ConsumerConsumer LawLaw

Klaus ViitanenKlaus Viitanen

UniversityUniversity of Helsinki of Helsinki

October-NovemberOctober-November 2012 2012

1. INTRODUCTION1. INTRODUCTION

The main aims of these lecturesThe main aims of these lectures

1) 1) to give an overall picture on different legal to give an overall picture on different legal

instruments used in consumer lawinstruments used in consumer law, especially in EU , especially in EU consumer law and in the Nordic countriesconsumer law and in the Nordic countries

2) 2) a special attention will be given on the problems a special attention will be given on the problems

connected with consumer´s access to justiceconnected with consumer´s access to justice

1.1. Basic definitions:1.1. Basic definitions:

Consumer lawConsumer law the class of norms the class of norms which are especially designated to protect the which are especially designated to protect the

consumerconsumer in his or her dealings with a trader ( in his or her dealings with a trader (direct protectiondirect protection)) Competition Law and Unfair Competition rules give only Competition Law and Unfair Competition rules give only indirect indirect

protection protection to consumersto consumers

ConsumerConsumer a natural persona natural person who is acquiring goods or services who is acquiring goods or services for an other use for an other use

than business purposesthan business purposes a new trend: from consumer protection to a more wider a new trend: from consumer protection to a more wider user or client user or client

protectionprotection (.e.g. passenger protection in air, railway, sea and road (.e.g. passenger protection in air, railway, sea and road transport contracts)transport contracts)

TraderTrader a natural or legal persona natural or legal person who is who is professionallyprofessionally selling goods or selling goods or

providing services to consumers providing services to consumers in order to obtain economic benefitin order to obtain economic benefit

Substantive Consumer LawSubstantive Consumer Law rules of consumer legislation rules of consumer legislation which define the which define the rights and obligations rights and obligations of of consumers and tradersconsumers and traders

Consumers' Access to JusticeConsumers' Access to Justice different methods (often supervisory authorities and dispute different methods (often supervisory authorities and dispute

settlement bodies) settlement bodies) which aim is to ensure that consumers' rights which aim is to ensure that consumers' rights are fulfilled also in practiceare fulfilled also in practice

Access to justice –questions are in Access to justice –questions are in close relation to close relation to substantive consumer lawsubstantive consumer law without effective means for enforcement and consumer redress, without effective means for enforcement and consumer redress,

the material improvements in consumer protection legislation will the material improvements in consumer protection legislation will have little or no influence at all in a consumer's daily lifehave little or no influence at all in a consumer's daily life

formal right to take a legal action in a court is not enoughformal right to take a legal action in a court is not enough

Consumer Law -questions may be roughly Consumer Law -questions may be roughly divided into two groups:divided into two groups:

1)protection of consumers' collective interests1)protection of consumers' collective interests interests where interests where no individual consumer has a right to remedy no individual consumer has a right to remedy

when an infringement of these interests occurs when an infringement of these interests occurs examples: examples:

regulation and supervision of marketing regulation and supervision of marketing regulation and supervision of product safetyregulation and supervision of product safety

2)protection of individual rights2)protection of individual rights how consumer's rights are fulfilled in individual caseshow consumer's rights are fulfilled in individual cases after a after a

contract has been concluded and a consumer is dissatisfied contract has been concluded and a consumer is dissatisfied with his purchasewith his purchase

examples: examples: contractual remedies when a product or service is contractual remedies when a product or service is

defectivedefective product liabilityproduct liability

1.2. EU Consumer Law1.2. EU Consumer Law

The legal basis and the main aims of EU ConsumerThe legal basis and the main aims of EU ConsumerLaw in Law in The Treaty on the Functioning of The European The Treaty on the Functioning of The European UnionUnion (former (former EC TreatyEC Treaty, originally , originally Treaty of RomeTreaty of Rome):):

1)1)Internal Market -argumentInternal Market -argument EU is entitled to adopt measures which have as their object the EU is entitled to adopt measures which have as their object the

establishment and functioning of the internal market (art. 114)establishment and functioning of the internal market (art. 114) aim is to abolish obstacles of free movement of goods and aim is to abolish obstacles of free movement of goods and

servicesservices

2)2)Consumer Protection -argumentConsumer Protection -argument in order to ensure a high level of consumer protection (art. 169)in order to ensure a high level of consumer protection (art. 169)

Is there are a conflict between these two aims? Is there are a conflict between these two aims? in theory no, but how about in practice!in theory no, but how about in practice!

The Consumer Images behind Consumer LawThe Consumer Images behind Consumer Law

The EU Consumer Law: The EU Consumer Law: a consumer is a consumer is an active and critical information-seekeran active and critical information-seeker, who is , who is

able to make rational choices on the basis of collected able to make rational choices on the basis of collected information (information (a rational consumera rational consumer))

the main stressthe main stress in the legal regulation is in in the legal regulation is in the regulation of the regulation of informationinformation: to ensure the accessibility and quality of information: to ensure the accessibility and quality of information

The Nordic Consumer Law:The Nordic Consumer Law: a passive consumera passive consumer, who is neither able to collect information , who is neither able to collect information

available nor to use it in order to make a rational choice (available nor to use it in order to make a rational choice (an an irrational consumerirrational consumer))

regulation of information is not enough to ensure rational regulation of information is not enough to ensure rational choices choices

there is also a need for effective protection of consumers´ there is also a need for effective protection of consumers´ individual rights, e.g. by means of contract lawindividual rights, e.g. by means of contract law

Legal Instruments in EU Consumer LawLegal Instruments in EU Consumer Law 1)directives1)directives a traditional instrument in EU consumer lawa traditional instrument in EU consumer law have to be implemented to the national legislation have to be implemented to the national legislation minimum directivesminimum directives

set only the minimum level of protection set only the minimum level of protection MSs are free to provide better protection in their own legislationMSs are free to provide better protection in their own legislation

maximum directivesmaximum directives sets also the maximum level of protectionsets also the maximum level of protection MSs are not entitled to provide better or weaker protection MSs are not entitled to provide better or weaker protection

2)regulations2)regulations are directly applicable in all MSsare directly applicable in all MSs there is no need to implement them to the national legislationthere is no need to implement them to the national legislation are becoming more popular in EU consumer laware becoming more popular in EU consumer law

The EU Consumer LawThe EU Consumer Law directives and directives and regulationsregulations

Regulation of MarketingRegulation of Marketing Misleading and Comparative Advertising Directive (1984, Misleading and Comparative Advertising Directive (1984,

amended 1997, a codified version amended 1997, a codified version 2006/114/EC, OJ L 376, 2006/114/EC, OJ L 376, 27.12.2006)27.12.2006)

Unfair Commercial Practices Directive (2005/29/EC, OJ L 149, Unfair Commercial Practices Directive (2005/29/EC, OJ L 149, 11.6.2005)11.6.2005)

Consumer Information and Contract LawConsumer Information and Contract Law Doorstep Selling Directive (85/577/EEC, OJ L 372, 31.12.1985)Doorstep Selling Directive (85/577/EEC, OJ L 372, 31.12.1985) Package Travel Directive (90/314/EEC, OJ L 158, 23.6.1990)Package Travel Directive (90/314/EEC, OJ L 158, 23.6.1990) Distance Selling Directive (97/7/EC, OJ L 144, 4.6.1997)Distance Selling Directive (97/7/EC, OJ L 144, 4.6.1997) Distance Marketing of Financial Services Directive (2002/65/EC, Distance Marketing of Financial Services Directive (2002/65/EC,

OJ L 271, 9.10.2002)OJ L 271, 9.10.2002) Consumer Credit Directive (2008/48/EC, OJ L 133, 22.5.2008)Consumer Credit Directive (2008/48/EC, OJ L 133, 22.5.2008) Timeshare Directive (2008/122/EC, OJ L 33, 3.2.2009)Timeshare Directive (2008/122/EC, OJ L 33, 3.2.2009) Consumer Rights Directive (2011/83/EU, OJ L 306, 22.11.2011)Consumer Rights Directive (2011/83/EU, OJ L 306, 22.11.2011)

Contract LawContract Law Unfair Contract Terms Directive (93/13/EEC, OJ L 95, 21.4.1993)Unfair Contract Terms Directive (93/13/EEC, OJ L 95, 21.4.1993) Sale of Consumer Goods Directive(99/44/EC,OJ L 171, 7.7.1999)Sale of Consumer Goods Directive(99/44/EC,OJ L 171, 7.7.1999) Regulations on passenger´s rights in transport contracts:Regulations on passenger´s rights in transport contracts:

Regulation on Air Passenger s´Rights on Denied Boarding and on Cancelled Regulation on Air Passenger s´Rights on Denied Boarding and on Cancelled or Delayed Flightsor Delayed Flights (EC N:o 261/2004, OJ L 46, 17.2.2004) (EC N:o 261/2004, OJ L 46, 17.2.2004)

Regulation on RRegulation on Rail Passengers` Rights and Obligations (EC N:o 1371/2007, ail Passengers` Rights and Obligations (EC N:o 1371/2007, OJ L 315, 3.12.2007)OJ L 315, 3.12.2007)

Regulation on Passengers` Rights on Bus Transport (EU N:o 181/2011, OJ L Regulation on Passengers` Rights on Bus Transport (EU N:o 181/2011, OJ L 55, 28.2.2011)55, 28.2.2011)

Regulation on Passengers` Rights on Maritime Transport (EU N:o 1177/2010, Regulation on Passengers` Rights on Maritime Transport (EU N:o 1177/2010, OJ L 334, 17.12.2010)OJ L 334, 17.12.2010)

Safety of ProductsSafety of Products Product Liability Directive (85/374/EEC, OJ L 210, 7.8.1985)Product Liability Directive (85/374/EEC, OJ L 210, 7.8.1985) Product Safety Directive (01/95/EC, OJ L 11, 15.1.2002)Product Safety Directive (01/95/EC, OJ L 11, 15.1.2002)

Access to JusticeAccess to Justice Injunctions Directive (98/27/EC, OJ L 166, 11.6.1998)Injunctions Directive (98/27/EC, OJ L 166, 11.6.1998) Cooperation Regulation (EC N:o 2006/2004, OJ L 364, 9.12.2004) Cooperation Regulation (EC N:o 2006/2004, OJ L 364, 9.12.2004)

New Trend: Towards full harmonisationNew Trend: Towards full harmonisation

The starting point: minimum directivesThe starting point: minimum directives most consumer law directives between years 1985-2002 were minimum most consumer law directives between years 1985-2002 were minimum

directivesdirectives there were only few exception, e.g., the product liability directive from 1985there were only few exception, e.g., the product liability directive from 1985

The new trend from year 2005: maximum directivesThe new trend from year 2005: maximum directives Unfair Commercial Practices Directive 2005/29/ECUnfair Commercial Practices Directive 2005/29/EC Timeshare Directive 2008/122/ECTimeshare Directive 2008/122/EC Consumer Credit Directive 2008/48/ECConsumer Credit Directive 2008/48/EC Consumer Rights Directive 2011/83/EUConsumer Rights Directive 2011/83/EU

The key questions:The key questions:1)whose interests does full harmonisation promote? 1)whose interests does full harmonisation promote? 2)is full harmonisation in practice possible?2)is full harmonisation in practice possible?

Who needs full harmonisation?Who needs full harmonisation?

Official explanations:Official explanations:1) full harmonisation promotes consumers´ confidence on 1) full harmonisation promotes consumers´ confidence on

internal marketinternal market assessment of this argument: do consumers really need assessment of this argument: do consumers really need

exactly same rules in all MSs?exactly same rules in all MSs?1)most sale of consumer goods takes still place inside MSs, cross-1)most sale of consumer goods takes still place inside MSs, cross-border shopping forms still only a small minority of the total saleborder shopping forms still only a small minority of the total sale2)when cross-border shopping takes place, a certain minimum level of 2)when cross-border shopping takes place, a certain minimum level of protection (e.g. at least two weeks cooling off -period in distance protection (e.g. at least two weeks cooling off -period in distance selling) is usually totally enough for consumers 3)instead more selling) is usually totally enough for consumers 3)instead more emphasis should be focus on the settlement of cross-border emphasis should be focus on the settlement of cross-border consumer disputes, where there are many problemsconsumer disputes, where there are many problems

• in practice many consumers avoid cross-border shopping due to the in practice many consumers avoid cross-border shopping due to the difficulties in potential disputes with traders domiciled in other countries difficulties in potential disputes with traders domiciled in other countries

2)full harmonisation promotes traders´ willingness to 2)full harmonisation promotes traders´ willingness to cross-border marketing and salecross-border marketing and sale

assessment of this argument:assessment of this argument: are the differences in consumer law rules, e.g., concerning are the differences in consumer law rules, e.g., concerning

marketing or consumer contracts, in practice so relevant in marketing or consumer contracts, in practice so relevant in cross-border marketing and sale compared to, e.g., rules on cross-border marketing and sale compared to, e.g., rules on product design, content, package, or labellingproduct design, content, package, or labelling

if there are markets for a product, and a company has if there are markets for a product, and a company has capacity for cross-border marketing, are the differences in capacity for cross-border marketing, are the differences in marketing and contract rules really in practice any relevant marketing and contract rules really in practice any relevant obstacles to make business?obstacles to make business?

compare to the situation in United States!compare to the situation in United States!

2. REGULATION OF MARKETING2. REGULATION OF MARKETING

2.1. General2.1. GeneralDomestic Marketing (ch. 2 of these lectures)Domestic Marketing (ch. 2 of these lectures) marketing in which traders and consumers are domiciled in a marketing in which traders and consumers are domiciled in a

same countrysame country

Cross-border Marketing (ch. 3 of these lectures)Cross-border Marketing (ch. 3 of these lectures) marketing in which traders and consumers are domiciled in marketing in which traders and consumers are domiciled in

different countriesdifferent countries

The regulation of marketing has usually two main aimsThe regulation of marketing has usually two main aims1)1)prohibition of unfair marketing practicesprohibition of unfair marketing practices

to prohibit unfair marketing practices, especially false and to prohibit unfair marketing practices, especially false and misleading advertisingmisleading advertising

2)2)disclosure of consumer informationdisclosure of consumer information to ensure that traders provide to consumers certain basic to ensure that traders provide to consumers certain basic

information during the marketinginformation during the marketing

Prohibition of unfair marketing practicesProhibition of unfair marketing practices Different techniques to regulate:Different techniques to regulate:

1)general clauses1)general clauses prohibits the use of all kinds of unfair marketing practices prohibits the use of all kinds of unfair marketing practices

without clearly defining what marketing practices are unfairwithout clearly defining what marketing practices are unfair

whether a marketing practice is unfair or not, is decided by whether a marketing practice is unfair or not, is decided by courtscourts

it is question of it is question of delegation of legislative powerdelegation of legislative power from the from the Parliament to courtsParliament to courts

a general clause is a general clause is a flexible way to regulatea flexible way to regulate, especially when , especially when new unfair marketing practices have been developed (e.g. new unfair marketing practices have been developed (e.g. marketing in internet)marketing in internet)

whether the system is predictable, depends on the amount whether the system is predictable, depends on the amount of case law and its accessibility in practiceof case law and its accessibility in practice

2)specific detail rules2)specific detail rules

marketing practices which are regarded as illegal are defined marketing practices which are regarded as illegal are defined by specific rules in legislationby specific rules in legislation

benefibenefit: detail rules make it for an advertiser easier to predict t: detail rules make it for an advertiser easier to predict what kind of marketing practices may be regarded as illegalwhat kind of marketing practices may be regarded as illegal

defectdefect: in case there is a need to interfere with a totally new : in case there is a need to interfere with a totally new kind of marketing practice, legislative changes have to be kind of marketing practice, legislative changes have to be done firstdone first

3)combination of general clause and specific rules3)combination of general clause and specific rules

by using this model, benefits of general clause and specific rules by using this model, benefits of general clause and specific rules may be achieved at the same timemay be achieved at the same time

in the Nordic countries the combination of general clauses and in the Nordic countries the combination of general clauses and more detail rules have traditionally been used in the regulation of more detail rules have traditionally been used in the regulation of unfair marketing practicesunfair marketing practices

however, in the Nordic countries the main focus has always been however, in the Nordic countries the main focus has always been in the use of general clausesin the use of general clauses

due to this, most principles on unfair marketing practices in the due to this, most principles on unfair marketing practices in the Nordic countries may be found in the case law instead of the Nordic countries may be found in the case law instead of the written lawwritten law

Duty to Disclose Consumer InformationDuty to Disclose Consumer Information

Detail regulationDetail regulation defines quite precisely what information a trader is obliged to defines quite precisely what information a trader is obliged to

give to consumers during the marketinggive to consumers during the marketing is much more effective than general clausesis much more effective than general clauses is used in several EU consumer law directives: they oblige is used in several EU consumer law directives: they oblige

MSs to adopt rules which set to traders duties to give certain, MSs to adopt rules which set to traders duties to give certain, specific information to consumers concerning:specific information to consumers concerning:

1) cooling-off period1) cooling-off period consumers are not able to use this right, if they are not aware consumers are not able to use this right, if they are not aware

of its existenceof its existence see, e.g., Timeshare Directive, art. 5.4.see, e.g., Timeshare Directive, art. 5.4.

