argument. In the Benetton cases, the German Federal Constitutional Court ruled in favour of the latter view, while the US Supreme Court and the European Courts have not yet had to decide on the question (see Sections III and IV.A above). However, the question is whether German law is in the process of entirely abandoning the traditional distinction which gives less protection to commercial speech than to other kinds of expression. There does not yet appear to be a basis for drawing a definite conclusion about this, as there has been no decision on Article 5 of the German Constitution since the Benetton II case, only on Article 12. On the other hand, there do not seem to be grounds for assuming that there is a lower degree of protection for advertisements than for other kinds of protection. Thus, for the time being, it must therefore still be assumed that the less an expression concerns the formation of an opinion, the lower the degree of protection it will enjoy, ie the traditional view of the lower degree of protection for commercial speech than for other kinds of expression must still be presumed to apply.105 Advertisements, including advertising images, are thus unquestionably covered by the protection of Article 5(1) of the German Constitution in principle, and, as Frauke Henning-Bodewig explains in Chapter 3 of this book, the rulings in the Benetton cases have had great influence on German advertising law and have led to changes in German law on unfair competition in order to avoid future constitutional problems with that kind of advertising.

104 

Decision of 11 March 2003 in Case 1 BvR 426/02, para 16. and Hefermehl (n 91) 199, fn 83: ‘Je weniger daher eine Aüsserung zur Meinungsbildung in einer die Öffentlichkeit berührenden Frage beiträgt und je mehr eigennützigen Interessen dient, desto weniger schützwürdig ist sie.’ See also Köhler and Bornkamm (n 91) 117, fn 7.29. 105  Baumbach

Commercial Speech and its Limits 43 V.  SOME CONCLUSIONS ON THE PROTECTION OF FREEDOM OF COMMERCIAL SPEECH AND UNFAIR COMMERCIAL PRACTICES

The protection of freedom of expression under the European Convention on Human Rights and under the fundamental rights of EU law is a sophisticated system, with comprehensive case law. There is strong protection of freedom of expression in general, but even though it is of fundamental importance in a democratic society, freedom of expression is not an absolute legal right. Restrictions can be imposed on freedom of expression if required by important opposing public interests. This general European approach is clearly seen in the cases on commercial freedom of speech. The first—and leading—cases on the matter were decided by the ECtHR, and in the cases decided by the CJEU it is the established practice of the CJEU to refer to the system of the ECtHR. It is established case law that commercial freedom of speech is protected, but it also appears to have been established that commercial speech is less protected than political expression. The respect for the margin of appreciation of the Convention States is clearly greater in commercial speech cases than in cases of political freedom of expression. In several judgments, it has been stated that the Convention States’ margin is ‘particularly essential in the complex and fluctuating area of unfair competition. The same applies to advertising’,106 and that even though there is protection of commercial freedom of speech in principle, it can nevertheless sometimes be restricted, especially to prevent unfair competition and untruthful or misleading advertising. In some contexts, the publication of even objective, truthful advertisements might be restricted in order to ensure respect for the rights of others or owing to the special circumstances of particular business activities and professions.107

The case law also shows that the ECtHR’s starting point is that the national courts are better suited than the ECtHR itself, as an international court, to strike the right ­balance in cases on advertising. This is stated in the Casado Coca case, in paragraph 55, in relation to advertising by lawyers. The question is whether this statement has wider application than to advertising by lawyers. Presumably it has. Unless it can be established that there is a common European standard in the area, respect for the Convention States’ margin of appreciation will prevail, and the ECtHR will be hesitant to overrule the decisions of the Convention States. The case law of the CJEU explicitly follows the case law of the ECtHR, and with the rule of reference in the Article 52(3) of the Charter of Fundamental Rights of the European Union there is no reason to expect that any ­independent EU ­practice will be developed which departs from that under the Convention. However, it is also the established practice of the CJEU to be influenced by the constitutional traditions common to the Member States. As is well known, the German

106  107 

Casado Coca (n 13), para 50; repeated more recently in VGT Verein gegen Tierfabriken (n 15) 69. Casado Coca (ibid), para 50; see also Stambuk (n 17) para 39.

44  Caroline Heide-Jørgensen Federal Constitutional Court has a tradition for giving very strong ­protection to fundamental rights, including a stronger protection of commercial speech than in many other European jurisdictions or the USA. While the foundations of free speech may not play an important role in the daily life of unfair commercial practices, they do exist and they do matter as the outer limits of the system, though it remains to be seen exactly where those limits are.

3 Ethics, Taste and Decency Considerations in Advertising FRAUKE HENNING-BODEWIG

I. INTRODUCTION

E

VERYBODY WANTS COMMUNICATION to be free from any legal interference. On the other hand, nobody wants communication to be deceptive, hateful, indecent or offensive. The dilemma of these conflicting aims can also be seen in advertising, which is not only an important economic factor, but has become a sort of cultural phenomenon, too. This chapter will focus on commercial advertising—in other words, statements or representations that serve to market a product or a service.1 Furthermore, it will focus on legal (not economic or sociological) issues. As usual, when diametrical views clash, lawyers shy away from clear-cut answers and refer to a ‘balancing of interests’. This is also true in regard to the three fundamental questions one has to ask here: should the legislature intervene at all against advertising that is ‘unethical, tasteless or indecent’? If so, in which way? And how should the courts and/or authorities proceed when they have to apply legal rules that might be influenced by ethics, taste and decency? It should be mentioned at the outset that the outcome of such a balancing of interests will hardly ever be unanimously applauded. There are simply too many conflicting interests, perspectives and opinions involved. And it goes without saying that harmonisation on the European (let alone international) level is bound to be extremely difficult because the perception of what is ethical, decent or tasteful depends on the historical and cultural roots of a country and its approach to regulation in general. All this can be quite diverse, and it is an open question whether one should not simply respect these differences and leave them as they are. On the other hand, a globalised economy needs some basic (harmonised) rules more than

1  There are various (legal) definitions of commercial advertising. For this contribution, the rather broad definition of Directive 2005/29/EC (discussed in detail in chapter 4 of this book by Jules Stuyck) is used. The definition of Directive 2006/114/EC is somewhat narrower as it requires the intent of the advertiser to market his product.

46

Frauke Henning-Bodewig

ever, and they might well include issues like ethics and decency (though perhaps not taste, which seems furthest removed from the need for legal interference).

II. ‘ETHICS, TASTE AND DECENCY’: LAWYERS ON TREACHEROUS GROUND …

Anybody who starts a legal discussion about ‘ethics, taste and decency’ in advertising is entering slippery ground. These notions stem from the sociological and/or philosophical sphere, not from the commercial or legal sector lawyers usually deal with. And even in sociology and philosophy they refer to rather vague concepts and are far from being undisputed. A. General Definitions The following definitions are taken from the ‘Oxford Dictionaries.com’2 Ethics—‘moral principles that govern a person’s behaviour or the conducting of an activity’ … Schools of ethics in Western philosophy can be divided, very roughly, into three sorts. The first, drawing on the work of Aristotle, holds that the virtues (such as justice, charity, and generosity) are dispositions to act in ways that benefit both the person possessing them and that person’s society. The second, defended particularly by Kant, makes the concept of duty central to morality: humans are bound, from a knowledge of their duty as rational beings, to obey the categorical imperative to respect other rational beings. Thirdly, utilitarianism asserts that the guiding principle of conduct should be the greatest happiness or benefit of the greatest number. Decency—‘behaviour that conforms to accepted standards of morality or respectability’. Taste—‘the ability to discern what is of good quality or of a high aesthetic standard’; ‘Conformity or failure to conform with generally held views concerning what is offensive or acceptable’.

B. ‘Business Ethics’, ‘Public Policy Issues’, ‘Corporate Social Responsibility’ and the ICC Code Because of the vagueness of these definitions, economists and lawyers nowadays tend to avoid any reference to morals, ethics or decency, let alone taste. Instead of Kant’s categorical imperative, they focus on ‘business ethics’, ‘public policy issues’, 2 www.oxforddictionaries.com/definition/english/ethics (respectively ‘taste’, ‘decency’) (last accessed on 2 February 2016). If there is more than one definition, the cited examples are those closest related to commercial advertising.

Ethics, Taste and Decency Considerations in Advertising 47 the ‘public interest’ or ‘corporate social responsibility’. Admittedly, these concepts and definitions are not clear-cut (or undisputed) either, but they at have least the advantage of being more closely related to the economic and legal field than, for instance, ‘aesthetic’ considerations. This is in particular true of ‘business ethics’, which, according to the Oxford Dictionaries, means ‘a set of principles conceived of as forming a code of conduct in business’.3 If one wants to single out one of these topics that might be of relevance to the legal sphere, it would be the so-called ‘public policy issues’4 or the ‘public interest’, defined as ‘the society’s prevailing values’.5 ‘Public policy interests’ typically reflect fundamental principles laid down in the constitutions of many countries or in treaties like the European Convention of Human Rights the Charter of Fundamental Rights of the EU (discussed in Section IV below). They address such issues as human dignity, protection against discrimination, protection of children and youth, the environment and the rights of animals. A related concept much discussed lately is corporate social responsibility (CSR).6 The principles of CSR aim at ‘decent working conditions’ and ‘sustainable’ (environmentally friendly) production, but also ‘fair marketing’ and the ‘consumers’ interest’.7 In many respect, these principles can be regarded as specific aspects of the broader notion of public policy issues. CSR can be found in guidelines of international organisations (eg the UN Global Compact, the OECD Guidelines for Multinational Enterprises and the International Labour Organization (ILO)) or in European directives (like Directive 2014/95/EU on the disclosure of non-financial and diversity information). It can also be found in a company’s very own set of fairness rules, published, for instance, on the company’s website. Such ‘private’ CSR will often consist in a mixture of rather vague promises (‘we deal fairly’), references to guidelines (‘we produce according to ILO standards’) and more specific statements (‘we do not tolerate child labour with our foreign suppliers’).

3 www.oxforddictionaries.com/definition/english/business-ethic (last accessed on 3 February 2016). 4  For public policy issues in unfair competition (market) law and the chances of a harmonisation within the EU see Schricker and Henning-Bodewig, ‘Elemente einer Harmonisierung des Rechts des unlauteren Wettbewerbs in der europäischen Union’ [2001] Wettbewerb in Recht und Praxis 1367. 5 Heide-Jørgensen, Advertising Law. Marketing Law and Commercial Freedom of Expression (Copenhagen, DJØF Publishing, 2014) 436 et seq. 6  cf Kerr et al, Corporate Social Responsibility (Toronto, Lexis Nex Canada Inc, 2014); Hilty and Henning-Bodewig (eds), Corporate Social Responsibility; Verbindliche Standards des Wettbewerbsrechts? (Berlin, Springer, 2014); Henning-Bodewig, ‘UWG und Geschäftsethik’ [2010] Wettbewerb in Recht und Praxis 1094; Henning-Bodewig, ‘“Der ehrbare Kaufmann”, Corporate Social Responsibility und das Lauterkeitsrecht’ [2011] Wettbewerb in Recht und Praxis 1014. 7 Pursuant to the European Commission’s ‘A Renewed EU Strategy 2011–14 for Corporate Social Responsibility’, COM (2011) 681, 3 October 2011, CSR at least covers ‘human rights, labour and employment practices … environmental issues … and combating bribery and corruption. … Consumer interests, including privacy, are also part of the CSR agenda.’ Directive 2014/95/EU of 22 October 2014 as regards disclosure of non-financial and diversity information by certain large undertakings and groups has taken up most of these principles.

48  Frauke Henning-Bodewig A further type of principle—and of closest relation to the legal assessment— is the definitions given in guidelines (codes of conduct) that directly deal with marketing and advertising. The ‘Consolidated Code on Advertising and Marketing Practices’ of the International Chamber of Commerce (ICC) is of particular interest here because it refers inter alia to ‘decency and honesty’—notions seldom mentioned in connection with ‘business ethics’, ‘public policy issues’ or CSR. The first four paragraphs of the ICC Code read: (1) Basic principles All marketing communications should be legal, decent, honest and truthful. All marketing communications should be prepared with a due sense of social and professional responsibility and should conform to the principles of fair competition, as generally accepted in business. No communication should be such as to impair public confidence in marketing. (2) Decency Marketing communications should not contain statements or audio or visual treatments which offend standards of decency currently prevailing in the country and culture concerned. (3) Honesty Marketing communications should be so framed as not to abuse the trust of consumers or exploit their lack of experience or knowledge. Relevant factors likely to affect consumers’ decisions should be communicated in such a way and at such a time that consumers can take them into account. (4) Social responsibility Marketing communications should respect human dignity and should not incite or condone any form of discrimination, including that based upon race, national origin, religion, gender, age, disability or sexual orientation. Marketing communications should not without justifiable reason play on fear or exploit misfortune or suffering. Marketing communications should not appear to condone or incite violent, unlawful or anti-social behaviour. Marketing communications should not play on superstition.

In national law, guidelines of self-regulation organisations are built on similar principles. The Irish Code of Standards for Advertising, Promotional and Direct Marketing (2016), for instance, requires all advertising to be ‘legal, decent, honest and truthful’.8 And in the US, the FCC guidelines9 describe indecent programming 8 

www.asai.ie (last accessed on 3 February 2016). Federal Communication Commission (FCC), ‘Obscene, Indecent and Profane Broadcasts’, available at www.fcc.gov/consumers/guides/obscene-indecent-and-profane-broadcasts (last accessed on 3 February 2016). 9 

Ethics, Taste and Decency Considerations in Advertising 49 on TV as communication that ‘contains patently offensive sexual or excretory material that does not rise to the level of obscenity’.

III.  THE LEGAL FRAMEWORK FOR ‘ETHICS, TASTE AND DECENCY’

A. Between Ordnungsethik and Handlungsethik To get a grip on the (legal) assessment of matters like ethics, taste and decency in advertising it is, first of all, helpful to distinguish between explicit rules based on ethical principles (Ordnungsethik) and obligations that, independent of any explicit legal obligation, might require businesses to behave in a certain ethical way (Handlungsethik).10 In most developed societies, basic ethical principles, eg the right to a fair trial, respect of human dignity, decent working conditions, prohibition of discrimination, protection of youth or of the environment, have triggered more or less specific statutes, or at least are settled case law. In advertising, ethical principles are reflected in prohibitions of deceptive, surreptitious, aggressive or discrediting allegations or presentations, in rules to protect the health of consumers or to protect youth, etc. Prohibitions of this sort can be found in statutes on unfair competition, in market laws, tort law and case law. It goes without saying that such Ordnungsethik is legally binding. Handlungsethik is a much more complex matter. It indicates correct, ethical market behaviour independent of any explicit prohibition.11 An overlap with Ordnungsethik exists insofar as the legislature can deliberately use broad terms to describe prohibited types of behaviour and leave it to the courts and authorities (or legal writing) to define them. A typical example of this are general clauses that refer to concepts such as ‘unfair’ commercial practices, ‘good morals’ (gute Sitten), ‘good market behaviour’, etc. How are these terms to be interpreted in a specific, factual situation? To what extent can the general sociological or philosophical aspects discussed above (like ethics, taste and decency) influence the outcome? Although there are some accepted rules of interpretation, this certainly is a ­challenging task for courts and authorities. If there is no legal ‘anchor’ in the form of a general clause, this task becomes even more challenging. Handlungsethik then boils down to the crucial question of whether enterprises, independent of any direct or indirect legal obligation, are supposed to behave in a certain ethical way. It is probably true that the whole free 10  The differentiation is discussed by Peifer, ‘Schutz ethischer Werte im europäischen Lauterkeitsrecht oder rein wirtschaftliche Betrachtungsweise?’ in Hilty and Henning-Bodewig (eds), ­Lauterkeitsrecht und Acquis communautaire (Berlin, Springer 2009), 125 et seq. 11  This issue is mainly seen in respect of CSR; cf Riffel, The Protection against Unfair Competition in the WTO TRIPS Agreement (Leiden, Brill/Nijhoff 2016); Henning-Bodewig, ‘TRIPS and Corporate Social Responsibility—Unethical Equals Unfair Business Practices?’ in Ullrich et al (eds), TRIPS plus 20— From Trade Rules to Market Principles (Berlin, Springer 2016) 701.

50  Frauke Henning-Bodewig market system, from Adam Smith on, is based on the unwritten ‘expectation’ that all market participants behave in a certain ethical way.12 Transferred to advertising, this would mean: is a business under an obligation not only to respect the law but also to advertise its products in a way that respects the public’s feeling of ‘propriety’ or even ‘good taste’? And what are the consequences if the business chooses not to do so? As some of the examples discussed below may demonstrate, as a rule it is prudent not to upset the public with ‘indecent’ or ‘annoying’ advertisements because this might be counter-productive for turnover (although the advertiser might risk this for a certain time if his strategy is to make his trademark well known via the public uproar …). But is this a matter of law or of self-regulation, or should it perhaps be handled otherwise and be left to modern forms of public ‘sanctioning’, namely, ‘naming and shaming’ by non-governmental organisations, through firestorms on the internet, etc? It is hardly surprising that lawyers have a preference for Ordnungsethik and that, if confronted with issues like ‘ethics, taste and decency’, they look for a legal framework to be on more familiar ground. Indeed, there are some—though not many— legal rules that deal (among other things) with the issues at stake.

B.  Article 10bis Paris Convention On the international level, the Paris Convention for the Protection of Industrial Property (PC) of 1883 and its prohibition of all acts of competition contrary to honest trade practices (usages honnêtes) comes to mind. Although the PC focuses on intellectual property law, as early as 1900 a prohibition of unfair competition was included. The second paragraph of Article 10bis PC prohibits ‘any act of competition contrary to honest practices in industrial or commercial matters’, while the third paragraph gives a non-exhaustive list of examples (creating confusion, discrediting a competitor, making misleading allegations). This ‘unfair competition law’ in a nutshell not only has had a huge impact on the development of national laws on unfair competition (or more generally, market behaviour), but even today is referred to in European and international law.13 Article 10bis PC urges its more than 100 Member States to grant nationals of other Member States equal protection against unfair competition, either under their own national law (‘principle of national treatment’) or, if such law does not exist, at least under the rules established by Article 10bis PC (‘principle of minimum protection’). The terminology of the fall-back position of Article 10bis (2) PC (‘contrary to honest practices in industrial and commercial matters’) is sometimes criticised 12 

This is argued for by T Judt, Ill Fares the Land (New York, Penguin Books, 2010) 40 et seq. For a more complete study of Art 10bis PC see Wadlow, The Law of Passing-Off. Unfair Competition by Misrepresentation, 4th edn (London, Sweet & Maxwell, 2011) para 2-009 et seq; Henning-Bodewig, ‘International Protection against Unfair Competition’ in Henning-Bodewig (ed), International Handbook on Unfair Competition (Oxford/Baden-Baden, Hart Publishing/Nomos, 2013) 9. 13 

Ethics, Taste and Decency Considerations in Advertising 51 as being too imprecise for practical application. Without doubt, difficulties can arise insofar as there are no universally accepted standards for all cases of market behaviour. On the other hand, Article 10bis PC itself gives some guidance on what has to be considered as ‘dishonest’ or ‘unfair’ by: (i) expressly indicating three examples of commercial conduct that ‘in particular’ are considered as unfair; (ii) taking as a starting point the commercial practices, in other words, what is actually and frequently done in the trader’s field of activity; and (iii) limiting the corrective element—honesty (honnête)—to commercial matters, so that general ethical requirements, especially moral issues, are of no relevance. The question whether (business) ethics, taste and decency are encompassed by Article 10bis PC has to be seen against this background. In recent years, it has been argued that certain forms of ‘business ethics’, in particular CSR standards originating from the UN, UNESCO, OECD, etc, might be a subject of Article 10bis PC and thus possibly also of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement.14 A transfer of this rather new theory to indecent advertising seems, however, difficult. CSR principles focus not so much on the marketing as on the production of a product (although the two areas may overlap). In addition, guidelines in the field of advertising and marketing might not equal CSR established by international organisations like the UN, UNESCO, etc. Admittedly, many countries look to the ICC for guidance when it comes to determining the notion of ‘fairness’ in advertising. But even if the ICC guidelines, including their reference to ‘decency’, were a ‘globally acceptable framework for responsible creativity and communication’,15 they would only be of relevance for Article 10bis PC if they specified offences that are equally serious and harmful to competitors as the ‘hard core’ of unfair trade practices listed in paragraph 3 of that article. Rather vague parameters like ‘taste’ and ‘decency’ are, however, not in one line with offences like creating confusion or deceptive or denigrating advertising. This is all the more so because Article 10bis PC mainly has the interests of the competitor (and only indirectly those of consumers) in mind.16 This does not mean that ethical considerations are without influence on Article 10bis PC. The general clause (usages honnêtes) is broad and flexible enough to take up specific aspects of business ethics and to incorporate them into the PC’s very own system. For instance, a producer or trader who wrongly (or misleadingly) claims that his goods are produced ‘fairly’ or in accordance with certain CSR standards may be held responsible under the prohibition of deceptive commercial statements.17 The focus then is on the deceptive claim, not the violation of the public’s interest as such. 14  Cottier and Wermelinger, ‘Implementing and Enforcing Corporate Social Responsibility: The Potential of Unfair Competition Rules in International Law’ in Hilty and Henning-Bodewig (n 6) 81; Riffel (n 11). For a more critical view see Henning-Bodewig, ‘TRIPs and Corporate Social Responsibility: Unethical Equals Unfair Business Practices?’ in Ullrich et al (n 11) 701. 15  The very aim of the ‘Consolidated ICC Code of Advertising and Marketing Communication Practice’ (2011), see Introduction, 1. 16  For a detailed discussion see Henning-Bodewig (n 14). 17  See the decisions Kaska v Nike (USA) and LIDL (Germany), discussed in n 31, 35.

52  Frauke Henning-Bodewig C.  European Law (i)  No Comprehensive Regulation of Advertising Until now there have been no comprehensive, coherent rules to combat ‘unfair competition’ (or ‘unfair commercial practices’ or ‘unfair trading practices’) on the European level.18 The regulation of advertising, in particular, is spread over several directives and regulations. In B2C (business-to-consumer) relations, Directive 2005/29/EC applies, in B2B (business-to-business) relations, Directive 2006/114/ EC, and numerous other directives and regulations deal (among other topics) with the marketing of specific products or in certain media. Furthermore, there exists no coherence as regards the purpose of protection. In this respect, European harmonisation of the rules to combat unfair market behaviour, including advertising, shows a remarkable change of direction. While, at its first stage, with the directives on misleading and comparative advertising (1984, 1997), the protection of both competitors and consumers was aimed at, the Directive 2005/29/EC concerning unfair commercial practices (UCPD) deals solely with the protection of consumers. (ii)  Directive 2005/29/EC on Unfair Commercial Practices Although restricted to B2C practices, the UCPD is currently the most important basis for the assessment of advertising.19 It deals with commercial practices defined quite broadly in Article 2(d) 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’. There are, however, several exceptions from the directive’s application. One can be found in Recital 7 (emphasis added): This Directive addresses commercial practices directly related to influencing consumers’ transactional decisions in relation to products. It does not address commercial practices carried out primarily for other purposes, including for example commercial communication aimed at investors, such as annual reports and corporate promotional literature. It does not address legal requirements related to taste and decency which vary widely among the Member States. Commercial practices such as, for example, commercial solicitation in the streets, may be undesirable in Member States for cultural reasons. Member States

18 As to the reasons, cf Bakardjieva Engelbrekt, Fair Trading Law in Flux? (Stockholm University, 2003); Keirsbilck, The New European Law of Unfair Commercial Practices and Competition Law (Oxford, Hart Publishing, 2011); Henning-Bodewig, ‘Die Bekämpfung unlauteren Wettbewerbs in den Mitgliedstaaten der EU—Eine Bestandsaufnahme’ [2010] Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil 273; Henning-Bodewig, ‘Nationale Eigenständigkeit und Europäische Vorgaben im Lauterkeitsrecht’ [2010] Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil 549. 19  For a detailed study of this directive cf Stuyck, chapter 4 in this volume; Keirsbilck (n 18); Augenhofer, ‘European Union’ in Henning-Bodewig (ed), International Handbook on Unfair Competition (n 13) 41 et seq; the regulation of advertising is discussed in detail by Heide-Jørgensen (n 5).

Ethics, Taste and Decency Considerations in Advertising 53 should accordingly be able to continue to ban commercial practices in their territory, in conformity with Community law, for reasons of taste and decency even where such practices do not limit consumers’ freedom of choice. Full account should be taken of the context of the individual case concerned in applying this Directive, in particular the general clauses thereof.

The meaning is clear insofar as it is not considered as a subject of the directive. The example given in Recital 7 is, however, ill-chosen: if the reason for the exception is also the assumed lack of a direct influence of the consumer’s transactional decision, ‘commercial solicitation’ in the street is the wrong example. It can be assumed that Directive 2006/114/EC, which covers misleading and comparative advertising in B2B relations, is interpreted in a similar way, even though its rules on advertising aim at only a minimum standard and not, like the UCPD, total harmonisation. (iii)  Directive 2010/13/EC on Audiovisual Media Services Pursuant to Article 3, paragraph 4, the UCPD does not deal with specific regulations of commercial practices in other directives. In this context, Directive 2010/13/EU, the Audiovisual Media Services Directive,20 is of particular interest because it submits, inter alia, television commercials to principles that at least partly overlap with the ‘public policy issues’ discussed above. Article 9 of this directive reads as follows: (1) Member States shall ensure that audiovisual commercial communications provided by media service providers under their jurisdiction comply with the following requirements: (a) audiovisual commercial communications shall be readily recognisable as such. Surreptitious audiovisual commercial communication shall be prohibited; (b) audiovisual commercial communications shall not use subliminal techniques; (c) audiovisual commercial communications shall not: (i) prejudice respect for human dignity; (ii) include or promote any discrimination based on sex, racial or ethnic origin, nationality, religion or belief, disability, age or sexual orientation; (iii) encourage behavior prejudicial to health or safety; (iv) encourage behavior grossly prejudicial to the protection of the environment; (d) all forms of audiovisual commercial communications for cigarettes and other tobacco products shall be prohibited; (e) audiovisual commercial communications for alcoholic beverages shall not be aimed specifically at minors and shall not encourage immoderate consumption of such beverages;

20  Directive 2010/13/EU of 10 March 2010 concerning the provision of audio-visual media services [2010] OJ L95/1 (the former Television Directive).

54  Frauke Henning-Bodewig (f) audiovisual commercial communication for medicinal products and medical treatment available only on prescription in the Member State within whose jurisdiction the media service provider falls shall be prohibited; (g) audiovisual commercial communications shall not cause physical or moral detriment to minors. Therefore they shall not directly exhort minors to buy or hire a product or service by exploiting their inexperience or credulity, directly encourage them to persuade their parents or others to purchase the goods or services being advertised, exploit the special trust minors place in parents, teachers or other persons, or unreasonably show minors in dangerous situations.

D.  National Legislation (i)  The Different Approaches to the Regulation of Advertising Although most developed countries have established rules to regulate a­ dvertising,21 even within the relatively few countries of the EU the approach to regulation was (and still is) quite diverse. The reasons for this are mainly historical and/or cultural, in other words rooted in the very identity of a nation. It goes without saying that these differences also influence the perception of matters like ethics, taste and decency in advertising, in particular the question whether the law should concern itself with such matters. To complicate things further, the rules to combat unfair market practices are often determined by the general system of law and here in particular the system of enforcement, discussed in Section V below. Seen from a historical point of view, this is hardly surprising. When the new phenomenon of unfair trade practices— often in the form of socially harmful advertising—occurred at the end of the nineteenth century, it was dealt with on the basis of the system of law already in force, in other words, the already existing civil, criminal or administrative law regulations. France, for instance, with its sophisticated statutory law system— the famous Code Civil—quickly found a basis for protection against concurrence déloyale on the basis of the general tort clause. In other countries, however, for systematic reasons the legislature was forced to introduce a statutory provision because the court refused to apply the general tort clause to cases like deceptive advertising. In England, no tort of unfair competition was recognised and no special statute was enacted; rather, England concentrated upon familiar possibilities under equity and common law. All these differences existed even at the time when at least the purpose of protection was undisputed; the initial aim was to protect the honest businessman against his less honest competitors. It is no wonder that with the emergence of consumer protection in the second half of the twentieth century the picture became even more varied. 21  For an in-depth study of regulations worldwide to combat unfair commercial practices, including advertising, see Henning-Bodewig (ed), International Handbook on Unfair Competition (n 13).

Ethics, Taste and Decency Considerations in Advertising 55 An instructive example of this development—not least in respect of the legal assessment of ethics, taste and decency—is the German Act Against Unfair Competition, which will therefore be discussed in more detail. (ii)  The German Act Against Unfair Competition—from 1909 to 2015 Germany is one of the countries that, from the early twentieth century on, ­established specific rules against unfair competition.22 Pursuant to its general clause, the Act Against Unfair Competition of 1909 prohibited all acts of competition that were against ‘good morals’ (gute Sitten). The terminology was taken over from the Civil Code (the BGB) and reflected the language for unacceptable harmful behaviour at the turn of the twentieth century. Gute Sitten was often defined as the ‘feeling of propriety of the honest businessmen’. This, however, was a definition devoid of any concrete meaning. In practice, it was a balancing of interests that underlay the gute Sitten. Although the Act of 1909 was originally passed in order to protect the interests of honest businesses, the courts soon took into account the interests of the consumer and the public as well. And while the wording and the structure of the Act remained roughly the same for almost a century, in reality—not least due to the influence of European law—a decisive change had taken place; for instance, the decisions of the civil courts became increasingly more liberal and ‘consumer-friendly’. This sort of sophisticated case law was, however, hardly reflected any more in the sparse wording of the 1909 Act. To make the approach more transparent and European, in 2004 a new statute was passed. Section 1 of the 2004 Act Against Unfair Competition, the current basis of German unfair trade practices law, now lays down the threefold purpose of protection (competitor, consumer, public) already recognised by the courts under the 1909 Act. There is, however, one marked exception: the interest of the public is restricted to the functioning of the market. Why this restriction? One of the reasons was to avoid constitutional problems like in the Benetton cases.23 Why not leave sensitive matters at the borderline of taste and decency completely to self-regulation? In addition, other changes in the 2014 Act point to an ‘outsourcing’ of matters like ethics, taste and decency. For instance, the key term of the law in section 3 of the 2014 Act, ‘unfair’ (unlauter), is deliberately not defined; in legal writing, it is interpreted in a way that centres on the good functioning of the market.24 22  For a study of German unfair competition law (in English) see Henning-Bodewig and Boesche, ‘Germany’ in Henning-Bodewig (ed), International Handbook on Unfair Competition (n 13) 231 et seq. 23  As to the Benetton cases (eg German Supreme Court 9 December 2001, 170—HIV-Positive) see section V. They are also discussed by Heide-Jørgensen in chapter 2 of this book. 24  Köhler and Bornkamm, UWG, 34th edn (Munich, Beck, 2016) Einf § 1 UWG; Ohly and Sosnitza, UWG, 6th edn (Munich, Beck, 2014), Einf § 1 UWG; Harte-Bavedamm and Henning-Bodewig (eds), UWG, 3rd edn (Munich, Beck, 2013) § 1 UWG. It is the freedom to act and in particular to make informed and undisturbed transactional (market) decisions that must be preserved in the interests of all market participants.

56  Frauke Henning-Bodewig Admittedly, section 4, No 1 of the 2004 Act prohibited (inter alia) undue pressure through ‘contempt for humanity’, but even this was restricted to constellations that were capable of impairing the addressee’s freedom of decision—and was completely abolished in the latest reform of the Act in 2015.25 The emphasis is clearly on the functioning of the market, which makes the 2004 Act Against Unfair Competition a rather broad market law and not—as its deceptive title might suggest—a law restricted to the combat of unfair competition. In any case, the German Act Against Unfair Competition of 2004, which was reformed in 2008 and 2015, leaves only few indirect ‘openings’ for considerations like ethics, taste and decency. There are mainly four such openings: first, the wording of section 3, the general clause, which prohibits ‘unfair’ commercial practices, may still be interpreted in a way to include ‘human dignity’ because this fundamental right deriving from Article 1 of the German Constitution is at the basis of all laws in Germany.26 However, other cases that do not violate human dignity at the same time (eg sexual discrimination combined with violence) are considered as pursuing other matters than the functioning of the market and thus fall outside of the notion unlauter.27 Secondly, section 3a, which incorporates the socalled ‘breach of the law’ doctrine, extends the scope of application to violations of certain other regulations. Here again, however, the 2004 Act made a small but significant change that reflects the withdrawal from ethical consideration: while the established case law under the 1909 Act required these regulations to be based on ethical values (wertbezogen), since the 2004 Act they have to be market regulations in the interest of consumers or businesses. In general, advertising regulations will fulfil both requirements, so that the rules for TV commercials cited above are indirectly encompassed or, for example, rules for free professions (like lawyers) that still require ‘decent’ behaviour.28 Thirdly, section 4a bans all ‘aggressive’ commercial advertising. And fourthly, section 7 prohibits all ‘harassing’ commercial communication, in particular if the market participant objects to them (which is assumed in the ‘cold calling’ of consumers). The purpose is to protect the private 25  The reason for the 2015 reform was an even closer implementation of the UCPD (which was already aimed at with the reform of 2008). The 2015 reform introduced a new s 4a on aggressive practices that was very much in accordance with Arts 8 and 9 of the UCPD, which made an additional prohibition in s 4 No 1 (undue influence on decision making) superfluous. 26  Although the 2015 reform of the Act Against Unfair Competition abolished its s 4 No 1, including its express prohibition on an undue influence ‘in contempt for humanity’, the material of the law clarified that cases like this could still be handled under the general clause. This is in line with the emphasis the Federal Constitutional Court put on this fundamental right in the Benetton decisions (see n 23). 27  For instance, for the argument that erotic motifs in advertising are sex discrimination and thus against Art 3 of the Constitution, see, eg Ohly and Sosnitza (n 24) Einf D, 16b. 28  One of the few court decisions involving ethical advertising during the last decade was decided on this basis of s 43 of the Federal Code for Lawyers, which regulates ‘decent’ commercial behaviour of attorneys. An attorney had ‘advertised’ his services with free gifts of tea cups showing a woman with a gun to her head and a child being spanking on its naked behind. The BGH (NJW 2015, 72) held this to be a violation of s 43 BRAO and thus also of s 4 No 11 UWG. The BVerfG (GRUR 2015, 507) was of the same opinion and dismissed the attorney’s argument that the pictures were protected under free speech considerations because they were crossed through and intended for further public discussion.

Ethics, Taste and Decency Considerations in Advertising 57 sphere through the ban of certain ways of marketing that are regarded as an intrusion of privacy.29 Apart from this, all other constellations of ‘ethics, taste and decency’ in advertising are only matters of the Act Against Unfair Competition if they show additional features that are clearly addressed by the law. One such additional feature is the violation of the consumer’s right of privacy protected through section 7 of the Act (which, however, does not deal with the content of the advert) or the impairment of the consumers’ commercial interests through aggressive misleading advertising in sections 4a, 5 and 5a of the Act. As mentioned above (under Section III.B), CSR in particular may indirectly have an effect on unfair competition law. Although the German Supreme Court decided as early as 1980 (with obvious regret) that the mere marketing in Germany of a product that had been produced abroad under appalling (but legal) working conditions could not be considered as being against the gute Sitten of the 1909 Act,30 and although the Act of 2004 is even less open to ‘moral’ issues, CSR principles can come under its scope of application. For instance, if an enterprise makes its ‘commitment’ to certain standards of business ethics public (on its website, in public statements, in marketing) and then acts contrary to those standards, unfair competition law may step in, mainly by an application of the prohibition of deceptive practices.31 This requires, however, that rather explicit claims as to ‘ethical behaviour’ be made—all other cases of ‘taste and decency’ are difficult to enforce under the 2004 Act. In its famous Benetton decisions, the Federal Constitutional Court had stated that ‘Ekelerregende, Furcht einflössende und jugendgefährdende Bilder’ may be a subject for unfair competition law, but that was before the legislature restricted the interests of the public to the f­ unctioning of the market.32

29  The Act Against Unfair Competition, s 7 does not deal with the content of the advertising but solely with the way in which the market participant is addressed with commercial communication; the decision of the Munich court of appeal (GRUR-RR 2013, 117), which considered containers with advertising on graveyards as ‘offensive’, was much criticised (see, eg Köhler and Bornkamm (n 24) § 7 Rdnr 10) and partly taken back by OLG München (WRP 2008, 380). 30  BGH 9 May 1980, GRUR 1980, 858—Asbest-Importe. 31  In 2010, LIDL (a German chain of supermarkets) had claimed on its website and in brochures to respect certain working standards in its production abroad. Since this was not true, a consumer organisation brought an action for injunctive relief on the basis of s 5 UWG (deceptive advertising). The court did not render a judgment because LIDL signed a cease-and-desist declaration, but made it clear that it would have granted the injunction. 32  Since the 2004 Act, only a handful of cases have not been clearly focused on one of the specifically regulated aspects of the law. For cases that have addressed (business) ethics, taste and decency (as a possible matter for a legal assessment) see the decisions cited in n 28. The decision of the BGH in Jugendschützende Medien bei Ebay (2007 GRUR 890), which concerned the protection of youth, focused on the interest of consumers, not the public. The protection of youth under the headline of consumer protection has been criticised by Podszun, in Harte and Henning (eds) UWG, 4th edn (2016) § 1 UWG. In April 2016, an express prohibition of discriminating advertising, in particular sex discrimination, was discussed; see Henning-Bodewig, ‘Diskriminierung, public policy issues und das UWG’ [2016] Wettbewerb in Recht und Praxis Editorial, Heft 6.

58  Frauke Henning-Bodewig IV.  ETHICS, TASTE AND DECENCY AND THE ‘FREE SPEECH DOCTRINE’

Since the constitutional aspects of advertising are discussed by Caroline HeideJørgensen elsewhere in this book,33 a few remarks on this subject will suffice. Any legal restriction of advertising has to be seen under constitutional aspects. The ‘right to advertise’ is not only rooted in the freedom of commerce, the fundamental principle of every society with a free market system, but the advertiser can often invoke the constitutional ‘right to free speech’ as well. This fundamental right can be found in most national constitutions and also in European law. Article 10 of the European Convention on Human Rights (ECHR), which came into force on 3 September 1953, protects the right to freedom of expression, subject to certain restrictions.34 As the ECHR acknowledged as early as 1985—in its Barthold decision concerning the application of the German Act Against Unfair Competition of 1909 to a press interview35—this right also encompasses commercial communication like advertising. The same is true of Article 11 of the Charter of Fundamental Rights of the EU, which likewise protects the right to freedom of expression and which, due to its reference to the ECHR, is mainly interpreted in the same way.36 National (and European) authorities therefore rightly hesitate to prohibit any commercial advertising that does not clearly violate the legally recognised equally protected position of market participants or individuals, as is the case with deceptive or denigrating commercial communication. Free speech considerations therefore not only determine whether national laws regulating advertising are applicable at all—as in the US in the famous Kaske v Nike case37 or in Europe in the Barthold decision under the European Convention on Human Rights38—but also the interpretation of terms referring to commercial ‘fairness’ and the balancing of interests that indirectly influence prohibitions like that of deceptive advertising. It is interesting to note that while free speech considerations thus can have an impact on all these issues, the actual outcome may depend on the emphasis a country puts on specific aspects of this fundamental right or principle. For instance, while the US tend to focus more on the protection against ‘sexual indecency’39 than on ‘hate speech’, the European countries rather put the emphasis on the right of privacy.40 33  See Heide-Jørgensen in chapter 2 in this book; Streinz, ‘Europäisches und deutsches Verfassungsrecht: Erfassung von geschäftlicher Werbung (‘Commercial Speech’)’ in Hilty and Henning-Bodewig (eds), Corporate Social Responsibility (Berlin, Springer, 2014) 99. 34  For a detailed discussion of the ECHR, in particular with respect to commercial advertising, see Heide-Jørgensen (n 5) 163 et seq. 35  ECHR of 25 March 1985; disucussed by Heide-Jørgensen (ibid) 217 et seq. 36  cf Heide-Jørgensen (ibid) 202 et seq. 37  Kaske v Nike Inc, California Supreme Court, 45 P 3d 243 (Cal 2002). 38  ECHR 90 (25.3.85). 39  See the FCC guidelines cited in section II.B. For different emphasis see Heide-Jørgensen (n 5). 40  Although this does not always justify a restriction of the right to advertise, as could be seen in a recent decision by the ECHR. Following some violent incidents involving prince Ernst August von Hannover which were widely discussed in the yellow press, a campaign for the cigarette brand Lucky Strike made fun of this by showing a crushed cigarette package under the headline ‘War das Ernst? War das August?’ The ECHR held this to be no violation of Art 8 of the European Convention on Human Rights because the German Federal Supreme Court had dismissed the action on the basis of a ‘fair

Ethics, Taste and Decency Considerations in Advertising 59 Without doubt, the multi-faceted aspects of the free speech doctrine can prove to be too complex for civil courts or administrative authorities to apply to commercial advertising in day-to-day matters. As discussed above, this insight has, for instance, led the German legislature to restrict the protected interest of the public against unfair commercial practices to the ‘functioning of the market’. In this respect, Germany is in line with many other countries which consider ethics, taste and decency in advertising as issues of self-regulation. The same attitude is reflected in European law, where the harmonisation of commercial practices involving taste and decency is regarded as being too diverse to regulate by Directive 2005/29/EC. It should, however, also be mentioned that the ‘leave it to self-regulation’ approach is not without problems either. Many self-regulation codes refer to ‘decency’41 and thus to a seemingly recognised concept of business behaviour. As discussed above, though, decency in advertising is not only a rather vague notion but also may have undercurrents that are not unanimously agreed upon even within the same culture. A good example of this is sex in advertising. While some may have no problem at all with erotic or sexual motifs (as long as these do not violate human dignity or are against the protection of youth), others may deplore the loss of integrity or family values, while still others might object to them from the feminist perspective.42 If such advertising is blocked too efficiently, without any procedural safeguards similar to those of the right to a fair trial, this might also have an effect on the advertiser’s right to free speech.

V.  THE ROLE OF ENFORCEMENT

This leads to the role of enforcement. It is generally agreed upon that in unfair trading matters enforcement is of no less importance than the material law. There is, however, no general agreement on how enforcement is best guaranteed; on the contrary, the approaches to enforcement can be quite varied. This often lies at the bottom of misunderstandings when national systems are compared, and indeed sometimes leads to the comparison of ‘apples with pears’ (a notion borrowed here from comparative advertising).43

balance’ between the freedom of expression and the right to privacy (ECHR 061 (2015) of 19 February 2015). In Germany, Hertz had advertised its rental cars repeatedly with ‘humorous’ pictures of prominent citizens, eg Chancellor Merkel, who wisely refrained from any legal interference. 41 

Most prominently, the ICC Code discussed in section II.B. The public uproar in the UK in 2015 about the ‘beach body’ advertisements (see n 50) seemed to have originated from feminist groups which claimed women were degraded to sex objects because of the pressure to conform to a certain standard of beauty. The same reasoning led the ASA in 2011 to ban an airbrushed picture of Julia Roberts for L’Oreal; cf Median Guardian, 27 July 2011. For different perspectives see also Millan and Elliot (n 51). 43 These issues are discussed in detail by Henning-Bodewig, ‘Enforcement im deutschen und Europäischen Wettbewerbsrecht’ [2014] Wettbewerb in Recht und Praxis 667. 42 

60  Frauke Henning-Bodewig Enforcement also influences the question of how aspects of ethics, taste and decency in advertising can best be tackled. An instructive example of this is the Benetton campaign, which used ‘shocking’ motifs that several European countries had to deal with at the turn of the century. From the company’s point of view, the aim was to make Benetton a well-known brand, either through the attention the advertisements called to themselves or though the public discussion of them.44 Since this clearly was an ‘act of competition’ (or a ‘commercial practice’), some of the motifs were attacked (and prohibited) in Germany on the basis of the German Act Against Unfair Competition of 1909 and later overturned by the Federal Constitutional Court under commercial speech considerations. In other countries they were often banned by self-regulation organisations.45 Since the actual outcome in most countries was the same—some motifs considered particularly offensive (like the one with the AIDS victim) were banished—the most interesting question seems to be why these cases went to court in Germany at all and were not, as in most other countries, handled by self-regulation. The reason for this was not, as was sometimes suspected, that German unfair competition law was so strict—it was at that time no stricter than that of most other European countries—but because of the system of enforcement. Germany neither had (or has) an ombudsman system comparable to that of the Scandinavian states, nor does it have a system of self-regulation comparable to that of the UK or the Netherlands. The Deutsche Werberat (the German self regulation organisation to control advertising) had, as its counterparts in other European countries, intervened against certain motifs of the Benetton campaign but, unlike in other countries, this did not effectively put a stop to them. An action for injunction on the basis of the Act of 1909 therefore seemed to be the next logical step. This, again, has to be seen against the background that in Germany and some other countries court decisions in unfair competition matters are of somewhat different importance than in many other countries. It is sometimes noted (with astonishment) that in Germany unfair commercial practices lead to thousands of decisions per year while in other countries there is only a few. Indeed, even in relation to the number of inhabitants, there is a remarkably high number of court decisions in this field of law in Germany. Is this overenforcement?46 Well, first of all, there is a significant difference between enforcement by private party complaints and decisions inter partes 44  It was perhaps different with the photographer Oliveiro Toscani, who solely wanted to initiate a public discussion of certain issues. The BVerfG was impressed with his intentions, although they hardly played a role for any legal consideration. For a critical view of the Constitutional Court’s reasoning in general see Ahrens in Harte-Bavedamm and Henning-Bodewig (n 24) Einl G Rdn 68 et seq. 45  See Hartwig, ‘Image Advertising Under Unfair Competition Law and the Benetton Campaign’ [2001] International Review of Intellectual Property and Competition Law 777. 46  The question of overenforcement is an interesting one. For instance, it is hardly ever discussed how it relates to matters that are fully harmonised by European law and if enforcement may be an ‘impediment’ to competitors. In any case, enforcement has to be evaluated with respect to the actual impact that an intervention of the courts or authorities (but also self-regulation) has on consumers, businesses and competition at large. This important aspect is sometimes overlooked in studies focusing on specific remedies.

Ethics, Taste and Decency Considerations in Advertising 61 (like in Germany and some other countries), enforcement through criminal authorities or an administrative body (like eg in France), or enforcement using a mixture of an ombudsman system with civil law sanctions (like in Sweden). Enforcement in Germany is almost completely civil law enforcement, and roughly 80 per cent of all court proceedings concern actions for injunctive relief, the vast majority of them being preliminary proceedings in which specialised courts render a judgment in a relatively short time. These preliminary judgments inter partes often serve as a basis for a settlement between the parties. From a functional point of view, such preliminary proceedings often correspond to the role of self-regulation in other countries, in particular the Advertising Standards Authority (ASA) in the UK and the Code Commissie in the Netherlands; they make also up for the lack of an ombudsman system like that used in the Scandinavian countries. The rather restricted effect of an enforcement system through civil law actions inter partes, which consists mainly in injunctions rendered in preliminary proceedings, is thus hardly comparable to a system like that in the UK, where not only court proceedings in general are an exception, but in particular the combat of unfair commercial practices is not seen as a matter for the courts. The reason why most countries (including Germany since the 2004 reform of the Act Against Unfair Competition) leave sensitive matters like ethics, taste and decency to self-regulation mainly stems from the insight that the constitutional arguments often involved in these cases overburden the authorities that have to deal with enumerative advertisements on a daily basis. Particularly as regards advertisements with sexual motifs, which is probably the majority of the work of all self-regulation bodies,47 it makes sense to persuade the advertisers to quickly withdraw the offending motif without any involvement of the courts and authorities, which are bound to make an assessment of all the legal aspects. In this respect, it is interesting to note that some new forms of enforcement that have emerged during the last decades may even be quicker (and perhaps more efficient) than self-regulation. For instance, in 2014, during the FIFA World Cup, another ‘shocking’ campaign (this time for Adidas) was run in Germany: popular German football players held a (real) heart of a cow in their hand to illustrate Adidas’s claim ‘all in or nothing’.48 Although many people found the pictures with the bloody mess of a cow’s heart disgusting, this was never considered to be a matter for selfcontrol, let alone the law; however, the advertisements caused such a firestorm on the internet that the campaign was withdrawn within days. The same phenomenon could be seen in other countries, eg in the USA, where Amazon advertised the television series The Man in the High Castle in subways with posters containing Nazi motifs,49 or in the UK, where an advertising campaign with the picture 47 

For Germany see ZAW, Werbung 2014, 80. ‘Lukas Podolski posiert mit Kuh-Herz’, available at www.horizont.net/marketing/nachrichten/Wirbel-um-Schock-Motive-von-Adidas-Lukas-Podolski-posiert-Mit-Kuh-Herz-120795 (last accessed on 3 February 2016). 49 www.stern.de/wirtschaft/news/the-man-in-the-high-castle-amazon-stoppt-nazi-werbung-fuerserie-657396.html (last accessed on 3 February 2016). 48 See

62  Frauke Henning-Bodewig of a ‘beach body’ bikini girl (for a weight-loss product) in underground stations caused ­public uproar.50

VI.  CONCLUDING REMARKS

Ethics, taste and decency—these notions stem from the sociological and philosophical sphere. They are difficult to transfer to legal reasoning, which usually depends on more clearly cut concepts. This explains why advertising, if regulated by national or European law, is mainly seen under more tangible concepts, like deception and defamation. If issues concerning ethics, taste and decency in advertising come up, they tend to be left to self-regulation. This does not mean that ethics, taste and decency are without importance to the legal assessment of advertising. First of all, the legislature may expressly regulate specific aspects that are based on ethical considerations, particularly public policy issues, like respect of human dignity, anti-discrimination, protection of youth, environment, etc. These express regulations, for instance in the Audiovisual Media Services Directive, have a direct impact on what is allowed or not allowed in advertising, and are often encompassed (through reference) in other laws as well. Secondly, the regulation of advertising in advertising laws, market laws, unfair competition laws, etc often deliberately refers to business ethics in a wider sense; in particular, general clauses use expressions like ‘fair’, ‘gute Sitten’, ‘good market practices’, etc. The interpretation of such notions can be influenced by guidelines like those of the ICC, which also include aspects like decency. In addition, new concepts, like ‘corporate social responsibility’, can have an impact on the interpretation of the law. Apart from this, however, there seems to be a trend to not consider ethics, taste and decency as a matter of law, and in particular not as a matter for European harmonisation, as Recital 7 of the UCPD expressly states. Most modern legislatures tend to leave the regulation of ethics, taste and decency in advertising alone if these parameters do not clearly correspond to the recognised aims of business ethics— in other words, public policy issues, as discussed in Section II.B. Not only taste and its implication of aesthetic judgments but also decency is often regarded as too controversial an issue, even within one cultural sphere, to be a matter of law.51

50  www.bbc.com/news/uk-333403401 (last accessed on 3 February 2016); see also n 42. The public pressure led to a decision of the ASA, which held that the ‘beach body’ motive did not denigrate women but that the advertiser had to withdraw the advertisements anyway due to the violation of European Health Law. In the Julia Roberts case of airbrushed photos (n 42) the negative influence on women’s self-image was deemed decisive. 51  See, eg the Bulgarian case of an advertisement for beer: discussed by Millan and Elliot, ‘Offensive Advertising, Public Policy and the Law: the Rulings on the Zagorka Case’ [2004] Journal of Consumer Policy 475, 491: ‘In such instances interpretation easily becomes dominated by subjective perceptions.’

Ethics, Taste and Decency Considerations in Advertising 63 This is perhaps a wise insight, not least under constitutional (free speech) aspects. In national law, for instance, it has led the German legislator to avoid dealing with such sensitive matters within the German Act Against Unfair ­ ­Competition of 2004. An overall evaluation is hardly feasible, however, without the inclusion and evaluation of the different approaches to enforcement. From a functional point of view, the actual effect of a civil law enforcement through inter partes claims for injunctive relief mainly rendered in preliminary proceedings may well match effective concepts of self-regulation like those in the UK or the Netherlands. In the future, the differentiation between legal proceedings and self-regulation will perhaps become less important because unethical, indecent, tasteless advertising may increasingly be stopped within a short time through firestorms on the internet.

64 

4 The Unfair Commercial Practices Directive: Full Harmonisation, Scope and Key Notions1 JULES STUYCK

I. INTRODUCTION

D

IRECTIVE 2005/29/EC CONCERNING unfair business-to-consumer commercial practices in the internal market (the Unfair Commercial Practices Directive or UCPD; the Directive)2 is now nine years in operation (it had to be implemented by the Member States by 12 June 2007). The first judgment of the Court of Justice (the Court) on the UCPD dates from April 2009, ie seven years ago. This chapter will focus on the full harmonisation character of the UCPD, its scope of application and key substantive issues, such as ‘professional diligence’ and ‘misleading practice’. I will also discuss two judgments of the CJEU concerning two items on the Black List. Other issues, such as the notion of the ‘average consumer’, the relationship of the UCPD with contract law, the regulation of commercial practices and freedom of expression, and enforcement, will not be discussed.3 For a good understanding, I will first briefly discuss the UCPD’s background and context, its architecture and its objectives. Then I will discuss the issues mentioned above. Finally, I will draw some conclusions on the role of the Court of Justice in this area and on the capacity of the UCPD to achieve its goals.

1  Parts of this article have been borrowed from J Stuyck, ‘The Court of Justice and the Unfair Commercial Practices Directive’ [2015] Common Market Law Review 721. 2 [2005] OJ L245/22. For first comments see J Stuyck, E Terryn and T Van Dyck, ‘Confidence through Fairness? The New Directive on Business-to-Consumers Commercial Practices in the Internal Market’ (2006) 43 Common Market Law Review 107; for a comprehensive commentary and a comparative study of the implementation of the Directive in the UK, Germany, the Netherlands, Belgium and France see B Keirsbilck, The New European Law of Unfair Commercial Practices and Competition Law (Oxford, Hart Publishing, 2011); for a recent commentary see H-W Micklitz, ‘Unfair Commercial Practices and Misleading Advertising’ in Reich, Micklitz, Rott and Toner, European Consumer Law, 2nd edn (Antwerp, Intersentia, 2014) ch 2. 3  See for a more complete account of the case law of the CJEU on the UCPD see Stuyck (n 1).

66  Jules Stuyck II.  BACKGROUND AND OBJECTIVES OF THE DIRECTIVE

Before the adoption of the UCPD in 2005, Union law in the field of commercial practices was characterised by the existence of minimum harmonisation of misleading advertising and full harmonisation of comparative advertising, to protect both consumers and businesses.4 In 2005, the UCPD was adopted as a full harmonisation directive. It was the product of a new approach of the Commission, as explained in its Green Paper of 2006 on the revision of the consumer acquis.5 The approach has often been criticised in the literature, for a number of reasons, including a decrease in the level of consumer protection.6 A significant number of judgments and orders of the Court of Justice relate to national provisions on sales promotions (such as announcement of price reductions, premium offers and resale at a loss). Before the adoption of the UCPD, sales promotions had been made the object of another proposal—for a regulation concerning sales promotions in the Internal Market.7 In that proposal, sales promotions such as offers of premiums and sale at a loss were specifically regulated, but not prohibited. The proposal was eventually withdrawn in 2006, ie after the adoption of the UCPD. This apparently led some Member States (such as Belgium and France), at the time when they had to vote on the UCPD, to believe that sales promotions were not covered by it. As will be seen, the Court rejected this as wishful thinking that was not based on any solid legal argument. The Commission has since launched a review process of the Directive. While it has decided provisionally not to amend the UCPD, two other issues have been tabled: the first is a proposal to amend the Misleading and Comparative Advertising Directive (Directive 2006/114) (MCAD); the second, a Communication on Unfair Trading Practices in the Supply Chain. Recital 8 of the UCPD states that the Directive: directly protects consumer economic interests from unfair business-to-consumer commercial practices. Thereby, it also indirectly protects legitimate businesses from their competitors who do not play by the rules in this Directive and thus guarantees fair competition in fields co-ordinated by it. It is understood that there are other commercial practices which, although not harming consumers, may hurt competitors and business customers. The Commission should carefully examine the need for Community action in the field of

4 See now Directive 2006/114 concerning misleading and comparative advertising (2006) OJ L376/21. The full harmonisation character of the provisions on comparative advertising has been confirmed by the Court of Justice in Case C-44/01 Pippig Augenpoptik EU:C:2003:205. 5  ‘Green Paper on the Review of the Consumer Acquis’, COM (2006) 744 final, 10. 6  With regard to consumer contract law, see in particular Smits, ‘Full Harmonisation of Consumer Law? A Critique of the Draft Directive on Consumer Rights’ (2010) 18 European Review of Private Law 5. 7 Proposal for a Regulation concerning sales promotions in the Internal Market [2002] OJ C75 E, 11.

The Unfair Commercial Practices Directive 67 unfair competition beyond the remit of this Directive and, if necessary, make a legislative proposal to cover these other aspects of unfair competition.

In 2012, the Commission published a communication on ‘Protecting businesses against misleading marketing practices and ensuring effective enforcement’,8 in which it proposed specific changes to the Misleading and Comparative Advertising Directive (2006/114) with a view to eliminate harmful misleading practices in the business-to-business (B2B) sector, such as the schemes of misleading directory companies. The Commission announced that for this purpose it will present a targeted legislative proposal (with a blacklist as in the UCPD) to amend the MCAD. In a report adopted on 22 October 2013, the European Parliament adopted a resolution on this communication.9 It welcomed the initiative, and specifically supported the Commission’s intention to investigate the possibility of introducing, on the basis of validated criteria, an EU-wide blacklist of misleading marketing practices. The Parliament also recommended that such a blacklist should be coherent with that which already exists under the UCPD, should be exhaustive and should include clear definitions of misleading marketing practices.10 In July 2014, the Commission published another communication, ‘Unfair Trading Practices in the Business-to-Business Food Supply Chain’11 (UTPs), which essentially deals with unfair contract terms in supply chain contracts between businesses. Apart from the fact that the Commission has now clearly abandoned the idea of taking any legislative action in the field (but instead wants to stimulate a combination of voluntary and regulatory frameworks at the national level),12 it should also be noted that UTPs are quite different from the commercial practices in the UCPD and the MCAD. Instead, they relate to unfair contract terms, similar to the subject matter of the Unfair Contract Terms Directive,13 which applies only to business-to-consumer (B2C) relations. The UCPD has a dual purpose: to contribute to the proper functioning of the internal market and to achieve a high level of consumer protection by approximating the laws of the Member States on unfair commercial practices harming consumers’ economic interests (Article 1). It is therefore logical that Article 3(3) states that the Directive is without prejudice to Union or national rules relating to the health and safety aspects of products. According to recital 6, the UCPD neither covers nor affects national laws on unfair commercial practices which harm only competitors’ economic interests or

8 

COM (2012) 702 final.

9 2013/2122(INI).

10 

See point 7 of the Resolution. COM (2014) 472 final. 12  ‘Green Paper on Unfair Trading Practices in the Business-to-Business Food and Non-food Supply Chain in Europe’, COM (2013) 37, which preceded the Communication, did not rule out legislative action at the EU level. Legitimacy and EU competence for such an action are not obvious: see J Stuyck, ‘Consumer Protection for SMEs?’ (2013) 2(3) Journal of European Consumer and Market Law 117. 13  Directive 93/13 on unfair contract terms in consumer contracts [1993] OJ L95/29. 11 

68  Jules Stuyck which relate to transactions between traders. Recital 7 stresses that the Directive addresses commercial practices directly related to influencing consumer’s transactional decisions. Member States should accordingly be able to continue to ban commercial practices in their territory, in conformity with Union law, for reasons of taste and decency. Finally, according to recital 8, the UCPD indirectly protects legitimate businesses from their competitors who do not play by the rules. Recital 6 has been referred to by the Court in several judgments, discussed below with regard to national laws, which have a dual purpose: protection of consumers and of competitors. Notwithstanding the limitation of its aim to provide protection only to consumers, the UCPD contains a provision that is a typical measure to protect competitors. Article 6(2)(a) qualifies as misleading B2C practice (where it causes the consumer to take a transactional decision that he would not have otherwise taken) ‘any marketing of a product, including comparative advertising, which creates confusion with any products, trade marks, trade names or other distinguishing marks of a competitor’. Recently, in UPC Magyaroszag,14 the Court of Justice decided, against the opinion of AG Wahl,15 that the UCPD not only aims at the protection of the collective interests of consumers, but also aims at the protection of individual interests, and hence applies to commercial practices that affect one consumer only.

III.  THE DIRECTIVE’S ARCHITECTURE: A THREE TIER SYSTEM

The Directive contains a three-tier system for the appraisal of the unfairness of a commercial practice. At the first, most general, level, a commercial practice is to be considered unfair where it is (i) contrary to the requirements of professional diligence and (ii) likely to materially distort the economic behaviour of the average (targeted) consumer, meaning that the consumer is induced to take a transactional decision that he would not have otherwise taken (Article 5(2): grand general clause). At the second level, the Directive defines misleading (respectively aggressive) practices, in Articles 6–7 (respectively 8–9), by requiring, again, that the practice is likely to cause the consumer to take a transactional decision that he would not have otherwise taken (small general clauses). Finally, at the third level, Annex I contains an exhaustive list of 31 commercial practices (23 misleading practices and eight aggressive practices) that shall be regarded as unfair in all circumstances (the Black List).

14  15 

Judgment in Case C-388/13 UPC Magyaroszag EU:C:2014:225. Opinion in Case C-388/13 UPC Magyaroszag EU:C:2014:2323.

The Unfair Commercial Practices Directive 69 IV. SCOPE

The Directive is limited to unfair B2C commercial practices, but extends to practices before, during and after a commercial transaction concerning a product (Article 3(1)).16 ‘Commercial practice’ is a broad concept, 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’ (Article 1(2)). Pursuant to Article 2(a), ‘consumer’ means ‘any natural person who, in commercial practices covered by this Directive, is acting for purposes which are outside his trade, business, craft or profession’; ‘trader’ is defined in Article 2(b) as ‘any natural or legal person who, in commercial practices covered by the Directive, is acting for purposes relating to his trade, business, craft or profession and anyone acting in the name of or on behalf of a trader’.

A.  Commercial Practices In its first judgment on the UCPD, in VTB-VAB,17 the Court stressed that Article 2(d) of the Directive gives a particularly wide definition to the concept of commercial practices, ie ‘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’. This concept covers not only advertising, but also sales methods and methods of sales promotions, and more generally the way in which businesses approach consumers (see also Section IV.B below). The Court confirmed this broad definition in several judgments.18 Two decisions of the Court of Justice show the limits to the very broad scope of the harmonised field, ie all B2B ‘commercial practices’. The first is the judgment in RLvS,19 the second, the order in Pelckmans Turnhout.20 Against the opinion of AG Wathelet21 and in a lengthy but not totally convincing motivation, the Court ruled that Directive 2005/29 may not be relied upon to set aside the application of a national provision under which newspaper publishers are required to identify specifically, in this case through the use of the term ‘advertisement’ (‘Anzeige’), any publication in their periodicals for which

16  An example of an unfair commercial practice occurring after the conclusion of a contract is given in point 27 of the Annex: requiring a consumer who wishes to claim on an insurance policy to produce documents which could not reasonably be considered relevant in order to dissuade the consumer from exercising his contractual rights. 17  Judgment in Joined Cases C-261/07 and C-299/07 VTB-VAB EU:C:2009:244. 18  See in particular the Grand Chamber Judgment in Case C-540/08 Mediaprint, EU:C/2010:660. 19  Judgment in Case C-391/12 RLvS EU:C:2013:669. 20  Order in Case C-559/11 Pelckmans Turnhout EU:C:2012:615. 21  Opinion in Case C-391/12 RLvS EU:C: 2013:468.

70  Jules Stuyck they receive remuneration, unless it is already evident from the arrangement and layout of the publication that it is an advertisement. The Court acknowledged that the German law has, amonst other things, as its objective the protection of consumers against being misled, but came to the conclusion that it does not come within the scope of the UCPD by considering that the conduct covered by that national provision is not a commercial practice. In view of Mediaprint (which is a grand chamber judgment) and the opinion of the AG in RLvS, the significance of the judgment in the latter case should certainly be confined to the specific circumstances of the case.22 The second case, the order in Pelckmans Turnhout, is more obvious. A Belgian court referred a question on the application of a Belgian law which, save for certain exceptions set out in that law, requires a trader to choose a weekly closing day for the shop. The Court ruled that the UCPD does not apply to such a law that does not pursue objectives related to consumer protection.23

B.  B2C Commercial Practices As to the limitation to B2C commercial practices, it should be stressed that national rules on commercial practices, in particular those relating to methods of sales promotions, such as clearance sales, premium offers, combined offers, resale at a loss, prize competitions and announcements of price reductions, are often presented as being aimed at consumer protection, while in reality they primarily serve other interests, in particular the protection of small shopkeepers. VTB-VAB24 is a striking example. Belgium had a general prohibition of combined offers, with some exceptions.25 According to the Belgian law at the time, a combined offer is an offer made to consumers whereby the acquisition of a good, a service or another advantage (such as a coupon) is made dependent on the acquisition of another good or service (even if the two items that are offered jointly can also be purchased separately, but typically at a higher price). The law contained a limited number of exceptions. In its judgment, the Court confirmed the full harmonisation character of the UCPD and came to the conclusion that the Directive

22 

To which the Court expressly refers in paras 39 and 47 of its judgment. The very same national provision gave rise to another preliminary reference concerning the same Belgian law, this time by the Belgian Constitutional Court, Judgment in Case C-483/12 Pelckmans Turnhout EU:C:2014:304. The questions related to the Charter of Fundamental Rights and the principle of equality. The Court found nothing in the order for reference demonstrating that the legal situation at issue in the main proceedings came within the scope of EU law and decided that it had no jurisdiction. 24  See n 17. 25  The prohibition primarily served interests other than those of consumers (in particular, small shopkeepers), but it has always been presented as aiming at consumer protection as well: J Stuyck, Handelspraktijken, 3rd edn (Mechelen, Kluwer, 2013); cf. There is a discussion on the former Dutch prohibition concerning premium offers in Opinion of AG VerLoren van Themaat in Case C-286/81, Oosthoek EU:C:1982:302. 23 

The Unfair Commercial Practices Directive 71 precludes national legislation, which, with certain exceptions, and without taking account of the specific circumstances, imposes a general prohibition of combined offers made by a business to a consumer. Combined offers are a commercial practice, because they form part of an operator’s commercial strategy and are directly connected with the promotion and sale of its products or services.26 The Court confirmed the application of the Directive to sales promotions in its judgments in Telekomunikacja Polska,27 Plus,28 Mediaprint29 and Köck,30 and in its orders in Wamo,31 Inno32 and Euronics Belgium.33 In its judgments and orders mentioned above since Plus, the ECJ made it clear that legislation that has a mixed purpose, ie the protection of consumers and the protection of businesses against unfair commercial practices or consumer protection and any other objective (such as the plurality of the press), also falls within the field harmonised by the Directive. Plus related to a provision of the German Law on Unfair Competition (UWG) prohibiting the combination of a prize competition or lottery with the purchase of goods or use of services. The provision is similar to the one which the Court found to go beyond the Directive in VTB-VAB. However, in Plus the CJEU also had to cope with the argument that such a provision has as its principal aim the protection not of consumers, but, rather, of competitors against unfair commercial practices employed by certain operators, with the result that such provision does not come within the scope of the UCPD. The Court referred to recital 6 in the preamble to the Directive, to the effect that only national legislation relating to unfair commercial practices which harm ‘only’ competitors’ economic interests or which relate to a transaction between traders is thus excluded from its scope. In Mediaprint,34 again about the prohibition of combined offers—this time in Austria—the Court’s Grand Chamber confirmed this point. The orders in Wamo, Inno (both on a Belgian prohibition on the announcement of price reductions during the periods preceding the seasonal sales periods) and Euronics Belgium and the judgment in Köck relate to national provisions prohibiting in all circumstances (ie without the necessity of a case-by-case fairness appraisal) certain forms of sales promotions and arrive at the same conclusion, ie that the full harmonisation character of the Directive precludes Member States from maintaining the provisions at issue, because they aim among other things at the protection of consumers.

