Unfair trading practices to be banned?, April 2003

The Financial Times reported on 3 April 2003 that the European Commission is soon to submit proposals for legislation to ban 'unfair' trading practices.

Described as 'controversial', the proposals are, said the FT, opposed by businesses, concerned they 'would increase costs and might trigger a wave of legal actions from disgruntled consumers against retailers and manufacturers.' A spokesman for Eurocommerce, quoted in the FT, said 'This proposal is totally unacceptable. The Commission wants to regulate everything'.

The proposals referred to in the FT are those arising from the Commission's Green Paper on Consumer Protection. A 'Follow-up Communication' was issued in June 2002, in which the Commission called for comments by the end of September and stated it would seek to adopt a legislative proposal before the end of 2002. The delayed proposal now seems imminent.

From the evidence of the Commission's latest Communication on this issue, it appears that the proposal will be for a Framework Directive intended to ensure legal certainty for businesses and consumers whilst avoiding overly prescriptive rules.

The legislation will be based on the concept of 'fair commercial practices' rather than that of 'misleading practices'. Businesses will therefore be required to 'trade fairly', rather than 'not to trade unfairly'.

The Directive is likely to have two main elements: one concerning unfairness, the other dealing with a 'consumer detriment test' (the fact that a commercial practice might cause direct detriment to a consumer).

The concept of 'fairness' will have to be examined, says the Commission, in the light of Member States' legal systems. However, some its scope might include:

• misleading practices
• failure to provide material information, including representations, omissions and conduct
• use of force, harassment, coercion and undue influence
• failure to provide after sale customer assistance and effective complaint handling

Examples of the sorts of 'misleading commercial practices' which the Directive would seek to ban include:

• 'any technique to promote the goods or services or property on offer that is not clearly identifiable as such by the consumer. In particular, features, announcements or promotions that are disseminated in exchange for a payment or other reciprocal arrangement should be clearly recognisable as such by the consumer
• a representation that any good or service has sponsorship, approval, performance characteristics, accessories, ingredients, quantities, components, uses or benefits that it does not have
• a representation that any good or service is of a particular standard, quality, grade, style or model that it is not'

The onus would be on businesses 'to objectively substantiate all representations/claims, other than those specifically regulated in other EU legislation, made to consumers, whether direct or implied.' There would, however, be some exceptions, including advertising based on 'subjective claims or on correctly stated opinions if consumers are made aware of the source and limitations of the communication.'

Existing legislation would be either incorporated into the new Directive or left, to provide consumers with additional protection.

Links:

European Commission:
	Communication - Follow-up Communication to the Green Paper on EU Consumer Protection (COM(2002) 289) [text]
	Follow-up Communication to the Green Paper on EU Consumer Protection [general page]
European Sources Online: Topic Guides
	The Consumer Policy of the European Union

Eric Davies
Researcher
Compiled: Friday, 4 April 2003

According to the Financial Times, the European Commission could soon submit proposals to ban unfair trading practices.