2)other essential information, for example2)other essential information, for example

a) Package Travel Directive, art. 3.2. and 4.1.a) Package Travel Directive, art. 3.2. and 4.1. the identity of the trader the identity of the trader (name, address, etc.)(name, address, etc.) the legal rights of consumers the legal rights of consumers the main features of the product or service marketedthe main features of the product or service marketed all relevant information connected to the price of the product or all relevant information connected to the price of the product or

service service (including taxes, extra expenses, etc.)(including taxes, extra expenses, etc.)

b) Consumer Credit Directive, art. 4b) Consumer Credit Directive, art. 4 the annual percentage rate (the annual percentage rate (the total cost of credit to a consumer the total cost of credit to a consumer

per an year)per an year)

2.2.Unfair Commercial Practices Directive2.2.Unfair Commercial Practices Directive

replaced Misleading and Comparative Advertising Directive 84/450/EEC replaced Misleading and Comparative Advertising Directive 84/450/EEC in consumer matters, but not in unfair competition matters (a codified in consumer matters, but not in unfair competition matters (a codified version in year 2006)version in year 2006)

but how is comparative advertising regulated at this moment?but how is comparative advertising regulated at this moment?

on the contrary to the most earlier consumer law directives, UCPD is on the contrary to the most earlier consumer law directives, UCPD is a a full harmonisation directivefull harmonisation directive

taste and decency –questions taste and decency –questions e.g. discriminatory (sex, ethnic background, religion) advertising has e.g. discriminatory (sex, ethnic background, religion) advertising has

been left outside of the scope of the directive (recital 7)been left outside of the scope of the directive (recital 7)

is based on a combination modelis based on a combination model general clause (art. 5)general clause (art. 5) more specific rules (art. 6-9)more specific rules (art. 6-9) black list of always forbidden practices (Annex I)black list of always forbidden practices (Annex I)

General clause (art.5)on unfair commercial practicesGeneral clause (art.5)on unfair commercial practices

commercial practice, whichcommercial practice, whicha)is contrary to the requirements of professional a)is contrary to the requirements of professional diligence (diligence (fairness testfairness test, e.g. false or misleading , e.g. false or misleading advertising) advertising)

and and b)it b)it essentially distortsessentially distorts or is likely to distort the economic or is likely to distort the economic behaviour behaviour

of of the average consumer the average consumer ((effect testeffect test), ),

is regarded as unfair (art. 5.2)is regarded as unfair (art. 5.2)

protection of vulnerable consumersprotection of vulnerable consumers commercial practices which are directed to a clearly identifiable group of commercial practices which are directed to a clearly identifiable group of

particular consumers (e.g. children, sick or elderly people) particular consumers (e.g. children, sick or elderly people) are assessed are assessed from the perspective of the average member of that groupfrom the perspective of the average member of that group (art. 5.3. (art. 5.3.))

Supplementary specific rules:Supplementary specific rules: Misleading commercial practices (art.6-7):Misleading commercial practices (art.6-7): A commercial practice shall be regarded misleading ifA commercial practice shall be regarded misleading if

a) a) it contains false informationit contains false information and is therefore and is therefore untruthful untruthful

oror b) b) it misleads or is likely to mislead the averageit misleads or is likely to mislead the average consumerconsumer even if the information is factually correct even if the information is factually correct oror

c) c) it omits certain relevant informationit omits certain relevant information that the average that the average consumer needs consumer needs

andandin all three alternatives this practice causes or in all three alternatives this practice causes or is likely to cause is likely to cause a consumer to take an economic decision that he would not havea consumer to take an economic decision that he would not havetaken otherwisetaken otherwise

Aggressive commercial practices (art.8-9):Aggressive commercial practices (art.8-9): A commercial practice shall be regarded as aggressiveA commercial practice shall be regarded as aggressive

if if

a) it by harassment, coercion, including the use ofa) it by harassment, coercion, including the use ofphysical force, or undue influencephysical force, or undue influence

b) significantly impairs or is likely to significantly impair the average b) significantly impairs or is likely to significantly impair the average consumer´s freedom of choice and therebyconsumer´s freedom of choice and thereby

c) causes or is likely to cause him to take economicc) causes or is likely to cause him to take economicdecision that he would not have taken otherwisedecision that he would not have taken otherwise

The flexible nature of the general clauseThe flexible nature of the general clause the specific rules in art. 6-9 on misleading or aggressive commercial practices the specific rules in art. 6-9 on misleading or aggressive commercial practices

clarify, what practices may especially be regarded as unfairclarify, what practices may especially be regarded as unfair the general clause may be used in casesthe general clause may be used in cases

1)which fall under the scope of the specific rules,1)which fall under the scope of the specific rules,but also in cases but also in cases

2)which do not fall under the scope of art. 6-92)which do not fall under the scope of art. 6-9

The black listThe black list annex I of the directive contains a list of commercial practices which are in all annex I of the directive contains a list of commercial practices which are in all

circumstances unfair, so called circumstances unfair, so called typically unfair practicestypically unfair practices ( (fairness or effect fairness or effect test is not neededtest is not needed) )

Supervision of marketingSupervision of marketing should be organised in the MSs as during the former Misleading and should be organised in the MSs as during the former Misleading and

Comparative Advertising Directive: state authorities or consumer Comparative Advertising Directive: state authorities or consumer organisations are entitled to start court or administrative procedure (art.11)organisations are entitled to start court or administrative procedure (art.11)

Problematic questions in the UCPDProblematic questions in the UCPD

1)what is the expected level of knowledge of 1)what is the expected level of knowledge of average consumers?average consumers? the case law of the ECJ: the case law of the ECJ: average consumer is a reasonable well-average consumer is a reasonable well-

informed and reasonable observant and circumspectinformed and reasonable observant and circumspect a clear conflict between the common meaning of word average and this a clear conflict between the common meaning of word average and this

definition: definition: an average consumer is certainly not reasonable well-an average consumer is certainly not reasonable well-informed and observantinformed and observant

implementation in the Nordic countries: implementation in the Nordic countries: the main stress has been given to the common meaning of word the main stress has been given to the common meaning of word

“average” and the word average itself has been left away from the “average” and the word average itself has been left away from the law textlaw text

remember the different consumer images in EU and Nordic remember the different consumer images in EU and Nordic consumer law (an active information-seeker v. a passive , irrational consumer law (an active information-seeker v. a passive , irrational consumer)consumer)

this implementation may cause different interpretations in MSs, as this implementation may cause different interpretations in MSs, as many MSs adopted also the word average to their law textmany MSs adopted also the word average to their law text

2)when the condition ”2)when the condition ”is likely to essentially distort theis likely to essentially distort the economic behaviour of consumerseconomic behaviour of consumers” is met?” is met?

different wording is used in articles 6-9: “different wording is used in articles 6-9: “ is likely to cause him to take an is likely to cause him to take an economic decision that he would not have taken otherwiseeconomic decision that he would not have taken otherwise””

different wording – different meaning?different wording – different meaning? the latter definition seems to require more stronger effect to the the latter definition seems to require more stronger effect to the

behaviour of consumersbehaviour of consumers

should we assess the effect of, e.g., false informationshould we assess the effect of, e.g., false information separately, when it is hardly never decisive from the viewpoint of separately, when it is hardly never decisive from the viewpoint of

consumer´s decision-making procedure (consumer´s decision-making procedure (separate effectseparate effect)) together with all other marketing information which effects on together with all other marketing information which effects on

consumers (consumers (common effectcommon effect)) the choice between these two alternatives might have serious the choice between these two alternatives might have serious

consequencesconsequences• example: claims on environmental friendliness of marketed example: claims on environmental friendliness of marketed

productsproducts

3)the effect of the 3)the effect of the taste and decencytaste and decency –doctrine –doctrine

matters related to taste and decency were left outside of the matters related to taste and decency were left outside of the scope of the directive (recital 7)scope of the directive (recital 7)

these differ greatly among European countries, e.g., these differ greatly among European countries, e.g., concerning discriminatory (sex, ethnic background, religion) concerning discriminatory (sex, ethnic background, religion) advertisingadvertising

sometimes these values are overlapping with the protection the sometimes these values are overlapping with the protection the economic interests of consumers (which is the main target of economic interests of consumers (which is the main target of the directive)the directive)

example: marketing to minors in schoolsexample: marketing to minors in schools protection of economic interests: minors do not expect to protection of economic interests: minors do not expect to

face marketing at schools, especially marketing in which face marketing at schools, especially marketing in which teachers are involvedteachers are involved

social values: schools should be marketing-free zonessocial values: schools should be marketing-free zones in a in a world which is coming more and more commercialworld which is coming more and more commercial

2.3. Regulation of Marketing in Finland 2.3. Regulation of Marketing in Finland

I. Former regulationI. Former regulation

relevant act: Consumer Protection Act 1978, ch. 2relevant act: Consumer Protection Act 1978, ch. 2 the former general clause in the Finnish Consumer Protection Act, ch. 2, the former general clause in the Finnish Consumer Protection Act, ch. 2,

art. 1: art. 1: ““Conduct that is contrary to good practice or that is otherwise unfair Conduct that is contrary to good practice or that is otherwise unfair from the viewpoint of consumers is not allowed in marketing”from the viewpoint of consumers is not allowed in marketing”

specific articles, e.g., ch. 2, art. 2: specific articles, e.g., ch. 2, art. 2: ””False or misleading information shall not be conveyed in False or misleading information shall not be conveyed in marketing”marketing”

whether marketing had impact on the economic whether marketing had impact on the economic behaviourbehaviour of of consumers in the target group, was not relevant from the viewpoint of consumers in the target group, was not relevant from the viewpoint of law textlaw text

but was it an implied term which fulfillment was necessary before these but was it an implied term which fulfillment was necessary before these rules could be applied?rules could be applied?

II. Implementation of the UCPD in Finland II. Implementation of the UCPD in Finland

amendments to chapter 2 of the CPA (561/2008) entered into force on 1 October amendments to chapter 2 of the CPA (561/2008) entered into force on 1 October 20082008

a new general clause (ch.2, art. 1)a new general clause (ch.2, art. 1)

””Marketing which Marketing which (a)is contrary to good practice (a)is contrary to good practice oror (b)is unfair from the viewpoint of consumers, (b)is unfair from the viewpoint of consumers,

is not allowed in marketing”is not allowed in marketing” new separate general clauses on new separate general clauses on

1) marketing contrary to good practice (ch.2, art. 2)1) marketing contrary to good practice (ch.2, art. 2) based on the taste and decency –restrictionbased on the taste and decency –restriction2) unfair marketing practices (ch.2, art. 3)2) unfair marketing practices (ch.2, art. 3) based on the idea to prevent the distortion of consumers´ economic based on the idea to prevent the distortion of consumers´ economic

behaviourbehaviour in addition, (3) the CPA contains new and old specific rules on unfair marketing in addition, (3) the CPA contains new and old specific rules on unfair marketing

practicespractices

1) Marketing contrary to good practice 1) Marketing contrary to good practice

a new general clause (ch.2, art 2):a new general clause (ch.2, art 2):

””..is in clear conflict with generally accepted social values, especially if ..is in clear conflict with generally accepted social values, especially if

a)it infringes human rights or religious or political a)it infringes human rights or religious or political persuasionspersuasionsb)it contains discrimination on the basis of sex, age, b)it contains discrimination on the basis of sex, age,

ethical or geographical origin, etc.ethical or geographical origin, etc.c)it shows in a positive light activities where health, c)it shows in a positive light activities where health, general general

safety or environment are put in danger”safety or environment are put in danger”

former Finnish case law on the protection of social values in marketing former Finnish case law on the protection of social values in marketing was based only on the interpretation of the general clause on the was based only on the interpretation of the general clause on the consequence that the competence of Consumer Ombudsman and consequence that the competence of Consumer Ombudsman and Market Court was sometimes questioned Market Court was sometimes questioned

the implementation of UCPD solved this problem and there is now a the implementation of UCPD solved this problem and there is now a clear legal basis: CPA ch. 2, art. 2clear legal basis: CPA ch. 2, art. 2

Some examples from the former case law (still valid!)Some examples from the former case law (still valid!)a) violence in marketinga) violence in marketing

Market Court decision 1998:18Market Court decision 1998:18 The Raisio Group was forbidden from showing a TV commercial called Gone with The Raisio Group was forbidden from showing a TV commercial called Gone with

the Winchester, where a soldier was shot in the back. According to the Court, the Winchester, where a soldier was shot in the back. According to the Court, violence is not an acceptable way of attracting attention in advertisingviolence is not an acceptable way of attracting attention in advertising, especially , especially when violence has no connection with the product being advertised (in this case when violence has no connection with the product being advertised (in this case food stuff)food stuff)..

b)discrimination based on sexb)discrimination based on sexMarket Court decision 2001:6 (Market Court decision 2001:6 (Lola –case)Lola –case)Maskun Kalustetalo Oy was marketing sofas by using ex-Miss Finland who was Maskun Kalustetalo Oy was marketing sofas by using ex-Miss Finland who was lying in one of sofas dressed with her bikinis only. The advertisement contained, lying in one of sofas dressed with her bikinis only. The advertisement contained, e.g. following text: ”e.g. following text: ”Lola is not included in the priceLola is not included in the price!”The court stated, that !”The court stated, that the use the use of half-naked woman in an advertisement may, as such, not be regarded as unfairof half-naked woman in an advertisement may, as such, not be regarded as unfair . . However, the ad may be considered as insulting due to a way how woman is treated However, the ad may be considered as insulting due to a way how woman is treated in it. In this case the campaign was regarded as discriminative and unfair.in it. In this case the campaign was regarded as discriminative and unfair.http://www.city.fi/antitv/klippi/19821

2) Unfair marketing practices2) Unfair marketing practices

a new general clause (ch. 2, art. 3), which scope of application a new general clause (ch. 2, art. 3), which scope of application covers also the specific rules (ch. 2, art. 4-14)covers also the specific rules (ch. 2, art. 4-14)

the general clause is rather identical to art. 5 of the UCPD: the general clause is rather identical to art. 5 of the UCPD: according to ch.2 art 3: according to ch.2 art 3: unfair marketing is marketing, which isunfair marketing is marketing, which is

contrary to the requirements of professional diligence andcontrary to the requirements of professional diligence and is likely to distort the economic behaviour of consumers who is likely to distort the economic behaviour of consumers who

belong to its target groupbelong to its target group one relevant difference: average consumer is not mentioned at all!one relevant difference: average consumer is not mentioned at all!

according to Government´s Proposal (HE 32/2008), the concept according to Government´s Proposal (HE 32/2008), the concept of average consumer is equivalent to the concept of ordinary of average consumer is equivalent to the concept of ordinary consumer on the consequence that there is no need to consumer on the consequence that there is no need to mention it in the law textmention it in the law text

similar choice has been made also in the other Nordic countriessimilar choice has been made also in the other Nordic countries effects from the viewpoint of full harmonisation?effects from the viewpoint of full harmonisation?

Protection of vulnerable consumersProtection of vulnerable consumers

UCPD: a special attention should be given to the target group in the UCPD: a special attention should be given to the target group in the assessment of legality of a marketing campaignassessment of legality of a marketing campaign

CPA contains now in its general clause a clear provision on the protection CPA contains now in its general clause a clear provision on the protection of vulnerable consumers (minors, elderly people etc) of vulnerable consumers (minors, elderly people etc)

the protection of vulnerable consumers was in the Nordic countries the protection of vulnerable consumers was in the Nordic countries possible also before the law reform, but it was based on case law onlypossible also before the law reform, but it was based on case law only

marketing aimed at minors provides here a good examplemarketing aimed at minors provides here a good example main principle: main principle: marketing to minors is in principle allowed, but it must marketing to minors is in principle allowed, but it must

comply with much more stricter rules than marketing to adultscomply with much more stricter rules than marketing to adults Market Court 2000:12: Market Court 2000:12: Distribution of advertising magazine in schools and Distribution of advertising magazine in schools and

day-care centresday-care centres Family 2000 -magazine was a publication intended for Family 2000 -magazine was a publication intended for children children

and young people which contained marketing and young people which contained marketing mainly in the form of mainly in the form of articles. The Market Court banned the articles. The Market Court banned the distribution of the magazine in distribution of the magazine in schools and day-care schools and day-care centres centres without parents' permissionwithout parents' permission

3) Specific rules in ch. 2 of the CPA3) Specific rules in ch. 2 of the CPA

Identification of marketing (ch.2., art.4)Identification of marketing (ch.2., art.4) consumers should always be able to make difference between consumers should always be able to make difference between

commercial and non-commercial material and to identify the commercial and non-commercial material and to identify the person behind marketingperson behind marketing

this rule it is not based on the UCPD, but was initially created in this rule it is not based on the UCPD, but was initially created in case law already in 1980´s, and was added to CPA in year 2002case law already in 1980´s, and was added to CPA in year 2002

Market Court decision 1997:6: Market Court decision 1997:6: Commercials must be Commercials must be distinct from programmingdistinct from programmingKiss FM radio station was forbidden from broadcasting com-Kiss FM radio station was forbidden from broadcasting com-mercials unless they are distinguished from other prog-mercials unless they are distinguished from other prog-ramming by, for example, a distinctive tune used both before ramming by, for example, a distinctive tune used both before and after commercial breaks.and after commercial breaks.