26 

See para 37 of the judgment. Judgment in Case C-522/08 Telecomunikacja Polska EU:C:2010:135. Judgment in Case C- 304/08 Plus Warenhandelsgesellschaft EU:C:2010:12 29  Judgment in Case C-540/08 Mediaprint EU:C:2010:660. 30  Judgment in Case C-206/11 Köck EU:C:2013:14. 31  Order in Case C-288/10 Wamo EU:C:2011:443. 32  Order in Case C-126/11 Inno EU:C:2011:851. 33  Order in Case C-343/12 Euronics Belgium EU:C:2013:154. 34  See n 18. 27  28 

72  Jules Stuyck In Citroën Belux,35 the Court found that a per se prohibition of combined offers of which at least one component is a financial service is compliant with Article 3(9) (allowing Member States, with regard to financial services and immovable property, to impose requirements that are more restrictive or prescriptive than this Directive).

C.  Protection of Economic Interests of Consumers Pursuant to its Article 1, the dual purpose of the UCPD is to contribute to the proper functioning of the internal market and to achieve a high level of consumer protection by approximating the laws, regulations and administrative provisions of the Member States on unfair commercial practices harming consumers’ economic interests. Hence, as explained in recital 7, the Directive addresses commercial practices directly related to influencing consumers’ transactional decisions in relation to products. It does not address commercial practices carried out primarily for other purposes, including for example commercial communication aimed at investors, such as annual reports and corporate promotional literature. It does not address legal requirements related to taste and decency which vary widely among the Member States. Commercial practices such as, for example, commercial solicitation in the streets, may be undesirable in Member States for cultural reasons. Member States should accordingly be able to continue to ban commercial practices in their territory, in conformity with Community law, for reasons of taste and decency even where such practices do not limit consumers’ freedom of choice. Full account should be taken of the context of the individual case concerned in applying this Directive, in particular the general clauses thereof.

As a result, national legislation that regulates or bans commercial practices or advertising in order to protect certain values (such as non-discrimination or public morality) or other public interests (safety, health, environment) does not come within the harmonised field. Article 3(3) can also be mentioned in this respect, pursuant to which the Directive is ‘without prejudice to Community or national rules relating to the health and safety aspects of products’. The reference to ‘taste and decency’ in the recital is more puzzling, and will be discussed below in the section on the grand general clause.

D.  Personal Scope of Application Pursuant to Article 3(1), the Directive applies to ‘unfair business-to-consumer commercial practices’. The Directive does not define ‘business’, but Article 2(b) defines ‘trader’ as ‘any natural or legal person who, in commercial practices 35 

Judgment in Case C-256/12 Citroën Belux EU:C:2013:498.

The Unfair Commercial Practices Directive 73 c­ overed by this Directive, is acting for purposes relating to his trade, business, craft or profession and anyone acting in the name of or on behalf of a trader’. In BKK Mobil, the ECJ rules that the personal scope of application of the Directive is determined by the latter notion.36 BKK is a health insurance fund established as a public law body which is part of the German statutory system. An association combating unfair commercial practices sought an order in court requiring BKK to desist from circulating a promotional message sent to members and prospective members, considering that it was misleading because BKK failed to mention that any insured person has a specific statutory right of cancellation under German law. The German Supreme Court (the BGH) submitted the following question to the CJEU: can the action of a statutory health insurance fund in making (misleading) statements to its members concerning the disadvantages that those members would suffer were they to move to another statutory health insurance fund also constitute an act by a trader in the form of a B2C commercial practice? The Court answered in the affirmative: a public law body charged with a task of public interest, such as the management of a statutory health insurance fund, falls within the persons covered by the Directive. ‘Trader’ as defined by the Directive refers to any natural or legal person who carries out a gainful activity and does not exclude from its scope either bodies pursuing a task of public interest or those which are governed by public law.37 Article 2(d) of the Directive gives a very broad definition of commercial practice and defines the trader in relation to the related but diametrically opposed concept of ‘consumer’. The trader therefore seems to be any person who has a consumer as a counterpart, provided that he carries out a gainful activity (pure C2C relations therefore seem to be excluded). In the Court’s view, the prohibition of misleading practices in the UCPD applies where misleading information is circulated by such a person preventing the consumer from making an informed choice and leading him to take a decision he would not have taken in the absence of such information. In those circumstances, whether the body at issue or the specific task it pursues is public or private is irrelevant. The judgment is in line with the generally accepted view that the notion of business should be a wide one, in order to guarantee consumers effective protection not only in the traditional commercial sectors, but also against the professions, public enterprises, cultural organisations and all entities that provide goods or services on the market. By way of comparison, according to the CJEU, for the application of the EU competition rules (Articles 101 and 102 TFEU), an undertaking is ‘every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed’,38 ie an activity consisting in offering goods or services on a given market.39 In the field of social security, the Court further held that 36 

Judgment in Case C-59/12 BKK Mobil EU:C:2013:634. Para 32 of the judgment. 38  Judgment in Case C-41/90 Höfner and Elser EU:C:1991:161, para 21. 39  Judgment in Case C-35/96 Commission v Italy EU:C:1998:330, para 36. 37 

74  Jules Stuyck certain bodies entrusted with the management of statutory health insurance and old-age insurance schemes pursue an exclusively social objective and do not engage in economic activity. That is the case with German sickness funds when they exercise their statutory task, hence the Court in AOK Bundesverband.40 It follows from the case law on the competition rules that the exercise of an economic activity is linked to the existence of competition on the market with ‘pure’ commercial undertakings. As AOK Bundesverband41 shows, German sickness funds compete with each other, but that in itself is not sufficient to qualify them as undertakings. Likewise, in BKK Mobil, the sickness fund was (only) competing with other sickness funds by trying to convince persons to adhere to it (with misleading statements). In his opinion, AG Bot asked the Court to rule, as it eventually did, that a trader within the meaning of the UCPD encompasses a public body entrusted with a task of general public importance, such as a sickness insurance fund, when it circulates commercial advertising,42 but the AG insisted on the functional approach in AOK Bundesverband, ie that sickness funds are capable of engaging in operations which have a purpose that is not social but economic in nature. In BKK Mobil, the Court does not make a single reference to its case law on the competition rules, let alone that it considers a unitary interpretation of ‘trader’ in the UCPD and ‘undertaking’ in Articles 101 and 102 TFEU. The notion of trader, as interpreted by the Court, is obviously broader than that of ‘undertaking’, which determines the application of the competition rules. However, the Court refers to the fact that the practice relates to a ‘gainful activity’. This seems to exclude the application of the UCPD to non-professional services that are provided for free (eg C2C). In BKK Mobil, the Court seems rightly concerned about the ‘commercial’ attitude of the sickness fund in its competition with other sickness funds, but the fact remains that, while recruiting members, the fund is primarily acting in its statutory social capacity, not as an operator that provides ancillary services on the market.

V.  FULL HARMONISATION

The full harmonisation character of the Directive results from Article 4 (free movement clause), Article 5(5) (reference to the exhaustive list of the Annex) and Article 3(9) (minimum harmonisation for financial services and immovable property as an exception). Article 5(5) refers to Annex I, which contains the list of those commercial practices that shall be regarded as unfair in all circumstances.

40  Judgment in Case C-355/01 AOK Bundesverband EU:C:2004:150, para 51; see also the older j­udgments in Joined Cases C-159/91 and C-160/91 Poucet and Pistre EU:C:1993:63, paras 15 and 18; Judgment in Joined Cases C-264/01, C-306/01 and C-354/01. 41  See n 40. 42 EU:C:2013:450.

The Unfair Commercial Practices Directive 75 The same single list shall apply in all Member States and may only be modified by revision of the Directive. Finally, and a contrario, Article 3(9) provides that Member States may impose requirements for ‘financial services’ and immovable property that are more restrictive or prescriptive than the Directive in the field which it approximates. On the basis of these provisions of the Directive, the Court found in its very first preliminary ruling on the UCPD in April 2009 in VTB-VAB43 that the UCPD is a full (exhaustive) harmonisation directive. This means that a national law on commercial practices that is stricter than the UCPD cannot be justified on the basis of mandatory requirements such a those to provide for a higher level of consumer protection. Hence Member States cannot maintain or introduce a per se prohibition of a commercial practice that is not on the Directive’s Black List. Practices that are not on that list can only be prohibited after a case-by-case assessment of their fairness (under either the grand general clause or one of the two small general clauses). The Court confirmed this principle in later judgments, ie Telecomunikacja Polska,44 Plus,45 the (so far only) grand chamber judgment on the UCPD in Mediaprint46 and Köck.47 In Mediaprint, Plus and later cases, the Court also had to deal with the defence of certain Member States that the stricter national rules serve another purpose than the protection of the economic interests of consumers. The full harmonisation character of the Directive has sometimes been criticised because it allegedly forces Member States to abandon measures of consumer protection.48 It is submitted that there is no evidence for this and that the measures Member States so far had to abandon can hardly be seen as genuine measures of consumer protection. All the national prohibitions that were found to go beyond what the Directive allows concerned regulations on sales promotions that do not serve the consumer interest or at least have not (primarily) been designed to protect consumers but, rather, small shopkeepers or other business interests. Be that as it may be, concerning the full harmonisation character of the Directive, the case law faithfully follows the text and the rationale of the Directive.49

VI.  KEY CONCEPTS

Key in the Directive are the scope of the grand general clause and the scope of the small general clauses, in particular the one on misleading practices. Both 43 

Judgment in Joined Cases C-277/07 and C-299/07 VTB-VAB EU:C:2009:244. Judgment in Case C-522/08 Telecomunikacja Polska EU:C:2010:135. 45  Judgment in Case C-304/08 Plus Warenhandelsgesellschaft EU:C:2010:12. 46  Judgment in Case C-540/08 Mediaprint EU:C:2010:660. 47  Judgment in Case C-206/11 Köck EU:C:2013:14. 48  See G Howells, ‘Unfair Commercial Practices Directive—A Missed Opportunity?’ in Weatherill and Bernitz (eds), The Regulation of Unfair Commercial Practices under EC Directive 2005/29 (Oxford, Hart Publishing, 2007) 111. 49  It should also be mentioned that in this (early) case law the Court was very well advised by the well documented and sharp opinions of AG V Trstenjak. 44 

76  Jules Stuyck the grand and the small general clauses contain a rule of conduct (professional diligence, respectively misleading the consumer or behaving aggressively) and a requirement of an impact on the consumer’s decision (material distortion of the economic behaviour of consumers and causing the consumer to take a transactional decision that he would not have otherwise taken). There is also the question of the relationship between the grand general clause and the small general clauses.

A.  The Grand General Clause Under the ‘grand general clause’ of Article 5 UCPD, a B2C commercial practice is unfair where it fulfils two criteria: (i) it is contrary to the requirements of professional diligence and (ii) 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 at a particular group of consumers. Professional diligence means: the standard of special skill and care which a trader may reasonably be expected to exercise towards consumers, commensurate with honest market practice and/or the general principle of good faith in the trader’s field of activity (Article 2(h)). To materially distort the economic behaviour of consumers means: using a commercial practice to appreciably impair the consumer’s ability to make an informed decision, thereby causing the consumer to take a transactional decision that he would not have otherwise taken (Article 2(e)). The Court of Justice has not yet received questions on the grand general clause, but it has interpreted the concept of ‘causing the consumer to take a transactional decision that he would not have otherwise taken’. The Court ruled in Trento Sviluppo,50 concerning the same concept in the prohibition of misleading practices (Article 6), that it covers not only the decision whether or not to purchase a product, but also the decision directly related to that decision, in particular the decision to enter the shop. ‘Taste and decency’ is a special issue. On this front, recital 7 has already been cited. The following three sentences therein are puzzling: It [the Directive] does not address legal requirements related to taste and decency which vary widely among the Member States. Commercial practices such as, for example, commercial solicitation in the streets, may be undesirable in Member States for cultural reasons. Member States should accordingly be able to continue to ban commercial practices in their territory, in conformity with Community law, for reasons of taste and decency even where such practices do not limit consumers’ freedom of choice.

First, the second sentence seems to suggest that cultural reasons (for banning solicitation in the streets) are part of ‘taste and decency’, while it may be linked 50 

Judgment in Case C-281/12 Trento Sviluppo EU:C:293:859.

The Unfair Commercial Practices Directive 77 to the protection of the personal sphere. Secondly, the third sentence seems to contradict the first sentence. If ‘taste and decency’ is outside the scope of the Directive, it does not seem necessary to say that Member States may continue to ban commercial practices for reasons of taste and decency ‘even where such practices do not limit consumers’ freedom of choice’. One would think that this power of the Member States would exist even where the practice does limit the consumers’ freedom of choice. But more fundamental questions are what ‘taste and decency’ means and how it can be distinguished from the notion of ‘professional diligence’ in the grand general clause. In RLvS,51 the Court of Justice has confirmed that the Directive does not affect Member States’ possibility to intervene in commercial speech for strictly other reasons than the protection of the economic interests of consumers. It remains to be seen how the Court, if requested, will draw the line between the protection of the economic interests of consumers, which is one of the Directive’s objectives, and national prohibitions or decisions in the name of ‘taste and decency’, which are beyond its scope. The concept of ‘taste and decency’ is not defined by the Directive and is only mentioned in a recital, but the existence of a link with honest market practices (which is an element of the general clause) cannot be denied. In most Member States, these questions are dealt with by self-regulatory bodies, but in others, questions of shocking advertisements (such as those of Benneton) have also been dealt by the courts, eg in the Nordic countries and Germany.52 When such advertisements are likely to influence consumers’ transactional decisions they might come under the scope of the UCPD and then questions could be referred to the Court of Justice as to whether there is a violation of the requirements of professional diligence. It would be an interesting test to see to what extent the Court would be willing to go into the meaning and the borders of this concept.

B.  The Notion of Misleading Practice The first judgment to be mentioned on the notion of ‘misleading’ practice in Article 6(1)) of the Directive is Trento Sviluppo.53 This judgment shows the language inconsistencies of the Directive. The referring Italian court had doubts regarding the scope of the concept of ‘misleading commercial practice’ as referred to in Article 6(1) of the UCPD. In the English version, Article 6(1) states that a commercial practice shall be regarded as misleading if it contains false information and is therefore untruthful or in any way … deceives the average consumer, even if the information is factually correct … and in either case 51 

Judgment in RLvS (n 19). H-W Micklitz, J Stuyck and E Terryn, Casebook Consumer Law (Oxford, Hart Publishing, 2010) ch 2. 53  Judgment in Trento Sviluppo (n 50). 52  See

78  Jules Stuyck causes or is likely to cause him to take a transactional decision that he would not have otherwise taken.

According to the referring court, the interpretation problem arises from the differences between the language versions of that provision. The Italian version (which uses the expression ‘e in ogni caso’) and the German (which uses the expression ‘und … in jedem Fall’) seem to refer to a general provision under which the mere fact that a commercial practice is likely to influence the transactional decision of the consumer is sufficient for that commercial practice to be classified as misleading. By contrast, the English version (which uses the expression ‘and in either case’) and the French (‘et dans un cas comme dans l’autre’) suggest that a misleading commercial practice can exist only if both the condition that the commercial practice be capable of influencing the transactional decision of the consumer and one of the alternative conditions laid down in the first part of the introductory section of that provision are satisfied. In line with standing case law, the Court considers that, in the event of divergence between the language versions, the provision in question must be interpreted by reference to the purpose and general scheme of the rules of which it forms a part. Since the misleading commercial practices referred to in Article 6 of Directive 2005/29 constitute a specific category of unfair commercial practices, referred to in Article 5(2) of that directive, they must necessarily combine all the constituent elements of such unfairness, including, in consequence, the element relating to the ability of the practice to materially distort the economic behaviour of the consumer by causing him to take a transactional decision that he would not have otherwise taken. Interestingly, the Court adds that that concept therefore covers not only the decision whether or not to purchase a product, but also the decisions directly related to that decision, in particular the decision to enter the shop. A more fundamental judgment on the notion of misleading practice is CHS Tour Services.54 CHS and Team4 Travel are two competing Austrian travel agencies. In its brochure, Team4 Travel had described certain accommodation establishments as ‘exclusive’ on specified dates. Team4 Travel had concluded contracts for bed quotas to that effect and checked that no other organised tour group could be put up in the hotels concerned during the periods in question. The contracts with the hotels confirmed the exclusivity. It was subsequently found that CHS also had bed quotas in the same hotels and for the same dates as Team4 Travel. The hotels in question were therefore in breach of their contractual obligations to Team4 Travel. However, CHS held that the exclusivity statement contained in those documents infringed the prohibition of unfair commercial practices because it was incorrect. It brought an action for a cease and desist order in an Austrian court. Team4 Travel argued that it acted with the professional diligence required when drawing up its brochures and that, until the date the brochures were sent out, it had not been aware of the contracts concluded between CHS and the hotels 54 

Judgment in Case C-435/11 CHS Tour Services EU:C:2013:634.

The Unfair Commercial Practices Directive 79 in question, so that it was not guilty of any unfair commercial practice. The case went up to the Supreme Court, the Oberster Gerichtshof (OG). The OG considered that, according to logic, where a claim is made that a trader misleads the public within the meaning of Article 6 UCPD, it is permitted to establish, case by case, that he has not failed in his duty of diligence (of Article 5). Since the OG was uncertain, however, it referred the question to the CJEU. The Court of Justice did not follow the OG’s logic and ruled that if a commercial practice satisfies all the criteria set out in Article 6(1) for being categorised as a misleading practice in relation to the consumer, it is not necessary to determine whether such a practice is also contrary to the requirements of professional diligence as referred to in Article 5(2)(a) in order for it legitimately to be regarded as unfair and, therefore, prohibited in accordance with Article 5(1). In Article 6(1) there is no mention of the condition, set out in Article 5(2)(a) of the Directive and relating to the practice being contrary to the requirements of professional diligence, which relates to the sphere of the trader.55 This interpretation is the only one capable of preserving the effectiveness of the specific rules laid down in Articles 6–9 of the Unfair Commercial Practices Directive and providing a high common level of consumer protection.56 The ruling in CHS Tour Services is severe. No doubt the EU legislature wished to ensure a high level of consumer protection. One will also easily agree with the Court that the notion of misleading practice does not have to be redefined via the detour of the ‘requirements of professional diligence’, since, in the logic of the Directive, a misleading practice is per definition an unfair practice. However, had the Court taken into account the historic and more general context of the Directive (including the law of unfair competition), it could have come to the conclusion that the author of an advertising campaign that is erroneous beyond his control is not the author of the deception. It could also have come to that conclusion if it had taken into account the other objective of the Directive, ie the completion of the internal market and the ensuing minimal legal certainty for businesses. The ruling is particularly harsh in the situation which gave rise to the preliminary reference where the action was brought by the competitor who in fact caused the information to be erroneous. One may assume that in such a situation the national court would eventually reject the action for a cease and desist order on the basis of abuse of right or a related doctrine.57 But taken as such, the Court’s ruling means that a business can be responsible for a message it has launched in good faith and even where it has taken all possible measures in order to ensure its correctness, merely because the message no longer corresponds to reality as a

55 

Para 46, with reference to Case C-453/10 Pereničová and Perenič EU:C:2012:144, paras 40 and 41 Para 47, with reference to Mediaprint (n 10), para 27. 57  See P Nihoul and C Delforge, ‘Arrêt CHS Tour: pour être interdites les pratiques commerciales induisant en erreur les consommateurs doivent-elles être contraires à la diligence professionnelle?’ [2014] European Journal of Consumer Law 182, referring to D Trantafyllou, ‘L’interdiction des abus de droit en tant que principe général du droit communautaire’ [2002] Cahiers de Droit Europeen 611. 56 

80  Jules Stuyck result of the conduct of a third party (in casu a competitor) for whom it cannot be accountable. In the law of unfair competition, that, together with the legislation on commercial practices in the Scandinavian countries, is at the heart of the UCPD. It has always been held that a business is responsible for deception of the public as a result of announcements that it is aware are incorrect (in which case it is in bad faith) or which are incorrect because it has been negligent.58 It is striking that the Court does not refer in its judgment to the notion of good faith in the definition of unfair commercial practices. The ECJ has chosen to depart from the traditional approach to misleading practices, which requires a fault or some form of negligence. The Court came to a kind of objective liability on the basis of a literal interpretation of the Directive. The outcome is consumer friendly but not equitable. Admittedly the finding that a trader has infringed the rules implementing the UCPD does not necessarily mean that he will be liable to damages (or worse if he has committed a criminal offence). The UCPD does not influence the tort law or criminal law of the Member States. Nevertheless, a trader may be found ‘guilty’ of an unfair practice, which he has to stop (even if he has acted in good faith) and possibly to pay the costs of the procedure. In some Member States the finding may have other civil law consequences, eg the validity of a contract entered into by a consumer on the basis of the ‘misleading’ practice59 or the right to claim damages under tort law. VII.  SOME QUESTIONS RELATING TO THE BLACK LIST

A reading of the Black List in the Annex of the Directive reveals that it contains a number of rather open norms, where, contrary to what the Directive suggests (Article 5(5): ‘the list of those commercial practices which shall be regarded as unfair in all circumstances’), the judge has indeed to make an appraisal taking into account the circumstances of the case. The two judgments the Court of Justice has so far passed on the interpretation of two items of the Black List, one aggressive practice and one misleading practice, illustrate this point. The first one, Purely Creative,60 concerns point 31 of the Black List qualifying as an aggressive practice in all circumstances: Creating the false impression that the consumer has already won, will win, or will on doing a particular act win, a prize or other equivalent benefit, when in fact either, there 58  On the notion of negligence (fault) in the law of unfair competition in the original six Member States see E Ulmer and F-K Beier, Das Recht des unlauteren Wettbewerbs in den MIitgliedstaaten der Europäischen Wirtschaftsgemeinschaft (Beck, 1965), 41. 59  The Directive, Art 3(2): ‘This Directive is without prejudice to contract law and, in particular, to the rules on the validity, formation or effect of a contract.’ In other words, Member States decide on the consequences of an unfair commercial practice for the ensuing contractual relationship. 60  Judgment in Case C-428/11 Purely Creative EU:C:2012:651.

The Unfair Commercial Practices Directive 81 is no prize or other equivalent benefit, or, taking any action in relation to claiming the prize or other equivalent benefit is subject to the consumer paying money or incurring a cost.

The Court of Appeal (England and Wales) sought an interpretation of this provision. The traders in this case contended that the ‘false impression’ forms an element distinct from the situations described in the second part of point 31, meaning that there is no unfair practice where the consumer is sufficiently informed of the cost of claiming the prize. The Court of Justice does not follow this reasoning and takes a strict consumer friendly position, which it qualifies as a ‘literal’ interpretation.61 It stresses that point 31 considers an aggressive practice, whereas point 20 refers to the misleading practice of ‘describing a product as “gratis”, “free”, “without charge” or similar if the consumer has to pay anything other than the unavoidable cost of responding to the commercial practice and collecting or paying for delivery of the item’. Eventually, the Court of Justice ruled that point 31 prohibits aggressive practices by which traders give the false impression that the consumer has already won a prize but where one of the methods the consumer can use to claim that prize is subject to an obligation on the consumer to pay money or to incur any cost whatsoever, and that it is irrelevant that the cost imposed on the consumer, such as the cost of a stamp, is minimal compared with the value of the prize or that it does not procure the trader any benefit. Ultimately, however, the Court stressed that it is for the national courts to assess the information provided to consumers in the light of recitals 18 and 19 in the preamble and Article 5(2)(b) of the UCPD, that is to say, by taking into account whether that information is clear and can be understood by the public targeted by the practice. This case also shows that the division between misleading and aggressive practices in the Black List is somewhat arbitrary. The practice mentioned in point 31 is labelled aggressive, but its application eventually depends on whether the consumer is misled or not. The second, most interesting and undoubtedly important, judgment on the Black List is 4Finance.62 4Finance is a company that grants, by correspondence, loans of a small amount within a short period. 4Finance offered to all new customers a bonus of LTL 20 for every other new customer they recruited. In order to become a 4Finance customer, the new customer had to pay a registration fee of LTL 0.01 when registering on its website. The State Consumer Rights Protection Authority fined the company for infringement of the prohibition of pyramid schemes.

61  This literal interpretation can be explained as follows: a practice is deemed to ‘create the false impression that the consumer has already won or will win a prize’ when the consumer has to take action. There is no additional requirement of proof that a false impression was created. 62  Judgment in Case C-515/12 4Finance UAB EU:C:2014:211.

82  Jules Stuyck The Supreme Administrative Court of Lithuania referred questions on the interpretation of point 14 of the Annex. In English it reads: [the practice consisting in]: (i) establishing, operating or promoting a pyramid-­ promotional scheme where (ii) a consumer gives consideration (iii) for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products’ [is prohibited in all circumstances].63

The Court of Justice was asked to address the three elements of the definition. On the first element (the notion of the pyramid scheme), the Court of Justice stresses that a scheme can only be a ‘pyramid’ in the sense that its sustainability requires the subscription of an ever increasing number of new participants to fund the compensation paid to existing members. It also means that the most recent members are less likely to receive compensation for their participation. That scheme ceases to be viable when the growth in membership, which should theoretically tend to infinity in order for the scheme to continue, is no longer sufficient to fund the compensation promised to all participants. On the second point (the need for consideration), the Court notes that some language versions differ considerably from the English version. Notably, the ­German version (and the Lithuanian one) does not make any specific reference to a contribution to be given by the consumer. It follows from the consumer protection aim of the UCPD, and from most language versions, that the members of such a scheme have to give consideration. Any financial contribution from the consumer, regardless of the amount, suffices, but there should be a sufficient link between the consideration and the compensation, ie a sufficiently significant part of the bonuses given to existing members has to be financed by the contributions of new members. Finally, on the last element of the definition, the Court finds that the funding of the compensation that a consumer may receive must depend ‘primarily’ or ‘mostly’ on consideration given subsequently by new participants. In the case at hand, bonuses paid to existing members were funded only to a very small extent by the financial consideration required from the new members, ie the scheme does not seem to fulfil the second condition. However, it is for the national judge to rule on this. The Court also reminds that the practices which are not listed in the Annex of the UCPD may be declared unfair after a case-by-case examination of their characteristics, having regard to the criteria set out in Articles 5–9. The ruling is important because an increasing number of direct selling companies operate according to a multi-level marketing formula in which distributors can climb up the hierarchy and obtain bonuses on the sales realised by their down liners (distributors below them whom they have recruited). The CJEU focuses on the viability of the system. This is based on (but not limited to) the old history of the prohibition of ‘vente en boule de neige’, ie the 63 

Numbering added.

The Unfair Commercial Practices Directive 83 prohibition of male fide systems based a geometric series inexorably leading to saturation of the market and the ensuing impossibility for a distributor to sell the stock acquired (which he cannot return). Eventually a scheme that does not fulfil the conditions set out to be qualified as a pyramid scheme can still be qualified as an unfair, ie misleading, practice, but only on the basis of a case-by-case analysis under the different conditions of the relevant provisions. The fact that the Court stresses this point (although it is nothing more than reminding us of the structure of the Directive) may perhaps be a suggestion that national courts and agencies should carefully examine schemes that fall short of being pyramid schemes as possible cases of misleading practice. The interpretation given by the Court of Justice of the prohibition of pyramid schemes is without doubt very helpful, but again the national court will have to deal with the details of the scheme to appraise whether it is a pyramid scheme or not, and in particular to determine whether the compensation that a consumer may receive depends ‘primarily’ or ‘mostly’ on consideration given subsequently by new participants.

VIII.  CONCLUDING REMARKS

Nearly eight years after the deadline for the national implementation of the UCPD, one may wonder whether it has contributed to an improvement of consumer protection. The most striking thing probably is that the case law of the Court of Justice on the UCPD largely relates not to consumer protection, but to national provisions that seem to protect small shopkeepers rather than consumers (restrictions on sales promotions). Generally, the Court of Justice is consumer friendly. In BKK Mobil, it recognised the UCPD’s broad personal scope of application, which is broader than that of the EU’s competition rules. Secondly, in CHS Tours, the Court set a strict standard for misleading practices, although this may have inequitable results for traders. It is too early to say whether the level of consumer protection in certain Member States will be lowered through the interpretation of the UCPD, eg where genuine measures of consumer protection would be struck down because they prohibit per se practices that are not on the Directive’s Black List. An important question on the consequences of full harmonisation, as explained by the Court, for the level of consumer protection, is to what extent Member States can ensure a proper application of the general clauses (eg the one on misleading practices) by listing examples not as a blacklist (which they cannot), but as an indicative list, like the one in the Annex to the Unfair Contract Terms Directive.64

64  See A Pliakos and G Agnanostaras, ‘Case Note: Case C-540/08 Mediaprint’ (2011) 48 Common Market Law Review 1326.

84  Jules Stuyck The Court has also confirmed that where national laws on commercial ­practices only aim at the protection of businesses, they are not covered by the Directive, even if they concern B2C commercial practices (announcement of price reductions, resale at a loss, etc). It is a paradox that while Member States cannot go beyond the level of protection of the Directive in the interest of consumers, they can maintain or adopt stricter rules, provided those rules only aim at the protection of businesses. This also means that Member States with an integrated approach to unfair competition and B2C commercial practices face difficulties in separating what they have always considered together.65 All in all, the Directive may not fulfil its objectives. One may question whether full harmonisation and a high level of consumer protection can be achieved through a mix of general clauses and a blacklist. More specifically, full harmonisation may be difficult to achieve with general clauses that can be interpreted differently in the various Member States, while the Court of Justice can only interpret concepts, and cannot tell the national judges how they have to apply those concepts exactly in the case at hand. Several of the judgments mentioned above indeed stress that it is for the national court to decide in concreto whether or not a commercial practice is unfair.

65 See J Stuyck, ‘Consumer Protection and Fair Competition—One Fight?’ in L Thévenoz and N Reich (eds), Droit de la consommation—Konsumentenrecht—Consumer Law. Liber Amicorum Bernd Stauder (Nomos/Schultess, 2006) 497–509.

5 Interpretation and Assessment under the Unfair Commercial Practices Directive—the ICC Code for Advertising and Marketing and the Commission’s Staff Working Document JAN TRZASKOWSKI

I. INTRODUCTION

F

ROM A TRADER’S perspective, marketing serves the legitimate purpose of influencing consumers’ preferences—by means of commercial information and conduct—in order to increase profits. Individual traders may, however, have an incentive to present their products and offerings in as favourable a light as possible. Consumers, on the other hand, are interested in finding the products and deals that best suit their preferences. In order to do so, consumers are expected to make efficient decisions—ie decisions that match their preferences—based on their experience and knowledge, as well as available information, including marketing. Thus, from a societal perspective, marketing plays an important role in the functioning of markets by informing consumers about products and their attributes. The role of marketing law is to ensure that marketing is not carried out in a way that distorts the consumer’s ability to make such efficient choices, eg by means of misleading actions, misleading omissions or aggressive conduct. This is also to protect other traders from any disturbance such distortion of consumers’ economic behaviour may cause.1 Regulation of unfair competition was introduced to the Paris Convention for the Protection of Industrial Property (20 March 1883) by the insertion of

1  J Trzaskowski et al, Introduction to EU Internet Law (Copenhagen, Ex Tuto Publishing 2015) 223, with references. See also N Reich et al, European Consumer Law (Cambridge, Intersentia 2014); S Weatherill, EU Consumer Law and Policy, 2nd edn (Cheltenham, Edward Elgar 2013); I Ramsey, Consumer Law and Policy, 3rd edn (Oxford, Hart Publishing 2012).

86  Jan Trzaskowski Article 10bis on 2 June 1911. Subsection 2 now provides that ‘Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition’. The purpose of this chapter is to discuss the role of soft law in the interpretation and application of the Unfair Commercial Practices Directive (the ­Directive).2 The focus will be on the guidelines found in the International Chamber of Commerce’s Consolidated Code for Advertising and Marketing Communication Practice3 (ICC Code) and in the European Commission’s staff working guidance document concerning the Unfair Commercial Practices Directive4 (Staff Working Document). For good measure, it should be mentioned that there is a large variety of guidelines and that the ‘OECD consumer policy toolkit’ also deserves to be mentioned in this context as a helpful tool for application of the Directive.5 The Commission issued a revised staff working document after the submission of this chapter.6 In that vein a few reflections have been added during the editorial phase.

II.  THE UNFAIR COMMERCIAL PRACTICES DIRECTIVE

The Unfair Commercial Practices Directive may be perceived as a breakthrough for the Internal Market as it fully harmonises national law concerning business-toconsumer commercial practices that may harm consumers’ economic interests.7 However, the Directive does not apply to national law, which does not (at all) pursue objectives related to consumer protection.8 The full harmonisation entails that Member States may not retain or introduce restrictions and prohibitions of commercial practices that differ from the Directive, even in order to achieve a higher level of consumer protection.9 For good measure, it should be mentioned that Member States may impose requirements that are more restrictive or prescriptive than in relation to i­ mmovable

2  Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market. 3 International Chamber of Commerce, ‘Advertising and Marketing Communication Practice (Consolidated ICC Code)’ (August 2011) Document No 240-46/660. 4  ‘Guidance on the Implementation/Application of Directive 2005/29/EC on Unfair Commercial Practices’, SEC (2009) 1666, Commission Staff Working Document of 3 December 2009. 5 OECD, Consumer Policy Toolkit (Paris, OECD Publishing, 2010). 6 ‘Guidance on the Implementation/Application of Directive 2005/29/EC on Unfair Commercial Practices’, SWD (2016) 163, Commission Staff Working Document of 25 May 2016. The present ­chapter was submitted in March 2016 following a conference held in Copenhagen in January 2015. 7  See, eg Joined Cases C-261/07 and C-299/07 VTB-VAB EU:C:2009:244. 8  Case C-559/11 Pelckmans Turnhout EU:C:2012:615. See also Case C-126/11 INNO EU:C:2011:851, concerning a general prohibition on announcements of price reductions and those suggestive of such reductions in the period preceding the period of sales. 9  VTB-VAB (n 7) para 52.

Interpretation and Assessment 87 property and certain financial services (Article 3(9)),10 but may not exclude, for example, members of a profession or particular activities.11 It is, however, questionable whether such measures may be imposed on traders established in other Member States (cf Article 4). Before the Directive, the Court of Justice of the European Union (CJEU) was willing to apply the Directive’s predecessor, the Misleading Advertising Directive,12 to concrete cases by carrying out the necessary assessments. In the Gut Springenheide case, the Court noted, in connection with the assessment of whether a description, trade mark or promotional text is misleading, that ‘whenever the evidence and information before [the CJEU] seemed sufficient and the solution clear, it has settled the issue itself rather than leaving the final decision for the national court’.13 This practice seems to have changed with the Directive, even though it remains unclear to what extent the CJEU will eventually provide guidelines for national application of the Directive.14 It follows from the Directive’s 18th recital that ‘national courts and authorities will have to exercise their own faculty of judgement … to determine the typical reaction of the average consumer in a given case’. In addition, the assessment must have regard to CJEU case law, which means that the CJEU is not barred from interpreting the provisions in question by providing guidelines for the assessment to be carried out by the national courts. In recent case law, the CJEU has left the assessment of central issues concerning the Directive to the Member States—including the requirement for professional diligence,15 sufficient information to consumers16 and whether national law pursues consumer protection objectives.17 In the Mediaprint case, the CJEU left it to the Member State to determine whether the selling of newspapers with a possibility of participating in a competition is contrary to the requirements of professional diligence.18 In this context, the CJEU could have found—eg with reference to the proposal behind the Directive19—that the offering of incentives 10  See also Case C-265/12 Citroën Belux EU:C:2013:498, where the Unfair Commercial Practices Directive did not preclude a national provision, which laid down a general prohibition—save in the cases exhaustively listed by the national legislation—of combined offers made to consumers where at least one of the components of those offers was a financial service. 11  See Case C-421/12 Commission v Belgium EU:C:2014:2064. 12  Now (consolidated) Directive 2006/114/EC concerning misleading and comparative advertising. 13 See Case C-210/96 Gut Springenheide and Tusky v Oberkreisdirektor des Kreises Steinfurt EU:C:1998:369, paras 30–33 with references. 14 See, eg J Trzaskowski, ‘Lawful Distortion of Consumers’ Economic Behaviour—Collateral Damage Under the Unfair Commercial Practices Directive’ [2016] European Business Law Review 25. 15  Case C-540/08 Mediaprint Zeitungs- und Zeitschriftenverlag EU:C:2010:660. 16 Case C-122/10 Ving Sverige EU:C:2011:299; Case C-428/11 Purely Creative and Others EU:C:2012:651. 17  Case C-288/10 Wamo EU:C:2011:443. 18  Above n 15, paras 44 and 45. 19 ‘Proposal for a Directive Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market’, COM (2003) 356, 2003/0134 (COD), para 53. According to the proposal for the Directive, the concept of professional diligence is necessary to ensure normal business practices, which are in conformity with custom and usage, such as the offering of incentives and advertising based on brand recognition or product placement.

88  Jan Trzaskowski is an accepted practice. The CJEU’s decision not to conclude so may be understood as ­confirming the Court’s reluctance to provide detailed guidance on the assessments.20 So, even though traders may rely on the same legal framework, it is obvious that the Directive will not eradicate all differences as the interpretation in most cases will be carried out by national courts, and those national courts will have to make their own assessments, in particular in order to apply central provisions in concrete cases.21 This includes determining whether a commercial practice is likely to distort the economic behaviour of the average consumer. Except for items on the Black List found in Annex I, these criteria must be analysed in determining the legality of a commercial practice. According to Article 2(1)(e), material distortion of the economic behaviour of consumers means ‘using a commercial practice to appreciably impair the consumer’s ability to make an informed decision, thereby causing the consumer to take a transactional decision that he would not have taken otherwise’. ‘Transactional decision’ is defined in Article 2(1)(k),22 and it comprises any decision directly related to the actual or possible purchase of a product, including the decision to enter a shop.23 It follows further from Recital 18 that in line with the principle of proportionality … this Directive takes as a benchmark the average consumer, who is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors, as interpreted by the Court of Justice.24

It seems reasonable to conclude that national courts and authorities must also take social, cultural and linguistic factors, including national differences, into account when exercising their own faculty of judgement. Another central criterion for determining the legality of a commercial practice is whether the practice is contrary to the requirement of professional diligence as defined in Article 2(1)(h).25 There is no similar reference to the national courts’ faculty of judgement in this context. This could entail that professional diligence is a common (autonomous) standard for all Member States, which may make sense as professional diligence is further elaborated on in Articles 6–9, c­ oncerning

20 

Trzaskowski (n 14) 41. See Trzaskowski (n 14). 22 ‘Any decision taken by a consumer concerning whether, how and on what terms to purchase, make payment in whole or in part for, retain or dispose of a product or to exercise a contractual right in relation to the product, whether the consumer decides to act or to refrain from acting.’ 23  Case C-281/12 Trento Sviluppo and Centrale Adriatica EU:C:2013:859, paras 36 and 38. 24  Emphasis added. 25 ‘The standard of special skill and care which a trader may reasonably be expected to exercise towards consumers, commensurate with honest market practice and/or the general principle of good faith in the trader’s field of activity’. See also Mediaprint (n 15) paras 44–46. 21 

Interpretation and Assessment 89 misleading and aggressive commercial practices.26 However, these provisions themselves require assessment of what behaviour can be expected by the average consumer, which provides an argument for national assessment in accordance with Recital 18 (to ‘determine the typical reaction of the average consumer in a given case’). It should also be emphasised that Article 5(2) allows a court of justice to find a commercial practice to be contrary to professional diligence even though it is not laid out in Articles 6–9.27 The fact that the CJEU, despite opportunities, has not made such assessments may indicate that there is at least some reluctance to interfere with national assessments also in this context. Only the future can tell to what extent the CJEU’s interpretation will dictate or guide the national assessments. It is, however, obvious at this stage that there is no common standard for professional diligence within the meaning of the Directive (beyond what is laid out in Articles 6–9) and that national courts, until further notice, must use their own faculty of judgement to determine whether a commercial practice is contrary to the requirements of professional diligence and whether it is likely to materially distort the economic behaviour of the average consumer. In addition to the concepts concerning professional diligence and distortion of the consumer’s economic behaviour, there are a number of other issues that requires interpretation or assessment in concrete cases. The blacklist has, for instance, despite the intention to provide clear prohibitions, been criticised for not being sufficiently precise because of its use of vague notions, which, together with per se prohibition, is likely to pose important problems in practice.28 Some items on the list require that the trader claims something.29 It is not clear whether an explicit statement is required or just creating an impression of the claim. Other practices on the list point towards the former as these require the trader to ‘claim or create the impression’30 or ‘state or otherwise create the impression’.31 On the other hand, one item regards ‘explicitly informing a consumer’,32 which may exclude impressions inferred implicitly. The need to consult an ‘average ­consumer’ is not

26  See, eg Case C-435/11 CHS Tour Services EU:C:2013:574. If a commercial practice satisfies the criteria for misleading or aggressive commercial practices, it is not necessary to determine whether such a practice is also contradictory to the requirements of professional diligence. 27  It is assumed that the vast majority of the practices which would be defined as unfair under the general prohibition are either ‘misleading’ or ‘aggressive’. ‘Proposal for a Directive Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market’ (n 19) para 56. 28  J Stuyck et al, ‘Confidence Through Fairness? The New Directive on Unfair Business-to-Business Commercial Practices in the Internal Market’ [2006] Common Market Law Review 107, 131. 29  To be signatory to a code of conduct (item 1), that a code of conduct or his product has been endorsed (items 3 and 4), the trader is about to cease trading (item 15), that products are able to facilitate winning in games of chance (item 16) or that a product is able to cure illnesses (item 17). 30  That the trader is not acting for purposes relating to his trade, business, craft or profession (item 22). 31  That a product can legally be sold (item 9). 32  That if he does not buy the product or service, the trader’s job or livelihood will be in jeopardy (item 30).

90  Jan Trzaskowski completely eliminated by the Black List, as some of them focus on the impression created on consumers33 or on acts performed by the consumer.34 There may also be a need to consider some sort of professional diligence, eg when determining reasonable grounds that the trader may have for believing that he will not be able to offer advertised products (item 5), if the trader promotes a product ‘deliberately to mislead’ the consumer35 (item 13) or when failing to respond to correspondence is done systematically ‘in order to dissuade a consumer from exercising his contractual rights’ (item 27). Further prohibited practices may be difficult to deal with in the context of proof. This includes proving that a false statement of limited availability is actually given in order to elicit an immediate decision and to deprive consumers of sufficient opportunity or time to make an informed choice (item 7), or the intention of promoting a different product in bait and switch marketing (item 6). Finally, there are a number of concepts that need to be interpreted, including the ‘pyramid-promotional scheme’36 (item 14) and when information on market conditions is ‘materially inaccurate’ (items 12 and 18). There is also a need to determine when an advertisement contains ‘a direct exhortation to children to buy advertised products or persuade their parents or other adults to buy advertised products for them’ (item 28). It falls outside the scope of this chapter to discuss the blacklisted commercial practices in detail, but the intention is to demonstrate that even though Annex I seems relatively clear, there is still room left for interpretation and (national) assessment.37

III.  THE ROLE OF SELF-REGULATION

A national judge may request the CJEU to clarify a point of interpretation of European law in order to be able to apply it correctly. However, when it comes to a matter of assessment, such as those mentioned above, the national courts, as well as national authorities, may seek other sources of inspiration, including in particular by means of soft law. It is obvious in this context—eg as shown above in

33  Creating a false impression concerning after-sales service and winning a prize (items 23 and 31) or creating the impression that the consumer cannot leave the premises until a contract is formed (item 24). Also in advertorials it is required that paid promotion must be ‘identifiable by the consumer’ (item 11), and the consumer’s ‘impression’ must be considered when a trader sends eg an invoice for products not ordered by the consumer (item 21). See also Purely Creative and Others (n 16) para 25. 34  Requesting the trader to leave or not to return (item 25). 35  Into believing that the product is made by that same manufacturer when it is not. 36  Schemes in which ‘a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products’. See Case C-515/12 4finance EU:C:2014:211. 37 J Trzaskowski, ‘The Unfair Commercial Practices Directive and Vulnerable Consumers’ in International Association of Consumer Law Conference (2013) 16–17, available at http://www. legalriskmanagement.dk/.

Interpretation and Assessment 91 the context of the Black List—that it is not always clear when a question concerns interpretation or assessment; and sometimes the interpretation results in guidelines for how to carry out the assessment, including by determining elements that may be taken into consideration. In the proposal for the Directive, it is mentioned that the tradition of using codes of conduct in some Member States to define norms or standards of behaviour for traders can be used to show in greater detail how to apply legislative requirement; and it is mentioned that these codes of conduct ‘could be taken into account by the Member States in assessing whether a trader had breached the provisions of the Directive as implemented in the Member State where the trader is established’.38 In earlier work concerning better law making, it has been mentioned that implementation measures to some extent may be prepared within the framework of co-regulation, which ‘combines binding legislative and regulatory action with actions taken by the actors most concerned, drawing on their practical expertise’.39 The European Commission has published ‘Principles for Better Self- and Co-­regulation’,40 of which principles for conception are presented ‘at a glance’ on the website as: —— Participants. As many as possible potential useful actors should be represented. —— Openness. Envisaged actions should be prepared openly and involve all interested parties. —— Good faith. Different capabilities of participants should be taken into account, activities outside the action’s scope should be coherent with the aim of the action and the participants are expected to commit real effort to success. —— Objectives. Must be set out clearly and unambiguously, and include targets and indicators for evaluation purposes. —— Legal compliance. Actions must be designed in compliance with applicable law and fundamental rights as enshrined in EU and national law. Chapter 3 of the Unfair Commercial Practices Directive deals with codes of conduct. It follows from Article 10 that the Directive ‘does not exclude the control … of unfair commercial practices by code owners and recourse to such bodies … if proceedings before such bodies are in addition to the court or administrative proceedings’ and that ‘Recourse to such control bodies shall never be deemed the equivalent of foregoing a means of judicial or administrative recourse’. It is inserted as a subordinate clause in Article 10 that Member States may encourage41 such codes of conduct, but it is also clear that the Directive does not 38  ‘Proposal for a Directive Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market’ (n 19) paras 72–74. 39  European Commission’s White Paper of 25 July 2001 on ‘European Governance’, COM (2001) 428 final, 17. 40 https://ec.europa.eu/digital-agenda/en/principles-better-self-and-co-regulation (accessed ­February 2016). See also European Commission’s communication of 25 October 2011 on ‘A Renewed EU Strategy 2011–14 for Corporate Social Responsibility’, COM (2011) 681 final. 41  Recital 20 suggests that codes of conduct should be encouraged.

92  Jan Trzaskowski clearly establish a link between the Directive and soft law. Whereas the Directive makes reference to codes of conduct in the context of enforcement, the Directive on Electronic Commerce42—by means of comparison—provides in Article 16 that both the Commission and Member States shall encourage ‘the drawing up of codes of conduct at Community level, by trade, professional and consumer associations or organisations, designed to contribute to the proper implementation of ’ of the substantive provisions (Articles 5–15), including ‘the drawing up of codes of conduct regarding the protection of minors and human dignity’. Thus, the Directive on Electronic Commerce makes reference to codes of conduct in the context of implementation. Recital 20 of the Directive states that ‘it is appropriate to provide a role for codes of conduct … In sectors where there are specific mandatory requirements regulating the behaviour of traders, it is appropriate that these will also provide evidence as to the requirements of professional diligence in that sector’ (author’s emphasis). It is obvious to assume that mandatory requirements as such provide evidence for professional diligence. It seems equally obvious that guidelines that are not mandatory may provide evidence for ‘the standard of special skill and care which a trader may reasonably be expected to exercise’. In addition, the definition of professional diligence in Article 2(1)(h) includes references to ‘honest market practice’ and ‘the general principle of good faith in the trader’s field of activity’, which are also standards that may be deduced from the guidelines.43 It is, however, equally clear that guidelines may only have an inspirational (ie non-binding) effect. It also follows from Recital 20 that consumers’ organisations could be informed and involved in the drafting of codes of conduct with the aim of pursuing a high level of consumer protection. Guidelines may have different influence depending on their background, including the commitment behind them. The involvement of professional organisations may weigh more heavily than guidelines that are adopted solely by, for example, consumer organisations, which may have elements of a ‘wish list’ rather than provide an account of what traders themselves would consider to be honest practices. Similarly, the professional organisations may have a tendency to be less restrictive than the ‘real’ standard for honest practices. It should be borne in mind that traders themselves collectively have an interest in a certain standard for honest practices as reflected in the introduction to the ICC Code: Responsible advertising and marketing communications, based on widely supported selfregulatory codes of conduct, are an expression of the business community’s recognition of its social obligations. The fundamental value of self-regulation lies in its ability to create, enhance and preserve consumer trust and confidence in the business communities behind it, and thereby in the marketplace itself. Effective self-regulation is also an instrument for the protection of individual companies’ goodwill and reputation.44

42  Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market. 43  See also Reich et al (n 1) 91. 44  Consolidated ICC Code of Advertising and Marketing Communication Practice, 1.

Interpretation and Assessment 93 The Directive deals more specifically with codes of conduct in the context in which a trader makes references to codes of conduct. It follows from Article 6(2)(b) that it is a misleading action for a trader not to comply with commitments contained in codes of conduct by which the trader has undertaken to be bound, where: i) the commitment is not aspirational, but is firm and is capable of being verified, and ii) the trader indicates in a commercial practice that he is bound by the code.

However, such situations fall outside the scope of the analyses intended for the purpose of this chapter. It follows from the Directive’s definition of code of conduct in Article 2(1)(f) that it envisages an agreement, or a set of rules, that defines a behaviour that traders ‘who undertake to be bound by the code’ (author’s emphasis) shall comply with, and which is not imposed by law or administrative provision. It is obvious that this provision focuses on codes of conduct that the trader voluntarily undertakes to comply with, and does not as such concern general guidelines such as those drawn up by the International Chamber of Commerce. It follows from the first items of the Black List that it is considered a misleading commercial practice per se to falsely claim, eg by means of displaying a mark, to be a signatory to a code of conduct, or to falsely claim that a code of conduct has an endorsement from a public or other body.

IV.  THE ICC CODE

In 1937, the International Chamber of Commerce issued its first code on advertising practice. The ICC Code seeks to ‘provide a globally acceptable framework for responsible creativity and communication’.45 The consolidated ICC Code is global in its nature, and may, according to its introductory chapter, ‘be used by the Courts as a reference document within the framework of applicable legislation’. The ICC Code may in particular serve as inspiration for determining the requirement of professional diligence, as it reflects widely adopted standards for ‘sound business principles’ and can serve to provide ‘practical guidance’ on the concept.46 Given that the Directive is relatively detailed in its description of misleading and aggressive practices, which in itself paints a picture of the requirements of professional diligence, the added value of the general rules of the ICC Code may be quite limited, though it is by no means useless. In the following list, a number of these general principles have been rephrased to constitute questions that traders, authorities, courts of law, etc may ask as part of their overall assessment of whether a commercial practice complies with the requirements of professional diligence.47

45 

International Chamber of Commerce (n 3) 1. Reich et al (n 1) 91; Trzaskowski et al (n 1) 238. Provisions concerning taste and decency and business-to-business issues are omitted as they fall outside the scope of the Directive. 46 

47 

94  Jan Trzaskowski —— Is the commercial practice decent, honest and truthful? (Article 1) —— Is the commercial practice framed so as to abuse the trust of consumers or exploit their lack of experience or knowledge? (Article 3) —— Are relevant factors likely to affect consumers’ decisions communicated in such a way and at such a time that consumers can take them into account? (Article 3) —— Does the commercial practice play on fear without justifiable reason or exploit misfortune or suffering? (Article 4) —— Does the commercial practice play on superstition? (Article 4) —— Are statistics presented in such a way as to exaggerate the validity of a product claim? (Article 6) —— Is scientific terminology or vocabulary used in such a way as to falsely suggest that a product claim has scientific validity? (Article 6) —— Does the commercial practice denigrate any firm, organisation, industrial or commercial activity, profession or product, or seek to bring it or them into public contempt or ridicule? (Article 12) —— Does the commercial practice contain or refer to any testimonial, endorsement or supportive documentation that is not genuine, verifiable and relevant? (Article 13) —— Does the commercial practice imitate marketing communications of another marketer in any way likely to mislead or confuse the consumer, for example through the general layout, text, slogan, visual treatment, music or sound effects? (Article 16) Due to both its global nature and its source (businesses), it is most likely that the ICC Code can provide guidance on what is contrary to the requirements of professional diligence rather than what is compliant; ie a commercial practice is not necessarily in accordance with the requirements of a professional practice just because it complies with the guidelines. More detailed guidelines are found in chapters A–E concerning sales promotion, sponsorship, direct marketing, use of digital interactive media and environmental claims, respectively. Due to their level of detail, these chapters may prove to be more helpful in concrete cases, bearing in mind that they should only be used as a source of inspiration, and that some of the areas are subject to particular EU legislation on the subject matter, including in particular direct marketing and digital media.

V.  THE EUROPEAN COMMISSION’S STAFF WORKING DOCUMENT

As mentioned above, the European Commission has drawn up the Staff Working Document, which aims at providing guidance on the key concepts and ­provisions of the Directive that are perceived to be problematic. The Staff Working Document refers to itself as ‘the guidance’ and, for instance, in the first report concerning the Directive, it is referred to as a ‘guidance document’, ‘the UCPD Guidance’

Interpretation and Assessment 95 and ‘the Commission services’ Guidance document’.48 In this chapter, it is deliberately referred to as the Staff Working Document to emphasise that it is an internal working document. Similar guidance is found for the Directive on Consumer Rights.49 In addition to the Staff Working Document, the Commission has also drawn up a brochure50 and a web page,51 which provide information about unfair commercial practices. The Commission has also developed a legal database to support national enforcers in achieving a common understanding and a uniform application of the Directive.52 The database gives public access to national laws transposing the Directive, jurisprudence, administrative decisions, references to related legal literature and other relevant materials. Decisions by national courts and enforcement agencies will be made available in English, which will foster a uniform application of the Directive.53 The Staff Working Document includes four references to the UK guidance document concerning the implementation of the Unfair Commercial Practices Directive,54 but it remains undisclosed who have been heard or otherwise involved in the process of drawing up this document. It is stated on the Commission’s website concerning the Unfair Commercial Practices Directive55 that ‘since the adoption of the Directive, the Commission and the national enforcers have cooperated regularly to ensure a common understanding of its provisions’ and that ‘this Guidance aims at developing a convergence of practices while implementing the Directive’. The combination of these sentences seems to indicate that [all] Member States have been involved in the guidance, but there is no evidence that the two sentences should be read in conjunction. Given the European Commission’s role in the legislative process,56 it is obvious that it cannot issue guidelines that are binding courts in their interpretation of or assessment under the Directive.57 This is also recognised in the disclaimer printed in the beginning of the Staff Working Document: This document, drawn up by the services of the Directorate-General for Health and Consumers, is not binding on the European Commission as an Institution. Please note that 48  ‘Report

of 14 March 2013 on the Application of Directive 2005/29/EC’, COM (2013) 139 final.

49 http://ec.europa.eu/justice/consumer-marketing/files/crd_guidance_en.pdf. 50 

The Unfair Commercial Practices Directive—New Laws to Stop Unfair Behaviour towards Consumers (European Commission, 2006). 51 www.isitfair.eu. 52 https://webgate.ec.europa.eu/ucp/. 53  European Parliament, ‘State of Play of the Implementation of the Provisions on Advertising in the Unfair Commercial Practices Legislation’ (July 2010) 12 and chapter 2.6. 54  Office of Fair Trading, ‘Guidance on the UK Regulation (May 2008) implementing the Unfair Commercial Practices Directive, 2008 Consumer Protection from Unfair Trading’ (2008). 55 http://ec.europa.eu/consumers/consumer_rights/unfair-trade/unfair-practices/index_en.htm (accessed on 17 December 2015). 56  See, eg Arts 289 and 294 TFEU concerning the ‘ordinary legislative procedure’. 57  See, eg Case C-74/69 hauptzollamt bremen-freihafen EU:C:1970:58, para 9: ‘An unofficial interpretation of a regulation by an informal document of the Commission is not enough to confer on that interpretation an authentic community character. Such documents, which no doubt have their

96  Jan Trzaskowski this document cannot provide a formal interpretation of community law in relation to specific situation. It does also not provide legal advice on issues of national law. (author’s emphasis)

From a legal perspective, it would have been correct to emphasise that the document is not binding at all and that it only expresses the Commission Services’ understanding. Similarly, the part on legal advice could be omitted to avoid misunderstandings concerning the value of the document with regard to both EU law and the national law implementing it. This is accommodated to some extent on page 6 of the Staff Working Document, where it is mentioned that ‘this document has no formal legal status and in the event of a dispute, the ultimate responsibility for the Directive’s interpretation lies with the Court of Justice of the European Union’. The report providing a first assessment of the application of the Directive58 comprises several references to the Staff Working Document. In the report, it is explicitly mentioned that the Staff Working Document is intended to support uniform application of the Directive. Other references may be perceived as endorsements of the Staff Working Document, including expressions such as ‘as the Commission services have explained’, ‘[it] has helped to clarify some key concepts’, ‘showing how the Directive works’, ‘Commission services, in the Guidance document, advocate’ and ‘the Commission services clarified’. In the report, it is emphasised that, ‘despite the fact that this document has no formal legal status (binding nature)’, ‘it has been widely used including in the context of proceedings before the [CJEU], as well as by national courts and authorities in their assessment of individual cases’.59 The Staff Working Document has also been mentioned in an opinion made by an Advocate General.60 It is obvious that the Staff Working Document will play an important role in the application of the Directive, both because it bears the European Commission’s name and because it is one of few documents that is available and may appear to be official (despite its disclaimers). Findings within behavioural sciences also suggests this, as it is found within psychology that humans tend to focus on what is available rather than what we are able to compute (the ‘availability heuristic’).61 Under all circumstances, it seems problematic that the document provides solutions concerning both interpretation and assessment of aspects that are not clear in the Directive. Thus, it is a risk that the Staff Working Document will become a

value for the purpose of applying certain regulations, have, however, no binding effect … The uniform application of Community law is only guaranteed if it is the subject of formal measures taken in the context of the Treaty.’ 58  ‘Report

of 14 March 2013’ (n 48). ibid, 8. 60  Case C-122/10 Ving Sverige EU:C:2011:299. 61 See. eg D Kahneman, ‘Maps of Bounded Rationality: Psychology for Behavioral Economics’ [2003] The American Economic Review 1475, 1469. 59 

Interpretation and Assessment 97 self-fulfilling prophecy,62 at least until the CJEU reaches solutions other than those provided in the Staff Working Document. Some of the issues dealt with in the Staff Working Document are discussed below. To the extent that the document suggests interpretation of the Directive, it is not always clear whether the conclusions build upon accepted legal methodology or are merely policy making. It is the intention in this part of the chapter to challenge the conclusions reached in the Staff Working Document and to establish that the suggested solutions are not necessarily evident. As argued in the conclusion, it may in many cases be more helpful for courts and authorities if uncertainties were made explicit and alternative understanding made available. This would allow the reader to understand the problem rather than just providing a solution. For good measure, it should be emphasised that the European Commission, in the revised Staff Working Document, has accommodated most of the critique concerning the particular issues discussed below.63 These points will, however, still serve as a good illustration of the caveats to bear in mind when reading staff ­working documents.

A.  The Scope of Application As mentioned above, the Directive applies to aspects of business-to-consumer commercial practices that may harm the economic interests of consumers. It is mentioned on page 9 of the Staff Working Document that ‘according to the definition provided in the Directive, commercial practices only cover practices “directly connected with the promotion, sale or supply of a product to consumers”’ (original emphasis). Subsequently, it is found that situations in which a trader purchases products from consumers does not fall within the scope of the Directive.64 It is obvious that a product within the meaning used in the directive includes both goods and services.65 If a trader claims to offer ‘the highest price on gold’, it seems counter-intuitive that the practice should fall outside the scope of application just because it concerns a situation where a trader buys goods from consumers. The purpose is, after all, and according to Article 1, to protect consumers against unfair commercial practices harming consumers’ economic interests.

62  See the discussion in J Trzaskowski, ‘Towards a Common European Marketing Law’ (2010) 2010– 21 EUI Working Paper Series, Law 35, 46. See also G Anagnostaras, ‘The Unfair Commercial Practices Directive in Context: From Legal Disparity to Legal Complexity?’ (2010) 47 Common Market Law Review 147, 170. 63  These points were also made on the underlying conference in December 2015 where the ­European Commission was present. 64  See also about ‘C2B’ transactions in the ‘Report of 14 March 2013’ (n 48) 9–10. 65  Article 2(1)(c) provides that ‘product’ means any goods or service including immovable property, rights and obligations.

98  Jan Trzaskowski It would seem logical—and it cannot be excluded by means of available case law—that a trader’s purchase of gold etc in itself can be considered a service and therefore falls within the scope of application.66 Such a result has in fact been suggested by the UK and in that vein it has been suggested that such interpretation could be achieved by means of clarification in the Staff Working Document.67 That suggestion is particularly worrying, as ensuring a specific interpretation should not be achieved through amendment of the Staff Working Document but by means of referring a suitable case for a preliminary ruling before the CJEU.

B.  National Assessment; Social, Cultural and Linguistic Factors As mentioned above, it follows from Recital 18 of the Directive that national courts and authorities must (‘will have to’)—‘having regard to the Case Law of the Court of Justice’—exercise their own faculty of judgement in determining the typical reaction of the average consumer in a given case. As mentioned above, however, it is unclear to what extent the CJEU is likely to interfere with such national assessment. It follows from page 27 of the Staff Working Document that ‘In certain cases, social, linguistic and cultural features that are peculiar to a Member State may justify a different interpretation of the message communicated in the commercial practice by the competent authority or court’ (emphasis added). The Commission’s framing seems to indicate that the account of social, linguistic and cultural features should only be included in exceptional cases, whereas the recital could indicate that it should be the norm. What further remains unclear is what it entails to have ‘regard to the Case Law of the Court of Justice’. As mentioned above, the CJEU has, in contrast to case law before the Directive was adopted, refrained from making these assessments or providing guidelines. Therefore, it cannot be ruled out that national courts inhibit more flexiblility in their assessments than before, perhaps due to the message found in Recital 18 and the explicit reference to national assessment. There may be divergences in how Member States apply key concepts used in determining whether a commercial practice is unfair. Therefore, the courts of various Member States may treat similar commercial practices differently. However, according to Article 4, a Member State may not restrict a trader from providing products that are subject to commercial practices that are themselves in accordance with national law. In contrast, the Staff Working Document suggests that ‘requiring [a] foreign trader to provide an additional piece of information could be justified on the basis of social, cultural or linguistic factors’. 66  The Unfair Commercial Practices Directive is characterised by a particularly wide scope ratione materiae and the term ‘commercial practice’ is conferred a very broad meaning by the EU legislature. See, eg Case C-388/13 UPC Magyarország EU:C:2015:225, paras 34–36 with references. 67  ‘Report of 14 March 2013’ (n 48), 10.

Interpretation and Assessment 99 C.  Misleading Environmental Claims Pages 37–46 of the Staff Working Document deal with misleading environmental claims. On page 41 the application of the provisions of the Directive to environmental claims are summarised in two main principles: (a) based on the Directive’s general clause, traders must, above all, present their green claims in a specific, accurate and unambiguous manner; (b) traders must have scientific evidence to support their claims and be ready to provide it in an understandable way in the case that the claim is challenged.

These conclusions are surprisingly clear considering the fact that the Directive does not explicitly mention environmental claims. As mentioned in the Staff Working Document, the Black List contains provisions on endorsements and quality marks etc, which also apply to environmental marks and endorsement, but not to environmental claims that do not refer to such marks or endorsements. It follows from Article 6(1)(b–c) that ‘composition of the product’, ‘method of manufacture’ and ‘the extent of the trader’s commitments’ are elements that should be included in the assessment of whether a trader’s commercial practice is misleading. It is obvious that these elements also apply to environmental claims. It may also be deduced from these requirements that green claims must be presented in a specific, accurate and unambiguous manner. In addition, it is further deduced on page 43 that it should be mentioned whether the claim covers the whole product or only one of its components, whether the claim refers to a company or only to certain products, and which stage of the life cycle or what product characteristics the claim exactly covers (if not all). The document provides further detailed conclusions concerning the trader’s obligation in relation to product comparisons involving environmental claims. It follows from Article 12 of the Directive that Member States must enable courts or administrative authorities to (i) require the trader to furnish evidence as to the accuracy of factual claims in relation to a commercial practice if such a requirement appears appropriate and (ii) consider factual claims as inaccurate if the evidence is insufficient. It may be from this provision that the European Commission has deduced that ‘traders must have scientific evidence to support their claims and be ready to provide it in an understandable way’ (author’s ­emphasis). It should be emphasised that Article 12 only requires a possibility—ie not an obligation—to demand such evidence, and that it can only be invoked if it is appropriate, ‘taking into account the legitimate interest of the trader and any other party to the proceedings’. The European Commission’s conclusions may be true but, given the lack of explicit attention to misleading environmental claims in the Directive, the decision to devote so many pages (almost 20 per cent of the substantive part) to this issue does not seem justifiable—even if the real purpose is to promote principles from the European Commission’s Guidelines for Making and Assessing Environmental Claims (prepared by Dr Juan R Palerm, December 2000). Other relevant

100  Jan Trzaskowski guidelines, such as the above-mentioned chapter E of the ICC Code, could have been included as well.

D.  Invitation to Purchase Invitation to purchase is dealt with in Article 7(4), which defines a set of information68 that is considered to be ‘material’ for the interpretation of Article 7(1) concerning misleading omissions. According to the latter provision, a commercial practice is misleading if it omits ‘material information’ that the average consumer needs, according to the context, in order to take an informed transactional decision. In this regard, account must be taken of the factual context, including all its features and circumstances and the limitations of the communication medium. It follows from Article 7(1) that, in order to constitute a misleading omission, the omission of material information must be likely to distort the average consumer’s economic behaviour. It follows from page 51 of the Staff Working Document that failure to give the information in a clear, unambiguous, intelligible and timely manner is ‘tantamount to a misleading omission’. The Staff Working Document thus ignores that the omission must be likely to distort the economic behaviour of the average consumer as interpreted on a case-by-case basis by a national court exercising its own faculty of judgement, and taking social, cultural and linguistic factors into account. The Staff Working Document does make a reference to Recital 14, which provides that the ‘Directive sets out a limited number of key items of information that the consumer needs to make an informed transactional decision’, which, however, does not entail that the actual text of the provision should not be understood literally. It is, for instance, debatable whether the omission of a geographical address in a magazine advertisement is likely to distort the economic behaviour of an average consumer that may find this information by visiting the advertised online shop, from where he is most likely to place his order. The goal of the Directive is to protect the economic interests of consumers, not to put excessive burdens on traders. An invitation to purchase is defined in Article 2(1)(i) as a ‘commercial communication which indicates characteristics of the product and the price in a way appropriate to the means of the commercial communication used and thereby enables the consumer to make a purchase’. In addition to this, it is provided on page 47 that the ‘characteristics of the product’ requirement is ‘invariably present as soon as there is verbal or visual reference to the product’. A reasonable argument is presented, ie that ‘a different interpretation could incentivise traders to provide vague product descriptions or omit information in their commercial offers in order to circumvent the information requirements’. However, it seems appropriate 68  The main characteristics of the product, geographical address, price information, arrangements for payment, delivery, performance etc, and possible right of withdrawal or cancellation.

Interpretation and Assessment

101

to assume that some verbal or visual references to a product are too vague for the commercial communication in question to constitute an invitation to purchase, even though a price is mentioned.

