Estonian Consumer Protection Board Yearbook

2012

2

The Consumer Protection Board of Estonia would like to thank all those

who contributed to the preparation of this annual report. Special thanks

should go to Marika Merilai, Katrin Talihärm, Merle Kangur and Märt Ots.

3

Table of content

Foreword ................................................................................................................................................. 4

About the Consumer Protection Board of Estonia .................................................................................. 7

A campaign that lasted the whole year: right to claim ......................................................................... 12

The reality of responsible lending ......................................................................................................... 15

The charm and pain of e-commerce ..................................................................................................... 19

Tourism services: success stories and drawbacks ................................................................................. 22

Busy advertising year ............................................................................................................................ 26

Preparations for opening up the electricity market .............................................................................. 30

The Consumer Protection Board in figures ........................................................................................... 34

4

Foreword

The year 2012 was a period of moderate growth for the Estonian economy

after recovery from the economic recession, one in which national gross

domestic product increased by approximately three percent. Although income

improved, the rising price of convenience goods and food absorbed salary

growth. This was the reason that no significant activation took place in the

consumer environment. Conservatism persisted, and expectations of quality

increased together with an awareness of the legal environment in terms of

consumption. The Consumer Protection Board also contributed to the latter

process.

In spring we organised an information campaign about the application of the

right to claim in retail business. This event was driven by a check that was

carried out at the end of 2011, which showed by its results that almost half of

retailers did not provide the correct information to consumers. Information

and sanctions helped to reduce the percentage of violations to less than 10%

by the autumn. It is important to add that entrepreneurs also had a role in

such success levels; their activity and readiness allowed information materials

to be disseminated to service personnel in the retail sector as well as to

consumers. In conclusion, it was the remarkably efficient and combined

regulation of the market, involving cooperation in the field of market

surveillance and communications, whilst simultaneously testing the

cooperative ability of the entire Board in the development of reliability,

initiative and efficiency.

The training series entitled “Suunanäitaja” was launched in 2011, being

organised in cooperation with the Estonian Chamber of Commerce and

Industry, and it also helped to significantly improve the results. Within the

framework of this project, five training courses for undertakings were held in

2012, which had as their main themes those issues that were related to the

submission of claims and warranties. Almost 300 people in total participated

in the training courses.

We also decided to take the aforementioned positive experience as a model for

the organisation of our autumn campaign, “Laena targalt!” (Lend Wisely).

The campaign concentrated on the principle of responsible lending and

related consumer rights. Active, and also partially painful, feedback from the

5

companies operating in this field - financial institutions offering consumer

credit - confirmed the relevance of the topics that had been raised. The

campaign took place simultaneously with preparations for the amendments

to the legislation that concerned responsible lending in ministries, and also

provided an input to the market for the prevention of loan advertisements

that trod a fine line between good and bad practice and ethics in the

Christmas period.

Furthermore, together with the local representation of the European

Commission and the Chamber of Commerce and Industry, we introduced to

the public the idea of a self-regulating consumer environment and its

participants: responsible dealers and informed consumers. The topic was

discussed in November at the international conference on the development of

the consumer environment: “Influential Consumers and Responsible

Undertakings”.

Active cooperation was developed with the University of Tartu and the Tallinn

University. We participated in the strategy design processes in the field of

financial literacy, responsible business and tourism, and contributed to the

strengthening of consumer education as part of the school programme.

Furthermore, we have provided input into several legislative amendments

together with the Ministries of Finance, Justice and Economic Affairs and

Communications. We are also happy to have become a credible partner for all

representative organisations in the business sector that are related to the

operations of the Consumer Protection Board. The Board has won several

successful court cases and will hopefully be as successful in the future.

The staff behind the chairmen of the Consumer Complaints Committee who

operate at the Consumer Protection Board changed significantly in 2012:

three new chairmen of the Committee were added and one former chairman

retired. The Committee takes steps towards the harmonisation of its

operating principles and practices. The range of complaints handled by the

Committee is constantly broadening and is aimed mainly towards more

complicated disputes.

On the negative side, the tourism sector again managed to surprise both us

and the public. In the summer, two travel agencies declared their insolvency.