Misleading or false marketing (ch.2., art. 6-7)Misleading or false marketing (ch.2., art. 6-7)

prohibition to giveprohibition to givea)misleading information a)misleading information

ororb)false information b)false information

ororb)omit relevant informationb)omit relevant information

which is which is likely to cause a consumer to take a transactional decision that likely to cause a consumer to take a transactional decision that he would not have taken otherwisehe would not have taken otherwise

rather identical to art. 6-7 of the UCPDrather identical to art. 6-7 of the UCPD

once again, the concept of the average consumer is not at all mentioned once again, the concept of the average consumer is not at all mentioned in the law text in the law text

Duty to disclose information (ch.2, art.8)Duty to disclose information (ch.2, art.8)

corresponds article 7.4. of the UCPDcorresponds article 7.4. of the UCPD marketing of marketing of individualizedindividualized products or services should always contain at products or services should always contain at

least the following information:least the following information:

1) the main features of a product and service 1) the main features of a product and service in a scale which is appropriate (a)when taking into account the marketed in a scale which is appropriate (a)when taking into account the marketed

product or service and (b)product or service and (b)the used marketing toolthe used marketing tool• different requirements for TV and newspaper adds!different requirements for TV and newspaper adds!

2) trader´s – or his agent´s - name and geographical address2) trader´s – or his agent´s - name and geographical address3) price information: the total price of the product or service including all 3) price information: the total price of the product or service including all taxestaxes

this is based also on the former case law and Decree on Price Markingthis is based also on the former case law and Decree on Price Marking the price had to be mentioned in an advertisement where a certain the price had to be mentioned in an advertisement where a certain

product or service could be identifiedproduct or service could be identified the price mentioned had to be the total price, included all taxes and the price mentioned had to be the total price, included all taxes and

service chargesservice charges

the most important information for a consumer is normally the most important information for a consumer is normally the total the total price of the product or serviceprice of the product or service

it does not matter, whether the procedure to count the total price it does not matter, whether the procedure to count the total price would in practice be rather easy, the price informed to consumers in would in practice be rather easy, the price informed to consumers in marketing has to be always the total pricemarketing has to be always the total price

Market Court decision 1992:11: Market Court decision 1992:11: Price splittingPrice splittingin advertising of cruise pricesin advertising of cruise prices

Oy Viking Line Ab had marketed its cruise prices without mentioning Oy Viking Line Ab had marketed its cruise prices without mentioning the passenger tax. The Court stated, that passenger tax is a part of the passenger tax. The Court stated, that passenger tax is a part of the price which consumers must pay for a cruise. From the the price which consumers must pay for a cruise. From the viewpoint of the consumer it makes no difference that the business viewpoint of the consumer it makes no difference that the business which sells the cruise forwards part of the price to the state in the which sells the cruise forwards part of the price to the state in the form of tax. form of tax. It is important for consumers that ads clearly indicate It is important for consumers that ads clearly indicate the total price charged by the businessthe total price charged by the business . Marketing, which do not . Marketing, which do not contain the total price of the product or service is regarded as unfair.contain the total price of the product or service is regarded as unfair.

Additional benefits (ch.2, art.12) and benefits based onAdditional benefits (ch.2, art.12) and benefits based onchance (lotteries etc.) (ch.2, art. 13-14)chance (lotteries etc.) (ch.2, art. 13-14)

are accepted in marketing only if the following two conditions are are accepted in marketing only if the following two conditions are fulfilled:fulfilled:1) benefits 1) benefits should not have a dominant roleshould not have a dominant role in the marketing in the marketing

this condition is based on the general clause, not on the specific rules this condition is based on the general clause, not on the specific rules aboveabove

2) the means of getting additional benefits should be 2) the means of getting additional benefits should be clearly explained clearly explained in in the marketingthe marketing3) a former requirement until year 2011: consumers´ right to take part on 3) a former requirement until year 2011: consumers´ right to take part on lottery or in other kind of competition could not be connected to the fact lottery or in other kind of competition could not be connected to the fact whether he was purchasing a product or not whether he was purchasing a product or not

change in June 2011: purchase may now be put as a condition to change in June 2011: purchase may now be put as a condition to participate participate

reform was argued on basis of ECJ recent case (C-304/08)reform was argued on basis of ECJ recent case (C-304/08) but was the case misunderstood in Finland?but was the case misunderstood in Finland?

Market Court decision 1995:25: Market Court decision 1995:25: Free gifts and lotteriesFree gifts and lotteriesin the direct marketing of time‑sharesin the direct marketing of time‑shares

Helsingin Resort Marketing Oy was direct marketing of Helsingin Resort Marketing Oy was direct marketing of timeshares by inviting consumers to a special meeting. timeshares by inviting consumers to a special meeting. The The predominant focuspredominant focus of an invitation letter sent out by the of an invitation letter sent out by the company to a presentation and sales meeting company to a presentation and sales meeting was on free gifts was on free gifts and lotteriesand lotteries. Based on this information, consumers had . Based on this information, consumers had difficulty in assessing the true nature of the meeting in difficulty in assessing the true nature of the meeting in question. Many of the consumers arriving at the meeting did so question. Many of the consumers arriving at the meeting did so mainly to collect the free gift promised. The marketing was mainly to collect the free gift promised. The marketing was regarded to be in conflict with the general clause because regarded to be in conflict with the general clause because the the promised benefits had a dominant position in the marketing.promised benefits had a dominant position in the marketing.

Other specific norms in ch.2 of the CPA:Other specific norms in ch.2 of the CPA:

comparative or other marketing may not cause confusion between comparative or other marketing may not cause confusion between products of different traders (art.5)products of different traders (art.5)

the former article concerning comparative advertising was the former article concerning comparative advertising was removed to Unfair Competition Actremoved to Unfair Competition Act

what is the role of this removed article in consumer protection?what is the role of this removed article in consumer protection? prohibition to use aggressive selling methods (art. 9)prohibition to use aggressive selling methods (art. 9) prohibition of inertia selling (art. 10) prohibition of inertia selling (art. 10)

it is prohibited to deliver a products or a service without an it is prohibited to deliver a products or a service without an express order in case a consumer is expected to pay it in case express order in case a consumer is expected to pay it in case he does not clearly refuse or return the goodhe does not clearly refuse or return the good

the price should not be announced as being reduced more than it the price should not be announced as being reduced more than it actually has been (art. 11)actually has been (art. 11)

the promised discount should always be realthe promised discount should always be real

2.4. Case Law 2.4. Case Law

many leading principles of the Finnish marketing law have been created by many leading principles of the Finnish marketing law have been created by the Market Court since 1978 in cases where the former general clause was the Market Court since 1978 in cases where the former general clause was appliedapplied

during the years, for informative reasons many of these principles have during the years, for informative reasons many of these principles have been added as new specific rules into ch. 2 of the CPA been added as new specific rules into ch. 2 of the CPA

however, there are still many principles which have not been codified, but however, there are still many principles which have not been codified, but are still based on the case law onlyare still based on the case law only

many of them are closely connected to the prevention of misleading and many of them are closely connected to the prevention of misleading and false marketingfalse marketing

after implementation of the UCPD, especially the effect test, the central after implementation of the UCPD, especially the effect test, the central question will be, what is going to happen to these principles? question will be, what is going to happen to these principles?

do they remain or disappear?do they remain or disappear?

1) The principle of general impression1) The principle of general impression

lawfulness of marketing is evaluated on the basis of what kind of lawfulness of marketing is evaluated on the basis of what kind of general impression consumers do get after a reasonable short general impression consumers do get after a reasonable short acquaintance of advertisementsacquaintance of advertisements

relevant information may not be presented by small letters at the end of relevant information may not be presented by small letters at the end of an advertisement an advertisement

Market Court 2001:9. Market Court 2001:9. In TV commercial subscription costs of mobile phones were shown at In TV commercial subscription costs of mobile phones were shown at the bottom of the screen in very small print, while the call time and the bottom of the screen in very small print, while the call time and trade-in offer was spread across the screen. If a specific subscription is trade-in offer was spread across the screen. If a specific subscription is advertised, typical user costs must be indicated clearly. The advertised, typical user costs must be indicated clearly. The commercial was regarded as unfair.commercial was regarded as unfair.

the significance of the new effect test to the principle of general the significance of the new effect test to the principle of general impression?impression?

2)The principle of trader´s burden of proof2)The principle of trader´s burden of proof

a trader must always be able to prove facts he presents in his a trader must always be able to prove facts he presents in his marketingmarketing

however, relevant is however, relevant is the difference between facts and matters the difference between facts and matters of taste of taste

““cheapest in the towncheapest in the town” is a fact which must be proven ” is a fact which must be proven ““best service in townbest service in town” is matter of taste which cannot be ” is matter of taste which cannot be

provenproven

this principle may also be found in art. 12 of the UCPD, which this principle may also be found in art. 12 of the UCPD, which mean that mean that it will remain also in the futureit will remain also in the future

Market Court decision 1997:2: Market Court decision 1997:2: Unproven Price Claims/Unproven Price Claims/Price GuaranteePrice Guarantee Oy PC‑Superstore used in its marketing, e.g., the following texts: Oy PC‑Superstore used in its marketing, e.g., the following texts:

a)Finland’s cheapest computer chain store a)Finland’s cheapest computer chain store b)Price guarantee: we will pay you back the price b)Price guarantee: we will pay you back the price

difference at time of purchase if you could buy the same difference at time of purchase if you could buy the same product product at a lower price from another shop.” at a lower price from another shop.”

The company produced no proof that its products were cheaper than The company produced no proof that its products were cheaper than similar products marketed by its competitors. According to the similar products marketed by its competitors. According to the Court, Court, claims concerning a ‘lowest price’ are not proven merely by claims concerning a ‘lowest price’ are not proven merely by the fact that the advertiser promises to pay the customer the the fact that the advertiser promises to pay the customer the difference if he can find the same product on sale more cheaply difference if he can find the same product on sale more cheaply somewhere elsesomewhere else. The Court regarded marketing to be in conflict with . The Court regarded marketing to be in conflict with the CPA.the CPA.

3) Comparative advertising3) Comparative advertising

may not be false or misleadingmay not be false or misleading one may compare only products which have a similar purpose of useone may compare only products which have a similar purpose of use comparison has to be objective comparison has to be objective only relevant features may be compared, e.g., priceonly relevant features may be compared, e.g., price the use of test results is accepted if the following conditions are fulfilled:the use of test results is accepted if the following conditions are fulfilled:

tests itself have been made by objective third parties tests itself have been made by objective third parties only relevant features have been tested and comparedonly relevant features have been tested and compared

Market Court 2003:5 Market Court 2003:5 Use of EuroNCAP –testUse of EuroNCAP –test Veho Ltd was marketing: “Mercedes Benz is safer than the most safest Veho Ltd was marketing: “Mercedes Benz is safer than the most safest

Volvo on the basis of a recent EuroNCAP –test.” However, the Volvo on the basis of a recent EuroNCAP –test.” However, the cars which cars which had been tested by EuroNCAP belonged to different classeshad been tested by EuroNCAP belonged to different classes. According to . According to EuroNCAP-rules cars from different classes may not be compared with EuroNCAP-rules cars from different classes may not be compared with each others due to different technical and other features, e.g., weight. each others due to different technical and other features, e.g., weight. Because this rule had been infringed and the cars were not directly Because this rule had been infringed and the cars were not directly comparable with each others, the advertising was regarded as unfair.comparable with each others, the advertising was regarded as unfair.

4) Claims on environmental friendliness of marketed 4) Claims on environmental friendliness of marketed productproduct

Consumer Ombudsman´s decision in 1999: Consumer Ombudsman´s decision in 1999: MarketingMarketingof green electricity.of green electricity.

Kainuu Electricity had marketed eco‑electricity using slogans Kainuu Electricity had marketed eco‑electricity using slogans “Eco‑electricity is the choice of families who care about the “Eco‑electricity is the choice of families who care about the environment”. However, in fact environment”. However, in fact electricity with an eco‑label electricity with an eco‑label formed only 43% of the company’s total salesformed only 43% of the company’s total sales. The danger was . The danger was that the entire company’s electricity production will be given an that the entire company’s electricity production will be given an eco‑label in consumers’ eyes. Emphasizing the environmental eco‑label in consumers’ eyes. Emphasizing the environmental effects of consumers choice of electricity was therefore effects of consumers choice of electricity was therefore misleading and was regarded as unfair.misleading and was regarded as unfair.

the influence of effect test in environmental claims?the influence of effect test in environmental claims?

5) The use of word “guarantee” in marketing5) The use of word “guarantee” in marketing

guarantee should always mean that a consumer receives a guarantee should always mean that a consumer receives a certain benefit compared to his legal rights which are based on certain benefit compared to his legal rights which are based on the lawthe law

Market Court 1994:14 Market Court 1994:14 Satisfaction guaranteeSatisfaction guaranteeA mailorder company used in its marketing concept ”satisfac-A mailorder company used in its marketing concept ”satisfac-tion guarantee” which gave to consumers one week cooling off tion guarantee” which gave to consumers one week cooling off –period. Due to the fact, that consumers already had the same –period. Due to the fact, that consumers already had the same right on the basis of CPA ch. 6, the use of word guarantee in right on the basis of CPA ch. 6, the use of word guarantee in marketing was regarded as unfair.marketing was regarded as unfair.

2.5. Supervision of marketing2.5. Supervision of marketing

1. General1. General

Different models to superviseDifferent models to supervise in principle there are different possibilities to organise supervision in principle there are different possibilities to organise supervision

of marketing:of marketing:1)supervision may be taken care by:1)supervision may be taken care by:

a)state authorities a)state authorities ororb)consumer organisations b)consumer organisations ororc)self-regulatory bodiesc)self-regulatory bodies

2)supervision may be taken care by only one of these alternatives 2)supervision may be taken care by only one of these alternatives ((single modelsingle model) or more than one at the same time () or more than one at the same time (combined modelcombined model))

3)decision whether a marketing practice is unfair or not, may in 3)decision whether a marketing practice is unfair or not, may in principle be made (a) in administrative procedure or (b) in court principle be made (a) in administrative procedure or (b) in court procedureprocedure

Supervision according to the EU consumer law:Supervision according to the EU consumer law:

Unfair Commercial Practices Directive Unfair Commercial Practices Directive obligesobliges (as the Misleading(as the Misleadingand Comparative Advertising Directive before it) Member States to and Comparative Advertising Directive before it) Member States to ensure that:ensure that:

1)state authorities and/or consumer organisations are entitled to 1)state authorities and/or consumer organisations are entitled to start start

2)court procedure or administrative procedure in order to prohibit 2)court procedure or administrative procedure in order to prohibit unfair commercial practices (art. 11)unfair commercial practices (art. 11)

self-regulatory bodies - based on business self regulation - are self-regulatory bodies - based on business self regulation - are accepted only as a supplementary, but not as the only supervisory accepted only as a supplementary, but not as the only supervisory system (art. 10system (art. 10))

2.The Nordic Model in the Supervision of Marketing2.The Nordic Model in the Supervision of Marketing

enforcement of consumers´ collective interests in the Nordic enforcement of consumers´ collective interests in the Nordic countries is taken care by a special state authority, called as the countries is taken care by a special state authority, called as the Consumer Ombudsman (CO)Consumer Ombudsman (CO)

CO is a state authority, whose task is to protect consumers´ CO is a state authority, whose task is to protect consumers´ collective interests bycollective interests by

1)supervising marketing practices1)supervising marketing practices2)supervising the use of standard contract terms2)supervising the use of standard contract terms

3)promoting consumer interests in general3)promoting consumer interests in general

these authorities were established in all four countries between these authorities were established in all four countries between years 1971‑1978 years 1971‑1978

the activities of the CO are in Sweden connected to the National the activities of the CO are in Sweden connected to the National Consumer Agency, and in Denmark and Finland (in the latter from Consumer Agency, and in Denmark and Finland (in the latter from January 2013) to the combined Competition and Consumer AgencyJanuary 2013) to the combined Competition and Consumer Agency

The most relevant acts in force which regulate the The most relevant acts in force which regulate the activities of the Nordic COs, are activities of the Nordic COs, are in Denmark the Marketing Act 2005in Denmark the Marketing Act 2005 in Finland the Consumer Protection Act 1978in Finland the Consumer Protection Act 1978 in Norway Marketing Act 1972 in Norway Marketing Act 1972 in Sweden the Marketing Act 1995in Sweden the Marketing Act 1995

English translations of these acts are available in the English translations of these acts are available in the following internet-pages:following internet-pages: Danish National Consumer Agency (Danish National Consumer Agency (http://www.forbrug.dk)) Finnish National Consumer Agency (Finnish National Consumer Agency (http://www.kuluttajavirasto.fi)) Norwegian Consumer Ombudsman (Norwegian Consumer Ombudsman (http://www.forbrukerombudet.no)) Swedish National Consumer Agency (Swedish National Consumer Agency (http://www.konsumentverket.se)

The competence of the Nordic Consumer Ombudsmen The competence of the Nordic Consumer Ombudsmen in the supervision of marketingin the supervision of marketing

1)preventive methods:1)preventive methods:

an extremely typical featurean extremely typical feature for the supervision of marketing in for the supervision of marketing in the Nordic countries the Nordic countries is the frequent use of preventive actionsis the frequent use of preventive actions

the aim is to prevent any infringements of law by providing the aim is to prevent any infringements of law by providing information for the traders who are preparing new advertising information for the traders who are preparing new advertising campaignscampaigns

often these preventive actions are not based on the law, but often these preventive actions are not based on the law, but have been created in practice during the yearshave been created in practice during the years