E. Describing a Product as ‘Gratis’, ‘Free’, ‘Without Charge’ or Similar It follows from item 20 on the Black List in Annex I that it is prohibited per se (ie with assessment of professional diligence or distortion of the average consumer’s economic behaviour) to describe a product as ‘gratis’, ‘free’, ‘without charge’ or similar ‘if the consumer has to pay anything other than the unavoidable cost of responding to the commercial practice and collecting or paying for delivery of the item’. Even though the provision seems very straightforward, six pages (pages 55–61) of the Staff Working Document have been devoted to this topic. Even though this straightforwardness is recognised in the document, it is found on page 56 that ‘combined offers (ie when more products and/or services are marketed together) require a more complex case by case assessment based on the specific features of the commercial offer and the product or services involved’. On page 57, the basic criteria in relation to combined offers are laid out as (i) ‘Traders must not try to recover their costs by reducing the quality or composition or by inflating the price of any product that must be bought as a pre-condition for obtaining the free item’ and (ii) ‘Traders should not describe an individual element of a package as “free” if the cost of that element is included in the package price’. As an example, on page 60 it is found that item 20 does not prevent traders from offering a ‘free sports bag for new members’ of a gym, provided the sports bag was ‘offered to all new members, who could choose whether or not to take it, and new members paid the same price whether or not they took the bag’. However, on page 56, it is recognised that the prohibition is ‘based on the idea that consumers expect a “free” claim to be exactly that, meaning they receive something for nothing: no money or other consideration has to be given in exchange’. However, it seems more obvious than not to assume that a requirement of paying a membership fee to a gym amounts to more than ‘the unavoidable cost of responding to the commercial practice and collecting or paying for delivery of the item’. By means of comparison, the consumer may, according to item 31 on the Black List, not be required to pay money or incur a cost for taking action in relation to claiming a prize. In this context, the CJEU has emphasised that the wording does not allow for any exception, meaning that it is evident that the expression ‘incur a cost’ does not allow the consumer to bear the slightest cost, even if it is de minimis compared with the value of the prize …69

For good measure, it should be mentioned that Article 7 of the ICC Code provides that the term ‘free’, eg ‘free gift’ or ‘free offer’, should be used only (i) where the 69

Purely Creative and Others (n 16) para 30. See similarly 4finance (n 36) para 26.

102  Jan Trzaskowski offer involves no obligation whatsoever; (ii) where the only obligation is to pay shipping and handling charges, which should not exceed the cost estimated to be incurred by the marketer, or (iii) in conjunction with the purchase of another product, provided the price of that product has not been increased to cover all or part of the cost of the offer. The last situation seems to be in line with the argument promoted in the Staff Working Document. As mentioned above, the ICC Code may also be used in the assessment of ‘professional diligence’, though this is not relevant in the context of the Black List.

VI. CONCLUSIONS

The Unfair Commercial Practices Directive has a very broad scope of application and has a very ambitious goal of providing greater legal certainty (Recital 17) in a complex legal discipline. Marketing law is complicated for several reasons, and in particular because sound and well-intentioned principles have to be applied in concrete cases, involving a myriad of constellations of consumers, products, media, content, circumstances, etc. In addition, there is, as always, the need for interpretation of provisions, etc that may not be sufficiently clear. It goes without saying that the interpretive powers lie with the judiciary, and that the CJEU has the final say in matters of interpretation, whereas national courts to a large extent have the last word in matters of assessment. It takes time to build a comprehensive amount of case law, and traders and enforcement authorities in particular may need guidelines to follow before a sufficient amount of cases have reached the CJEU. For that purpose, the ICC Code provides some additional guidelines that can play a role in the assessment of professional diligence, and in particular can be a valuable tool for traders. However, the guidelines are quite general and do not, in contrast to the Staff Working Document, address issues concerning the Directive specifically. Therefore, in that sense, the Staff Working Document is a more valuable tool for traders, enforcement authorities and judges. Despite its disclaimers, the Staff Working Document appears to be an official document, and is widely referred to in other official documents and on websites operated by the European Commission. Therefore, it is not surprising that traders and national authorities take it into consideration in their daily operations. The document is likely to influence the behaviour of both traders and national enforcement authorities; therefore, the European Commission and its services should be extraordinarily careful in their interpretations, which in the Staff Working Document are often presented as facts that to some extent may misguide the reader as to their reliability. It seems fair to argue that, as it stands, the Staff Working Document comprises elements that amount to policy making, which may be perceived as a democratic problem in the context of non-binding guidance. Law is not an exact science in the sense that, in contexts like this, legal methodology is applied to deliver a prognosis that rests on the interpretation of sources of

Interpretation and Assessment 103 law. Such analyses must be made by the national enforcement authorities in their consideration as to whether to approach a trader, eg through the judiciary. It is the opinion of the author that national authorities would benefit more from a more ambiguous document that provides various possible interpretations and relevant arguments. This would allow both authorities and judges to better understand the issues for which the judiciary is to find a solution. Such an approach would help to identify and funnel relevant cases to the CJEU for faster and more reliable interpretation. There is a risk that the interpretations found in the Staff Working Document will dissuade authorities and traders from referring questions of interpretation to the courts. The Staff Working Document was thought of as a living document that should be updated on a regular basis,70 but it took more than six years, from its publication in December 2009, before the revised version was published. In that period a substantial number of cases were decided by the CJEU without being reflected in the document. It has been impossible to get any official insight into the process of the revision—even though the Commission believes that policies should be prepared in a transparent and accountable manner.71 Thus the European Commission should be encouraged to consult their own principles for better self- and co-regulation. The Staff Working Document is a valuable tool for understanding the Unfair Commercial Practices Directive. It would greatly improve the legitimacy of the document if the process, including the involvement of stakeholders, was more transparent and also allowed for a wide engagement with stakeholders. It would make the document less political if the document would allow for the expression of uncertainties as to its own conclusions, and preferably allow the inclusion of counter-arguments. Since a substantial body of national case law and practical experience has been gathered, it would be helpful if future versions would be more factual, eg by presenting and structuring experiences and solutions adopted by national authorities and courts. In addition, it could prove helpful if references were made to the growing body of academic literature concerning the Directive. With the revised—and dramatically expanded—Staff Working Document, the European Commission has accommodated much of the specific critique c­ oncerning substantive issues expressed above in Section IV (A–E). The revised document is more agnostic and designed in a more approachable way, and it integrates case law from both the CJEU and national courts of law. It also includes a welcome guidance to the Directive’s boundaries with other directives. However, instead of revising the disclaimer in order to properly warn the reader, it has been removed altogether; it is also expressly stated on page 5 that ‘the purpose of this guidance document is to facilitate the proper application of Directive 2005/29/EC’ (author’s emphasis). 70  ‘Report

of 14 March 2013’ (n 48), 8. European Commission’s communication of 19 May 2015 on ‘Better Regulation for Better Results—An EU Agenda’, COM (2015) 215 final, 4. See also European Commission’s communication of 12 December 2012 on ‘EU Regulatory Fitness’, COM (2012) 746 final. 71  The

104 

6 The ‘Fitness Check’ of the MCAD and UCPD BERT KEIRSBILCK

I. INTRODUCTION

I

T IS WELL known that two framework directives generally regulate marketing in the European Union. Directive 2006/114/EC on misleading and comparative advertising (MCAD) contains a prohibition of misleading business-to-business (B2B) advertising (based on minimum harmonisation) and a conditional permission of comparative advertising (based on full harmonisation).1 Directive 2005/29 concerning unfair business-to-consumer (B2C) commercial practices (UCPD) is a full harmonisation framework directive that prohibits unfair B2C commercial practices before, during and after a commercial transaction.2 The UCPD is based on a three-tier system, with a general prohibition of unfair commercial practices, two general prohibitions of misleading actions/ omissions and aggressive practices, and a Black List of 31 practices that are unfair in all circumstances. In November 2012, the Commission published a Communication entitled ‘Protecting Businesses against Misleading Marketing Practices and Ensuring Effective Enforcement—Review of the MCAD (MCAD Communication).3 The Commission announced that it would come up in due time with a Proposal to amend the MCAD in order to address the problem of unfair B2B practices. The revised MCAD would be based on a two-tier system, with a Black List of the most common and harmful B2B marketing practices and a general prohibition of misleading B2B marketing practices. This would be minimum harmonisation only; the rules on comparative advertising would be amended and would continue to be based on full harmonisation.

1  Directive 2006/114/EC of the European Parliament and the Council of 12 December 2006 concerning misleading and comparative advertising [2006] OJ L376/21. 2  Directive 2005/29/EC of the European Parliament and the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market [2005] OJ L149/22. 3  COM (2012) 702 final.

106  Bert Keirsbilck In March 2013, just a few months after the launch of the MCAD review, the Commission also published a Communication on the application of the UCPD (UCPD Communication),4 in which it concluded that ‘it would be inappropriate to amend the Directive at this stage’. Then, it was silent for quite some time.5 The Commission did not come up with a Proposal for a Business Marketing Directive, although that was announced in the 2015 Work Programme as one of the ‘REFIT actions’6 in the area of justice, consumers and gender equality: The Business Marketing Directive will simplify and streamline the scope of protection in business-to-business transactions. It addresses the problem of misleading marketing practices through online or other means of distance communication. The expected benefit of the Business Marketing Directive for SMEs, reducing costs relating to the misleading marketing practices where SMEs cannot themselves enforce their rights effectively, amount to 419–477 million euro per year.7

In the 2015 Work Programme, the Commission also announced a so-called ­‘Fitness Check’ of three key EU directives concerning ‘consumer rights and advertising’, to be started in 2015: —— Directive 2005/29/EC on unfair business-to-consumer commercial practices; —— Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees; and —— Directive 93/13/EEC on unfair terms in consumer contracts.8

4  ‘On the Application of the Unfair Commercial Practices Directive’, COM (2013) 138 final. See also COM (2013) 139 final. 5  See the Note of the future Italian, Latvian and Luxembourg Presidencies of the Council, 18 Month Programme (1 July 2014–31 December 2015), 11258/14, 23 June 2014: ‘The three Presidencies will also give high priority to a possible review of the current Directive on misleading advertising between businesses.’ 6  The Regulatory Fitness and Performance Programme (REFIT) was launched in December 2012 and aims to make EU law lighter, simpler and less costly so that it benefits citizens and businesses and helps to create the conditions for growth and jobs. 7  COM (2014) 910 final, Annex 3, No 59. See also Commission Staff Working Document, ‘Regulatory Fitness and Performance Programme (REFIT): Initial Results of the Mapping of the Acquis’, SWD (2013) 401 final, 82: ‘a revision process has been launched with the aim of strengthening the enforcement co-ordination and clarifying the application of the Directive to certain unfair practices which are particularly problematic for SMEs, such as misleading directory scams. A proposal is under preparation.’ See also Commission Staff Working Document, ‘Regulatory Fitness and Performance Programme (REFIT): State of Play and Outlook’, SWD (2015) 110 final, 102: ‘The preparations focus on simplifying and streamlining the scope of protection in business-to-business transactions, clarifying what is prohibited (including through the definition of a “black-list” of prohibited practices) and making it easier for businesses to find out where to complain and how to obtain help if they have been the victim of misleading advertising.’ 8  COM (2014) 910 final (ibid) Annex 3, No 62. See also SWD (2013) 401 final (ibid) 82 and 84: ‘A Fitness check with a view to consolidation and merger of several legal acts in this area will be carried out’; SWD (2015) 110 final (ibid) 106: ‘Fitness Check on legal acts related to consumer rights and advertising.’

The ‘Fitness Check’ of the MCAD and UCPD 107 Just before the end of 2015, the Commission officially launched the ‘Fitness Check of EU Consumer Law’, which naturally covers the above-mentioned directives of ‘general’ EU consumer legislation (UCPD, Consumer Sales Directive (CSD) and Unfair Contract Terms Directive (UCTD)). Yet the Commission argued that, for consistency reasons and to ensure a comprehensive evaluation, the following directives, including the MCAD, will also be subject to the Fitness Check: —— Directive 98/6/EC on consumer protection in the indication of the prices of products offered to consumers (PID); —— Directive 2006/114/EC concerning misleading and comparative advertising (MCAD); and —— Directive 2009/22/EC on injunctions for the protection of consumers’ ­interests (ID). In the context of the Fitness Check, the Commission will commission a First Study9 that will deal with five out of the six above-mentioned directives. The evaluation of the CSD will be carried out through a separate Second Study that will inter alia assess the costs and benefits for consumers and traders of aligning the rules of the CSD for face-to-face sales of goods to the more modern rules in the new Proposal for a Directive on certain aspects concerning contracts for the online and other distance sales of goods.10 In respect of distance sales of tangible goods, the proposed directive will replace the CSD; as a consequence, retailers who are selling both at distance and face-to-face (ie in physical bricks-and-mortar shops or through off-premises selling) will need to apply different regimes, and consumer rights may vary depending on the type of transaction. However, the Commission is committed to take steps, on the basis of the Second Study, to avoid that undesirable consequence.

II.  THE TWO MAIN OBJECTIVES OF THE FITNESS CHECK OF EU CONSUMER LAW

The first main objective of the Fitness Check of the above-mentioned six directives is to assess whether their consumer protection and market integration objectives have been effectively achieved, and whether they have been achieved in the most cost-effective manner. Thus, effectiveness and efficiency are two main criteria that the Commission will take into account in assessing whether EU consumer law is fit for purpose.

9  ‘Study to Support the Fitness Check of EU Consumer Law’, http://ec.europa.eu/justice/newsroom/ contracts/2015_461153_en.htm 10  ‘Proposal for a Directive on Certain Aspects of Contracts for the Online and Other Distance Sales of Goods’, COM (2015) 635 final. See also ‘Proposal for a Directive on Certain Aspects Concerning Contracts for the Supply of Digital Content’, COM (2015) 634 final.

108  Bert Keirsbilck As regards effectiveness, one of the challenges will be to identify the factors that have contributed to or stood in the way of achieving the consumer protection and market integration objectives. As regards efficiency, the focus will be inter alia on the costs and benefits associated with the implementation of these directives and on the factors that make an efficient implementation more difficult and hamper the maximisation of the benefits. In this context, the Fitness Check will also assess whether achieving these objectives can be reasonably attributed to the EU intervention, rather than to any other factors. Hence, EU added value is also amongst the main criteria that the Commission will take into account in assessing whether EU consumer law is ‘fit for purpose’. Here, the focus will be on the added value resulting from the EU intervention, compared to what could be achieved by Member States at national and/or regional levels and on the likely consequences of stopping or withdrawing the existing EU intervention. Relevant questions will include whether EU intervention would have been the only way to achieve these objectives, whether it offers ‘better value for money’ in achieving these objectives and whether it is necessary to complement, stimulate and leverage action by Member States to reduce disparities, raise standards and create synergies. The second main objective of the Fitness Check is to assess the complexity and potential for simplification of the current regulatory framework and to explore whether and to what extent a potential codification or recasting of EU consumer law into a horizontal EU instrument could bring added clarity, remove overlaps and fill any gaps. In this context, it should be noted that the most recent instrument of general or ‘horizontal’ EU consumer legislation, the Consumer Rights Directive (CRD),11 will be subject not to the Fitness Check, but to a separate evaluation report by the Commission. It is well known that the CRD is the somewhat disappointing outcome of the review of the so-called ‘consumer acquis’ (ie eight directives in the field of consumer contract law), that was undertaken in 2004–11.12 It is equally well known that the review of the consumer acquis was a spin-off project of the broader project to make EU contract law more coherent, which was launched in 2001 and imploded in 2015 with the withdrawal of the Proposal for a Regulation establishing a Common European Sales Law.13 Apparently, the Commission’s codification spirit in the field of European private law was wounded but not defeated, as the Commission will now explore a

11  Directive 2011/83/EU. The Consumer Rights Directive lays down the pre-contractual information requirements and the consumer’s right to withdraw from distance and off-premises contracts (contracts concluded outside business premises). It also regulates the consequences of non-delivery of goods, limits any additional costs imposed on the consumer for the use of specific means of payment and prohibits the use of default settings (‘pre-ticked boxes’) for charging additional payments. 12  See S Weatherill, ‘The Consumer Rights Directive: How and Why a Quest for “Coherence” has (Largely) Failed’ [2012] Common Market Law Review 1279; B Keirsbilck, ‘Introduction: The Long Legislative History of the Consumer Rights Directive 2011/83/EU’ [2013] Revue européenne de droit de la consommation 337. 13  COM (2011) 635 final (n 10) 115.

The ‘Fitness Check’ of the MCAD and UCPD 109 potential codification or recasting of EU general marketing law together with part of EU general consumer contract law into a single horizontal EU instrument. Clearly, the scope of this potential codification project will be somewhat different from that of the project to make EU contract law more coherent (2001–15) as well as from that of the review of the consumer acquis (2004–11). The Commission stressed that the Fitness Check will look at the entire life-cycle of a commercial transaction and assess all its stages: —— the marketing phase, where products are presented to consumers and businesses in a form of advertising communication, as well as when pre-­ contractual information is displayed before the conclusion of the contract; —— the formation, form, effect and validity of a B2C or a B2B contract; —— the post-contractual stage, when consumers or businesses exercise rights in relation to the contractual performance, such as the conformity with the contract or in relation to different types of after-sales services, both from the point of view of the unfair commercial practices and from the point of view of contractual rights. In this context, ‘coherence’ and ‘relevance’ are the two main criteria that the Commission will take into account. As regards coherence, the focus will be mainly on the extent to which the general principles and requirements set out in the six directives have contributed to the coherence of consumer protection policy as well as on any specific inconsistencies and unjustified overlaps, obsolete provisions and/or gaps. As regards relevance, the main issue will be the extent to which the objectives of these directives are still relevant and valid, and whether any other objectives should be considered in view of current needs and trends. At each of the above-mentioned stages of a commercial transaction, the Fitness Check will identify potential gaps, inconsistencies and consumer problems stemming from the application of EU law or where certain aspects are not regulated by EU law even though a market failure could be identified. A third objective of the Fitness Check of EU Consumer Law is to identify and recommend ways to facilitate uniform enforcement and application of the six directives.

III.  ARE THE MCAD AND UCPD FIT FOR PURPOSE?

A. Scope Ratione Materiae, Regulatory Approach and Degree of Harmonisation (‘Effectiveness’ and ‘Efficiency’) As mentioned, the MCAD covers, first of all, advertising (occurring at the precontractual stage). In the MCAD Communication, the Commission proposed to extend the scope of the MCAD to ‘marketing practices’.14 The Commission

14 

MCAD Communication, 5.

110  Bert Keirsbilck explained that the current definition of ‘advertising’ is not clear enough to stop certain (misleading) marketing practices or to respond to future developments.15 The Commission stated that the concept of ‘marketing practice’ will better serve the purpose of business protection and will eliminate confusion and establish legal certainty.16 The Commission proposed to introduce a two-tier system, with a general prohibition and a blacklist (the Black List). The Commission concluded that the Black List should include such practices as: 1. 2. 3. 4. 5. 6.

misleading directory companies; misleading payment forms disguised as invoices or obligatory payments; misleading offers to extend internet domain names; misleading offers to extend protection for trademarks; misleading offers for legal advice based on publicly available information; and misleading offers on social networks.17

The Commission argued that such an additional layer will strengthen the protection granted by the general prohibition and will also facilitate clearer enforcement.18 In addition, the Commission stressed that the current general prohibition does not give sufficient legal certainty for the purpose of tackling certain clearly misleading practices, as it is broad, general and open to different interpretations and case-by-case assessments. The Commission concluded that the general prohibition needs to be revised so as to generally prohibit misleading B2B marketing practices (as a safety net for practices not covered under the new Black List).19 In the MCAD Communication, the Commission also observed that there is a great variety of rules going beyond the current minimum EU-wide protection against misleading advertising.20 The Commission did not explain why the envisaged general prohibition and Black List of misleading marketing practices will continue to be based on minimum harmonisation instead of full harmonisation. It should be noted that Member States will remain free, for example, to additionally blacklist certain B2B marketing practices as misleading or otherwise unfair. As mentioned, the MCAD also covers comparative advertising. In the MCAD Communication, the Commission also announced that the definition of ‘comparative advertising’ will be amended. However, no further explanation was given. The Commission stated that further legislative clarification of the rule on comparative advertising is needed, based on the CJEU case law.21 In addition, the Commission was happy to observe that the conditional permission of comparative advertising was transposed in a uniform manner in the

15 

ibid, 9. ibid, 10. 17  ibid, 5–6. 18  ibid, 10. 19  ibid, 10. 20  ibid, 2–4. 21  ibid, 10. 16 

The ‘Fitness Check’ of the MCAD and UCPD 111 Member States. The revised rule on comparative advertising will continue to be based on full harmonisation.22 Based on the terms of reference of the Fitness Check:23 1. The effectiveness of the MCAD in eliminating obstacles to the internal ­market, such as: —— the effects of the divergences between national laws due to the minimum harmonisation approach in the MCAD as regards misleading advertising, including the costs to traders to adapt their commercial practices when selling in different EU markets; —— whether the application of the principle-based approach under the MCAD in different Member States shows disparities in the understanding of its principles and, if so, whether these disparities have an impact on cross-border trade; —— whether the minimum harmonisation character of provisions on misleading advertising represents a barrier to cross-border trade; and —— whether the fully harmonised provisions on comparative advertising provide an appropriate legal framework in cross-border trade for advertising where a competitor or a product offered by a competitor can be identified; 2. The effectiveness of the MCAD (ie the national laws transposing them) for business protection, such as: —— the scope of protection under the MCAD, in particular whether limiting the scope to the notion of ‘advertising’ provides effective protection for businesses or whether the scope should cover all types of commercial practices before, during and after a transaction; —— the effects of the minimum harmonisation provisions on misleading advertising; —— the overall effectiveness of the principle-based approach to misleading advertising; —— the practical benefits of a possible Black List and its application in practical cases; —— the effects of the full harmonisation provisions on comparative advertising; and —— whether the comparative advertising rules provide an effective legal framework for modern types of marketing where a competitor or a product offered by a competitor can be identified. As mentioned, the UCPD is a full harmonisation directive covering all B2C commercial practices before, during and after a commercial transaction. The concept

22 

ibid, 3.

23  ‘Tender

Specifications Attached to the Invitation to Tender’ JUST/2015/RCON/PR/CO02/0112, study to support the Fitness Check of EU consumer law

112  Bert Keirsbilck of ‘business-to-consumer commercial practices’ is defined particularly widely. In the UCPD Communication, the Commission stressed that the directive covers practices not only at the marketing stage of a transaction, but also during and after the transaction in relation to the product.24 The Commission did not, however, discuss the application to and the potential need for further regulation of practices outside of any contractual relationship. In addition, the Commission stated that the benefits of the directive to a great extent stem from its combination of principle-based rules with a Black List of specific prohibitions of certain unfair practices. Its principle-based rules have proved particularly effective in allowing national authorities to adapt their assessments to the rapid evolution of products, services and selling methods. In turn, the Black List of practices banned in all circumstances has provided national authorities with an effective tool to tackle common unfair practices.25 The Black List has proved to be a useful tool in the hands of national enforcers, because there is no need to apply the transactional decision test in order to take action.26 The Commission concluded that there was no need to amend the Black List.27 In the UCPD Report, the Commission also stressed that the UCPD’s full harmonisation character has considerably improved consumer protection in and across the Member States, while better protecting legitimate businesses from competitors who do not play by the rules.28 The directive has simplified the regulatory environment and helped to remove obstacles to cross-border commerce by replacing the divergent regulations of the Member States on unfair commercial practices with a single set of rules.29 Article 3(9) UCPD provides for an important limitation on the full harmonisation character of the UCPD by stating that, in relation to financial services and immovable property, Member States may impose requirements which are more restrictive or prescriptive than this directive in the field which it approximates. Thus, minimum harmonisation applies to these two sectors. As Recital 9 explains, ‘financial services and immovable property, by reason of their complexity and inherent serious risks, necessitate detailed requirements, including positive obligations on traders’. One study on the application of the UCPD in the fields of financial services and immovable property showed that Article 3(9) has been widely used throughout Europe.30 The study concluded that it would not be appropriate to remove the exemption under Article 3(9) UCPD.31 In the UCPD 24 

UCPD Report, 9. UCPD Communication, 3; UCPD Report, 29. 26  UCPD Report, 19. 27  ibid 20. 28  UCPD Communication, 9; UCPD Report, 29. 29  UCPD Communication, 3; UCPD Report, 4 and 30. cf Recitals 12 and 13 UCPD. 30  See ‘Study on the Application of the Unfair Commercial Practices Directive to Financial Services and Immovable Property Conducted by Civic Consulting on Behalf of the European Commission’ (DG Justice, 2012), available at http://ec.europa.eu/justice/consumer-marketing/document 31  UCPD Communication, 6; UCPD Report, 26. The main reasons are: the higher financial risk in respect of financial services and immovable property (as compared to other goods and services); 25 

The ‘Fitness Check’ of the MCAD and UCPD 113 ­ ommunication, the Commission stated that there is no case for removing, but a C strong case for keeping, Article 3(9) UCPD.32 In the context of the Fitness Check, a fresh analysis will be made of the effectiveness of the UCPD: 1. The effectiveness of the UCPD in eliminating obstacles to the internal market, such as: —— the effects of the full harmonisation provisions under the UCPD; —— whether the application of the principle-based approach under the UCPD in different Member States shows disparities in the understanding of its principles and, if so, whether these disparities have an impact on cross-border trade; —— the effects of the uniform Black List of unfair commercial practices annexed to the UCPD on the free movement of goods and services; and —— whether the minimum harmonisation derogation under the UCPD allowing national rules on financial services and immovable property represents a barrier to cross-border trade. 2. The effectiveness of the UCPD (ie the national laws transposing them) for consumer protection, such as: —— the overall effectiveness of the principle-based approach; —— the practical benefits for consumers of the Black List of unfair commercial practices annexed to the UCPD, in particular its application in practical cases; —— the practical benefits for consumers arising from the Member States’ use of the minimum harmonisation clauses for financial services and immovable property; —— the practical benefits for consumers of the ‘average consumer’ as the reference point for assessing whether a commercial practice is likely to materially distort economic behaviour; and —— the practical benefits for consumers of the specific protection of ‘vulnerable consumers’ introduced by the directive. In addition, the Fitness Check will also entail an analysis of the costs and benefits associated with the implementation of the UCPD and MCAD, and of the factors that make an efficient implementation more difficult and hamper the maximisation of the benefits.

the particular inexperience of consumers in these areas (combined with a lack of transparency, in particular of financial operations); particular vulnerabilities found in both sectors that make consumers susceptible to both promotional practices and pressure; the experience of the competent financial enforcement bodies with a nationally grown system; and finally the functioning and the stability of the financial markets as such. 32 

UCPD Report, 4 and 26.

114  Bert Keirsbilck As regards consumers, an analysis is needed of the costs, including time, in obtaining redress, and of the benefits stemming from both the minimally harmonised and the fully harmonised consumer rules. As regards traders, an analysis will be made of the costs of research, legal advice and compliance, as well as the amount of time necessary to comply with the UCPD and MCAD, and of the impact of those costs on the prices and availability of goods and services in selected markets. In addition, an analysis of the benefits of the creation of a level playing field, of the protection in B2B transactions under the MCAD and of the use of fair market practices in line with the UCPD, for instance in attracting consumers and gaining market share, will be made.

B.  Scope Ratione Personae (‘Relevance’) As mentioned, the MCAD applies only to B2B advertising; the UCPD applies only to B2C commercial practices. According to Recital 6 UCPD, ‘it neither covers nor affects the national laws on unfair commercial practices … which relate to a transaction between traders’.33 According to Recital 8 UCPD, ‘the Commission should carefully examine the need for Community action in the field of unfair competition beyond the remit of this Directive and, if necessary, make a legislative proposal to cover these other aspects of unfair competition’. In the MCAD Communication, the Commission concluded that there was a very strong call for increased protection of businesses against misleading B2B marketing practices.34 As mentioned, the Commission announced that the revised MCAD will establish a general prohibition of misleading marketing practices, as well as a Black List of the most frequent misleading B2B marketing practices. In the UCPD Communication, the Commission announced that the current ‘dualistic approach’ will be maintained: the UCPD will continue to cover (unfair) B2C commercial practices and the revised MCAD will cover only (misleading) B2B marketing practices. The Commission argued that only four Member States— Germany, Austria, France and Sweden—currently apply (with some modulation) the UCPD also to B2B relations. Moreover, the Commission suggested that the extension of the scope of the UCPD to B2B practices has been mooted in the past mainly with a view to solving the specific B2B problem of practices of misleading directory companies and that this specific B2B problem will be addressed by the ongoing review of the MCAD. Finally, the Commission claimed that the vast 33  See Commission Staff Working Paper, ‘Extended Impact Assessment on the Directive of the ­ uropean Parliament and of the Council Concerning Unfair Business-to-Consumer Commercial E Practices in the Internal Market and Amending Directives 84/450/EEC, 97/7/EC and 98/27/EC (the Unfair Commercial Practices Directive)’ SEC(2003) 724, sub 7.2, explaining why including business (in particular SMEs), in its role of purchaser, within the scope of the UCP Proposal, had been rejected, even though, in particular situations, business operators may be struck by specific disadvantages just as consumers. 34  MCAD Communication, 8.

The ‘Fitness Check’ of the MCAD and UCPD 115 majority of Member States and stakeholders did not support an extension of the scope of the UCPD to B2B practices.35 The Commission did not pay attention to two alternative options. The first alternative would be to complement the general prohibition of misleading advertising not only by a Black List but also by new general prohibitions of unfair and aggressive B2B practices. Then the MCAD would be turned into a genuine framework directive concerning unfair B2B practices. The UCPD could, of course, be an important, if not the major, source of inspiration for the drafters of such broader B2B legislation. The second alternative would be to integrate the MCAD into the UCPD, thus turning the UCPD into a single regulatory framework for both B2C and B2B practices. Hence, the problem of unfair B2B practices would be addressed by streamlining the protection of businesses and consumers under a single instrument. As part of the Fitness Check, the Commission now wants to assess the relevance of EU consumer law for transactions other than B2C. The Commission wonders whether there is a need to extend EU consumer rules to protect businesses, especially small and medium enterprises (SMEs), and in particular microenterprises. More specifically, an analysis will be made of the potential need for extending the application of the UCPD to B2B relations, in particular to contracts where customers are SMEs or not-for-profit organisations that do not qualify as ‘consumers’ under the current definition. In addition, an analysis will be made of the need for and potential of a more restricted and targeted modernisation of the existing MCAD, ie limited to marketing and pre-contractual stages of the B2B transaction. The Commission wonders, inter alia: 1. whether an extension of the UCPD to B2B transactions or a revision of the MCAD would bring benefits for cross-border trade; 2. whether it is appropriate to keep separate legal regimes for B2B and B2C transactions in the area of commercial practices and to what extent both regimes could be aligned; 3. whether the protection in B2B transactions should cover only the precontractual stage (ie misleading or aggressive marketing) or also unfair commercial practices during and after the transaction; 4. whether there is a need to have a Black List of practices in the B2B marketing area; or 5. whether there is a need to adapt the rules on comparative advertising of the MCAD. In the UCPD Communication, the Commission noted that only four Member States would want the Directive to be extended to C2B transactions, while the remainder do not support an extension. Hence, the Commission announced that

35 

UCPD Report, 10–11.

116  Bert Keirsbilck it would not amend the UCPD, but it stressed that Member States are free to regulate the area concerned to address their own national specificities and needs.36  As part of the Fitness Check, the Commission now wants to analyse the need and potential for the application of the consumer law directives in C2B relations. This concerns situations where the consumer sells goods or provides services to a trader (eg where the consumer sells gold jewellery to a trader or supplies digital content to business against remuneration). In the UCPD Communication, the Commission noted that enforcement experience shows that the main problem in relation to C2C transactions is, in reality, caused by traders disguised as consumers and hiding their real qualification/commercial intent. As such practices are already forbidden by item 22 on the Black List, the Commission argued that preventing such practices is therefore more a question of enforcement rather than a gap in the UCPD.37 As part of the Fitness Check, the Commission now wants to analyse the need and potential for the application of the consumer law directives in C2C transactions, which are becoming increasingly important due to the rise of the collaborative (sharing) economy. Issues concerning C2C transactions via collaborative economy platform (peer-to-peer (P2P) transactions) will be addressed in a separate specific study. That study will analyse national rules governing P2P transactions via platforms, the distinction between B2C and C2C transactions, and the distinction between individuals acting in a private and a professional/commercial capacity. On the basis of the findings of that study, the Commission will assess the potential need for further EU-level rules, for example on distinguishing traders from consumers on the basis of the frequency, volume or revenue of individuals’ activity in P2P transactions, or on liability for faulty performance of P2P accommodation and transportation services.

C.  Interplay with other EU Instruments (‘Coherence’) The UCPD has a ‘general’ or ‘horizontal’ nature. Article 3(4) UCPD explains the directive’s relation with sector-specific directives and was inspired by a similar rule in Article 8(2) MCAD. Where sector-specific directives conflict with the provisions of a lex generalis, the lex specialis prevails. However, the existence of specific rules in a given sector does not exclude the application of the general rules: in these cases, and in relation to all the aspects not covered by the lex specialis, the lex generalis complements these sector-specific provisions and fills any remaining gaps in the protection of consumers. As part of the Fitness Check, an analysis will be made of the interplay and the complementarity between the ‘general’ consumer

36 ibid. 37 ibid.

The ‘Fitness Check’ of the MCAD and UCPD 117 law directives (including the UCPD) and sector-specific consumer protection rules. This will include assessments of: 1. the awareness of the requirements of the horizontal EU consumer legislation by businesses, consumers and the specific public enforcement bodies in the relevant sectors, as demonstrated in particular by their practical application, distinguishing between cases where one and the same authority is responsible for the enforcement of the horizontal EU consumer law and the sectorspecific rules and cases where different authorities are responsible these two sets of rules; 2. the benefits and costs due to the complementary application of the general EU consumer legislation in the sectors concerned; 3. the extent to which the combination of horizontal consumer provisions and sector-specific rules provide for a clear and coherent legal framework; 4. any need for clarification of the interplay between the EU sector-specific rules and horizontal EU consumer law; and 5. any need for clarification of the interplay between or removal of the identified inconsistencies between EU consumer law and sector-specific EU consumer protection rules (eg overlapping information obligations that pursue the same or similar objectives). The UCPD is also complemented by other horizontal EU consumer legislation— mostly the PID, which deals with the indication of the selling price and the price per unit of measure of products offered to consumers, and the CRD, which ­contains information requirements and per se prohibitions of certain commercial practices (eg the use of ‘pre-ticked boxes’). Furthermore, the UCPD is ­complemented by other horizontal EU legislation with a consumer protection dimension—mostly the E-Commerce Directive38 and the Services Directive39—which contain in ­particular information requirements. In the context of the Fitness Check, an analysis will be made of: 1. the interplay between, on the one hand, the specific requirement of the PID to display the selling price and the unit price and, on the other, the more general information requirements under the UCPD and the CRD to indicate the prices of products;40

38 

EU Directive 2000/31/EC. EU Directive 2006/123/EC. 40  Sub-questions concern the burden for businesses arising from obligations under the PID at different stages of the transaction (ie advertising and pre-contractual stage); the consumer benefits of receiving the information required under the PID at different stages of the transaction; the effect on cross-border trade of the divergences between national laws due to the minimum harmonisation character and the use of regulatory options under the PID; and the potential benefits and burden for traders and consumers from integrating the requirements under the PID into the provisions of, respectively, the UCPD and the CRD, which would imply also applying a full harmonisation approach to these requirements. 39 

118  Bert Keirsbilck 2. the interplay between the information requirements applicable, on the one hand, in the case of an ‘invitation to purchase’ under the UCPD and, on the other hand, at the pre-contractual stage under the CRD; and 3. the interplay and the complementarity between EU consumer law and the information requirements in the E-Commerce Directive41 and the Services Directive.42

IV. CONCLUSION

Neither the MCAD Communication nor the UCPD Communication addressed all the relevant aspects of these general ‘marketing’ directives; rather, they focused on selected issues concerning the implementation and application of the directives in the Member States. Admittedly, both Communications provided a lot of relevant information in relation to the application of the directives over the past years. However, as a result of the somewhat biased selection of relevant issues in the questionnaires, the Communications unfortunately did not address certain important issues. Both Communications consistently supported the decision, probably made in advance, not to make any amendments to the UCPD and to revise the MCAD so as to include a Black List and a revised general prohibition of misleading B2B marketing practices (minimum harmonisation) and a revised rule on comparative advertising (full harmonisation). As a result, all other possible policy options seemed to be disregarded and set aside. Now, the Commission has launched a Fitness Check of EU general marketing law together with part of the EU general consumer contract law; the main evaluation criteria are effectiveness, efficiency, EU added value, relevance and coherence. Upon inspection of the general and specific questions concerning the MCAD and the UCPD, it seems that the Commission is willing to reopen the debate on the future of general EU marketing law and to reconsider certain policy options that were already set aside in the MCAD and UCPD Communications. This is to be welcomed.

41 

EU Directive 2000/31/EC. EU Directive 2006/123/EC. Sub-questions concern the awareness of businesses, consumers and public enforcement bodies of the requirements stemming from these horizontal directives, as demonstrated by their practical application; the benefits and costs due to the complementary application of their requirements and those stemming from EU consumer law; and the need for clarification of the interplay between or removal of the identified inconsistencies between EU consumer law and other EU horizontal law with a consumer protection dimension, as well between EU consumer law. This particularly concerns overlapping legal requirements (eg information obligations that pursue the same or similar objectives). 42 

7 The Impact of the UCP Directive on National Fair Trading Law and Institutions: Gradual Convergence or Deeper Fragmentation? ANTONINA BAKARDJIEVA ENGELBREKT*

I. INTRODUCTION

T

HE UNFAIR COMMERCIAL Practices Directive (UCPD, the Directive)1 was adopted in 2005 with the bold promise of putting an end to the previously lamented fragmentation of national rules in this area and achieving a high degree of uniformity of regulative standards. This ambition was clearly expressed in the Preamble of the Directive and in the various documents paving the way to its adoption. In a press release following the launch of the proposal for a directive in 2003, the Commission stated confidently: This single set of common rules will replace the existing multiple volumes of national rules and court rulings on commercial practices. This will give consumers the same protection against sharp business practices and rogue traders whether they buy from the shop around the corner or from a website in another Member State.2 (emphasis added)

More than ten years after the entry into force of the Directive, the question can be asked whether the Directive has achieved (or is close to achieving) its ambitious goals. Have national rules in this area really been replaced by a single EU standard of fairness? Can consumers rely on an equivalent level of protection in

* Funding for this research from Torsten and Ragnar Söderberg Foundation is gratefully acknowledged. 1  Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (Unfair Commercial Practices Directive) [2005] OJ L149/22. In the following referred to either as UCPD or as ‘the Directive’. 2  EU Press Release IP/03/857 (Brussels, 18 June 2003).

120  Antonina Bakardjieva Engelbrekt the 28 Member States of the European Union? Or, more generally, has the UCPD brought about harmony and coherence in European fair trading law? National courts and enforcement bodies have now lived with the Directive for a number of years. The Court of Justice of the European Union (CJEU) has delivered judgment in dozens of preliminary reference proceedings.3 In 2013 the Commission submitted its First Report on the application of the Directive (First Commission Report 2013).4 A new guidance has recently been issued by the Commission that builds on the aggregated experience of the Member States from the first years of application of the UCPD.5 Consequently, there is sufficient evidence to venture an at least preliminary assessment of the effects of the Directive. This chapter is divided into six sections. After this introduction, section II looks into the main features of the Directive, trying to distinguish, on the one hand, those characteristics that enhance uniformity and coherence of the regulative framework, and on the other hand, features and regulative techniques that may work in an opposite direction, namely preserving diversity and even increasing fragmentation. Within the latter category, particular attention is paid to three aspects, of a substantive, systemic and institutional nature, respectively. Concerning substantive law, a closer look is given to the difficulty of achieving uniformity through an open general clause. From a systemic perspective, the option to limit the scope of application of the UCPD to business-to-consumer (B2C) practices and to consumers’ economic interests is approached. From an institutional perspective, the procedural and enforcement neutrality of the Directive is revisited. While the analysis in section II is carried out at a general and abstract level, the next three sections turn to more specific examples of national implementation of the Directive, tracing how the above-mentioned substantive, systemic and institutional factors have influenced national fair trading law and regulative practice. Section III looks into the effects of the Directive on substantive law, with special focus on implementation and interpretation of the general clause. Section IV discusses the challenges to find an appropriate systemic place for the Directive in the fabric of national law. Section V seeks to establish the extent, if any, to which the UCPD has influenced institutional choice and design in the Member States. Given the limitations of time and space, this chapter does not attempt to provide a comprehensive, let alone exhaustive, comparative analysis. Rather, the account builds on examples from a few selected Member States, foremost Sweden, 3  See J Stuyck, ‘The Court of Justice and the Unfair Commercial Practices Directive’ (2015) 52 Common Market Law Review 721. 4  ‘First Report on the Application of Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market (‘Unfair Commercial Practices Directive’)’, COM (2013) 139 final (hereinafter First Commission Report 2013). 5  ‘Guidance on the Implementation/Application of Directive 2005/29/EC on Unfair Commercial Practices, Commission Staff Working Document’ SWD (2016) 163 final (hereinafter Commission Guidance 2016). The document replaces the 2009 version of the Guidance.

The Impact of the UCP Directive 121 Germany and some of the new EU Member States from Central and Eastern Europe (CEE). This selection may prima facie seem arbitrary, and is indeed to a certain extent motivated by my personal insights into these jurisdictions. However, it includes two countries that are known for their strong tradition and distinct approaches to fair trading law and law enforcement: Sweden, representing a consumer-oriented model with emphasis on public law enforcement through the Consumer Ombudsman (Konsumentombudsmannen, KO) and the Consumer Agency (Konsumentverket, KOV), and Germany—well known for its unfair competition law model, based on private law enforcement. The CEE countries, on the other hand, have experienced dynamic legislative development in this area during the last decades, chiefly under the influence of European integration, and have experimented with new institutional solutions. They can therefore be a good litmus test for the broader effects of the Directive in an institutional environment without well-established national traditions in this domain. The objective is to tentatively assess the extent to which a relatively coherent set of rules and—most of all—of enforcement practices is emerging in an ever more diverse Europe. Despite the widely proclaimed commitment to uniformity and coherence, the analysis in these three sections suggests that the Directive has produced surprisingly different effects in the individual Member States of the Union. In the sixth and final section, I reflect on the need to learn to understand and work with diversity. I touch upon some of the reasons for the persisting fragmentation. On the basis of previous comparative work of myself and others, I discuss three sources of fragmentation: the disparate character of the regulative objectives and concerns that underlie national fair trading law; the different historical paths of regulation in the EU Member States; and the variety of actors involved in rule making and enforcement. What I hope to demonstrate is that the regulation of fair trading is deeply embedded in institutional traditions and practices that have largely evolved along national lines and that show remarkable tenacity. In conclusion, some ways to ensure a functioning internal market in this unwieldy ­regulative domain are suggested.

II.  CONSTRUCTING COHERENCE THROUGH THE UCPD: AN UNFINISHED BUSINESS?

As already mentioned, the Commission had, from the very start of the legislative process, trumpeted its main regulative ambition with the UCPD, namely achieving coherence and uniformity in the law of fair trading in Europe. Indeed, the Directive uses a number of innovatory techniques in order to reach this goal. However, as any legislative act of the Union, the UCPD is a product of complex political negotiations, involving a variety of actors and institutions, often with divergent self-interest and agendas, which implies inevitable compromises and imperfect outcomes.

122  Antonina Bakardjieva Engelbrekt A.  Coherence-Enhancing Techniques Below, some of the most prominent coherence-enhancing techniques used in the Directive will be briefly mentioned:6 (i)  Horizontal Approach The UCPD is by far the most ambitious attempt to find a comprehensive solution to the problem of divergent fair trading standards across the Community. In contrast to the colourful patchwork of Community directives regulating various product-, media- and distribution-specific aspects of marketing in a vertical manner,7 which preceded the present regime, the UCPD aims at providing general solutions with an effect across business sectors. It is thus taking a horizontal approach. (ii)  Full Harmonisation Also deviating from previous legislative instruments in the field, which have been based on minimum harmonisation, the UCPD advanced a vision of full harmonisation. Thus, Recitals 14 and 15 UCPD speak respectively of ‘[t]he full harmonization approach adopted in this Directive’ and ‘the full harmonization introduced by this Directive’. Recital 11 UCPD underlines that ‘[t]he high level of convergence achieved by approximation of national provisions through this Directive creates a high common level of protection’. Recital 12 elaborates further: Harmonisation will considerably increase legal certainty for both consumers and business. Both consumers and business will be able to rely on a single regulatory framework based on clearly defined legal concepts regulating all aspects of unfair commercial practices across the EU. (emphasis added)

The concept ‘full’ harmonisation is to signify, on the one hand, a comprehensive and complete harmonisation of the subject matter in the co-ordinated field (as opposed to selective and fragmentary harmonisation). On the other hand, it involves ‘maximum harmonisation’, meaning that Member States cannot

6 A Bakardjieva Engelbrekt, ‘EU and Marketing Practices Law in the Nordic Countries: Consequences of a Directive on Unfair Business-to-Consumer Commercial Practices’, Report for the Nordic Council, 2005:424, available at www.diva-portal.org/smash/get/diva2:700919/FULLTEXT01.pdf; see also U Bernitz, ‘The Road Ahead—Present Status and Need for Reform’, chapter 12 in this volume. 7  See, eg the following product-specific directives: Directive 90/496/EEC on nutrition labelling for foodstuffs [1990] OJ L276/40; Directive 2000/13/EC on the labelling, presentation and advertising of foodstuffs [2000] OJ L109/29; Directive 2001/83/EC on the Community code relating to medicinal products for human use. Examples of media-specific directives include: Directive 2000/31/EC on electronic commerce [2000] OJ L178/1; Directive 2010/13/EU on audiovisual media services. Directives on specific marketing methods include Directive 85/577/EEC on doorstep selling [1985] OJ L372/31 and Directive 97/7/EC on distance selling [1997] OJ L144/19, both of which now form part of Directive 2011/83/EU on consumer rights [2011] OJ L304/64.

The Impact of the UCP Directive 123 set stricter requirements than those in the Directive (as opposed to minimum harmonisation). (iii)  Internal Market Clause The full harmonisation approach in the Directive is based on the so-called ‘Internal Market’ clause in Article 4. Pursuant to this provision, Member States shall neither restrict the freedom to provide services nor restrict the free movement of goods for reasons falling within the field approximated by the Directive. This clause has shown a powerful potential to wither away national regulations that are within the scope of the Directive but deviate from the Directive’s rules. Indeed, on the basis of this clause, the CJEU has in a number of judgments proclaimed various national prohibitions and restrictions as being in conflict with the Directive, once they were found to be within its regulative scope and to go beyond the level of protection set therein.8 Following a rather expansive interpretation of the scope of the UCPD, the Court found that it was not only national provisions that aimed at protecting consumers’ interests that were covered by the full harmonisation approach, but also provisions having mixed objectives, as long as consumer protection was one of the objectives. In this way, the Court arguably accorded the UCPD an effect that went beyond the original intent of the EU legislator, or at least beyond the intent of some national governments.9 (iv)  Regulative Detail Another technique directed at achieving coherence and uniformity is the considerable regulative detail in which the common standards of fair commercial practice are laid down. The Directive provides extensive definitions of the central concepts employed in the general clause and in the small general clauses on misleading and aggressive commercial practice. Thus, it purports to define abstract concepts such as ‘business-to-consumer commercial practice’, ‘material distortion of the economic behaviour of consumers’ and ‘professional diligence’. Further on, in Article 5 it sets out the main prerequisites for invoking the general clause and lists the most typical categories of unfair commercial practices, namely misleading and aggressive commercial practices. Last, but not least, the Directive features a detailed list of examples of commercial practices that are to be considered unfair in all circumstances (Annex I). These definitions and detailed rules are binding on the Member States and have to be transposed into national legislation.10 All this purports to ensure harmony and even uniformity of standards. 8 Case C-299/07 Galatea v Sanoma Magazines Belgium NV Judgment, ECLI:EU:C:2007:484, 23 April 2009; Case C-261/07 VTB-VAB v Total Belgium NV Judgment, ECLI:EU:C:2009:244, 23 April 2009; Case C-304/08 Plus Warenhandelsgesellschaft Judgment, ECLI:EU:C:2010:12, 14 January 2010. 9  Stuyck (n 3). See also Stuyck’s contribution to this volume, chapter 4. 10  An update on the national laws transposing the UCPD is available at https://webgate.ec.europa. eu/ucp/public/index.cfm?event=public.home.show&CFID=141535&CFTOKEN=9949ead5b1 53a888-27C695AA-F3BF-60DF-CAA0F1757B433802.

124  Antonina Bakardjieva Engelbrekt B.  Factors Sustaining Diversity Despite the substantial efforts to achieve a high degree of uniformity and coherence, there are a number of elements in the Directive that in fact work in the opposite direction, namely towards preserving and even enhancing diversity. Some of these aspects are of a substantive law nature and have to do with the substantive rules stipulated in the Directive (section II.B(i)). Other aspects are of a systemic character (section II.B(ii)). A third group concerns the institutional and procedural set up on which the Directive is based (section II.B(iii)). (i)  Substantive Issues: The Difficulty of Harmonisation through a General Clause A serious problem with the full harmonisation approach in the UCPD is that it builds essentially on a European general clause, prohibiting unfair commercial practices (Article 5 UCPD). General clauses are by definition open and flexible. They are notorious for the large margin of appreciation left to the enforcement bodies and notably to the courts. Usually a general clause receives concrete content and meaning only incrementally, by the slow accumulation of consistent administrative practice and case law. It may therefore be questioned to what extent achieving full harmonisation through a general clause is a realistic objective.11 (ii)  Systemic Positioning: The Distinction between B2B and B2C Despite the far-reaching ambitions of the Directive to achieve harmonisation and even uniformity of fair trading standards, it is in one respect significantly limited in scope, namely by the choice to focus on B2C relations and on the economic interests of consumers. The UCPD intentionally does not encompass commercial practices affecting exclusively competitors’ interests. Several recitals in the Directive’s Preamble make it clear that traders are not directly protected by the Directive, either in their capacity of competitors (on a horizontal plane) or in their capacity of customers and targets of commercial practices (on a vertical plane). According to Recital 6 UCPD: It 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; taking full account of the principle of subsidiarity Member States will continue to be able to regulate such practices, in conformity with Community law if they choose to do so. (emphasis added)

At the same time, Recital 6 acknowledges that the Directive indirectly protects legitimate businesses from their competitors who do not play by the Directive’s 11  In this sense, see J Glöckner, ‘Über die Schwierigkeit, Proteus zu beschreiben—die Umsetzung der Richtlinie über unlautere Geschäftspraktiken in Deutschland’ (2013) 3 Gewerblicher Rechtsschutz und Urheberrecht 224.

The Impact of the UCP Directive 125 rules and thus guarantees fair competition in the field co-ordinated by it.12 This recital was introduced in the last version of the text, apparently to appease the critics of the divided (dualist) approach adopted in the UCPD. The most important reason for taking the divided approach in the Directive is probably an institutional one. At the level of the Commission, the division of competences between different directorates at the time of drafting—notably the Consumer Protection Directorate and the Internal Market Directorate—has most likely prompted a degree of restraint when it comes to defining the regulative scope of the Directive. This is confirmed by previous experiences, whereby the proposal for a Regulation on Sales Promotions13 was driven by the Internal Market Directorate. Another reason may be the well-known UK resistance to a general clause of unfair competition with a focus on business interests.14 The divided approach could be, and has been, criticised from a number of perspectives:15 (i)

Proceeding from an analysis of economic reality, one can infer that most commercial practices that are unfair to consumers affect the interests of legitimate competitors negatively as well. This economic reality has been accounted for in the commercial practices law of a number of EU Member States, notably most of the Nordic countries, such as Denmark, Norway and Sweden, but also in Germany, Austria, Greece and many East European Member States. In these countries the regulation of business-to-business (B2B) and B2C relations is (or at least used to be prior to the Directive) integrated in one and the same piece of legislation.16 (ii) From the perspective of normative quality, many of the distinctions introduced in the Directive in order to uphold the division between B2B and B2C appear artificial and experimental. They do not have their counterpart in national market law and are therefore difficult to implement and interpret. This was pointed out by the Economic and Social Committee, which in its opinion on the proposal for a directive noted that the considerable overlaps between the draft Directive and the Misleading and Comparative Advertising Directive (MCAD)17 would complicate the current legal framework and 12  ‘This Directive therefore approximates the laws of the Member States on unfair commercial practices, including unfair advertising, which directly harm consumers’ economic interests and thereby indirectly harm the economic interests of legitimate competitors …’ (emphasis added). 13  ‘Proposal for a European Parliament and Council Regulation Concerning Sales Promotions in the Internal Market’, COM (2002) 585 final. 14  For further elaboration on the reasons for the limited scope of the Directive see A Bakardjieva Engelbrekt, ‘An End to Fragmentation? The Unfair Commercial Practices Directive from the Perspective of the New Member States of Central and Eastern Europe’ in S Weatherill and U Bernitz (eds), The Regulation of Unfair Commercial Practices under EC Directive 2005/29: New Rules and New Techniques (Oxford, Hart Publishing, 2007), 47–90. 15  See Bakardjieva Engelbrekt (n 6); see also Bernitz (n 6). 16  For the different approaches see Bernitz (ibid). 17  Directive 2006/114/EC of the European Parliament and of the Council of 12 December 2006 concerning misleading and comparative advertising [2006] OJ L376/21.

126  Antonina Bakardjieva Engelbrekt could result in inconsistencies and differences in treatment and regulation. According to the Committee, this went against the principle of legislative simplification and could reduce legal certainty.18 (iii) From the perspective of legal policy, the somewhat absurd result produced by the split between B2B and B2C commercial practices is that, in the area of marketing practices affecting traders only, Member States retain a greater margin of freedom to introduce more stringent protective rules and regulations.19 While such measures remain subject to Union law and notably to the scrutiny under the fundamental economic freedoms, an in casu control by the CJEU is certainly much less efficient. Therefore, the divergence in legal rules in this field is likely to continue to produce distortions of competition in the Internal Market.20 (iv) Finally, from the point of view of transposition of the UCPD into national law, Member States are confronted with a number of legislative dilemmas. In order to fulfil their obligations of correct transposition of the Directive, it appears that a literal transfer of many of the provisions, definitions and concepts of the UCPD into national law has to take place.21 But for countries which prior to the Directive had an integrated approach to commercial practices law, distinguishing the scope and meaning of particular provisions in the B2B and B2C domains creates serious problems. As will be demonstrated below, this choice has exerted sometimes unexpected effects, given the logic of preserving the systemic coherence of domestic law in the Member States. (iii) Institutional Aspects: Limited Guidance on Issues of Institutions and Procedures In contrast to the ambitious approach taken in the area of substantive standards, the Directive introduces few novelties when it comes to enforcement and institutional and procedural requirements.22 In this respect, the Directive remains faithful to the approach of institutional and procedural neutrality of previous consumer law directives. The UCPD recognises two main avenues of enforcement: (i) taking 18  See ‘Opinion of the ECOSOC on the Proposal for a Directive on Unfair Business-to-Consumer Commercial Practices’, COM (2003) 356 final, point 3.3.1.1. 19  See ‘Opinion of the European Consumer Law Group on the Proposed Directive on Unfair Commercial Practices’, ECLG/134/2004, 9. 20  See B Keirsbilck, ‘Toward a Single Regulatory Framework on Unfair Commercial Practices’ (2009) 20(4) European Business Law Review 507; B Keirsbilck, ‘Which Way Forward for the New European Law of Unfair Commercial Practices?’ (2013) 2 Revue européenne de droit de la consommation 233. 21  However, Germany and Austria were the only states to enter an express statement of disagreement on this point in the minutes. See ‘Statements to be Entered into the Minutes’, Council Doc 14166/04, Add 1, Rev 1 of 12 November 2004. 22  On enforcement see A Stadler’s contribution to this volume, chapter 10. cf D Poelzig, ‘Private or Public Enforcement of the UPC Directive? Sanctions and Remedies to Prevent Unfair Commercial Practices’ in W van Boom and A Garde (eds), The European Unfair Commercial Practices Directive. Impact, Enforcement Strategies and National Legal Systems (London, Routledge, 2014).

The Impact of the UCP Directive 127 private legal action in the form of judicial proceedings; and/or (ii) bringing the allegedly unfair commercial practices before an administrative authority competent either to decide on complaints or to initiate appropriate legal proceedings (see Article 11(1) UCPD). Both techniques are expressly declared compatible with the Directive and the choice between the two is left to the Member States. This dual solution reflects the dichotomy between the continental civil law approach to fair trading under unfair competition laws, on the one hand, and the public law approach with consumerist connotations characteristic of UK law and of the Scandinavian countries, on the other. The UCPD does not say anything about the courts competent to try the legal claims. These can be civil, criminal or specialised courts. The decisive requirement is that these courts act upon the (direct) action of interested persons and organisations.23 The Directive is likewise taciturn with regard to the character of the administrative agency envisaged in the respective provisions. It is clear that such authority can be designed either as a quasi-judicial body and granted competence to decide on complaints or it may act as a sort of clearing house for complaints and an advocate of the collective consumer interest, instituting appropriate legal proceedings before courts. The specific form of the agency, its mandate and its place in the system of government is, however, ultimately a matter for the Member States. Any sort of public board, directorate, ombudsman, commission or ministry can function as an administrative authority so far as it is vested with the powers envisaged in the Directive. To sum up, on the surface, the UCPD can hardly be expected to produce any major changes in national institutional and procedural solutions. This, in turn, suggests that there is persisting diversity in enforcement patterns, and arguably in the level of protection.

III.  THE IMPACT OF THE UCPD ON NATIONAL FAIR TRADING LAW AND PRACTICE: EFFECTS ON SUBSTANTIVE LAW

Having sketched out the most distinctive features of the UCPD in view of its capacity for achieving coherence in fair trading law, the following sections look into the way these factors have played out in the transposition of the Directive and the practice of fair trading law at the national level. The clearly stated full harmonisation approach in the UCPD presupposed a very close and even literal transposition of the main provisions of the Directive. Indeed, a number of Member States chose to introduce a special legislative act bearing the same (or very similar) name as the Directive and transposing its provisions almost verbatim. In the UK, the transposition was carried out through 23  Thus a civil action before criminal courts as part of criminal proceedings (an approach accepted in France) would satisfy the requirement. In contrast, an action by the public prosecutor alone would arguably be insufficient.

128  Antonina Bakardjieva Engelbrekt the Consumer Protection from Unfair Trading Regulations 200824 following the traditional UK approach of keeping the provisions of implemented EU Directives clearly separated from the rest of national law. Likewise, in Poland, the Directive was transposed through the Prevention of Unfair Market Practices Act of 2007,25 despite the already existing legislation in the area of unfair competition and consumer protection.26 Other countries that, according to the First Commission Report 2013, have applied a similar approach are Portugal, Romania, Hungary, Cyprus, Slovenia, Slovakia, Estonia, Ireland, Luxembourg, Latvia, Lithuania and Greece.27 This picture of overwhelming commonality is, however, only part of the story. A few, but quite influential, countries have taken a rather relaxed approach to the process of transposition, preferring to adapt the text of the Directive to their well-established regulative traditions in this domain (section III.A). In addition, the method used for fleshing out and interpreting the general clause seems to be another source of persisting divergence (section III.B).

A.  Half-hearted Implementation of the UCPD The Member States which opted to accommodate the Directive’s rules to established national approaches and concepts in this area are typically states with distinctive and long-standing traditions in fair trading law. Prime examples are Germany, Sweden and Belgium. The process of transposition in these countries implied not only deviations from the text of the Directive in specific technical details, but, more problematically, deviations from, or pure omissions to transpose, some of the main criteria of the general clause. In its original proposal, the Commission proclaimed the general prohibition of Article 5 to be ‘the essential element of the Directive’. It expected the prohibition to replace ‘the existing national general clauses in relation to unfair commercial practices between business and consumers’ and to establish ‘more precise criteria for determining what is unfair than any existing national general clause’.28 If this intention was to be taken seriously, then the general prohibition should have been transposed literally into the national law of the Member States, allowing no room for deviations.29 24  The Consumer Protection from Unfair Trading Regulations, 2008 No 1277, available at www. legislation.gov.uk/uksi/2008/1277/pdfs/uksi_20081277_en.pdf. 25 Act of 23 August 2007 on Prevention of Unfair Market Practices (in Polish: Ustawa o przeciwdziałaniu nieuczciwym praktykom rynkowym, PNPRU). Available in English at https://www. uokik.gov.pl/consumer_protection.php. 26  See Act of 16 April 1993 on Combating of Unfair Competition (Ustawa o zwalczaniu nieuczciwej konkurencij, ZNKU) and Act of 16 February 2007 on Protection of Competition and Consumers (Ustawa o ochronie konkurencji i konsumentów, OKiKU). The legal acts are available in English at www.uokik.gov.pl/consumer_protection.php. 27  See First Commission Report 2013 (n 4), 3. 28  ‘Opinion of the ECOSOC’ (n 18) Explanatory memorandum, para 49. 29  H Köhler and T Lettl, ‘Das geltende europäische Lauterkeitsrecht, der Vorschlag für eine ­Richtlinie über unlautere Geschäftspraktiken und die UWG-Reform’ [2003] Wettbewerb in Recht und Praxis 1019, 1035.

The Impact of the UCP Directive 129 But even these central pillars of the Directive were not fully incorporated into national legislation in some Member States. (i)  Germany and Sweden in an Effort to ‘Domesticate’ the Directive In Germany, a consciously conservative implementation approach was signalled in the preparatory works to the legislative act aimed at transposing the UCPD in German law. In 2004, only a year before the Directive was enacted, the country had adopted a new national Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb, UWG), replacing the century-old UWG of 1909, and carrying through a major overhaul of German unfair competition law. This reform had already been underway when the Commission published its proposal for a directive in 2003. Consequently, the 2004 UWG had been drafted in anticipation of the new EU Directive and partly followed the latter’s structure.30 The German government was therefore confident that only minor changes would be needed to meet the UCPD’s requirements. In the words of one representative of the Ministry of Justice, ‘the German law maker was in many respects ahead of its time’.31 The ministerial draft (Referentenentwurf) underlined this overall congruence and found no need for specific implementation of a number of concepts in the UCPD.32 The government bill (Regierungsentwurf) went somewhat further in trying to ensure the compatibility of German law with the Directive, but nevertheless stressed the need to remain loyal to the well-proven German approach and in particular to the triad of policy objectives laid down in § 1 UWG (protection of the interests of the consumers, the competitors and the general public). Still, the Federal Council (Bundesrat) expressed its disappointment that the government was no longer pursuing the initially announced ‘leanest possible’ approach to implementation.33 Eventually, the final legislative act was closer to the Directive than originally intended, but some of the central concepts of the UCPD, such as ‘professional diligence’ and ‘business-to-consumer commercial practice’, were nevertheless adapted to traditional German terminology.34 The prohibitions of aggressive commercial practices and of misleading omissions as transposed in the UWG showed

30  See Deutscher Bundestag, 16 Wahlperiode, Gesetzentwurf der Bundesregierung, Entwurf eines Ersten Gesetzes zur Änderung des Gesetzes gegen den unlauteren Wettbewerb, Drucksache 16/10145, 11. 31 B Timm-Wagner, ‘Die Umsetzung der Richtlinie über unlautere Geschäftspraktiken in Deutschland’ (2013) 3 Gewerblicher Rechtsschutz und Urheberrecht 245. 32 Referentenentwurf, Erstes Gesetz zur Änderung des Gesetzes gegen den unlauteren Wettbewerb, BMJ, Referat III, available at http://rsw.beck.de/docs/librariesprovider5/rsw-dokumente/ Referentenentwurf_UWG_1-BMJ/ 33 ‘Er bedauert, dass der Gesetzentwurf von der im Diskussionsentwurf vom 8. Mai 2007 und im Referentenentwurf vom 27. Juli 2007 verfolgten Linie einer möglichst schlanken Umsetzung der Richtlinie unter weitestgehender Beibehaltung der Formulierungen des UWG abweicht. Er bittet, die Abweichungen zum bisherigen Konzept des UWG im weiteren Gesetzgebungsverfahren zu überprüfen und möglichst zurückzuführen’, Stellungnahme des Bundesrates, Anlage 3, Drucksache 16/10145, 37. 34  See Erstes Gesetz zur Änderung des Gesetzes gegen den unlauteren Wettbewerb vom 22.12 2008 (Bundesgesetzblatt 2008 Teil I, No 64, S 2949ff.).

130  Antonina Bakardjieva Engelbrekt considerable peculiarities in wording and systematic place. Importantly, they did not include the more precisely formulated criteria of impact on consumer’s transactional decision in Articles 7 and 8 of the Directive.35 Instead, reference was made to the rather vaguely defined criterion of relevance in the overarching general clause of § 3 I UWG (‘likely to tangibly impair the interests of consumers’). Other differences followed from the integrated approach retained in the German UWG, and the effort to ensure coherence between the regulation of B2B and B2C factual situations. Importantly, the general clause of the 2008 UWG could, according to commentators, be interpreted in a way prohibiting B2C commercial practices that would be allowed under the UCPD.36 Finally, the Black List of the Directive was slightly revised in the UWG and consisted of 30 practices, instead of the 31 clauses of Annex I UCPD.37 In Sweden, the ambition to ‘domesticate’ the Directive was stated even more openly. In the government bill preparing the transposition, the preferred implementation approach was described as follows: ‘The starting premiss when transposing the Directive shall be to use, whenever possible, the terminology and systematics of the present Marketing Practices Act (1995:450) and other consumer legislation.’38 As to specific provisions, the general clause of the Directive was first of all recast into a positive language, preserving the already established approach in previous Swedish marketing legislation. Thus the Swedish Marketing Practices Act (marknadsföringslagen, MFL) of 2006 stipulates in Article 5 that ‘Marketing shall be consistent with good marketing practice’ (emphasis added). Only thereafter, in Article 6, does the Act lay down the prohibition of unfair marketing. Further deviation from the language of the Directive is the continued use of the well-established concept of marketing (marknadsföring) on which the Swedish MFL traditionally builds, instead of ‘commercial practice’ (affärsmetod). The question of divergent concepts was addressed in the government bill preparing the new MFL. Several consulted stakeholders, including the Swedish Consumer Agency, opined that the term ‘marketing’ (marknadsföring) was not the same as the term 35  See Art 7 UCPD: ‘if … it omits material information that the average consumer needs, according to the context, to take an informed transactional decision and thereby causes or is likely to cause the average consumer to take a transactional decision that he would not have taken otherwise’; see also Art 8 UCPD: ‘if it significantly impairs or is likely to significantly impair the average consumer’s freedom of choice or conduct with regard to the product and thereby causes him or is likely to cause him to take a transactional decision that he would not have taken otherwise’. 36  This was partly so because the consumer-oriented part of the general clause, which contained the elements of Art 5 UCPD, was formulated as an example of the overarching general clause in § 3 I UWG. See Timm-Wagner (n 31) 247; H Köhler, ‘Die Umsetzung der Richtlinie über unlautere Geschäftspraktiken in Deutschland—eine kritische Analyse’ (2012) 11 Gewerblicher Rechtsschutz und Urheberrecht 1073, 1076. 37  The clause on unsolicited telephone marketing was integrated in § 4, No 6 UWG; see Köhler (ibid). 38 ‘Vid genomförandet av direktivet om otillbörliga affärsmetoder bör utgångspunkten vara att i möjligaste mån använda den terminologi och systematik som finns i den nuvarande marknadsföringslagen (1995:450) och i annan konsumenträttslig lagstiftning’, Prop 2007/08:110, 57.