In addition to underlining the inability of the owners to continue to manage

6

the companies, the procedures undertaken by the Board also revealed the fact

that the companies had submitted inaccurate information about their sales

results. Therefore, their warranties did not meet the actual requirements and

consumers who had been deprived of their travel had to suffer a major

financial blow.

Somewhat unintentionally, we gained the public’s attention in connection

with the preparations for opening up the electricity market. On the top of this

attention, the Consumer Protection Board became a major spokesperson in

terms of opening up the electricity market as a whole. In our more specific

field, which is mainly the surveillance of marketing activities and contract

terms offered by electricity vendors, the successful contestation of the fine for

the premature termination of contracts can be selected as a highlight.

Another aspect of our activities that has been less well discussed in public was

the implementation of the strategy drafted in 2011 that sought to ensure the

more efficient internal operation of the Board. The Trade Division, which is a

step below the Market Surveillance Department, became more regionally-

centred, highlighting teamwork in particular. We developed a model for the

assessment of service staff competencies and carried out a preliminary

assessment. This improved the objectivity of the assessment of work results for

service staff who are carrying out similar duties.

I believe that for the year 2013, which should be similar to the previous year

in terms of its general figures, our preparation, reputation and reliability will

be better than ever before. This sets higher demands for the Consumer

Protection Board and we must be ready to bear more responsibility. The

general development of the Estonian consumer environment could continue

towards balance and quality in 2013. This essentially requires a concerted

effort by both consumers and undertakings, first and foremost in the field of

organising and strengthening already-existing organisations.

Andres Sooniste,

Director General of the Consumer Protection Board

7

About the Consumer Protection Board of Estonia

The organisation of the Consumer Protection Board’s work was changed

slightly in 2012. The reorganisation mainly concerned the Trade Division,

which deals with trade surveillance and its regional units. Work was also

continued so that the strategic goals that were set for the period leading up

to 2016 could be met and, together with some high quality partners, the

Board organised the first international conference on the development of

the consumer environment in Estonia.

Until the autumn-winter period of 2012, ten regional units operated

beneath the Trade Division in addition to Tallinn: Haapsalu, Jõhvi,

Kuressaare, Paide, Pärnu, Rakvere, Tartu, Viljandi, Võru and Valga. In these

centres there was mainly one person who was responsible for carrying out

supervision and counselling for consumers. After the reorganisation, four

major regional surveillance and counselling teams started work. Tallinn

was the centre of the team that covered North Estonia, while Jõhvi handled

North-East Estonia, Tartu covered South Estonia, and Pärnu oversaw West

Estonia.

The Consumer Protection Board also started negotiations with local

governments, with the view to creating an option whereby consumers

could visit a representative of the Board in other county centres across

Estonia. For example, the counselling of consumers has taken place in this

very way on a monthly basis since November, utilising the premises of

Rapla County authority.

In 2012, work continued for the fulfilment of the strategic goals of the

Consumer Protection Board. Pursuant to the strategy document that was

drafted in 2011, a factor for the success of the achievement of the strategic

goals is the raising of organisational skill levels. Last year the Board defined

the key indicators needed for measuring organisational capacity. In

addition, the first measurements were conducted to evaluate competency

and the commitment of employees and analyse the image and reliability of

the Board.

On the basis of both areas of research just mentioned, it can be said that

most Estonians trusted the Board in 2012 (Figure 1), and the official image

of the Board was positive. The dominating qualities in its image were

8

security, friendliness, equality and openness. The Board was less associated

with such qualities as vigorousness, rapidity, and familiar (Figure 2).

The third major activity of the entire Board in 2012 was the organisation of

the international conference on the development of the consumer

environment, which was conducted in cooperation with the Estonian

representation of the European Commission and the Chamber of Commerce

and Industry. The main themes of the conference that was entitled

“Influential Consumers and Responsible Undertakings”, which was held on

21 November in Tallinn, were self-regulation of the market and conflicts of

interest between consumers and undertakings. The speakers included

policy-makers, consumer protectors, volunteers, and entrepreneurs from

Estonia as well as from elsewhere in Europe.

