Commission publishes proposal for a Directive on unfair commercial practices, June 2003

As forecast two months ago, the European Commission has published a draft Directive on unfair business-to-consumer commercial practices. The proposed Directive will ban unfair advertising, marketing and other commercial practices used by businesses in their dealings with consumers. It will establish two general conditions concerning the 'unfairness' of a business practice: whether it is 'contrary to the requirements of professional diligence' and whether it 'materially distorts consumers' behaviour.'

The Directive will create a single set of rules for businesses selling to consumers, irrespective of where seller or buyer is based in the EU. According to the commission, both businesses and consumers will benefit: ''The only real losers from this Directive will be rogue traders and rip-off merchants who exploit the gaps and differences between national laws to cheat consumers.'

Consumers will be entitled to basic information concerning the product to be purchased, including its main characteristics, price (inclusive of taxes and delivery charges), and the option - if any - to change their mind.

The proposal also gives details of commercial practices which are considered 'misleading' or 'aggressive' and will therefore be banned. They include:

Misleading practices:

• a trader claiming to be a signatory to a code of conduct when he isn't
• advertising a product as a special offer when it isn't in stock, or is not available in realistic quantities ('bait advertising')
• falsely using the expression 'liquidation sale' (or its equivalent)
• claiming that a product can be sold legally when it can't
• using paid-for media coverage ('advertorials') without making clear that what people are reading is an advertisement
• establishing, operating or promoting a 'pyramid' selling scheme

Aggressive practices:

• creating the impression that the consumer cannot leave the premises until a contract is signed or payment made
• conducting prolonged and/or repeated personal visits to a consumer's home and ignoring requests to leave
• making persistent and unwanted solicitations by telephone, fax, e-mail or other remote media
• targeting consumers who have recently suffered a bereavement or serious illness in their family in order to sell a product which bears a direct relationship with the misfortune
• advertising to children in a way which implies that their acceptance by their peers is dependent on their parents buying them a particular product
• demanding payment for products supplied by the trader, but which were not requested by the consumer ('inertia' selling)

Speaking of the proposal, the Commissioner responsible for Health and Consumer Protection, David Byrne, said it 'creates a triple-win situation: for consumers, businesses and Europe's economy. Studies show that the maze of national rules we have at the moment is holding back cross-border commerce. Consumers are uncertain of their rights. Businesses, particularly smaller ones, are daunted by the prospect of having to comply with the accumulation of rules, court judgements and guidelines that exist. Both are deterred from taking full advantage of the economic opportunities of the Internal Market that the euro has made evident. Unfair business practices are recognised as a problem in all EU countries and harm consumers as well as respected companies with established business practices. They also affect confidence in markets. This proposal seeks to stamp them out in a simpler and more effective way,'

The initiative was also welcomed by the European Consumers' Organisation, BEUC, which said: 'There is by no means full agreement in substance on what constitute undesirable commercial practices, but there are many practices that would in all member states be regarded as undesirable or “unfair” to consumers. National rules regulating such practices are very disparate, relying on very different approaches and concepts, and constitute a significant obstacle to the development of the single market for consumers. A common approach is therefore urgently needed to give consumers confidence when buying cross-border.'

There is a different perspective amongst the business community: in early April, the Financial Times said that the proposals were 'controversial' and opposed by businesses, a view echoed by smallbusiness|Europe, who said 'we still remain unconvinced ... of the need for a Framework Directive on unfair commercial practices.' One point made by smallbusiness|Europe is that other factors influence cross-border purchasing decisions, including 'linguistic and geographical barriers.'

The proposal will be considered by the European Parliament and the Council, and might be adopted by 2005.

Links:
European Commission:
	18.06.03:	Rough times for rogue traders: Commission proposes EU-wide ban on unfair commercial practices [IP/03/857]
	18.06.03:	Questions and answers on the proposed Unfair Commercial Practices Directive [MEMO/03/135]
	Unfair commercial practices
smallbusiness|europe:
	10.04.03:	[Draft Unfair Commercial Practices Directive]
European Sources Online: In Focus:
	04.04.03:	Unfair trading practices to be banned?, April 2003

Eric Davies
Researcher
Compiled: Friday, 20 June 2003

Background and reporting on the week's main stories in the European Union and the wider Europe.

ESO: Information Guide: Consumer Policy http://www.europeansources.info/record/information-guide-consumer-policy/

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