The Impact of the UCP Directive 131 ‘commercial practice’ (affärsmetod).39 Nevertheless, the government insisted on preserving the time-honoured and familiar terminology, though indicating that the old concept had to be interpreted in conformity with the UCPD. Among others, the previously valid understanding that the concept ‘marketing’ only related to actions and omissions in the course of pre-contractual relations had to be revised and the concept had to be extended to after-sales situations.40 Another concept that was not transposed verbatim is that of ‘professional diligence’. Instead of the more literal translation god yrkessed, the Swedish government preferred the accepted term god marknadsföringssed (good marketing practice). Finally, the legislator did not find it necessary to introduce an express reference to the concept of the average consumer, since this concept was already highly familiar to Swedish marketing practices law.41 Similar flexibility was employed in the transposition of other provisions of the UCPD.42 When defending a flexible approach to implementation despite the full harmonisation character of the Directive, both Sweden and Germany have sought support in the very nature of the instrument of harmonisation, namely a directive.43 Thus, in the government bill for the new MFL, the Swedish government recalls that, following Article 288 TFEU, a directive is binding upon Member States as to the results to be achieved, but allows them to choose the forms and methods of implementation. The government interprets this Treaty provision as implying that Member States are not bound by ‘things like the directive’s terminology and systematics, if the result pursued could be achieved by different terminology and systematics’.44 Similar arguments were advanced by the German Ministry of Justice, stressing that, in contrast to a regulation, a directive does not require literal transposition, even if it aims at full harmonisation.45 The German government went so far as to include, at the final stage of negotiations of the UCPD, an official statement insisting that the regulatory autonomy granted to Member States under Article 288(3) TFEU should also apply in relation to the Directive’s Black List.46 More generally, national governments have argued that building on systematics and terminology that is familiar to local stakeholders and enforcement institutions is an approach that is more apt to give full effect to the Directive and

39 

ibid 62. ibid 63. 41  ibid 68. On the problematic aspects of this omission see U Bernitz, ‘The Unfair Commercial Practices Directive and the Legislation Implementing it in Sweden: A Comparison’ in HH Lidgard (ed), National Developments at the Intersection Between Intellectual Property Law and Competition Law, Swedish Studies in European Law, vol 3 (Oxford, Hart Publishing, 2011) 241, 252. 42  For instance, not all of the aspects of misleading commercial practices were included in the enumeration; the prohibition of aggressive commercial practices was much more concisely transposed in § 7 MFL, etc. 43  See Timm-Wagner (n 31) 246, fn 16. 44  See Prop 2007/08:115, 56. 45  Timm-Wagner (n 31) 246. 46 Erklärung Deutschlands zur Richtlinie über unlautere Geschäftspraktiken, Ratsdokument 7860/05, ADD 3 v 13 April 2005. 40 

132  Antonina Bakardjieva Engelbrekt to ensure the results pursued are achieved. In this vein, the overly extensive and detailed style of the Directive had to be adapted to the more abstract and general style of German law.47 Or, the negative wording of the Directive had to be recast in positive wording to match the established benevolent language of Swedish ­marketing regulation.48 (ii)  A Tug-of-War with the Commission Probably not surprisingly, such a relaxed attitude has not been readily accepted by the Commission, especially in view of the full harmonisation ambition of the UCPD. Starting as early as 2010, the Commission opened a series of EU Pilot procedures against selected Member States, notably Belgium, Germany and Sweden, to inquire into possible infringements of EU law on grounds of incorrect implementation of the UCPD.49 In the framework of the structured dialogue with the Commission under the EU Pilot procedures, Member States were given an opportunity to explain their positions.50 Both Germany and Sweden claimed to have correctly implemented the Directive. They continued to defend the superiority of an implementation approach, which shows sensitivity to national traditions and established terminology. Also, they sought to demonstrate that national courts were applying the relevant provisions of national law correctly with the help of general principles of law such as proportionality and loyal interpretation, thus ensuring the full effect of the Directive.51 In addition, the German and Swedish national governments insisted that the Commission should show respect for traditional national methods of law making and interpretation. In the case of Sweden, the importance of preparatory works was pointed out. Following the phase of early settlement, and despite the extensive explanations by the Swedish government, the Commission extended a letter of formal notice, thus opening a formal infringement procedure.52 In its letter, the Commission stressed the full harmonisation character of the Directive, as extensively interpreted and supported by the CJEU. While acknowledging differences in national legislative methods and traditions, the Commission highlighted the particular importance of having in place national rules that reflect the content of the 47 

Timm-Wagner (n 31) 246. Prop 2007/08:115, 68. Germany see the letter of 12 December 2011, discussed in O Sosnitza, ‘Der Regierungsentwurf zur Änderung des Gesetzes gegen den unlauteren Wettbewerb’ (2015) 4 Gewerblicher Rechtsschutz und Urheberrecht 318; for Sweden see the letter of 27 July 2012, EU Pilot 3835/12/JUST (on file with the author). 50  On EU pilot procedures see European Commission, ‘Second Evaluation Report on EU Pilot’, SEC (2011)1629/2. 51  On Germany see Sosnitza (n 49); Timm-Wagner (n 31). On Sweden see reply to the Commission, letter of 24 January 2014. 52  Letter of formal notice, infringement procedure 2014/132, European Commission, C (2014) 6679 final, 25 September 2014 (on file with the author). 48 

49  On

The Impact of the UCP Directive 133 Directive with the necessary clarity and legal certainty, not only for Swedish actors, but also for traders from other Member States who want to reach Swedish consumers. The threshold set by the Commission for accepting preparatory works and general principles as methods of implementation of the rules of a directive is very high. National governments have to demonstrate that national courts, on the basis of preparatory works, interpret and apply national law in full accordance with the Directive, but also that this is well known and predictable for all actors. Relying only on case law as a way of implementation is not accepted.53 In its exchange with the Commission in 2014, the Swedish government grudgingly defended the position that, although the transposition had not been literal, the actual practice and application of the MFL were in full compliance with the UCPD.54 The government provided examples from the case law of the Market Court indicating that the Court interprets the concept ‘marketing’ (marknadsföring) in conformity with the Directive. One can, however, express certain scepticism as to the convincingness of such arguments. For instance, the concept ‘marketing’ has been traditionally understood in Sweden as extending to precontractual relations only. Although it is now clear that the Swedish MFL also applies to post-contractual relations, retaining the old concept may have a certain conserving effect as to the types of situations that are brought before the courts. It is worth noting that so far very few (if any) cases have concerned post-contractual relations.55 The only criticism that the Swedish government accepted was the need for clarification of the rules on aggressive marketing practices.56 As with other provisions of the UCPD, the transposition of Articles 8 and 9 of the Directive had been carried out by keeping some of the details—namely the factors to be taken into account when determining whether there is harassment, coercion or undue influence—in the preparatory works. The Commission made its usual objection that such method of transposition did not ensure conformity with the Directive with sufficient certainty. In contrast to other instances of transposition through preparatory works, case law in this area had been very limited, and the Swedish government could not demonstrate that actual practice was in compliance with the UCPD. Therefore with an amendment of 2016, a new Article 7a was added to the Swedish MFL which closely follows Article 9 of the UCPD.57 The German government was more receptive to the criticism than the Swedish one. In response to the infringement proceedings initiated by the Commission, it conceded that major amendments in the UWG were needed in order to achieve

53 

ibid 4. Reply to the Commission, Dnr Fi2015/00041/KO, 26 November 2014 (on file with the author). 55  See HM Holtz, ‘Oskäliga avtalsvillkor som otillbörlig marknadsföring’ [2016] Svensk Juristtidning 389. 56  Reply to the Commission, Dnr Fi2015/00041/KO (n 54). 57 SFS 2016: 22, see Government Bill, Prop 2015/16:46 Ändring i reglerna om aggressiv ­marknadsföring, 9. 54 

134  Antonina Bakardjieva Engelbrekt systemic consistency and to bring German legislation closer to the language of the UCPD.58 During the debates in the German Parliament, the government emphasised that the reform did not aim to introduce any changes in substance. German courts were said to be applying the Directive in a very loyal and correct manner. The more limited objective was to codify this jurisprudence and to clarify the legal situation.59 Nevertheless, following the advice of experts from academia and from the judiciary, the German Bundestag ventured to undertake a more daring reform, going beyond cosmetic adjustments and attempting to achieve greater consistency with the Directive. A number of the deviating concepts in the UWG were adapted to the language and conceptual apparatus of the UCPD (eg the concept of professional diligence and the concept of commercial practice). The experts had also recommended a more radical refurbishment of the German UWG and ensuring systemic clarity and cohesion through more distinct separation of the rules relating to B2B and B2C commercial practices.60 In this respect, the reform introduced some distinctions, but was arguably less successful, leaving a number of uncertainties (see below). All in all, it appears remarkable that, despite its clearly stated full harmonisation objective, the language and terminology of the UCPD have not been followed by all Member States. National law makers have insisted on retaining the power to adapt the Directive to their legislative traditions. What is evident is that the promised automatic withering away of national general clauses and provisions cannot be taken for granted. In the screening procedures, the Commission has paid a lot of attention to this aspect of terminological exactness and consistency, showing little tolerance for deviating national traditions and styles. This insistence on language and terminology appears, however, misguided. As succinctly observed by Ohly, there is certain irony in the fact that the Commission has opened infringement proceedings against some of the Member States, like Germany and Sweden, with the longest tradition in the domain of unfair trade practices law, where this complex of rules and regulations is heavily invoked by market actors and applied by national courts. In contrast, when a Member State like the UK transposes the UCPD verbatim, but the implementing Regulations remain by and large a dead letter, this provokes no objections.61 It is submitted that, rather than trying to ensure an exact match in wording, the efforts of the Commission should be directed at meeting the real challenge, namely achieving workable integration of the UCPD 58 

Deutscher Bundestag, Plenarprotokoll 18/133, 5 November 2015, 13046–50, 13046.

59 ibid.

60 A Ohly, ‘Nach der Reform ist vor der Reform. Anmerkungen zum Referentenentwurf eines Zweiten Gesetzes zur Änderung des UWG’ (2014) Gewerblicher Rechtsschutz und Urheberrecht 1137; A Ohly, ‘Der Schutz unternehmerischen Interessen im Lauterkeitsrecht. Empfehlungen an den Gesetzgeber und die Politik’ (2015), available at https://www.bihk.de/bihk/Anhaenge/bihkrepository/ gutachten-uwg-reform-2015.pdf; Timm-Wagner (n 31). 61  Ohly, ‘Nach der Reform‘ (ibid) 1138. For further criticism of this insistence on literal transposition see F Henning-Bodewig, ‘Der Schutzzweck des UWG und die Richtlinie über unlautere Geschäftspraktiken’ (2013) 3 Gewerblicher Rechtsschutz und Urheberrecht 238.

The Impact of the UCP Directive 135 into the fabric of national fair trading law and reasonable equivalence in the level of enforcement. These issues are addressed in the remainder of this chapter.

B. Methodologies of General Clause Interpretation and the Standard of Professional Diligence Arguably, a greater risk for the full harmonisation objective of the UCPD lies in the divergent methods of interpretation and application of the general clause. Certainly, the Directive painstakingly defines the main criteria for determining unfairness under the general clause, like professional diligence and material distortion of consumer economic interests. However, these criteria inevitably remain open and require further concretisation. The UCPD itself invites enforcement bodies to seek support in external sources when it defines ‘professional diligence’ as ‘the standard of special skill and care … commensurate with honest market practice and/or the general principle of good faith in the trader’s field of activity’ (emphasis added). Following well-established jurisprudence of the CJEU, a concept used in a directive should in principle be given autonomous and uniform interpretation.62 Yet, as noted by Micklitz, there is no uniform European standard of professional diligence.63 The UCPD therefore seems to allow taking as a benchmark a national, a European or an international standard. The problem is that national courts and enforcement bodies have historically developed different techniques and methods for concretisation of the general clause, relying on different sources. Among the most important ones are (i) codes of business conduct; (ii) statutory obligations in other legislation; and (iii) agency guidelines. (i)  Codes of Business Conduct Codes of business conduct are one source for fleshing out the general clause, which the UCPD expressly allows and even encourages (see Recital 20 and Article 10 UCPD).64 Such codes undoubtedly represent a traditional means of ascertaining the content of ‘honest market practice … in the trader’s field of activity’.65

62  See Case C-106/89 Marleasing v Comercial Internacional de Alimentación ECLI:EU:C:1990:395; Case C-441/93 Pafitis ECLI:EU:C:1996:92, paras 68–70; Case C-231/13 Deckmyn and Vrijheidsfonds ECLI:EU:C:2014:2132. 63  H-W Micklitz, ‘UGP-Richtlinie Art 5: Nationale, europäische und internationale berufliche Sorgfaltspflichten’ in Münchner Kommentar zum Lauterkeitsrecht, 2 edn (Munich, Beck, 2014) paras 29–31. 64  I am not referring here to the more narrow case of non-compliance with publicly announced corporate codes, which is one situation of misleading commercial practice specifically mentioned in the Directive (see Art 6(2)(b) UCPD). On codes of conduct see J Trzaskowski, chapter 5 of this volume. 65  Also the recent Commission Guidance when commenting on the concept of professional diligence emphasised that ‘the notion encompasses principles which were well-established in the laws of the Member States already before the adoption of the UCPD, such as “honest market practice”, “good faith” and “good market practice”. These principles emphasise normative values that apply in the ­specific field of business activity.’ See Commission Guidance 2016 (n 5) 56.

136  Antonina Bakardjieva Engelbrekt Yet such codes have different institutional backing and scope, and are accorded different status in individual Member States. In the Scandinavian countries, the ICC Codes of Advertising Practice have gained particular prominence in marketing practices law and in the jurisprudence of the competent courts (in Sweden, the Market Court).66 The allegiance to the ICC Codes in Sweden can be explained by a long-standing tradition and strong involvement of representatives of Swedish industry in the negotiations and the drawing up of the original Codes back in the 1930s.67 The ICC Codes are often invoked by parties as evidence of the standard of honest commercial practice and are accepted by the Market Court as an authoritative source of interpretation of the general clause. For instance, with reference chiefly to the Codes, a strict standard is maintained in respect to using superlatives and exaggerations in advertising. Traders are required to be able to substantiate their claims, even when these are of a rather abstract nature.68 After entry into force of the UCPD, certain loosening of the standard was expected, in particular given the explicit proviso in Article 5(3) UCPD referring to traders’ ‘legitimate advertising practice of making exaggerated statements or statements which are not meant to be taken literally’. The so-called ‘transactional test’ was also expected to lower the standard of fairness. However, while some decisions of the Market Court indeed seemed to go in this direction,69 with reference to the Codes, the overall standard continues to be high; something that has provoked criticism in the literature.70 Invoking the ICC Codes as a basis of the standard of fair trading appears prima facie unproblematic, given that they are widely acknowledged as a result of international co-operation and agreement between economic actors. Yet the Codes are far from being equally accepted in all EU Member States. Germany has been notoriously resistant to self-regulation in this domain and there is no developed practice of invoking codes of conduct in judicial proceedings as indications of the standard of fairness.71 In contrast, the UK is well known for relying almost exclusively on self-regulation in the area of advertising. The standards there are, 66 

See Trzaskowski (n 64). A Bakardjieva Engelbrekt, ‘Fair Trading Law in Flux. National Legacies, Institutional Choice and the Process of Europeanisation’ (Stockholm, US AB, ac diss, 2003). 68  See A Bakardjieva Engelbrekt, ‘Unfair Competition Law in Sweden’ in Henning-Bodewig (ed), International Handbook on Unfair Competition (Munich/Oxford, Beck/Hart Publishing, 2013) 528; A Bakardjieva Engelbrekt, ‘The Scandinavian Model of Unfair Competition Law’ in R Hilty and F Henning-Bodewig (eds), Unfair Competition Law in the New Member States of the European Union: Impulses for Europe (Berlin, Springer Verlag, 2007) 161–81; cf U Bernitz, Svensk marknadsrätt, del II: Marknadsföringsrätten (Stockholm, Norstedt juridik, 2013) 84 and 90. 69  See MD 2010:28—L’Oreal: an advertising claim that a skin cream was ‘the source to a healthy skin’ was accepted as a claim that was not meant to be taken literally according to Art 5(3) of the Directive. 70  See, eg MD 2009:38—Elgiganten (‘cheapest in everything’) and MD 2010:8—Volvo (‘the safest in the world’). See also MD 2013:16—Bauhaus (‘where better products cost less’). For a critical assessment see Bernitz (n 68) 93. 71  See A Beckers, ‘Taking Corporate Codes Seriously. Towards Private Law Enforcement of Voluntary Corporate Social Responsibility Codes’ (Maastricht, ac diss, 2014) 176ff. 67 

The Impact of the UCP Directive 137 however, set out in national codes of advertising practice, elaborated within the framework of a national self- and co-regulatory system, which is managed by the Advertising Standards Authority (ASA).72 Certainly, the ASA works in full awareness of the UCPD and strives to uphold compatibility between the Codes and the Directive. Nevertheless, the diversity of codes and the wide spectrum of national attitudes to self-regulation are hardly conducive to coherence. (ii)  Breach of Statutory Duty as Unfair Commercial Practice Another method for fleshing out the contents of the general clause of the UCPD, with potentially disruptive effects for the goal of coherent interpretation, is the doctrine of breach of statutory duties. According to this doctrine, acts by traders committed in breach of legal obligations established in other relevant legislation can be enjoined as acts of unfair competition (or, according to the present terminology, as unfair commercial practice). The doctrine is recognised in almost all Member States of the Union.73 In Germany, the accepted term is Vorsprung durch Rechtsbruch ([competitive] advantage through breach of law). The same concept is used in Austria.74 In Sweden, one speaks of lagstridighetsprincipen (or the ‘principle of unlawfulness’).75 In the UK, breach of statutory duties is an established tort.76 In France and Belgium, the doctrine is also recognised under the tort of concurrence déloyale.77 Yet, although on the surface it may appear that there is commonality of approach, in fact the scope, prerequisites for application and effects of the doctrine are widely divergent. For one, the types of legal obligations that are indirectly enforced through this action are of a very different nature. More importantly, different actors and institutions are making use of the doctrine, partly depending on the structure of enforcement in individual Member States. In Germany, the doctrine of unfair competition through Rechtsbruch has a history dating back to the very early years of the first UWG of 1909. Initially, both legal scholars and jurisprudence treated the possibility of extending the general clause through recognising breach of statutory duties as an act of unfair competition cautiously.78 Subsequently, the courts changed course and accepted broader scope for this category of violations of the general clause, while legal scholarship 72  UK Code of Non-Broadcast Advertising, Sales Promotion and Direct Marketing and the UK Code of Broadcast Advertising, available at http://www.cap.org.uk/Advertising-Codes.aspx. See Beckers (ibid)179ff. 73  See the country reports in H Harte-Bavendamm and F Henning-Bodewig, UWG Kommentar, 3rd edn (Munich, Beck, 2013) and in Henning-Bodewig (n 68). 74  R Wiebe and A Heidinger, ‘Austria’ in Henning-Bodewig (n 68) 125–26. 75  Probably a more adequate translation in English would be ‘the principle of legality’, but I have chosen to retain the somewhat awkward, negative wording used in Swedish law. 76 A Ohly, Richterrecht und Generalklausel im Recht des unlauteren Wettbewerbs (Cologne, Carl ­Heymanns, 1997). 77  See Henning-Bodewig, ‘Belgien’ and ‘Frankreich’ in Harte-Bavendamm and Henning-Bodewig (n 73), paras 35 and 195 respectively. 78  See R Callmann, Der unlautere Wettbewerb, 2nd edn (Mannheim, J Bensheimer, 1929) 130ff with reference to case law from the Reichsgericht.

138  Antonina Bakardjieva Engelbrekt provided theoretical justification through the theory of undue competitive advantage. According to influential scholars at the time, the logic behind the doctrine was that when traders violate statutory duties outside the scope of the UWG, they typically gain undue competitive advantage over law-abiding competitors.79 This generous interpretation opened a floodgate of lawsuits, turning the institute of Vorsprung durch Rechtsbruch into one of the most popular grounds for litigation between competitors.80 With an increased number of court decisions interpreting infringements of various statutory duties as acts against good morals, the judiciary sought a more nuanced approach. One such dogmatic distinction was that between value-laden (wertbezogen) and value-neutral (wertneutral) norms. By identifying norms that ‘didn’t have anything to do with the general moral perceptions’ and were more of a pragmatic, state expediency nature, the courts tried to prevent the expansion of this cause of action out of proportion.81 Even here, however, the line was not drawn sharply. While the breach of value-neutral norms was not regarded per se as contra bonos mores, it could nevertheless be considered to accord an undue competitive advantage to the infringer under particular circumstances, like when the infringement was conscious and planned.82 The broad opportunity that the doctrine of Rechtsbruch opens for competitors and their associations in terms of mutual policing produced countless decisions enforcing through private lawsuits a range of public law norms and statutes. Among the most popular areas of application of the doctrine in the past were the Rebates Act (Rabattgesetz) and the Closing-Times Act (Ladenschlussgesetz).83 Despite the latter act being qualified as value-neutral, the courts found situations of undue competitive advantage to exist.84 Interestingly, infringement of consumer protection legislation was consistently considered as value-neutral and therefore not constituting ground for applying the doctrine of Vorsprung durch Rechtbruch, something that was criticised in legal doctrine.85 Institutionally, the flourishing of lawsuits under the Rechtsbruch doctrine was closely associated with the smooth and facilitative structure of private enforcement under the UWG (see section V.C below). The doctrine was considered a

79  E Ulmer, Sinnzusammenhänge im Recht des unlauteren Wettbewerbs (Berlin, Julius Springer, 1932). On the historical development see G Schricker, Gesetzesverletzung und Sittenverstoß (Munich, 1970). 80  Schricker (ibid). 81  The distinction was first introduced by the Imperial Court (Reichsgericht) and lived on through legal practice and legal doctrine. On this development see Bakardjieva Engelbrekt (n 67) 148ff; cf J Glöckner, ‘Wettbewerbsbezogenes Verständnis der Unlauterkeit und Vorsprungserlangung durch Rechtsbruch’ [2008] Gewerblicher Rechtsschutz und Urheberrecht 960. 82  H Köhler and J Bornkamm, UWG Kommentar, 34th edn (Munich, Beck, 2016). 83  Both legislative acts were later repealed. 84  For instance, when petrol stations offered flowers for sale outside normal opening hours: see O Sosnitsa, Wettbewerbsbeschränkungen durch die Rechtsprechung. Erscheinungsformen und Ursachen auf dem Gebiet des Lauterkeitsrechts (Baden-Baden, 1995). 85  HW Micklitz, ‘Die Rechtsbruchsklage nach § 22 AGBG’ in Brönneke (ed), Kollektiver Rechtsschutz im Zivilprozess (Baden-Baden, Nomos, 2001) 89ff.

The Impact of the UCP Directive 139 legitimate way to compensate for the notorious ineffectiveness of public enforcement. However, not surprisingly, it was employed excessively by competitors and competitive associations. The mere simplicity of proving infringement of rules like those on closing times and rebates helped attract vast numbers of eager litigants, prompting debates about exaggerated, even hypertrophic, extension of the field of application of UWG. Concerns about the ensuing restrictive effects on legitimate competition were voiced in the academic literature.86 Critiques pointed out that administrative enforcement of regulatory law implied a great deal of administrative discretion and sometimes well-founded restraint—something that was absent from the private law enforcement under the UWG. The distinction between value-neutral and value-laden norms was also criticised as arbitrary and dysfunctional.87 Moreover, given the dispersed jurisdiction of the courts and the large number of courts deciding on unfair competition subject matter, there was a lack of co-ordination and harmony between the decisions of different courts. Vorsprung durch Rechtsbruch proved to be one of the most unwieldy outgrowths of the general clause of § 1 UWG. Consequently, at the time of the major overhaul of German unfair competition law in 2004, there was a widely shared perception that legislative amendments to curb the abuse of the doctrine were a matter of priority.88 The 2004 UWG included a special provision (§ 4, No 11 UWG) devoted to the factual situation of Rechtsbruch, which stipulated some additional criteria that were supposed to have a filtering and limiting function. In particular, the violation of legal rules outside the scope of the UWG could be regarded as an act of unfair competition only when the rules aimed at regulating market conduct.89 Ideally this limitation was to exclude application of the doctrine to statutory provisions of a more general regulatory character, such as tax rules, territorial and building regulations, licensing and policing regulations. In reality, however, the case law continued to develop expansively.90 In legal doctrine, sophisticated classifications developed of the legal rules, the infringement of which could trigger the application of the Rechtsbruch provision, like rules concerning the regulated professions, product-related rules, marketing rules and activity-related rules.91 The 2015 reform of the UWG preserved the requirement that the relevant rule should aim at regulating market conduct in the interest of market participants and introduced further adjustments, notably a threshold of relevance (appreciable 86 

Sosnitsa (n 84); Glöckner (n 81). Glöckner (n 81) 961. 88  See Sosnitza (n 49); Glöckner (n 81) 961; cf BGH, Gewerblicher Rechtsschutz und Urheberrecht 2000, 1076—Abgasemmissionen; BGH, Gewerblicher Rechtsschutz und Urheberrecht 2002, 825—Elektroarbeiten. 89  § 4, Abs 1, No 11 of the 2004 UWG reads as follows: ‘A trader is considered to commit an act of unfair competition in particular … 11. If he infringes a legislative provision, which aims among others at regulating market conduct in the interest of market participants’. This provision remained unchanged after the 2008 reform of the UWG, ensuring the transposition of the UCPD. 90  Glöckner (n 81). 91 See HM Holtz, ‘Lagstridighetsprincipen—Ett jämförande perspektiv’ (2015–16) 1 Juridisk ­Tidskrift 120 87 

140  Antonina Bakardjieva Engelbrekt effect). The rule on Rechtsbruch was placed in a separate article seeking to delimit more clearly its application in the B2B and B2C spheres.92 For B2C commercial practices falling within the scope of the UCPD, scholars emphasise that the infringed statutory rules have to be compatible with EU law.93 Some of the situations of Rechtsbruch are also nowadays subsumed under specific rules of the Directive, namely point 9 of the Black List, Article 7 on misleading omissions and Article 7(4) defining material information in the case of invitation to purchase. In the B2B domain, where EU law does not exert a restricting effect, the spectrum of potential market conduct rules remains generally broader. Despite the continued ambition of curbing the excesses of application of this rule, however, scholarly reviews of the case law after the implementation of the Directive indicate that the cases based on breach of statutory duty still constitute a major portion of the aggregate number of cases under the UWG. Reportedly, they reach numbers higher even than those under the prohibition of misleading advertising, which is probably the most important provision of unfair commercial practices law.94 Among the statutory provisions that are most frequently being brought before the courts under the doctrine of Rechtsbruch are rules concerning the regulated professions, in particular restrictions on the marketing of legal services,95 accounting and tax consultancy,96 medical and dental services,97 rules and regulations on pharmacies, legislation on health and safety, on price indications, etc. Obviously the legislative intent of restricting the excessive application of the provision has hardly succeeded. According to one commentator, ‘the numerous cases based on Rechtsbruch confirm the continued importance of this factual 92  § 3a Rechtsbruch: ‘Unlauter handelt, wer einer gesetzlichen Vorschrift zuwiderhandelt, die auch dazu bestimmt ist, im Interesse der Marktteilnehmer das Marktverhalten zu regeln, und der Verstoß geeignet ist, die Interessen von Verbrauchern, sonstigen Marktteilnehmern oder Mitbewerber spürbar zu beeinträchtigen.’ 93  Such compatibility is at hand in three main situations: (i) when the rules are based on EU legal instruments; (ii) when they constitute legitimate exceptions from these rules; or (iii) when they regulate areas not yet covered by EU law. See Köhler and Bornkamm (n 82) § 3a Rn 1.11–1.13. 94  J Glöckner, ‘Rechtsbruchtatbestand oder—The Saga Continues’ [2013] Gewerblicher Rechtsschutz und Urheberrecht 568; W Büscher, ‘Aus der Rechtsprechung des EuGH und des BGH zum Lauterkeitsrecht seit Ende 2014’ [2016] Gewerblicher Rechtsschutz und Urheberrecht 113. 95  BGH Gewerblicher Rechtsschutz und Urheberrecht 2015, 286, Rn 19-25—marketing of legal services; BGH, Gewerblicher Rechtsschutz und Urheberrecht-RR 2015, 108, Rn 11-15—circular by an attorney to investors. 96  BGH, Gewerblicher Rechtsschutz und Urheberrecht 2015, 1019, Rn 10—mobile accounting service; BGH, Urt v 25 Juni 2015—I ZR 145/14 (OLG Karlsruhe, question concerning the qualification of an economist who is not part of the tax consultancy profession). 97 BGH, Gewerblicher Rechtsschutz und Urheberrecht 2015 1237 (question about a new marketing model for a dentist practice); BGH, Gewerblicher Rechtsschutz und Urheberrecht 2015, 283 Rn 25 (question about advertising for a hearing aid device; the case was brought by the Zentrale zur Bekämpfung unlauteren Wettbewerbs e V); BGH, Gewerblicher Rechtsschutz und Urheberrecht 2015, 916 (question about the sale of medicines without prescription); BGH, Gewerblicher Rechtsschutz und Urheberrecht 2015, 1033 (question about the sale of individually packaged medicines); BGH, Gewerblicher Rechtsschutz und Urheberrecht 2014, 1009—pharmacies; BGH, Gewerblicher Rechtsschutz und Urheberrecht 2015, 1025 (question of whether TV advertising for medicines in the waiting room of a medical practice is in violation of the restrictions for advertising).

The Impact of the UCP Directive 141 situation’.98 It is therefore safe to assume that breach of statutory duties will continue to be one of the categories of unfair commercial practices most frequently invoked by parties before German courts, giving flesh to the bones of the general clause. Like in Germany, in Sweden compliance with legal obligations laid down in statutes other than the MFL has traditionally been considered an integral part of the standard of good marketing practice. An injunction can consequently be obtained from the Market Court to enjoin violations of such statutory duties on the basis of the general clause of good marketing practice. In preparatory works and legal doctrine, this obligation not to act against the law is called lagstridighetsprincipen, or the principle of unlawfulness. The rationale for the principle is, however, not seen to lie in the undue advantage gained vis-à-vis law-abiding competitors, but rather in the ‘right of consumers not to be forced to tolerate illegal marketing measures or to be induced to undertake unlawful actions’.99 A particularly solid support for this principle is found in the leading paragraph of the ICC Code of Advertising Practice, stating that ‘All marketing communications should be legal, decent, honest and truthful’ (emphasis added). The principle was addressed in the preparatory works to the 1995 MFL, but was considered so self-evident and well established in national law that it was not found necessary to codify it in the legislative text.100 The government bill preparing the transposition of the UCPD paid special attention to the lagstridighetsprincipen and its compatibility with EU law. The government pointed out that the principle is stipulated in the leading article of the ICC Code of Advertising Practice and shall be respected under the general prohibition of unfair commercial practices of Article 5 UCPD as part of the requirement of professional diligence. It acknowledged that this principle does not have its origin in a Community law initiative and has not been codified or clearly expressed in any of the existing consumer protection directives. The principle was, however, founded on earlier well-established commercial traditions shared by the Member States and internationally, and was seen as an expression of the general principle of legality. Therefore, an application of the principle was to be ensured within the framework of Community law as well as of national law. All in all, the importance of the principle as part of the general standard of fairness was reconfirmed. The ICC Codes on Advertising worked as a channel for integrating the principle in the Community law concept of ‘professional diligence’ (god yrkessed).101 Yet, despite the common traditions to which the government bill of 2008 was alluding, the way in which the scope of the principle is defined in Sweden shows considerable differences from the German approach. There are also differences

98 

Büscher (n 94) 113. See Government Bill to the 2008 MFL, Prop 2007/08:110, 77. See Government Bill to the 1995 MFL, Prop 1994/95:123, 43. 101  See Prop 2007/08:110, 77–78. 99 

100 

142  Antonina Bakardjieva Engelbrekt regarding the main actors who are involved in enforcement and the pattern of case law evolving on the basis of the principle. First of all, the Swedish MFL contains no general criterion as to the types of rules the infringement of which can be considered to constitute an unfair commercial practice.102 Unlike in Germany, there is no requirement for the rules to have an effect on market conduct. However, the MFL features an extensive list of legislative acts, which constitute the so-called ‘annex legislation’, the violation of which can be enjoined as being contrary to good marketing practice (cf § 1 MFL). The legislative acts on the list are primarily consumer oriented and stipulate statutory duties on marketing in particular media or business sectors, or of specific products. Many of the acts have their origin in EU law. The enumeration is not exhaustive, but it is extensive, and gives a strong indication as to the types of obligations which the legislator has envisaged to fall under the principle in the first place. Following the transposition of the UCPD in the new MFL, partial basis for the prohibition of marketing in breach of legal obligations is found in point 9 of the Black List.103 Many of the information obligations in specific regulatory acts are manifestations of the duty to provide information under Article 7 UCPD, which was transposed through 10 § MFL.104 In institutional terms, the principle of unlawfulness under the Swedish MFL has implications that are quite different from those under the corresponding doctrine in Germany. Rather than empowering private enforcement of public law statutes, the principle has the effect of extending the competences of the KO and delimiting these competences from those of other public authorities. Through the explicit reference to annex legislation, the KO is indirectly empowered to monitor a broad array of markets, and to file injunctions in cases of violation of a number of consumer protection statutes, but also of paternalist legislation on alcohol, tobacco, children, etc.105 While private litigants also enjoy standing under the MFL, in contrast to in Germany, lagstridighetsprincipen is only rarely relied on by competitors or by business associations. In any case, there have been no signs of excessive recourse to the

102 

Holtz (n 91). Prop 2007/08:110. cf from the case law of the Market Court: MD 2009:10 Canal Digital, COMHEM v Teknikkedjan; see also MD 2009:17 KO v Casa Nordica Altavista: package travel was marketed despite the trader having failed to lodge the mandatory guarantee deposit according to the Package Travel Act. The example is mentioned in the Commission Guidance 2016 (n 5), 88. 104 For instance, information about the effective credit rate, and information duties under the Distance Selling Act and the Price Information Act. See MD 2009:29 KO v Expert; MD 2007:17 KO v Mobillån Sverige 12. 105 The list includes, among others: the Act on Package Tours (1992:1672); the Tobacco Act (1993:581); the Act on Deposit Guarantees (1995:1571); the Act on Marketing of Cristal Glass (1996:1118); the Time-sharing Act (1997:218); the Act on E-Commerce (2002:562); the Price Information Act (2004:347)); the Distance Selling and Doorstep Selling Act (2005:59)); the Insurance Act (2005:104)); the Air Transport Act (2010:510); the Radio and Television Act (2010:696); the Alcohol Act (2010:1622) and the Consumer Credit Act (2010:1846). 103  See

The Impact of the UCP Directive 143 principle, and in legal doctrine no sophisticated debate as to the scope and limits of the principle can be discerned. Finally, and related to the above, the pattern of cases decided under the doctrine of breach of statutory duty in Sweden and Germany differs considerably. In Sweden, lagstridighetsprincipen has been most intensely applied to enforce prohibitions of advertising on alcohol106 and tobacco,107 prohibitions of television advertising targeting children108 and consumer protection legislation in general, for example legislation on consumer credits,109 package tours and distance ­selling.110 Most of these cases have been brought before the court by the KO. The basis nowadays is often § 10 MFL or the Black List of the UCPD. The few actions lodged by competitors have concerned marketing of illegal decoder equipment111 and marketing of medicines in breach of the Medicines Act.112 As to other, more general, regulatory or consumer law, competitors have not been particularly keen on invoking breach of statutory duties in their interest (for instance, on the basis of arguments about undue competitive advantage).113 A slight intensification may arguably be observed in recent years, raising the question of whether the experience of German economic actors can produce viral effects across the rest of the Union. It would be prohibitive to engage in further comparative elaborations in the limited space of this chapter. It suffices here to mention that in the UK the tort of breach of statutory duty requires proof that a statute has a relevant purpose of protecting the negatively affected individual interest, which is exceedingly difficult. This means that the doctrine has limited importance in practice.114 In stark contrast, in Austria, where the doctrine Vorsprung durch Rechtsbruch has a status similar to that in Germany, it is even more generously applied than in Germany: in the Austrian UWG, there is no limitation on the type of rules that can be invoked and no requirement that they aim at regulating market conduct.115 Likewise, in 106  On the marketing of alcohol, see MD 2015:7 KO v The Wine Company (mail-box marketing); MD 2014:4 KO v Berntsonsbrands (Jägermeister). 107  On the marketing of tobacco, see MD 2014:14 KO v Swedish Match. 108  See MD 2001:8 KO v TV 4 (Pokémon). 109  See MD 2010:30, 2014:7; MD 2014:18 KO v Elgiganten. 110  See MD 2005:37 KO v Optimal Telecom; MD 2015:2 KO v Swedish Online Services (SOS); MD 2010:14 KO v TeliaSonera. MD 2009:8 KO v Fordronsvärderingen i Skåne; 2012:17 PSW v KO (marketing of financial investment advice). On price indications, see MD 2004:25 KO v 3 Call Aktiebolag (price indication of contact services by SMS marketing); MD 2016:1 KO v Eniro (§ 10 MFL, material information). 111 Law 1993:1367 prohibiting certain decoding equipment. MD 2000:19, MD 2000:21; MD 2001:19; MD 2002:15 and 2002:16; MD 2003:30; MD 2004:17 STOP—Scandinavian TV Organisations against Piracy; MD 2003:27 COMHEM, Viasat et al v Flashback. 112  MD 2012:8 Nordic Drugs. See also MD 2009:33 Cederroth about unlawful use of the symbols of the Red Cross. 113  Holtz (n 91). 114  In any case, infringements of the Trade Description Act are not recognised as sufficient basis for the tort of breach of statutory duty. See F Henning-Bodewig, ‘Grossbrittanien’ in Harte-Bavendamm and Henning-Bodewig (n 73) 262. 115  See Wiebe and Heidinger (n 74) 125–26.

144  Antonina Bakardjieva Engelbrekt Belgium, a violation of basically any type of statutory provision—consumer protection rules, but also almost any kind of administrative duty—can be considered contrary to honest commercial practices and can consequently trigger a claim of unfairness, as long as the breach occurs in the course of trade.116 The doctrine finds similarly broad application in France.117 Certainly, some of the situations under a doctrine of breach of statutory duty may fall outside the scope of the UCPD, since they concern B2B relations. Nevertheless, the distinction is not always easy to draw and the difference in national approaches also has wide implications for the domain of harmonised law under the UCPD.118 Thus, the doctrine can be seen as one source of considerable dissonance in the interpretation and application of the general clause. (iii)  Agency Guidelines Finally, in countries where unfair commercial practices law is enforced by public authorities, it is not rare for these authorities to issue interpretative guidelines, often following consultation with affected stakeholders. In Sweden, the KOV has a long-standing tradition of negotiating and issuing guidelines (riktlinjer) and advisory notices (allmänna råd), which are elaborated in consultation with business representatives in the respective industry or services sector. The role of guidelines was particularly prominent during the 1970s, in the early days of the Swedish MFL. During this period, KO and KOV used the guidelines as a central instrument for defining the standard of good marketing practice and achieving voluntary compliance with this standard. The approach was quite representative for the soft corporatist model of governance predominant at the time.119 In the 1980s the excessive use of guidelines was subject to critical assessment. Some disadvantages were brought to the fore, including potential anticompetitive effects, and the costs for SMEs of participation in guidelines negotiations and of compliance with guidelines.120 Consequently, starting from the late 1980s, the importance of guidelines subsided. In the mid-1990s a general trend towards leaner government and reducing red tape led to the official replacement of ‘guidelines’ (riktlinjer) by less demanding steering documents of advisory character, the so-called ‘advisory notice’ (allmänna råd). The change of name was to emphasise the non-binding character of the documents.

116 

See Henning-Bodewig, ‘Belgien’ in Henning-Bodewig (n 68), paras 35 and 195 respectively. ibid para 195. 118  For instance, in Belgium the legal basis for bringing action for breach of statutory duties is the general clause of unfair competition stipulated in Art 95 LPMC. Although this is the general clause for B2B relations, it is accepted that under this clause traders can sue competitors for breach of consumer protection statutes. See J Stuyck, ‘Belgian Report: Example of an Integrated Approach’ in Hilty and Henning-Bodewig (n 68) 143; cf Henning-Bodewig (n 68) para 195. 119 L Lewin, Samhället och de organiserade intressena (Stockholm, Nordstedts juridik, 1992); J Hermansson, Politik som intressekamp (Stockholm Nordstedts juridik, 1993); cf SOU 1999:121. 120  See the statistics in SOU 1983:40, 59. 117 

The Impact of the UCP Directive 145 The recourse to advisory documents and guidelines nevertheless remains a firm part of the governance style of the Swedish consumer protection institutions. Examples of such guidelines are KOV’s advisory notices on marketing of alcoholic beverages to consumers,121 on marketing of tobacco and on consumer credit. It is not uncommon for preparatory works to mention existing guidance documents.122 The Market Court has also acknowledged that such guidelines and advisory notices constitute expression of the standard of professional diligence and good marketing practice. The Court recurrently refers to such documents in its decisions, for instance regarding good marketing practice in the marketing of alcoholic beverages,123 in the marketing of tobacco124 and in the marketing of consumer credit.125 A similar approach of soft administrative governance is characteristic of the other Nordic countries. The Commission Guidance of 2016 quotes a number of guidance documents issued by Scandinavian Consumer Ombudsmen, such as the Danish Ombudsman’s ‘Guidelines on Best Practices in the Telecommunications Industry’126 and ‘Guidance on the Use of Environmental and Ethical Marketing Claims’,127 and the Norwegian Consumer Ombudsman’s ‘Guidance on Labelling of Marketing in Social Media’.128 Some guidelines are issued by the Nordic Ombudsmen jointly.129 In the UK, issuing interpretative guidelines is a well-established governance approach of public authorities in general, and in the area of consumer protection in particular. General guidelines on the Consumer Protection from Unfair Commercial Practices Regulations were issued by the Office of Fair Trading and, after its dismantling, by the new Competition and Markets Authority.130 To be sure, many guidelines are nowadays elaborated on the basis of, and with reference to, European legislative and interpretative acts. These guidelines are generally drawn up in careful consideration of the Directive and of the guidance

121  See the advisory notice of the Consumer Agency on marketing of alcoholic beverages to consumers (KOVFS 2009:6). 122  See, eg Government Bill 2009/10:125, 90 with reference to KOVFS 2009:6 quoted above. 123  MD 2011:5 KO v Spendrups (question of whether combined offers could be seen as per se contrary to the requirement of moderation in the marketing of alcoholic beverages, and thus against the standard of good marketing practice); MD 2015:7 KO v The Wine Company (question of whether directto-consumer mail advertising constituted advertising in violation of the requirement of moderation). 124  MD 2014:14 KO v Swedish Match Sweden (reference to KOV’s advisory notice on the marketing of tobacco products to consumers (KOVFS 2009:7). 125  Under the old MFL, see MD 2006:20 KO v CitiFinancial Europe (good credit practice with reference to the advisory notice of KOV on consumer credit, KOVFS 2004:6). From the more recent case law of the Market Court see MD 2010:30 and MD 2014:7 KO v MediaMarkt, 11, where the Market Court mentions that the previous advisory notice of 2004 has been replaced by a new notice of 2011 and that this document should be accorded the same importance as before. 126  Commission Guidance 2016 (n 5), 62. 127  ibid 63. 128  ibid 144. 129  See, eg Guidance on Children, Young People and Marketing; Position of the Nordic Consumer Ombudsmen on social media marketing of 3 May 2012, Commission Guidance 2016 (n 5) 62. 130  See Commission Guidance 2016 (n 5) 53.

146  Antonina Bakardjieva Engelbrekt documents issued by the Commission. In this way, the Commission and national enforcement bodies mutually enhance each other’s authority. Nevertheless, there are nuances of interpretation added by the respective national agencies. If such guidelines are used too intensely, they may constitute a disturbing factor for the cohesive interpretation of the UCPD. In all of the above situations, one overarching problem is that it would be difficult to elicit a common Union-wide standard of professional diligence. Codes of conduct are often local, elaborated by representatives of industry and trade sectors, established on the territory of a single Member State. Statutory duties forming part of the standard of good market practice according to the principle of legality may differ from country to country, especially if they regulate a domain not harmonised by EU law. The guidelines elaborated by local consumer protection authorities have likewise typically limited territorial validity, depending on the jurisdiction of the agency. The question that emerges, then, is how do differing standards of professional diligence between Member States (or regions) affect the prospects for uniform implementation of the UCPD? In the course of the negotiations of the UCPD, the European Parliament had proposed an amendment (Amendment 21) according to which the concept of professional diligence was to depend on the honest practices in the country where the trader is established. After the deletion of the country of origin principle from the Directive,131 such interpretation became unsustainable. Instead, in case of conflict, the applicable standard of professional diligence should be determined on the basis of general rules of jurisdiction and private international law. Certainly, the mutual recognition principle in Article 4 will continue to act as a filter, obliging Member States to ensure the free movement of commercial practices if the latter comply with the rules of the state of origin. However, this ‘filtering’ operation threatens to be far from easy. The deciding courts would have to ascertain the standard of professional diligence not only in the country the law of which governs the commercial practice in question following conventional conflict of law principles, but also in the country of origin (if different). It has to further compare the two standards and ensure the free movement of the commercial practice if it complies with the more relaxed standard in the country of origin. Given the very individual and situation-specific assessment taking place in each lawsuit concerning an allegedly unfair commercial practice, such a prospect is hardly attractive to the courts and hardly realistic.

IV.  SYSTEMIC EFFECTS

One of the greatest challenges for national law makers when transposing the UCPD has been to find a logical and sustainable way for fitting the provisions of

131 

See Bakardjieva Engelbrekt (n 6), 21.

The Impact of the UCP Directive 147 the Directive into the systemic structure of national law. In this respect, the variation of solutions is remarkable. The First Commission Report 2013 identifies two main techniques of incorporation: 1. Some Member States have incorporated the Directive into existing laws: acts against unfair competition (Germany, Austria, Denmark and Spain), consumer codes (France, Italy, Bulgaria, Czech Republic and Malta), civil codes (the Netherlands) or specific existing acts (Belgium, Finland and Sweden). 2. Others have adopted new ad hoc laws transposing the UCPD almost verbatim (UK, Portugal, Romania, Hungary, Cyprus, Poland, Slovenia, Slovakia, ­Estonia, Ireland, Luxembourg, Latvia, Lithuania and Greece).132 Yet this twofold classification is somewhat simplistic and obscures a much broader diversity of systemic arrangements. Obviously, the effects of the Directive may differ non-negligibly, depending on whether it is incorporated into a consumer code, an act of unfair competition or a civil code. Likewise, while the countries in the second group have in common the transposition through a new and separate legislative act, the relation of these new acts with the remaining bits and pieces of the regulative landscape is far from similar across jurisdictions. From a systemic perspective, major difficulties have been associated with the choice between an integrated approach and a divided one in respect of the dichotomy between B2B and B2C commercial practices. This choice has of course been heavily influenced by previous traditions in this regulative area, the complexity being particularly high in countries where, prior to the UCPD, an integrated approach had been preferred. A. Dilemmas in Member States Preserving the Integrated Approach: Delineating the Domain of the UCPD Among the countries that chose to maintain an integrated approach, the prime examples are Germany and Sweden. Thus, in Germany, the implementation of the Directive followed clearly the objective of achieving as unified and coherent national fair trading law as possible, taking into account the interests of competitors, consumers and other market participants, and transposing the Directive in the already existing UWG.133 The superiority of this integrated approach, with deep roots in German unfair competition law, was praised in the course of parliamentary deliberations on the 2008 UWG.134 However, shaping the general clause so as to maintain the integrated approach while satisfying the UCPD’s requirements in the B2C domain proved to be a tricky task. If one wanted to avoid letting the criteria in the general clause ‘contaminate’ 132 

First Commission Report 2013 (n 4), 3. This perception is clearly expressed in the Government Bill to the latest amendment of the UWG of 2015, see Gesetzesentwurf der Bundesregierung, Bundesrat, Drs 26/15, 23 January 2015, at 5. 134  Deutscher Bundestag—16. Wahlperiode—179. Sitzung, 25 September 2008, 19226. 133 

148  Antonina Bakardjieva Engelbrekt and narrow down the scope of the clause in cases of unfair competition, then one had to find devious ways of formulating fine-tuned distinctions, which was far from easy. To this end, the general clause of § 3 UWG, as it was worded in the 2008 UWG, consisted of a first overarching paragraph, applying to both B2B and B2C relations, proclaiming that unfair commercial practices were prohibited if they were likely to tangibly impair the interests of competitors, consumers or other market participants. Then the second paragraph applied only to B2C relations and incorporated the criteria of the general clause of the UCPD, including the standard of professional care, the ‘material distortion’ threshold and the ‘average consumer’ benchmark. Yet this statutory technique for differentiating between B2B and B2C factual situations did not prove particularly successful and gave rise to considerable confusion and uncertainty.135 The effort to delineate the regulatory domains of B2B and B2C unfair commercial practices affected the wording and the systematic place of other provisions in the 2008 UWG as well. Thus, the rules on misleading and aggressive commercial practices extended to both B2B and B2C relations, but this led to a substantially modified and abridged wording of the rules. Conversely, the Black List remained applicable in B2C relations only. Apparently, the blurred dividing line between the rules on B2B and B2C commercial practices was one of the main points of critique on the part of the Commission in the course of its review of national implementation measures. The Commission insisted that the provisions regulating the relations between traders and consumers had to be more clearly separated from those regulating relations between traders.136 Responding to this critique, the German government, when proposing the most recent amendment of the UWG, stated explicitly that the reform was mainly of a systemic nature. It underlined emphatically that the bill did not seek to introduce any substantive changes beyond pure systemic adjustments. Or, in the words of the reporting MP: ‘Let me state this clearly, beyond the changes in systematics and wording, we do not seek to introduce any changes in the contents of substantive fair trading law.’137 Still, despite the ambition to introduce changes in the systematics of the UWG, the government reiterated its trust in the superiority of the integrated approach and its commitment to remain faithful to this approach: Given that the UWG has proven its worth as an Act governing in a unified manner the law of fair trading, one should remain true to the principle that the protection against unfair commercial practices of consumers as well as of competitors and other market participants should be regulated in one and the same legislative act. (my translation)138 135 

See Köhler (n 36); Ohly, ‘Nach der Reform‘ (n 60). Deutscher Bundestag—18 Wahlperiode -100. Sitzung. Berlin, 23 April 2015. 137 Statement of Dr Jan-Marco Luczak, Deutscher Bundestag—18 Wahlperiode—133 Sitzung ­Berlin, 5 November 2015, 13046. 138  Entwurf eines zweiten Gesetzes zur Änderung des Gesetzes gegen den unlauteren Wettbewerb, Regierungsentwurf, Bundesrat, Drs 26/15, 23 January 2015, 5; cf Deutscher Bundestag, Drs 18/4535, 1 April 2015, 1. 136 

The Impact of the UCP Directive 149 In order to clarify the distinction between the fairness standards applicable to the horizontal relations between traders, on the one hand, and between traders and consumers, on the other, the government bill proposed to reformulate the general clause of § 3 UWG by including a separate general clause for B2B relations (§ 3, Absatz 3 Draft).139 This clause had a first sentence concerning business practices which, while targeting or reaching consumers, affected business interests only. The second sentence concerned business practices which only targeted and reached other traders. In both cases the standard of fairness was to be professional diligence in the respective business sector. However, in the course of parliamentary debates, experts from academia and the judiciary pointed at potential risks of unnecessarily limiting the protection of traders against unfair competition. Therefore, in its final version, the revised UWG still features a common general clause for the B2B and B2C domains, but complemented by a separate provision on unfair practices in B2B relations.140 A different approach to ensuring coherence between B2B and B2C regulation was undertaken in Sweden. The first Government Inquiry into the implementation of the Directive in Swedish law had suggested preserving the integrated approach but nevertheless drawing up parallel general clauses for B2B and B2C unfair commercial practices. The government preferred, however, to take a more radical grip on the matter. Emphasising the advantage of treating the regulative area of marketing practices law in an integrated manner, the Swedish law-maker opted to extend the rules of the UCPD (with very few exceptions) to B2B relations. Consequently, the general clause against unfair commercial practices, the Directive’s rules on misleading actions and on aggressive commercial practices, and even mutatis mutandi the Black List of commercial practices that are prohibited under any circumstances also apply fully in the relations between traders. The only provision that is limited to B2C relations is the information requirement c­ oncerning invitation to purchase (Article 7 UCPD, Article 10 § 3 MFL). The main advantages of this radical solution are its clarity, legal certainty and principled approach. Misleading and aggressive practices are unequivocally identified as undesirable forms of doing business, irrespective of the context and the addressees of such practices; something that certainly can facilitate the application of the law. On the negative side, it could be argued that by extending the scope of the UCPD to the B2B domain an unnecessary layer of protection is added vis-à-vis actors who are well informed and fully capable of taking care of their own interests. Conversely, concerns have been expressed by Swedish lawyers that some of the criteria of the general clause as laid down in the UCPD would make it more difficult and cumbersome to protect traders’ interests against unfair competition. In particular, the fact that the ‘relevance’ criterion, or the so-called ‘transactional test’ of the Directive, was introduced also for B2B commercial practices could arguably 139  140 

Regierungsentwurf, Drs 26/15, 6. See Ohly, ‘Nach der Reform‘ (n 60); cf Luczak (n 137) 13046–47.

150  Antonina Bakardjieva Engelbrekt raise the threshold for bringing actions against unjustified goodwill appropriation (renommésnyltning).141

B. Dilemmas of the Divided Approach: Defining the Interface with Other Legal Domains Ensuring a logical and coherent systemic ordering has not been a much easier task for countries choosing to strictly divide the provisions on B2B and B2C commercial practices either. Below, the experience of a few Member States from CEE will be briefly reviewed. This experience is of particular interest because it is characterised by frequent legislative changes and recurrent, but elusive, attempts to find a stable systemic positioning of the rules on fair trading in the national legal system, which has been additionally complicated by the UCPD. (i) Poland In Poland, prior to the implementation of the UCPD, unfair trade practices law built chiefly on the Polish Act Against Unfair Competition Act of 1993 (ZNKU). The ZNKU was adopted soon after the transition to a market economy and was essentially shaped on the example of the German UWG.142 It stated as its main objective ‘to prevent and combat unfair competition … in the interest of the ­general public, of traders and their customers, in particular consumers’ (Article 1 ZNKU). The ZNKU thus recognised the classical triad of protected interests in unfair competition law and took an integrated approach.143 Later on, the Act on Protection of Competition and Consumers (OKiKU) established important competences for the President of the Office for Protection of Competition and Consumers (UOKiK) in the area of protection of collective consumer interests, including the right of action in cases of unfair commercial practices on the basis of the ZNKU.144 The general approach, however, remained an integrated one. When the UCPD had to be transposed, the main challenge of transposition— much like in Germany—proved to be not of a substantive, but rather of a systemic, nature. According to Nestoruk, the problems were chiefly where the new legal provisions should be positioned in national law and how to define their relationship 141 This action was quite generously handled by the courts in previous case law. See H Steen, ‘Genomsnitsskonsumentens snedvridna ekonomiska beteende—konsekvenser av svenskt införlivande av direktivet om otillbörliga affärsmetoder’ (2009) 4 Europarättslig tidskrift 617; cf PJ Nordell, ‘Transaktionstestet och dess tillämpning i Marknadsdomstolens praxis’ (2011) 6 Nordiskt Immateriellt Rättskydd 548. 142  I Wiszniewska, ‘Polen’ in G Schricker (ed), Recht der Werbung in Europa (Baden-Baden, Nomos, 1995) No 26. 143  Recognised among others in the Misleading Advertising Directive 84/450/EEC (now consolidated in Directive 2006/114/EC). 144  See A Bakardjieva Engelbrekt, ‘Polen’ in Harte-Bavendamm and Henning-Bodewig (n 73) paras 459ff; I Nestoruk, ‘Poland’ in Henning-Bodewig (n 68), paras 422ff.

The Impact of the UCP Directive 151 with the existing ZNKU.145 Eventually, the Polish law maker opted for implementing the Directive through a new piece of legislation, the PNPRU, limited exclusively to B2C relations. In this way, a two-track regulative regime was established, whereby ZNKU regulates B2B relations and protects the interests of traders in fair competition and PNPRU regulates B2C relations and has as its objective the protection of the interests of consumers in fair commercial practices. The reference to consumers in Article 1 ZNKU was consequently deleted. This solution was, however, heavily criticised and alternatives were proposed both before and after the entry into force of the new legislative act.146 The decision to transpose the UCPD through a brand new legislative act, following the provisions of the Directive closely, has had the advantage of easily demonstrating conformity with EU law and of keeping relatively intact the ZNKU. On the negative side, according to commentators, the considerable overlap between the two pieces of legislation creates a great deal of confusion and uncertainty.147 Likewise, positive synergies in enforcement are lost, to which I will return in the next section. (ii) Hungary The law against unfair trade practices also underwent significant transformations in Hungary following the transposition of the UCPD. Interestingly, the regulation of unfair trade practices in this country originally took shape soon after the transition to a market economy. In 1990, the comprehensive Act LXXXVI/1990 on the Prohibition of Unfair Market Conduct was adopted. It set out to control anticompetitive practices, unfair competition and consumer deception in a consolidated manner, thus laying down the main rules of conduct in the market economy. This approach was preserved in the follow-up Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market Practices (Competition Act, or VT). The VT was devoted foremost to antitrust regulation, but also contained rules on unfair competition in B2B relations, as well as rules on consumer-related unfair market practices, notably consumer deception and distortion of consumer choice. The rules were enforced by the Hungarian Competition Authority (Gazdasági Versenyhivatal, GHV), a strong and independent agency with clearly separated investigative and adjudicatory functions. The resulting regime was favourably assessed by commentators as ensuring positive synergies between antitrust and consumer law enforcement.148 However, in the course of Hungary’s accession to the EU, the regime was criticised by the Commission as distracting the attention 145  I Nestoruk, ‘Poland: The Impact of the UCP Directive on National Contract and Tort Law’ (2015) 5 Journal of European Consumer and Market Law 198. 146 ibid. 147 ibid. 148  See K Cseres, ‘The Hungarian Cocktail of Competition Law and Consumer Protection: Should it be Dissolved?’ (2004) 27(1) Journal of Consumer Policy 43.

152  Antonina Bakardjieva Engelbrekt of the Competition Authority from the important antitrust cases towards cases of lesser economic significance.149 On a parallel track, and still in the course of EU accession, Hungary adopted a wide-ranging Consumer Protection Act (Act CLV of 1997, Törvény a fogyasztóvédelemről) with a view to implementing EU consumer protection legislation. In 1997 a separate public authority, the Bureau of Consumer Affairs (Fogyasztóvédelmi Főfelügyelőség, FTF), was set up with the broad mandate of enforcing consumer protection laws. Prior to the UCPD, these legislative and institutional changes had already tilted developments towards splitting the regulation of unfair practices into separate B2B and B2C domains. Remarkably, the Misleading and Comparative Advertising Directive was implemented through a separate Advertising Act, enforced by the GHV in the B2B domain and by the FTF in the B2C domain, creating overlapping layers of protection and enforcement. The UCPD was transposed through the new Act XLVII on the Prohibition of Unfair Commercial Practices Against Consumers (UCPA), which is limited to B2C relations and enforced chiefly by the FTF. The Competition Act remains the main legal source of Hungarian unfair competition law regulating unfair trade practices in B2B relations, enforced by way of private action before general courts. While this systemic arrangement contributed further to a divided regulative regime, the split between the B2B and B2C domains was not followed through fully. The Hungarian Competition Authority continues to be entrusted with enforcement powers under the UCPA and can intervene in cases of unfair B2C commercial practices, provided that the practices are capable of materially affecting competition.150 To avoid duplications and gaps in enforcement, the GHV and FHF have entered a Cooperation Agreement, delineating their respective spheres of competence and defining in detail their relationship, including duties on exchange of information, etc. Clearly, the Hungarian law maker has not been willing to fully abandon its integrated regulative regime. The cost of ensuring compliance with the UCPD, however, has been an excessively complex system of enforcement and institutional co-ordination, and, ultimately, loss of the advantages of previously accumulated experience and good practice.151 (iii) Bulgaria In Bulgaria, the regulation of unfair commercial practices (B2B as well as B2C) was originally part of the first Competition Protection Act (CPA) of 1991. Much like in Hungary, the objective was to address in one and the same legislative act both freedom and fairness of competition, with due respect for consumer interests. 149 A Bakardjieva Engelbrekt, ‘Grey Zones, Legitimacy Deficits and Boomerang Effects: On the Implications of Extending the Acquis to Central and Eastern Europe’ in N Wahl and P Cramér (eds), Swedish Yearbook of European Law, vol 1 (Oxford, Hart Publishing, 2006) 1–36. 150  G Bacher, ‘Hungary’ in Henning-Bodewig (n 68), 262ff. 151  For a critique see V Balogh and K Cseres, ‘Institutional Design in Hungary: A Case Study of the Unfair Commercial Practices Directive’ (2013) 36 J Consumer Policy 343.

The Impact of the UCP Directive 153 The CPA set out an elaborate regime of protection against unfair competition, including a general clause and a catalogue of prohibited unfair practices comprising, among others: misleading advertising, unfair comparative advertising and defamation. Infringements of these provisions were pursued by way of administrative proceedings before the Bulgarian Competition Commission (CPC). In the process of EU accession, a new CPA was adopted in 1998, preserving the consolidated approach, although toning down the emphasis on consumer protection.152 In parallel, a first Consumer Protection Act (ConsPA) was introduced in 1999, adapting Bulgarian law to the EU consumer acquis. This act was replaced by a new and comprehensive ConsPA in 2006, transposing, among others, the rules on misleading and comparative advertising of the MCAD. This created a doubletrack regime with considerable overlaps. With the transposition of the UCPD, a final split of the regulation of commercial practices into separate B2B and B2C fields was carried through. Rules on commercial practices considered detrimental chiefly to competitors’ interests remained located in the CPA. These rules are enforced by the Bulgarian Competition Authority. On the other hand, the ConsPA of 2006 now offers a separate chapter with extensive regulation of B2C unfair commercial practices based on the rules of the UCPD, enforced by a separate Consumer Protection Agency. The resulting regime is not unproblematic, since similar situations (like misleading advertising) may be subject to overlapping regulations with not always identical content and terminology, while different bodies are competent and different procedural rules apply in the different areas. Summing up, although the regulation of unfair commercial practices in each of these new Member States of the Union had a different starting point, a common tendency can be discerned of clearly splitting the regulation of commercial practices law into B2B and B2C parts. This may not always have been an expressed requirement, or even an intention, on the part of the European institutions; however, it is the combined result of the emphasis placed by the Commission on the need for strong competition authorities with focus on antitrust enforcement, on the one hand, and the insistence on comprehensive consumer protection legislation and a corresponding public enforcement body, on the other. The exclusive focus of the UCPD on B2C practices only enhanced this trend of separation.

C.  The B2B Domain—Uncharted Waters? The radical split between the B2B and B2C sides of unfair commercial practices law introduced by the UCPD and boosted by the CJEU’s jurisprudence has had an additional, probably unintentional, consequence, namely that national governments have perceived a newly opened free space for regulatory intervention in 152 

See Bakardjieva Engelbrekt (n 149), 22ff.

154  Antonina Bakardjieva Engelbrekt the domain of B2B fair trading law. Indeed, to judge from a recent Commission Communication and Report on unfair trading practices in the food supply chain, a whole array of national rules and regulations on B2B unfair trading practices seem to have been passed, in particular in the wake of the financial crisis.153 These national prohibitions and restrictions inhabit a grey zone between antitrust law and unfair competition law. Examples include old and new regulations on selling below cost of the Keck and Mithouard154 type, restrictions on rebates and special offers, and restrictions on specific retail practices. It seems that introducing such provisions is particularly popular in the new Member States from CEE and generally in countries more severely hit by the economic and financial crises of recent years.155 In Poland, a special rule on practices restricting market access was included in the ZNKU of 1993 (Article 15). The rule initially contained three well-defined situations (sale below cost, enticing refusal to sell or purchase and discriminatory treatment of customers).156 However, in 2002 the rule was expanded to include less clearly defined categories of competitive practices. Among others, a prohibition against collecting charges other than commercial margins for accepting goods for resale was included (Article 15(1)(4) ZNKU). This provision was directed at curbing what is known as ‘buyer power’, exercised by powerful (often non-domestic) economic actors in the food retail sector. More specifically, the prohibition targeted the widespread practice of big food retail chains to require payment for exposing suppliers’ goods on the store shelves (so-called ‘shelves rental’ or, in German, Regalmiete). The rule soon became one of the most popular grounds for private enforcement action under the ZNKU.157 The prohibition was perceived as so excessive that it was challenged before the Polish Constitutional Court as unconstitutional on grounds of violating the freedom to conduct business. However, the Constitutional Court upheld the prohibition.158 In Bulgaria, the current CPA of 2008159 contains a number of rules limiting the use of rebates and of prize competitions and lotteries. Previously, these provisions included references to consumer interests, but following the latest revision of the Competition Act such references have been deleted, apparently to avoid falling 153  ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions’, COM (2014) 472 final; ‘Report from the Commission to the European Parliament and Council on Unfair Business-to-Business Practices in the Food Supply Chain’, COM (2016) 32 final. 154  Joined Cases C-267/91 and C-268/91 Keck and Mithouard Judgments.ECLI:EU:C:1993:905 and ECLI:EU:C:1993:160 155  See the examples in COM (2016) 32 final (ibid) 3. According to the report, of the 20 Member States that have legislation on unfair trade practices in the B2B domain, 15 have introduced it in the last 5 years. A few more may consider legislation in the near future and some Member States have enhanced their older frameworks in the last 5 years. ibid. 156  See I Nestoruk, ‘Das Verbot der sog. “Regalmiete” im polnischen Lauterkeitsrecht—eine verfassungsrechtliche Perspektive’ (2015) 11 Gewerblicher Rechtsschutz und Urheberrecht: Internationaler Teil 1015, 1017. 157  See Nestoruk (n 145) 19. 158 ibid. 159  The text of the Act is available in English at www.ecc.bg/materials/55/consumer-protection-act. htm.

The Impact of the UCP Directive 155 within the scope of the UCPD.160 The CPA also prohibits sale below cost, if the practice concerns considerable product quantities and is carried out over a long period (Article 36(4) CPA). Finally, a new provision (Article 37a CPA) was introduced in 2015 on the abuse of a stronger negotiating position. Article 37a prohibits any act or omission by a company that enjoys a stronger negotiating position if the act is contrary to good business practice and harms the interests of the weaker negotiating party or the consumer.161 The location of these rules in the area of B2B unfair trade practices law, now clearly separated from consumer protection law, makes it easier for the national law maker to defend the legitimacy of these rules as pursuing objectives other than consumer protection and thus falling outside the scope of the UCPD. Summing up, finding the appropriate place for incorporation of the UCPD in the fabric of national fair trading law has not been an easy task. Irrespective of the chosen technique, all Member States have been confronted with hard choices from a systemic perspective, defining the interfaces with other regulative areas, such as civil law, commercial law, consumer law and competition law. The implementation of the UCPD has brought about a number of artificial distinctions and has complicated the relations between the regulative fields of unfair competition law, consumer protection and antitrust law. More unexpectedly, while exposing old national rules which, under the guise of consumer protection, aimed at economic regulation,162 the Directive opened up room for, and might have even encouraged, the growth of new national commercial regulation in the B2B domain with ­possible restrictive effects on legitimate competition.