Different preventive methodsDifferent preventive methods

Advance opinionAdvance opinion is an opportunity (but naturally never an obligation) for an individual is an opportunity (but naturally never an obligation) for an individual

advertiser to check beforehand whether a planned marketing campaign is advertiser to check beforehand whether a planned marketing campaign is infringing the marketing law or notinfringing the marketing law or not

on request, the CO will give an oral or written statement regarding his view on request, the CO will give an oral or written statement regarding his view of the lawfulness of the planned marketing arrangementof the lawfulness of the planned marketing arrangement

once the CO has shown “green light”, he will not interfere on his own once the CO has shown “green light”, he will not interfere on his own initiative with an arrangement covered by the advance opinion and initiative with an arrangement covered by the advance opinion and implemented within a reasonable time of its deliveryimplemented within a reasonable time of its delivery

Marketing guidelinesMarketing guidelines COs have issued during the years non-binding marketing guidelines in COs have issued during the years non-binding marketing guidelines in

several sectors of business several sectors of business they are mainly based on the existing case law they are mainly based on the existing case law their purpose is to inform traders what kind of marketing practices are their purpose is to inform traders what kind of marketing practices are

infringing the lawinfringing the law a new trend: CO and branch organisations have prepared guidelines a new trend: CO and branch organisations have prepared guidelines

together together

2) repressive methods2) repressive methods

In case infringements of law are observed:In case infringements of law are observed:

a) in the first step, CO tries to a) in the first step, CO tries to persuade a trader to abandon in apersuade a trader to abandon in a voluntarily way voluntarily way marketing which is regarded as unfairmarketing which is regarded as unfair

b) in case persuasion fails CO is b) in case persuasion fails CO is entitled to impose an injunctionentitled to impose an injunction order order together with together with conditional finesconditional fines in cases which do not have in cases which do not have major importancemajor importance if the trader resists, this injunction becomes void except in Norway, where the if the trader resists, this injunction becomes void except in Norway, where the

trader has to appeal in case he resiststrader has to appeal in case he resists temporary injunction orders in urgent cases are available in all four countriestemporary injunction orders in urgent cases are available in all four countries

c) c) take legal action against a tradertake legal action against a trader in the court in the court special courts have jurisdiction to decide whether marketing is infringing the special courts have jurisdiction to decide whether marketing is infringing the

law or notlaw or not

The Nordic Market CourtsThe Nordic Market Courts

Special courts whose jurisdiction is limited to a certainSpecial courts whose jurisdiction is limited to a certainareas of law onlyareas of law only

in Finland: in Finland: the Market Court the Market Court (collective consumer law, unfair (collective consumer law, unfair competition, competition law, and in the near future also IPR- issues) competition, competition law, and in the near future also IPR- issues) http://www.oikeus.fi/markkinaoikeus/index.htm

in Sweden: in Sweden: the Market Courtthe Market Court (collective consumer law, unfair (collective consumer law, unfair competition, competition) competition, competition) http://www.marknadsdomstolen.se

in Norway: in Norway: the Market Councilthe Market Council (collective consumer law, unfair (collective consumer law, unfair competition law) competition law) http://www.markedsradet.no

In Denmark: In Denmark: the Maritime and Commercial Court of Copenhagenthe Maritime and Commercial Court of Copenhagen (also (also maritime law and other commercial law) maritime law and other commercial law) www.shret.dk

If the Nordic Market Courts regards marketing practice If the Nordic Market Courts regards marketing practice as unfair, the following sanctions are available:as unfair, the following sanctions are available:

1) 1) injunction orderinjunction order the purpose of this order is to prohibit the trader to carry on its illegal the purpose of this order is to prohibit the trader to carry on its illegal

activitiesactivities in most Nordic countries an injunction order is strengthen with a in most Nordic countries an injunction order is strengthen with a

conditional fine (which has to be paid only if the same infringement is conditional fine (which has to be paid only if the same infringement is repeated)repeated)

2) 2) corrective advertisingcorrective advertising an obligation to correct the information given in unfair marketing, an obligation to correct the information given in unfair marketing,

normally by a totally new advertisementnormally by a totally new advertisement in practice the significance of corrective advertising has been rather in practice the significance of corrective advertising has been rather

small, because marketing campaigns have in practice ended a long ago small, because marketing campaigns have in practice ended a long ago before the judgment is givenbefore the judgment is given

3) 3) market disruption feemarket disruption fee

has been available in Sweden since year 1996has been available in Sweden since year 1996 available if the trader acts intentionally or if he by carelessness violates the available if the trader acts intentionally or if he by carelessness violates the

detail rules of the Swedish Marketing Actdetail rules of the Swedish Marketing Act the ordered fee may be from SEK 5 000 to 5 000 000, (the latter about EUR the ordered fee may be from SEK 5 000 to 5 000 000, (the latter about EUR

500 000), but not more than ten percent of the trader´s annual turnover.500 000), but not more than ten percent of the trader´s annual turnover. disruption fee is an alternative sanction to an injunction orderdisruption fee is an alternative sanction to an injunction order it should be used in serious cases only, and in practice it has been used it should be used in serious cases only, and in practice it has been used

rather seldom rather seldom

No criminal sanctions or compensation of damagesNo criminal sanctions or compensation of damages these questions are dealt in general courts onlythese questions are dealt in general courts only in practice criminal sanctionsin practice criminal sanctions have been used very seldomhave been used very seldom

3. Evaluation of the Nordic enforcement system 3. Evaluation of the Nordic enforcement system from the viewpoint of effective consumer protectionfrom the viewpoint of effective consumer protection

11) in the beginning of the establishment of the Nordic consumer ) in the beginning of the establishment of the Nordic consumer protection system, protection system, serious attention was paidserious attention was paid, not only to substantive , not only to substantive law, but law, but on the enforcement of consumers´ collective interestson the enforcement of consumers´ collective interests

2) 2) enforcement of consumer protection has been the sole task of the enforcement of consumer protection has been the sole task of the Nordic ombudsmen and consumer authoritiesNordic ombudsmen and consumer authorities so far there have been no fear that the fulfilment of other tasks, so far there have been no fear that the fulfilment of other tasks,

especially, enforcement of competition law, would have started to especially, enforcement of competition law, would have started to dominate their activities by using majority of the available resourcesdominate their activities by using majority of the available resources

what is going to happen in Denmark and Finland where consumer what is going to happen in Denmark and Finland where consumer and competition authorities have been merged?and competition authorities have been merged?

3)3) the channeling of consumers´ collective protection -cases to the channeling of consumers´ collective protection -cases to special special courts courts instead of general courts has instead of general courts has created more consumer –friendly created more consumer –friendly case lawcase law

4) 4) the wide use of soft law –methodsthe wide use of soft law –methods has in practice been very has in practice been very successfulsuccessful most of the traders are willing to change their marketing practices most of the traders are willing to change their marketing practices

voluntarily, especially in clear cases, in order to avoid bad voluntarily, especially in clear cases, in order to avoid bad publicity caused by a potential procedure in the Market Courtpublicity caused by a potential procedure in the Market Court

5)5) soft law need hard law as a backing soft law need hard law as a backing without the possibility to use sanctions if necessary, the without the possibility to use sanctions if necessary, the

persuasive methods would not be so successful as they have persuasive methods would not be so successful as they have been now in practicebeen now in practice

6) 6) the lack of other sanctions than injunction makes the system the lack of other sanctions than injunction makes the system sometimes rather toothless sometimes rather toothless it is possible for unscrupulous traders to continue - at least for a it is possible for unscrupulous traders to continue - at least for a

while - and repeat the infringements in some similar, but also while - and repeat the infringements in some similar, but also unfair formunfair form

7) 7) larger competence to issue injunction orders?larger competence to issue injunction orders? should Cos have larger competence to issue injunction order should Cos have larger competence to issue injunction order

without a need to start a court case in Market Court?without a need to start a court case in Market Court?

3. Regulation and Supervision of Cross-3. Regulation and Supervision of Cross-border border MarketingMarketing

3.1. General3.1. General

Cross-border Marketing means marketing in which Cross-border Marketing means marketing in which

a trader is marketing consumer goods or services a trader is marketing consumer goods or services from one country (from one country (source countrysource country) ) to consumers who are domiciled in an other country to consumers who are domiciled in an other country

((target countrytarget country))

The basic problems in cross-border marketing:The basic problems in cross-border marketing:

1) 1) the differences between the substantive rulesthe differences between the substantive rules in source and target in source and target countriescountries

even in areas, where EU has adopted consumer law directives, even in areas, where EU has adopted consumer law directives, the aim has been to set a common minimum standard of the aim has been to set a common minimum standard of protection, not to harmonise national lawsprotection, not to harmonise national laws

marketing which is full in accordance with the laws of the source marketing which is full in accordance with the laws of the source country, may infringe the laws of the target countrycountry, may infringe the laws of the target country

2) 2) the marketing may be directed only to consumers domiciled in other the marketing may be directed only to consumers domiciled in other countries countries than where the trader is domiciledthan where the trader is domiciled

the consumer authorities/organisations in the source country do the consumer authorities/organisations in the source country do not have interest to interfere in such marketing not have interest to interfere in such marketing

3) 3) there are often differences between MSs how actively the consumer there are often differences between MSs how actively the consumer authorities/organisations are supervising marketingauthorities/organisations are supervising marketing

these differences are based on supervisory traditions, level of these differences are based on supervisory traditions, level of motivation, available resources, etc.motivation, available resources, etc.

4) 4) the consumer authorities/organisations in the target country are the consumer authorities/organisations in the target country are often powerlessoften powerless: in practice it may be difficult to enforce remedies : in practice it may be difficult to enforce remedies against a foreign traderagainst a foreign trader

Two opposite models Two opposite models of regulation and of regulation and supervisionsupervision

There exists two opposite models to regulate and to superviseThere exists two opposite models to regulate and to supervisecross-border marketing. These systems do not have to excludecross-border marketing. These systems do not have to excludeeach others; they may also be parallel or supplementaryeach others; they may also be parallel or supplementary

The home country principle The home country principle (principle of the country of origin)(principle of the country of origin) the level and substance of regulation is determined by the country the level and substance of regulation is determined by the country

in which the trader is domiciled (the source country) in which the trader is domiciled (the source country) also the compliance of regulation is supervised by the authorities also the compliance of regulation is supervised by the authorities

and/or organisations of the source countryand/or organisations of the source country political background: internal market -argumentpolitical background: internal market -argumentThe target country principleThe target country principle the level and substance of regulation is determined by the country the level and substance of regulation is determined by the country

or countries in which the effects of an infringement may be seen or countries in which the effects of an infringement may be seen (the target country)(the target country)

also the compliance of regulation is supervised by the authorities or also the compliance of regulation is supervised by the authorities or organisations situated in the target countryorganisations situated in the target country

political background: consumer protection -argumentpolitical background: consumer protection -argument

3.2. Satellite advertising3.2. Satellite advertising

TV directive (89/552/EEC, OJ N:o L 298, 17.10. 1989)TV directive (89/552/EEC, OJ N:o L 298, 17.10. 1989)

The transmitting state principleThe transmitting state principle is one application of the home country principleis one application of the home country principle art.2.1.: transmitting Member State must ensure that all television art.2.1.: transmitting Member State must ensure that all television

broadcasters under its jurisdiction comply with the law on that Statebroadcasters under its jurisdiction comply with the law on that State art.2.2.: receiving Member State must ensure the freedom of art.2.2.: receiving Member State must ensure the freedom of

reception and reception and it is not allowed to restrict retransmissionit is not allowed to restrict retransmission of of television broadcasters from other Member States, television broadcasters from other Member States, for reasons for reasons which fall within the fields coordinated by the directivewhich fall within the fields coordinated by the directive

De Agostini -caseDe Agostini -case: C-34/95 in the ECJ: C-34/95 in the ECJ

Facts of the case:Facts of the case: De Agostini -company was using services of a British company De Agostini -company was using services of a British company

which broadcasted television programmes by satellite from the which broadcasted television programmes by satellite from the UK to Denmark, Sweden and NorwayUK to Denmark, Sweden and Norway

De Agostini -company advertised a kids magazine which was De Agostini -company advertised a kids magazine which was published in series, each consisting of several issuespublished in series, each consisting of several issues

with each issue came a part of a model dinosaur: in order to with each issue came a part of a model dinosaur: in order to build one dinosaur, all issues of one series had to be collectedbuild one dinosaur, all issues of one series had to be collected

the Swedish CO took legal action against the De Agostini- the Swedish CO took legal action against the De Agostini- company in the Swedish Market Court for two reasons:company in the Swedish Market Court for two reasons:1)television advertising to children under 12 years was1)television advertising to children under 12 years was

forbidden according to the Swedish Broadcasting Lawforbidden according to the Swedish Broadcasting Law2)advertising was misleading because it did not contain2)advertising was misleading because it did not contain

information how many issues belong to each series and what information how many issues belong to each series and what was the total price of one series and one model dinosaur: was the total price of one series and one model dinosaur: it contained only the price of one individual issueit contained only the price of one individual issue the Swedish Market Court asked ECJ to a give a preliminary the Swedish Market Court asked ECJ to a give a preliminary

rulingruling

Decision of the ECJ was quite predictable:Decision of the ECJ was quite predictable:1) the TV-directive allows advertising to children in case certain basic 1) the TV-directive allows advertising to children in case certain basic

conditions are fulfilledconditions are fulfilled the Swedish authorities were not allowed to totally forbid cross-border the Swedish authorities were not allowed to totally forbid cross-border

television advertising which was directed to childrentelevision advertising which was directed to children2) the TV-directive did not prevent the consumer authorities in the target 2) the TV-directive did not prevent the consumer authorities in the target

country to take legal action against cross-border television advertising country to take legal action against cross-border television advertising in those fields which were not coordinatedin those fields which were not coordinated by the TV-directive by the TV-directive

as the TV-directive was not regulating misleading advertising, the as the TV-directive was not regulating misleading advertising, the Swedish authorities were entitled to take legal action against cross-Swedish authorities were entitled to take legal action against cross-border misleading advertisingborder misleading advertising

So, in the satellite advertising the both principles may So, in the satellite advertising the both principles may be used at the same time:be used at the same time:

1) the home country principle 1) the home country principle in those fields which are coordinatedin those fields which are coordinated by by the TV-directivethe TV-directive2) the target country principle 2) the target country principle in those fields, which are not coordinatedin those fields, which are not coordinated by the TV-directiveby the TV-directive

Audiovisual Media Services Directive (AVMSD) 2007Audiovisual Media Services Directive (AVMSD) 2007

is in fact a revised version of TV-directive 1989is in fact a revised version of TV-directive 1989 its scope of application was expanded to cover also the so its scope of application was expanded to cover also the so

called on-demand AVM –servicescalled on-demand AVM –services surprisingly, the content of the transmitting state principle was surprisingly, the content of the transmitting state principle was

not changed, or even clarified!not changed, or even clarified! this means that DeAgostini –case has not lost its significancethis means that DeAgostini –case has not lost its significance target countries have still right to take legal actions against target countries have still right to take legal actions against

cross-border TV-advertising in those fields which are not cross-border TV-advertising in those fields which are not coordinated by the AVMSD-directivecoordinated by the AVMSD-directive

a codified version of the AVMSD-directive was published in a codified version of the AVMSD-directive was published in year 2010 (2010/13/EU, OJ L 95, 15.4.2010)year 2010 (2010/13/EU, OJ L 95, 15.4.2010)

3.3. Cross-border e-commerce3.3. Cross-border e-commerce

Electronic CommerceElectronic Commerce Directive Directive (2000/31/EC, OJ L 178, (2000/31/EC, OJ L 178, 17.7.2000)17.7.2000) is mainly based on the home country principle (art.3.1.-3.2.)is mainly based on the home country principle (art.3.1.-3.2.) however, the target country may take measures against cross-however, the target country may take measures against cross-

border electronic marketing in case two conditions are border electronic marketing in case two conditions are fulfilled:fulfilled:

measures are necessary in order to protect, e.g., public measures are necessary in order to protect, e.g., public order, public health or order, public health or consumersconsumers (art. 3.4.) (art. 3.4.)

the target country has asked - without adequate results - the the target country has asked - without adequate results - the home country to take measures against illegal marketing home country to take measures against illegal marketing (art.3.4)(art.3.4)

the influence of DeAgostini-case may be clearly seen in this the influence of DeAgostini-case may be clearly seen in this directivedirective

3.4. Different methods to develop regulation 3.4. Different methods to develop regulation and supervision of cross-border marketingand supervision of cross-border marketing

Problems in enforcementProblems in enforcement even if we adopt the target country principle in theeven if we adopt the target country principle in the regulation and supervision of marketing, one centralregulation and supervision of marketing, one central problem still remains: problem still remains:

how the authorities in the target countries may in practice how the authorities in the target countries may in practice enforce sanctions against companies domiciled in other enforce sanctions against companies domiciled in other countries?countries?