Figure 2. Breakdown of the CPB’s public

image.

Source: Past ja Partnerid 2012

Figure 1. Assessment of the reliability of the

CPB in June 2012.

Source: Turu-uuringute AS 2012

0%10%20%30%40%50%60%

0

0,5

1

1,5

2

9

The conference on the development of the consumer environment in Tallinn, held on 21 November 2012. At the front: the director general of the Chamber of Commerce and Industry, Mait Palts.

Pursuant to the current strategy period for 2012-2016, other factors in

the success of the Consumer Protection Board besides its organisational

capacity are the assurance of the legal security of consumers that it can

The conference on the development of

the consumer environment in Tallinn on

21 November 2012. Speaking: the

director general of the Consumer

Protection Board, Andres Sooniste.

The conference on the development of the

consumer environment in Tallinn on 21

November 2012. At the front: the director

of the Association of Estonian Food

Industry, Sirje Potisepp (left) and the

executive director of the Estonian Traders

Association, Marika Merilai.

10

offer (including market surveillance and handling complaints), its

contribution to the development of consumer rights, and its promotion of

the awareness of consumers and undertakings.

Taking a longer perspective, market-based consumer protection or the self-

regulation of market participants could function in Estonia, based on

responsibility and awareness. Such a consumer environment is

characterised by aware and active consumers, the essential role of

voluntary consumer organisations, and responsible behaviour by

undertakings. The longer-term goal of the Board as an organisation, when

proceeding from the strategy, is to become a recognised and active designer

of the development, quality and rules of conduct for the consumer

environment and to be an appreciated partner in such initiatives.

Using the values specified in the strategy, namely activeness, reliability and

efficiency, should help the Board to achieve such a role and should also

further the development of market-based consumer protection.

The Board’s strategy defines the objectives for the main supervisory fields

for the coming years. In the field of financial and communications services,

the Board has a significant task and a challenge for the coming years -

essentially to achieve a more consumer-friendly and reliable environment

in the most complicated and rapidly developing service sector. This

requires active and systematic supervision, cooperation with market

participants, and a raising of the efficiency and competency of the Finance &

Communications Division.

In addition to its tasks that are related to consumer protection, in the field

of tourism and advertising the Board also has an obligation to supervise the

implementation of the Tourism Act and the Advertising Act, which means

much more versatile work tasks. However, the most important task in the

strategy period is to increase the reliability of the tourism sector through

the lawful conduct of its undertakings, and to reduce a cross-market

problem which is the widespread use of confusing trading methods. The

main methods for the achievement of these goals are efficient and

preventive supervision, systematic checks, and efficient cooperation with

market participants.

11

In commerce, the main task is to increase the reliability of trading. To

achieve this, the main keywords are ensuring product safety, ensuring

proper checks on the correct marking of goods, the provision of consumer

information, cooperation with speciality associations, and training for

undertakings.

Structure of the Board. In addition to the Market Surveillance Department

which consists of four divisions (Trade Division, Tourism and Advertising

Division, Finance & Communications Division, and Consumer Service

Division), the Consumer Protection Board also has an Administrative

Department and a Consumer Policy and Public Relations Department,

which includes the Consumer Environment Development Service, which

deals with the training of consumers and undertakings. Also operating at

the Board are the Consumer Complaints Committee which, as an

extrajudicial institution, resolves disputes between consumers and

undertakings, and the European Consumer Centre of Estonia, which is

partially funded by the European Commission and deals with cross-border

disputes.

Figure 3. Structure of the Consumer Protection Board

Director General

Consumer Policy and Public Relations

Department

Consumer Environment Development

Service

Administrative Department

Market Surveillance Department

Trade Division

Tourism and Advertising

Division

Finance and Communications

Division

Consumer Service Division

EU Consumer Centre

12

A campaign that lasted the whole year: right to claim

The first information campaign to be initiated by the Consumer Protection

Board concentrated on the legal right of consumers to submit a claim to the

retailer as much as two years after a purchase was made. Although the

active campaign period was between February and March, this activity

covered almost the entire Board and the whole year.