V.  ADAPTING INSTITUTIONS AND ENFORCEMENT

The above-described variety of approaches to systemic arrangements may prima facie be considered of only technical or even academic concern. However, it has already become apparent that the diversity in systemic ordering is both influenced by and itself influences the choice of enforcement avenues and techniques. This, in turn, decisively shapes the application of unfair commercial practices law—or, in other words, ‘law in action’. As elaborated above, the UCPD does not introduce binding requirements in respect of institutions and enforcement. It thus leaves considerable leeway for Member States to shape their institutional frameworks and enforcement according

160  See A Bakardjieva Engelbrekt, ‘Bulgarien’ in Harte-Bavendam and Henning-Bodewig, UWG Kommentar, 4th edn (Munich, Beck, 2016) paras 59–61. 161  Qualified as unfair are acts or omissions which have no objective economic justification, such as the unjustified refusal to supply or purchase goods or services, or the imposition of unreasonable or discriminatory conditions or the unfair dismissal of trade relations. See Bakardjieva Engelbrekt (ibid) para 70. 162  On this see Bernitz (n 6).

156  Antonina Bakardjieva Engelbrekt to national traditions or political exigencies. Indeed, the First Commission Report 2013 maps a broad variety of enforcement regimes in the Member States. The report identifies broadly two groups of countries along the private/public divide. Into the first group fall Member States relying on public authorities, such as consumer ombudsmen, consumer and competition protection authorities and ministry departments. The second group consists of countries relying on private enforcement, with Germany and Austria being the main proponents.163 What the report does not capture are the institutional dynamics unleashed by the UCPD and the considerable reshuffling of institutional competences triggered by it. In addition, the distinction between public and private enforcement outlined in the Report provides only a very rough, broad-brush picture of the institutional landscape. As the Commission rightly notes, most systems combine elements of private and public enforcement. At a closer look, enforcement schemes—private, public and mixed—differ quite strikingly in the minutiae of institutional design in respect of the actors involved and eventually in the outcomes produced.

A.  A Shift to Public Enforcement? It may seem contentious to claim that the UCPD has had any impact at all on institutions and avenues of enforcement, given its expressly stated institutional and procedural neutrality. Yet, even a casual look at developments in the Member States in the wake of the Directive can reveal that the implementation process has brought about the visible reshuffling of institutional competences, the building of new institutional structures and the opening of novel enforcement avenues. Many of these changes seem to align with what can be described as a shift to public enforcement. Indeed, although the UCPD is impartial on the question of enforcement, a particularly prominent tendency in the wake of the Directive was the setting up of new consumer protection authorities or extending the powers of existing authorities to the unfair commercial practices domain. In the Netherlands, a Consumer Protection Authority was established for the first time in 2007.164 In addition, in many Member States where the division between B2B and B2C has been faithfully followed, the result has generally been to enhance the public dimension of the enforcement of unfair commercial practices law. In countries like Hungary and Bulgaria, discussed above, but also in other Member States such as the Baltic 163  ‘In some countries enforcement is mainly carried out by public authorities such as consumer ombudsmen (eg Denmark, Sweden and Finland), consumer/competition authorities (eg Italy, Ireland, the Netherlands, Romania and the UK) and dedicated departments of ministries (eg Portugal and Belgium). Other Member States run a private enforcement scheme led by competitors (eg Austria and Germany). Most systems, however, combine elements of public and private enforcement.’ See First Commission Report 2013 (n 4) 26. 164  K Cseres, ‘Integrate or Separate—Institutional Design for the Enforcement of Competition Law and Consumer Law’, Amsterdam Law School Research Paper No 2013-03.

The Impact of the UCP Directive 157 States, the already existing consumer protection authorities expanded their powers by a mandate to enforce the law of unfair commercial practices.165 The reasons for these somewhat unexpected institutional repercussions are manifold. On the one hand, the institutional dynamics appears to have been triggered by the quite radical relocation of unfair commercial practices law as a regulative area. Whereas previously in many countries it was perceived and classified as part of commercial regulation, the sharp divide between B2B and B2C practices introduced by the Directive and the decisive emphasis on the consumer dimension, firmly pushed the integration of the regulation of unfair commercial practices into the domain of consumer policy. Given that enforcement of consumer protection legislation in many countries was already conceptualised as the task mainly of public authorities, the regulation of unfair commercial practices assumed a stronger public law flavour. On a separate note, and in parallel, the Commission has rather openly promoted a public dimension in the enforcement of unfair commercial practices law. An article authored by one of the Commission’s officials, closely associated with the work on the UCPD, describes public enforcement by a single authority as the clearly preferred model for enforcement 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 delegate 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.166

The push to public enforcement was additionally strengthened by the alignment of the UCPD with the Commission’s advances in the area of consumer protection enforcement through the Consumer Protection Cooperation Regulation.167 It was apparently not accidental that the two legislative instruments were launched almost simultaneously. In the preparatory materials to the CPC Regulation the Commission had already duly stressed the advantages of public enforcement, namely: —— sufficient investigation powers; —— sufficient guarantee of confidentiality and professional secrecy;

165  See A Bakardjieva Engelbrekt, ‘The Impact of EU Enlargement on Private Law Governance in Central and Eastern Europe: The Case of Consumer Protection’ in F Cafaggi and H Muir-Watt (eds), Making European Private Law: Governance Design (Cheltenham, Edward Elgar, 2008) 98–137. 166  G Abbamonte, ‘The Unfair Commercial Practices Directive: An Example of the New European Consumer Protection Approach’ (2005–06) 12 Columbia Journal of European Law 695. Emphasis added 167  Regulation 2006/2004 of the European Parliament and the Council of 27 October 2004 on co-operation between national authorities responsible for the enforcement of consumer protection laws (the Regulation on consumer protection co-operation) [2004] OJ L364/1 (hereinafter CPC Regulation).

158  Antonina Bakardjieva Engelbrekt —— proven efficiency and effectiveness of a public dimension to enforcement in the Member States where public authorities exist; and —— impartiality and accountability.168 In the article quoted above, Abbamonte also underlines the link to the CPC Regulation, thus confirming that the Directive and the Regulation were seen as forming a single legislative package: These considerations are even stronger in light of the recently adopted Regulation 2006/2004 on co-operation between national authorities responsible for the enforcement of consumer protection. … The Regulation obliges the Member States to appoint one or more public bodies responsible for the repression of such cross-border infringements. This gives Member States who do not already have a public enforcement system in place a golden opportunity to set up a consumer protection enforcement agency dealing also with national infringements.169

An additional aspect of the shift to public enforcement concerns the sharpening of enforcement tools employed by public authorities. Arguably, a move towards stronger and more dissuasive sanctions can also be noted in countries previously known for their lenient approach to enforcement. Thus, in Sweden, where a special brand of ‘soft public enforcement’ has been dominant ever since the setting up of the Office of the Consumer Ombudsman at the beginning of the 1970s, recent amendments to the MFL have furnished the KO/KOV with the power to issue binding prohibitive injunctions, subject to appeal before administrative courts. Also, the level of monetary sanctions that can be imposed by courts upon action by the KO (the so-called ‘market disturbance penalty’, or marknadsstörningsavgift) has been significantly increased.170 These innovations appear to be at least partly inspired by the exchange of experience and best practices between fellow public enforcers within the framework of the network of public authorities established by the CPC Regulation. The trend is confirmed by the recent Commission Proposal for a reformed CPC Regulation aspiring to grant even more expansive powers to national consumer protection authorities.171

B.  The Many Guises of Public Enforcement While the above trend towards strengthened public enforcement can hardly be overlooked, it should not create exaggerated expectations for a homogeneous 168  See ‘Proposal for a Regulation on Cooperation between National Authorities’, COM (2003) 443 final. 169  Abbamonte (n 165) 695. Emphasis added. 170  See Ds 2015:45; Prop 2015/16:168 Stärkta sanktionsmöjligheter för Konsumentombudsmannen; cf amendment to the MFL (SFS 2016:793). 171 ‘Proposal for Regulation on Co-operation between National Authorities Responsible for the Enforcement of Consumer Protection Laws’, COM (2016) 283 final, 25 May 2016.

The Impact of the UCP Directive 159 enforcement environment and equivalent outcomes. As indicated above, the institutional structures that emerge, or that are now more actively engaged in the enforcement of fair trading law, differ in their competences and in terms of institutional design, including aspects such as status, enforcement capacity and experience. These authorities enjoy different degrees of independence from the government, have different arsenals of sanctions and are more or less transparent and accountable in their work. Importantly, the regulative styles of these new or already existing public bodies with a strengthened mandate to enforce the UCPD reflect distinct national traditions of public administration.172 In terms of competence and structure, differences ensue from the status and regulatory mandate of the respective public agencies. Paradoxically, while in some of the new Member States from CEE the UCPD, in combination with the CPC Regulation, has had the above-described effect of separating consumer protection from competition law and strictly dividing the institutional responsibilities of competition and consumer agencies, in old Member States the opposite trend can be observed, namely of such agencies merging. Thus, in the Netherlands, the recently founded Consumer Agency soon became part of the new mega-agency of Competition, Consumers and Markets (including tasks of sectoral regulation). Likewise, in Denmark, the Consumer Agency and the Competition Agency fused into the Consumer and Competition Agency. In the UK, the Office of Fair Trading was closed down and some of its functions were transferred to the Competition and Markets Authority.173 Some public mega-agencies were in existence already earlier. Examples are the French Direction générale de la concurrence, de la consommation et de la répression des fraudes and the Polish UOKiK. Although the merger or separation of such agencies seem prima facie to be based on ­technical (often budgetary) considerations, the implications for the status, selfidentification and working methods of the agencies can be significant. Competition agencies traditionally enjoy a powerful position within the structure of public administration. They are often independent from the government, getting their funding from, and being directly accountable to, national parliaments.174 They are typically equipped with more solid economic expertise and are carefully structured so as to ensure quasi-judicial handling of alleged infringements, with sufficient guarantees for due process and other rights of the defendants. Investigations include complex assessments of markets and the agencies have considerable discretion in terms of defining priorities and modes of enforcement as well as remedies.175 Consumer protection authorities, in contrast, are often designed as executive agencies under ministerial supervision, although examples

172 

On the importance of these differences see Bakardjieva Engelbrekt (n 149) and (n 168). See Balogh and Cseres (n 151). 174  See, eg the Hungarian GVH, the Bulgarian Competition Authority; cf Bakardjieva Engelbrekt (n 149). 175  On the institutional design of competition agencies see E Fox and M Trebilcock (eds), The Design of Competition Law Institutions: Global Norms, Local Choices (Oxford, Oxford University Press, 2013). 173 

160  Antonina Bakardjieva Engelbrekt of more independent agencies also exist (eg the Swedish KOV). In many countries, the consumer agencies are ‘genetically’ connected with trade inspectorates and market surveillance authorities specialising in control and enforcement of clearcut product and services standards, where compliance is more adequately achieved by simple administrative control and penalties. Shifting competences and restructuring agencies is thus rarely a purely technical operation. Instead, the very core of the agency work is affected.176 For instance, introducing competences in the areas of enforcement of unfair commercial practices law, where assessment is complex and situation-specific, may require different working methods and remedies. The choice between separating and merging institutional competences has further implications for the complexity of the resulting institutional set-up. An agency combining enforcement of competition law and consumer law, like the example of the Hungarian GHV inferred above, has the advantage of strengthening expertise, pooling information and raising the effectiveness of enforcement in cases of serious infringements of collective consumer interests. In contrast, dividing institutional competences may give rise to co-ordination and information problems. Finally, in terms of regulative style, national approaches range from a policing ‘command and control’ style of regulation to deliberative and participatory ‘soft’ governance. For instance, countries from the Nordic legal family are known for the lenient and dialogical governance style of public authorities. As mentioned above (section III.A(iii)), negotiations are regularly carried out with representatives of trade and industry, and agreement is sought on issues of standards of fairness. Sanctions are imposed only as a last resort, and typically after a court decision.177 A similar soft approach distinguishes the activity of public agencies in the UK, where an even more hands-off attitude is openly pursued. Market actors are generally trusted to be able to self-regulate and intervention is seen as a remedy of last resort (co-regulation). Quite different legacies influence the role and actions of the public administration in some of the new Member States from CEE. Whereas they have certainly experienced major transformation towards building modern and responsive public administration, the emphasis in a number of these countries nevertheless continues to be on a ‘command and control’ governance style, with emphasis on administrative penalties and limited place for dialogue with industry. This style is not only part of the communist legacy, but also closer to the continental European (predominantly French) model of administration, which has historically exerted a strong influence in the region.178 176  On the importance of institutional choice and design in consumer protection policy with a focus on developments in CEE, see A Bakardjieva Engelbrekt, ‘Public and Private Enforcement of Consumer Law in Central and Eastern Europe: Institutional Choice in the Shadow of EU Enlargement’ in F Cafaggi and H-W Micklitz (eds), New Frontiers in Consumer Protection (Antwerp Intersentia, 2009) 91–133. 177  For a thorough analysis of the Swedish model see Bakardjieva Engelbrekt (n 67) 281ff. 178  See Bakardjieva Engelbrekt (n 165) and (n 176).

The Impact of the UCP Directive 161 Certainly, the unevenness of public enforcement is well observed by the Commission and much of the activity of the CPC Network established on the basis of Regulation 2006/2004 is directed at developing common good practices and a level playing field in the enforcement activity of national public enforcement bodies.179

C.  The Tenacity of Private Enforcement The one Member State remaining most faithful to a model of exclusively private enforcement of unfair commercial practices law is Germany. Even though a similar private enforcement model exists in Austria, it is not as uncompromisingly averse to elements of public enforcement.180 In Germany, any attempt to empower a public authority with enforcement of collective consumer rights has been systematically resisted. When the UWG was conceived at the end of the 19th century, it was designed as a private law statute, to be enforced by way of private litigation on the initiative of individual competitors and business associations. Soon after the law had been adopted, a vibrant network of private associations and bodies emerged with the sole or main purpose of enforcing the standards of fair competition (Wettbewerbsverbände). The activity of the associations was facilitated by an economically favourable way of calculating litigation costs in actions of unfair competition.181 In the 1960s, when political efforts were undertaken to render unfair competition law more sensitive to the interests of consumers, the option of empowering a public body with the enforcement of collective consumer interests was discussed but vehemently rejected. Instead, the task was delegated to private consumer associations, supported by the state.182 One argument in defence of private enforcement in Germany has often been the alleged efficiency of the private enforcement model. Commentators point out the high number of lawsuits, especially when compared with other Member States. Even higher is the number of so-called Abmahnschreiben, or warning briefs, that private litigants send to alleged infringers, with a demand to terminate the infringement and pay the costs of the warning. It is claimed that this high rate of enforcement is indicative of, if not synonymous with, a high level of consumer protection.183 This view can, however, be seriously challenged. A more adequate, though admittedly difficult, way of evaluating the efficiency of the system of 179  C Poncibó, ‘Networks to Enforce European Law: The Consumer Protection Cooperation Network’ [2012] J Consumer Policy 34. 180  On the Austrian model of enforcement see Wiebe and Heidinger (n 74). The functions of single liaison office under the CPC Regulation are exercised in Austria by the Federal Competition Authority (Bundeswettbewerbsbehörde). 181  On the institutional design of the 1909 UWG see Bakardjieva Engelbrekt (n 67), 127ff. 182  On the controversy of administrative versus private law enforcement see Bakardjieva Engelbrekt (ibid), 227ff. 183  On this debate see F Henning-Bodewig, ‘Die Gewinnabschöpfung nach § 10 UWG—ein Flop?’ [2015] Gewerblicher Rechtsschutz und Urheberrecht 731.

162  Antonina Bakardjieva Engelbrekt enforcement is to look at the type of infringements prevented or sanctioned and whether the focus is indeed on practices that are of significant consumer harm. The above-reported emphasis in Germany on cases of Rechtsbruch enforcing rules on regulated professions or other commercial regulation suggests that the profile of German unfair competition law is still biased towards protecting the interests of competitors rather than those of consumers.184 The insufficiency of the private enforcement model is brought up periodically in German academic and political debates.185 When the major reform of the UWG in 2004 was conducted, a clearly stated policy objective was to introduce more powerful remedies for the protection of consumers. One much discussed innovation was the so-called ‘skimming off ’ of illegally gained profits from unfair practices, now stipulated in § 10 UWG.186 While this remedy was supposed to strengthen the enforcement of consumer rights, the reform was carried out in a half-hearted manner. According to the relevant provisions in the UWG, standing to bring an action for skimming off is granted only to consumer organisations, yet the sum awarded by the courts is destined for the state budget. It thus neither benefits the negatively affected consumers nor rewards the activity of the consumer organisations. There are also other procedural intricacies which stand in the way of consumer-friendly enforcement.187 Consequently, incentives for employing this remedy are limited.188 As pointed out by academic commentators, it is noteworthy that a similar remedy within the framework of German antitrust law grants standing to the Federal Cartel Office. Such public authority is, however, absent from the consumer policy field.189 It is true that in 2002 a Federal Office for Consumer Protection and Food Safety was established (Bundesamt für Verbraucherschutz und Lebensmittelsicherheit, BVL). However, this was mostly devoted to food safety. Institutionally, it is situated within the ambit of the Federal Ministry of Food and Agriculture, and has only limited functions in the area of consumer economic rights.190 Following the entry into force of the CPC Regulation, Germany was confronted with the obligation to

184  In this sense see the critical comments of Glöckner (n 96); for a thorough critical analysis see Bakardjieva Engelbrekt (n 67). 185  In the course of parliamentary deliberations on the 2008 UWG the point has even been made that faithful implementation of the Directive and achieving its consumer protection objective would require renaming the German Unfair Competition Act into an Act Against Unfair Commercial Practices and vesting powers in the Federal Ministry on Consumer Protection in order to ensure a true consumer-friendly stance of German trade practices law. See the statement by MP Ulla Lötzer (DIE LINKE), Deutscher Bundestag, Wahlperiode—179. Sitzung. 25 September 2008, 19226. 186  See the contribution of A Stadler, chapter 10 in this volume. 187  Among others, the burden of proof, which is on the consumer organisations etc. See in more detail B Oppermann and S Müller, ‘Wie verbraucherfreundlich muss das neue UWG sein?—Eine Synopse lauterkeitsrechtlicher Instrumente’ (2005) 4 Gewerblicher Rechtsschutz und Urheberrecht 280. 188  For a critical analysis of the reform see Oppermann and Müller (ibid); H W Micklitz, ‘§ 10’ in Münchner Kommentar zum Lauterkeitsrecht (Beck, 2014). For a recent more positive assessment see Henning-Bodewig (n 182). 189  Oppermann and Müller (n 186), 283. 190  BVL was conceived as an office for licensing food stuffs and managing risk related to food.

The Impact of the UCP Directive 163 designate a competent public authority and single liaison office under Article 4 of the Regulation. The requirement of having one public authority responsible for consumer law enforcement was a novelty for the German system.191 Through the Federal EC Consumer Enforcement Act (EG-Verbraucherschutzdurchetzungsgesetz, VSchDG), the task was assigned to the BVL.192 Yet, the ensuing change was not as radical as it might appear at first sight. When the CPC Regulation was negotiated, a special solution was carved out, chiefly in order to accommodate the German tradition of private enforcement. Article 8(3) of the CPC Regulation allows competent authorities to delegate their functions to so-called designated bodies, which can be private, public or public–private. Germany used this possibility for delegation. Indeed, the VSchDG mandates the competent authority, before undertaking an injunctive action itself, to commission the enforcement to authorised third bodies.193 For the cross-border enforcement of the UCPD, such designated bodies can be both consumer associations and competition associations (§ 7(1) VSchDG). More specifically, the BVL has delegated part of its powers under the Regulation to the Federation of German Consumer Associations (Verbraucherzentrale Bundesverband, vzbv) and, for actions under the UCPD, to the Centre for Protection against Unfair Competition (Wettbewerbszentrale). The modalities of this delegation are set out in a framework agreement between the BVL, vzbv and Wettbewerbszentrale, which regulates, among others things, the division of labour between the participating bodies, issues of privacy, information duties and trade secrets protection.194 Thus the competent authority itself does not deal with the enforcement, but chiefly has the role of a ‘dispatcher’, directing requests for enforcement co-operation to the competent private associations. In 2012 the Federal Government submitted a report to the German Parliament about the effectiveness of the existing mechanism of implementation of the CPC Regulation.195 The report acknowledged that the involvement of public authorities in the enforcement of consumer law had been a novelty for Germany.196 It further identified a number of deficiencies of the order of delegation under the Regulation. Thus, it sometimes took up to three months to effectuate the delegation to

191  BT-Drucksache 17/8982, 2; see also F Weber, ‘Gegenwärtige Verbraucherrechtsfälle und Bedarf staatlicher Rechtsdurchsetzung’ (2013) 3 Verbraucher und Recht 133. 192  BVL was designated both as the single liaison office and the competent authority for most of the infringements covered by the CPC Regulation (n 166). See § 3 EC VSchDG, 29 Dezember 2006 (BGBl I S 3469). 193  § 7 VSchDG; see Weber (n 190) 133. 194  Rahmenvereinbarung vom 30. Mai 2008 zwischen dem BVL, dem Verbraucherzentrale Bundesverband eV und der Zentrale zur Bekämpfung unlauteren Wettbewerbs eV HJ gemäß §7 Abs 3 des VSchDG. 195  Deutscher Bundestag, Drs 17/8982, Unterricht durch die Bundesregierung, Bericht der Bundesregierung zur Wirksamkeit von § 7 des EG-Verbraucherschutzdurchsetzungsgesetzes, 9 März 2012. 196  ibid 2.

164  Antonina Bakardjieva Engelbrekt the respective private association before the very request for co-operation could be handled in substance. A series of complications were associated with this regime of delegation, including issues of statute of limitations, private international law, access to information and standing for the private associations.197 Nevertheless, the report concluded that the system of co-operation between the Federal Ministry and the consumer and business associations had asserted itself. According to the Ministry, the system allowed using the expertise and resources of associations already involved in the enforcement of collective consumer interests, which was conducive of a resource- and cost-efficient federal administration.198 Rather than changing or abandoning the national system of delegation, the Federal Government committed itself to lobbying harder for the adaption of the framework rules of the CPC Regulation to better accommodate the German model.199 In 2014 the powers of the BVL were transferred to the Federal Ministry of Justice and Consumer Protection. It remains to be seen to what extent this institutional reform would bring a strengthened public dimension of enforcement of fair trading law in Germany. It appears that the recently announced Commission proposal for a reformed CPC Regulation seeks to impose stricter obligations on Member States to ensure rigorous public enforcement for cross-border infringements of EU consumer law.200 Arguably it signals increased pressure on the G ­ erman model of private enforcement.

D.  Repercussions on ‘Law in Action’ Given the above-described persisting differences in procedural and institutional set-ups and avenues of enforcement, it is probably not surprising that the patterns of actual enforcement practices of fair trading law vary widely across Member States. The Commission reports the following—not representative or ­comprehensive—data about the actual enforcement in the Member States: the Italian Competition Authority issued more than 700 decisions and applied administrative fines totalling €91 million; the French General Directorate for Competition, Consumer Issues and Fraud Control (DGCCRF) issued 1251 Reports and corresponding fines amounting to approximately €1.7 million were imposed; the Latvian Consumer Rights Protection Centre took 154 binding decisions and imposed fines of €159,400; the Finnish Consumer Ombudsman initiated 8 court cases; the Irish National Consumer Agency issued 14 undertakings, 116 compliance notices, 2 prohibition orders, and started 2 prosecutions; the Slovak Trade Inspection issued 46 administrative decisions and imposed a total amount of €151,800 in fines; and, finally, 18 court rulings and 52 injunction orders were issued in Sweden.201 197 

ibid 6. ibid 6. 199  ibid 8. 200  See COM (2016) 283 final (n 170). 201  First Commission Report 2013 (n 4), 28. 198 

The Impact of the UCP Directive 165 This brief excerpt provides a succinct illustration of the different approaches and enforcement styles of national consumer protection authorities. The very fact that the number of enforcement decisions is so disparate, ranging from more than a thousand to only a few per year, is telling. Likewise, the excerpt hints at the disparity of remedies and sanctions imposed. The Italian and French authorities report fines of rather impressive amounts (€91 and €2 million, respectively). In a similar vein, the Latvian and the Slovak public agencies are clearly emphasising pecuniary sanctions and penalties. In contrast, the public authorities in Ireland and Sweden are visibly exercising restraint and selectiveness in enforcement, and show a preference for voluntary settlements.202 Not surprisingly, the report contains no figures on the private enforcement of the UCPD in Germany or Austria. In view of the decentralised character of this model of enforcement and the many courts involved, it clearly does not easily yield to statistical analysis and assessment. More importantly, the report says nothing about the qualitative aspects of enforcement and the types of infringements that are actually prosecuted and sanctioned. To get a more meaningful picture, one should know more about the actual enforcement priorities of public authorities and whether the attention and resources are really directed to cases of serious consumer harm. Likewise, it would be interesting to further analyse how individual and collective incentives shape the dynamic of enforcement under a model of private enforcement.

VI.  UNDERSTANDING AND WORKING WITH DIVERSITY

So what sense can one make of the somewhat erratic developments in national fair trading law in the wake of the UCPD? Evidently, the account above provides examples of resistance to change despite clear obligations set out in the Directive. At the same time, there are examples of substantive and institutional reforms that have been undertaken without actually having been required by European legislation. The main reasons for these disparate effects, it is submitted, lie in the diverse institutional environments of the individual Member States, where the Directive has to be transposed and where it is expected to produce concrete results. These institutional environments are complex and influenced by a variety of factors, some closely related to fair trading law as a legal and regulative area, and others of a more general nature. If we first look at factors related to the specific area of regulation, it is apparent that, in contrast to other domains, such as competition law, fair trading law can come to regulate an unwieldy mix of economic practices across jurisdictions, and can pursue a range of policy objectives, not always easily reconcilable with each 202  Injunction orders in Sweden are normally issued by the KO and are enforceable only if they are approved by the affected trader.

166  Antonina Bakardjieva Engelbrekt other. Different countries may place within the ambit of fair trading law practices as disparate as parasitic imitations, goodwill misappropriation, disparagement of competitors or their products, comparative advertising, deceptive and misleading practices, rebates and promotional offers, seasonal sales, opening hours, obstructive competitive practices, breach of statutory duties, and trade secrets (among others). The policy objectives are likewise strangely incongruent across countries. Moreover, they have evolved over time, in pace with changing technological and political priorities. Thus, some of the oldest objectives, which found expression in the 1883 Paris Convention, are promoting innovation and stifling parasitic competition and free riding, policy objectives close to those of intellectual property law. Combating misleading and deceptive practices is also among the relatively widely shared policy objectives that have gained increasing importance. However, beyond these classical objectives, law- and policy makers in individual countries occasionally vest fair trading laws with less conventional tasks related to more transient and pragmatic concerns of economic policy, for instance improving the competitive conditions for SMEs or for certain domestic industry and trade sectors. As the above example of regulation of unfair trading practices in the food retail sector demonstrates, this type of regulation often responds to local concerns, with solutions having a distinctly protectionist flavour. More rarely, fair trading law is occasionally charged with paternalist objectives, like child protection, promoting health or socially responsible consumer choices. Similarly, the interests affected by fair trading law are often mixed and can include interests of individual competitors, economic sectors, collective and diffuse consumer interests, as well as general public interests of economic, social and environmental character. Which practices, interests and policy objectives are given priority in a particular country depends strongly on what could be called the ‘constitutive moment’ of fair trading law—in other words, the historical time at which fair trading law entered the national legislative and political stage. Thus, German unfair competition law, despite numerous subsequent amendments and transformations, arguably still bears the imprint of the historical context in which it was conceived, namely the end of the nineteenth century, with strong ambitions to establish ‘rules of fair play’ in an environment of hardened conditions of competition following the end of the mercantilist era. In sharp contrast, Swedish marketing practices law is largely a product of the consumerist spirit of the 1970s, although many of the original provisions and institutions have been adjusted considerably since then. In the new Member States from CEE, the legacies of fair trading law do not run as deep, and in any case have been punctuated by decades of socialist command economy, making these countries arguably more susceptible to current EU influences, but also enhancing the fragility of the regulative environment. Over and beyond the specific context of fair trading law, the national institutional environment in which the UCPD is to be put into practice is shaped by factors of a more general nature. Central here is the type of political economy which a country represents. Hall and Soskice, in their much observed research

The Impact of the UCP Directive 167 on varieties of capitalism, have drawn attention to the diversity of economic and political institutions across countries.203 They have also convincingly shown that we can fruitfully distinguish between what they call liberal and co-ordinated market economies, with the UK being a proponent of the liberal model and Germany, Sweden and other continental countries representing different variations of coordinated economies. The factors on which Hall and Soskice base their classification are also highly relevant for the regulative regime of fair trading law. They relate to, among others, the degree of organisation of economic actors, as well as to the relations between labour, firms and government. Indeed, in the context of the UK liberal economy, the notorious resistance to a ­general clause against unfair competition is hardly surprising. In turn, the strong position of the Mittelstand (middle class) in the highly organised corporatist ­German society of the turn of the last century at least partly accounts for the important role played by business associations (Wettbewerbsverbände) in the enforcement of German UWG. Corporatist legacies also lurk behind the higher degree of susceptibility of law- and policy makers to the grievances of organised industry and regulated professions in countries like Germany and Belgium, and can explain the relative abundance of commercial regulation in these states. In Sweden, the rather different dynamics of the 1970s made labour unions instrumental for the early advance of consumer policy. While the unions soon retreated from the field of consumer protection, their involvement was decisive for the important role that public institutions have come to play in the enforcement of consumer law in Sweden.204 As to the Member States from CEE, they tend to be clumped together into one category of post-communist economies. Yet, recent research along the lines of Hall and Soskice shows that in this group of countries varieties of postcommunist capitalism can also be discerned, with their inevitable implications for fair trading institutions.205 Finally, as discussed above, enforcement of fair trading law is coded in national constitutional structures and governance traditions which are as a whole conservative and change only slowly. These differences would no doubt continue to impact the direction and nuances of national fair trading law, even in the wake of full harmonisation. The analysis in this chapter can understandably be perceived as painting a bleak picture for the future of European harmonisation of unfair commercial practices law. Are the efforts to bring national fair trading laws and practices into a coherent European regime doomed to failure and should we be concerned? To be sure, in this contribution I consciously chose to concentrate on factors that stand in the way of harmony and coherence. The account is thus admittedly biased towards 203 P Hall and D Soskice, Varieties of Capitalism: The Institutional Foundations of Comparative Advantage (Oxford, Oxford University Press, 2001). 204  It also explains the standing of ‘wage-earners’ organisations’ still featuring in the Swedish MFL. 205  D Lane and M Myant, Varieties of Capitalism in Post-Communist Countries (London, Palgrave Macmillan, 2007).

168  Antonina Bakardjieva Engelbrekt emphasising persisting diversity and pays less attention to instances of successful approximation. However, my purpose has been mainly to challenge a mechanistic view of harmonisation as a technical operation of replacement of national rules by common European standards. The analysis above hopefully demonstrates that such a vision of harmonisation is both unrealistic and misguided, nurturing false ideals of seamless uniformity and coherence, and occasionally prompting erroneous policy choices. As was convincingly argued by Otto Kahn Freund in the early days of European integration, law is hardly comparable to a machine part and cannot be replaced as easily as a carburettor.206 In most domains, legal rules and institutions are organically embedded in the institutional and political texture of society. Change—irrespective of whether it is triggered by legal transplantation or European harmonisation—is therefore a delicate operation, moulded by affected actors and institutions, and inevitably influenced by local context. Accepting this insight should not, however, be a reason for gloomy predictions and pessimism. It simply requires recalibrating our expectations with regard to European legal harmonisation. In a diverse European polity, harmonised instruments would rarely come to simply ‘replace’ national rules and regulative practices. Under the thin crust of harmonised European law, deeper layers of national traditions and legacies are in constant motion—folding, shifting and adjusting in an effort to accommodate European influences. Harmonisation can thus not be a quick, one-step operation, but is an incremental and time-consuming process. It is better conceptualised by metaphors like ‘irritation’ or ‘refraction’, whereby common European rules are refracted through the prism of national institutional environments and produce often unexpected and diverse effects.207 At the same time, diversity should not be a source of concern, but rather should be acknowledged as an important asset of European integration. Europe offers a formidable arena for testing institutional solutions and for challenging established national patterns and old truths. European legal instruments should therefore not strive to mangle national regulative regimes into a single common model. A much more realistic and normatively suitable task for such instruments would be to level the playing field and mitigate only those national idiosyncrasies that are truly problematic within an integrated European market. At their best, instruments of harmonisation would set out a broad and flexible frame within which coexistence of diverse national regimes is possible and mutual learning is promoted. In this sense, the main contribution of the UCPD could probably be seen to consist not so much in the detailed rules it stipulates, but rather in the common language it offers for communicating, testing and revising competing interpretations and understandings of fairness through the system of judicial dialogue. Furthermore, the emerging networks of public authorities and self-regulatory bodies 206 

O Kahn Freund, ‘On Uses and Abuses of Comparative Law’ (1974) 37(1) Modern Law Review 1. G Teubner, ‘Legal Irritants: Good Faith in British Law or How Unifying Law Ends Up in New Divergences’ (1998) 61(1) Modern Law Review 11. For the concept of ‘refraction’ see Bakardjieva Engelbrekt (n 67) 634. 207  See

The Impact of the UCP Directive 169 provide useful platforms where diverse national experiences and enforcement practices can be exchanged, compared and recalibrated. It is interesting to note that, according to Article 38 of the proposed new Regulation on Consumer Protection Cooperation, the competent authorities may participate in exchange schemes of competent officials from other Member States in order to improve enforcement co-operation. Such exchange schemes presuppose that officials from one Member State are enabled to play an effective role in the activities of the competent authority of another. During the exchange, the competent officials shall in many respects be treated in the same way as officials of the host competent authority. This sort of institutionalised ‘cultural immersion’ can be seen as a promising attempt to enhance mutual understanding between different institutional traditions and a necessary prerequisite for genuine co-operation.208 To be sure, ten years is a short historical period of time, and it is still too early for conclusive assessments. Following the first evaluation reports of the UCPD, many proposals have been advanced for minor or more radical amendments, including proposals for widening the scope of the Directive to encompass B2B practices. Some of these proposals are certainly founded on sound analysis and on convincing critique. However, it is contended here that, before starting the next legislative round, sufficient time should be allowed for national institutional structures to settle and for national actors to find their way to the Directive and to readjust their ‘collective expectations’ around the new rules.209 Only then would the true effects of the Directive become visible and possible to adequately estimate. Therefore, embarking on the next reform may be premature.

208  V Grosswald Curran, ‘Culturan Immersion, Difference and Categories in US Comparative Law’ (1998) 46(1) American Journal of Comparative Law 43. 209  K Pistor, ‘Contesting Property Rights: Towards an Integrated Theory of Institutional and System Change’ (2011) 11(2) Global Jurist Art 6; M Aioki, Toward a Comparative Institutional Analysis (Cambridge, Cambridge University Press, 2001).

170 

8 B2B and B2C Marketing Practices—the Case for an Integrated Approach PALLE BO MADSEN

I. INTRODUCTION

A.  Looking Back

I

N ITS ORIGINAL version, Directive 85/450/EEC concerned any misleading advertising, and in doing so it made no distinction between advertising addressed to consumers (B2C, business-to-consumer) and business (B2B, business-to-business). In 1997 followed Directive 97/55/EC, amending Directive 84/450/EEC so as to include comparative advertising. According to Article 1 of the amended directive, the purpose of this directive was to protect consumers, persons carrying on a trade or business or practicing a craft or profession and the interests of the public in general against misleading advertising and the unfair consequences thereof and to lay down the conditions under which comparative advertising is permitted.

Contrary to the regulation of misleading advertising in B2B relations, which from the very start has been based on minimum harmonisation, the prohibition of unlawful comparative advertising was (and still is) based on full harmonisation. Following from Directive 2005/29/EC concerning unfair commercial practices (hereinafter UCPD), Directive 85/450/EEC was amended again in 2005, with both its purpose and scope being altered. The purpose of the latter directive was now ‘to protect traders’—but no longer consumers or the interests of the public in general. Instead, the UCPD took over the concern for the consumers’ economic interests, while the purpose of the UCPD is ‘to contribute to the proper functioning of the internal market and achieve a high level of consumer protection’. Later on, in 2006, a codified version of Directive 84/450/EEC was enacted. The new Directive 2006/114/EC on misleading and comparative advertising (hereinafter MCAD) repeals and replaces Directive 84/450/EEC. Since 2005, the EU law of unfair competition has been based on a distinction between B2B and B2C relations. This approach is completely different from the one originally known and embraced by both the EU and a number of Member States.

172  Palle Bo Madsen B.  Looking Ahead Within the last few years, both the MCAD and the UCPD have been reviewed in order to detect possible problems in their application and, if appropriate, to propose amendments. The MCAD Communication was published in November 2012 (COM (2012) 702 final), and in March 2013 it was followed by the UCPD Communication (COM (2013) 138 final). These communications recommend that specific changes be made to the MCAD with regard to misleading marketing practices, including the introduction of a blacklist of misleading commercial practices but without turning the MCAD into a genuine framework directive for B2B practices,1 while at the same time it is considered inappropriate at present to amend the UCPD Directive.2 A regular merger of the two directives seems out of the question.3 Both communications are based on public consultations with the Member States and a number of stakeholders, although it is not that easy to determine whether or to what extent these (varying) inputs have actually influenced the subsequent output from the Commission.4 Regrettably, one is left with the impression that the way forward had been laid down beforehand.5 This chapter addresses the appropriateness of the split between B2B and B2C.

1 MCAD Communication, ‘Protecting Businesses against Misleading Marketing Practices and Ensuring Effective Enforcement, Review of Directive 2006/114/EC Concerning Misleading and Comparative Advertising’, COM (2012) 702 final, 12 and 14. 2 UCPD Communication, ‘On the Application of the Unfair Commercial Practices Directive, Achieving a High Level of Consumer Protection and Building Trust in the Internal Market’, COM (2013) 138 final, 9. 3  The MCAD Communication focuses on misleading marketing practices, while revision of the rules on comparative advertising, and especially their relation with certain intellectual property rights (eg the use of a competitor’s trademark in comparative advertising), might require further clarification before a proposal for specific changes is made. 4  The UCPD Communication is linked to the UCPD Report (‘First Report on the Application of Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market and Amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’)’, COM (2013) 139 final), based on Member States’ and stakeholders’ responses to the UCPD questionnaire. Also the MCAD Communication is allegedly resting on responses to the MCAD questionnaire, but does not reflect the fact that the majority of the responding stakeholders actually called for broader B2B protection somewhat like that granted to consumers in B2C relations. See eg B Keirsbilck, ‘Which Way Forward for the New European Law of Unfair Commercial Practices?’ [2013/2] European Journal of Consumer Law 233, fnn 39–52. This is also overlooked on page 11 of the UCPD Report, where the Commission categorically finds no case for an extension of the UCPD to B2B transactions. In this respect, the communications themselves seem close to being misleading, ie omitting a material piece of information. 5  cf the Opinion of the European Economic and Social Committee (EESC opinion) [2013] OJ C271, 3.1.7: ‘the Commission appears to have already decided which option it intends to adopt … the choice was a foregone conclusion from the start’.

B2B and B2C Marketing Practices 173 II.  THE SPLIT BETWEEN B2B AND B2C—IS IT WORKING?

A.  Communicating Vessels Basically, a split between B2B and B2C regarding unfair commercial practices does not make much sense from a practical or economic point of view. Most unfair commercial practices in B2B relations—be it horizontal between competitors or vertical in the business sales chain—will have a negative influence on consumers’ decision making in vertical B2C transactions. Conversely, commercial actions in relation to B2C transactions will inevitably affect the B2B competition. The best example to illustrate this is probably comparative advertising, which is within the MCAD’s field of application and today is therefore considered and dealt with mainly as a B2B matter. This was not the case in 1997, when Directive 97/55/ EC was enacted, thereby adding comparative advertising to Directive 84/459/EEC (which until then covered both B2B and B2C), but has been since 2005 as a result of Directive 2005/29/EC. However, it is hard to see how comparative advertising being unfair and illegitimate according to the MCAD can avoid also being misleading or otherwise unfair to consumers. Most often it is exactly because of the consequent impact on consumers that unfair comparative advertising becomes detrimental to the exposed trader.6 As recital 6 of the UCPD preamble correctly explains, this directive is dealing with unfair commercial practices ‘which directly harm consumers’ economic interests and thereby indirectly harm the economic interests of legitimate competitors’;7 likewise recital 8 recognises that, although UCPD ‘directly’ protects consumer economic interests from unfair B2C commercial practices, it thereby ‘also indirectly protects legitimate businesses from their competitors who do not play by the rules of the Directive and thus guarantees fair competition’. In other words, the UCPD generally aims to ensure, promote and protect fair competition in the area to the benefit of both consumers and traders. At the same time, however, recital 6 UCPD states that the directive does not cover or affect the provisions of the MCAD on advertising which misleads business but which is not misleading for consumers, nor is it applicable to comparative advertising as a whole. This is not consistent. As we can learn from Article 6(2)(a) UCPD, a commercial practice shall be regarded as misleading in B2C relations if it involves any marketing of a product, ‘including comparative advertising’, which creates confusion with a product etc of a competitor. Correspondingly, as laid down in Article 4(a) MCAD, advertising or commercial practices that contain false or misleading information about competitors (or products of competitors etc) within

6  Also evident from recital 9 in the preamble to the MCAD, on determining which practices relating to comparative advertising may ‘distort competition, be detrimental to competitors or have an adverse effect on consumer choice’. 7 Alongside, recital 4 in the preamble to the MCAD addresses advertising which affects ‘the economic welfare of consumers and traders’.

174  Palle Bo Madsen the meaning of the UCPD, ie in B2C relations, shall be considered unfair comparative advertising under the MCAD, ie in B2B relations. These things simply cannot be separated in a meaningful way, and the question whether to place misleading advertising under the auspices of a B2B or a B2C regulation would seem to require a both … and answer. Despite the possibility that unfair commercial practices in B2C relations may very well be detrimental to consumers and for that reason must be stopped, the underlying intention of the traders is not primarily to harm consumers but to gain market shares, ie to beat the competitors. As a result, the socalled consumer protection rules in the UCPD may as well be considered part of a business protection scheme aimed at protecting one trader from another.8 Before the conceptualisation of consumer law in the 1960s and 1970s, business protection was more or less the only justification of unfair competition law, and the fact that consumer protection is now also part of unfair competition law should not lead to the misapprehension that the former consideration has been totally abandoned in consumer transactions (B2C). Nor should it be assumed that the protection of business (in the marketplace) to any appreciable extent can be separated from the protection of consumers when the latter is also at stake. In other words, B2B and B2C are like interconnected vessels predominantly filled with the same fluid and impossible to measure separately. Trying to separate B2B from B2C with regard to fair commercial practices is therefore more or less an impossible task.

B.  The Scope of the Two Commercial Practices Directives As It Is The UCPD applies to unfair B2C commercial practices (see Article 3(1) UCPD), and in that regard it should be borne in mind that the UCPD gives ‘a particularly wide definition to the concept of commercial practices’, as stated in Plus Warenhandelsgesellschaft.9 According to Article 2(d) UCPD, the concept of ‘commercial practices’ means ‘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’.10 Regarding

8  See M Namyslowska, ‘To B2C or Not to B2C. Some Reflections on the Regulation of Unfair Commercial Practices from a Polish Perspective’ (2013) 36 Journal of Consumer Policy 329. 9  See CJEU Judgment of 14 January 2010, Case C-304/08 Plus Warenhandelsgesellschaft EU:C: 2010:12, para 36. 10 See also CJEU Judgment of 9 November 2010, Case C-540/08 Mediaprint Zeitungs- und Zeitschriftenverlag EU:C:2010:660, paras 17 and 21; CJEU Judgment of 30 June 2011, Case C-288/10 Wamo EU:C:2011:443, para 22; CJEU Order of 15 December 2011, Case C-126/11 Inno EU:C:2011:851, para 29; CJEU Judgment of 3 April 2013, Case C-59/12 Zentrale zur Bekämpfung unlauteren Wettbewerbs EU:C:2013:634, para 40; CJEU Judgment of 19 September 2013, Case C-435/11 CHS Tour Services EU:C:2013:574, para 27; CJEU Judgment of 16 April 2015, Case C-388/13 UPC Magyarország EU:C:2015:225, paras 34–35.

B2B and B2C Marketing Practices 175 the B2C delimitation in the UCPD, paragraph 39 in Plus Warenhandelsgesellschaft explains: As is evident from recital 6 in the preamble to that directive, only national legislation relating to unfair commercial practices which harm ‘only’ competitors’ economic interests or which relate to a transaction between traders is thus excluded from that scope [and left behind in MCAD].

In Wamo, the CJEU further confirms the interpretation that a national provision concerning commercial practices falls within the scope of the UCPD insofar as the provision ‘actually pursues objectives relating to consumer protection’.11 Several protective measures in national law will, however, have mixed aims and effects (ie protecting the interests of both consumers and competitors), and in order to establish whether a certain provision does actually pursue consumer protection objectives, ‘the general purpose of the law, the background and genesis of the measures in question, the preparatory work and academic comments’ can be taken into account.12 On the basis of this variety of criteria, the actual segregation of pure B2B practices which fall exclusively outside the scope of UCPD seems rather difficult to grasp—and could even be described as somewhat arbitrary. The term ‘actually pursues objectives’ may refer to the intended purpose of the provision in question, and the weight attached to the general purpose and the preparatory work of the law certainly supports this. However, the term also connects to the objectives that are actually pursued, which again might refer to the demonstrable effect or influence of the provision on the market and its players. The latter understanding would also correspond with recital 6 in the UCPD preamble, according to which the essential criterion would be whether commercial practices actually ‘harm’ the economic interests of the consumers or only relate to transactions between traders. On the other hand, not just any B2C commercial practice falls within the scope of the UCPD. In Pelckmans Turnhout, the CJEU ruled that the UCPD does not preclude a national regulation prohibiting the traders from opening their stores seven days a week by imposing a weekly closing day.13 Although this was clearly a commercial practice affecting the B2C relation, and therefore obviously not within the scope of MCAD, the said national legislation did not pursue consumer protection objectives but instead aimed at protecting workers

11 

Wamo (ibid) paras 28 and 40. Commission Staff Working Document, ‘Guidance on the Implementation/Application of UCPD’, SEC (2009) 1666, 15, referring to the Opinion of Advocate General Trstenjak in Plus Warenhandelsgesellschaft (para 66). In the updated version of the 2009 Guidance Paper adopted by the Commission in May 2016, SWD (2016) 163, reference is instead made to the considerations expressed by the CJEU itself—eg in Plus Warenhandelsgesellschaft and Inno—while at the same time underlining that it is for the national authorities and courts to decide whether a national provision actually pursues objectives related to consumer protection, in order to determine whether it falls within the scope of the UCPD, cf CJEU Order of 8 September 2015, Case C-13/15 Cdiscount EU:C:2015:560, para 29. 13  CJEU Order of 4 October 2012, Case C-559/11 Pelckmans Turnhout EU:C:2012:615, para 22. 12 

176  Palle Bo Madsen and employees by securing them ‘a minimum family and social life after opening hours’.14 For this reason, the regulation did not fall within the scope of the UCPD either. Objectives of protection

+ Consumer interests

÷ Consumer interests

+ Business interests

Within the scope of the UCPD

Within the scope of the MCAD

÷ Business interests

Within the scope of the UCPD

Neither within the scope of the MCAD nor the UCPD (eg Pelckmans)

Nevertheless, the scope of the UCPD is very wide. Its substantive provisions are structured to cover almost all unfair B2C commercial practices15 due to the general clause in Article 5(2), which is a catch-all for any unfairness that is not included in the general prohibitions on misleading or aggressive practices in Articles 6–9 and the per se unfairness test of the Black List in Annex I. Notably, any professional conduct or communication by a trader to a consumer may constitute a ‘commercial practice’ within the meaning of the UCPD, even if it concerns only a single consumer.16 As mentioned, this leaves the MCAD with only unfair marketing practices which exclusively harm the economic interests of traders/competitors. Contrary to the UCPD, the MCAD only addresses misleading and comparative advertising it does not prohibit other forms of unfair conduct between businesses. Specifically, it does not contain a general clause to catch other kinds of unfair practices. Therefore, the split between B2B and B2C is presently as essential as it is impossible to work with. The very distinction between consumers’ and traders’ interests may be questioned. Rules whose sole rationale is to ensure fair competition in the marketplace will also affect/protect consumers’ economic interests, even though such a protective purpose or effect may not be seen at first glance. Likewise, if the objective of the regulation is to protect the economic interests of consumers, it does in fact frequently cover B2B affairs as well. Most often consumers’ and traders’/competitors’ interests cannot be separated—they either coincide or collide and therefore have to be balanced. Also, the impact of the one marketing practices directive on the other is evident with regard to a commercial practice being ‘misleading’, ie deceiving the persons to whom it is addressed or to whom it has reached, as here the MCAD makes explicit references to the UCPD, including the average consumer test (see Articles 2(b) and 4(a) MCAD and Articles 6(2) and 7(2) UCPD). The little space left for

14 My unofficial translation from French—the CJEU Order is not available in an official English version. See the subsequent CJEU Judgment of 8 May 2014, Case C-483/12 Pelckmans Turnhout EU:C:2012:615, para 12. 15  Confined to unfair commercial practices harming consumers’ economic interests, and without prejudice to contract law and rules relating to the health and safety aspects of products. 16  CJEU Judgment of 16 April 2015, Case C-388/11 UPC Magyarország EU:C:2015:225, paras 41–42.

B2B and B2C Marketing Practices 177 commercial practices which harm only competitors’ economic interests, and which can be meaningfully separated from concepts and considerations under the UCPD (ie pure B2B practices, if such exist in this sense at all), would not require separate legislation but could easily be integrated in a revised UCPD—especially if the intention of the EU lawmakers is to broaden out the B2B legislation and not limit the scope to misleading and comparative advertising. Some Member States have already gone all the way regarding national law and have on their own initiative extended the protection granted under the UCPD to B2B transactions (see footnote 41 below), which they are allowed to do with regard to misleading advertising according to Article 8(1) MCAD.

III.  THE CONFUSED MARKETPLACE—WHO’S WHO? OR WHAT TO DO?

The present marketing practices directives relate only to B2B and B2C transactions covered by MCAD and UCPD, respectively. According to Article 2(d) MCAD, this directive covers only commercial practices ‘directly connected with the promotion, sale or supply of a product to consumers’.17 The reverse situation, where traders purchase products from consumers, does not fall within the scope of the directive(s),18 and neither does consumer-to-consumer marketing and sales. However, the development of the internet and the rise of social media have given a new and growing digital platform not just for the commercial communication and sales carried out by traders, but also for consumers offering goods or services—or simply their opinion or advise—to business enterprises (C2B) or to other consumers (C2C). B2B—business to business Commerce activities between businesses

B2C—business to consumer Commerce activities towards consumers

C2B—consumer to business Consumers offering goods/services to business or ‘demanding offers’ from business

C2C—consumer to consumer Eg online shopping between consumers, social network recommendations

C2B relations (sometimes also known as costumer-to-business) must be characterised as being somewhat complex, as this model has several faces. The C2B model is not just the complete reversal of the B2C model. Although the concept

17  According to Art 2(a) UCPD, a ‘consumer’ is ‘any natural person who, in commercial practices covered by this Directive, is acting for purposes which are outside his trade, business, craft or profession’. According to Art 2(c) UCPD, a ‘product’ is ‘any goods or service’. 18  Unless in the specific case a ‘link’ can be established between the trader’s purchase of a product from consumers and the trader’s promotion, sale or supply of a (different) product to consumers; see further in the text.

178  Palle Bo Madsen of commercial practices in principle does not cover situations of traders buying products from consumers, a C2B sale may be linked to a trader’s promotion, sale or supply of a (different) product to consumers in such a way that the one thing is conditional on the other, eg the consumer buys a new vehicle from a car salesman, who in return purchases the consumer’s used vehicle, in which case the practice as a whole falls within the scope of the UCPD.19 It is, however, difficult to understand why the consumers’ need of protection and the requirement of professional diligence on the traders’ part in this situation should be any different from the situation where the trader advertises for and buys products from the consumers (be it eg used cars, antiques or jewellery) without selling anything in return. Moreover, besides the complete reversal to the B2C model (ie consumers selling goods and services to business), we also find, for example, the so-called demand collection model (or reverse auction), where consumers in the capacity of buyers name their own price (or maximum price) for a specific product and advertise their demand bids on a website created for this purpose. We also find C2B concepts where consumers create value for businesses (who ‘consume’ that value) by giving reviews or other kinds of useful feedback on specific products, enabling businesses to improve their existing products or develop new ones, and the businesses pay the consumers. Such C2B transactions or collaborations concern the consumers’ economic interests in addition to the businesses’, and also in the C2B models the consumers may very well base their economic behaviour on specific information or other kinds of influence from the trader in question. A mutual obligation is binding upon both parties, and when a professional business enterprise is involved with a consumer for economic reasons, it may be as a seller and a buyer at the same time, and the two things cannot really be separated. Consequently, one could argue that the standard of professional diligence on the traders’ part should in principle apply equally in all B2C and C2B relations. As for C2C conducts, these are non-commercial and non-professional by definition, and are therefore kept outside the scope of the marketing practices regulations for good reason—provided, of course, they actually are what they appear to be, and that the consumers in reality are not traders or acting on behalf of business enterprises aiming to promote and advertise their products, ie the traders not simply disguising themselves as consumers.20 In case a natural person is acting in a more extensive and systematic way for overriding economic purposes related to the promotion, sale or supply of his own goods or services—be it to traders or consumers—he himself is likely to be considered a trader, not a consumer.21 More commonly, however, the use of social media on the internet and the widespread user-generated marketing, such as viral marketing, where consumers share their opinions in a modern word-of-mouth way, often blur the picture by making it 19 

Commission’s 2016 Guidance Paper (n 12) 89. latter conduct is covered by the Black List in UCPD, Annex I, point 22 and/or Art 6(1)(c) UCPD. See also Art 6(a) of Directive 2000/31/EC on Electronic Commerce. 21  cf Art 6(1)(a) and (b) UCPD and Art 2(d) MCAD. 20  The

B2B and B2C Marketing Practices 179 difficult to distinguish pure ‘social’ interaction between private individuals from commercial messages.22 A distinction has to be made here on a case-by-case basis, depending on an assessment of the connection between the individual and the business in question. Official guidelines, and eventually case law, must help to eliminate the uncertainty following from this distinction, which cannot be abandoned.23

IV.  THE PRIMARY PURPOSE(S) OF MARKETING LAW VIS-À-VIS COMPETITION LAW—A COMMON DENOMINATOR?

Originally, the purpose of marketing practices law (as part of competition law in a broad sense) in national law was to protect the competitors against each other. From the 1970s, however, the protection of consumers became an equally important objective in marketing practices law. In Danish and Swedish marketing law, for example, the two considerations merged completely.24 The declared purpose of the MCAD of today is ‘to protect traders’ (competitors) (Article 1 MCAD). The purpose of the UCPD, on the other hand, is ‘to contribute to the proper functioning of the internal market and achieve a high level of consumer protection’ (Article 1 UCPD). Despite the different wordings and proclaimed purposes, the protective aims are overlapping, and both directives are basically tools for ensuring the proper functioning of the market by facilitating fair marketing and competition.25 More generally, misleading or otherwise unfair marketing practices generate market failure by impairing the ability of both businesses and consumers to make informed, and hence effective, choices. In particular, ‘The distortion of businesses’ economic decision-making also gives rise to distortion of competition’.26 As Advocate General Jacobs very accurately puts it in the Bronner case with regard to competition law (antitrust law), the primary purpose is ‘to prevent distortion of

22  See J Trzaskowski, ‘User-Generated Marketing—Legal Implications when Word-of-Mouth Goes Viral’ [2011] Journal of Law and Information Technology 1. 23  Commission’s 2016 Guidance Paper (n 12) 139–41. The Nordic Consumer Ombudsmen published in May 2010, and again in May 2012, a joint position paper on social media marketing, addressing, for example, the issue of such marketing being identifiable as marketing, ‘Position of the Nordic Consumer Ombudsmen on Social Media Marketing of 3 May 2012’. 24  According to the Danish Marketing Practices Act (consolidated Act of 2013), traders ‘shall exercise good marketing practice with reference to consumers, other traders and public interests’. According to the Swedish Marketing Act (of 2008), its purpose is ‘to promote the interests of consumers and business’ and to ‘prevent marketing that is unfair to consumers and traders’ (s 1 of both Acts). 25  It should be noted that both directives are based on Art 114 TEUF (ex Art 95 TEC), which aims to achieve the objectives set out in Art 26 TEUF (ex Art 14 TEC), ie ensuring the establishment and functioning of the internal market. One could argue that this in itself would call for a functional model of legislative and judiciary legal thinking, not limited by rigid legal distinctions between B2B and B2C relations. 26  MCAD Communication, 2.

180  Palle Bo Madsen competition—and in particular to safeguard the interests of consumers—rather than to protect the position of particular competitors’.27 It seems that this focus on a competitive market, and ultimately the interests of consumers and society, would serve adequately as a guiding principle not just for competition law but also for any marketing practices law as well—be it B2B or B2C. The justification for any interfering with the market powers and the freedom of competition requires a careful balancing of conflicting considerations, taking into account the market experience and/or bargaining power of each party as well as the possible impact on the workable competition in the market. Since the aim of market regulations in general should be to balance the interests, expectations and expected behaviour of consumers and traders (B2C) as well as between traders (B2B), while at the same time considering public interests, all parties must be required to act with a certain degree of reasonableness and attention. This is reflected in the UCPD’s requirement of ‘professional diligence’ on the traders’ part, which in B2C relations is bound up with the presumed economic behaviour of the consumer acting ‘reasonably well informed and reasonably observant and circumspect’ (see Article 5(2) UCPD and the well-established EU case law on the notion of the ‘average consumer’). Also, the requirement of ‘professional diligence’ in B2B relations sets a standard for traders acting vis-à-vis other traders and should form the basis for a general framework for B2B practices. Like the B2C regulation in the UCPD intends to protect the collective interests of consumers,28 the B2B marketing regulation—despite the greater concern shown in some cases for the particular trader and his individual rights—has an eye open to the promotion of competition as such. Any market regulation in fact influences a broader array of interests, ie the economic interests of consumers and competitors as well as society (the fair and effective functioning of the market as a whole), and all market rules ultimately serve to prevent distortion of competition—whether due to restrictive business practices (competition law) or due to misleading or otherwise unfair business practices (marketing law).29 Together, competition law and marketing law constitute the backbone of a free and fair market—the ‘freedom’ aspect and the ‘fairness’ aspect reflecting the two legal foundations of the market economy. Although complementary, however, competition law and marketing law address different market failures, following from the structure of the market and the marketing practices on the market, respectively. Consequently, there are still good reasons for some distinction to be made between competition law and marketing law—the former aiming to promote economic efficiency in society when competition on the market fails due to the market structure or anti-competitive agreements on a kind of

27 

Opinion of Advocate General Jacobs in Case C-7/97 Bronner, para 58. Even though a commercial practice covered by the UCPD may concern only one single consumer: see n 16 above. 29  See B Keirsbilck, The New European Law of Unfair Commercial Practices and Competition Law (Oxford, Hart Publishing, 2011) 539–42. 28 

B2B and B2C Marketing Practices 181 macroeconomic level,30 the latter focusing directly on economic behaviour among the market participants, although also simultaneously contributing to the smooth functioning of the market itself.31 Contrary to this, it seems very hard to justify a distinction made between a consumer and a businessman if one of these market players is exposed to unfair or misleading behaviour on the market. Here, we are talking about the same kind of market failure, namely the distortion of economic decision making, irrespective of the actual victim’s status. Basically, one may question the very existence of an unfair and unlawful commercial practice exclusively harming a competitor’s economic interests, which is the very rationale behind the separate B2B regulation in MCAD. At the same time, one may point to the fact that since business enterprises (competitors) are not all alike, their need of protection varies accordingly. For the same reason, it seems hard to explain that all traders are treated equally when it comes to the protection offered against unfair commercial practices (see below).32

V.  BIG BUSINESS AND SMALL BUSINESS (SMEs)—ONE SIZE FITS ALL?

In the European Union, more than 99 per cent of all enterprises in the nonfinancial business sector are SMEs.33 Moreover, the SMEs employ two in every three people working in the sector and generate 58 per cent of the value added. The largest and most important SME sector is the ‘wholesale and retail trade ­sector’. SMEs in the wholesale and retail trade sector therefore play a central role in the European economy and are key drivers for economic growth, innovation, employment and consumer welfare.34 This certainly applies with special force to microfirms35—these enterprises being even more numerous today than before the global financial crisis.36 Around 90 per cent of SMEs are microenterprises.37 30  Not overlooking the fact that competition law has both a ‘behavioural’ and a ‘structural’ side (as expressed in Arts 101 and 102 TEUF), the focus is on economic efficiency. Although the practices prohibited under the competition rules are not automatically considered unfair under the UCPD (or the MCAD), there is an interplay between the two set of rules, and the breach of competition rules should always be taken into account when assessing their unfairness under the marketing rules, especially Art 5(2) UCPD, cf Commission’s 2016 Guidance Paper (n 12) 27. 31 Keirsbilck (n 30) 543–53 argues that competition law and unfair trade law (marketing law) should be understood as ‘living apart together’—complementary but autonomous. 32  Paraphrasing George Orwell’s famous novel Animal Farm: all traders are equal, but some traders are more equal than others! 33  SMEs (micro-, small and medium-sized enterprises) are defined as firms with fewer than 250 employees, with an annual turnover not exceeding €50 million and/or an annual balance sheet total not exceeding €43 million (Art 2 of the Annex of Recommendation 2003/361/EC). 34 ‘Annual Report on European SMEs 2013/2014—A Partial and Fragile Recovery’ (European Commission, July 2014); ‘Annual Report on European SMEs 2014/2015—SMEs Start Hiring Again’ (European Commission, November 2015). 35  Microfirms are defined as enterprises with fewer than 10 employees, with an annual turnover not exceeding €2 million and/or an annual balance sheet total not exceeding €2 million. 36  See n 34 above. 37  MCAD Communication, fn 2; Commission’s Annual Report on European SMEs 2014/2015 (n 34).

182  Palle Bo Madsen S­ upport for SMEs therefore is and should be an EU priority when confronted with market imperfections, distortions of competition and unfair marketing practices. Today, the concern for the SMEs is widely recognised when, for instance, it comes to entrepreneurial and innovative MSEs having difficulties in obtaining capital or credit, particularly in the early start-up phase.38 However, adequate legal regulation and protection in the market place is just as important, especially to microand small firms, as is the access to sufficient economic resources.39 Businesses all over Europe are victims of unfair marketing practices, which are particularly damaging to smaller companies. When trading or competing with big enterprises, many SMEs (especially micro- or small firms) find themselves in a position not very different from that of consumers.40 Furthermore, SMEs run the risk of being cornered between a regulation of the downstream markets based on total harmonisation of the rules on misleading or otherwise unfair B2C practices and the marketing conditions they themselves have to live with in relation to their own suppliers in the upstream markets, ie unfair B2B practices exercised against them. For purely macroeconomic reasons, this seems to call for better protection especially of smaller business enterprises than is presently offered by the MCAD (see further below in section VI). However, setting up criteria for a special regulation (B2SME) distinguishing the smaller and/or weaker enterprises especially in need of protection would be somewhat arbitrary, since a precise demarcation—even if based on the Commission’s definition of micro-, small and medium-sized firms— seems impossible. An obvious solution would therefore be to tear down the wall between the B2C and B2B marketing practices law and let the B2C regulation expand to also cover all B2B relations. Some Member States have in fact decided to go beyond the minimum legal standards enshrined in the MCAD and extend the level of protection granted by the UCPD to B2B relations, either partly or in its entirety. In particular, in Austria, Denmark, Germany, France, Italy, Sweden and Belgium the national legislation protecting consumers against unfair commercial practices also applies either partly or entirely to marketing practices affecting businesses. Other Member States, on the other hand, have chosen a different model when transposing the MCAD Directive and the B2B regulation into national law, since they do not consider it appropriate that businesses and consumers should be equally protected.41 The great variety in how the MCAD is implemented in the 38  See the ‘Small Business Act’, COM (2008) 394 final, as reviewed in COM (2011) 78 final, underlining the political will to recognise the central role of SMEs in the EU economy and creating a healthy legal and administrative environment responsive to the SMEs’ needs. (This is a policy paper, and the name of an ‘Act’ is purely symbolic.) 39  As recognised in ‘Review of the Small Business Act’, COM (2011) 78 final; cf CMAD Communication, 1–2, fn 5. 40  MCAD Communication, 9: ‘Small businesses are most affected by such practices, as their vulnerability is not much different from that of consumers.’ See also the EESC opinion (n 5) 3.1.18, advocating that the UCPD be ‘extended and applied equally to some small and micro enterprises … when they are in comparable situations’. 41  MCAD Communication, 3; UCPD Communication, 10, fn 40; Commission’s 2016 Guidance Paper (n 12) 10, fn 13. For example, Austria and Sweden fully apply the provisions of the UCPD to

B2B and B2C Marketing Practices 183 Member States in itself can be said to leave European businesses in an odd and uncertain position, particularly in cross-border situations, but, as also recognised in the MCAD Communication, ‘The differences between consumer and business protection systems further blur the picture’.42 Somewhat surprising, however, the Commission does not conclude from this observation that the said differences should be overcome by taking an integrated approach.

VI.  ALMOST QUIET ON THE B2B FRONT?43

In December 2012, the Commission launched its Regulatory Fitness and Performance Programme (REFIT) with the aim of reviewing EU legislation and providing a simpler, clearer, more stable and predictable regulatory framework.44 As a proclaimed REFIT initiative, laid out in the Commission Work Programme 2015,45 the MCAD shall be transformed into a new Business Marketing Directive, simplifying and streamlining the scope of protection in B2B transactions. The intention is to strengthen the protection by first of all clarifying the rules concerning misleading advertising, eg by introducing a new definition on misleading marketing practices and by adding a blacklist.46 This should bring substantial cost savings to businesses, especially SMEs. According to the Commission, the expected benefit of the proposed MCAD revision (the new Business Marketing Directive) for SMEs alone will amount to €419–77 million per year, by reducing costs relating to the misleading marketing practices where SMEs cannot themselves enforce their right effectively.47 This is marvellous. However, one can only guess what the figures would have been had the new legislation covered the entire complex of problems related to marketing by taking a unitary B2B + B2C approach and integrating the whole B2B area into the UCPD. The Commission does not supply us with this information or even consider it. Although the Commission recognises that legislative action is necessary as the current B2B legislative framework has several deficiencies,48 the proposed revision of the MCAD only targets specific areas of concern. It would seem that we are talking about merely pinprick manoeuvres, not

B2B practices, while other Member States have done so for certain provisions only. Denmark is very much in line with those countries that have extended the UCPD protection to B2B relations, with the exception of the Black List. 42 

MCAD Communication, 4. Loosely borrowed from the famous World War I novel of Erich Maria Remarque, All Quiet on the Western Front (Im Westen nichts Neues). 44  COM (2012) 746 final. 45  COM (2014) 910 final. 46  The planned revision of the MCAD also focuses on better enforcement of the rules in crossborder B2B cases. This is just as important as the B2C cross-border enforcement, and also seems to call for a more integrated approach, but I shall not go into that aspect here. 47  COM (2014) 910 final, Annex 3, 12. 48  MCAD Communication, 11. 43 

184  Palle Bo Madsen a full-scale attack on those companies who do not play by the rules of the game. The challenge is to keep the market regulation simple, while at the same time delivering the consistent and effective measures necessary to achieve policy goals. In my opinion, this is done by avoiding overlapping layers of B2B and B2C regulation, and by letting the B2B/B2C correlation show in a unitary legislation.49 This, however, is obviously not how the Commission sees things. Still, in the most recent REFIT initiative (begun by the Commission at the end of 2015 with planned completion in 2017), concerning a ‘Fitness Check’ of EU consumer law with special focus on the UCPD, the MCAD is among other directives included in the check ‘for consistency reasons and to ensure comprehensive evaluation’, and in particular in order to assess ‘whether legal entities and persons other than consumers require protection comparable to consumers’.50

VII.  CONCLUSION—OR WISHFUL THINKING

As pointed out above, there is no doubt that business indirectly benefits from the consumer protection as shaped in the present UCPD in regard to B2C matters, and likewise consumers indirectly benefit from rules in the MCAD ensuring fair competition. To a significant extent, B2B practices are also already regulated under the UCPD, since only some of the B2B transactions (the pure B2B transactions) are left under the regime of the MCAD. The fact that the lines are so blurred between the different B2B and B2C relations that it is hard to differentiate between them in a meaningful way is apparent from the lack of transparency in the division between the B2B and B2C directives. Furthermore, the varying market relations between business and consumers are also blurred to such a degree that it makes little or no sense to distinguish in principle between B2C and C2B. All kinds of B&C relations (covering both B2C and C2B), where traders are acting towards consumers, should therefore require that the businesses meet the standard of ‘professional diligence’ as this concept is laid out in the present UCPD. Consequently, what is needed is a more functional and almost ‘holistic’ approach developing and maintaining multiple perspectives on the market activities, and thereby thinking about the market as a whole, its place in the economy and society, and in the lives of the consumers as well as the traders. The fulfilment of this wishful thinking requires, at the very least, a coherent approach to different aspects of common or comparable marketing situations, and it would seem most appropriate to go all the way and

49 The European Parliament has also on several occasions urged the Commission to consider extending the UCPD concept of unfair commercial practices, together with the Black List, to B2B relations: see, eg EP Resolution of 22 October 2013 on misleading advertising practices, A7-0311/2013, No 16. This is partly argued out of concern for the SMEs. 50 http://ec.europa.eu/smart-regulation/roadmaps/docs/2016_just_023_evaluation_consumer_ law_en.pdf.