Different alternatives to improve enforcementDifferent alternatives to improve enforcement1)the principle of entity1)the principle of entity2)free movement of actions for injunction2)free movement of actions for injunction3)cooperation between the national supervisory bodies3)cooperation between the national supervisory bodies4)harmonisation of the substantive marketing law4)harmonisation of the substantive marketing law

1)The Principle of Entity1)The Principle of Entity

originates from competition law: originates from competition law: all companies belonging to the same multi-national group of all companies belonging to the same multi-national group of

companies are liable for infringements of law caused by any of its companies are liable for infringements of law caused by any of its parent or subsidiary companiesparent or subsidiary companies

has already been used at least in Finlandhas already been used at least in Finland

The Finnish Market Court 1987:13.The Finnish Market Court 1987:13. McDonalds was marketing its McDonalds was marketing its products via satellite television from Britain to Finland. The Finnish products via satellite television from Britain to Finland. The Finnish CO took legal action in the Finnish Market Court against the Finnish CO took legal action in the Finnish Market Court against the Finnish subsidiary company of the multinational company in question – subsidiary company of the multinational company in question – McDonalds Osakeyhtiö. The court stated that the Finnish CPA was McDonalds Osakeyhtiö. The court stated that the Finnish CPA was applicable in the case due to the fact that applicable in the case due to the fact that marketing was intentionally marketing was intentionally targeted also to the Finnish consumerstargeted also to the Finnish consumers. The injunction order with a . The injunction order with a conditional fine was imposed to McDonalds´ Finnish subsidiary conditional fine was imposed to McDonalds´ Finnish subsidiary company.company.

2)The free movement of actions for injunction2)The free movement of actions for injunction

The directive on injunctions for the protection of consumers‘ The directive on injunctions for the protection of consumers‘ interests (interests (injunction directiveinjunction directive) (98/27/EC, OJ N:o L 166, 11.6.1998)) (98/27/EC, OJ N:o L 166, 11.6.1998)(a codified version 2009/22/EC, OJ N:o L 110,1.5.2009)(a codified version 2009/22/EC, OJ N:o L 110,1.5.2009)The main content of the injunction directiveThe main content of the injunction directive traditionally the right to take legal action against traders have been traditionally the right to take legal action against traders have been

reserved only to the consumer authorities/organisations in the same reserved only to the consumer authorities/organisations in the same country where trader is domiciled country where trader is domiciled

MSs are obliged to ensure so that also MSs are obliged to ensure so that also qualified entitiesqualified entities (which may be (which may be consumer authorities, consumer organisations or trade organisations) consumer authorities, consumer organisations or trade organisations) in target countries are entitled to take legal actions for injunction in in target countries are entitled to take legal actions for injunction in source countries when an infringement affects to the interests of source countries when an infringement affects to the interests of consumers in the target country where the qualified entity has its consumers in the target country where the qualified entity has its domiciledomicile

the right to bring an action for injunction is limited to those consumer the right to bring an action for injunction is limited to those consumer issues where the EU has adopted consumer law directives (as issues where the EU has adopted consumer law directives (as transposed into the internal legal order of the MSs)transposed into the internal legal order of the MSs)

Evaluation of the injunction directive:Evaluation of the injunction directive:

the injunction directive does not solve problems which are the injunction directive does not solve problems which are based on differences in substantive law between the MSs based on differences in substantive law between the MSs

the right to bring an action for injunction in the source country is the right to bring an action for injunction in the source country is useless when the substantive rules or the case law are stricter in useless when the substantive rules or the case law are stricter in the target country than in the source country (as it was in De the target country than in the source country (as it was in De Agostini-case)Agostini-case)

who finances the cross-border actions? who finances the cross-border actions? legal expenses cause an economic risk which in practice legal expenses cause an economic risk which in practice

prevents cross-border litigation in a quite effective way when prevents cross-border litigation in a quite effective way when authorities and organisations are working with limited financial authorities and organisations are working with limited financial resourcesresources

practical relevance of this directivepractical relevance of this directive how many times it has been used in practice?how many times it has been used in practice?

3)Cooperation Between National Supervisory 3)Cooperation Between National Supervisory

BodiesBodies

I. Informal cooperationI. Informal cooperation

the International Consumer Protection and Enforcement the International Consumer Protection and Enforcement NetworkNetwork (ICPEN) ( (ICPEN) (www.icpen.org))

was established in 1992was established in 1992 it consists of national, normally supervisory bodies from more it consists of national, normally supervisory bodies from more

than 40 different countries than 40 different countries exchange of information, collaboration (e.g. sweep days in exchange of information, collaboration (e.g. sweep days in

internet), yearly meetings, etc.internet), yearly meetings, etc. may be used between all countries, not only between the EU may be used between all countries, not only between the EU

Member StatesMember States

II. Formal collaborationII. Formal collaboration

Regulation on Consumer Protection Cooperation Regulation on Consumer Protection Cooperation (N:o 2006/2004, (N:o 2006/2004, OJ N:o L 364, 9.12.2004) OJ N:o L 364, 9.12.2004)

every MS must have a consumer authority, who has jurisdiction to every MS must have a consumer authority, who has jurisdiction to deal with cross-border marketingdeal with cross-border marketing

indirect effect in some countries, e.g., in Netherlandindirect effect in some countries, e.g., in Netherland consumer authority in the source country (consumer authority in the source country (requested authorityrequested authority) is ) is

obliged, on the request of consumer authority in the target country obliged, on the request of consumer authority in the target country (applicant authority),(applicant authority), to take all necessary measures to cease illegal to take all necessary measures to cease illegal cross-border marketing in the source country (art. 8.1.)cross-border marketing in the source country (art. 8.1.)

the requested authority may, however, determine which measures the requested authority may, however, determine which measures will be taken (art. 8.2.)will be taken (art. 8.2.)

in case legal action in a court is taken, the applicant authority has to in case legal action in a court is taken, the applicant authority has to pay the legal expenses which the plaintiff is liable to pay to the pay the legal expenses which the plaintiff is liable to pay to the defendant if the case is lost (art. 15.1.)defendant if the case is lost (art. 15.1.)

4)Harmonisation of the Substantive Law4)Harmonisation of the Substantive LawThe starting pointsThe starting points1) collaboration between supervisory bodies is useless if cross-1) collaboration between supervisory bodies is useless if cross-

border marketing which infringes the law of the target country border marketing which infringes the law of the target country is in accordance with the laws of source countryis in accordance with the laws of source country

2) directives which are based on minimum clauses 2) directives which are based on minimum clauses (a)do not eliminate the differences in substantive rules between (a)do not eliminate the differences in substantive rules between the MSs on the consequence the MSs on the consequence (b) that they are conflicting with the Internal Market -argument(b) that they are conflicting with the Internal Market -argument

Full harmonisation of legislation on unfair marketing practicesFull harmonisation of legislation on unfair marketing practices first efforts: Unfair Commercial Practices Directive 2005first efforts: Unfair Commercial Practices Directive 2005 shows the new trend in the EU Consumer Lawshows the new trend in the EU Consumer Law

instead of minimum clauses (and minimum level of instead of minimum clauses (and minimum level of protection), the aim is now full harmonisation (and protection), the aim is now full harmonisation (and abolishment of the differences between the national abolishment of the differences between the national legislation of the MSs)legislation of the MSs)

in case it works, the choice between home and target country in case it works, the choice between home and target country principles becomes less important than nowadaysprinciples becomes less important than nowadays

UCPD: will its aims be achieved?UCPD: will its aims be achieved?1) 1) is it really possible to harmonise national rules concerningis it really possible to harmonise national rules concerning marketing by using general clauses?marketing by using general clauses?

general clauses are legal instruments which delegate the decision-making general clauses are legal instruments which delegate the decision-making power from the Parliament to courtspower from the Parliament to courts

general clauses will be applied by the national courts in 27 different MSsgeneral clauses will be applied by the national courts in 27 different MSs when taking into account (a)unclear concepts used in the UCPD (e.g., when taking into account (a)unclear concepts used in the UCPD (e.g.,

average consumer, effects on consumers’ economic behaviour) and average consumer, effects on consumers’ economic behaviour) and (b)differences in cultural and legal traditions of the MSs, it is more than (b)differences in cultural and legal traditions of the MSs, it is more than obvious that the case law (created by national courts) will differ between obvious that the case law (created by national courts) will differ between MSs MSs

the consequence: the differences between the substantive laws of the the consequence: the differences between the substantive laws of the Member States may not be abolished by the UCPD Member States may not be abolished by the UCPD

2) 2) is it really possible to ensure that the supervision of marketing would in is it really possible to ensure that the supervision of marketing would in practice be at the same level in all Member States? practice be at the same level in all Member States?

the efficiency of supervision often depends on motivationthe efficiency of supervision often depends on motivation and available resources of the supervisory bodiesand available resources of the supervisory bodies most probable there will be remarkable differencesmost probable there will be remarkable differences

3) 3) if full harmonisation of the national legal rules may not be achieved, the if full harmonisation of the national legal rules may not be achieved, the choice between home and target country principle still remains relevant choice between home and target country principle still remains relevant from the viewpoint of consumer protection from the viewpoint of consumer protection

in the home country principle the lawfulness of marketing may be in the home country principle the lawfulness of marketing may be determined by a country in which the level is lowest if the trader is determined by a country in which the level is lowest if the trader is domiciled in that countrydomiciled in that country

4) 4) is UCPD based on home or target country principle?is UCPD based on home or target country principle? Commission´s first proposal (COM (2003) 356 final)Commission´s first proposal (COM (2003) 356 final)

Traders shall only comply with the national provisions of the Member State in Traders shall only comply with the national provisions of the Member State in which they are established (art. 4.1.)which they are established (art. 4.1.)Member States shall neither restrict the freedom to provide services nor restrict 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 free movement of goods for reasons falling within the field approximated by this Directive (art. 4.2.)this Directive (art. 4.2.)

due to resistance of many MSs the article 4.1 was dropped away and only due to resistance of many MSs the article 4.1 was dropped away and only article 4.2 was left to the final Directivearticle 4.2 was left to the final Directive

what does it mean?what does it mean? Is the home country principle the onlyIs the home country principle the only possible principle of regulation and supervision or may targetpossible principle of regulation and supervision or may target countries also take measures against cross-border marketingcountries also take measures against cross-border marketing which infringes the laws of target countries?which infringes the laws of target countries? this issue will be decided later on by the ECJ this issue will be decided later on by the ECJ

4. CONSUMER CONTRACT LAW4. CONSUMER CONTRACT LAW

Traditional view how contracts are concluded:Traditional view how contracts are concluded:

basic presumption:basic presumption: (1)equal parties (2) agree (1)equal parties (2) agree individually each contract terms (3)after negotiationsindividually each contract terms (3)after negotiations

pacta sund servanda:pacta sund servanda: the contract binds both parties the contract binds both parties according to its termsaccording to its terms

the legitimacy of pacta sund servanda –principle is the legitimacy of pacta sund servanda –principle is based on the presumption of equal partiesbased on the presumption of equal parties

Reality in consumer contracts:Reality in consumer contracts:

The parties, consumers and traders, are in most cases The parties, consumers and traders, are in most cases unequalunequal1) the lack of information1) the lack of information: consumers do not in the most cases : consumers do not in the most cases

have enough information (quality, price, other terms) which is have enough information (quality, price, other terms) which is necessary to conclude a good contractnecessary to conclude a good contract

2) 2) the unbalanced negotition powerthe unbalanced negotition power: even if well informed, : even if well informed, consumers do not have as much as influence on the content consumers do not have as much as influence on the content of contract terms than tradersof contract terms than traders

good example: the wide use of standard contract good example: the wide use of standard contract terms in practiceterms in practice

the presumption on equal parties does not correspond with the presumption on equal parties does not correspond with the realitythe reality

consumers need protection in their contractual relations consumers need protection in their contractual relations with traderswith traders

Different Methods to Provide Protection in Different Methods to Provide Protection in

Consumer ContractsConsumer Contracts 1) Cooling off -periods1) Cooling off -periods definition: definition: consumer's right to withdraw from a consumer's right to withdraw from a

contract with in a certain timecontract with in a certain time (normally from 7 to 14 (normally from 7 to 14 days), days), without penalty and not having to give a without penalty and not having to give a reasonreason

cooling off- periods, cooling off- periods, based on the lawbased on the law, are normally , are normally provided in those types of contracts in which it is provided in those types of contracts in which it is typical that:typical that:a)consumers do not have the possibility to compare a)consumers do not have the possibility to compare the price and quality of the marketed product with the price and quality of the marketed product with other similar products before making their decisionother similar products before making their decision

Doorstep Selling Directive, art.5Doorstep Selling Directive, art.5

b)consumers do not have an opportunity to check b)consumers do not have an opportunity to check the product before the contract is madethe product before the contract is made

Distance Selling Directive, art.6 Distance Selling Directive, art.6 c)aggressive methods of marketing are often used c)aggressive methods of marketing are often used

Timeshare Directive, art. 6 Timeshare Directive, art. 6 d)there is a risk of consumer´s over-indeptednessd)there is a risk of consumer´s over-indeptedness

Consumer Credit Directive (2008), art. 14Consumer Credit Directive (2008), art. 14

the length of cooling off-period in these directivesthe length of cooling off-period in these directives depends on whether or not the trader has fulfilled his obligation to depends on whether or not the trader has fulfilled his obligation to

provide to a consumer certain information referred to in the directivesprovide to a consumer certain information referred to in the directives

Cooling off –periods based on a contractCooling off –periods based on a contract cooling off-periods based on law should not be confused with cooling off-periods based on law should not be confused with cooling cooling

off-periods based on an individual contract onlyoff-periods based on an individual contract only (latters are usual, e.g., (latters are usual, e.g., in big department stores)in big department stores)

2) Mandatory provisions of consumer contract 2) Mandatory provisions of consumer contract lawlaw

definition: the parties are not entitled to conclude definition: the parties are not entitled to conclude individual contracts individual contracts imposing worse termsimposing worse terms regarding regarding to the weaker party to the weaker party than is provided by the than is provided by the mandatory provisions of lawmandatory provisions of law

Sale of Consumer Goods Directive (99/44/EC)Sale of Consumer Goods Directive (99/44/EC) especially in the sale of goodsespecially in the sale of goods the essential the essential

questions on consumer contracts have often been questions on consumer contracts have often been regulated by mandatory provisions of law. These regulated by mandatory provisions of law. These question are, for example:question are, for example:a) goods a) goods conformityconformity with the contract with the contract

when a product is defectivewhen a product is defective

Sale of Consumer Goods Directive, art. 2Sale of Consumer Goods Directive, art. 2

b) b) burden of proofburden of proof concerning when the lack of concerning when the lack of conformity existsconformity exists Sale of Consumer Goods Directive, art. 5.3.:Sale of Consumer Goods Directive, art. 5.3.: any lack of conformity which becomes apparent within any lack of conformity which becomes apparent within

six months of delivery is presumed to have existed at six months of delivery is presumed to have existed at the time of delivery, unless proved otherwise (so called the time of delivery, unless proved otherwise (so called legal guaranteelegal guarantee))

c) rights of the consumer (c) rights of the consumer (remediesremedies) in the case of a lack ) in the case of a lack of conformityof conformity

Sale of Consumer Goods Directive, art. 3.:Sale of Consumer Goods Directive, art. 3.: in the first place, in the first place, repair free of chargerepair free of charge or or replacementreplacement if not possible or if not done, if not possible or if not done, reduction of pricereduction of price or or the the

right to have the contract rescindedright to have the contract rescinded (the latter only in (the latter only in case the lack of conformity is not minor)case the lack of conformity is not minor)

d) d) minimum time limit for liabilityminimum time limit for liability Sale of Consumer Goods Directive, art. 5.1.:Sale of Consumer Goods Directive, art. 5.1.: at least two yearsat least two years from the delivery of the goods from the delivery of the goods

in Finland there is no maximum time for seller*s liabilityin Finland there is no maximum time for seller*s liability however, consumer has the burden of proof whether a four year ago however, consumer has the burden of proof whether a four year ago

bought product was defective already at the time of deliverybought product was defective already at the time of delivery

e) e) minimum time limit for complainingminimum time limit for complaining Sale of Consumer Goods Directive, art. 5.2.:Sale of Consumer Goods Directive, art. 5.2.: consumer must inform the seller consumer must inform the seller within two monthswithin two months from the from the

date on which he detected the lack of conformity (date on which he detected the lack of conformity (in Finland no in Finland no exact time limit, only in reasonable timeexact time limit, only in reasonable time))

However, it is not possible or even sensible to regulateHowever, it is not possible or even sensible to regulateall potential contract terms by mandatory provisionsall potential contract terms by mandatory provisions

a wide area of different kind of questions will always stay at the parties a wide area of different kind of questions will always stay at the parties to agreeto agree

that is why, there is also a need for other methods to balance the that is why, there is also a need for other methods to balance the contractual relationship between the partiescontractual relationship between the parties

3) Prohibition to use unfair contract terms in consumer 3) Prohibition to use unfair contract terms in consumer contractscontracts

the main aim: to prevent the use of unfair terms inthe main aim: to prevent the use of unfair terms in consumer contractsconsumer contracts

Unfair Contract Terms Directive (93/13/EEC)Unfair Contract Terms Directive (93/13/EEC)

Definition: unfair contract term is a contractual term which Definition: unfair contract term is a contractual term which causes causes a significant imbalancea significant imbalance in the parties´ contractual rights and in the parties´ contractual rights and obligationsobligations

scope of application:scope of application: only standard contract terms, not individually negotiatedonly standard contract terms, not individually negotiated co called core terms, included price terms, stays out of the scope of co called core terms, included price terms, stays out of the scope of

directivedirective the MSs have a right to choose whether to regulate unfair contract the MSs have a right to choose whether to regulate unfair contract

terms by (1) a general clause or terms by (1) a general clause or (2) more specific rules or by (3) a combination model(2) more specific rules or by (3) a combination model