The Board’s Trade Division began inspections in stores to map out the

situation as early as 2011, and carried out two follow-up actions in 2012.

The main task was to discover which information concerning the options to

submit a claim consumers got from retailers at the point of purchase. The

total number of such inspections that were carried out during the year was

almost a thousand. The percentage of violations (Figure 4) showed a clear

decrease over time, which meant that the simultaneous information work

could be considered to have been efficient.

Figure 4. The percentage of violations detected in the checks which covered the

information provided about the right to claim in 2011-2012

In addition to the regular information activities that were targeted at the

wider public, such as TV and radio advertisements, outdoor posters, web

advertising and publications, the Board used special channels for

information for undertakings and service staff in the retail trade.

Representatives of major chain stores, footwear dealers, and sellers of

electronic and household appliances could participate in the discussions

that were held behind closed doors at the Board. Furthermore, a public

discussion was held on Consumer Rights Day on 15 March, which also

received a great deal of feedback in the press. On the basis of issues that

were raised in the discussions, the Board drafted an instruction material for

undertakings and a reminder for the training of service staff. Both

0%

10%

20%

30%

40%

50%

2011 veebruar-märts2012

september 2012

47%

18%

9%

13

documents were sent via a direct mailing to almost 7,000 retailers that

were operating in Estonia. Those aspects that were related to the

submission of claim were also explained in more detail at the events for the

joint training series of the Consumer Protection Board and the Estonian

Chamber of Commerce and the “Suunanäitaja” Industry. Three training

sessions in Tallinn, one in Jõhvi and one in Narva were held for packed

halls.

Many references to the Consumer Protection Board in 2012 were related to

the right to claim. The number of phone counselling cases on this theme

was more than twice as large as in the previous year, numbering 4,444 in

total.

Commentary by the Estonian Traders Association

Close cooperation between the Traders Association and the Consumer

Protection Board continued in 2012. The latter ensured that representatives

from undertakings that belonged in the association participated actively in

the work of the Consumer Complaints Committee, while the former provided

to its members with information about the results of research that had been

conducted by the Board which covered the submission of claim and sales

warranties, as well as several new requirements concerning matters such as

consumer credit. We are convinced that the campaigns that were organised

by the Consumer Protection Board had an essential effect on raising the

awareness of consumers as well as traders, and this was backed up by the

Consumer Rights Day and media coverage.

“Suunanäitaja” training in Narva on 13

November 2012.

“Suunanäitaja” training in Jõhvi on 29

October 2012.

14

Most problems that are experienced by consumers are solved in store. Last

year the Consumer Complaints Committee revised 259 complaints. Although

the number of complaints is not large, when taking into account the fact that

the number of purchases made reaches into the hundreds of millions, we are

still convinced that in the field of complaint solution we must continue to

inform consumers and traders, and cooperate in the improvement of the

process that aims to reach a solution in disputes, thereby discovering further

options to be able to involve competent experts. Committee sessions should

not handle complaints that concern goods with obvious signs of wear and tear

or those that involve misused products.

For retailers it is important that disputes with consumers should be solved.

The use of instructions and the creation of an activity plan for the prevention

and solution of claims will help to avoid unnecessary disputes, as well as

saving time and money and, most importantly, ensuring customer

satisfaction.

Marika Merilai,

Executive Director of the Estonian Traders Association

15

The reality of responsible lending

In summer 2011, the principle of responsible lending, which had been

established on the European level, took force in Estonia, setting for credit

institutions the obligation to ensure the creditworthiness of the consumer

before concluding a contract, and providing the consumer with enough

information to make a decision that is based on a full awareness of the

consequences. The year 2012 can be considered as being the touchstone of

the application of this principle.

As for the principle of responsible lending, during its surveillance the Board

detected shortages in cases involving almost 30 financial service providers.

There were also shortcomings in creditworthiness checks as well as in the

information being provided to consumers. In the latter case, one problem

was ignoring the form requirements of an EU standard information sheet

for consumer credit and the submission of the information sheet in such a

way that it did not meet the goal to provide a consumer with the chance of

comparing various offers before making a decision. Based on these findings,

in the future it would be reasonable to set more specific time limits for the

submission of the information sheet, to clarify the concept of the

creditworthiness of a consumer, and to specify the role of the credit

provider in such a check.