B2B and B2C Marketing Practices 185 create a comprehensive common frame, integrating the B2B and B2C relations in the same regulation with regard to misleading or otherwise unfair commercial practices.51 This would not, of course, rule out certain differentiations when it comes to the assessment of a specific case, where certainly the characteristics of the individual market players and their different economic positions, as well as their average level of professional knowledge and bargaining power etc, should be recognised and taken into account. However, there seems to be little hope that the Commission’s new ‘Fitness Check’ in 2016 and 2017 will fundamentally rethink the very framework of the B2B and B2C unfair commercial practices regulations.

PS

The aim of this intervention has been to question the legal distinction between B2B and B2C unfairness as such, as well as the regulatory separation of B2C practices from B2B practices following from this distinction, but not to discuss in detail what a revised set of rules should entail, or the extent to which a full harmonisation approach would be appropriate. The latter discussion is most certainly as important as the former, but realising that a joint review of B2B and B2C relations must be done within a common framework, and preferably within the same regulation, would, in my view, be an important precondition for achieving the goals pursued.

51 

See along similar lines Keirsbilck (n 4); Keirsbilck (n 30) 331–32.

186 

9 Applying the UCP Directive in Practice: The Norwegian Experience TORE LUNDE

I. INTRODUCTION

T

HE EU DIRECTIVE on Unfair Commercial Practices (UCPD)1 was implemented in the EEA Agreement by the EEA Committee’s decision on 7 July 2006, and finalised by the Norwegian Parliament’s consent to implementation pursuant to section 26(2) of the Norwegian Constitution by a decision on 16 February 2007. Norway, as an EEA Member, implemented the UCPD in Norwegian national legislation by adopting a new Marketing Control Act (MCA), which came into effect on 1 July 2009, in which the UCPD is implemented mainly in chapter two. Chapter two of the MCA’s sections 6–9 corresponds to the UCPD’s Articles 5–8. Thus, section 6 contains the main general paragraph prohibiting unfair commercial practices, sections 7 and 8 regulate, respectively, misleading actions and misleading omissions, and section 9 regulates aggressive commercial practices. In addition, the UCPD’s Annex I, hereinafter referred to as the Black List,2 is implemented by a specific regulation on unfair commercial practices.3 According to Article 5(5) UCPD, the Black List contains a list of those commercial practices which shall in all circumstances be regarded as unfair, in order to provide greater legal certainty.4 Thus, the Black List ‘reverses the burden of proof by laying down

1  Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 998/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’) (text with EEA relevance) [2005] OJ L149/22. 2  See further M Namysłowska, ‘The Blacklist of Unfair Commercial Practices: The Black Sheep, Red Herring or White Elephant of the Unfair Commercial Practices Directive?’ in W van Boom, A Garde and O Akseli (eds), The European Unfair Commercial Practices Directive. Impact, Enforcement Strategies and National Legal Systems (Farnham, Ashgate, 2014) 65ff. 3  FOR-2009-06-01-565 Forskrift om urimelig handelspraksis. 4  See further A Garde, ‘Can the UCP Directive Really Be a Vector of Legal Certainty’ in van Boom et al (n 2) 109ff.

188  Tore Lunde an irrefutable presumption of unfairness’.5 The UCPD requires that the same blacklist shall apply in all Member States and may be modified only by revision of the UCPD. It follows from recital 17 that those commercial practices are the only practices that can be deemed to be unfair without a case-by-case assessment against the provisions of Articles 5–9. The purpose of this chapter is to describe the application of the UCPD based on the Norwegian experience, particularly the relationship between the UCPD’s Annex I and other provisions.

II.  ENFORCEMENT AUTHORITIES

According to Article 11(1) UCPD, it is left to the Member States to ensure that adequate and effective means exist to combat unfair commercial practices in order to enforce compliance with UCPD provisions. The UCPD leaves it to the Member States to decide whether to provide public or private instruments to enforce the unfair commercial practices law.6 In Norway, enforcement of and sanctioning under the MCA are tasks for the Norwegian Consumer Ombudsman (Forbrukerombudet), The Market Council (Markedsrådet) and the ordinary courts. Only a limited number of consumer law cases are brought before the council or the ordinary courts. Hence, to my knowledge, Norwegian courts have so far not decided any cases that have raised interesting questions on the interpretation of the UCPD or the implemented provisions in chapter two of the MCA. The reason why is that most cases regarding unfair commercial practices within this area of law are handled by the Norwegian Consumer Ombudsman.

III.  THE MCA, SECTION 20(2) AND THE BLACKLIST’S PARAGRAPH 28

Section 20(2) MCA reads as follows: ‘It shall be prohibited to include in advertising direct exhortations to children to purchase advertised products or to persuade their parents or other adults to buy the advertised products for them.’7 This provision is intended to implement the UCPD’s central regulations on advertising to children, particularly the Black List’s paragraph 28.8 Its first sentence lists the following as a commercial practice that shall be deemed to be unfair: ‘Including in an advertisement a direct exhortation to children to buy advertised

5 

Garde (ibid) 116. See D Poelzig, ‘Private or Public Enforcement of the UCP Directive? Sanctions and Remedies to Prevent Unfair Commercial Practices’ in van Boom et al (n 2) 235ff. 7 Unofficial translation, not completely updated, available at http://www.forbrukerombudet.no/ id/11039810.0 (last accessed on 10 December 2015). 8  Ot.prp. nr 55 (2007–2008) 205. 6 

The UCP Directive in Norway 189 products or persuade their parents or other adults to buy advertised products for them.’ In the preparatory works, the relevant ministry stated that it is for the enforcement authorities to decide upon how ‘direct’ the ‘direct exhortations’ must be in order to violate the provision.9 This question has also been raised in jurisprudence. Amandine Garde asks: But where should the line be drawn between direct and indirect exhortations? For example, what about the many company-owned websites promoting their goods and services through a page specifically intended to attract children with advergames or give-aways, funny characters, bright attractive colours and graphics and whose purpose is to impact directly on their purchase requests and consumption patterns? The relevant question remains outstanding: how direct should an exhortation to buy be to fall within the scope of Annex I?10

According to the preparatory works, this evaluation is supposed to be based on the children’s perspective, in accordance with section 19 and the UCPD’s preface, paragraph 18. The preparatory work’s approach caused confusion in the Market Council’s decision MR-2012-1245-1 of 23 January 2013.11

IV.  THE MARKET COUNCIL’S FIRST DECISION IN THE JUSTIN BIEBER CASE—MR-2012-1245-1

A.  The Facts The case was brought before the Market Council by the Consumer Ombudsman, who claimed that a concert organiser had violated section 20(2) MCA by including in its Facebook advertising for concert tickets direct exhortations to children to purchase the advertised tickets to a Justin Bieber concert in Oslo. On its Facebook page that promoted the Justin Bieber concert, the concert organiser had posted the following exhortations (unofficial translation from Norwegian): SURPRISE: Awake all beliebers!!! In about 10 minutes (at 7:00) there will be a limited number of token cards in all the country’s 308 Rimi supermarket stores … They can be used to buy two Justin Bieber tickets already TODAY. Maximum one card per person. Beliebers—there are still RIMI code cards left in many shops. Run, grab your bike or get someone to drive you to …

9 ibid.

10 

Garde (n 4) 118. The author of this chapter holds the position of Chairman of the Market Council, and participated in the council’s decision of the case. 11 

190  Tore Lunde Bieberfever at Rimi shops throughout Norway today. Half of the code cards are still available in the 308 Rimi supermarket stores … so RACE beliebers. Maximum one card per person. Remember to buy a ticket to the Bieberexpressen while you buy tickets via RIMI today.

In addition to the concert organiser’s advertising on its Facebook page, similar marketing took place on the food chain Rimi’s Facebook page and also in the form of banner ads through Facebook’s mainstream advertising platform. Newsletters were also sent to those who had consented to receive them. The event was further promoted on popular blogs for children and young people, by bloggers who organised a competition where winners received tickets. Potential participants had to sign up for the event and invite all their friends on Facebook, ‘like’ the concert organiser’s general page on Facebook, and agree to receive newsletters from the concert organiser on its websites as well as comment on the bloggers’ posts.

B.  The Legal Assessments In the Consumer Ombudsman’s view, the concert organiser had acted contrary to section 20(2) MCA by directing exhortation towards children to buy advertised products. Accordingly, the concert organiser was informed that administrative penalties could be imposed. The case was brought before the council, and it was proposed that the concert organiser be penalised NOK 100,000. To impose a penalty, several conditions must be met. First, the disputed actions referred to in paragraph IV, A must objectively qualify as violations of section 20(2) MCA. Secondly, the offence must also be found to be ‘substantial’, or to have occurred repeatedly. The latter was not relevant in this case. Thirdly, it must be found that the violation of the relevant provision was either wilful or negligent. Against this background, the question was whether the provision in section 20(2) MCA was objectively violated. In its decision, the Market Council first stated that the provision in section 20(2) is an expression of a widespread belief that promoting products and services aimed at young people raises specific challenges, and that there is a special need to protect children and adolescents against some marketing efforts. However, a general prohibition against directing advertising towards this group of consumers cannot be inferred from the provision. The council remarked that marketing on social media like Facebook, blogs and Twitter raises new challenges that had not previously been examined by the council. However, the MCA is mainly technology-neutral, and the law applies to all advertising, regardless of the medium used. In its reasoning, the council started by referring to the fact that the provision in section 20(2) aims to protect ‘children’ against marketing. The notion ‘children’ refers generally to minors (ie persons under 18 years old). Nevertheless, the preparatory works stated that a more nuanced and flexible interpretation of the

The UCP Directive in Norway 191 notion of ‘children’ is supposed to be applied. The interpretation is supposed to be based on previous practice, taking into account the children’s maturity and the applicable regulation in question.12 The Market Council took the view that this principle also applies to section 20(2) MCA. Such an interpretation was not considered to be contrary to the UCPD. The term ‘direct exhortation to … buy’ is not explained in the wording of section 20(2). The council therefore relied upon the preparatory works, in which it was stated that the provision applies to encouragements directly aimed at children to ‘come and buy’.13 How ‘direct’ such exhortations to buy must be in order to violate the provision depends, according to the preparatory works, on a case-by-case analysis from the perspective of the children. As will be further commented below, this interpretation is most likely not in accordance with the UCPD. The council anticipated that the Justin Bieber concert primarily attracted adolescents 13–16 years old. In the council’s view, it should be taken for granted in the legal reasoning that the age limit for having a Facebook account is 13. Hence, according to the council’s view, it was not relevant whether children below this age limit got illegitimate access to Facebook, contrary to the age-limit restrictions. Regarding the specific, disputed advertising cited above, the council considered it as undoubtedly having the purpose of selling tickets to the Justin Bieber concert. The advertising statements also had clear elements of direct exhortations, such as ‘run, grab your bike, etc’ and ‘REMEMBER to buy a ticket to …’. Read in isolation, these advertising statements qualified as direct exhortations to buy. However, the Market Council referred to the interpretation stated in the preparatory works, requiring a more specific analysis of how direct the exhortations to buy have to be in order to violate section 20(2). The council was therefore of the opinion that other factors that may affect the strength of the exhortations to buy should also be considered. First, it was held that the marketing in question was directed towards a presumably more mature age group than that in the cases referred to by the Consumer Ombudsman. Many persons belonging to the relevant age group would probably have acquired information, tickets and access to the concert by other means. In the council’s opinion, the disputed advertisement’s wording was not of such a nature that it would represent exploitation of the vulnerability of children, such as their susceptibility, gullibility, trust and lack of experience.14 According to the council, it should be taken into account that the artist held a unique position among young people in the relevant age group. Hence, the advertising as such hardly caused or was likely to cause average consumers of that age group to take a transactional decision that they would not otherwise have taken. In the Market Council’s view, the marketing information had a more practical purpose, aiming at distributing tickets geographically throughout Norway and 12 

See Ot.prp. nr 55 (2007–2008) 70. ibid 205. 14  On the vulnerability, see M Friant-Perrot, ‘The Vulnerable Consumer in the UCPD and Other Provisions of EU law’ in van Boom et al (n 2) 89ff. 13 

192  Tore Lunde enhancing concert security. Although time pressure in advertising may intensify exhortations to buy, the Market Council did not agree that in the present case there were such elements that supported it finding that a violation had occurred. In its assessment, the council recognised the well-known need to act quickly when selling tickets for popular events. In light of these factors, the council did not consider that the specific advertising went beyond the acceptable. Secondly, the council regarded as legitimate the organiser’s need to use Facebook as an effective information channel. Safety considerations, logistical challenges and geographical distribution of tickets were accepted as legitimate concerns in this respect. In its overall and specific assessment, the council concluded that the disputed exhortations to buy, assessed from the perspective of an average member of the particular customer group were not of such a direct and strong character that they violated section 20(2) MCA. Consequently, there was no legal basis for penalising the concert organiser.

V.  THE SWEDISH STARDOLL CASE—MD-2012: 14

In the aftermath of the Justin Bieber decision, questions were raised concerning the relationship between section 20(2) MCA and the Black List’s paragraph 28. The question was put on the agenda because of the Consumer Ombudsman’s request for an administrative reversal of the Market Council’s decision. The question was whether paragraph 28 implies that no specific assessment of the unfairness of the advertising can be carried out if the contested advertising directed towards children contain exhortations to buy. The request for reversal was chosen as a procedural tool, since the council’s decisions are not subject to further administrative, formal complaint procedures. Unlike private parties, the Consumer Ombudsman does not have the right to contest the validity of the council’s decisions before the ordinary courts. The request for reversal was influenced by the Swedish Market Court’s judgment in the Stardoll case, MD-2012: 14.15 This case was concluded 14 days after the Justin Bieber case was argued before the Market Council, but before the council reached its decision 23 January 2013. The Swedish Market Court held that, contrary to the Black List’s paragraph 28, exhortations to buy should be considered as trade practice, which in any case is prohibited, without carrying out a more specific assessment regarding the unfairness of the contested commercial practice. The Market Court concluded that paragraph 28 was violated by direct exhortations to buy, based on a rather objective and strict interpretation of the relevant paragraph.

15  See http://www.konsumetverket.se/Global/Konsumentverket.se/pressmeddelanden/Dom201214.pdf (last accessed on 10 December 2015).

The UCP Directive in Norway 193 In the Consumer Ombudsman’s opinion, the Swedish Market Court’s judgment was based on a correct understanding of paragraph 28, contrary to the Market Council’s interpretation of section 20(2) MCA. The contested exhortations to buy were communicated on a digital gaming community for young girls—www.stardoll.com—consisting of a virtual doll universe. A central element of the game is access to a virtual doll that the girls can make up and dress up, and the doll’s virtual suite can be furnished. Girls who have registered and logged on can communicate with other players. The target group is minor girls aged 7–17. Most probably, the game attracts primarily the younger girls within this age group. Hence, the Swedish Market Court considered that the average consumer was a girl not yet a teenager. Alternatively, the average consumer could be divided into groups within each age group, such as 7–8 years old. The contested exhortations to buy were communicated at different stages of the game. The wording16 of the exhortations consisted, among others, of ‘buy’, ‘buy more’, ‘buy here’, ‘upgrade!’, ‘upgrade to Superstar!’, ‘upgrade now’ and ‘upgrade here’. Many of the exhortations to buy were strengthened with exclamation marks, gold stars, etc. In the Market Court’s opinion, these exhortations to buy were captured by the Black List’s paragraph 28, and that there was therefore no obligation to assess the contested exhortations in relation to other provisions of the Swedish marketing act. The court did not support the defendant’s argument that the contested exhortations were purely information, falling outside the scope of paragraph 28.

VI.  THE MARKET COUNCIL’S REVISED DECISION IN THE JUSTIN BIEBER CASE—MR-2012-1245-2

The Consumer Ombudsman argued in its request for reversal that the Market Council’s first decision in the Justin Bieber case was based on an incorrect interpretation and application of section 20(2) MCA (see the Black List’s paragraph 28). Hence, the decision should be declared void. The Consumer Ombudsman argued that in cases involving the Black List, it should only be assessed whether the objective criteria laid down in the relevant paragraphs of the Black List are fulfilled. If the objective criteria is fulfilled, no specific assessment need be carried out on the question of whether the commercial practice is unfair according to the general paragraph in the MCA’s section 6, which corresponds to the UCPD’s Article 5(1).17 According to the Consumer Ombudsman’s own practice, three factors are decisive when assessing whether exhortations to buy actually have been communicated—the clarity of the exhortations to buy, the type of media in which

16  17 

Unofficial translation from Swedish. See the subsequent Case C-435/11 CHS Tour Services/Team4 Travel EU:C:2013:574, para 45.

194  Tore Lunde the exhortations have been communicated and the accessibility of the offer made. To find that direct exhortations contrary to the MCA have been made, the Consumer Ombudsman holds that in some cases it may be relevant to consider all three factors. Otherwise, the exhortations’ clarity would often be so obvious that further assessments of the other factors would be superfluous. Given the council’s conclusion that the contested advertising qualified as direct exhortations to buy, this was sufficient to conclude that objectively there was a violation of the MCA. Hence, in the Consumer Ombudsman’s view, the council is not entitled to consider whether children are vulnerable, but rather merely to consider the children’s vulnerability when assessing the possible violation. In the present case, the Consumer Ombudsman emphasised that the advertising beyond doubt was directed towards minors, and that the advertising constituted direct exhortations to buy. A correct application of the law would have been to conclude that section 20(2) objectively was violated. Consequently, according to general administrative law, in particular the Norwegian Public Administration Act,18 section 35, first paragraph, letter ‘c’, the decision should be declared void. In its revised decision, the council first referred to its decision in which it held that the purpose of the disputed advertising undoubtedly was to sell concert tickets. Based on an isolated reading, the advertising should be classified as direct exhortations to buy. However, the council remarked that tension exists between the preparatory works’ interpretation and the maximum harmonisation principle introduced by the UCPD, including the UCPD’s structure and its Annex I listing commercial practices which shall always be deemed to be unfair without a case-by-case assessment of the provisions of Articles 5–9. In this regard, the council recalled that the prohibition in section 20(2) MCA was formulated word for word from the Black List’s paragraph 28, to avoid ambiguities and any contradictions between the Norwegian legislation and the UCPD. In light of the above, the Market Council therefore agreed with the Consumer Ombudsman’s opinion that, from the legislature’s side, section 20(2) was not intended to have any function other than the intentions laid down by other provisions of the Black List. However, the council emphasised that the listing of commercial practices that shall always be deemed to be unfair does not eliminate the need for interpretation of the Black List’s respective provisions.19 Hence, the UCPD’s system and structure invites the drawing of a line between an ordinary interpretation of the Black List’s respective provisions to define what commercial practices should be deemed unfair and a specific assessment of whether the disputed practices

18 

Act of 10 February 1967 relating to procedures in cases concerning the public administration. the European Court of Justice’s interpretation of the scope of paragraph 31 of the Black List, see Case C-428/11 Purely Creative EU:C:2012:651, para 25ff. See also the updated version of Commission Staff Working Document, ‘Guidance on the Implementation/Application of Directive 2005/29/EC on Unfair Commercial Practices’, SWD (2016) 163 final. Para 4.6 emphasises that ‘the check to determine whether a commercial practice falls under point 28 of Annex I must be carried out on a case-by-case-basis’. 19  Compare

The UCP Directive in Norway 195 are in fact unfair. The Market Council agreed that, as argued by the Consumer Ombudsman and according to case law from the European Court of Justice (ECJ),20 cases regarding violation of the Black List’s provisions should not be subject to a specific fairness assessment. In its revised decision, the council considered that its previous, contested decision went too far regarding the interpretation of section 20(2) MCA, taking into consideration that the provision implements the Black List’s paragraph 28. This reasoning seems to conform to the CJEU’s subsequent judgment in Purely Creative.21 The CJEU stated that national courts must interpret national law, as far as possible, in light of the UCPD’s wording and purpose, in order to achieve the result pursued by the UCPD and thereby comply with the third paragraph of its Article 288 TFEU.22 In reality, the first decision represents a specific assessment of the commercial practices’ fairness, beyond the limits of an ‘ordinary’ interpretation of the provision. The Market Council acknowledged that the first decision did not sufficiently consider that minors within the actual age group are vulnerable to direct marketing (see the UCPD’s preamble, paragraph 18). In its assessment, the council relied on the reasoning in the Swedish Market Court’s Stardoll judgment, MD 2012: 14. The Market Council was of the opinion that the Swedish decision was directly relevant to the disputed questions. As mentioned, the Swedish Market Court concluded that direct exhortations to buy had been directed towards minors aged 7–17. According to the Market Council’s assessment, there were no appreciable differences between the direct exhortations to buy that were disputed in the two respective cases. In its revised decision, the council relied on the legal assessment of the Swedish case, and consequently held that the direct exhortations cited above are captured by section 20(2) MCA. Hence, the first decision was declared void due to errors of law.

VII.  OTHER NORWEGIAN CASES

A. MR-2013-207 Norsk Tipping—The Black List’s Paragraph 22 The case MR-2013-207 demonstrates interesting aspects of the phenomenon of surreptitious advertising. A fundamental principle in marketing law is that marketing communications should not misrepresent their true commercial purpose (see, for example, Article 9 of the ICC Consolidated Code of Advertising and Marketing). According to this principle, communications promoting the sale of a product or service should not be disguised as, for example, market research,

20 See

CHS Tour Services/Team4 Travel (n 17) para 38. Purely Creative (n 19) para 41. 22  Consolidated Version of the Treaty on the Functioning of the European Union [2012] OJ C326/47. 21 See

196  Tore Lunde consumer surveys, user-generated content, private blogs or independent reviews. Typical of surreptitious advertising is that attempts are made to camouflage surreptitious advertising so that it does not appear to be an advertisement but something that is not recognizable as a sales promotional measure and commercial influence; the advertising is not marked as such, [footnote omitted] and the recipient of the commercial message is thus not aware that they are being exposed to an advertisement [footnote omitted].23

In this case, the parties—the Consumer Ombudsman v The Norwegian monopolist betting company Norsk Tipping AS—agreed that a specific marketing campaign violated the Black List’s paragraph 22. The betting company acted in a web campaign as a fictional private person who had won first prize in the Lotto and therefore had decided to give away all existing belongings, such as bicycles and kayaks. The campaign was later presented as a ‘publicity stunt’ arranged by the betting company. The marketing campaign consisted of 100 adverts on the betting company’s web page, which in sum had generated 362,000 views, with 32,000 consumers contacting the fictional person via email to express interest in receiving the free goods. During the relevant period, traffic on the ‘give-away market’ on the popular web page www.finn.no had increased by 22 per cent. The Market Council held, as acknowledged by the betting company, that the marketing campaign should be deemed as a commercial practice violating the Black List’s paragraph 22, as implemented in the Norwegian Regulation (see n 3), section 1(2) (see section 6(5) MCA). The marketing campaign was also considered to violate the section 3(1) MCA, which contains the general principle that marketing communication shall not misrepresent its true commercial purpose. By its marketing campaign, the betting company had falsely created the impression that it did not act for purposes relating to its business activity, and simultaneously had violated the prohibition against surreptitious advertising. The infringement qualified for the imposition of fines, provided that consumers’ interests justified such a reaction. The betting company disputed that consumers’ interests justified the imposition of fines, arguing that the marketing had not harmed any consumers. In assessing whether the imposition of fines was required in the interests of consumers, the council stated that it was permitted to consider the marketing’s specific harmful effects on consumers. On the other hand, the criterion interests of consumers cannot be interpreted antithetically, so that the absence of specific negative effects on consumers should preclude intervention. Whether intervention from the consumer authorities is required must be based on a specific assessment of the need to intervene against the commercial practice in question. In its specific assessment, the council agreed with the Consumer Ombudsman’s opinion that the infringement was not de minimis. In the council’s view, the commercial practice was an obvious infringement of the Black List’s paragraph 22. In favour of 23 C Heide-Jørgensen, Advertising Law: Marketing Law and Commercial Freedom of Expression (Copenhagen, DJØF Publishing, 2013) 359.

The UCP Directive in Norway 197 intervention in the interests of consumers, the Market Council described the Black List as an expression of commercial practices that are considered to be the most obvious and serious violations of the MCA. Besides, the marketing campaign reached a large number of consumers. It is also a matter of fact that the marketing campaign resulted in intense media publicity both during and after the campaign. The increased exposure resulting therefrom demonstrates that the infringement was not de minimis. The Market Council considered the Black List’s paragraph 22 to be an expression of the fundamental principle that is laid down in section 3(1) MCA, that all marketing shall be designed and presented such that it clearly appears as marketing. Both consumer interests and more general social interests are the motivations behind the principle that commercial communication shall be distinguishable from other information. Breach of such fundamental principles suggests that consumer authorities should intervene.

B.  MR-2013-1141—Teaser Advertisements The question before the Market Council in this case concerned, as in the previous case, the Black List’s paragraph 22. The Consumer Ombudsman requested that the council impose a fine upon a company for having violated the prohibition against surreptitious advertising. First, the case raised the question whether socalled teaser advertisements, or teaser campaigns, were captured by the Black List’s paragraph 22, first alternative, and/or section 3(1) MCA. Secondly, if teaser advertisements were exempted, the question was whether the disputed teaser campaign qualified for exemption. Regarding the first question, the council remarked that it was not directly regulated in the wording of the Black List’s paragraph 22 or section 3(1) MCA. The solution must therefore rely on an interpretation of the provisions. The terms ‘teaser’ and ‘teaser advertisements’ are not otherwise regulated in formal statutes or regulations. Based on definitions set forth in the preparatory works,24 the Market Council described ‘teasers’ and ‘teaser advertisements’ as marketing where the product or service and/or the identity of the trader are covered in the first phase of the marketing campaign. A subsequent planned ‘identification’ of the product or service and the trader will take place at a later stage of the campaign after a period during which teasers are used. The Market Council referred to the wording of the Black List’s paragraph 22 that captures a commercial practice described as ‘falsely claiming or creating the impression that the trader is not acting for purposes relating to his trade, business, craft or profession, or falsely representing himself as a consumer’. Although the Black List has as its purpose the provision of greater legal certainty, each of its provisions must in principle be subject to interpretation to decide which practices are captured by

24 

See Ot.prp. nr 62 (1999–2000) 29.

198  Tore Lunde the respective provisions. The fact that such interpretation must be carried out separately from a specific fairness assessment is also supported by the EU Commission’s Guidance.25 To this end, the council referred to the generally accepted principle on marketing ethics and marketing law that it shall be possible to identify commercial communication.26 This principle is formulated in the International Chamber of Commerce’s Consolidated ICC Code of Advertising and Marketing Communication Practice (2011 revision), Articles 9 and 10.27 Article 10(2) states that ‘the above does not apply to communications with the sole purpose of attracting attention to communication activities to follow (eg so-called “teaser advertisements”)’. The reference to ‘the above’ must presumably be read as referring to both Articles 9 and 10, as both regulate identification of commercial communication. In its further reasoning, the Market Council referred to the fact that at EU level there is no general requirement for identification either in Directive 84/450/EEC on misleading advertising or in Directive 97/55 on comparative advertising, or in the codified version Directive 2006/14/EC. Nor does the UCPD contain any general requirement to identify advertising. However, in addition to the Black List’s paragraph 22, paragraph 11 is of interest. According to paragraph 11, the use of ‘editorial content in the media to promote a product where the trader has paid for the promotion without making that clear in the content or by images or sounds clearly identifiable by the consumer (advertorial)’ will be deemed to be unfair without a case-by-case assessment against the provisions of Articles 5–9. Beyond these two provisions, neither the UCPD nor the Black List contains any regulations on the legality of teasers. There are no judgments from the CJEU that throw any light upon the interpretation of the Black List’s paragraph 22. The Market Council considered the ICC Code’s explicit exemption of teasers from the requirement of identification as a clear indication of an internationally recognised principle of advertising law that such commercial practice does not infringe the prohibition against surreptitious advertising. Although the ICC Code of conduct is not binding upon the interpretation of the Black List’s paragraph 22, the council was nevertheless of the opinion that the ICC Code should be considered in the legal reasoning.28

25  See Commission Guidance (n 19). Jan Trzakowski argued during the conference that the Commission Guidance is likely to have an impact on the interpretation of the UCPD and the assessment of its standards. I agree with his opinion. Although the Guidance is not legally binding, we can observe many references to it and its examples. It is likely that these interpretations will eventually play a more decisive role than its formal legal status deserves. 26  See Heide-Jørgensen (n 23) 347–48. 27 See http://www.iccwbo.org/Advocacy-Codes-and-Rules/Document-centre/2011/Advertising-andMarketing-Communication-Practice-(Consolidated-ICC-Code)/ (last accessed on 10 December 2015). 28  See also T Lunde, I Mestad and TL Michaelsen, Markedsføringsloven med kommentarer, 2nd edn (Oslo, Gyldendal, 2015) 37–38. The relationship between the UCPD and codes of conduct seems underdeveloped. Codes of conduct have not so far contributed much to the UCPD’s double purpose of harmonisation and a high level of consumer protection. See C Pavillion, ‘The Interaction between the Unfair Commercial Practices Directive and Self-Regulation: The Case of Codes of Conduct’ in van Boom et al (n 2) 137ff.

The UCP Directive in Norway 199 In the council’s view, it is not likely that the UCPD-introduced regulation is contrary to this internationally acknowledged principle. In this regard, the Market Council referred to the ICC’s mission of furthering a high ethical standard within the area of marketing. Since the 1930s, the ICC has developed broadly accepted international ethical codes for marketing. In its interpretation of paragraph 22, the council also assessed whether teasers could violate the general ban on surreptitious advertising as laid down in section 3(1) MCA. To this end, the council referred to its case MR-2013-207, in which it described paragraph 22 as a clarification of the principle that all marketing shall be designed and presented such that it clearly appears as marketing. The legislative history behind section 3(1) MCA leaves the question of the legality of teasers to jurisprudence. Based on this legal landscape, the Market Council argued that considerable weight should be put on the exemption for teasers in the ICC Code’s Article 10(2), and that an equivalent exemption must be read into section 3(1) MCA. The council also took into consideration that a similar exemption seems to apply in Danish law. § 4 of the 2005 Law of Marketing contains a rule on the identification of advertising as such, similar to the Norwegian section 3(1) MCA. The Danish provision requires that an advertisement shall appear such that it will clearly be perceived as advertising, whatever its form and whatever medium it is published in. Based on the Danish preparatory works, it was also argued, both by the Danish Consumer Ombudsman and in a Danish law commentary, that the requirement to identify advertising as such does not prevent the use of ‘appetisers’ to attract customers’ attention. Although the relevant Danish preparatory works originated before the implementation of the UCPD, the council nevertheless found the statements to be of importance for understanding the Black List’s clauses, since the implementation of the UCPD would not cause any substantive changes.29 The Market Council also referred to Swedish law, which seemed to consider teaser advertisements as not being captured by the prohibition against surreptitious advertising. In addition, policy considerations support an exemption for teasers from the ban on surreptitious advertising. The purpose of the ban on surreptitious advertising and the requirement to identify advertising as such are primarily to ensure that advertising not be mixed with editorial material and thereby cause the risk that consumers be manipulated into thinking that they are not being exposed to advertising. This description is not suitable for teasers and teaser campaigns, in which the fundamental point is to reveal the product and/or the identity of the trader at a later stage when the ‘appetiser’ presumably has had some effect. Based on these considerations, the council concluded that the ban on surreptitious advertising, including section 3(1) MCA and the Black List’s paragraph 22, must be interpreted as not capturing teasers.

29 https://www.retsinformation.dk/Forms/R0710.aspx?id=100803 (last accessed on 10 December 2015).

200  Tore Lunde After this clarification of the fundamental question, the Market Council had to assess whether the specific campaign qualified as a teaser campaign falling within the scope of the exemption. A majority of the council voted in favour of the view that the campaign was not captured by the ban on surreptitious advertising. According to the majority, the advertising qualified as a teaser campaign in the sense that had been defined and understood in different sources of law. In the majority’s opinion, the trader did not by its campaign falsely claim or create the impression that it was not acting for purposes related to its trade, business, craft or profession (see the Black List’s paragraph 22, first alternative). Although some elements of the campaign could be considered to be far beyond the trader’s business activities, in the majority’s opinion there was no risk that the advertising was likely to deceive the average consumer into believing that the campaign concerned public information. Advertising techniques often include the use of irony and exaggerations that may not be able to manipulate consumers into believing that the message is something other than marketing. The majority considered the disputed promotion to be of such an exaggerated character that the average consumer would understand that the campaign was related to marketing. A minority of the council assessed the campaign differently, and were of the opinion that it infringed the ban on surreptitious marketing. It was the minority’s opinion that the trader did not sufficiently communicate that the disputed campaign concerned advertising, and hence that the campaign did not qualify as a teaser that fell outside the ban on surreptitious marketing. According to the minority’s opinion, the campaign went beyond what could reasonably be perceived as commercial practices, contrary to the wording of the Black List’s paragraph 22. The motives behind the exemption for teasers do not suffice regarding the disputed campaign.

VIII.  FINAL REMARKS

The Norwegian case law, albeit involving a limited number of cases, illustrates the challenges in interpreting the Black List’s clauses. Although the introduction of a blacklist was aimed at increasing legal certainty and consumer confidence, it should be noted that applying the prohibitions in the Black List requires a process of interpretation, as many of them are rather vague and open-textured. The Black List’s contribution to legal certainty may therefore be questionable. As pointed out by Monika Namysłowska, the uniform interpretation and effective enforcement may be challenged by the various national methods of implementing Annex I, including dissimilar notions and legal definitions.30 Case law from the ECJ also demonstrates the importance of interpreting the Black List’s clauses, thereby showing that the viewpoint ‘unfair per se’ is not as certain as it seems.31

30  31 

See further Namysłowska (n 2) 71ff. See especially Purely Creative (n 19) para 31; Case C-515/12 4Finance EU:C:2014:211, para 14.

10 Enforcing Unfair Competition Law Cross Border: Cooperation Mechanisms and Consumer Redress—Does the System Work? ASTRID STADLER

I.  SOME GENERAL REMARKS ON THE ENFORCEMENT OF THE UNFAIR COMMERCIAL PRACTICE DIRECTIVE1 AND THE MISLEADING AND COMPARATIVE ADVERTISING DIRECTIVE2

A.  Specifications of the Directives

R

EMARKABLE DIFFERENCES IN the laws of the Member States relating to unfair commercial practices and on advertising prompted the European Commission ten years ago to launch two directives: Directive 2006/114/ EC concerning misleading and comparative advertising (MCAD) and Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market (UCPD). Both directives provide numerous rules to harmonise substantive law and were enacted in order to grant extensive protection for consumers and businesses (recital 8, Article 1 UCPD) and traders (Article 1 MCAD). Neither of the instruments, however, intends to harmonise enforcement systems in the Member States. Instead, Article 5 MCAD and Article 11 UCPD leave it to the Member States ‘to ensure that adequate and effective means exist to combat’ misleading advertising and enforce compliance with the provisions of comparative advertising, respectively, with the provisions to protect consumers against unfair commercial practices. Both provisions attempt to describe some key issues of judicial enforcement by setting forth, for example, that individual persons as well as organisations regarded under national law as having a legitimate interest to combat unfair commercial practices shall have legal standing. Enforcement

1  2 

Directive 2005/29/EC of 11 May 2005 [2005] OJ L149/22. Directive 2006/114/EC of 12 December 2006 [2006] OJ L376/21.

202  Astrid Stadler instruments include taking legal action or bringing the violator’s conduct before an administrative authority competent to either decide on complaints or to initiate appropriate legal proceedings.3 All this leaves considerable room for Member States to establish or keep individual enforcement systems. Ultimately, however, the idea behind both directives to promote the free circulation of goods and service and generate a high level of consumer protection as well as a level playing field for businesses can only be realised if efficient enforcement systems exist. It is one of the consequences of the internal market that unfair commercial practices and misleading or comparative advertising banned by the MCAD do not honour national borders. Unlawful marketing strategies very often affect consumers in several Member States, and typically a large number of people are affected. In an ideal world, procedural instruments in each Member State would be harmonised and there would be efficient tools to enforce mass damage claims where numerous parties have been harmed or affected by a perpetrator’s wrongdoing. The European Union is not, of course, an ideal world. Efforts of the European Commission to harmonise instruments of collective redress for injunctive and compensatory collective redress mechanisms have so far failed. In June 2013, the Commission published a Recommendation ‘on common principles for injunctive and collective redress mechanisms in the Member States concerning violations of rights under Union Law’.4 The Commission advocated a horizontal instrument and provided common principles as guidelines for reform in the Member States. Owing to the strong resistance from the business sector against US class action-style instruments, the Recommendation is a political trade-off, and years of debates have resulted in only a non-binding European instrument. The period for implementation expired in July 2015 and not one of the Member States has followed the Recommendation exactly. Some of them have enacted new instruments of collective redress. Others—like Germany—have done nothing so far. Therefore, hopes for a harmonised system of private enforcement of Union law which might have existed when the UCPD and MCAD came into force have more or less vanished. Although the Commission will revisit Recommendation 2013/396 in 2017, it is not very likely that the political situation at that time will allow for a more ambitious advance. On the contrary, the more some Member States have realised their own ideas on collective redress, the less they are likely to agree to accept a harmonised European instrument instead. Therefore, enforcement of the UCPD and MCAD will continue to depend on the enforcement systems of the Member States.

B.  Variety of Enforcement Systems in the Member States Over the years, Member States of the European Union have developed quite ­different traditions with respect to the enforcement of consumer rights or unfair 3  4 

Art 5(1) MCAD; Art 11(1) UCPD. COM 2013/396/EU.

Enforcing Unfair Competition Law Cross Border 203 commercial practices. In most of them there is no horizontal instrument5 that can be applied to all kind of violations or infringement of consumer rights. Furthermore, unfair commercial practices and misleading advertising throw up a new problem: as the respective provisions include the protection of consumers and traders, different actors and representatives may come into play, and different legal or administrative proceedings may apply for the two groups. The UCPD and MCAD have slightly different objectives: whereas the UCPD particularly wants to protect consumers, the MCAD, according to its Article 1, aims at the protection of traders. Nevertheless, the purposes of both directives go hand in hand with each other. The smooth functioning of the Internal Market without distortions of competition is for the benefit of traders and consumers. Consumers also benefit from an efficient enforcement of rules against unfair commercial practices initiated by competitors, trade associations or chambers of commerce in case of injunctions and cease-and-desist court orders. Therefore this chapter will address judicial actions of both groups. However, there is not even a uniform approach across the EU with respect to the question of whether public or private enforcement should prevail in this sector. Some Member States, like the Nordic countries, the United Kingdom6 and Ireland, rely on ombudspersons and public authorities to enforce consumer laws.7 Austria and Germany, on the other hand, are well known for their tradition of private enforcement by strong and active consumer associations and trade organisations. Those entities can apply for injunctive court orders8 or they can ‘collect’ consumer claims by assignment or by power of attorney9 and, thus, pool numerous claims in a single piece of litigation. In 2005, the Germany also enacted a new rule on the skimming off of illegally gained profits in competition law and granted legal standing to consumer organisations and trade associations.10 Particularly with respect to unfair commercial practice, German policy makers traditionally trust in surveillance by market participants and grant legal standing for injunctions to competitors, chambers of commerce and trade associations. 5  Horizontal instruments which apply to all sectors of law, including unfair commercial practices and competition law, are available, for example, in Sweden (Group Proceedings Act 2002, SFS 2002:599) and in the Netherlands. In the Netherlands, by way of a general collective action, representative entities can bring actions on behalf of consumers (Art 3: 305a Burgerlijk Wetboek), but so far with the exception of damages claims. A draft published by the Dutch Ministry of Justice in October 2014 for public consultation introduced new rules on representative collective damages actions. Due to intensive criticism, the draft is currently under review. 6  In the UK, the new Consumer Rights Act 2015 implemented a series of new instruments for the protection of consumers (ch 79 of the Consumer Rights Act 2015, sch 7 with amendments to pt 8, ss 211, 214, 217–219C, 220 of the Enterprise Act 2002). So-called ‘enhanced consumer measures’ are available for numerous public authorities and consumer associations like Which?. 7 Proceedings for collective redress are available in Sweden (n 4), Denmark (Law No 181 of 28 ­February 2007: ch 23a (§§ 54a–254k) Danish Civil Procedure Code), Finland (Class Action Act 444/2007 of 13 April 2007) and Norway (Act relating to Mediation and Procedure in Civil Disputes, ch 35). 8  For details see the German Injunctions Act (Unterlassungsklagegesetz). 9  German Civil Procedure Code, s 79. 10  Unfair Commercial Practices Act, s 10.

204  Astrid Stadler The so-called ­Wettbewerbszentrale (Centre for Protection against Unfair Competition), founded in 1912 (immediately after the German Unfair Competition Act came into force), plays an important role in prosecuting violation of competition rules. France,11 Belgium12 and Italy13 have also expanded the legal standing of consumer associations in recent years, and have implemented class action proceedings for the enforcement of consumer claims. The scope of application varies, but sometimes also includes rights arising from unfair commercial practices. In most national systems, however, there is a mixture of public and private enforcement. Although, at the national level, national enforcers can fight quite successfully against unfair commercial practices, they depend, whether public authorities or private entities, on adequate financial resources and manpower to prosecute infringements. Their resources are often sufficient to provide an efficient response in domestic cases, but cross-border unfair commercial practices require more input. Therefore the activities of enforcers very often stop at national boundaries.

C.  Coordination and Judicial Co-operation in the European Judicial Area The different systems of enforcement in consumer and competition law in Europe require mechanisms of co-ordination and co-operation. Two years before the UCPD and MCAD came into force, the European Commission had established an enforcement co-operation network among national authorities responsible for consumer protection.14 This will be analysed in section II of this chapter. Even more important are the instruments provided by European civil procedure law for cross-border enforcement of court decisions. The Brussels Convention on Jurisdiction and Enforcement of Judgments in Civil and Commercial Matters in 1968 marked a modest beginning of an ultimately overwhelmingly successful system for the free movement of judgments in the European Union. Its ­successor,

11  The new French consumer class action (loi no 2014-344 rélative à la consommation, Journal officiel 18 mars 2014, 5400, Titre II Code de Consommation (action de groupe & procedure d’action de groupe simplifiée)) grants legal standing to French consumer organisations in antitrust cases to sue for the recovery of damages in follow-on actions. The scope of application is limited to consumer claims arising from the violation of consumer contracts (contract for the sale of goods and for services) and claims arising from the infringement of antitrust rules. 12  Code de droit économique, livre 1, titre 2 (‘l’action en réparation collective’); Law 28 March 2014 (Moniteur Belge 29 April 2014, S. 35201). For details see S Voet, ‘Consumer Collective Redress in Belgium: Class Actions to the Rescue?’ (2015) 16 European Business Organization Law Review 121; S Voet, ‘Belgium’s New Consumer Class Action’ in V Harsági and R van Rhee (eds), Multi-party Redress Mechanisms in Europe: Squeaking Mice? (Antwerp, Intersentia, 2014) 95ff. 13  Law No 99/2009, Art 140bis Codice di Consumatori (‘azioni di classe’). For details see F Rolla and F Chiaves, ‘Bank Charges’ in W van Boom and G Wagner (eds), Mass Torts in Europe—Cases and Reflections (2012) 117ff. 14  Regulation No 2006/2004 of 27 October 2004 on co-operation between national authorities responsible for the enforcement of consumer protection laws [2004] OJ L364/1.

Enforcing Unfair Competition Law Cross Border 205 the Brussels I Regulation,15 which came into force in 2002, further improved the ­system before being replaced in January 2015 by the Brussels Ia Regulation16 (the so-called ‘recast’). Section III of this chapter will present the amendments and their relevance for the UCPD and MCAD.

II.  THE CONSUMER PROTECTION COOPERATION (CPC) NETWORK

A. Directive 98/27/EC of 19 May 1998 on Injunctions for the Protection of Consumer Interests and Directive 2009/22/EC Violations of consumer protection law and rules against unfair commercial practices rarely result in individual litigation. Instead, representative entities like consumer associations and trade organisations play an important role. For cross-border activities of such entities, the European legislature very early on provided an instrument which allowed so-called qualified entities established in one Member State to institute an action for an injunction in the Member State where the offence originated. The Injunction Directive of 1998—amended in 2009—is based on the idea that each Member State decides on the requirements and conditions for granting legal standing to representative entities which represent consumer interests. All other Member States have to accept that entities notified and registered in the official register established by the European Commission have legal standing before all courts. In practice, however, representative entities were reluctant to make use of these rights in the framework of cross-border offences due to the high cost of the litigation in some Member States and the procedural differences existing between the national systems. As a consequence, the ­European Commission realised that fighting against cross-border offences by companies operating on a European-wide or global level predominantly requires closer co-operation among the national entities or authorities which are in charge of protecting consumer interests.

B. A Network of National Public Enforcement Authorities for Mutual Assistance The antagonism between public and private enforcement of (consumer) law has been a controversial issue not only in the Member States, but also at the European level. Despite the advances made by DG Competition in 200517 and 200818 and 15 

Regulation No 44/2001. Regulation No 1215/2012. 17  COM (2005) 672. 18  COM (2008) 165. 16 

206  Astrid Stadler DG Sanco in 200819 for the improvement of private enforcement of competition and consumer law, the Commission has had to accept that a considerable number of Member States give priority to public authorities or ombudspersons for the protection of consumer interests. The Commission accepted that approach and, in 2004, established a system of co-operation whereby Member States were obliged to designate a competent public authority and a single liaison office responsible for the enforcement of consumer law.20 Regulation 2006/2004 does not, however, specify how Member States should apply public enforcement in general. The authorities to be established (if not already existing) may act as intermediaries only, and are allowed to delegate their obligations under the regulation to designated bodies such as private consumer associations, which can take the necessary enforcement measures to bring about the cessation or prohibition of an infringement.21 The network is responsible for mutual assistance in case of so-called ‘intraCommunity infringements’ of Community legislation. For that purpose, public enforcement authorities in the Members States were to receive ‘a minimum of common investigation and enforcement powers’.22 These powers include access to relevant documents, the right to carry out on-site inspections, the right to request a seller or service provider to cease an infringement and to receive an undertaking to cease the wrongdoing, and the right to require the cessation or prohibition of infringements (including the possibility of publishing resulting decisions) before courts.23 ‘Intra-Community infringements’ defined in Article 3, lit b of the regulation are all acts or omissions contrary to law that protect consumer interests which harm or are likely to harm the collective interest of consumers residing in a Member State other than the one in which the act or omission took place or originated. Regulation 2006/2004 establishes a framework for the co-operation between Member States24 and with the European Commission. Key elements of the mutual assistance are (i) the exchange of information (Articles 6–7); (ii) requests for enforcement measures (Article 8); and (iii) a co-ordination of market surveillance and enforcement activities. A common electronic database is m ­ aintained by the

19 COM (2008) 794; in February 2011 the EU Commission launched a public consultation on a coherent approach to collective redress: SEC (2011) 173. For an analysis of the statements on the Commission’s proposal see the study of B Hess and T Pfeiffer, ‘Evaluation of Contributions to the Public Consultation and Hearing: “Towards a Coherent European Approach to Collective Redress”, JUST/2010/JCIV/CT/0027/A4 (2011), available at http://ec.europa.eu/competition/ consultations/2011_collective_redress/study_heidelberg_summary_en.pdf. 20  Art 1 Regulation 2006/2004. 21  Arts 4(2) and 8(3) Regulation 2006/2004. In Germany, for example, the Bundesamt für Verbraucherschutz und Lebensmittelsicherheit (BVL) is the public authority established to comply with Regulation 2006/2004. When it comes to particular enforcement proceedings like injunctions, the BVL regularly delegates the conduct of litigation to the Verbraucherzentrale Bundesverband (vzbv) or the Wettbewerbszentrale. 22  Recital 6 Regulation 2006/2004. 23  Art 4 (6) Regulation 2006/2004. 24  And the EEA partner countries Iceland, Liechtenstein and Norway.

Enforcing Unfair Competition Law Cross Border 207 Commission (Article 9) to which national authorities notify any intra-­Community infringements for a better exchange of information and co-­ordination of enforcement measures. Requests for enforcement measures must be fulfilled by the requested authority (or a designated body that is acting on behalf of the authority) by using its powers under national law (for which the minimum standard is defined in Article 4 [6] of the regulation). The Regulation’s approach is, however, rather modest, as it aims only to apply measures to cease or prohibit further infringements by a seller or service provider. It does not include any assistance in the recovery of damages or measures which would allow the skimming off of illegally gained profits. Consumer redress is addressed by other European instruments but, as described above, no harmonised procedural tools have been implemented across the Member States so far. The European Commission plays an important role within the network and has co-ordinated annual enforcement actions—so-called ‘sweeps’. These are sets of checks carried out simultaneously by national enforcement authorities to identify breaches of EU consumer law in a given sector.25 Such sweeps were carried out in recent years, for example, with respect to the websites of companies offering airline tickets, consumer credits, and tickets for sports and cultural events.

C.  Functioning of the CPC Network In summer 2014, the EU Commission published a summary report on the functioning of the CPC network, which has been operating since 2007.26 Unsurprisingly, the Commission concludes that since 2007 the network has contributed to a more uniform application of consumer protection laws and has provided effective means to safeguard consumers’ interest in a cross-border context. However, the figures given in the report are not very impressive. From 2007 to 2013, 1454 mutual assistance requests were made within the network: 699 information requests and 755 requests for cross-border enforcement.27 Whereas the exchange of information about emerging illegal practices seems to work quite well and allows the early detection of infringements, common enforcement approaches are still developing. The Commission stated that the full potential of Article 9 Regulation 2006/2004, which allows a joint enforcement by national authorities, had not been realised in the years 2007–13.28 Actually, this instrument has not been used directly to co-ordinate parallel simultaneous enforcement actions. The Biennial Report of 2012 had already emphasised the need to prioritise enforcement actions.29 Difficulties 25 Definition provided by the CPC network at http://ec.europa.eu/internal_market/scoreboard/ performance_by_governance_tool/consumer_protection_co-operation_network/index_en.htm. 26  Commission’s Report, COM (2014) 439. 27  ibid 4. 28  ibid 7. 29  Biennial Report 2012, 10, 13, available at http://ec.europa.eu/consumers/enforcement/biennal_ national_reports_en.htm#biennial.

208  Astrid Stadler in joint enforcement proceedings are obviously arising from the fact that Member States have different procedural rules, standards and instruments. There are significant differences in particular with regard to the judicial authorities’ involvement in public enforcement proceedings. The same applies for the power of national authorities or consumer associations to carry out test purchases, which are in important instrument in fighting against unfair commercial practices.30 The public consultation upon which the Commission’s report is mainly based also revealed that the so-called ‘sweeps’ are deemed to be quite effective and should be extended to other sectors. ‘Sweeps’ are, however, characterised by the leading role that the Commission takes in planning and co-ordinating such actions. Therefore, unsurprisingly, many respondents to the public consultation are asking for a more active role of the Commission. Indeed, Member States can exchange information about infringements, but when it comes to parallel enforcement proceedings in more than two states it requires a single body to assume control at the European level. The report points out that even strong guidance ‘cannot substitute missing powers at the national level in some Member States’. Thus, the Commission concluded that the results achieved were not enough. The growth of the digital economy, with households making greater use of international online purchasing, is creating new challenges, particularly as unfair commercial practices can spread quickly across the EU. It therefore requires even better co-operation. Some of the improvements discussed include the following: —— clarification and strengthening of the toolbox of national authorities; —— strongly co-ordinated enforcement actions or even a single action at the EU level; —— the obligation of Member States to notify infringements and any enforcement actions taken; and —— mandatory joint surveillance and enforcement actions. Another lesson to be learned from the report is that the co-operation among national public authorities and a strong role of the European Commission in joint enforcement proceedings can be only one pillar in combating illegal commercial practices. Cease-and-desist orders, which are at the centre of attention of Regulation 2006/2004, are important, but their effects are only for the future, albeit with comprehensive effect for all consumers and competitors. In order to achieve deterrent effects, it is necessary to enhance the enforcement of damages actions or actions for skimming off illegally gained profits. Therefore it is equally important that European civil procedural law provides a legal framework which invites competitors or entities representing either consumers’ interests or commercial interests to bring actions particularly in cross-border cases.

30 

Commission’s Report (n 26) 10, 11.

Enforcing Unfair Competition Law Cross Border 209 III.  JUDICIAL ENFORCEMENT OF INJUNCTIONS AND PRIVATE DAMAGE CLAIMS

Enforcement of damages claims is important in consumer-to-business (C2B) and business-to-business (B2B) situations. Claims arising from unfair commercial practices are rarely enforced by individual consumers. Typically, consumers incur only small or trivial damages and stay passive as their claims are so-called ‘negative value claims’ (claims for which the costs of litigation and enforcement outweigh the amount of damages to be recovered).31 This rational apathy must therefore be compensated by representative entities which have legal standing to sue infringers on behalf of consumers or even on behalf of a public interest. Again, the most difficult challenge arises from cross-border offences. They raise conflict-of-laws issues, but first of all, claimants whether individuals or representative entities, must decide where to sue the perpetrator. The Brussels I (respectively Ia) Regulation is a tool of judicial co-operation that provides, in its first part, rules on international jurisdiction that are uniformly accepted and thus considerably reduce the number of potential fora for crossborder disputes. In its second part, the regulation lays down the principle of the mutual recognition of judgments without any review as to the substance of a foreign judgment and with a very limited review of the jurisdiction of the court of origin in the state of enforcement. A.  Jurisdictional Regime of the Brussels Ia Regulation (i)  Jurisdictional Privilege for Consumer Contracts The Brussels Ia Regulation, which has been applicable since 10 January 2015, builds on the jurisdictional system of its predecessors, the Brussels I Regulation and the Brussels Convention of 1968. The four pillars of the system (which remained unchanged by the recast 2015) are: (i) general jurisdiction as defined in Article 4 based on the actor sequitur forum rei principle. All claims against a defendant, irrespective of the subject matter, can be brought against him in the courts of his domicile. Article 63 provides a definition of the domicile of companies and legal persons that refers to the statutory seat, the central administration and the principal place of business of a company; (ii) special jurisdiction according to Articles 7–9, particularly for contract and tort cases; (iii) protective jurisdiction for consumers, employees and insurance policyholders (Article 10–23) and exclusive jurisdiction (Article 24); and (iv) jurisdiction based on choice-of-court agreements (Article 25) or submission (Article 26). From the outset, these instruments have provided a special protective regime for consumer claims. According to Article 17–19 Brussels Ia Regulation, c­ onsumers 31 J Coffee, Entrepreneurial Litigation—Its Rise, Fall, and Future (Cambridge, MA, Harvard ­University Press, 2015) 3.

210  Astrid Stadler benefit from exclusive jurisdiction of the courts in the Member States of their domicile if they are defendants. Where consumers initiate legal actions against traders, they can choose between the courts of the defendant’s domicile and the courts of their own country. This privilege applies only for consumer contracts described in Article 17 Brussels Ia Regulation, but the scope of application is rather broad because Article 17(1) (c) includes all contracts between a consumer and a person who pursues commercial or professional activities in the Member State of the consumer’s domicile or, by any means, directs such activities to that Member State or to several States including that Member State, and the contract falls within the scope of such activities.

This provision is of particular importance for e-commerce transactions, and the European Court of Justice has given it a rather broad interpretation. In particular, the requirement of ‘directing activities’ to the consumer’s Member State is easily met when a trader or service provider offers goods or services on the internet and his website indicates that he also invites consumers from other Member States to get in contact with him. This can be done by using an international domain level (eg ‘.com’, ‘.eu’), providing a telephone number with an international area code, giving directions of how to get to the business premises from abroad, etc.32 The European Court of Justice also held that no causal link is necessary between the trader’s or service provider’s internet activities and the consumer’s decision to get in contact with him.33 It is not even necessary for the consumer to conclude a distant selling contract with the party advertising on the internet.34 Thus, where unfair commercial practices or misleading advertising have had an influence on such a consumer contract, claims for damages can be filed in the consumer’s home courts even if the consumer had travelled into the jurisdiction of the business counterparty to conclude the contract. (ii) Consumer Contracts with Traders or Service Providers Domiciled in a Third State Whereas the Brussels I Regulation required that the consumer sue a trader or service provider who is domiciled in a Member State, the recast of the regulation cautiously opened its scope of application to cases having a relationship with a third state. According to Article 18 Brussels Ia Regulation, consumers can also sue a business counterparty in their home Member State if the enterprise is domiciled outside the European Union. Businesses from all over the world may now be exposed to actions in the European Union in consumer contract cases where they did not previously anticipate that risk.

32 

CJEU Joined Cases C-585/08 and 144/09 Pammer and Alpenhof ECLI:EU:C:2010:740. CJEU Case C-218/12 Emrek ECLI:EU:C:2013:666. 34  CJEU Case C-190/11Mühlleitner ECLI:EU:C:2012:542. 33 

Enforcing Unfair Competition Law Cross Border 211 (iii)  Consumer Associations as Claimants The European Court of Justice has confirmed in various decisions that the privilege granted by Articles 17–19 Brussels Ia Regulation applies only to individual consumers and not to consumer organisations or other entities to which a consumer may have assigned his or her claim.35 The rationale behind this settled case law is a narrow interpretation of Articles 17–19 because these provisions are an exception to the basic rule provided in Article 4 that ‘persons domiciled in a Member State shall, whatever their nationality, be sued in the courts of that Member State’. The exception is based on the assumption that consumers are the weaker party and deserve special protection. For consumer associations, which are repeat players, such a privilege is not necessary.36 From the perspective of an individual litigation this assumption is of course correct, but from a broader perspective the enforcement activities of consumer associations would definitely be enhanced if they could start proceedings against businesses from abroad in their home Member States.

B.  Enforcement Regime of the Brussels Ia Regulation One of the most important improvements of the recast is the abolition of exequatur proceedings in the Brussels Ia Regulation. At the beginning of the recast proceedings the European Commission wanted to totally abolish exequatur proceedings for being too expensive and time-consuming. Together with the need for an exequatur decision in the state of enforcement, the Commission planned to do away with all the grounds for non-recognition of a judgment, including any public policy objection.37 This provoked resistance from almost all Member States, and

35  CJE Case C-89/91 Shearson Lehmann Hutton ECLI:EU:C:193:15; ECJ Case C-218/01 Henkel 2002, I 8111. For a critical review see A Stadler [2002] Zeitschrift für Zivilprozess—International 284. 36  CJEU Case C-96/00 Gabriel ECLI:EU:C:2002:436; CJEU Case C-419/11 Feichter ECLI:EU:C:2013:165; A Stadler, ‘Die Einheitlichkeit des Verbrauchervertragsbegriffs im Europäischen Zivil- und Zivilverfahrensrecht—zu den Grenzen rechtsaktübergreifender Auslegung’ [2015] Praxis des Internationalen Privat- und Verfahrensrechts 203, 205. 37  In November 2010 the European Commission published its progressive concept for a recast of the Brussels I Regulation: ‘Proposal for a Regulation of the European Parliament and of the Council on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (Recast)’, COM (2010) 748 final, based on the so-called ‘Heidelberg Report’: B Hess, T Pfeiffer and P Schlosser, ‘Report on the Application of Regulation Brussels I in the Member States’, JLS/C4/2005/03 (2007), available at ec.europa.eu/civiljustice/news/docs/study_application_brussels_1_en.pdf); A Nuyts, ‘Review of the Member States’ Rules Concerning the “Residual Jurisdiction” of their courts in Civil and Commercial Matters Pursuant to the Brussels I and II Regulations’, JLS/C4/2005/0730-CE)0040309/00-37 (2006, ec.europa.eu/civiljustice/news/docs/study_residual_jurisdiction_ en.pdf); ‘Data Collection and Impact Analysis—Certain Aspects of a Possible Revision of Council Regulation No 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters’ (17 December 2010), available at ec.europa.eu/justice_home/doc_centre/ civil/studies/doc_civil_studies.en.htm) and some public consultations with stakeholders.

212  Astrid Stadler finally the Commission succeeded only insofar as judgments given in one Member State are enforceable everywhere in the European Union without any declaration of enforceability being required. Any judgment given by a court in one Member State can now be enforced in any other Member State under the same conditions as a domestic judgment of that state (Article 41 Brussels Ia Regulation). Nevertheless, all grounds for non-recognition of foreign judgments as provided in the Brussels I Regulation have been retained. The main difference is that defendants must now file an application for refusal of enforcement in the state of recognition or enforcement (Articles 44 and 45 Brussels Ia Regulation) if they want to prevent enforcement. In sum, the new regulation provides the framework for speedy and inexpensive cross-border enforcement, which is particularly advantageous for consumers if they consider filing an individual action against a trader or service provider for violating the rules implemented according to the UCPD or MCAD.

C.  B2B Situations: Cross-Border Enforcement of Injunctions Unfair commercial practices often require a quick reaction by competitors to stop infringements. All Member States provide rules on protective or provisional court orders based on summary proceedings. In a cross-border context, however, these provisional measures often raise difficult questions. (i)  Brussels I Regulation With respect to provisional measures, the jurisdictional system of the Brussels I Regulation was not exclusive. It allowed applicants to apply for interim relief either with the court that had jurisdiction as to the substance of the matter or courts in one of the Member States. Jurisdiction could then be based on domestic rules permitting the application even of those jurisdictional rules under national law which were otherwise banned by the Brussels I Regulation (Article 31(3) Brussels I Regulation) as too far-reaching. Applicants could thus benefit from home advantage or choose a jurisdiction with a broad range of provisional measures. However, early case law of the European Court of Justice restricted the applicant’s chance for cross-border enforcement of such injunctions considerably. In the 1980 Denilauler decision,38 the European Court of Justice gave a very restrictive interpretation of the term ‘court decision’ used in Article 32 Brussels I Regulation, the article which described the free movement of court decisions in the European Union. The court held that the system of mutual recognition established by the Brussels I Regulation was available only for court decisions given in contradictory proceedings. Therefore ex parte court orders, which are typical for provisional

38 

CJEU Case C-120/79 Denilauler [1980] ECR I-01553.

Enforcing Unfair Competition Law Cross Border 213 measures, were excluded from the free movement within the EU. As a result, no provisional measure or injunction that had been ordered by a court or tribunal without the defendant being summoned to appear in court could be enforced in another Member State unless at least the judgment was served on the defendant prior to enforcement. The decision was very much criticised for destroying any surprise effect in favour of the applicant,39 but the European Court of Justice has held onto that interpretation over the years. The negative consequences for applicants were, however, particularly important where creditors tried to seize and attach their debtor’s assets in order to secure the enforcement of monetary claims. With respect to injunctions, which are of much greater importance in the field of unfair commercial practices or misleading advertising, the Denilauler decision is no great disadvantage for applicants, since defendants are not tempted to secret away assets. Even where a defendant is summoned to appear before court and must be aware of an interim court order, an injunction can be enforced successfully. The European Court of Justice further limited the availability of provisional measures in two earlier decisions published under the regime of the Brussels Convention.40 The two cases referred to interim payment orders issued by Dutch courts which had based their jurisdiction on domestic rules in accordance with the Convention. The CJEU feared that particularly the French system of provisional measures for interim payment of debts allowed the bypassing of the regular jurisdictional system of the Brussels Convention by using the exceptional rule for provisional measures even though court orders issued as ‘provisional’ often turned out to in fact be a final decision.41 Therefore the CJEU held that only those courts which had jurisdiction as to the substance of the matter were allowed to issue provisional measures with the potential of being enforced in all other Member States. Courts which lacked jurisdiction under the Brussels rules must restrict the effect of their orders to the respective territory. In van Uden, the CJEU said:42 It follows that the granting of provisional or protective measures on the basis of ­ Article 24 is conditional on, inter alia, the existence of a real connecting link between the subject-matter of the measures sought and the territorial jurisdiction of the Contracting State of the court before which those measures are sought.

Subsequently there was much dispute over the interpretation of ‘a real connecting link’. Such a requirement was comparatively easy to understand and apply in case 39  cf T Rauscher and S Leible (eds), Europäisches Zivilprozessrecht (2011), Art 31 Brussels I Regulation, fn 36a with further references; H Schack, Internationales Zivilverfahrensrecht (Munich, CH Beck, 2014) margin no 915; O Remien, ‘Einseitige Unterlassungsverfügung im europäischen Binnenmarkt und EuGVÜ,—Zur Sache Modern Music./. EMI Records’ [1994] Wettbewerb in Recht und Praxis 27. 40 CJEU Case C-391/95 Van Uden ECLI:EU:C:1998:543; ECJ Case C-99/96 Mietz [1999] ECR I-2277. 41  Mietz (ibid) fn 47: ‘it is important to ensure that enforcement, in the State where it is sought, of provisional or protective measures allegedly founded on the jurisdiction laid down in Art 24 of the Convention, but which go beyond the limits of that jurisdiction, does not result in circumvention of the rules on jurisdiction as to the substance set out in Arts 2 and 5 to 18 of the Convention’. 42  Van Uden (n 40) fn 40.

214  Astrid Stadler of interim orders for the seizure of particular assets of a defendant located in the forum state.43 A ‘real connecting link’ was, however, much more difficult to find with respect to monetary claims unless the existence of any assets in the forum state was deemed to be sufficient. Furthermore, it could not be excluded that the CJEU wanted the ‘real connecting link’ requirement to also apply to injunctions. As a consequence, courts having no jurisdiction as to the substance of the matter could provide injunctive relief only with legal effect for their own Member State. Any applicant who wanted to obtain a Union-wide enforceable cease-and-desist order against competitors violating rules against uncommercial practice had to file an application with a court having jurisdiction as to the substance of the matter. A less attractive alternative was several applications in different Member States with only territorial effects. (ii)  Brussels Ia Regulation (a)  Restriction to Cross-border Enforcement of Injunctions Despite the ambiguous wording of the Van Uden and Mietz decisions, European policy makers did not clarify the text of the regulation until Brussels I Regulation had been recast. Article 2 Brussels Ia Regulation now explicitly states that ‘judgment’ includes provisional, including protective, measures ordered by a court or tribunal which by virtue of this Regulation has jurisdiction as to the substance of the matter. It does not include a provisional, including protective, measure which is ordered by such a court or tribunal without the defendant being summoned to appear, unless the judgment containing the measure is served on the defendant prior to enforcement.

