01/02/10

Unfair Commercial Practices: European Court gives its first ruling - Green light for “Combined Offers” in Belgium and other M…

The European Court of Justice ("ECJ") has recently issued the first ruling on the 2005 Unfair Commercial Practices (UCP) Directive. The UCP Directive creates a brand new harmonised legal framework for assessing commercial practices towards EU consumers (1).

On 23 April 2009, the first Chamber of the ECJ has answered a preliminary question asked by the Commercial Court of Antwerp (Belgium) regarding the compatibility of the Belgian law forbidding "combined offers" with the UCP Directive and the EC Treaty (2). Combined offers refer to commercial offers where the acquisition, whether or not free of charge, of a product or service is tied to the acquisition of other an even identical product or service. 

The ECJ states that the Belgian law forbidding combined offers, with certain exceptions and without taking into account specific circumstances, infringes the UCP Directive. This means that the Belgian Parliament will have to alter this prohibition. Accordingly a Belgian judge can no longer apply the rule forbidding combined offers even if the national law remains in force.

The ECJ's judgement clarifies several issues that have been raised not only in Belgium but also in other Member States.

First, the ECJ rules that combined offers are "commercial acts which clearly form part of an operator's commercial strategy and relate directly to the promotion thereof and its sales development" and constitute therefore commercial practices as defined in the UCP Directive.

Second, the ECJ stresses that the UCP Directive "fully harmonises" unfair business-to-consumer commercial practices, meaning that Belgium is not competent to adopt stricter rules, even if those national rules are intended to achieve a higher level of consumer protection.

Third, the ECJ recalls that the Directive itself sets out the criteria on the basis of which commercial practices are to be qualified as ‘unfair' and, therefore, should be forbidden. The UCP Directive contains several grounds to qualify a particular commercial practice as unfair. The ECJ summarizes the regulatory scheme as follows:

- a commercial practice is unfair "if it is contrary to the requirements of professional diligence and materially distorts or is likely materially to distort the economic behaviour of the average consumer with regard to the product";
- in addition, a commercial practice is also unfair if it constitutes a ‘misleading' or ‘aggressive' practice according to the criteria defined in the UCP Directive;
- finally, the UPC Directive contains an exhaustive list of 31 commercial practices (among which combined offers are not mentioned) which can be deemed to be unfair.

As emphasized by the ECJ, the first two grounds imply a "case-by-case assessment", while a commercial practice covered by one of the 31 commercial practices explicitly listed is unfair "in all circumstances".

Fourth, the Belgian rule laying down the principle that combined offers are forbidden establishes, according to the ECJ, "a presumption of unlawfulness of combined offers" and therefore violates
"clearly" the Directive. The ECJ underlines that this Belgian rule "prohibits, generally and pre-emptively, combined offers without any verification of their unfairness".

Fifthly, the ECJ has equally taken into account that the Belgian legislation forbidding as a principle combined offers has foreseen a number of exceptions to this principle. Acknowledging that these exceptions "restrict the scope of the prohibition of combined offers", these exceptions are "limited and pre-defined" and can therefore "not take the place of the analysis, which must of necessity be undertaken having regard to the facts of each particular case, of the ‘unfairness' of a commercial practice".

As a conclusion, it must be emphasized that the importance of the ECJ's judgement is not limited to the Belgian legislation prohibiting, as a principle, combined offers. Every ‘business-to-consumer commercial practice' not covered by the list of commercial practices which are unfair "in all circumstances", can only be unfair (i) on the basis of the criteria enumerated in the UCP Directive, and no other ones, and (ii) after a case-by-case assessment, i.e. after verification.

In order to improve the understanding of both Members States authorities and consumers on this legislation the European Commission has issued a Guidance document on the implementation of the Directive on 3 December 2009 (3).

(1) Directive 2005/29/CE concerning unfair business-to-consumer commercial practices in the internal market.

(2) ECJ, Cases C-261/07 and C-299/07, VTB-VAB, not yet reported.

(3) SEC (2009) 1666.

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