Therefore, 2012 showed that the wording of responsible lending as

specified in the Law of Obligations Act and in the explanatory report for the

draft allowed for a slightly different interpretation of the requirements as

set out for credit providers in practice. Partially for this reason the

amendment proposals by the Law of Obligations Act were drafted on the

initiative of the Ministry of Justice and in cooperation with the Consumer

Protection Board, the Ministry of Economic Affairs and Communications,

and the Ministry of Finance, which were submitted to the government for

further proceeding.

Table 1. Enquiries related to responsible lending in 2011-2012

Year Requests for explanations Complaints Telephone consultations

2011 181 18 328

2012 202 31 298

16

The Consumer Protection Board also used the public arena to try and

discuss the theme of responsible lending, organising an information

campaign called “Laena targalt!” in the second half of the year. The objective

of the campaign was to explain the importance of informed credit decisions

and to introduce the EU standard information sheet for consumer credit to

consumers.

By the time the campaign had entered its initial period, the research that

had been ordered by the Board: “Consumer credit - mapping out

information provided during pre-contract negotiations”, had been

completed, and during its compilation the research company Dive made 87

test purchases in thirty companies that were offering consumer credit. It

was found that credit providers are the weakest in terms of the provision of

information and explanations to the consumers. They often only mentioned

the interest rate and monthly payments when covering the terms and

conditions of a contract. The right to withdraw from a consumer credit

contract in fourteen days, default interest charges that could be applied in

the case of late payments, and the consequences of insolvency problems

were not usually discussed.

To discuss these problems, the Board called round tables of undertakings,

which also included the participation of major banks, small and quick loan

providers, and instalment providers. A major public discussion which also

included the press was held on 14 November.

17

Panel discussion on the theme of responsible lending in Tallinn, 14 November 2012. Participants (from the left) were the journalist, Tõnis Oja, the head of retail banking for Swedbank, Ulla Ilisson, the executive director of Credit24, Rain Sepp, the lawyer, Kai Amos, and the director general of the Consumer Protection Board, Andres Sooniste.

Commentary by the Estonian Banking Association

The promotion of financial education is a priority field for the Estonian

Banking Association. In this field in 2012, the association dealt with the

preparation of a national financial literacy programme, the raising of

financial awareness in bank customers, and projects that were targeted at

school students.

After this process, we are happy to be able to report that the importance of

financial literacy has also been perceived at the national level. As a result of

cooperation between several partners, the programme for the promotion of

financial literacy in the Estonian population for the period 2013-2020 is being

launched, which is something that was prepared with the active contribution

of the Banking Association and of the banks.

18

To be able to reach intelligent, informed decisions, access to relevant

information is required. In order to facilitate the availability and

comparability of information pertaining to banking services, the comparison

tables for account-related services, time deposits, and credit card fees were

completed in 2011 in cooperation between the Financial Supervision

Authority and the Banking Association, while in 2012 the comparison tables

for share transactions and consumer loans were added. The tables are

available on the consumer website at www.minuraha.ee, where the banks

that are responsible for submitting the information shown there are also

responsible for the information’s accuracy.

As part of the promotion of financial literacy, the main focus of the Banking

Association has been concentrated on school students. Last year the

Association organised seven “My Money Days” in schools together with the

Financial Supervision Authority and the Tallinn Stock Exchange, introducing

the organisation of financial matters and main financial services as well as

the financial matters manual, “Finantsaabits”, which teachers can use as a

supplementary material in school lessons. In 2012 the manual was also

translated into Russian with the support of the Association.

Last year also saw the launch of a cooperation project for teachers which was

organised by the Banking Association, the Ministry of Education and

Research, the Tallinn Stock Exchange, and the Financial Supervision Authority

in order to help to develop special methodological lesson materials covering

financial literacy. The objective of this project is to cover fourteen subjects at

basic school level, as well as in upper secondary school. The first worksheets

were introduced at the end of the year, and all plans should be completed in

the first half of 2013.