Thus, it has become clear now that any provisional or protective court order— including injunctions—issued by a court which has no jurisdiction as to the substance of the matter will not be recognised and enforced in other Member States. (b)  Jurisdiction for Injunctive Relief: Article 7 No 2 Brussels Ia Regulation In order to obtain a Union-wide enforceable injunction applicants must therefore file a motion with a court having general or specific jurisdiction according to the Brussels Ia rules. Some room for forum shopping is left, however. Article 7 No 1 Brussels Ia Regulation provides a rule on specific jurisdiction in tort cases and the concept of tort includes inter alia unfair commercial practices,44

43  For details see A Stadler, ‘Erlass und Freizügigkeit von einstweiligen Maßnahmen im Anwendungsbereich des EuGVÜ’ [1999] Juristenzeitung 1089. 44  German Federal High Court (Bundesgerichtshof) NJW 2005, 1435; NJW 1988, 1466; GRUR 1998, 419 and 945; BGHZ 153, 82ff, 91; Court of Appeals Munich, BeckRS 2008, 00744 = IPRax 2009, 256; Court d’appel Orléans RCDIP 93 (2004), 139.

Enforcing Unfair Competition Law Cross Border 215 ­antitrust matters45 and all sort of infringements of intellectual property rights.46 For cross-border torts the CJEU established the ‘principle of ubiquity’, which gives the ‘place where the harmful event occurred’ a broad meaning: in a standing line of case law, the CJEU47 held that this covers the place where the event giving rise to the damage or infringement occurred (Handlungsort), but also the place where the damage was actually sustained (Erfolgsort). Where the defendant has violated commercial practice rules, the application of the principle of ubiquity is, however, controversial. Although the CJEU does not accept in general the idea that international jurisdiction must in principle follow the applicable law, in the field of unfair commercial practice many commentators favour the application of the so-called ‘marketplace rule’ established by Article 6 of the Rome II Regulation.48 However, the devil hides in the detail: ‘marketplace’ can be interpreted to be the place where the illegal activities take place49 or the Member State where the fair competition with regard to consumers and competitors is affected.50 In the case of unfair commercial practices or misleading advertisement used on a website on the internet, the mere accessibility of the website in a country does not suffice to influence the market there:51 the defendant must have directed his website to the particular country in order to influence the market and must have a significant economic interest at stake there.52 The indicators listed by the CJEU in its Pammer and Alpenhof decision with respect to ‘directing activities’ via internet in the context of consumer contracts can be applied to unfair commercial practices.53 Since Article 7 No 1 Brussels Ia Regulation (like its predecessor in the Brussels I Regulation) provides considerable advantages for tort victims, the CJEU

45  CJEU Case C-352/13 CDC Hydrogen Peroxide ECLI:EU:C:2015:335 No 34 = EuZW 2015, 584, 587ff; German Federal High Court (Bundesgerichtshof) BeckRS 2013, 03164 = GRUR-RR 2013, 228, 229. 46  CJEU Case C-523/10 Wintersteiger ECLI:EU:C:2012:220 = EuZW 2012, 513; German Federal High Court (Bundesgerichtshof), NJW 2006, 689. 47  The basic decision was CJEU Case C-21/76 Mines de potasse [1976] ECR 1735. 48  eg C Kessedjian in C McLachlan and P Nygh (eds), Transnational Tort Litigation—Jurisdictional Principles (1996) 184ff; C Heinze, ‘Der europäische Deliktsgerichtsstand bei Lauterkeitsverstößen’ [2009] Praxis des Internationalen Privat- und Verfahrensrechts 231; J Fitchen, (2006) 13 Maastricht ­Journal of European and Comparative Law 391, 393ff; P Mankowski, in Müncher Kommentar Lauterkeitsrecht (2006) IntWettR, margin nos 210–21. 49  R Sack, ‘Das internationale Wettbewerbs -und Immaterialgüterrecht nach der EGBGB—Novelle’ [2000] Wettbewerb in Recht und Praxis 269, 272; W Veelken, ‘Sachnormzwecke im Internationale Wettbewerbsrecht’ in J Basedow, U Drobnig andR Ellger, Festschrift 75 Jahre MPI—Aufbruch nach Europa (2001) 315. 50  W Lindacher, ‘Zum Internationalen Privatrecht des unlauteren Wettbewerbs’ [1996] Wettbewerb in Recht und Praxis 645, 648; for an overview and further references see P Mankowski, in U Magnus and P Mankowski (eds), Brussels I Regulation, 2d edn (2012) Art 5 No 253, 254. 51  Court d’appel Paris, Clunet 131 (2004), 492; Hof Brussels TBH 2005, 694; Court of Appeals Munich, NJW 2002, 611; Tribunal de Grande Instance Nanterre, JCP éd E, 1999, 954; Mankowski (ibid) 255. 52  Therefore disclaimers may restrict the scope of dissemination, Court of Appeals Frankfurt, MMR 2001, 751ff; Mankowski (ibid) 257. 53  Mankowski (ibid) 255a.

216  Astrid Stadler has developed concepts which restrict a claimants’ forum shopping. In Shevill54— a defamation case—the court applied the so-called ‘mosaic principle’: only the courts in the place where the tortious act was committed (Handlungsort) have jurisdiction for claims for the recovery of the whole amount of damages—no matter where the damage occurred. In the Member State of the place where the damage was sustained, however, only claims for the damage sustained exactly in the forum state can be brought. The court thus attempted to strike a balance between the plaintiff ’s privilege granted in tort cases by Article 7 No 1 Brussels Ia Regulation, the predictability of jurisdiction and the defendant’s legitimate interest to be protected against intensive forum shopping. The mosaic principle was understood to apply to all kind of torts.55 Although objections have been raised as to its application to claims for injunctions,56 it would probably be applied at least to cease activities of the defendant which can be nationally split.57 Therefore courts in the Member State where unfair commercial practices have influenced the market and distorted competition have jurisdiction only to prohibit such practices for the forum state. In recent years, the European Court of Justice has clearly tried to set limits to the application of the mosaic principle. In another defamation case,58 the court allowed the injured person to sue the defendant for the recovery of all damages sustained in the courts of the place of ‘the centre of his interests’:59 in the event of an alleged infringement of personality rights by means of content placed online on an internet website, the person who considers that his rights have been infringed has the option of bringing an action for liability, in respect of all the damage caused, either before the courts of the Member State in which the publisher of that content is established or before the courts of the Member State in which the centre of his interests is based. That person may also, instead of an action for liability in respect of all the damage caused, bring his action before the courts of each Member State in the territory of which content placed online is or has been accessible. Those courts have

54 

CJEU Case C-68/93 Shevill [1995] ECR I-415, I-461ff. P Mankowski, (1999) 63 RabelsZ 203, 274ff. The mosaic principle with respect to international jurisdiction has a parallel in the applicable law: in case of multi-state offences, Art 6(1) Rome II Regulation requires that for each Member States where a distortion of competition occurred the law of the respective Member State applies. There is a controversial debate on details, particularly for injunctions. See H Unberath and J Cziupka, in T Rauscher (ed), Europäisches Zivilprozess- und Kollisionsrecht (2010) Art 6 Rome II Regulation, Nos 32–37; G Wagner, ‘Die neue Rom-II-Verordnung’ [2008] Praxis des Internationalen Privat- und Verfahrensrechts 1; R Sack, ‘Internationales Lauterkeitsrecht nach der Rom II VO’ [2008] Wettbewerb und Recht in Praxis 845, sub IV. 56  See, eg Høyesterett [1995] International Litigation Procedure 437; S Kubis, Internationale Zuständigkeit bei Persönlichkeitsrechts- und Immaterialgüterrechtsverletzungen (1999) 139ff. 57  P Schlosser and B Hess, Europäisches Ziviprozessrecht, 3rd edn (2015); Art 7 Brussels Ia Regulation, No 17; Art 24 Brussels Ia Regulation No 23a. 58  CJEU Joined Cases C-509/09 and 161/10 eDate advertising and Martinez ECLI:EU:C:2011:685. 59  For comments on the decision see, eg Bogdan, ‘Defamation on the Internet, Forum Delicti and the E-Commerce Directive: Some Comments on the CJEU Judgment in the eDate Case’ (2011) XIII Yearbook of Private International Law 483; T Hartley, ‘Cross-Border Privacy Injunctions: The EU Dimension’ [2012] The Law Quarterly Review 197. 55 

Enforcing Unfair Competition Law Cross Border 217 jurisdiction only in respect of the damage caused in the territory of the Member State of the court seised.

In a cartel damage case60 in 2015, the CJEU even completely gave up on the mosaic principle: although direct purchasers affected by an international price-fixing cartel may sustain economic loss in several Member States, the court held that only the direct purchaser’s registered office is the place ‘where [the] harmful event occurred’. This interpretation did not only abolish the mosaic principle, the court also implicitly (without arguing on that point) denied the application of a ‘market place rule’.61 What are the implications of these decisions for unfair commercial practice cases? In both cases the CJEU dealt with claims for the recovery of damages, not with injunctions. Nevertheless, the underlying tendency of the CJEU reasoning seems to suggest that at least the rationale of ‘eDate advertising’ can be applied to unfair commercial practice cases. As a consequence, competitors can file a motion for a cease-and-desist order (as well as an action for the recovery of damages) in the Member State in which the ‘centre of their interest’ is based. For companies, however, it is unclear where that place might be. It could be the claimant’s principle place of business, but in the cartel damage case the CJEU explicitly referred to ‘registered office’ in the English version of the judgment.62 The German version uses the word Sitz, which could be interpreted in a much broader sense because it refers to Article 63 Brussels Ia Regulation. The definition provided in this article for ‘domicile’ (Wohnsitz in German) includes a party’s statutory seat, its central administration and its principle place of business. The broad concept of Article 63 Brussel Ia Regulation is acceptable for defining a defendant’s domicile, but it would privilege a claimant in an extraordinary way when applied to tort cases in order to define the place where the claimant’s loss arose. The CJEU has always struggled to define the place where the ‘alleged damage actually manifests itself ’63 when a tort caused purely economic loss. Regarding securities cases, the court in Kronhofer rejected the idea that it is the place where the injured party mainly administered her assets, instead identifying it as the place where the particular bank account from which the plaintiff transferred money was located. In a recent securities case, the court accepted the plaintiff ’s domicile, which, however, coincided with the location of the bank account.64 In sum, against the background of recent case law, it is difficult to predict where in unfair commercial practice cases the CJEU will locate the place where competitors sustain damage. It seems very likely that a ‘centre of interest’ approach will be used, as in the defamation cases. For actions for the recovery of damages, the court 60  CDC Hydrogen Peroxide (n 45). For a review of the judgment see A Stadler, ‘Schadensersatzklagen im Kartellrecht—Forum Shopping Welcome’ [2015] Juristenzeitung 1138. 61  Harms/Sanner/Schmidt EuZW 2015, 584, 590–91. 62  CDC Hydrogen Peroxide (n 45) No 53. 63  ibid No 52. 64  CJEU Case C-375/13 Kolassa ECLI:EU:C:2015:37.

218  Astrid Stadler tends to emphasise the circumstances of the particular situation of the injured party in order to define jurisdiction under Article 7 No 1 Brussels Ia Regulation. Particularly in the cartel damage case, the European Court of Justice highlighted the special features of follow-on damages actions: the assessment of a claim for damages for loss allegedly inflicted upon a specific undertaking as a result of an unlawful cartel, as already found by the Commission in a binding decision, essentially depends on factors specifically relating to the situation of that undertaking. In those circumstances, the courts in whose jurisdiction that undertaking has its registered office are manifestly best suited to adjudicate such a claim.

When it comes to injunctions, a more general approach seems likely. We will have to wait and see whether the CJEU will apply the rule established for the cartel damage case to unfair commercial practice cases and thus allow plaintiffs rather generously to benefit from a home advantage.

IV. CONCLUSION

The question raised in this contribution, ‘Co-operation mechanisms and consumer redress—does the system work?’, cannot be answered by a simple ‘yes’ or ‘no’. With respect to the protection of the interests of consumers, national public authorities and representative entities are quite successful in combating unfair commercial practices in domestic cases by cease-and-desist orders. In a crossborder context, however, the CPC network established in 2007 needs further improvement with respect to joint enforcement actions; the system is on the right track, albeit restricted to injunctive relief and the prohibition of illegal practices. When it comes to consumer redress, ambitious projects of the European Commission to establish a harmonised system of collective redress instruments in Europe failed. Not even ‘common principles’ as laid down in the Commission’s Recommendation of 2013 are uniformly accepted in all Member States. Consumers will therefore continue to depend on the existence of effective procedural tools such as class action proceedings or representative actions for the recovery of damage at the national level. With respect to cases in which consumers typically sustain only minimal damages by illegal marketing strategies, it is important that legislatures provide actions for skimming off ill-gotten profits (which can be initiated either by representative private interest groups or public authorities). Such instruments can have a much better deterrent effect than (opt-out) collective damages actions, which result, even if they are successful, in complex mechanisms for the distribution of small amounts to individuals. Consumers will often not step forward to claim a small sum of money or will not be able to prove that they belong to the class for which the damages award has been gained. The heterogeneous landscape of collective redress mechanisms in Europe requires an intensive search for the best forum by those who intend to file an action for damages. The Brussels Ia Regulation provides a good protective regime for individual consumer claims, but

Enforcing Unfair Competition Law Cross Border 219 the recast unfortunately did not consider the introduction of special jurisdictional rules for collective redress.65 In unfair commercial practice cases, it is also important for competitors to obtain injunctive relief against unlawful activities. For interim court orders that are enforceable across the European Union, claimants must address a court which has jurisdiction as to the substance of the matter. These are in any case the courts in the Member State of the defendant’s domicile as defined in Article 63 Brussels Ia Regulation. Article 7 No 1 Brussels Ia Regulation could also allow the filing of a motion in the courts of the Member State where the unlawful practice caused harm, but there is no settled case law of how to define such a place in unfair commercial practice cases.

65  A Stadler, ‘The Commission’s Recommendation on Common Principles of Collective Redress and Private International Law Issues’ [2013] Nederlands internationaal privaatrecht 483.

220 

11 Unfair Competition Law: How Can It Work as an Important Complement to Intellectual Property Protection. Are There Missing Links? PER JONAS NORDELL

I. INTRODUCTION

T

HE TITLE OF this chapter is demanding in many ways, as it points at so many layers and levels. The influence of unfair competition law on intellectual property protection has for years been identified as an interesting and crucial intersection between different areas of law. What makes it difficult is not least that it differs from one time to another, from one place to another and in practice. In this chapter I will first focus on the international framework of unfair competition law and its impact on national and European intellectual property law. Next, I will focus on the European legislation on unfair competition law, its interrelation with intellectual property law and how it has been interpreted in EU case law. Finally, I will discuss the present European legal situation. I will give my own reflections on the system and its flaws, and some thoughts on a possible road ahead. The main focus will be on the relationship between unfair competition law and trade mark law.

II.  THE INTERNATIONAL LEGISLATIVE FRAMEWORK

During the nineteenth century, a liberal approach to commerce had grown strongly. Competition should be free; however, in many ways it was a game without rules. Because of this, the 1883 Paris Convention on Industrial Property was instituted,1 with the starting point of free competition, but with exclusive rights in the industrial property field. 1  Paris Convention for the Protection of Industrial Property of 20 March 1883, as revised at Brussels on 14 December 1900, at Washington on 2 June 1911, at The Hague on 6 November 1925, at London on 2 June 1934, at Lisbon on 31 October 1958 and at Stockholm on 14 July 1967, and as amended on 28 September 1979 (Paris Convention).

222  Per Jonas Nordell Intellectual properties are monopolies, and monopolies can hamper the competition. Even if they are monopolies, rights owners may have the opportunity to gain from others’ investments in research and development and in intellectual assets. For this reason, intellectual property rights are delimited by balancing the exclusive right with exceptions, terms of protection, remedies or sanctions connected to a violation of the right. The boundaries may also be set beyond the right’s protection, by means, for example, of competition law.2 This relationship was set by Article 10bis of the Paris Convention as a result of its London revision of 1934.3 The present Article 10bis states that: (1) The countries of the Union are bound to assure to nationals of such countries effective protection against unfair competition. (2) Any act of competition contrary to honest practices in industrial or commercial matters constitutes an act of unfair competition. (3) The following in particular shall be prohibited: (i) all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities, of a competitor; (ii) false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor; (iii) indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods.

At the international level, it is remarkable that there is no other primary international regulation in the field of unfair competition law.4 For example, there are no provisions on this merit within the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights.5 There is, however, an interesting soft law: the International Chamber of Commerce (ICC) was established in 1919 in the aftermath of the World War I. It is a non-governmental organisation of businesses and undertakings from all over the world.6 As early as the 1930s, the ICC had realised that there were severe differences between legislation and interpretation of the notion of unfair competition in different countries, and that many countries at that time had non-existing, vague or inadequate legislation against unfair competition. Therefore, the ICC developed a set of rules for advertising. These have been developed and revised over time. Today it is a detailed set of regulations laid

2  This perspective of intellectual property rights was analysed in Danish doctrine by ­Koktvedgaard, in ‘Immaterialretspositioner’ (1965) and later on by Schovsbo, ­‘Grænsefladespørgsmål mellem immaterialretten og konkurrenceretten’ (1996). 3  On the implementation of Art 10bis, see Ricketson, ‘The Paris Convention for the Protection of Industrial Property. A Commentary’ (2015) 688–93. 4  See Chen (1996) 18 European Intellectual Property Review 450. 5 Its Art 39 is about one kind of unfair competition, namely the relationship to undisclosed ­information, which is not the focus of this article. 6 www.iccwbo.org/.

Unfair Competition Law and IP Protection 223 out in the ‘Advertising and Marketing Communication Practice Consolidated ICC Code’.7 Within its general provisions, there are a number of articles of direct interest in relation to the Paris Convention. There are also articles that concern the EU harmonised area. Within the ‘General Provisions on Advertising and Marketing Communication Practice’ (General Provisions), four articles focus on the traditional concept of unfair competition. The first one is found in Article 5: Marketing communications should be truthful and not misleading. Marketing communications should not contain any statement, claim or audio or visual treatment which, directly or by implication, omission, ambiguity or exaggeration, is likely to mislead the consumer.

Even though the article focuses on the misleading of consumers, such an action can harm third parties. The provision gives some examples. One of them is misleading about copyright and industrial property rights such as patents, trade marks, designs and models, and trade names. In that respect, it mirrors in a broad sense Article 10bis 3(i) of the Paris Convention, in that it includes all acts of such a nature as to create confusion by any means whatever with the establishment, the goods, or the industrial or commercial activities of a competitor. The second provision is about comparative advertising. Article 11 of the General Provisions states that: Marketing communications containing comparisons should be so designed that the comparison is not likely to mislead, and should comply with the principles of fair competition. Points of comparison should be based on facts which can be substantiated and should not be unfairly selected.

It can be noted that comparative advertising has no legal ground in Article 10bis of the Paris Convention. There are several reasons for this. Of immediate note is that the distance between industrial properties and comparative advertising was so great for so long that the international legislator was never required to reflect on the question. The third provision is Article 12, which states that ‘marketing communications should not denigrate any person or group of persons, firm, organisation, industrial or commercial activity, profession or product, or seek to bring it or them into public contempt or ridicule’. The article mirrors Article 10bis 3(ii) of the Paris Convention, covering ‘false allegations in the course of trade of such a nature as to discredit the establishment, the goods, or the industrial or commercial activities, of a competitor’. The last provision on unfair competition in the General Provisions is Article 15, on exploitation of goodwill: Marketing communications should not make unjustifiable use of the name, initials, logo and/or trademarks of another firm, company or institution. Marketing communications

7  www.iccwbo.org/advocacy-codes-and-rules/document-centre/2011/advertising-andmarketing-communication-practice-(consolidated-icc-code).

224  Per Jonas Nordell should not in any way take undue advantage of another firm’s, individual’s or institution’s goodwill in its name, brands or other intellectual property, or take advantage of the goodwill earned by other marketing campaigns without prior consent.

One immediate conclusion in relation to this provision is that undue advantage is not covered by Article 10bis of the Paris Convention. One reason for this could be that those kinds of marketing practices mentioned in the ICC Code would normally be equally seen as intellectual property infringements. To sum up so far, freedom must be a starting point. Intellectual properties, competition law and marketing practices legislation are exceptions to this profound rationale. Intellectual properties are monopolies, and monopolies can hamper the competition. For that reason, intellectual property rights are delimited to balance their influence within their fields respectively. Some aspects of unfair competition have been recognised internationally for a long time. This was one of the first measures taken by the international legislator, being introduced in Article 10bis of the Paris Convention on Industrial Property Law. Much has happened since Article 10bis was enacted in 1934. Today, almost every country in the world is party to the Paris Convention, and different political interests have caused problems for new revisions of it. Therefore, there is no revision in sight today. At the beginning of the twentieth century the ICC had already identified that there were lacks in the legislation on unfair competition, which resulted in their Rules. These are soft law. But just as the Rules have, over time, given recommendations for what is fair play on the market, so have they also been the starting point for national legislators and courts when setting their own standards.8 This leads us directly to the next section of the chapter, namely in what ways, and to what extent, the European harmonised legislation of unfair competition law meets the global framework on the field of unfair competition legislation.

III.  THE EUROPEAN LEGAL FRAMEWORK

The rationale behind the creation of the EU was a single market with free movement of goods and services. Such a market was achieved without free or sound competition. This means that freedom must be the starting point. Intellectual properties, competition law and marketing practices legislation are exceptions to this underlying rationale. It is well now be shows that the building of a single harmonised market has been a long and troublesome process. It is still ongoing, and continually faces new problems. As the main feature of this chapter is about how unfair competition law can work as an important complement to intellectual property, I will not give an extensive

8  In Sweden the legislator has directed the estimation and decision of whether a market practices act is a violation or not to the ICC Code.

Unfair Competition Law and IP Protection 225 history of the development of the existing European regulations on unfair completion. Briefly, the Directive on Misleading Advertising9 was amended by the Directive on Comparative Advertising. The rationale for the European legislator in this regard seems to be clear, namely that the Member States have to comply with the standards given under Article 10bis of the Paris Convention.10 The provisions on misleading marketing practices in the Directive on Unfair Commercial Practices mainly follow Article 6 in the Directive on Misleading Practices, which sets the same—but more elaborated—standards in relation to consumers as are generally set in the Directive on Misleading Advertising. The interrelationship between the Directive on Comparative Advertising and the Unfair Commercial Practices Directive is today set in Article 14.3 of the Unfair Commercial Practices Directive:11 Comparative advertising shall, as far as the comparison is concerned, be permitted when the following conditions are met: (a) it is not misleading within the meaning of Articles 2(2), 3 and 7(1) of this Directive or Articles 6 and 7 of Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market; (b) it compares goods or services meeting the same needs or intended for the same purpose; (c) it objectively compares one or more material, relevant, verifiable and representative features of those goods and services, which may include price; (d) it does not discredit or denigrate the trade marks, trade names, other distinguishing marks, goods, services, activities, or circumstances of a competitor; (e) for products with designation of origin, it relates in each case to products with the same designation; (f) it does not take unfair advantage of the reputation of a trade mark, trade name or other distinguishing marks of a competitor or of the designation of origin of competing products; (g) it does not present goods or services as imitations or replicas of goods or services bearing a protected trade mark or trade name;

9  Directive Council Directive 84/450/EEC of 10 September 1984 relating to the approximation of the laws, regulations and administrative provisions of the Member States concerning misleading advertising. 10  The directives are today codified in Directive 2006/114/EC of the European Parliament and of the Council of 12 December 2006, commonly known as the Directive on Comparative Advertising. 11  Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (referred to as the Unfair Commercial Practices Directive).

226  Per Jonas Nordell (h) it does not create confusion among traders, between the advertiser and a competitor or between the advertiser’s trade marks, trade names, other distinguishing marks, goods or services and those of a competitor.

A primary rationale for the Directive on Comparative Advertising was that there were different general opinions on comparative advertising in different countries. Such a situation could cause trade barriers, which was due cause for a directive.12 While these directives constitute the main legislation in the area of unfair competition law on the European market, there is far more detailed EU legislation in various fields of advertising and marketing regulations in almost any field of marketing practices, mainly in relation to consumer interests. An act of unfair marketing can comprise the use of a trade mark of a third party. This can be a trade mark infringement as well as an act of unfair competition. The more the relationship between harmonised trade mark law according to the Trade Mark Directive13 and unfair competition law, as embodied in particular in the Directive on Comparative Advertising, seems to have an impact on trade mark law, the more they seem to interact. Even if they both strive for the same general goals of a common market with free movement of goods and sound competition, they may build upon different legal structures and—to some extent—different legal starting points. For example, Article 5 of the Trade Mark Directive gives an exclusive right to the trade mark holder to use the trade mark in the course of trade. Article 5(1)(a) is about ‘double identity’, and gives an exclusive right for any of the trade mark’s functions. Article 5(1)(B) is about ‘likelihood of confusion’. It gives a relative right based on an overall estimation, mainly based on the relationship between trade marks and goods or services. Article 5(2) gives an extended protection for wellknown trade marks. This exclusive right limits the scope of competition. It is given on certain conditions. Among other things, the trade mark shall not entitle the proprietor to prohibit a third party from using the trade mark in the course of trade, where it is necessary to indicate the intended purpose of a product or service, in particular as accessories or spare parts, provided he uses them in accordance with honest practices in industrial or commercial matters.14 Article 7, on exhaustion, sets as a main rule that a reseller or parallel importer shall have the right to use the trade mark as far as there exist no legitimate reasons for the proprietor to oppose further commercialisation of the goods, especially where the condition of the goods is

12  See Ohly and M Spence, The Law of Comparative Advertising: Directive 97/55EC in the United Kingdom and Germany (Oxford, Hart Publishing, 2000). 13  First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks, now replaced by Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the laws of the Member States relating to trade marks (codified version) (both directives are referred to as the Trade Mark Directive). 14  Trade Mark Directive, Art 6(2)(c).

Unfair Competition Law and IP Protection 227 changed or impaired after they have been put on the market.15 This means that a border to the right of expression in relation to the trade mark law is to some extent set by the trade mark law, though practice from the CJEU indicates that it is rather the harmonised regime of unfair practice that shall prevail over the harmonised trade mark law.

IV.  THE RELATIONSHIP BETWEEN INTELLECTUAL PROPERTY AND UNFAIR COMPETITION LAW IN EU CASE LAW

The relationship between intellectual property and unfair competition law has been recognised and interpreted by the CJEU in a number of decisions. It is mainly the relationship between the Trade Mark Directive and the Directive on Comparative Advertising that has been in focus for the Court. The first case is the Toshiba decision.16 It was about an equipment manufacturer’s use of specific OEM numbers (product numbers) for spare parts.17 One question put by the national court was whether, on a proper construction of the Directive on Comparative Advertising, such product numbers were ‘distinguishing marks’ within the meaning of the Directive and whether their use in catalogues of a competing supplier enabled the latter to take unfair advantage of the reputation attached to them.18 The CJEU stated that comparative advertising is to be permitted where, amongst other things, it did not take unfair advantage of the reputation of a trade mark or trade name, the distinguishing marks of a competitor or the designation of origin of competing products.19 A sign used by an undertaking could be a ‘distinguishing mark’ within the meaning of Article 3.a of the Directive on Comparative Advertising if the public identified it as coming from a particular undertaking. However, it was not established that product numbers used by an equipment manufacturer to identify spare parts and consumable items, in themselves and used alone, without an indication of the manufacturer’s trade mark or the equipment for which the spare parts and consumable items were intended, were identified by the public as referring to the products manufactured by a particular undertaking, and it was for the national court to determine whether the equipment manufacturer’s product numbers were ‘distinguishing marks’.20 The CJEU then stated that, on a proper construction of Article 3.a: where product numbers (OEM numbers) of an equipment manufacturer are, as such, distinguishing marks within the meaning of that provision, their use in the catalogues 15 According to resale, cf Judgment of the Court 23 February 1999 in Case C-63/97 BMW EU:C:1999:82, paras 54–55; according to parallel import, see Judgment of the Court 4 November 1997 in Case C-337/95 Christian Dior EU:C:1997:517, para 48. 16  Judgment of the Court (Fifth Chamber) 25 October 2001 in Case C-112/99 Toshiba EU:C:2001:566. 17  RT Hilty and F Henning-Bodewig (eds), Law Against Unfair Competition: Towards a New Paradigm in Europe? (Berlin, Springer, 2007) para 116. 18  Toshiba (n 15) para 41. 19  ibid para 42. 20  ibid paras 49–52.

228  Per Jonas Nordell of a competing supplier enables him to take unfair advantage of the reputation attached to those marks only if the effect of the reference to them is to create, in the mind of the persons at whom the advertising is directed, an association between the manufacturer whose products are identified and the competing supplier, in that those persons associate the reputation of the manufacturer’s products with the products of the competing supplier. In order to determine whether that condition is satisfied, account should be taken of the overall presentation of the advertising at issue and the type of persons for whom the advertising is intended.21

According to the later Pippig decision, the CJEU stated that use of another’s trade mark, trade name or other distinguishing marks did not breach that exclusive right in cases where it complied with the conditions laid down by the Directive on Comparative Advertising.22 In the O2 decision, there was a statement on the relationship between Article 5(1) and (2) of the Trade Mark Directive and the Directive on Comparative Advertising. The CJEU concluded: Article 5(1)(b) of Directive 89/104 is to be interpreted as meaning that the proprietor of a registered trade mark is not entitled to prevent the use by a third party, in a comparative advertisement, of a sign similar to that mark in relation to goods or services identical with, or similar to, those for which that mark was registered where such use does not give rise to a likelihood of confusion on the part of the public, and that is so irrespective of whether or not the comparative advertisement satisfies all the conditions laid down in Article 3a of Directive 84/450, as amended by Directive 97/55, under which comparative advertising is permitted.23

In the O2 decision, the CJEU did not seem to distiguish between the different conflict situations within the harmonised European trade mark law, ie ‘double identity’ under Article 5(1)(a), ‘risk of confusion’ under Article 5(1)(b) and the protection of well-known trade marks under Article 5(2) of the Trade Mark Directive. Perhaps the final step (so far) was taken by the CJEU in its L’Oréal decision.24 In this decision, the CJEU dealt with, among other aspects, the relationship between the trade mark right and the right against unfair competition law. The case was about ‘scent alikes’, ie cheaper perfumes with odours likened to others with wellknown trade marks. The case was not about the likelihood of confusion between the products, their trade marks or packages as such, which would rather have come under Article 5(2)(b) of the Trade Mark Directive. Instead, it was about the use of the well-known perfume trade marks in ‘comparison lists’ to indicate to resellers the relationship between the relevant presumed scents between the ‘scent alikes’ and the original ones. From the trade mark perspective, it is a question of so-called ‘double identity’ according to Article 5(1)(a) of the Trade Mark Directive, and the

21 

ibid para 60. Judgment of the Court 8 Aril 2003 in Case C-44/01 Pippig EU:C:2003:205. 23  Judgment of the Court 12 June 2008 in Case C-533/06 O2 EU:C:2008:339, paras 1–2 (cf paras 45 and 51). 24  Judgment of the Court (First Chamber) of 18 June 2009 in Case C-487/07 Lancôme parfums et beauté & Cie SNC, Laboratoire Garnier & Cie v Bellure NV EU:C:2009:378 (L’Oréal). 22 

Unfair Competition Law and IP Protection 229 additional question is whether and to what extent it related to the conditions set down in Article 3(a) of the Directive on Comparative Advertising, as the trade marks were used in an act of marketing practice: The CJEU concluded that the use by an advertiser, in a comparative advertisement, of a sign identical with or similar to the mark of a competitor for the purposes of identifying the goods or services offered by the latter could be regarded as use for the advertiser’s own goods and services for the purposes of the trade mark. Such use could therefore be prevented, where appropriate, by virtue of those provisions.25 However, the proprietor of a registered trade mark was not entitled to prevent the use by a third party of a sign identical with or similar to its mark in a comparative advertisement which satisfied all the conditions, laid down in Article 3a(1) of the Directive on Comparative Advertising.26

So far, a fair act of comparative advertising does not violate the Directive of Comparative Advertisement nor the Trade Mark Directive: The Court has already held that the exclusive right under Article 5(1)(a) of Directive 89/104 was conferred in order to enable the trade mark proprietor to protect his specific interests as proprietor, that is, to ensure that the trade mark can fulfil its functions and that, therefore, the exercise of that right must be reserved to cases in which a third party’s use of the sign affects or is liable to affect the functions of the trade mark. These functions include not only the essential function of the trade mark, which is to guarantee to consumers the origin of the goods or services, but also its other functions, in particular that of guaranteeing the quality of the goods or services in question and those of communication, investment or advertising. … It is apparent from the Case Law cited in paragraph 58 of this judgment that the proprietor of the mark cannot oppose the use of a sign identical with the mark on the basis of Article 5(1)(a) of Directive 89/104 if that use is not liable to cause detriment to any of the functions of that mark.27

In this case, the CJEU found that there is a lack of interpretation between the two directives. It has therefore decided—as I understand it—that if an advertisement that contains another’s trade mark fulfils all the conditions laid down in the Directive on Comparative Advertisement, it cannot be a trade mark infringement. One interesting observation is that there seems to be no legal definition of the notion of ‘ne int competition’.28 It has been treated in case law, and implemented nationally, in different ways in the different European countries.29 In Article 2(2a) of the Directive on Comparative Advertising, it is defined as any advertising which explicitly or by implication identifies a competitor or

25 

The Court made references to the O2 decision (n 22) paras 36 and 37. L’Oréal (n 23) 44. The CJEU referred to the O2 decision (n 22) paras 45 and 51. 27  L’Oréal (n 23) 58 and 60 with references to, among others, Judgment of the Court 12 November 2002 in Case C-206/01 Arsenal Football Club plc v Matthew Reed EU:C:2002:651, 54; Judgment of the Court (First Chamber) of 25 January 2007 in Case C-48/05 Opel EU:C:2007:55, 22. 28  See Henning Bodevig and Shricker (2002) 24 European Intellectual Property Review 272. 29  See Bakardjieva Engelbrekt, ‘Law in Flux? National Legalices, Institutional Choices and the Process of Europeanisation’ (2003); Henning-Bodewig, Unfair Competition Law. Europeon Union and Member States (Kluwer Law International, 2006). 26 

230  Per Jonas Nordell goods or services offered by ‘a competitor’.30 The claim of a ‘competitive relationship between undertakings’ according to Article 2(2a) and its relation to Article 3a(1)(b), ie that comparative advertising shall be permitted if it compares goods or services ‘meeting the same needs or intended for the same purpose’, was interpreted by the CJEU in a preliminary ruling about a Belgian company— De Landtsheer Emmanuel SA (De Landtshee)—and marketed several varieties of beer under the trade mark Malheur. In 2001 it launched a beer under the name Malheur Brut Réserve, which was allegedly brewed via a process based on the production method for sparkling wine, and using the word ‘champagne’ and wordings alluding to champagne, such as ‘BRUT RÉSERVE’ and ‘La première bière brut au monde’. In 2002, the Comité Interprofessionnel du vin de Champagne (CIVC) and Veuve Clicquot brought an action against De Landtsheer before the Tribunal de commerce de Nivelles in Belgium, seeking, in particular, a prohibition on the use of the wordings. The Tribunal ordered De Landtsheer to cease the use, among other things, of the wording ‘méthode traditionnelle’, the designation of origin ‘champagne’ and the method of producing champagne. De Landtsheer withdrew its use of the designation of origin ‘champagne’ in the expression ‘champagnebier’, but it appealed against the judgment in relation to all other elements of the case. The CIVC and Veuve Clicquot brought a cross-appeal relating to the use, among other things, of the wordings ‘brut réserve’ and ‘la première bière brut au monde’. The Cour d’appel Brussels considered that an interpretation of the Directive on Comparative Advertising was necessary and decided to stay the proceedings pending a preliminary ruling from the CJEU.31 The CJEU concluded that in the context of Community harmonisation of ­ comparative advertising, Articles 2(2a) and 3a(1)(b) of the Directive on ­Comparative Advertising served different purposes. While Article 2(2a) laid down the criteria which served to define the term ‘comparative advertising’—thereby delimiting the scope of the directive—Article 3a(1)(b) laid down one of the conditions which comparative advertising must satisfy for it to be permitted, requiring that the competing products being compared meet the same needs or be intended for the same purpose, that is to say, that they must display a sufficient degree of

30  According to Wikipedia, ‘unfair competition’ is a situation in which competitors compete on unequal terms because favourable or disadvantageous conditions are applied to some competitors but not to others. The concept can also refer to situations in which the actions of some competitors actively harm the position of others with respect to their ability to compete on equal and fair terms. It contrasts with fair competition, in which the same rules and conditions are applied to all participants and in which the competitive action of some does not harm the ability of others to compete. Often, unfair competition means that the gains of some participants are conditional on the losses of others when the gains are made in ways which are illegitimate or unjust. cf https://en.wikipedia.org/wiki/ Unfair_competition. 31  Judgment of the Court (First Chamber) 19 April 2007 in Case C-381/05 Malheure EU:C:2007:230.

Unfair Competition Law and IP Protection 231 i­nterchangeability for consumers.32 It was true that the two provisions of the directive were obviously close.33 However, whilst the definition of comparative advertising given in Article 2(2a) assumes that there is a competitive relationship between undertakings proving, for that purpose, sufficient to ascertain whether the products they offer generally display a certain degree of substitutability for one another, the condition laid down in Article 3a(1)(b) requires an individual and specific assessment of the products which are specifically the subject of the comparison in the advertisement before it can be concluded that there is a real possibility of substitution.34

Taking all the foregoing into account, criteria for establishing the existence of a competitive relationship within the meaning of Article 2(2a) of the Directive on Comparative Advertising were not identical to those for determining whether the comparison fulfilled the condition in Article 3a(1)(b) of the directive.35 From my point of view, this case from the CJEU expresses a fundamental misunderstanding of the concept of ‘expres competition’ from several points of view. It states that a first step for the Directive on Comparative Advertising to apply is that ‘the products they offer generally display a certain degree of substitutability for one another’.36 As treated and interpreted traditionally, internationally and generally, unfair competition takes a far reaching starting point. In relation to trade mark law, it is about using someone else’s goodwill or reputation. In such a case, it is not necessary for the goodwill to lie in products or marks which display a certain degree of substitutability. The extended protection for well-known trade marks, which is today found in Article 5.2 of the Trade Mark Directive, has been optional for Member States, as they are free to keep that principle as a means for unfair competition. It is telling that no European Member State, as far as I am aware, has opted out. Now there is a new Trade Mark Directive, with new and updated conditions.37 Perhaps the EU legislator should have taken a closer look at the relationship between intellectual properties and unfair competition law. Even if there is no international or European definition, the EU legislator and the CJEU should also have taken a closer look at the international and European discourse on this matter.

V.  CONCLUDING REMARKS

As shown above, there is a close relationship between intellectual property rights and protection against unfair competition. Even though it can be seen as an international and European system, it is still very much a patchwork. 32 

ibid 43–44. ibid 46. 34  ibid 47. 35  ibid 49. 36  cf ibid 47. 37  Directive (EU) 2015/2436 of the European Parliament and of the Council of 16 December 2015 to approximate the laws of the Member States relating to trade marks. 33 

232  Per Jonas Nordell At the international level, one central issue seems to be missing in Article 10bis of the Paris Convention, namely that there is no provision for the exploitation of goodwill of a kind that follows from Article 15 in the ICC Rules. It is well known that, for political reasons, no revision of the Paris Convention is in sight. Therefore, we will have to live with our current international IP protection, which is kept as well as possible by the WIPO and the ICC. In my view, this is still a kind of missing link between the international framework and the national legislations. At the European level, the patchwork nature is even more obvious: there are three main directives on unfair practices. They are more or less related to each other. The Directive on Misleading Advertising is codified by the Directive of Comparative Advertising. These are then harmonised in different ways by the Unfair Commercial Practices Directive.38 Whereas the first two directives are socalled minimum directives, the latter one is a maximum directive. What does this actually mean? From my point of view, a harmonising directive should be the same across the entire European Union. In that view, there is no room for any ‘additional national legislation’. Harmonisation is an absolute—there is no more or less; either it is or it is not. The mere idea of a minimum is a chimera. This can be illustrated by the Unfair Commercial Practices Directive, which is said to be a fully harmonised directive in relation to ‘in relati perspectives’,39 though it also relates to ‘competitors’.40 In my view, as the harmonisation of the EU continues, there is no question that the directives should be transformed into a general EU directive, or rather a regulation. I am not convinced by the CJEU’s definition of ‘defini competition’ in the Malheure decision. I think the case totally misunderstands what unfair competition is all about. This decision must be analysed and criticised on a far more profound level to give a starting point for a discussion on what is really meant by ‘unfair competition’. As long as this remains an unclear question within the EU, it seems impossible for a fully harmonised market to be achieved. The final missing link is the intersection between the Trade Mark Directive and the Directive on Comparative Advertising. As has been stated, market positions may take different places: the CJEU seems to have observed and solved this problem as an act of comparative advertising. If the act does not violate the Directive of Comparative Advertisement or the Trade Mark Directive, it does not cause a trade mark infringement. This is an interesting and growing area of power of the CJEU, making legislation in fields which previously were exclusively for legislators or national courts to decide upon.

38  Directives 84/450/EEC, 97/7/EC, 98/27/EC and 2002/65/EC and Regulation (EC) No 2006/2004 (Unfair Commercial Practices Directive). 39  See Heide-Jørgensen in [2016] Europarättslig Tidskrift 87. 40  ibid 97 et seq.

12 The Road Ahead—Present Status and Need for Reform ULF BERNITZ

I.  THE UCPD AND ITS OBJECTIVES

W

E HAVE NOW had nearly ten years of experience of application within the EU of legislation based on the UCPD (the Directive)1 and a fairly considerable case law has developed, albeit uneven in its coverage. This book explores the extent to which a common European Law of Unfair Competition has emerged or is emerging, and discusses legal problems related to the application of the UCPD and the adjoining MCAD.2 The underlying fundamental question is whether the present legal situation is fully satisfactory or to what extent there is need for reform. As has been mentioned in the book, the Commission will now pursue a ­Fitness Check of EU consumer law (the Regulatory Fitness and Performance Programme, or REFIT), which also comprises the UCPD.3 It makes this a good timing for reflections on the present status of the law. The experiences with the two ­directives in practice have brought to light many problems as to scope, interpretation and enforcement. Very recently, the revised and quite comprehensive UCPD ­Guidance

1 Directive 2005/29/EC. It was required to have been implemented by the Member States by 12 December 2007. See, among others, J Stuyck et al, ‘Confidence through Fairness? The New Directive on Unfair Business-to-Consumer Practices in the Internal Market’ (2006) 43 Common Market Law Review 107; G Anagnostaras, ‘The Unfair Practices Directive in Perspective: From Legal Disparity to Legal Complexity?’ (2010) 47 Common Market Law Review 147; W van Boom, A Garde and O Akseli, The European Unfair Commercial Practices Directive. Impact, Enforcement Strategies and National Legal Systems (Farnham, Ashgate, 2014); M Durovic, European Law on Unfair Commercial Practices and Contract Law (Oxford, Hart Publishing, 2016). For an account of legal developments leading up to the UCPD and its general structure, see G Howells, H-W Micklitz and T Wilhelmsson, European Fair Trading Law. The Unfair Commercial Practices Directive (Farnham, Ashgate, 2006). See also H-W M ­ icklitz in N Reich et al, European Consumer Law, 2nd edn (Cambridge, Intersentia, 2014) 70ff. 2 Directive 2006/114/EC concerning misleading and comparative advertising. The MCAD is ­discussed primarily in section VIII below. 3  The background to the REFIT and its purposes has been described by Bert Keirsbilck in chapter 6 of this book.

234  Ulf Bernitz of 2016 was issued by the Commission as a Staff Working Document.4 The ­Guidance is prepared by the Commission services and is very informative but not authoritative, and certainly not a legally binding instrument.5 It has not been cited by the CJEU. However, one can assume this comprehensive soft law instrument will often be used by practising lawyers and probably to a certain extent also by national authorities and courts. This chapter will discuss the road ahead and possible needs for reform against the backdrop of what has been presented in previous chapters. It will discuss, amongst other things, whether the UCPD has achieved its objectives. It will try to assess the development of the law in three core areas: the Black List, the legal standard in relation to misleading commercial practices and the application of the general clause. It will also discuss the business-to-business (B2B) protection indirectly offered by the UCPD. It will raise the question of whether the system of enforcement and remedies is satisfactory. The final part of the chapter will discuss the MCAD6 and the need for its revision. The UCPD should be regarded as an important piece of European legislation. It is built on a new systematic formation, based on functional considerations fitting the EU. It does not follow the legislative model of any particular Member State. Few directives in the consumer law field have such a broad scope and represent such a high level of legislative ambition. The UCPD has introduced full harmonisation combined with a blacklist system in a field of law where minimum harmonisation used to be the general rule. The UCPD aims at a single regulatory network and is based on a very broad definition of what is a ‘commercial practice’, including all types of advertising, marketing and commercial communication.7 It covers all commercial practice before, during and after a commercial transaction, and regulates all aspects of business-to-consumer (B2C) unfair commercial practices.8 In a recent case, the CJEU found that the notion of ‘commercial practice’ includes a trader’s information to one single consumer.9 The notion of ‘trader’ is also broad, and comprises all natural or legal persons carrying out a gainful a­ ctivity.10 The CJEU has found a statutory based health insurance fund to be a trader.11

4 Commission Staff Working Document, ‘Guidance on the Implementation/Application of ­ irective 2005/29/EC on Unfair Commercial Practices’, SWD (2016) 163 final. This has replaced the D 2009 version of the Guidance. See the website htpps://webgate.ec.europa.eu/ucp/, which also contains comprehensive information about national implementation of the UCPD and case law in the Member States. 5  On the status of the Guidance, see Jan Trzaskowski in chapter 5, section IV of this book. 6  Directive 2006/114/EC concerning misleading and comparative advertising. 7  Art 2(d). 8  Art 3(1) and Recital 12. 9  Case C-388/13 Nemzeti Fogyasztóvédelmi Hatósá v UPC Magyarország EU:C:2015:225, critically commented on by B Keirsbilck, ‘The UCPD’s Notion of “Commercial Practice”: UPC Magyarország’ (2016) 53 Common Market Law Review 527. 10  Art 2(b). 11 C-59/12 BKK Mobil Oil Körperschaft v Zentrale zur Bekämpfung unlauteren Wettbewebs EU:C:2013:634. For more information see Jules Stuyck in chapter 4, section IV.D of this book.

The Road Ahead 235 In addition, the Directive has introduced other broad, open-textured concepts, like ‘material distortion of the economic behaviour of the average consumer’, ‘invitation to purchase’ and ‘undue influence’.12 The UCPD is based on what is now Article 110 TFEU on the functioning of the internal market, and aims to create a single framework regulating most aspects of unfair commercial practices across the EU and to compel the Member States to bring their legislation fully in line with the provisions of the Directive.13 This is claimed to create a high common level field of consumer protection14 and ­eliminate the barriers stemming from fragmentation of the rules on unfair commercial practices.15 As a consequence, national legislation or established case law on commercial communication to consumers of a more restrictive character than the Directive prescribes cannot be upheld unless there is an exemption or derogation—even if the clear purpose of the national law would be to secure a higher level of consumer protection. Without adopting this principle, it would not have been possible to establish a level playing field. However, as Jan Trzaskowski and others have discussed in this book,16 the full harmonisation prescribed in the UCPD is not as complete as one might think. Many notions used in the statutory text of the Directive and its recitals are rather vague and open. In its case law, the CJEU seems rather reluctant to give detailed assessment in order to offer guidance to the national courts on the application of the UCPD in connection to the circumstances of the case. An example would be the grand chamber case Mediaprint, which was about the legality of bonuses (lottery participation) offered to consumers in connection to the purchase of newspapers.17 In this case, the CJEU pronounced itself quite cautiously. In ­reality, there still seems to be considerable scope for national application of B2C ­marketing and advertising law. While the CJEU certainly has the final word in matters of interpretation, issues of assessment are normally left to the national courts. In addition, as Antonina Bakardjieva Engelbrekt explains and discusses in chapter 7 of the book, the implementation of the Directive has been half-hearted in a number of Member States and there has also been a tendency to ‘domesticate’ the Directive by choosing ways of implementation which bring concepts and other basic provisions close to the established national law in the field. The UCPD is limited to unfair commercial practices harming consumers’ economic interests;18 a limitation well in line with its primary harmonisation object. Thus, the Directive excludes practices affecting matters of ‘taste and decency’

12 

See the definitions in Art 2. Recital 12. The full harmonisation requirement follows from the free movement clause in Art 4; cf Arts 5(5) and 3(9). See chapter 4, section V of this book. 14  Recital 11. 15  Recital 12. 16  Chapter 5, section I of this book. 17  Case C-540/08 Mediaprint Zeitungs- und Zeitschriften Verlag EU:C:2010:660. 18  Art 1. 13 

236  Ulf Bernitz where the requirements are said to vary widely between the Member States.19 As discussed in chapter 3 of this book,20 advertising triggering issues of taste and decency might involve sensitive problems connected to free speech and constitutional limitations. The UCPD also marks an important split between B2B and B2C relations. The scope of the UCPD is limited to B2C relations, the consumer being defined as a natural person acting for non-business purposes.21 B2B transactions have been left out of the Directive,22 and in this area the far less ambitious older 1984 Directive on Misleading Advertising (MCAD) continues to apply, in revised (2006) form, including a comprehensive addition on comparative advertising (which is also applicable to B2C).23 It may be argued that the UCPD has grown out of the idea of national unfair competition laws originally meant to protect the interests of competitors, and that by connecting to the general EU consumer law and leaving the B2B relations outside the UCPD it has opened up new core issues connected to the scope and interpretation of the Directive. On the other hand, the split of B2B and B2C is not necessarily working well in all EU Member States, many of which have had a tradition of integration of B2C and B2B commercial practices in the same regulation, and there have been discussions about how to protect B2B relations at the EU level. However, the UCPD also offers B2B protection of considerable importance indirectly, as will be discussed in section VI below. The role of the MCAD will be discussed in section VIII. Given the background to the enactment of the UCPD and noting Article 110 TFEU as its legal basis, the primary purpose of the Directive should be to ‘contribute to the proper functioning of the internal market’ by eliminating marked differences in Member States’ legislation on unfair commercial practices which can generate appreciable distortions of competition and obstacles to the smooth functioning of the internal market.24 The fundamental idea behind the Directive is to create a common level playing field throughout the Union for advertising and marketing. Looking at the legislative history, an important factor, explaining the Commission’s interest in having the UCPD enacted, was the objective of achieving deregulation of national unfair competition law in such Member States where the applied standard was regarded as too strict and restrictive, thus eliminating barriers to the development and liberalisation of the internal market. The primary target in this regard was undoubtedly the traditionally restrictive German Unfair Competition Act as it was applied in German case law.25 Thus, a basic aim of the 19 

Recital 7. Frauke Henning-Bodewig, chapter 3 of this book. See also chapters 2 (Caroline Heide-Jørgensen) and in 4 section VI.A (Jules Stuyck). 21  Art 2(a). 22  Recital 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. 23  It is also based on what is now Art 110 TFEU. 24  See, in particular, Art 1 of the Directive and Recitals 3–5. 25  This will be discussed in section IV below. 20 

The Road Ahead 237 UCPD is to facilitate advertising, marketing and trade, especially cross-border, in the EU. However, another fundamental objective of the UCPD is to establish a high level playing field of B2C consumer protection, based on the general prohibition of unfair commercial practices distorting consumers’ economic behaviour. This is clearly stated in Article 1 and Recital 11 of the UCPD. Consumer protection is also an important general objective of EU law, as follows from Articles 12 and 169 TFEU. The Charter of Fundamental Rights states in its Article 38 that ‘Union ­policies shall ensure a high level of consumer protection’. The MCAD also has dual objectives. According to its recitals, the objective is to promote the smooth functioning of the internal market, as misleading advertising and unlawful comparative advertising can lead to distortion of competition within that market.26 Article 1 of the MCAD states its purpose to be to protect traders against misleading advertising and the unfair consequences thereof, and to lay down the conditions under which comparative advertising is permitted. How should the dual objectives of the UCPD and the MCAD be evaluated? Both objectives are important and designed to function in a pro-competitive environment. Both directives take a positive view on advertising and marketing as important instruments for a well-functioning competitive economy in Europe; they aim at the enhancement of open markets. However, in my view, keeping in mind that the directives are part of EU legislation, the elimination of fragmented national barriers to advertising and marketing of goods and services across borders should be regarded as their primary objective. Although the UCPD is to be regarded as an important part of EU consumer law in a broader sense, its background and purpose remains dual.

II.  THE STRUCTURAL FORMATION

When the UCPD was enacted, it was based on a new systematic formation, built on functional considerations fitting the EU law. The Directive and its legal formation is not closely connected to any of the already existing legislative models in the Member States. Considering that the Directive aims at full harmonisation of the field, the fairly quick and smooth acceptance by the Council and the E ­ uropean Parliament of the Commission’s proposal for such a comprehensive directive should be regarded as a remarkable achievement by the Commission. In my opinion, it was a wise decision, in order to reach a result after such a long preparation time, not to follow the legislative model of any particular EU country but to place the Directive on a new foundation, based on functional considerations fitting existing EU law. The decision to limit the scope of the new directive to B2C transactions harming consumers’ economic interests is probably the principal reason for its success. By concentrating on the consumer protection aspect, the 26 

Recitals 2 and 3.

238  Ulf Bernitz Directive was able to establish a strong connection to other consumer law directives, eg the e-Commerce Directive,27 and make it part of the quickly developing European consumer law. In addition, as discussed by Antonina Bakardjieva Engelbrekt in chapter 7, by using a new system, the Commission was able to adapt its model to the specific need to remove barriers to cross-border advertising and marketing, thus furthering the aims of the internal market. As has been explained in chapter 1, the original study and drafting work for the Commission was conducted during the 1960s and early 1970s by the Max Planck Institute for Intellectual Property and Competition Law in Munich, headed by Professor Eugen Ulmer (the Ulmer project).28 It was based on the assumption that the German/Continental unfair competition law concept should serve as the primary model. The studies published as part of the Ulmer project were traditional in their approach. There was no primary focus on furthering European integration by removing barriers to cross-border advertising and marketing. Also, in line with the general thinking of the time, the focus was more on B2B than B2C protection. Despite the high quality of the work, however, the Ulmer project must be regarded as unsuitable for the legislative purposes of the present-day EU. However, the solution taken, leading to the enactment of the UCPD, has been and still is the object of much criticism. In particular, it is contrary to the German concept of a unitary unfair competition law which has been largely accepted in a substantial number of Continental EU countries.29 Historically, the German unfair competition concept has focused on protection against unfair practices in B2B transactions, but it has gradually been widened and the German Unfair Competition Act of 2004 as revised in 2008 aims at offering B2B and B2C protection on the same level, balancing conflicting business and consumer interests when necessary.30 The marketing practices legislation in the Scandinavian countries also includes both B2B and B2C protection, albeit with a more pronounced emphasis on the protection of consumers than is the case in Germany.31 On this point, reference should be made to chapter 8 of this book.32 There are a number of other models within Europe. For example, in France, the Code de la Consummation includes legislation against unfair marketing practices in a broadly 27 2000/31/EC.

28  E Ulmer et al, Das Recht des unlauteren Wettbewerbs in den Mitgliedstaaten der Europäischen Wirtschaftsgemeinschaft (published in six volumes by CH Beck Verlag 1965–1980). See also chapter 1, section III.B(i) of this book. 29  See, eg J Stuyck, ‘The Unfair Commercial Practices Directive and its Consequences for the Regulation of Sales Promotion and the Law of Unfair Competition’ in S Weatherill and U Bernitz (eds), The Regulation of Unfair Commercial Practices under EC Directive 2005/29 (Oxford, Hart Publishing, 2007) 159ff. 30  F Henning-Bodewig in F Henning-Bodewig (ed), International Handbook on Unfair Competition (Munich, CH Beck, 2013) 234–35. 31  A Bakardjieva Engelbrekt, ‘Fair Trading in Flux? National Legacies, Institutional Choice and the Process of Europeanisation’ (dissertation, Stockholm University, 2003). The combined approach does not apply to Finland, where the UCPD is implemented as a part of the comprehensive Finnish statute on consumer protection while the legislation B2B constitutes a separate statute. 32  Palle Bo Madsen, ‘B2B and B2C Marketing Practices—the Case for an Integrated Approach’.

The Road Ahead 239 framed ­consumer code. In England, on the other hand, no coherent legal principle of unfair competition has been developed, and existing consumer legislation on unfair commercial practices is scattered and lacking systematisation.33 Thus, very d ­ ifferent legal ­techniques have been applied across Member States when ­implementing the UCPD, reflecting the differences in their national legal traditions. On this point, see in particular Antonina Bakardjieva Engelbrekt in chapter 7, section IV of this book. Taking into regard the wide differences between the national legal systems within the EU, the Union legislation should not be criticised for not having followed the German model. However, as will be discussed in section VIII, the separation between B2C and B2B marketing practices remains a problem. In order to reach a result, the Commission had to compromise during the course of the legislative process and drop its original proposal to introduce the countryof-origin principle into the marketing practices field. According to that principle, advertising fulfilling the legal requirements of its country of origin would have had to have been accepted in all the other Member States throughout the Union (save for specific exemptions). The main thrust of the original Green Paper on Commercial Communication in the internal market of 199634 was the liberalisation of commercial communication and promotion of free movement of advertising and marketing services throughout the Community, using the principles of country of origin and mutual recognition as main instruments. This principle has been accepted in the e-Commerce Directive: ‘Member States may not, for reasons falling within the co-ordinated field, restrict the freedom to provide information services from another Member State’.35 However, although it was kept in the Green Paper of 2001 on EU Consumer Protection36 and in the proposed text of the Directive as first presented by the Commission, the country-of-origin principle faced massive criticism from certain Member States that wanted to enforce stricter national standards. It was finally accepted that it was up to the Member States to implement the UCPD by making the necessary changes in their national legislation and for national courts and administrative agencies to apply that legislation loyally, respecting the spirit of the Directive and its integrative aims. As the UCPD prescribes total harmonisation with few exemptions, there should, in principle, be no room left for different applications, except in cases where differences can be established between Member States in consumers’ perception or understanding of a certain type of marketing practice.37 However, the reality is somewhat different. The fundamental question of the extent to which the Directive has been able 33  J Davis in Henning-Bodewig (ed) (n 30) 600ff; L Bently and B Sherman, Intellectual Property Law, 4th edn (Oxford, Oxford University Press, 2014) 884ff. 34  COM (96) 192 final. 35  Art 3.2 of the e-Commerce Directive (2000/31/EC). 36  COM (2001) 531 final. 37  The issues are discussed in Stuyck et al (n 1) 115ff; I Otken Eriksson and U Öberg, ‘The Unfair Commercial Practices Directive in Context’ in Weatherill and Bernitz (n 29) 91ff. Derogations and exemptions will be discussed in section IV below.

240  Ulf Bernitz to accomplish its harmonisation objectives is discussed by Antonina Bakardjieva Engelbrekt in chapter 7. In 2013, the Commission published a Report on the application of the UCPD.38 In the accompanying Communication from the Commission,39 it concluded that the UCPD is proving to be a valuable tool to increase the consumer welfare. It has simplified the regulatory environment and helped eliminate obstacles to cross-border commerce … The Commission considers that it would be inappropriate to amend the Directive at this stage … The Commission will now focus its attention on the coherence or the implementation of the Directive, taking concrete actions to make enforcement work better in key areas to the benefit of consumer confidence and growth’.

It follows from this Report, and also from the terms of the recent REFIT, that the Commission no longer seems to be pushing for the introduction of the country-of-origin principle in this area. Largely, the Commission seems to ­ regard the innovative approach it took when launching the UCPD as a success. However, there is probably still a long way to full harmonisation in actual practice due to differences in national tradition and interpretation of the law. Hopefully, the REFIT will explore the extent to which companies will find identical advertising and marketing practices are meeting legal hindrances in certain Member States while considered completely acceptable in others.

III.  ASSESSING THE BLACK LIST

As has been described elsewhere in this book,40 the architecture of the substantive provisions of the UCPD is based on a division into three tiers: (I)

A Black List comprising 31 types of commercial practices considered to be ­prohibited as unfair in all circumstances (Annex I). The blacklisted practices are prohibited per se, and do not require case-by-case assessment of their effects. (IIA) 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). (IIB) 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). A prerequisite for the application of the prohibitions mentioned in IIA and IIB is that the practice causes or is likely to cause the average consumer to take a transactional decision he or she would not have taken otherwise. 38 

COM (2013) 139. COM (2013) 138. 40  See, in particular, chapter 4. 39 

The Road Ahead 241 This covers not only the situation in which the consumer is actually deciding whether or not to buy a product, but also related decisions, such as the decision to go to or enter a shop.41 (III) A broad general clause prohibiting unfair commercial practices contrary to the requirements of professional diligence, provided the practice is likely to materially distort the economic behaviour of the average consumer (Article 5; see section V below). The Black List of per se prohibitions was a novelty within European advertising and marketing law when the Directive was enacted.42 The prohibitions are based on a legally binding presumption that the practices are detrimental to average consumers and are likely to cause them to take transactional decisions they would not otherwise take. The practices are unfair in all circumstances (per se)43 and do not require any case-by-case assessment.44 There is no transactional decision test. In all, there are 23 prohibitions on misleading commercial practices and eight prohibitions on aggressive commercial practices, but there is no clear structure within those two groups. The practices listed are the only ones which can be deemed to be unfair without a case-by-case assessment.45 The legislative technique chosen has had no previous direct counterpart in the national law of any of the Member States. Studying the case law from the CJEU that has since emerged, the Black List seems to have proven more important than was originally foreseen. So far, most of the cases in the CJEU have dealt with the interpretation of different Black List provisions.46 The List has become a key part of the UCPD. In conjunction with the Commission proposal for the UCPD, the Commission also proposed the enactment of a specific Regulation on Sales Promotion.47 The aim of the Commission proposal was to liberalise the market by restricting national prohibitions in the Member States on particular types of promotional practices, eg different types of combined offers, premiums and rebates, trading stamps and clearance sales, used in order to facilitate cross-border marketing based on the same marketing concept. Normally, these national prohibitions of promotions were primarily aimed at offering protection for small shopkeepers rather than consumers. The Commission withdrew the proposed regulation in 2006—after the enactment of the UCPD—as it met with a lot of resistance from 41  Case C-281/12 Trento Sviluppo et al v Garante della Concurrenza e del Mercato EU:C:2013:859, paras 29–30 and 35. In this case a shop advertised a laptop computer at a promotional price. When the consumer entered the shop the product was not available. 42  A somewhat similar approach is practised in antitrust law, where the Commission has issued a substantial number of detailed block exemptions. 43  Art 5(5). 44  Case C-428/11 Purely Creative et al v Office of Fair Trading EU:C:2012:651, para 45. 45  Recital 17. 46  See Tore Lunde, ‘Applying the UCP Directive in Practice: the Norwegian Experience’, chapter 9 of this book. Lunde presents a case study of some of the important provisions in the Black List. 47  ‘Proposal for a European Parliament and Council Regulation Concerning Sales Promotions in the Internal Market’, COM (2002) 585 final.

242  Ulf Bernitz certain Member States. However, the UCPD recognises promotions as a kind of commercial practice48 and certain types of promotions are explicitly banned in the Black List, eg marketing pyramid-promotional schemes, making persistent and unwanted solicitations, and creating the false impression that the consumer has won a prize or equivalent benefit.49 As has been discussed elsewhere in this book, the CJEU has been able to solve the problem of restrictive national prohibitions of promotions by way of interpreting the UCPD. The VTB-VAB and Galatera case has been very important in this.50 This was the first preliminary ruling case on the UCPD to reach the Court. The case concerned the Belgian law prohibiting combined offers (with a limited number of exceptions). The CJEU found the Black List to be exhaustive and not to contain any prohibition on combined offers. Other commercial practices cannot be deemed unfair under the Directive without a case-by-case assessment. As the UCPD is based on full harmonisation, the Member States may not adopt stricter rules than those provided for in the Directive, even in order to achieve a higher level of consumer protection.51 Thus, the Court found that the UCPD precluded a general prohibition of combined offers in B2C relations. The Court has confirmed its conclusions in the VTB-VAB case in a number of later judgments on combined offers and similar promotions.52 The Commission has since had to conduct infringement proceedings against Belgium for not fully respecting the outcome of the VTB-VAB case. The CJEU found that Belgium was infringing Union law by, among other things, maintaining special legal restrictions on announcements of price reductions which had no counterpart in the Black List.53 In another case, Köck, the CJEU struck down Austrian legislation requiring prior administrative authorisation of clearance sales.54 The Court found that a national court had precluded to order the cessation of a commercial practice not covered by the Black List without carrying out an assessment of the practice against the criteria set out in Articles 5–9 of the UCPD.55 In short, according to the core of the Court’s judgments, as the UCPD is based on full harmonization, Member States cannot apply any other outright prohibitions of practices falling within the ambit of the Directive than those mentioned in the Black List. All other practices are to be assessed on a case-by-case basis. This is so even if the national rule would lead to a higher level of consumer protection. 48 

Art 2(d). Points 14, 26 and 31 in the Black List. 50  Joined Cases C-261/07 and C-299/07 VTB-VAB v Total Belgium and Galatea v Sanoma Magazines Belgium EU:C:2009:244. 51  In particular case VTB-VAB (ibid) paras 56, 59 and 50. 52 For more detailed information, see chapter 4, section IV.B in this book. See also J Stuyck, ‘The Unfair Commercial Practices Directive and its Consequences for the Regulation of Sales ­Promotion and the Law of Unfair Competition’ in Weatherill and Bernitz (n 29) 159ff. 53  Case C-421/12 Commission v Belgium EU:C:2014:2064. 54  Case C-206/11 Georg Köck v Schutzverband gegen unlauteren Wettbewerb EU:C:2013:14. 55  See, among others, Case C-310/15 V Deroo-Blanquart v Sony Europe EU:C:2016, para 28ff, with further references. 49 

The Road Ahead 243 The UCPD as interpreted by the CJEU has achieved the pro-integrative object of the proposed but contested Sales Promotion Regulation via the backdoor at least as long as consumer protection is among the objectives of national regulations. When the UCPD was enacted as a result of a political compromise, the Member States were given the opportunity to keep their national provisions which were more restrictive or prescriptive than the UCPD permits for a limited period of six years—that is, to 2013—provided the specific national measures applied were proportionate.56 The statutory text included a provision making it possible to prolong such derogations. However, no such prolongation has taken place.57 Whether or not it still exist national provisions that are incompatible with the UCPD are a matter for supervision and action by the Commission. Thus, it has been possible to limit the scope of derogations and exemptions to just a few areas. A derogation for national rules on commercial practices by the regulated professions has been admitted, and without time limitation.58 Member States may also impose more restrictive or prescriptive national rules on financial services and immovable property, ie these areas are within the ambit of the Directive but are not covered by the full harmonisation principle.59 To conclude, the inclusion in the UCPD of a Black List was an innovative and successful move. Given the CJEU’s firm interpretation of the Black List, this might be the part of the UCPD that has contributed most successfully to the harmonisation of the Member States’ law in the field. The Black List approach should be here to stay. It would be a natural part of the REFIT to evaluate whether the Black List needs any revision—in particular, whether there are any other practices that should be added to the List. However, as explained by Jules Stuyck and Tore Lunde in this book, it should be noted that a number of the prohibitions included in the Black List are in reality rather open norms in need of further clarification by the case law.60

IV.  THE LEVEL OF CONSUMER PROTECTION AGAINST MISLEADING COMMERCIAL PRACTICES

The prohibitions against misleading and aggressive commercial practices in ­Articles 6–9 constitute a core part of the UCPD. They stand on their own feet. As the CJEU stated in the case CHS Tour Services,61 there is no requirement that the practices should also be contrary to the requirements of professional diligence, as 56 

Art 3(5). UCPD Guidance 2016, para 1.3.2. Art 3(8). 59  Art 3(9). 60  Jules Stuck in chapter 4, section VII; Tore Lunde in chapter 9, section VIII. See also examples given by M Namyslowska, ‘The Blacklist of Unfair Commercial Practices’ in van Boom et al (n 1) 78–79. 61  Case C-435/11 CHS Tour Services v Team4 Travel EU:C:2013:574. The case is assessed critically by Jules Stuyck in chapter 4, section VI.B of this book. 57  58 

244  Ulf Bernitz is the case with the general clause Article 5(2)(a). The CJEU ruling on this point is important because it has secured the effectiveness of the two prohibitions. It is widely considered that misleading advertising is the most common type of unfair commercial practice. Normally, the traders carry the burden of proof as to the accuracy of factual claims they have made.62 In this chapter I will concentrate on the assessment of what is misleading and leave out the regulation on aggressive practices. When assessing whether a commercial practice is misleading or not, the concept ‘average consumer’ functions as the benchmark.63 The Court developed that concept in its case law in the late 1990s. The leading case is still Gut Springenheide and Tusky,64 decided in 1998, in which the Court said: in order to determine whether a particular description, trade mark or promotional description or statement is misleading, it is necessary to take into account the presumed expectations of an average consumer who is reasonably well informed and reasonably observant and circumspect.

