New Commercial Practices and Consumer Protection Act

On 18 March 2010, the Belgian Senate approved a bill on commercial practices and consumer protection (hereinafter the "CPA") which will repeal the Fair Trade Practices Act ("FTPA") of 14 July 1991.

Repealing the FTPA was deemed necessary for two main reasons. Firstly, the existing statutory framework no longer conforms to changed market conditions and does not satisfy the standards and needs of consumers. Secondly, the Court of Justice of the European Union (the "ECJ") recently held that the FTPA's general pre-emptive ban on tied offers[1] is inconsistent with Directive 2005/29/EC concerning unfair business-to-consumer commercial practices (the "Unfair Commercial Practices Directive").[2] As a result of this decision, the Belgian courts and public authorities were precluded from giving full effect to the general ban on tied offers. It accordingly became clear that the law had to be changed.

Like the FTPA, the CPA has a twofold purpose, namely to protect consumers and ensure fair competition. However, the CPA represents a significant departure from the FTPA on a number of points, the most significant of which are discussed below.

Tied offers
Under the CPA, tied offers will in principle be allowed, provided they are not (i) contrary to the requirements of professional diligence and do not distort or are not likely to distort the average consumer's economic behaviour and/or (ii) misleading or aggressive.

However, the general ban on tied offers involving financial services will continue in effect. This ban is, in principle, consistent with the Unfair Commercial Practices Directive, which expressly states that the Member States may enact more far-reaching provisions in order to protect the economic interests of consumers in certain fields, including financial services. There are various exceptions to this rule, however. Indeed, under the CPA, the following can be offered together with financial services for a single price :

  • other related or closely connected financial services, which form a whole with the underlying services;
  • small goods or services the grant of which is generally accepted in trade;
  • authorised lottery tickets;
  • promotional items which are not freely available on the market, provided the price paid by the offeror for these items does not exceed EUR 10.

Sales at a loss
Selling at a loss is contrary to the fundamental purpose of a commercial undertaking, which is to turn a profit. With this in mind, the CPA maintains the general prohibition on selling goods or providing services at a loss. Under the FTPA, however, this prohibition applies not only to sales made below the wholesale price but also to low-profit-margin sales. As the application of the ban to this second type of sale proved difficult in practice and gave rise to legal uncertainty, it has been done away with in the CPA. This means that merchants will in future be able to lower the prices of slow-moving merchandise, without having to worry about potential statutory violations.

End-of-season sales
End-of-season sales are an exception to the general rule prohibiting sales at a loss. However, such sales can only be held during two defined periods: from 3 January through 31 January (winter sales) or from 1 July through 31 July (summer sales).

Whereas under the FTPA end-of-season sales apply only to so-called seasonal items, the CPA provides that all types of merchandise should qualify for end-of-season sales. This extension is consistent with what appears to have become standard practice.[3]

Likewise, the prohibition on announcing discounts during the period leading up to the end-of-season sales has been relaxed. Under the CPA, the period during which no announcements of discounts can be made is shortened by 3 weeks and will start on 6 June (rather than 15 May) for summer sales or 6 December (rather than 15 November) for winter sales. In addition, the ban only applies to certain types of goods (i.e. clothing, leather goods, and shoes).

The rules on the announcement of discounts have been simplified. Under the FTPA, discount announcements had to be made in accordance with one of four methods. Under the CPA, however, merchants have more freedom to decide how they wish to announce a price reduction, as long as the announcement is not misleading. They can opt to either mention the reference price or simply provide consumers with sufficient information to immediately calculate the new price.

Moreover, under the CPA, merchants need not have applied the reference price for an uninterrupted period of one month prior to announcing the discount. It will henceforth be sufficient for the new price to be lower than the lowest price charged during the month preceding that in which the reduction applies.

Distance sales, e-commerce and default options
Under the FTPA, a distance seller may not receive payment from consumers prior to expiry of the cancelation period, during which time the consumer is entitled to freely cancel his or her order for any reason. This prohibition will be lifted.

In addition, the cancellation period will be extended from 7 to 14 days in order to ensure maximum consumer protection.

Finally, Article 44 of the CPA expressly forbids merchants from using so-called default options in the scope of consumer sales over the Internet, i.e. boxes which consumers must expressly untick if they wish to avoid having to pay for one or more additional goods or services. The CPA thus introduces an opt-in system, whereby consumers can actively decide which additional goods or services they wish to receive.

Under the FTPA, certain information on product labels, in instruction manuals or on guarantee certificates must be indicated in the language or languages of the place (linguistic region) where the goods or services are offered (former Article 13 FTPA). For goods and services offered or provided throughout Belgium, this means the information must be provided in Dutch, French and German. The most important change introduced by the CPA in terms of labelling is that it will henceforth be sufficient for the information to be provided "in a language easily understood by consumers". This change was essential in order to comply with the ECJ's case law on this subject.[4] That being said, it remains to be seen whether in practice, these new rules will yield any advantage.

Cease-and-desist actions (injunctive relief)
As under the FTPA, cease-and-desist proceedings can be brought before the president of the competent commercial court for violation of the CPA. These are proceedings on the merits which are initiated and conducted as interlocutory proceedings, the main difference being that a showing of urgency is not required.

Under the CPA, the president can set a deadline for termination of the violation. If it is subsequently shown that the defendant has complied with the court's order, the injunction can be lifted. Under the FTPA, it is only possible to grant a deadline for certain types of violations, which is deemed contrary to other statutory provisions.[5]

Finally and most importantly, an action for violation of the CPA must now be brought within one (1) year from the time the facts that form the origin of the dispute have come to an end. This represents a major shift since the courts have unanimously held that violations of the FTPA are not subject to a statute of limitations. Consequently, such actions could be brought even years after the facts arose, for instance by means of a counterclaim when a trader was sued by a competitor.

Entry into force
The new legislation is expected to enter into force in May 2010.

The CPA has eliminated one major incompatibility with the Unfair Commercial Practices Directive - namely, the general ban on tied offers. However, certain provisions of the CPA may have a similar fate in store for them. Indeed, the provisions governing inter alia end-of-season and clearance sales, the offering of discount coupons, and sales at a loss may also be considered to go beyond the scope of the Directive, which is intended to fully harmonise the rules on unfair business-to-consumer commercial practices and which, in general, does not allow the Member States to adopt stricter provisions. The practices listed above, however, are not expressly covered by the Directive. Therefore, there will undoubtedly be a number of requests for preliminary rulings to the ECJ to review the compatibility of the CPA with Community law.

[1] According to the CPA, a tied offer will be found whenever the acquisition by consumers, for a price or free of charge, of goods, services or another advantage is linked to the acquisition of other goods or services

[2] ECJ, 23 April 2009, C-261/07 and C-299/07, VTB-VAB v. Total and Galatea v. Sanoma Magazines Belgium (for more information, please see our newsflash of 23 April 2009). The ECJ recently confirmed its position in a case involving a provision of the German Competition Code (UWG), which stated that making participation by consumers in a contest or lottery contingent on the purchase of goods or services was unfair (14 January 2010, C-304/08, Zentrale zur Bekämpfung unlauteren Wettbewerbs e.V. v. Plus Warengesellschaft GmbH).

[3] The courts already tended to interpret the notion of "seasonal items" broadly to include glasses, furniture, hi-fi equipment, household appliances, cosmetics, and watches and jewelry.

[4] See e.g. ECJ, 3 June 1999, C-33/97, Colim v. Bigg's Continent Noord.

[5] E.g. performing commercial activities other than those listed in the Commercial Register, violation of social security and labour law provisions, permit requirements, etc. (Art. 97 FTPA)