Additionally, the member banks of the Banking Association are taking

essential steps to facilitate financial planning. This can be proved by the fact

that in 2012 the financial planning solutions were selected both by the panel

and the public as the winners of the competition of banking achievements.

Katrin Talihärm,

Managing Director of the Banking Association

19

The charm and pain of e-commerce

In the second half of 2012, e-commerce entered the top three for consumer

enquiries that were received by the Board, and it remained there. In total, over

1,900 enquiries related to internet shopping reached the Consumer Protection

Board during the year. When compared to 2011, there was a 27 per cent

increase (Figure 5). Such an increase shows that consumers use the options that

are offered to them by e-commerce on a constant and increasingly frequent

basis. The plusses of internet shopping are its speed and cheapness, as well as

the abundance of purchase opportunities. Unfortunately, as a trade channel, the

internet also provides more options for deception by unscrupulous market

participants.

Figure 5. Number of enquiries related to e-commerce in 2011-2012

Complaints submitted by consumers to the Board were on the whole rather

similar: an order had been placed, advance payment had been made, but the

goods had not been received on the promised date. This was the main problem

both in internal and cross-border complaints that were submitted to the

European Consumer Centre of Estonia which operates at the Board. In addition,

enquiries were made about consumer rights that were related to internet

shopping, such as the options available to consumers for withdrawing from a

transaction. The third recurrent topic in the enquiries concerned campaigns by

voucher portals. In the case of such campaigns, problems were caused by the

fact that the undertakings that were responsible for the campaigns could not

always satisfy the needs of those consumers who were requesting goods or

services on the basis of a voucher. They also experienced problems in refunding

payments to customers who did not receive their goods or services.

0

500

1000

1500

2000

2500

2011 2012

654 1089

127

387 588

789 telefoninõustamised

kaebused

selgitustaotlused

20

The main problems that were detected during the monitoring that was carried

out on e-commerce in 2012 were the lack of due registration by the

undertakings, the non-publication of sales conditions, and an essential conflict of

the conditions with the Law of Obligations Act. The main shortage in the

conditions was the issuance of compensation for postal costs that were related

to the right of a consumer to withdraw from a transaction. Pursuant to the law, a

trader shall also refund postal costs that are related to the fulfilment of an order

to a consumer who has rejected the goods. Many undertakings are not aware of

this obligation and some traders ignore this requirement deliberately.

Table 2. Inspections and violations in e-commerce in 2011-2012

Year Inspections Violations Percentage of

violations

2011 264 199 75%

2012 324 183 56%

The European surveillance action, Sweep Day, which was organised in June

2012, also concentrated on e-commerce. More specifically, the survey

concentrated on digital products, such as the terms and conditions for ordering

web games, e-books, music files, etc. The Consumer Protection Board reviewed

ten websites and detected shortages on five of them. Websites failed to include

the trader’s contact details, its terms of payment, or the final price of the

product, and the responsibility of the trader was reduced in the sales conditions

and aspects that were related to the right to withdraw from a transaction were

not described.

Commentary by the Estonian Association of E-commerce

E-commerce has been among the most rapidly growing fields of business in recent

years: according to information collated by the register of economic activities,

when compared to 2011 the number of companies that are now registered for

operation in the e- commerce environment has almost doubled in 2012, to 781.

This indicates that constantly more companies are finding a new channel in e-

commerce to allow them to extend their operations to target groups and

consumers. A contributing aspect has been the consolidation of fair and correct e-

shops into the Association of E-commerce, which is constantly supervising the

21

operations of its members through close and smooth cooperation with the

Consumer Protection Board.

In addition to continuous supervision, the Association of E-commerce also grants

the quality sign for a place of safe purchase, which helps consumers to distinguish

reliable e-shops from those that practice unfair trading methods.

Merle Kangur,

Managing Director of the Estonian Association of E-commerce

22

Tourism services: success stories and drawbacks

In the field of tourism the dominating themes of 2012 were the operation of

companies that were involved in organising and mediating package trips,

and air passenger rights. As for travel agencies, some recession could be

seen, related mainly to security obligations. The success stories of the year

were related to the implementation of air passenger rights: three air

carriers paid compensation that was due to customers following a demand

by the Board that they do so.