The annex of Unfair Contract Terms DirectiveThe annex of Unfair Contract Terms Directive it contains so called it contains so called grey listgrey list of contract terms which of contract terms which

may be regarded as unfairmay be regarded as unfair typically unfair contract terms in the list are often typically unfair contract terms in the list are often

connected to the following items:connected to the following items: trader has a right to make changes to the contract trader has a right to make changes to the contract

terms including the price without consumer´s terms including the price without consumer´s approval approval

trader has excluded or limited his legal liability in case trader has excluded or limited his legal liability in case he breaches the contracthe breaches the contract

sanctions which are available for consumer´s breach sanctions which are available for consumer´s breach of contract are very hardof contract are very hard

arbitration clause which excludes access to the courtsarbitration clause which excludes access to the courts

Supervision: Unfair Contract Terms Directive, art. 7:Supervision: Unfair Contract Terms Directive, art. 7:

MSs are obliged to ensure that MSs are obliged to ensure that adequate and effective adequate and effective meansmeans exist in order to prevent the use of unfair exist in order to prevent the use of unfair contract terms in standard contracts contract terms in standard contracts

the choice between different supervision systems has the choice between different supervision systems has been left to the MSs: they may give to authorities and been left to the MSs: they may give to authorities and organisations organisations

1)a right to take legal action against a trader who is 1)a right to take legal action against a trader who is using unfair terms in standard contracts (using unfair terms in standard contracts (court court procedureprocedure) or) or2)only a right to complain to an authority which task it 2)only a right to complain to an authority which task it is to decide whether a contract term is unfair or not is to decide whether a contract term is unfair or not ((administrative procedureadministrative procedure))

supervisory system is similar to the UCPDsupervisory system is similar to the UCPD

In the Nordic countries the system to regulate andIn the Nordic countries the system to regulate andsupervise unfair contract termssupervise unfair contract terms is rather similar than is rather similar than in the marketing:in the marketing:

1) the fairness of contract terms is mainly regulated by general 1) the fairness of contract terms is mainly regulated by general clausesclauses

no combination model has been used hereno combination model has been used here case law is in practice the main source of informationcase law is in practice the main source of information

2) the Consumer Ombudsman tries to prevent the use of unfair 2) the Consumer Ombudsman tries to prevent the use of unfair contract termscontract termsa)the CO first tries to persuade a trader to abandon the use of unfair a)the CO first tries to persuade a trader to abandon the use of unfair contract termscontract termsb)in case persuasion fails, the CO may issue a permanent (in case b)in case persuasion fails, the CO may issue a permanent (in case trader does not resist) or a temporary (in urgent cases) injunction ordertrader does not resist) or a temporary (in urgent cases) injunction orderc)finally the CO is entitled to take legal action against trader in the c)finally the CO is entitled to take legal action against trader in the Market CourtMarket Court

3)negotiations with branch organisations3)negotiations with branch organisations

a preventive method a preventive method is not based on the law, but has been created in practice is not based on the law, but has been created in practice

during the yearsduring the years standard contract termsstandard contract terms have been have been negotiated between CO negotiated between CO

and branch organisationsand branch organisations in several branches of business in several branches of business a good example in Finland: a good example in Finland: Package Travel Contract TermsPackage Travel Contract Terms negotiations does not necessarily mean that the CO negotiations does not necessarily mean that the CO

approves all the contract terms in the negotiated standard approves all the contract terms in the negotiated standard contract terms, but he approves most of themcontract terms, but he approves most of them

Benefits connected to these negotiations:Benefits connected to these negotiations:

1)1)from traders´ point of view:from traders´ point of view: the probability that CO would take actions against negotiated the probability that CO would take actions against negotiated

contract terms is in practice quite smallcontract terms is in practice quite small it makes the system more predictableit makes the system more predictable

2)2)from consumers´ point of viewfrom consumers´ point of view: : law prohibits only the use of unfair contract termslaw prohibits only the use of unfair contract terms by negotiations it is possible to add to the standard contracts by negotiations it is possible to add to the standard contracts

new terms which improve consumers´ contractual position new terms which improve consumers´ contractual position compared to the earlier used terms, and even compared to compared to the earlier used terms, and even compared to the mandatory provisions of consumer contract lawthe mandatory provisions of consumer contract law

example: consumer´s right to withdraw from a package travel example: consumer´s right to withdraw from a package travel contract with rather small expenses contract with rather small expenses

4)voidness and adjustment of unfair contract terms 4)voidness and adjustment of unfair contract terms in individual contractsin individual contracts

it is a repressive control methodit is a repressive control method

Unfair Contract Terms Directive, art. 6.1:Unfair Contract Terms Directive, art. 6.1: unfair contract term do not bind on a consumer in an unfair contract term do not bind on a consumer in an

individual contractindividual contract in disputed cases consumer has to take the case to a court in disputed cases consumer has to take the case to a court

or another dispute settlement body, which will consider the or another dispute settlement body, which will consider the unfairness of a contract termunfairness of a contract term

weakness of this method is thatweakness of this method is that1)consumer has to be active - and sometimes wealthy enough - to take 1)consumer has to be active - and sometimes wealthy enough - to take the case to a dispute settlement bodythe case to a dispute settlement body2)it has directly legal effect on the disputed case only: other similar 2)it has directly legal effect on the disputed case only: other similar unfair terms in contracts made by other - passive - consumers stays unfair terms in contracts made by other - passive - consumers stays still validstill valid

Two possible legislative alternatives when a contractTwo possible legislative alternatives when a contractterm is regarded as unfair:term is regarded as unfair:

a) the court or an other dispute settlement body declares a) the court or an other dispute settlement body declares the unfair contract term as the unfair contract term as voidvoidb) the court or an other dispute settlement body may b) the court or an other dispute settlement body may adjustadjust the unfair contract term the unfair contract term

Adjustment of a contract term: Adjustment of a contract term: a court or an alternative dispute resolution body a court or an alternative dispute resolution body

changes the content of an individual contract termchanges the content of an individual contract term is a typical feature to the Nordic consumer lawis a typical feature to the Nordic consumer law even the so called core terms including the price of the even the so called core terms including the price of the

product may be adjusted in the Nordic countries product may be adjusted in the Nordic countries

5) transparency and interpretation of contract 5) transparency and interpretation of contract termsterms

Unfair Contract Terms Directive, art. 5:Unfair Contract Terms Directive, art. 5:

1)contract terms must always be drafted 1)contract terms must always be drafted in plain andin plain and intelligible languageintelligible language

2)in case there is any doubt about the meaning of a2)in case there is any doubt about the meaning of a standard contract term, the standard contract term, the interpretation which isinterpretation which is most favourable to the consumer prevails most favourable to the consumer prevails (in dubio (in dubio contra stipulatorem)contra stipulatorem)

Future of EU Consumer Contract LawFuture of EU Consumer Contract Law

review of former consumer protection rules review of former consumer protection rules ((so called so called consumer acquis)consumer acquis)

all former contract law directives have been based on all former contract law directives have been based on minimum clausesminimum clauses

the review of the consumer acquis is based on the idea of the review of the consumer acquis is based on the idea of full harmonisationfull harmonisation

this means that minimum clauses will no more be usedthis means that minimum clauses will no more be used those MSs who have used their right to provide better those MSs who have used their right to provide better

protection to their consumers (especially the Nordic protection to their consumers (especially the Nordic countries) are afraid that new directives will mean weaker countries) are afraid that new directives will mean weaker consumer protection in the futureconsumer protection in the future

Proposal for Directive of Consumer Rights2008Proposal for Directive of Consumer Rights2008

the draft was published in October 2008 (COM(2008) the draft was published in October 2008 (COM(2008) 614 final)614 final)

was based on full harmonisationwas based on full harmonisation its aim was to replace four former minimum directives its aim was to replace four former minimum directives

from years 1985-1999from years 1985-1999 Sale of consumer goods (99/44/EC)Sale of consumer goods (99/44/EC) Unfair contract terms (93/13/EC)Unfair contract terms (93/13/EC) Distance selling (97/7/EC)Distance selling (97/7/EC) Doorstep selling (85/577/EC)Doorstep selling (85/577/EC)

The main problems in the proposalThe main problems in the proposal

1)1)from the viewpoint of consumer protectionfrom the viewpoint of consumer protection: the proposal : the proposal was mainly based on the former minimum directives was mainly based on the former minimum directives without any bigger changeswithout any bigger changes

minimum level of protection had suddenly became also the minimum level of protection had suddenly became also the maximum level of protection!maximum level of protection!

how did this fulfil the requirement of EC Treaty: high level of how did this fulfil the requirement of EC Treaty: high level of protection to consumers?protection to consumers?

those countries who had used the opportunity to give better those countries who had used the opportunity to give better protection to their citizens, would have been forced to lower down protection to their citizens, would have been forced to lower down their former level of protectiontheir former level of protection

2)2)from the viewpoint of internal marketfrom the viewpoint of internal market: many relevant : many relevant contract law issues (e.g. right to compensation), which contract law issues (e.g. right to compensation), which harmonisation would have been utmost essential had harmonisation would have been utmost essential had been left totally open in the proposalbeen left totally open in the proposal

Some examplesSome examples

Time limit for seller´s liabilityTime limit for seller´s liability maximum time limit for seller´s liability would have maximum time limit for seller´s liability would have

been two years from the delivery of the goodsbeen two years from the delivery of the goods in the present directive two years is only the minimum timein the present directive two years is only the minimum time in Finland no fixed time limit is used in Finland no fixed time limit is used however, consumer has the burden of proofhowever, consumer has the burden of proof

new time limit and sustainable consumptionnew time limit and sustainable consumption cars, televisions and other durable goodscars, televisions and other durable goods what kind of message it will sent to the producers?what kind of message it will sent to the producers?

the new role of commercial guarantees?the new role of commercial guarantees?

RemediesRemedies

the conditions for compensation of damages had been the conditions for compensation of damages had been left totally unregulatedleft totally unregulated

the decision-making power on these questions had the decision-making power on these questions had been left to the MSs:been left to the MSs: under what conditions is the seller liable to under what conditions is the seller liable to

compensate the damages?compensate the damages?• strict liability, liability based on negligence (with or strict liability, liability based on negligence (with or

without turned burden of proof)without turned burden of proof) what damages should be compensated? what damages should be compensated?

• only direct damaged or also indirect damaged?only direct damaged or also indirect damaged? calculation of the size of damagescalculation of the size of damages

• only real damages or also punitive damages?only real damages or also punitive damages?

Full harmonisation of Consumer Contract Law

Is it desirable?

this is naturally a highly political question

answers to the question: from the viewpoint of businessmen: yes from the viewpoint of consumers: no, minimum

protection is enough, especially when the new proposals are not based on high level of protection

Is it possible? Is it possible? 1) practical problems: poor quality in law drafting1) practical problems: poor quality in law drafting the new full harmonisation directives are not based on the new full harmonisation directives are not based on

careful preparationcareful preparation they contain a lot of unclear definitions, which will be they contain a lot of unclear definitions, which will be

most probable interpreted differently in the MSsmost probable interpreted differently in the MSs they contain a lot of unregulated questions (e.g. tort law), they contain a lot of unregulated questions (e.g. tort law),

which will be still regulated differently in MSswhich will be still regulated differently in MSs2) principal problems: differences between the Members 2) principal problems: differences between the Members

States in legal traditions, social values, etc.States in legal traditions, social values, etc. even full harmonisation directives are implemented in a even full harmonisation directives are implemented in a

way which fits to their legal system, correspond their way which fits to their legal system, correspond their social values, and enforced in way that fits to their social values, and enforced in way that fits to their traditionstraditions

3) experiences from the new UCPD do not convince 3) experiences from the new UCPD do not convince

5. SAFETY OF PRODUCTS5. SAFETY OF PRODUCTS

Basic division: Basic division: product safety and product liabilityproduct safety and product liability

I. Product SafetyI. Product Safety legislation and supervisory activities legislation and supervisory activities which aim is to preventwhich aim is to prevent

that dangerous products are sold to consumers that dangerous products are sold to consumers is a part of the protection of the consumers´ collective interestsis a part of the protection of the consumers´ collective interests

General product safety:General product safety: all areas of product safety which are not regulated by sectoral all areas of product safety which are not regulated by sectoral

legislationlegislation Special product safety:Special product safety: product safety regulation which scope of application is limited product safety regulation which scope of application is limited

to a certain consumer goods only (e.g. toys, cosmetics, to a certain consumer goods only (e.g. toys, cosmetics, medicines, electrical appliances)medicines, electrical appliances)

General Product SafetyGeneral Product Safety Product Safety DirectiveProduct Safety Directive (2001/95/EC, OJ N:o L 11, (2001/95/EC, OJ N:o L 11,

15.1. 2002)15.1. 2002) producers may place on the market only safe producers may place on the market only safe

products (art.3.1)products (art.3.1) directive sets rules for market surveillance directive sets rules for market surveillance prior acceptance given by authoritiesprior acceptance given by authorities

is only needed in the Member State where the is only needed in the Member State where the product was first placed on the market product was first placed on the market

this principle is not mentioned in the directive, this principle is not mentioned in the directive, but is based on the case law of the ECJ (Cassis but is based on the case law of the ECJ (Cassis de Dijon –principle)de Dijon –principle)

Member States are obliged to:Member States are obliged to:1)establish or nominate authorities which task it is to1)establish or nominate authorities which task it is to take care of the supervision (art.6.2)take care of the supervision (art.6.2)

the supervisory task may not be left to consumer organisations the supervisory task may not be left to consumer organisations alonealone

2)take care that these supervisory authorities have 2)take care that these supervisory authorities have necessary measures available in case they suspect necessary measures available in case they suspect ((checks, information, sampleschecks, information, samples) or notice unsafe products in ) or notice unsafe products in the market (the market (sale prohibition, recall, etc.sale prohibition, recall, etc.)(art.6.2., art. 7, art.8))(art.6.2., art. 7, art.8)

the authorities are entitled to make by themselves a the authorities are entitled to make by themselves a decision whether a product is dangerous or not without a decision whether a product is dangerous or not without a need to take legal action in a courtneed to take legal action in a court

compare the system to the supervision of unfair compare the system to the supervision of unfair marketing and unfair contract terms!!marketing and unfair contract terms!!

II. Product liabilityII. Product liability

it is a part of the protection of consumers´ individual rightsit is a part of the protection of consumers´ individual rights is a part of tort lawis a part of tort law it is question of it is question of

liability for damages caused by a defective product liability for damages caused by a defective product to a person or other property than the defective product itselfto a person or other property than the defective product itself

Product Liability DirectiveProduct Liability Directive (85/374/EEC) (85/374/EEC) it is a full harmonisation directiveit is a full harmonisation directive scope of application:scope of application:

a) a) personal injuriespersonal injuries caused by defective products caused by defective products irrespective irrespective whether the product was in private use or notwhether the product was in private use or notb) b) damages to propertydamages to property other than the defective product itself if other than the defective product itself if the defective product was meant for the defective product was meant for private use or consumptionprivate use or consumption and primarily used for such purposesand primarily used for such purposes

The liable parties:The liable parties:

1)a producer, who is domiciled in one of the MSs1)a producer, who is domiciled in one of the MSs2)if the product has been produced outside the internal market,2)if the product has been produced outside the internal market, the trader who has imported it to the internal marketthe trader who has imported it to the internal market3)a trader, who presents himself as its producer by putting, e.g.,3)a trader, who presents himself as its producer by putting, e.g., his trade mark on the producthis trade mark on the product

The injured person has to prove:The injured person has to prove:1)the 1)the damagedamage or injury or injury2)the 2)the causal relationshipcausal relationship between the defect in the product and between the defect in the product and the injury or the damagethe injury or the damage3)the 3)the lack of safetylack of safety in the defective product: in the defective product: the product is not as the product is not as safe as consumers may reasonable expectsafe as consumers may reasonable expect

producer´s liability is producer´s liability is strictstrict: negligent behaviour from his side is no more : negligent behaviour from his side is no more neededneeded

importer´s and seller´s liability is still based on negligenceimporter´s and seller´s liability is still based on negligence

The Cross-border Nature of Product Liability CasesThe Cross-border Nature of Product Liability Cases

a person who has suffered damages may have to start a cross-a person who has suffered damages may have to start a cross-border litigation in case he prefers to claim compensation on border litigation in case he prefers to claim compensation on the basis of strict liabilitythe basis of strict liability

for example, an Estonian consumer has bought in Estonia an for example, an Estonian consumer has bought in Estonia an electrical appliance, which has been made in Italy. In case this electrical appliance, which has been made in Italy. In case this appliance causes an accident in Estonia due to its poor quality, appliance causes an accident in Estonia due to its poor quality, the Estonian consumer has to take legal action against the the Estonian consumer has to take legal action against the Italian producer instead of Estonian seller or importerItalian producer instead of Estonian seller or importer

the court procedure may take place in Estonia, but the the court procedure may take place in Estonia, but the judgment has to be enforced in Italyjudgment has to be enforced in Italy

it might be a better idea to take legal action against the it might be a better idea to take legal action against the Estonian seller or importer on the basis of negligence Estonian seller or importer on the basis of negligence

Case studies: Product Liability and TobaccoCase studies: Product Liability and Tobacco

Two Finnish court cases - Two Finnish court cases - is a producer of tobacco is a producer of tobacco products responsible for personal injuries caused by products responsible for personal injuries caused by his products?his products?