This case law was characterised by a pro-competition approach and a reaction against the very strict standard of the German case law of that time on the assessment of whether consumers are likely to be misled, which the CJEU seems to have regarded as too far-reaching and protective. The average consumer concept has been transferred into statutory text via the enactment of the UCPD. The prohibitions on misleading and aggressive practices, as well as the general clause, refer to the average consumer as the person likely to be misled, having his or her freedom of choice restricted, etc.65 The recitals refer to the notional, typical consumer and the benchmark is described as: ‘The average consumer, who is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors, as interpreted by the Court of Justice.’66 So far, it has not really been clarified by the CJEU how well informed and ­observant consumers should be considered to be. There is still no case in which the CJEU has pronounced itself on the interpretation of Article 6 on misleading actions. The extent to which the Court would stick to the rather harsh views on the level of protection it was taking in the 1990s is an open issue. However, the UCPD Guidance 2016 states that the average consumer is a reasonably critical p ­ erson, conscious and circumspect in his or her market behaviour.67 The Guidance

62 

Recital 21, second sentence. Weatherill, ‘Who is the “Average Consumer”?’ in Weatherill and Bernitz (n 29) 115ff; B Duivenvoorde, The Consumer Benchmarks in the Unfair Practices Directive (Springer, 2015). 64 Case C-210/96 Gut Springenheide and Tusky v Oberkreisdirektor des Kreises Steinfurt EU:C:1998:369, para 31. Another well-known case, in which the Court referred to its statement in Gut Springenheide, is C-220/98 Estée Lauder Cosmetics v Lancaster Group EU:C:2000:8. 65  See Arts 5(2)(b), 6(1), first sentence and Art 8. 66  Recital 18. 67  UCPD Guidance 2016, para 2.5. 63 S

The Road Ahead 245 ­ entions as an example, closely connected to the Mars case decided by the CJEU m in 1995:68 ‘The reasonably circumspect consumer will not believe that the size of a promotional marking or a package corresponds to the promotional increase in the size of that product.’ On the other hand, the UCPD Guidance takes the view that the average consumer concept should always be interpreted having in mind Article 114 TFEU, which provides for a high level of consumer protection. Does that mean that the somewhat ignorant and careless consumer should be offered protection? We do not have the answer. As is explicitly stated in the recitals, the average consumer test is not a statistical test. The CJEU has taken a reserved attitude towards basing the assessment of the reaction of the average consumer on consumer research pools or other statistical market surveys as evidence. It took such an attitude in the Gut Springenheide and Estée Lauder judgments in the 1990s, and Recital 18 has confirmed this sceptical position. When the case eventually comes up, the CJEU might leave the assessment of what is to be considered misleading to the national court. It is stated in the recitals that national courts and authorities must exercise their own faculty of judgment to determine the typical reaction of the average consumer.69 Recital 18 indicates that social, cultural and linguistic factors can be taken into account. Where a commercial practice is specifically aimed at a particular group of consumers, the impact of the practice should be assessed from the perspective of the average member of that group.70 It is possible to offer extended protection to particularly vulnerable target groups, eg, children and sick people. The UCPD mentions clearly identifiable groups of consumers who are particularly vulnerable to the commercial practice or the underlying product because of their mental or physical infirmity, age or credulity.71 In the Purely Creative case, the CJEU pointed to the necessity of protecting the consumers forming a group that was particularly susceptible to a commercial practice, in that case the claiming that receiving a prize is free of charge.72 However, what the UCPD requires when it comes to protection of vulnerable consumers against unfair commercial practices is still largely unknown.73 Has the UCPD been able to establish a common European standard when it comes to the assessment of what is a misleading commercial practice—by far the most frequent type of unfair practice in B2C relations? The answer might be

68 

Case C-470/93 Verein gegen Unwesen in Handel und Gewerbe Köln v Mars EU:C:1995:224. Recital 18, last sentences. 70  Recital 18, Purely Creative (n 44) paras 53–54. 71  Recitals 18 and 19, Art 5(3). UCPD Guidance 2016, para 2.6. 72  Purely Creative (n 44) para 54. 73  N Reich, ‘Vulnerable Consumer in EU Law’ in D Leczykiewicz and S Weatherill (eds), The Images of the Consumer in EU Law. Legislation, Free Movement and Competition Law (Oxford, Hart Publishing, 2016) 139ff; M Friant-Perrot, ‘The Vulnerable Consumer in the UCPD and Other Provisions of EU Law’ in van Boom et al (n 1) 89ff; Durovic (n 1) 24ff; J Trzaskowski, ‘Lawful Distortion of Consumers’ Economic Behaviour—Collatoral Damage under the Unfair Commercial Practices Directive’ [2016] European Business Law Review 25. 69 

246  Ulf Bernitz ‘no’. Without having recourse to more case law from the CJEU, the UCPD standard remains quite vague.74 It would not be surprising if previously established national standards of evaluation have often continued to be applied in practice. It would be an interesting task for the Commission’s REFIT exercise to shed light on the issue. Taking the aims of the UCPD as the basis for an evaluation, the present situation is not very satisfactory.

V.  ROLE AND IMPORTANCE OF THE GENERAL CLAUSE IN THE UCPD

The emerging case law from the CJEU on the interpretation of the Directive is still quite incomplete. One important aspect is the uncertainty about the scope and interpretation of the general clause in Article 5. Basically, the general clause ­prohibits all unfair commercial practices. A commercial practice is defined as unfair if it is contrary to the requirements of professional diligence and materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product. In Article 2(h), professional diligence is defined as the standard of special skill and care which a trader may reasonably be expected to exercise towards consumers, commensurate with honest marketing practices and/or the general principle of good faith in the trader’s field of activity. What does this actually mean beyond what is laid out in the Articles 6–9 on misleading and aggressive practices? So far, the CJEU has not taken the opportunity to pronounce with any clarity on the interpretation and application of the general clause. There is no case law as yet clarifying what is meant by the concept ‘professional ­diligence’.75 However, we know from the CHS Tour Services case that the application of the prohibitions against misleading and aggressive commercial practices does not include an additional requirement for the practices to be ­contrary to professional diligence.76 As has been mentioned several times in this book, the Article 10bis of the Paris Convention for the Protection of Industrial Property requires that all countries that are party to the Convention must assure effective protection against unfair competition. According to the text, any act of competition contrary to honest practices in industrial and commercial matters constitutes an act of unfair competition. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) includes a general reference to the Paris Convention. The EU and its Member States are bound by these texts. It is interesting and somewhat surprising to note there is no reference in the UCPD or its recitals to these international instruments, although at least Article 10bis(2)(iii) of the Paris Convention refers

74  Case C-453/10 Jana Perenicová and Vladislav Perenic v SAS finac spol EU:C:2012:144 on m ­ isleading contract terms will be discussed in section VII below. 75 In Mediaprint (n 17) the CJEU left the assessment under Art 5 to the national court. 76  See section IV above; see also CHS Tour Services (n 61).

The Road Ahead 247 to consumer protection, stating ‘indications or allegations the use of which in the course of trade is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose, or the quantity, of the goods’ shall be prohibited.77 Also, there is no reference, directly or indirectly, in the UCPD to the ICC Code (the International Chamber of Commerce Consolidated Code on Advertising and Marketing Communication Practice, revised version of 2011, supplemented by more detailed Guidelines for specific types of marketing). As is pointed out by Jan Trzaskowski, the ICC Code has a long history and is able to offer solid guidance on what should be good advertising and marketing practice.78 The ambition of the ICC Code is to set the global standard. The ICC Code has been very influential and carries considerable weight as a soft law source of importance, in particular for self-regulatory bodies. Important examples are specialised bodies like the Advertising Standards Authority in the United Kingdom and also self-regulatory bodies in the Nordic countries. The UCPD does, however, refer to ‘codes of conduct’, which define the behaviour of traders as soft law instruments able to set the standard required to meet the ‘professional diligence’ norm prescribed as the benchmark in the general clause in Article 5.79 The relationship between the general clause and codes of conduct seems still to be unclear, but there should be no reason not to regard the ICC Codes as codes of conduct in the UCPD sense. In Article 10 the UCPD merely states that Member States may encourage the control of unfair commercial practices by code owners and have recourse to such bodies. Actually, the UCPD normally keeps codes of conduct at arm’s length; they are not presumed to be in conformity with the UCPD, and no privileges are granted to those who voluntarily comply with a non-binding code.80 However, the non-compliance by a trader with commitments contained in codes of conduct by which the trader has undertaken to be bound constitutes a misleading and prohibited practice.81 The UCPD Guidance 2016 has only a rather short text on the general clause. According to the Guidance, the general clause functions as a ‘safety net’ to ensure that any unfair practice that is not caught by the other provisions of the UCPD can still be penalised. The provision is also characterised as ‘future proof ’ as it allows for emerging unfair practices to be tackled. The notion of ‘professional diligence’ encompasses principles which were already well established in the laws of the Member States before the adoption of the UCPD, such as ‘honest market ­practice,

77  See, among others, Ulf Bernitz and Caroline Heide-Jørgensen in chapter 1, section II.B and Per Jonas Nordell in chapter 11, section I of this book. For a comment of the Paris Convention and TRIPS provisions, see F Henning-Bodewig in Henning-Bodewig (ed) (n 30) 9ff. 78  See chapter 5, section III of this book. 79  Arts 2(f) and 10 and Recital 20. 80 C Pavillion, ‘The Interaction between the Unfair Commercial Practices Directive and Self-­ Regulation: The Case of Codes of Conduct’, in van Boom et al (n 1) 137ff. 81  Art 6(2)(b) UCPD.

248  Ulf Bernitz ‘good faith’ and ‘good market practice’. These principles emphasise normative values that apply in the specific field of business activity.82 Against this backdrop, the general clause in Article 5 can be expected to primarily cover practices which are well in line with those practices that fall under any of the prohibitions on misleading and aggressive practices or the Black List but do not fully fit the specific criteria of those provisions but can be deemed to be contrary to the requirements of professional diligence and able to have a distorting effect on the behaviour of the average consumer. In a similar vein, the general clause could be used to tackle commercial practices which are close to what is prohibited under other EU legislation on specific aspects of unfair commercial practices without fully satisfying the criteria of the provisions in question. However, it would be perfectly possible for the CJEU to find the general clause applicable to other types of commercial practices regarded as contrary to the requirements of professional diligence, in particular if the Court would find the unfairness of the practice to be a widely held view in the Member States. The ICC Code provides examples, among others, of commercial practices which play on fear, misfortune or superstition without justifiable reason.83 The general clause could lead to the expansion of harmonisation of the law against unfair commercial practices by way of new decisions taken by the CJEU. However, it is a prerequisite for national courts to provide the CJEU with fruitful references for preliminary rulings. Surprisingly little has happened in this regard; preliminary references from Member States’ courts on the scope and interpretation of the general clause in the UCPD should be welcomed. To conclude, the potential of the UCPD general clause remains unexplored. So far, it seems to have had little influence on the application and development of the law on unfair commercial practices in the Member States.

VI.  THE B2B PROTECTION INDIRECTLY OFFERED BY THE UCPD

Taking a closer look at the provisions of the UCPD, the exclusion of B2B transactions is not as radical as one might be inclined to think. Many marketing practices are unfair both from the viewpoint of competitors or other traders and from a consumer protection perspective, albeit often with a somewhat different emphasis in the assessment of the character of the unfairness. Such practices are normally covered by the UCPD; the sometimes heard view that the Directive fully disregards B2B transactions is not correct. It is noted in the recitals that unfair advertising, which directly harms consumers’ economic interests, also indirectly harms the economic interests of legitimate competitors.84

82  83  84 

UCPD Guidance 2016, para 3.2. ICC Code, Art 4 on social responsibility. Recital 6 first sentence.

The Road Ahead 249 This indirect or complementary protection of the interests of competitors has a number of facets. Often, the same advertising or other type of marketing practice is directed both at consumers and other customers, and in such cases national law based on the UCPD will in effect offer protection covering a broader circle of addresses. Misleading advertising, having consumers as well as commercial purchasers as addressees, is the obvious example. Another aspect is the indirect beneficial effects for those competitors who stick to honest practices. As stated in the recitals, the UCPD indirectly protects legitimate businesses from their competitors who do not play by the rules of the Directive and thus guarantees fair competition in the fields co-ordinated by it.85 The object of the UCPD to also offer, within its general limits of application, protection of the interests of competitors and the business community in general is demonstrated clearly by the provision that competitors, as well as organisations, shall be regarded under national law as having a legitimate interest in combating unfair practices. This shall include the right to take legal action against such practices and to initiate other appropriate legal proceedings.86 Orders for the cessation of unfair commercial practices shall be available without requiring proof of actual loss or damage.87 There are certain practices, explicitly included in the UCPD, which have a particularly strong link to the interests of competitors and which might be regarded as inclusions of protection of unfair B2B practices in the Directive. Thus, the use of brands, trade names, packaging of products, etc which are misleading the average consumer about the commercial origin of the products and causing him or her to purchase the products on the basis of that misconception (passing off in a general sense) is covered by the UCPD.88 Of particular practical importance would be misleading advertising or misleading exposure of products or their packaging in sales outlets causing consumers to purchase look-alikes, so-called copycats. Interestingly, the issue of copycats is observed and discussed in the UCPD Guidance 2016 under the caption ‘Confusing marketing’.89 The Guidance defines ‘copycat packaging’ as the practice of designing the packaging of a product (or its ‘trade dress’) to give the general ‘look and feel’ of a competing well-known brand. The risk posed by copycat packaging is consumer confusion and, consequently, the distortion of their commercial behaviour. It is stated in the Guidance that consumer deception caused by copycat

85 

Recital 8. Art 11 on enforcement. 87  Art 11(2)(a). 88  In particular, Art 6(2)(a), which comprises ‘any marketing of a product, including comparative advertising, which creates confusion with any products, trademarks, trade names or other distinguishing marks of a competitor’. See also Art 6(1)(b), referring to misleading information about commercial origin of a product. 89  UCPD Guidance 2016, para 3.3.2. 86 

250  Ulf Bernitz packaging can take a number of forms: outright confusion, deception over origin and deception over quality or nature. The Guidance text continues: The similar packaging suggests to consumers that the quality or nature of the copycat product is comparable to the quality or nature of the brand in question or at least that it is more comparable than they might otherwise assume. As such, similar packaging gives the impression to consumers that the price alone is the only term of comparison between the products (rather than the combination of price and quality).

However, it is not the purpose of the UCPD to duplicate intellectual property law protection of trademarks or the shape of products. This is clearly stated in Recital 14, which declares that it is not the intention of the Directive to reduce consumer choice by prohibiting the promotion of products which look similar to other products unless this similarity confuses consumers as to the commercial origin of the product and is therefore misleading. In other words, the UCPD does not prohibit the use of copycats and look-alikes as such; there has to be as additional element that increases the risk of the average consumer being confused in order to trigger the application of legislation based on the UCPD.90 The protection offered by the UCPD should satisfy what is required by the EU and the Member States to fulfil their international treaty obligations under the Paris Convention and the TRIPS to offer protection supplementing trademark law against acts creating confusion with the goods of competitors.91 The Black List’s point 13 prohibits, as a kind of misleading practice, ‘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’. This provision is of particular interest as it is straightforward. It requires the consumer to be misled about the commercial origin of the copycat or look-alike product. It also requires the trader marketing the copies to understand that his action is misleading. However, the text of the provision does not require the average consumer to have been caused to have taken a transactional decision.92 Misleading use of information about attributes, qualifications, connections to other undertakings, ownership of intellectual property rights and similar misleading actions all constitute typical examples of unfair B2B practices. However, they also fall under the UCPD as long as they are contrary to the standards laid down in the Directive of what is misleading to the consumer and likely to cause him or her to take a transactional decision.93 90  V Marsland, ‘Unfair Commercial Practices: Stamping out Misleading Packaging’ in Weatherill and Bernitz (n 29) 191ff. (supplying evidence of copycat practices). 91  See section V above. 92  The German Supreme Court (Bundesgerichtshof) is actively applying point 13 of the Black List as an independent provision. See H Köhler and J Bornkamm, Gesetz gegen den unlauteren Wettbewerb, 32 Aufl (Munich, CH Beck, 2014) s 263ff, mentioning two decisions from 2013: the cases AMARULA/ Marulablu, GRUR (2013) 631 and Hard Rock Café, GRUR (2013) 1161. 93  Art 6(1)(f) mentions: ‘The nature, attributes and rights of the trader or his agent, such as his identity and assets, his qualifications, status, approval, affiliation or connection and ownership of industrial, commercial or intellectual property rights or his awards and distinctions.’

The Road Ahead 251 Practices misleading as to the geographical origin of a product is also mentioned as a type of misleading action covered by the UCPD, provided the representation deceives or is likely to deceive the average consumer and is likely to cause him or her to take a transactional decision he or she would not have taken otherwise.94 Thus, the Directive does not offer full protection against the unauthorised use of protected appellations of origin or particular geographical denominations, as such is a special area of law, but the provision of the Directive might function as a useful complement to the existing, more detailed, regulation in the field. It will be the task of the CJEU to clarify and develop the legal standards to be applied. So far, the Court has not had the opportunity to clarify its position on confusing marketing in relation to either Article 6 UCPD or point 13 of the Black List. Most likely, the CJEU would use its well-established trademark law jurisprudence on confusion and deception as a point of departure.95 However, it is an important question whether it will be required for actual consumer confusion to be demonstrated in a particular case or whether such confusion can be inferred from the circumstances. The latter seems to be the view best in line with the principles of the UCPD, and it is certainly supported by point 13 of the Black List. The many aspects of B2B protection indirectly offered by the USPD raises the question why the Directive does not offer B2B protection directly. Revision of the MCAD will be discussed in section VIII of this chapter.

VII.  IS THE SYSTEM OF ENFORCEMENT AND REMEDIES SATISFACTORY?

As it stands at present, the UCPD is weak in the area of enforcement. There is a clear discrepancy between the full harmonisation provided for in the area of substantive law and the meagre provisions in the Directive on supervision and enforcement. There is no kind of centralised enforcement at the EU level.96 The UCPD states in Article 11 that Member States shall ensure that adequate and effective means exist to combat unfair commercial practices in order to enforce compliance with the Directive’s provisions in the interests of consumers. However, it is left to the Member States to have in place either a private law system, based on private entities, including competitors, and business or consumer organisations taking legal action, or to have a public law system based on administrative authorities competent to decide complaints or to initiate appropriate legal proceedings. It is also possible to have a combination of private and public instruments. Thus, in relation to legal remedies, the UCPD only requires Member States to have a judicial or administrative system to which are conferred powers to order

94  Art 6(1), in particular (b), which points at geographical origin. See UCPD Guidance 2016, para 3.3.1. 95 GB Dinwoodie and DS Gangjee, ‘The Image of the Consumer in EU Trade Mark Law’ in ­Leczykiewicz and Weatherill (n 73) 339ff. 96  cf the very different situation in competition (antitrust) law under Regulation 1/2003.

252  Ulf Bernitz the cessation of unfair practices and to impose penalties for infringements. The UCPD is silent on the issues of payment of damages and criminal sanctions. The variety of enforcement systems applied in the Member States have been ­discussed by Antonina Bakardjieva Engelbrekt in chapter 7, section V of this book and by Astrid Stadler in chapter 10.97 The MCAD is also vague when it comes to enforcement. According to Article 5(1), Member States shall ensure that adequate and effective means exist to combat misleading advertising and enforce compliance with the provisions on comparative advertising in the interests of traders and competitors. Clearly, the formation of the UCPD provisions on enforcement are the result of a compromise between different enforcement systems of the Member States, primarily the fundamental difference between private and public instruments. The lack of co-ordination between the different systems causes a lack of homogeneity, which seems to be detrimental to well-working cross-border enforcement. As is well known, marketing and advertising practices do not stop at national borders. However, a European supervision network has been built up, the Consumer Protection Cooperation (CPC) network, based on co-operation between national authorities in the Member States. In chapter 10, Astrid Stadler finds the CPC network to be on the right track but needing further improvement. She also presents the enforcement regime under international private law when it comes to injunctions and claims for damages based on unfair commercial practices. The Brussels I Regulation forms the legal basis. However, the overall picture seems to be that the enforcement of unfair commercial practices across borders needs to be improved. It remains to be seen what will come out of the Commission’s recent proposal for a new, more ambitious, regulation on co-operation between national authorities responsible for the enforcement of consumer protection laws.98 When it comes to enforcement and sanctions, the situation in unfair competition law is unsatisfactory when compared with intellectual property law and antitrust law. In intellectual property law, the Intellectual Property Rights Enforcement Directive of 200499 is of fundamental importance. It contains extensive provisions requiring all Member States to implement and apply an effective enforcement system to combat infringements of intellectual property rights. In antitrust law, the very comprehensive sanctions and enforcement system based on Regulation 1/2003100 have been supplemented recently by a new directive requiring Member States to introduce and apply an efficient system to secure the right to damages for those who have suffered harm from prohibited restrictive practices.101 The basic 97  See also D Poelzig, ‘Private or Public Enforcement of the UPC Directive? Sanctions and Remedies to Prevent Unfair Commercial Practices’ in van Boom et al (n 1) 235ff. 98  COM (2016) 283 final. 99  Directive 2004/48/EC. 100  Council Regulation on the implementation of the rules on competition laid down in Articles [101 and 102] of the [TFEU]. 101  Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union.

The Road Ahead 253 aim of this directive is to ensure that anyone who has suffered harm caused by an infringement of competition laws by an undertaking can effectively exercise the right to claim full compensation for that harm from that undertaking.102 Securing effective legal remedies in the unfair commercial practices area should be on the future agenda. The UCPD does not interfere with contract law and is without prejudice to individual actions brought by a consumer.103 Thus, the relation between the precontractual marketing and advertising stage and the European private law on contracts established by the different consumer protection directives has been left open to be developed by case law, which is normally a matter for national courts. This legally tricky area seems to have been regarded as too difficult to regulate. In the Perenicová case, the CJEU clarified that the use of unfair terms in a standard contract constitutes a commercial practice within the meaning of the UCPD.104 In the case, the Court found that giving false information about credit costs constitutes a misleading commercial practice. However, the Court did not rule that where a contract term constitutes an unfair commercial practice it is automatically an unfair contract term. It will be an important task for the Fitness Check to explore different options to link the UCPD to the EU private law on consumer contracts in a more efficient and consumer-friendly way. There is currently an ongoing academic discussion in European consumer law circles on private law remedies in contract and tort for breaches of the requirements of the UCPD. It is generally considered that the present legal situation in most countries is unclear and unsatisfactory.105 Union law should require efficient national remedies to be available, including the right to claim damages.

VIII.  REVISION OF THE MCAD?

The MCAD in its present shape was enacted in 2006.106 However, it is based on the old 1984 Directive concerning misleading and comparative advertising, which comprised both B2B and B2C relations.107 When the far more ambitious UCPD,

102  See, among others, U Bernitz, ‘Introduction to the Directive on Competition Damages Actions’ in M Bergström, M Iacovides and M Strand (eds), Harmonising EU Competition Litigation. The New Directive and Beyond, Swedish Studies in European Law Vol 8 (Oxford, Hart Publishing, 2016) 3ff. 103  Art 3(2) and Recital 9. 104  Perenicová (n 74); B Keirsbilck, ‘The Interaction between Consumer Protection Rules on Unfair Contract Terms and Unfair Commercial Practices; Perenicova and Perenic’ (2013) 50 Common Market Law Review 247; J Stuyck, ‘The Court of Justice and the Unfair Commercial Practices Directive’ (2015) 52 Common Market Law Review 743. 105  A number of articles published on this matter in the 2015 issues of the Journal of European Consumer and Market Law support this view. 106  Directive 2006/114/EC concerning misleading and comparative advertising. 107  Directive 84/450/EEC concerning misleading and comparative advertising.

254  Ulf Bernitz applicable only to B2C relations, was enacted in 2005, the MCAD was kept, with its major parts restricted to B2B relations. The MCAD also includes legislation on comparative advertising that was originally enacted in 1997. That part of the MCAD was not changed and is applicable also to B2C relations.108 A revision of the MCAD, aimed at more comprehensive legislation, was announced by the Commission some time ago, but has not resulted in a published Commission proposal. The MCAD is now included together with the UCPD in the Fitness Check.109 Recital 8 to the UCPD states that ‘the Commission should carefully examine the need for Community action in the field of unfair competition beyond the remit of this Directive and, if necessary, make a legislative proposal to cover these other aspects of unfair competition’. The objectives of the MCAD have been discussed in section I above. The provisions on misleading advertising represent a not very ambitious minimum harmonisation. The concepts used in the MCAD differ partially from the corresponding concepts in the UCPD. Thus, the concept of advertising, which is fundamental to the MCAD,110 is normally not used in the UCPD and is less comprehensive than the UCPD concept of commercial practice. Advertising as used in the MCAD is limited to representations in order to promote the supply of goods and services, while commercial practices as used in the UCPD include representations directly connected to the sale and later supply of products. To give another example, the regulation of misleading advertising in the MCAD111 is less comprehensive than the regulation of misleading actions in the UCPD. It seems like a natural task for the Fitness Check to propose a revision of the MCAD in order to bring its concepts and provisions in line with the UCPD to the extent that there is no good reason to keep them separate. The regulation of comparative advertising seems to represent a reasonable and functioning compromise. An informative case law has developed. The full harmonisation character of the provisions on comparative advertising was confirmed by the CJEU in the Pippig Augenoptik case.112 The law on comparative advertising and its relation to trademark law and unfair competition is discussed by Per Jonas Nordell in chapter 11 of this book.113 In many Member States it has been the task of unfair competition legislation to provide protection for trade secrets. Albeit outside the scope of this book, it is

108  For a review of the legislative history, see S Weatherill, EU Consumer Law and Policy, 2nd edn (Cheltenham, Edward Elgar, 2013) 218ff. 109  See chapter 6, section I of this book. 110  Art 2(a) MCAD. 111  Arts 2(b) and 3 MCAD. 112  Case 44/01 Pippig Augenoptik EU:C:2003:205. 113  See also, among others, U Bernitz, ‘The EC Directive on Comparative Advertising and its Implementation in the Nordic Countries: Especially in Relation to Intellectual Property’ (2002) 42 Scandinavian Studies in Law 11.

The Road Ahead 255 worth noting that in June 2016 the EU enacted a directive on the protection of trade secrets.114 The major issue is whether the separation between B2C and B2B commercial practices in two separate directives should be kept or whether a unified approach should be favoured, as is already applied in the area of comparative advertising. Many commercial practices are unfair in both B2C and B2B relations, eg many cases of misleading advertising, although it would be necessary to maintain a certain differentiation when it comes to the principles of assessment. Many of the practices listed in the Black List are common and equally unfair when addressed to other businesses, in particular small and medium enterprises. A good example is demanding payment for non-solicited products (point 29 in the Black List). As discussed in section VI above, passing off is an area where a strict distinction between B2C and B2B protection seems particularly artificial. The issue has been discussed on many occasions and in several chapters of this book. Bert Keirsbeck has presented a draft of an Unfair Commercial Practices Regulation integrating the MCAD.115 His proposal, ‘UCP Proposal 2011’, demonstrates that it is possible to do so without any particular difficulty. Reference should also be made to the study in chapter 8 of this book by Palle Bo Madsen, ‘B2B and B2C Marketing Practices—the Case for an Integrated Approach’. Madsen finds the split between B2B and B2C inappropriate and trying to separate B2B from B2C in regard to fair commercial practices to be more or less an impossible task.116 Personally, I find the arguments convincing. I have particular experience with the drafting and application of the Swedish Marketing Acts of 1995 and 2008. They represent an ambitious implementation of the UCPD, but also include B2B relations. Basically, the protection offered to consumers is extended to business enterprises, big and small. In particular, it is worth noting that in Sweden the Black List is also applicable in B2B relations in its entirety.117 The legislative model chosen has not caused any problems in practice. Naturally, in the assessment of a particular commercial practice, whether the addressee is a consumer or a business firm is taken into consideration. For example, a professional purchaser is normally presumed to be better informed and less easily misled than a consumer.118 However, as explained by Bert Keirsbilck in chapter 6 of this book, the Commission has announced that it will maintain the present ‘dualistic approach’ in its

114  Directive (EU) 2016/943 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure. 115 B Keirsbilck, The New European Law of Unfair Commercial Practices and Competition Law (Oxford, Hart Publishing, 2011) esp 19 and 575ff (text of the proposal). 116  See also Per Jonas Nordell in chapter 11, section IV. 117  A Bakardjieva Engelbrekt, ‘Country Report on Sweden’ in Henning-Bodewig (ed), (n 30) 511ff. 118  A partially different model has been chosen in the Norwegian Marketing Act of 2009. The Act is applicable to both B2C and B2B relations, but most of the provisions applicable to B2B have been gathered in a separate chapter. The Black List is applicable only to B2C.

256  Ulf Bernitz upcoming Fitness Check and revision, and keep the separation between the UCPD and the MCAD. An important reason seems to be that many Member States do not apply an integrated approach but have implemented the UCPD separately as part of consumer law. France provides a good example. Another reason seems to be that the Commission has the ambition within its ongoing revision work to strengthen the connection between the legislation on unfair business practices and private law remedies, an issue that has been discussed in section VII of this chapter. Thus, the dualistic approach seems likely to be kept. It can be argued that it is the actual substance of the rules that is the major issue, not the legislative frame. However, apart from Article 4 on comparative advertising, the MCAD should be regarded as insufficient and outdated in its present format. Should the dualistic approach be kept, there are strong reasons for drafting a new and expanded Business Marketing Directive. Such a directive should have the format of a parallel directive building on the same concepts as the UCPD, and should include a blacklist. The overarching objective to facilitate marketing and trade across Europe should always be kept in mind. European marketing practices law will eventually develop into an important sub-discipline of European law; however, it is still at a rather early stage.

Index Introductory Note References such as ‘178–79’ indicate (not necessarily continuous) discussion of a topic across a range of pages. Wherever possible in the case of topics with many references, these have either been divided into sub-topics or only the most significant discussions of the topic are listed. Because the entire work is about ‘marketing’ and ‘advertising’, the use of these terms (and certain others which occur constantly throughout the book) as an entry point has been restricted. Information will be found under the corresponding detailed topics. abuse  48, 79, 94, 139, 155 acquis, consumer  66, 108–9, 153 actor sequitur forum rei principle  209 acts of competition  50, 55, 60, 86, 151–52, 154, 222, 246 acts of unfair competition  137, 139, 147, 150, 222, 226, 246 addressees  149, 249, 255 administrative authorities  59, 99, 127, 202, 251 administrative decisions  95, 164 administrative discretion  139 administrative penalties  160, 190 administrative proceedings  91, 153, 203 administrative provisions  12, 16, 28, 72, 93 advertised products  90, 188–90 advertisements  22–26, 34, 36, 41–42, 60–61, 69–70, 77, 196 teaser  197–200 advertising law, see Introductory Note advertising practices  17, 93, 136–37, 141, 252 Advertising Standards Authority, see ASA advertorials  198 after-sales services  109 age groups  191, 193, 195 aggressive practices  80–81, 89, 123, 148–49, 240–41, 243–44, 246, 248 alcohol  17, 142–43 antitrust law  154–55, 179, 252 ASA (Advertising Standards Authority)  9, 61, 137, 247 assessment  4–5, 7, 85–103, 192–96, 235, 242, 244–45, 255 case-by-case  75, 100, 110, 179, 188, 194, 198, 240–42 critical  144 fairness  195, 198 national  89, 98 of professional diligence  101–2

assets  213–14 associations, private  161, 163–64 audiovisual media services  16–17, 53–54, 62 Austria  24, 71, 137, 143, 147, 156, 161, 165 courts  24–25, 78 authorities  4, 36, 49, 61, 87–88, 96–98, 117, 205–7 administrative  59, 99, 127, 202, 251 national  24–25, 28, 102–3, 112, 204, 207–8, 218, 252 average consumer  14–15, 87–89, 100–1, 193, 200, 240–41, 244–46, 248–51 B2B (business-to-business)  5, 15–16, 114–15, 147–57, 171–77, 179–85, 236, 253–55 and B2C split  173–77 general clauses for  149 indirect protection by UCPD  248–51 misleading advertising  2 transactions  114–15, 177, 183–84, 236, 238, 248 B2C (business-to-consumer)  5, 15–16, 114–16, 123–26, 147–53, 171–85, 234–39, 253–55 and B2B split  173–77 unfair practices  65–66, 72, 105–6, 201, 225 bad faith  80 balance  37, 59, 180, 216, 224 banner ads  190 bargaining power  180, 185 beer  230 Belgium  66, 70, 128, 132, 137, 144, 147, 242 benefits  46, 80–81, 107–8, 111–15, 117, 184, 203, 210 big business and SMEs  181–83 blacklists  4–7, 80–81, 88–91, 110–16, 187–88, 192–200, 240–43, 255–56 Norway  188–89, 195–97 UCPD, see UCPD (Unfair Commercial Practices Directive), Black List

258  Index Brussels I Regulation  205, 209–10, 212, 214–15, 252 Brussels Ia Regulation  209–12, 214–19 enforcement regime  211–12 jurisdiction for injunctive relief  214–18 Bulgaria  147, 152, 154, 156 Competition Authority  153 CPA (Competition Protection Act)  152–55 business activity  43, 196, 200, 248 business associations  142, 161, 164, 167 business ethics  46–48, 51, 57, 62 business interests  75, 125, 149 business protection  110–11, 174, 183 business-to-consumer, see B2C C2B (consumer-to-business)  115–16, 177–78, 184, 209 C2C (consumer-to-consumer)  73–74, 116, 177–78 capacity  65, 124, 127, 178 case-by-case assessment  75, 100, 110, 179, 188, 194, 198, 240–42 cease-and-desist orders  203, 208, 214, 217–18 CEE (Central and Eastern Europe)  121, 150, 154, 159–60, 166–67 Central and Eastern Europe, see CEE Central Hudson test  32, 34–39 Charter of Fundamental Rights  20, 26–27, 29–30, 43, 47, 58, 237 children  142–43, 188–92, 194, 245 direct exhortation to  90, 188–89 choice  53, 72, 76–77, 124, 126–27, 147, 155, 160 informed  73, 90 civil codes  55, 147 civil law enforcement  61, 63 CJEU (Court of Justice of the European Union)  27–31, 79–84, 87–90, 96–98, 210–18, 227–32, 234–35, 241–46 case law on free movement  11 class action proceedings  6, 204, 218 clearance sales  70, 241–42 codes of conduct  47–48, 91–93, 135–37, 146, 238, 247 codification, potential  4, 108–9 coercion  133, 240 coherence  5, 15, 109, 116, 118, 130, 137, 167–68 and UCPD  121–27 collective consumer interests  127, 150, 160–61, 164 collective redress  6, 202, 206, 218–19; see also class actions commercial communication  52–54, 56, 58, 69, 100–1, 197–98, 234–35, 239 commercial expression  3, 25, 31–36, 38

commercial freedom of expression  19–20, 22–25, 28, 31, 35, 40, 196 commercial interests  57, 208 commercial origin  249–50 commercial practices fair  123, 151, 174, 255 misleading  7, 77–78, 93, 234, 240–41, 243, 245, 253 unfair  1–3, 13–19, 148–50, 173–75, 201–5, 212–16, 234–37, 244–49 commercial speech  3, 77 comparative constitutional aspects  30–42 and limits  19–44 protection  3, 20–21, 30–31, 38 conclusions  43–44 European Convention on Human Rights  21–25 European Union  26–30 Germany  39–42 United States  30–39 restriction  23–24, 39 commercial transactions  31, 69, 105, 109, 111, 234 commitments  10, 57, 92–93, 121, 148, 247 common principles  202, 218 communications  15, 34–35, 45, 48–49, 67, 105–6, 118, 172 marketing  48, 92, 94, 141, 195–96, 223 companies  40, 42, 81, 182, 184, 205, 207, 209 misleading directory  67, 110, 114 comparative advertising  110, 230, 232 conditional permission of  105, 110 Directive, see MCAD rules  105, 110–11, 115 compensation  9, 82–83, 253 competences  125, 142, 152, 159–60 institutional  156, 160 national  11 competition  74, 150, 152, 159, 164, 179–80, 221–22, 236–37 acts of  50, 55, 60, 86, 151–52, 154, 222, 246 fair  48, 151, 161, 173, 176, 184, 215, 223 law  155, 159–60, 165, 179–80, 203–4, 222, 224, 238 legitimate  139, 155 rules  73–74, 83, 204 sound  224, 226 unfair, see unfair competition competition law, and marketing law  179–81 Competition Protection Act, see CPA competitive advantage, undue  138, 143 competitors  50–52, 66–68, 111–12, 173–77, 179–81, 222–23, 225–27, 249–52 legitimate  125, 173, 248 complaints  60, 127, 192, 202, 251 complementarity  116, 118 confusion  10, 50–51, 148, 151, 222–23, 226, 228, 250–51

Index 259 connecting links, real  213–14 constitutional aspects of commercial speech  30–42 constitutional protection  30, 37–41 consultations, public  172, 206, 208 consumer acquis  66, 108–9, 153 consumer associations  6, 92, 161, 163, 203–6, 208, 211 consumer confidence  15, 200, 240 consumer contracts  106, 210, 215, 253 jurisdictional privilege  209–10 with traders or service providers domiciled in a third State  210 consumer harm  86, 162, 165, 174, 248 consumer interests  151–52, 154, 161, 180, 196–97, 205–6, 218, 226 collective  68, 180, 206 consumer law  2, 4, 107–9, 111, 117–18, 163–64, 206–7, 236–37 consumer ombudsmen  9, 121, 145, 156, 158, 164, 188–97, 199 consumer organisations  92, 162, 203, 211, 251 consumer protection  1–2, 7–8, 13–14, 66–68, 70–72, 82–84, 237–39, 242–43 laws  155, 205, 207, 252 Consumer Protection Cooperation Network, see CPC Network consumer protection legislation  138, 143, 152–53, 157 consumer redress  6, 201, 207, 218 consumer rights  6, 95, 106–7, 161–62, 202–3 Consumer Rights Directive, see CRD consumer welfare  15, 181, 240 consumers  68–73, 75–83, 113–17, 147–52, 173–84, 196–206, 208–12, 249–51 average consumer  14–15, 87–89, 100–1, 193, 200, 240–41, 244–46, 248–51 economic interests  75, 77, 97, 100, 124, 176 trust  48, 92, 94 consumer-to-business, see C2B consumer-to-consumer, see C2C content-based regulation  33–35 contract law  4, 65, 108–9, 118, 253 contracts  78, 80, 107, 109, 115, 209–10, 253 consumer  106, 209–10, 215, 253 co-operation  6, 158, 164, 169, 204–6, 208, 252 enforcement  6, 163, 169, 204 judicial  204, 209 system  164, 206 co-ordination  139, 160, 204, 206–7, 252 copycats  249–50 co-regulation  91, 103, 137, 160 corporate promotional literature  52, 72 corporate social responsibility (CSR)  46–48, 57, 62 costs  80–81, 101–2, 107–8, 111, 113–14, 117, 152, 154–55 unavoidable  81, 101

country-of-origin principle  146, 239–40 Court of Justice of the European Union, see CJEU court orders  203, 212–14 cease-and-desist  203 interim  213, 219 CPA (Competition Protection Act)  152–55 CPC (Consumer Protection Cooperation) Network  6, 153, 161, 169, 205–8, 218, 252 Regulation  157–59, 162–64 CRD (Consumer Rights Directive)  108, 117–18 credulity  54, 245 cross-border enforcement  6, 163, 201–19, 252 cross-border trade  111, 113, 115 CSR, see corporate social responsibility Cyprus  128, 147 Czech Republic  8, 147 damages  80, 215–17, 249, 252 actions/claims  208, 210, 218, 252 judicial enforcement  209–18 amount  209, 216 recovery  6, 207, 217–18 decency  3, 13, 15, 45–63, 68, 72, 76–77, 235–36 definition  46 deception  62, 79–80, 250–51 defamation  62, 153, 216 delegation  163–64 democratic society  19, 21–23, 25, 43 Denmark  12, 125, 147, 159, 182–83 Ombudsman  145, 199 deregulation  236 designated bodies  163, 206–7 designations of origin  225, 227, 230 deterrent effects  208, 218 digital economy  208 dignity  47–49, 53, 56, 59, 62, 92 diligence, professional, see professional diligence direct exhortations  90, 188–89, 191–92, 194–95 direct marketing  48, 94, 195 directing activities  210, 215 disability  48, 53 disclaimers  95–96, 102–3 disclosure  39, 47 discretion  27–29, 139, 159 discrimination  47–49, 53, 154 sexual  56 disparagement  10, 12, 166 disparities  108, 111, 113, 165 distinguishing marks  68, 225–28 distortion  85, 89, 101, 126, 151, 179–82, 203, 237 appreciable  236 material  15, 76, 88, 123, 135, 148, 235

260  Index divergences  78, 98, 111, 126, 128, 130 diversity  120–21, 124, 127, 137, 147, 155, 165, 167–68 domicile  209–10, 217, 219 double-track regime  153 dualistic approach  114, 255–56 duties, statutory  137–38, 140–44, 146, 166 ECHR (European Convention on Human Rights)  20–21, 29, 43, 47, 58–59 protection of commercial speech  21–25 ECJ, see CJEU e-Commerce Directive  17, 117–18, 238–39 economic behaviour  76, 78, 85, 88–89, 100–1, 178, 235, 237 economic interests  66–67, 71–72, 171, 173, 175–78, 180–81, 235, 237 ECtHR (European Court of Human Rights)  3, 19, 21–31, 36, 43 effective enforcement  6, 157, 200, 252 effective procedural tools  6, 218 effective protection  73, 111, 222, 246 effectiveness  79, 107–9, 111, 113, 118, 158, 160, 163 efficiency  107–9, 118, 158, 161, 180 emotional advertising  40 employees  176, 209 endorsements  93–94, 96, 99 enforcement  6–7, 59–63, 151–52, 155–65, 201–2, 204, 212–14, 251–52 actions  157, 207–8, 218 activities  161, 206, 211 administrative  139 authorities/bodies  102, 117, 120, 124, 135, 153, 161, 189 Norway  188 avenues of  155–56, 164 civil law  61, 63 of consumer law  151, 163, 167, 206 co-operation  6, 163, 169, 204 cross-border, see cross-border enforcement effective  6, 157, 200, 252 efficient  203 fair trading law  5, 159, 164, 167 of fair trading law  159, 164, 167 judicial, see judicial enforcement measures  206–7 powers  152, 206 practices  5, 121, 164, 169 private, see private enforcement public, see public enforcement regime  156, 211, 252 systems  6, 54, 60–61, 158, 201–2, 204, 234, 251–52 of unfair commercial practices law  156–57, 160 environmental claims  94 misleading  99–100

Estonia  128, 147 ethical behaviour  49, 57 ethics  3, 45–63 business  46–48, 51, 57, 62 definition  46 European Commission  2, 91, 94–95, 97, 99, 102–3, 201–2, 204–7 European Convention on Human Rights, see ECHR European Court of Human Rights, see ECtHR European Court of Justice (ECJ), see CJEU European Parliament  67, 92, 146, 225, 237 evaluation  15, 63, 107, 189, 206, 246 comprehensive  107, 184 examination  21, 26, 29, 35, 38 case-by-case  82 close  24–25 exclusive jurisdiction  209–10 exclusivity  78 exemptions  112, 197, 199–200, 235, 239, 243 explicit  198 exhortations  189–94 to buy  189, 191–93 direct  90, 188–89, 191–92, 194–95 experience  85, 94, 103, 113, 143, 150, 152, 158–59 expertise  91, 159–60, 164 exploitation  191, 223, 232 expression, political  19–21, 23–24, 31, 41–43 extended protection  226, 231, 245 Facebook  189–91 face-to-face sales  107 fair commercial practices  123, 151, 174, 255 fair competition  48, 151, 161, 173, 176, 184, 215, 223 fair trading law  121, 127–28, 145, 148, 150, 154, 159, 165–67 enforcement  5, 159, 164, 167 national  4, 119, 121, 127, 135, 155, 165, 167 fair trial  49, 59 fairness  51, 58, 136, 141, 149, 152, 160, 168 assessment  195, 198 standards  149, 160 false allegations  222–23 false impressions  80–81, 242 false information  77, 253 financial services  72, 74–75, 87, 112–13, 243 fitness checks  2, 4, 15–16, 105–18, 184–85, 233, 253–54 objectives  107–9 food retail sector  154, 166 forum shopping  214, 216, 218 fragmentation  4, 120–22, 235, 237 frameworks, regulatory  4, 13, 16, 67, 108, 115, 122, 183

Index 261 France  9, 54, 61, 66, 114, 137, 144, 147 provisional measures  212–13 free movement  11, 17, 113, 146, 204, 212–13, 224, 226 free speech  20, 30, 44, 58–59, 63, 236 and unfair commercial practices  19–20 freedom of commerce  7–8 freedom of expression  19–21, 23, 26–30, 38–41, 43, 58–59, 65 commercial  19–20, 22–25, 28, 31, 35, 40, 196 political  19–20, 31, 43 protection  20, 22–23, 30, 40, 43 freedom of speech  3, 19, 29–30, 39 full harmonisation  1–4, 7, 13–14, 65–66, 83–84, 110–13, 122–24, 131–32 UCPD  74–75 fundamental principles  47, 58, 195, 197 fundamental rights  3, 19–21, 26, 28–29, 31, 43–44, 47, 58 gaps  4, 108–9, 116, 152 general clauses  4–5, 7–8, 75–77, 83–84, 123–24, 130, 135–37, 147–49 grand  76–77 national  128, 134 role in UCPD  246–48 small  68, 75–76, 123 general marketing law  4, 109, 118 general principles  26–27, 29, 93, 109, 132–33, 141, 196 general prohibitions  70–71, 105, 110, 114–15, 118, 128, 237, 242 geographical denominations  251 Germany  7–9, 59–61, 128–29, 131–34, 136–37, 141–43, 147, 161–65 Constitution  40–42, 56 Federal Constitutional Court  39–41, 44, 57, 60 unfair competition law  8, 55–57, 60, 129, 139, 147, 162, 166 gifts  12, 101 girls  62, 193 gold  97–98, 116 good faith  8, 76, 79–80, 91–92, 135, 246, 248 good marketing practice  130–31, 141–42, 144–45 good morals  49, 55, 138 governance  144–45, 160, 167 Greece  125, 128, 147 Green Papers  13, 66, 239 growth  15, 82, 155, 181, 208, 240 guidance  2, 51, 94–95, 145, 234–35, 244, 247, 249 document  94–96, 103, 145 UCPD  4, 94, 233, 244–45, 247, 249

guidelines  47–48, 51, 86–87, 91–95, 98, 100, 102, 144–46 interpretative  144–45 Handlungsethik  49–50 harassment  56, 133, 240 harm  67, 71, 173, 175–77, 206, 219, 223, 252–53 consumer  86, 162, 165, 174, 248 harmonisation  1–4, 7–8, 11–16, 74–75, 83–84, 109–12, 122, 167–68 approaches  111, 123–24, 127, 185 full  1–4, 13–14, 65–66, 74–75, 83–84, 110–13, 122–24, 131–32 minimum  1–2, 11, 14, 66, 105, 110–13, 118, 122–23 process  1–2, 11, 14 protection of honest entrepreneur to protection of consumer  12–17 of special areas  16–17 harmony  5, 120, 123, 139, 167 health  17, 49, 53, 67, 72, 95, 140, 166 home advantage  212, 218 honest entrepreneurs/businessmen  9–10, 12, 16, 18, 54–55 honest practices  50, 76–77, 92, 135, 222, 226, 246–47, 249 honesty  48, 51 horizontal approach  5, 122 horizontal instruments  202–3 Hungary  8, 128, 147, 151–52, 156, 160 ICC (International Chamber of Commerce)  3, 9, 11, 48, 93, 198–99, 222, 224 Codes  46, 85–86, 92–94, 100–2, 136, 141, 198, 247–48 immovable property  72, 74–75, 112–13, 243 impartiality  157–58 implementation  5, 92, 129, 131, 133, 149–50, 199, 235 efficient  108, 113 impressions  89–90, 172, 196–97, 200, 250 false  80–81, 242 incentives  85, 87, 157, 162 indecency  3, 45, 48, 50–51, 58, 63 independence  8, 157, 159 industrial property  9, 50, 85, 221, 223–24, 246; see also intellectual property inexperience  54, 113 influence, undue  15, 133, 235, 240 information false  77, 253 material  100, 140 misleading  73, 173 requirements  100, 117–18, 149 informed choice  73, 90

262  Index injunctions  60–61, 63, 107, 141, 203, 205, 212–14, 216–19 B2B situations  212–18 judicial enforcement  209–18 restrictions on cross-border enforcement  214 injunctive relief, see injunctions innovation  12, 158, 162, 166, 181 institutional competences  156, 160 institutional design  156, 159 institutional reforms  164–65 institutional traditions  121, 169 institutions  4, 95, 119, 121, 126, 155–56, 166, 168 integrated approach  5, 84, 126, 130, 147–50, 171–85, 255–56 integration  2, 5, 11, 14–15, 121, 168, 236, 238 intellectual property  6, 8–9, 50–51, 166, 238, 246, 250, 252 EU case law  227–31 European legal framework  224–27 international legislative framework  221–24 protection  223, 225, 227, 229, 231 and unfair competition law  221–32 intentions  16, 89–90, 97, 128, 153, 174, 177, 183 interests  35–36, 55, 57–58, 123–25, 149–51, 166, 175–76, 196 business  75, 125, 149 of competitors  147–48, 162, 236, 249 economic  66–67, 71–72, 171, 173, 175–78, 180–81, 235, 237 public  21, 27, 29, 34, 43, 47, 72–73, 166 interference, legal  45–46, 59 interim court orders  213, 219 interim payment orders  213 internal market  65–67, 72, 86, 92, 111, 113, 201–3, 235–39 International Chamber of Commerce, see ICC international jurisdiction  209, 215 internet  50, 61, 63, 177–78, 210, 215 domain names  110 interpretation  3–5, 26–27, 79–83, 85–103, 191, 194–95, 197–200, 246 literal  80–81 ordinary  194–95 strict  25, 192 uniform  6, 135, 200 interpretative guidelines  144–45 intervention  21, 24, 34, 108, 160, 185, 196–97 invitations to purchase  15, 100–1, 118, 235 Ireland  12, 26, 48, 128, 147, 165, 203 Italy  147, 182, 204 joint surveillance, mandatory  208 judicial co-operation  204, 209 judicial enforcement  201, 209–18 judiciary  102–3, 134, 138, 149

jurisdiction  27, 30, 54, 146–47, 204, 209–10, 212–14, 216–19 exclusive  209–10 general  209 international  209, 215 jurisdictional rules  212, 219 jurisdictional system  209, 212–13 justifiable reason  48, 94, 248 knowledge  33, 46, 48, 85, 94, 188 professional  185 lagstridighetsprincipen  137, 141–43 language  55, 130, 134 Latvia  128, 147, 164–65 legal basis  23, 33, 192, 236, 252 legal frameworks  3, 14, 50, 88, 111, 117, 125, 208 for ethics, taste and decency  49–57 intellectual property  221–27 legal interference  45–46, 59 legal methodology  4, 97, 102 legal obligations  49, 137, 141–42 legal persons  69, 72–73, 209, 234 legal standing  201, 203–5, 209 legality  11, 88, 141, 146, 235 teasers  198–99 legislative acts  121, 127, 129, 142, 147–48, 151–52 legislative models  6, 234, 237, 255 legislatures  3, 45, 49, 54, 57, 62, 218, 223–25 legitimacy  103, 155 legitimate businesses  66, 68, 112, 124, 173, 249 legitimate competition  139, 155 legitimate competitors  125, 173, 248 legitimate interest  23, 99, 201, 216, 249 level playing field  114, 161, 202, 235–36 lex generalis  17, 116 lex specialis  17, 116 liability  116, 216 liberal professions  22–25 liberalisation  236, 239 linguistic factors  88, 98, 100, 244–45 literal interpretation  80–81 literal transposition  127, 131 Lithuania  82, 128, 147 logos  223 lotteries  71, 154, 235 Luxembourg  128, 147 Malta  147 mandatory joint surveillance  208 manufacturing processes  10, 222, 247 margins of appreciation  21–22, 24–26, 38, 43, 124 market behaviour  4, 49–51, 140, 142, 244 market economies  150–51, 167, 180 market failure  109, 179–81

Index 263 market integration  4, 14, 107–8 market participants  50, 56, 58, 139, 147–48, 181, 203 marketing, see Introductory Note marketing campaigns  196–97, 224 marketing communications  48, 92, 94, 141, 195–96, 223 basic principles  48 marketing law  4, 40, 85, 102, 118, 180, 195, 198–99 and competition law  179–81 marketing practices  109–10, 171, 173, 175–77, 179–83, 185, 239–40, 247–49 good  130–31, 141–42, 144–45 law  7, 136, 149, 179–80, 182, 256 misleading  67, 105–6, 110, 114, 118, 172, 183, 225 unfair  8, 18, 176, 179, 182, 238 marketplace rule  215 material distortion  15, 76, 88, 123, 135, 148, 235 material information  100, 140 maximum harmonisation  11, 122, 194 MCAD (Misleading and Comparative Advertising Directive)  2–7, 109–11, 113–16, 171–77, 181–84, 201–5, 225–32, 251–56 enforcement  201–5 fintess for purpose  109–18 fitness check, see fitness checks possible revision  253–56 proposed transformation  183 media  26, 52, 102, 122, 142, 193, 198 social  145, 177–78, 190 medicinal products  16, 54, 143 methodology, legal  4, 97, 102 minimum harmonisation  1–2, 11, 14, 66, 105, 110–13, 118, 122–23 minors  53–54, 92, 190, 194–95 misleading actions  85, 93, 105, 149, 240, 244, 250–51, 254 misleading advertising  1–2, 12–14, 22–25, 35, 110–11, 171, 236–37, 254–55; see also MCAD Misleading and Comparative Advertising Directive, see MCAD misleading commercial practices  7, 93, 172, 234, 240–41, 243, 245, 253 level of consumer protection against  243–46 UCPD (Unfair Commercial Practices Directive)  77–80 misleading directory companies  67, 110, 114 misleading information  73, 173 misleading marketing practices  67, 105–6, 110, 114, 118, 172, 183, 225 misleading omissions  13, 85, 100, 129, 140, 187, 240 misleading payment forms  110 modernisation  10, 115

monetary claims  213–14 monopolies  196, 222, 224 morality  26, 46, 72 morals, good  49, 55, 138 motifs  60 Nazi  61 sexual  59, 61 motivations  69, 197 mutual assistance  205–7 mutual recognition  209, 212, 239 national application  24, 87, 235 national assessments  89, 98 national authorities  24–25, 28, 102–3, 112, 204, 207–8, 218, 252 national courts  83–84, 87–90, 95–96, 98, 102–3, 132–35, 235, 245 national enforcers  95, 112, 204 national fair trading law  4, 119, 121, 127, 135, 155, 165, 167 national general clauses  128, 134 national implementation  83, 120, 148 national laws  50, 67–68, 86–87, 95–96, 111, 113–14, 126, 128 national legislation  71–72, 129, 132, 175, 182, 232, 235, 239; see also individual countries approaches to regulation of advertising  54–55 national prohibitions  75, 77, 123, 154, 241–42 national provisions  17, 66, 69–71, 83, 122–23, 175, 243 national rules  23–24, 67, 70, 72, 119, 154–55, 168, 242–43 national systems  59, 164, 204–5 national traditions  7–8, 121, 132, 134, 156, 159, 168, 239–40 nationality  53, 211 Netherlands  60–61, 63, 147, 156, 159 Network of National Public Enforcement Authorities for Mutual Assistance  205 neutrality, procedural  120, 126, 156 non-recognition  211–12 Nordic countries  8–9, 125, 145, 203, 247; see also individual countries Norway  5, 125, 187–200 Blacklist  188–89, 195–97 enforcement authorities/bodies  188 Justin Bieber case  189–95 Market Council  188–200 MCA (Marketing Control Act)  187–97, 199 Swedish Stardoll case  192–93 teasers  197–200 obligations  49–50, 99, 102, 141–42, 162, 164, 206, 208 ombudspersons  203, 206 omissions  52, 69, 100, 105, 128, 131, 155, 206 misleading  13, 85, 100, 129, 140, 187, 240

264  Index orders  66, 69–71, 73, 100, 213, 218, 249, 251 cease-and-desist  208, 214, 217–18 Ordnungsethik  49–50 origin country of  146, 239 designations of  225, 227, 230 packaging  249–50 parents  54, 90, 188–89 Paris Convention  9–10, 12, 50, 85, 221–25, 232, 246, 250 Art 10bis  50–52 payment orders, interim  213 penalties  160, 165, 190, 252 administrative  160, 190 per se prohibitions  72, 75, 89, 117, 241 personal scope  72–73, 83 pluralism  26 Poland  8, 128, 147, 150, 154 ZNKU  150–51, 154 policy makers  166–67, 203, 214 political expression  19–21, 23–24, 31, 41–43 Portugal  128, 147 preliminary rulings  28–30, 75, 98, 230, 248 preparatory works  129, 132–33, 141, 175, 189–91, 194, 197, 199 price reductions  66, 70–71, 84, 242 prices  70, 100–2, 107, 114, 117, 178, 225, 250 principle-based approach  111–13 private associations  161, 163–64 private enforcement  6, 138, 142, 154, 156–57, 161–65, 202–6 tenacity  161–64 prizes  70–71, 80–81, 101, 154, 196, 242, 245 products, advertised  90, 188–90 professional diligence  76–79, 87–90, 92, 101–2, 134–35, 145–46, 180, 246–47 requirements  76–77, 79, 87–89, 92–94, 241, 243, 246, 248 professions  22, 43, 69, 73, 87, 94, 197, 200 liberal  22–25 regulated  139–40, 162, 167, 243 profits  85, 162, 203, 207–8 ill-gotten  218 prohibitions  25–26, 49–51, 82–83, 128–30, 142–43, 154, 196–200, 240–44 general  105, 110, 115, 118, 141, 237 national  75, 77, 123, 154, 241–42 per se  72, 75, 89, 117, 241 promotional literature, corporate  52, 72 promotions  66, 69–71, 177–78, 180, 198, 200, 239, 241–42 proportionality  21–22, 25–26, 29, 38, 88, 132 propriety  50, 55 protection  7–10, 19–23, 29–33, 39–43, 52–55, 148–53, 181–84, 248–51 business  110–11, 174 of commercial speech  3, 20–21

conclusions  43–44 European Convention on Human Rights  21–25 European Union  26–30 Germany  39–42 United States  30–39 consumer, see consumer protection effective  73, 111, 222, 246 extended  226, 231, 245 of freedom of expression  20, 22–23, 30, 40, 43 strong  20, 39, 41–44 of trade secrets  10, 163, 255 provisional measures  212–13 public authorities  142, 144–45, 156–58, 160–63, 165, 168, 203–4, 206 public consultations  172, 206, 208 public enforcement  6, 139, 156–58, 161, 164, 206 many guises  158–61 shift to  156–58 public interests  21, 27, 29, 34, 43, 47, 72–73, 166 public policy issues  46–48, 53, 62 public statements  28, 57 real connecting links  213–14 reasonableness  29, 180 Rechtsbruch  137–40, 143, 162 recognition, mutual  209, 212, 239 redress, consumer  6, 201, 207, 218 REFIT initiative  183–84, 233, 240, 243 reforms  56, 61, 129, 134, 139, 162, 169, 233–34 institutional  164–65 regulated professions  139–40, 162, 167, 243 regulation  15–19, 33–36, 39–40, 52–54, 125–26, 151–54, 205–12, 214–19 content-based  33–35 content-neutral  34, 39 by European Union  11–17 by International Conventions  9–11 regulatory environment  15, 112, 240 regulatory frameworks  4, 13, 16, 67, 108, 115, 122, 183 relevance  47, 51, 109, 114–15, 118, 130, 139, 149 religion  23, 26, 48, 53 representations  33, 45, 52, 69, 174, 254 representative entities  205, 209, 218 reputation  10, 25, 92, 225, 227–28, 231 resale  66, 70, 84, 154 resources  164–65, 204 reversal  192–93 administrative  192 complete  177–78 risk  4, 10, 96, 103, 112, 199–200, 210, 249–50 Romania  128, 147

Index 265 safety  17, 53, 67, 72, 140, 162 safety net  17, 110, 247 sales promotions, see promotions Scandinavian countries  60–61, 80, 127, 136, 238; see also individual countries self-regulation  9, 48, 50, 55, 59–63, 90–93, 136–37, 247 service providers  206–7, 210, 212 services  11, 70–71, 73, 101–2, 112–14, 177–78, 224–26, 228–30 audiovisual media  16–17, 53 financial  72, 75, 87 sexual motifs  59, 61 sexual orientation  48, 53 skimming off  162, 203, 207–8, 218 Slovakia  128, 147, 164–65 Slovenia  128, 147 small general clauses  68, 75–76, 123 SMEs  106, 115, 144, 166 and big business  181–83 social media  145, 177–78, 190 social responsibility, see corporate social responsibility soft law  4, 10, 86, 90, 92, 222, 224, 234 Spain  147 spare parts  226–27 speech commercial, see commercial speech freedom of  3, 19, 29–30, 39 sponsorship  16, 28, 94 stakeholders  103, 115, 130–31, 144, 172 standards  4–5, 48, 57, 91–92, 108, 136, 146, 224–25 standing, legal  201, 203–5, 209 statutory duties  137–38, 140–44, 146, 166 substitutability  231 superstition  48, 94, 248 supervision  7, 159, 243, 251 suppliers  47, 154, 182 competing  227–28 surreptitious advertising/marketing  3, 5, 49, 53, 195–200 Sweden  5, 120–21, 128–34, 136–37, 143–44, 147, 164–65, 167 Market Court  133, 136, 141, 145, 192–93, 195 MFL  130, 133, 141–44, 149, 158 systematics  130–31, 148 systemic coherence  126, 150 taste  3, 13, 15, 45–63, 68, 72, 76–77, 235–36 definition  46 teasers  197–200 legality  198–99 television  16–17, 23, 26, 28, 38, 53, 143 terminology  16, 23, 50, 55, 130–31, 134, 137, 153 TEU (Treaty on European Union)  26–27

TFEU (Treaty on the Functioning of the European Union)  11, 73–74, 131, 195, 235–37, 245 tobacco  16–17, 28, 38, 142–43, 145 products  16, 28, 53 tort  8–9, 49, 54, 80, 137, 209, 214, 216 cross-border  215 trade  7–8, 10–11, 69, 73, 197, 200, 222–23, 226 cross-border  111, 113, 115 trade marks  6, 8–9, 221, 223, 225–29, 231, 244, 250 infringement  226, 229, 232 trade names  9, 68, 223, 225–28, 249 trade organisations  6, 203, 205 trade practices, unfair  16, 51–52, 54, 66–67, 134, 150–52, 154–55, 166 trade secrets  10, 12, 166, 254 protection of  10, 163, 255 traders  68–74, 79–81, 87–93, 98–103, 148–51, 173–78, 180–81, 197–201 traditions  6, 15, 18, 30, 44, 91, 132, 147 constitutional  29, 43 institutional  121, 169 long-standing  128, 136, 144 national  7–8, 121, 132, 134, 156, 159, 168, 239–40 transactional decisions  52–53, 68, 72, 76–78, 88, 100, 240–41, 250–51 transactions  111–12, 114–16, 173, 175, 177–78, 183–84, 236, 248 transparency  113, 184 transposition  126–27, 130–31, 133, 141–42, 147, 150–51, 153 literal  127, 131 Treaty on European Union, see TEU Treaty on the Functioning of the European Union, see TFEU TRIPS  9–10, 51, 246, 250 trust  148, 191, 203 ubiquity  215 UCPD (Unfair Commercial Practices Directive)  1–7, 13–19, 65–84, 111–37, 139–53, 155–57, 171–85, 232–56 adaptation of institutions and enforcement  155–65 architecture  68 and B2B  153–55 background and objectives  66–68 Black List  80–83, 240–43 and coherence  121–27 description of product as ‘gratis,’ ‘free,’ ‘without charge’ or similar  101–2 and diversity  165–69 domain  147–50 enforcement  201–5, 251–53

266  Index European Commission staff working document  94–102 fitness check, see fitness checks fitness for purpose  109–18 full harmonisation  74–75 general clause interpretation and professional diligence  135–46 grand general clause  76–77 Guidance  4, 94, 233, 244–45, 247, 249 half-hearted implementation  128 impact on national fair trading law and institutions  119–69 implementation  128–35 indirect B2B protection  248–51 interpretation and assessment  85–103 invitations to purchase  100–1 key concepts  75–80 and ‘law in action’  164–65 level of consumer protection against misleading commercial practices  243–46 misleading commercial practices  77–80 misleading environmental claims  99–100 Norway  187–200 objectives  233–37 in practice  187–200 role of general clause  246–48 scope  15, 69–74, 97–98 structural formation  237–40 and substantive national law  127–46 systemic effects  146–55 Ulmer, E.  12, 238 uncertainties  31, 97, 103, 134, 148, 151, 179, 246 undue competitive advantage  138, 143 undue influence  15, 133, 235, 240 unfair advantage  225, 227–28 unfair commercial practices  1–3, 13–19, 148–50, 173–75, 201–5, 212–16, 234–37, 244–49

development of law  7–11 and free speech  19–20 Unfair Commercial Practices Directive, see UCPD unfair competition  7–10, 12, 49–50, 54–58, 84–86, 147–51, 222–24, 231–32 acts of  137, 139, 147, 150, 222, 226, 246 law  6–10, 12, 79–80, 154–55, 174, 221–22, 224, 226–28 Germany  8, 55–57, 60, 129, 139, 147, 162, 166 and intellectual property  221–32 unfair marketing practices  8, 18, 176, 179, 182, 238 unfair trade practices  16, 51–52, 54, 66–67, 134, 150–52, 154–55, 166 unfairness  68, 135, 144, 176, 185, 188, 192, 248 uniformity  5, 119–21, 123–24, 168 United Kingdom  60–61, 63, 134, 136–37, 143, 145, 159–60, 167 ASA (Advertising Standards Authority)  9, 61, 137, 247 United States  48, 58 commercial speech  30–39 Supreme Court  30, 32–33, 35–36, 39, 42 unlawfulness  137, 141–42 viral marketing  178 visual references  100–1 websites  47, 91, 95, 102, 189–90, 207, 210, 215 WIPO (World Intellectual Property Organization)  9–10, 232 working methods  159–60 World Intellectual Property Organization, see WIPO