Unfortunately, insufficient security for travel agencies also impacted upon

Estonian consumers in 2012. Two travel agencies declared their insolvency

in only ten days in June: these being the Good Company OÜ on 18 June and

Balt Travel Agency OÜ on 28 June. In both cases their security cover

amounted to less than 30 per cent of the total sum of all reasonable claims.

This is a major setback when compared to 2011, when in one case clients of

an insolvent travel agency recovered almost 70% of their outlay, and in

another case clients managed to recover fully 100% of their prepaid travel

fees (Figure 6).

Figure 6. Percentage of the sums paid to consumers from the security deposits of insolvent travel agencies for the initial travel fee in 2010-2012

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

DigistarGrupp OÜ

(2010)

Top ToursAS (2010)

Estour OÜ(2011)

Fiji Travel-Alma GruppOÜ (2011)

GoodCompany

OÜ (2012)

Balt TravelAgency OÜ

(2012)

12% 13%

69%

100%

27% 22%

23

Except for complaints that were related to insolvency, the total number of

complaints that were related to tourism services in 2012 was at 83. Of

these, 39 complaints that were related to package trips were submitted to

the Consumer Protection Board.

In terms of monitoring the tourism industry, checking the compliance of

companies in their security protection was a priority in 2012. During the

year the Board detected more than sixty security-related violations. The

problems included insufficient security, the imminent expiration of that

security, the sale of trips without valid security, and security sums that

failed to conform to the operations of the company. For example, precepts

were issued to four companies because their security was characteristic of

travel dealers or bus trip organisers, ie. consisting of a minimum of 13,000

euros. In reality, these companies were organising package trips that

contained flights, in which case the minimum required security deposit was

32,000 euros.

Table 3. Results of monitoring activities in the area of tourism in 2012

Topic Memoranda

and directing attention

Precepts Misdemeanour

rulings Fine amounts

(EUR)

Deficiencies in the registration of an undertaking

42 0 0 0

Security deposits expiring and a failure to submit a report in time

54 37 0 0

Insufficient security

18 1 19 29,100

Deficiencies in offering tourism services for sale

34 0 0 0

Total 148 38 19 29,100

Those issues that are related to the security deposits held by travel agencies

were also raised on a European level, and a discussion was launched to

reach an amendment of the directive on package trips that was originally

adopted at the beginning of the 1990s. Although security-related problems

were not the only reasons for these discussions taking place, it has been

found on a European level that the current guidelines contained within the

24

directive allow very different practices in different countries. For example,

unlike Estonia, in Latvia travel agencies are not obliged to ensure the

security of all of the travel fees that are paid by customers. There is an

obligation to provide security cover for each sale, but only to the a certain

percentage. According to the planned amendment to the directive, a single

and transparent security system should function across the entire

European Union, one which would cover all prepaid travel fees by

customers at any time and to the fullest extent.

Another main topic that was related to the area of tourism in 2012 was the

rights of airline passengers. Although no major disasters took place in the

year, the number of complaints received by the Board increased to the same

level as in 2010 (Figure 7), when the Icelandic volcanic ash crisis shook

aviation circles. The reason behind such an increase could be the improved

awareness of consumers of their rights, as well as the general economic

crisis. The latter has probably increased the sensitivity of consumers in

terms of protecting their economic rights, while the recent hard times could

also have a negative effect on the quality of services. The content of

complaints that were related to airline passenger rights has remained the

same throughout several years: dissatisfaction was caused mainly by late

arrivals, the cancellation of flights, and lost luggage.

Figure 7. Number of complaints related to airline passenger rights in 2010-2012

The field’s success stories included complaints that were resolved in favour

of consumers, and those that were related to applications for compensation

from air carriers. The Board issued precepts to two air carriers for the

payment of justifiable compensation to three passengers. In the first case,

after the receipt of the precept, the air carrier paid the passenger 500 euros

for the very late arrival of a flight. In the second case, the air carrier paid

two passengers 250 euros for preventing them from boarding their flight

with no grounds for such a move. Furthermore, the Board issued a warning

0

50

100

2010 2011 2012

82

30

74

25

to the third air carrier, after which the company agreed to pay

compensation to the amount of 400 euros to six passengers. Similar

complaints reached a positive outcome for consumers without the

administrative procedure being started. In total, air carriers paid more than

4,000 euros in compensation to passengers who contacted the Board in

2012.