The first case: Pentti Aho v. Rettig Oy and SuomenThe first case: Pentti Aho v. Rettig Oy and SuomenTupakka OyTupakka Oy the case started already in 1988 (being the first tobacco case the case started already in 1988 (being the first tobacco case

in Europe), two years before the Finnish Product Liability Act in Europe), two years before the Finnish Product Liability Act (PLA) and strict liability entered into force: at that time (PLA) and strict liability entered into force: at that time producer´s liability was still based on negligenceproducer´s liability was still based on negligence

the plaintiff smoked from year 1941 to 1986 and got several the plaintiff smoked from year 1941 to 1986 and got several serious diseases which are typical for heavy smokers, serious diseases which are typical for heavy smokers, including cancerincluding cancer

he died of these diseases during the procedure in 1992, but his he died of these diseases during the procedure in 1992, but his inheritors continued the caseinheritors continued the case

Before the PLA plaintiff had burden of proof on Before the PLA plaintiff had burden of proof on negligence of the tobacco companies negligence of the tobacco companies causal relationship between smoking and his diseasescausal relationship between smoking and his diseases damage and its sizedamage and its size

NegligenceNegligence the medical relationship between smoking and cancer was the medical relationship between smoking and cancer was

statistically clear already in 1950´s statistically clear already in 1950´s the advertising of tobacco products was banned in Finland by the advertising of tobacco products was banned in Finland by

the Tobacco Act 1976 and warning labels in cigarette boxes the Tobacco Act 1976 and warning labels in cigarette boxes came compulsory in 1986came compulsory in 1986

before year 1976 tobacco companies had advertised their before year 1976 tobacco companies had advertised their products decades without warning their customers about the products decades without warning their customers about the dangers connected to their productsdangers connected to their products

The Helsinki Court of First Instance dismissed the caseThe Helsinki Court of First Instance dismissed the casein 1992 for the following reasons:in 1992 for the following reasons:

1)the tobacco companies had not act in negligent way 1)the tobacco companies had not act in negligent way a)because selling tobacco products had been legala)because selling tobacco products had been legal during all these years during all these years b)tobacco companies had not been shown to infringeb)tobacco companies had not been shown to infringe the rules which regulated advertising of tobaccothe rules which regulated advertising of tobacco products before advertising of tobacco products wasproducts before advertising of tobacco products was totally banned in 1976 (the CPA into force in 1978)totally banned in 1976 (the CPA into force in 1978)

2)because the existence of negligence was a basic2)because the existence of negligence was a basic condition for liability, the Court did not study att allcondition for liability, the Court did not study att all the causal relationship between plaintiff´s smokingthe causal relationship between plaintiff´s smoking and his diseasesand his diseases

The Helsinki Court of Appeal dismissed the case in The Helsinki Court of Appeal dismissed the case in 19981998 : :1)the tobacco companies had mislead consumers – and had been1)the tobacco companies had mislead consumers – and had been negligent – because they had not informed consumers on thenegligent – because they had not informed consumers on the health risks connected to the smokinghealth risks connected to the smoking2)however, the plaintiff had not been able to prove the individual2)however, the plaintiff had not been able to prove the individual causal relationship between smoking and his diseasescausal relationship between smoking and his diseases

The Supreme Court dismissed the case in 2001:The Supreme Court dismissed the case in 2001: 1)the causal relationship between smoking and the diseases of1)the causal relationship between smoking and the diseases of the plaintiff had been shown by a strong statistical relationshipthe plaintiff had been shown by a strong statistical relationship2)in spite of the fact that advertising of tobacco products had2)in spite of the fact that advertising of tobacco products had been misleading, the tobacco companies had not acted in abeen misleading, the tobacco companies had not acted in a negligent way, because the plaintiff had been aware of the healthnegligent way, because the plaintiff had been aware of the health risksrisks

Assessment of the first tobacco caseAssessment of the first tobacco case1)The causal relationship between smoking and cancer:1)The causal relationship between smoking and cancer: what amount of evidences is in practice needed to proof what amount of evidences is in practice needed to proof

the causal relationship in tobacco liability cases?the causal relationship in tobacco liability cases? smoking is not the only possible reason for these diseases, smoking is not the only possible reason for these diseases,

although it is the most probable reason when the patient has although it is the most probable reason when the patient has been a heavy smokerbeen a heavy smoker

in individual cases it may be in practice impossible to prove that in individual cases it may be in practice impossible to prove that smoking has been the main reason for the plaintiff´s cancersmoking has been the main reason for the plaintiff´s cancer

relevant questions in this context:relevant questions in this context: should the case be dismissed always when there is even a small should the case be dismissed always when there is even a small

possibility that a cancer has not been caused by tobacco possibility that a cancer has not been caused by tobacco should the evaluation of evidences be based more on the fact should the evaluation of evidences be based more on the fact

which reason has been most probable?which reason has been most probable? the Finnish Supreme Court chose the latter alternative in 2001: a the Finnish Supreme Court chose the latter alternative in 2001: a

strong statistical relationship was enoughstrong statistical relationship was enough

2)The significance of smoker´s contributory negligence2)The significance of smoker´s contributory negligence

smoker´s do nowadays certainly know that smoking smoker´s do nowadays certainly know that smoking may cause cancer because of health education and may cause cancer because of health education and warning labels in each cigarette boxwarning labels in each cigarette box

should the compensation be totally or partly denied because should the compensation be totally or partly denied because of this reason?of this reason?

the Finnish Supreme Court in 2001: smoker´s own behaviour the Finnish Supreme Court in 2001: smoker´s own behaviour was a reason to deny the compensation totallywas a reason to deny the compensation totally

interesting questions in this context are:interesting questions in this context are: how does the smoker`s impression on the size of risk how does the smoker`s impression on the size of risk

correspond with the real size of the risk?correspond with the real size of the risk? smoking causes a strong addiction especially after long and smoking causes a strong addiction especially after long and

continuous use. Is a heavy smoker in a position where he/she continuous use. Is a heavy smoker in a position where he/she is able to make totally free choices any more?is able to make totally free choices any more?

this latter question was not dealt at all in the first case!this latter question was not dealt at all in the first case!

The second case: the light cigarette caseThe second case: the light cigarette case

four light cigarette smokers took legal action against four light cigarette smokers took legal action against Amer-Yhtymä Oyj and British American Tobacco Amer-Yhtymä Oyj and British American Tobacco Nordic Oy in March 2005Nordic Oy in March 2005

the plaintiffs claimed that the plaintiffs claimed that the defendants had, by the defendants had, by marketing light cigarettes, given intentionally an marketing light cigarettes, given intentionally an impression that smoking of light cigarettes was less impression that smoking of light cigarettes was less dangerous than smoking of ordinary cigarettesdangerous than smoking of ordinary cigarettes

concerning time period after September 1991, these concerning time period after September 1991, these cases are based on Product Liability Act and on cases are based on Product Liability Act and on strict liabilitystrict liability

Finnish Product Liability Act (694/1990)Finnish Product Liability Act (694/1990)

““This Act applies to the compensation for injury or damage This Act applies to the compensation for injury or damage caused by a product caused by a product

a)to a persona)to a personb)property meant for private use and primarily used for b)property meant for private use and primarily used for such purposes by the injured party” such purposes by the injured party” (Art. 1)(Art. 1)

““Compensation shall be paid for an injury or damage in case Compensation shall be paid for an injury or damage in case the product has not been as safe as could have been the product has not been as safe as could have been expectedexpected” (Art. 3)” (Art. 3)

Government´s Proposal on Product Liability ActGovernment´s Proposal on Product Liability Act(119/1989)(119/1989)

““an injured person may not claim compensation for damages an injured person may not claim compensation for damages caused by caused by well-known dangerswell-known dangers, such as smoking of tobacco , such as smoking of tobacco products”products”

Parliament´s Second Law Committee (II LaVM 4/1990)Parliament´s Second Law Committee (II LaVM 4/1990)

because tobacco industry still denies that smoking has negative because tobacco industry still denies that smoking has negative consequences on health and has not warned consumers consequences on health and has not warned consumers on the on the base of its own initiativebase of its own initiative, the official warnings (labels in tobacco , the official warnings (labels in tobacco packets) may not release producers from their liabilitypackets) may not release producers from their liability

attention should also be paid to the strong addictionattention should also be paid to the strong addiction caused by continuous smokingcaused by continuous smoking

Conclusions on the basis of Law CommitteeConclusions on the basis of Law Committee

tobacco is without any doubts a product which is meant in Product tobacco is without any doubts a product which is meant in Product Liability Act art. 1 and the Act is applicable also to tobacco productsLiability Act art. 1 and the Act is applicable also to tobacco products

still open question: is tobacco always a product which is meant in still open question: is tobacco always a product which is meant in art.3. :”a product which is not as safe as could have been expected art.3. :”a product which is not as safe as could have been expected (lack of safety)”(lack of safety)”

The Helsinki Court of First Instance dismissed the case in 2008 for The Helsinki Court of First Instance dismissed the case in 2008 for the following reasons:the following reasons:1) the plaintiffs were able to prove the causal relationship between smoking 1) the plaintiffs were able to prove the causal relationship between smoking

and their diseasesand their diseases2) the lack of safety did not exist as consumers must have been aware of the 2) the lack of safety did not exist as consumers must have been aware of the

dangers connected to tobacco products at least starting from 1970´s dangers connected to tobacco products at least starting from 1970´s 3) for the same reason, they had taken a conscious risk by 3) for the same reason, they had taken a conscious risk by

continuing smoking continuing smoking 4) light cigarettes are less dangerous than normal cigarettes, so the 4) light cigarettes are less dangerous than normal cigarettes, so the

marketing of light cigarettes had not been misleadingmarketing of light cigarettes had not been misleading5) nicotine addiction makes its more difficult to stop smoking, but not 5) nicotine addiction makes its more difficult to stop smoking, but not

impossibleimpossible

the Helsinki Court of Appeal dismissed the case in May 2010 the Helsinki Court of Appeal dismissed the case in May 2010

the plaintiffs sent a leave to appeal to the Supreme Court in August 2010, the plaintiffs sent a leave to appeal to the Supreme Court in August 2010, but cancelled it when they agreed with the tobacco companies that both but cancelled it when they agreed with the tobacco companies that both parties would take care of their own expenses they have had in the parties would take care of their own expenses they have had in the previous instances of court previous instances of court

What happens if a plaintiff wins next time?What happens if a plaintiff wins next time?

the general effects may remain quite small, because the so the general effects may remain quite small, because the so called punitive damages are not known in Finlandcalled punitive damages are not known in Finland

tobacco companies have to take into account in their economic tobacco companies have to take into account in their economic calculations the possibility of other similar cases in the future, calculations the possibility of other similar cases in the future, which might rise the prices of tobacco productswhich might rise the prices of tobacco products

however, it is obvious that the amount of court cases will be however, it is obvious that the amount of court cases will be quite small because the risk of legal expenses (which in these quite small because the risk of legal expenses (which in these kinds of principal cases are normally very high)kinds of principal cases are normally very high)

the public health care system reduces the need to seek the public health care system reduces the need to seek monetary compensation by court actionsmonetary compensation by court actions

are the court actions a right way to distribute the costs of are the court actions a right way to distribute the costs of tobacco deceases or are other methods, e.g., taxation, more tobacco deceases or are other methods, e.g., taxation, more effective?effective?

6. THE SETTLEMENT OF INDIVIDUAL6. THE SETTLEMENT OF INDIVIDUALCONSUMER DISPUTESCONSUMER DISPUTES

6.1. General6.1. General

Different types of consumer disputes:Different types of consumer disputes:

1)individual consumer disputes1)individual consumer disputes: one consumer : one consumer against one traderagainst one trader2)mass consumer disputes2)mass consumer disputes : several individual : several individual consumers have disputes in which both the facts and consumers have disputes in which both the facts and norms are identical to each others (mainly against the norms are identical to each others (mainly against the same trader)same trader)3)domestic and cross-border disputes3)domestic and cross-border disputes: the disputing : the disputing parties have domicile in the same country (domestic parties have domicile in the same country (domestic dispute) or in different countries (cross-border dispute) or in different countries (cross-border dispute)dispute)

Domestic Consumer DisputesDomestic Consumer Disputes

consumer disputes in which consumers and traders consumer disputes in which consumers and traders have their domicile in the same countrieshave their domicile in the same countries

in principle there are two alternative ways to settlein principle there are two alternative ways to settle individual consumer disputes if the two-partyindividual consumer disputes if the two-party negotiations between a consumer and a trader have negotiations between a consumer and a trader have

failed:failed:1) 1) normal civil procedurenormal civil procedure in a court in a court2) 2) alternative dispute resolutionalternative dispute resolution (ADR) mechanisms, (ADR) mechanisms,

mainly some kind of out-of-court proceduresmainly some kind of out-of-court procedures

Civil ProcedureCivil Procedure The basic problem in the normal civil procedure in courts: The basic problem in the normal civil procedure in courts: thetheordinary civil court procedure is in most cases inapplicable for theordinary civil court procedure is in most cases inapplicable for thesettlement of consumer disputes for the following reasons:settlement of consumer disputes for the following reasons: 1)1)expenses: expenses: the high costs of litigation especially whenthe high costs of litigation especially when compared to the economic interest of the case compared to the economic interest of the case the cost rules: a losing party is often obliged to pay also the legal the cost rules: a losing party is often obliged to pay also the legal

expenses of the winner expenses of the winner 2)2)the slowness of the procedurethe slowness of the procedure especially because of the appeals to the higher instancesespecially because of the appeals to the higher instances3)3)psychological barrierspsychological barriers: many people are not willing to: many people are not willing to participate in a court procedure even if the legal expenses stayparticipate in a court procedure even if the legal expenses stay in a moderate levelin a moderate level4)4)inapplicability to solve mass consumer disputesinapplicability to solve mass consumer disputes: in a traditional: in a traditional system all consumers who want to obtain redress have to takesystem all consumers who want to obtain redress have to take part in the trialpart in the trial

6.2. Alternative Dispute Resolution6.2. Alternative Dispute Resolution

means alternative to a normal civil procedure, in means alternative to a normal civil procedure, in most cases some kind of out-of court proceduremost cases some kind of out-of court procedure

it is possible to identify several different ADR- it is possible to identify several different ADR- models to settle individual consumer disputes in the models to settle individual consumer disputes in the EU Member States, e.g., the following ones:EU Member States, e.g., the following ones:

1) the Nordic model: public dispute boards1) the Nordic model: public dispute boards established and financed by the stateestablished and financed by the state decisions of these boards are only recommen-decisions of these boards are only recommen-

dations and cannot be put into force (except in dations and cannot be put into force (except in Norway)Norway)

general jurisdiction: they handle complaints general jurisdiction: they handle complaints concerning most sectors of business, including non-concerning most sectors of business, including non-organised tradersorganised traders

no firm and fast rules concerning how the procedure no firm and fast rules concerning how the procedure should be carried out should be carried out

the procedure is totally written: no oral hearings the procedure is totally written: no oral hearings the number of decisions complied with varies between the number of decisions complied with varies between

70-75 per cent 70-75 per cent ensuring that decisions are obeyed: ensuring that decisions are obeyed:

-the use of bad publicity (Finland)-the use of bad publicity (Finland)-guarantees given by trade organisations, etc.-guarantees given by trade organisations, etc.

(Sweden) (Sweden) -enforceable decisions (Norway): the best-enforceable decisions (Norway): the best

alternative!alternative!

2)the Dutch model: the co-operative sectoral2)the Dutch model: the co-operative sectoral boardsboards

the system consists of separate boards in several the system consists of separate boards in several branches of businessbranches of business

these boards have been established and are run by these boards have been established and are run by trade and consumer organisations together trade and consumer organisations together

there is a common umbrella organisation, e.g. to issue there is a common umbrella organisation, e.g. to issue minimum procedural standards and to distribute minimum procedural standards and to distribute economic resources economic resources

boards accept only complaints against organised boards accept only complaints against organised traderstraders

oral hearings usualoral hearings usual the decisions are enforceablethe decisions are enforceable

3)The Common law model: simplified court 3)The Common law model: simplified court procedureprocedure

special simplified procedures in ordinary courts of special simplified procedures in ordinary courts of first instance or totally new and separate courts for first instance or totally new and separate courts for small claimssmall claims

often called as small claims courts or tribunalsoften called as small claims courts or tribunals originates and still most popular in common law -originates and still most popular in common law -

countriescountries basic idea: there is no need for lawyers, parties should basic idea: there is no need for lawyers, parties should

be able to appear in a court without a legal assistantbe able to appear in a court without a legal assistant in Britain, Ireland and Maltain Britain, Ireland and Malta nowadays possible also in Denmark and Norwaynowadays possible also in Denmark and Norway

The common features of these courts:The common features of these courts:

the procedure has been made simpler and more the procedure has been made simpler and more informal in comparison to the normal civil procedure informal in comparison to the normal civil procedure

a no-cost rule has been adopted a no-cost rule has been adopted the judge should try to mediate between the parties the judge should try to mediate between the parties

in order to achieve a conciliation in order to achieve a conciliation the possibility of appealing to higher courts is the possibility of appealing to higher courts is

strongly restrictedstrongly restricted the procedure is available in most civil law disputes, the procedure is available in most civil law disputes,

but only if the amount involved in the dispute does but only if the amount involved in the dispute does not exceed a certain sum of moneynot exceed a certain sum of money

Disappointing experiences concerning small claimsDisappointing experiences concerning small claimscourts:courts: they are mainly used in collecting debts by tradersthey are mainly used in collecting debts by traders attorneys are frequently used in these courts, largely by tradersattorneys are frequently used in these courts, largely by traders court personnel do not advise the ordinary citizens enoughcourt personnel do not advise the ordinary citizens enough judges often find it difficult to change from a passive to a more judges often find it difficult to change from a passive to a more

active roleactive role

Legal reforms in some countries (at least in Ireland,Legal reforms in some countries (at least in Ireland,Australia, New Zealand and in some states in the USA):Australia, New Zealand and in some states in the USA): the use of attorney's has been prohibited in small claims courts the use of attorney's has been prohibited in small claims courts the use of small claims courts in normal debt collecting by traders the use of small claims courts in normal debt collecting by traders

has been prohibitedhas been prohibited

4) the Iberian model: consumer arbitration procedure4) the Iberian model: consumer arbitration procedure special arbitration procedure for consumer disputes, especially used in special arbitration procedure for consumer disputes, especially used in

Spain and Portugal Spain and Portugal decisions are enforceabledecisions are enforceable procedure covers only those traders procedure covers only those traders

a)who are members of a certain branch organisation or a)who are members of a certain branch organisation or b)who have given their acceptance to the procedure in some other wayb)who have given their acceptance to the procedure in some other way

5) the Central-European model: private sectoral boards5) the Central-European model: private sectoral boards private, sectoral boards established and financed mainly by trade private, sectoral boards established and financed mainly by trade

organisations onlyorganisations only common, e.g., in Germany, Belgium and Austriacommon, e.g., in Germany, Belgium and Austria

6) the Baltic model6) the Baltic model consumer disputes are solved by administrative bodies, who also has consumer disputes are solved by administrative bodies, who also has

task to protect consumer´s collective intereststask to protect consumer´s collective interests administrative fines may be imposed to traders who neglect to comply administrative fines may be imposed to traders who neglect to comply

with the decisionswith the decisions used in Estonia, Latvia, Lithuaniaused in Estonia, Latvia, Lithuania

Conclusions and EU initiativesConclusions and EU initiatives the amount and quality of ADR –bodies varies a lot between the amount and quality of ADR –bodies varies a lot between

various MSsvarious MSs one of the central problems has been the coverage of ADR-one of the central problems has been the coverage of ADR-

bodies: in many countries there exists several branches of bodies: in many countries there exists several branches of business where consumers have no access to any ADR –bodybusiness where consumers have no access to any ADR –body

EU adopted in years 1998 and 2001 two recommendations EU adopted in years 1998 and 2001 two recommendations however, the purpose of these recommendations was to ensure however, the purpose of these recommendations was to ensure

that already existing ADR -bodies fulfil certain minimum that already existing ADR -bodies fulfil certain minimum requirements, not to solve the problem of lacking coveragerequirements, not to solve the problem of lacking coverage finally, in November 2011, EU published finally, in November 2011, EU published a proposal on ADR-a proposal on ADR-

directive (COM (2011) 793 final)directive (COM (2011) 793 final) the purpose of this directive isthe purpose of this directive is

oblige MSs to establish an ADR-system which covers all consumer oblige MSs to establish an ADR-system which covers all consumer disputes (by using the already existing system, if desired)disputes (by using the already existing system, if desired)

make certain procedural minimum requirements bindingmake certain procedural minimum requirements binding

6.3. Group Action for Compensation6.3. Group Action for Compensation

Group action is a court action in whichGroup action is a court action in which a)a plaintiff, either a member or a non-member of a a)a plaintiff, either a member or a non-member of a

specified groupspecified group b)brings a legal action in a court for the benefit of a b)brings a legal action in a court for the benefit of a

specified group specified group c)without the express permission of the group c)without the express permission of the group

members, and members, and d)this results in a judgement that is binding both for d)this results in a judgement that is binding both for

and against all the members of the groupand against all the members of the group

Based on who the plaintiff may be, group actions may be dividedBased on who the plaintiff may be, group actions may be dividedinto three different types: into three different types:

1) 1) class actionsclass actions (plaintiff is a private person) (plaintiff is a private person)2) 2) actions by organizationsactions by organizations (plaintiff is, e.g., (plaintiff is, e.g.,

a consumer or environmental organization)a consumer or environmental organization)3) 3) public actionspublic actions (plaintiff is a state or municipial authority) (plaintiff is a state or municipial authority)

In the area of consumer protection, group action can be used: In the area of consumer protection, group action can be used: a) a) action for injunctionaction for injunction

in most European countries action for injunction is available asin most European countries action for injunction is available as a method to protect consumer´s collectice interestsa method to protect consumer´s collectice interests

b) b) action for compensationaction for compensation at this moment this kind action is still quite rare in Europe at this moment this kind action is still quite rare in Europe

outside the Nordic countriesoutside the Nordic countries more common outside Europe (the United States, Canada and more common outside Europe (the United States, Canada and

Australia as most famous examples)Australia as most famous examples)

Nordic group actionsNordic group actions for compensationfor compensation

1) The Swedish Group Action Act (SFS 2002: 599)1) The Swedish Group Action Act (SFS 2002: 599) entered into force in January 2003entered into force in January 2003 so far about 10 cases altogether, many still pendingso far about 10 cases altogether, many still pending

2) The Norwegian Group Action2) The Norwegian Group Action chapter 35 of the new Norwegian Act on Civil Procedurechapter 35 of the new Norwegian Act on Civil Procedure entered into force in January 2008entered into force in January 2008

3)3) The Finnish Group Action Act (444/2007)The Finnish Group Action Act (444/2007) entered into force in October 2007entered into force in October 2007 so far no casesso far no cases

4) The Danish Group Action4) The Danish Group Action entered into force in January 2008entered into force in January 2008 so far at least one pending caseso far at least one pending case

Scope of application: Scope of application: is in most Nordic countries general: group action is possible in all is in most Nordic countries general: group action is possible in all

kinds of civil disputes on the condition that they fulfil the general kinds of civil disputes on the condition that they fulfil the general requirements of group actions, e.g., requirements of group actions, e.g., 1)it is question of disputes where the facts are identical or at least 1)it is question of disputes where the facts are identical or at least identical and identical and 2)it is sensible to handle these disputes together in one trial2)it is sensible to handle these disputes together in one trial

in Finland scope of application is restricted to only mass consumer in Finland scope of application is restricted to only mass consumer disputes disputes

Types of group action availableTypes of group action available in Denmark, Norway and Sweden the plaintiff may be a member of in Denmark, Norway and Sweden the plaintiff may be a member of

the group (class action), an organisation, who is protecting the the group (class action), an organisation, who is protecting the interests of a certain group of citizens (action by organisation), or interests of a certain group of citizens (action by organisation), or state authority, as the Consumer Ombudsman (public action)state authority, as the Consumer Ombudsman (public action)

in Finland only a public action, in which the CO acts as a plaintiff, is in Finland only a public action, in which the CO acts as a plaintiff, is possiblepossible

How the group is formed?How the group is formed? in group actions judgements have legal effect for all members of the in group actions judgements have legal effect for all members of the

group, although they are not parties to the case group, although they are not parties to the case there are two opposite ways how the group may be formed: opt out or there are two opposite ways how the group may be formed: opt out or

opt inopt in opt opt out: out:

• all persons who fill certain requirements become automatically all persons who fill certain requirements become automatically members of the group members of the group

• those, who do not want to be members of the group have to use their those, who do not want to be members of the group have to use their right to opt out right to opt out

opt in:opt in:• only those persons, who have joined the group by registration, will only those persons, who have joined the group by registration, will

be members of the group and will be covered by the judgement. be members of the group and will be covered by the judgement. in Sweden and Finland only opt in –alternative is available in Sweden and Finland only opt in –alternative is available in Norway and Denmark (in the latter country in public actions only)in Norway and Denmark (in the latter country in public actions only)

also opt out -alternative is possible in mass disputes, where individual also opt out -alternative is possible in mass disputes, where individual court actions are not sensible, e.g., due to the fact that the monetary court actions are not sensible, e.g., due to the fact that the monetary interest of individual cases is so lowinterest of individual cases is so low

The costs of litigationThe costs of litigation

in all Nordic countries the main rulein all Nordic countries the main rule is that the losing party is is that the losing party is obliged to pay the legal expenses of the winnerobliged to pay the legal expenses of the winner

in Finland and Sweden only the parties in the group action are in Finland and Sweden only the parties in the group action are responsible for the costsresponsible for the costs

in Denmark and Norway the members may become partly in Denmark and Norway the members may become partly responsible of the legal expensesresponsible of the legal expenses

• the ceiling of members´ liability will be decided by the court the ceiling of members´ liability will be decided by the court already in the beginning of the trial already in the beginning of the trial

• in case the ceiling is individual and not collective, this in case the ceiling is individual and not collective, this makes it possible for the potential members of the group to makes it possible for the potential members of the group to assess, whether it is economically sensible to opt in or notassess, whether it is economically sensible to opt in or not

Evaluation of the Nordic group actionsEvaluation of the Nordic group actions

1) who has afford to a group action for compensation?1) who has afford to a group action for compensation?

The major obstacle to the use of group action for compensation inThe major obstacle to the use of group action for compensation inthe Nordic countries is the high costs of litigationthe Nordic countries is the high costs of litigation so far there have been rather few cases, e.g., in Sweden only 1-2 so far there have been rather few cases, e.g., in Sweden only 1-2

new cases per year since 2003new cases per year since 2003

Several possible ways to reduce the high costs of litigation: Several possible ways to reduce the high costs of litigation: a)no members liability as it is now possible in Denmark and a)no members liability as it is now possible in Denmark and NorwayNorwayb)ceiling for liability to pay the legal expenses of the winnerb)ceiling for liability to pay the legal expenses of the winnerc)no-cost rule (so called American rule)c)no-cost rule (so called American rule)d)conditional fee -payment (no results, no payment -system)d)conditional fee -payment (no results, no payment -system)e)public or private funding systems (e.g. in Canada)e)public or private funding systems (e.g. in Canada)

2) long duration of the procedure 2) long duration of the procedure seems also to be one the main problems connected to seems also to be one the main problems connected to

these actionsthese actions in Sweden many of the started group actions are still in Sweden many of the started group actions are still

pending casespending cases usual tactics for defendants: a plea of trial and separate usual tactics for defendants: a plea of trial and separate

appeal on the procedural requirements appeal on the procedural requirements central questions:central questions:

whether the defendant should have a right to make a separate appeal whether the defendant should have a right to make a separate appeal in the beginning of the procedure if his plea of trial concerning the in the beginning of the procedure if his plea of trial concerning the preconditions for a group action has been rejected in the District preconditions for a group action has been rejected in the District Court Court

whether there should be some kind of priority system in the Courts whether there should be some kind of priority system in the Courts of Appeal, when these kinds of actions are dealt withof Appeal, when these kinds of actions are dealt with

3) the problem of low-value claims3) the problem of low-value claims in spite of the fact that the combined monetary interest of in spite of the fact that the combined monetary interest of

the mass dispute can be millions of euro, the damages the mass dispute can be millions of euro, the damages suffered by individual consumers may be rather lowsuffered by individual consumers may be rather low

this will often discourage consumers to register when a this will often discourage consumers to register when a group action is based on opt in –model onlygroup action is based on opt in –model only

one alternative would be the adoption of opt out -model at least when it one alternative would be the adoption of opt out -model at least when it is question of low-value claims also in Sweden and Finlandis question of low-value claims also in Sweden and Finland

however, even opt out –model seems to be rather ineffective when the however, even opt out –model seems to be rather ineffective when the damages caused to individual group members are, e.g., only 100 euro damages caused to individual group members are, e.g., only 100 euro or even less.or even less.

second alternative: second alternative: group action for collective compensation of group action for collective compensation of damages damages (instead of distribution of the profit, the plaintiff e.g. a (instead of distribution of the profit, the plaintiff e.g. a consumer organisation would keep it in order to finance future actions) consumer organisation would keep it in order to finance future actions)

6.4. Cross-border Consumer Disputes6.4. Cross-border Consumer Disputes

Cross-border consumer disputesCross-border consumer disputes: : disputes, where a consumer and a trader are disputes, where a consumer and a trader are

domiciled in different countriesdomiciled in different countries Typical problems in cross-border consumer disputes:Typical problems in cross-border consumer disputes:

1)communicative problems 1)communicative problems • language problems, identification of the trader, etc. language problems, identification of the trader, etc.

2)what is the applicable law? 2)what is the applicable law? 3)what dispute settlement bodies are available/ 3)what dispute settlement bodies are available/ have jurisdiction in case the parties do not reach have jurisdiction in case the parties do not reach a settlement in two-party negotiations a settlement in two-party negotiations

The Applicable Law in Cross-Border Consumer The Applicable Law in Cross-Border Consumer

ContractsContracts The Rome I Regulation n:o 593/2008The Rome I Regulation n:o 593/2008 enteredentered into force in December 2009into force in December 2009 replaced the Rome Convention on the Law Applicable replaced the Rome Convention on the Law Applicable

to Contractual Obligations from year 1980 except in to Contractual Obligations from year 1980 except in UK and DenmarkUK and Denmark

includes an article concerning consumer contracts includes an article concerning consumer contracts (art. 6). According to it, if the trader (art. 6). According to it, if the trader a)is carrying on business activities in the country a)is carrying on business activities in the country where the consumer has his habitual residence where the consumer has his habitual residence ororb)direct such activities to that country b)direct such activities to that country the contract is governed by the law of the country in the contract is governed by the law of the country in which the consumer has his habitual residence which the consumer has his habitual residence

a trader cannot deprive the protection given by the a trader cannot deprive the protection given by the Regulation by using a choice-of-law clauseRegulation by using a choice-of-law clause

Jurisdiction of Courts in Cross-Border Jurisdiction of Courts in Cross-Border Consumer DisputesConsumer Disputes

the starting point: court decisions are traditionally not the starting point: court decisions are traditionally not enforceable in other countriesenforceable in other countriesThe Regulation N:o 44/2001 on Jurisdiction and the The Regulation N:o 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Recognition and Enforcement of Judgments in Civil and Commercial MattersCommercial Matters (OJ L 12, 16.1.2001) (OJ L 12, 16.1.2001)

contains a provision (art. 15) which gives protection to contains a provision (art. 15) which gives protection to consumers if: consumers if: 1)it is question of credit or instalment contract 1)it is question of credit or instalment contract connected to the sale of goods connected to the sale of goods oror 2)it is question of consumer contract and the contract 2)it is question of consumer contract and the contract has been concluded with a trader has been concluded with a trader

a) who is carrying on business activities in the Member a) who is carrying on business activities in the Member State where the consumer is domiciled State where the consumer is domiciled oror

b) who is directing such activities to the Member State b) who is directing such activities to the Member State where consumer is domiciledwhere consumer is domiciled

In case one of these conditions are fulfilled:In case one of these conditions are fulfilled:

1) a consumer is entitled to take legal action against a 1) a consumer is entitled to take legal action against a trader in the courts of the Member State where he is trader in the courts of the Member State where he is domiciled (art. 16.1.)domiciled (art. 16.1.)

2) proceedings may be brought against a consumer only in 2) proceedings may be brought against a consumer only in the courts of that Member State where he is domiciled the courts of that Member State where he is domiciled (art. 16.2.)(art. 16.2.)

3) judgment given by the court of the Member State where 3) judgment given by the court of the Member State where the consumer is domiciled may be enforced in an other the consumer is domiciled may be enforced in an other MS where the trader has his domicile or propertyMS where the trader has his domicile or property

The European Consumer Centres The European Consumer Centres Network (ECC-Net)Network (ECC-Net)

the starting point: in cross-border litigation the costs the starting point: in cross-border litigation the costs are normally much higher than in purely domestic are normally much higher than in purely domestic litigation and thus form a much higher obstacle to litigation and thus form a much higher obstacle to the use of ordinary court procedurethe use of ordinary court procedure

ECC-Net started in the beginning of year 2005ECC-Net started in the beginning of year 2005 replaced the former European Extra-Judicial replaced the former European Extra-Judicial

Network (EEJ-Net) which started as a pilot program Network (EEJ-Net) which started as a pilot program in October 2001in October 2001

The new network is based on The new network is based on 1)at least one European Consumer Centre in each1)at least one European Consumer Centre in each

Member StateMember State2)ADR- bodies in all Member States2)ADR- bodies in all Member States

The activities of European Consumer Centres The activities of European Consumer Centres 1)to give legal advice to consumers who have faced 1)to give legal advice to consumers who have faced

cross-border consumer problemscross-border consumer problems 2)to give assistance in the settlement of disputes by 2)to give assistance in the settlement of disputes by

clarifying the facts and mediating between the clarifying the facts and mediating between the disputing partiesdisputing parties

3)to serve as a special clearing house in unsettled 3)to serve as a special clearing house in unsettled casescases

a)to find out competent out-of-court dispute a)to find out competent out-of-court dispute settlement body in MS where trader has his domicilesettlement body in MS where trader has his domicile

b)translates consumer´s complaint and sends it to b)translates consumer´s complaint and sends it to the competent dispute settlement body in other MSthe competent dispute settlement body in other MS

the idea is that cross-border disputes will be settled the idea is that cross-border disputes will be settled in some of the out-of-court procedures in the in some of the out-of-court procedures in the Member State where the trader is domiciledMember State where the trader is domiciled

the existing ADR-bodies in MSs may be found in a the existing ADR-bodies in MSs may be found in a database which is updated by the Commission:database which is updated by the Commission:

http://ec.europa.eu/consumers/redress_cons/schemes_en.htm