On the European level, the year 2012 brought the topic of the amendment

of the regulation on air passenger rights into focus. Among other things, it is

planned to specify the period of validity for extraordinary circumstances

that may exempt air carriers from the payment of compensation and to

equate the long-term delay of a flight with a cancellation. Currently, the

European Commission is dealing with the preparations for the amendment

to the regulation and, according to the most optimistic plans, the new air

passenger rights will take effect in 2014.

The major legal amendment in the area of tourism in 2012 was the EU

regulation on maritime passenger rights. This took force in Estonia on 18

December, ensuring the better protection of maritime passengers, mainly in

cases involving long-term delays or the cancellation of voyages.

Furthermore, the regulation clearly specified the rights of disabled

passengers and the obligations that undertakings must observe in relation

to their assistance.

26

Busy advertising year

The keywords in monitoring advertising in 2012 were gambling and

telecommunications. The Consumer Protection Board engaged in several

disputes with gambling organisers over the interpretation of the

Advertising Act, while in the telecommunications sector the Board had to

carry out a good deal of explanatory work when it came to the

requirements for comparative advertising and the use of the word “free”.

A major event that also draw the attention of the public was a court dispute

between the Board and Eesti Loto. In March, the Supreme Court shared the

opinion of the Consumer Protection Board that notices about the value of an

expected jackpot should be considered as being a gambling advertisement,

which is prohibited, and therefore Eesti Loto should end their publication.

However, soon after the ruling by the Supreme Court, from 1 June, a legal

amendment took force which essentially expanded advertising options

when it came to the lottery, which also allowed the value of an expected

jackpot to be publicly announced.

Although the dispute with Eesti Loto gained the greatest levels of public

attention, the operation of the lottery organiser was not the thorniest

problem when it came to advertising gambling. The aspect that raised even

more issues was that of the marketing activities of remote gambling

organisers in the form of advertisements on their own websites, and

websites that provided information about gambling. For example, the

Consumer Protection Board initiated proceedings against three such

websites. All of these had published several gambling advertisements and

calls to the consumers to entice them into concluding a subscription and to

partake in gambling in general. The Board explained to the owners of the

sites that as their websites were not websites that belonged to a specific

gambling organiser, they could not publish any gambling advertisements.

The law allows them only to expose the trademarks of gambling organisers.

In the case of one website it was also necessary to explain that advertising

their rakeback or partial refund of the entry fee for internet casinos should

not be an indirect gambling advertisement and calls to join poker rooms

and other similar sentences had to be removed from these texts.

27

Similar problems also arose with remote gambling organisers. As the

Advertising Act does not separately regulate remote gambling organisers,

the requirements that have been laid out for advertising gambling remained

somewhat vague to them. Their opinion was that the act included

contradictory provisions when it came to the advertisement of remote

gambling organisers. The undertakings and the Estonian Association of

Gambling Operators took the initiative to draft a guideline that was related

to the advertisement of remote gambling organisers, which has the

objective of developing uniform opinions and a clear understanding of

them.

The telecommunications sector was characterised by close competition in

2012, and therefore so-called lure-over campaigns dominated the

marketing of the companies that were operating in the sector. Due to the

increase in the number of mobile internet users, information that was

related to the m-internet became central in advertisements. Throughout the

year the words “unlimited”, “free”, “zero euros”, etc were repeated in

advertisements, which were often misleading upon a more detailed revision

of the service conditions. The Board also discussed problems at the same

table with undertakings in this field and at the end of the year it certified

the guideline for following fair trading practices in advertisements by the

telecommunications sector. This was drafted in cooperation with EMT AS,

Tele2 Eesti AS, Elisa Eesti AS, Elion Ettevõtted AS, the Estonian Association

of Advertising Agencies, and the Division advertising agency. Through the

advertising council, the guideline was also approved by representatives of

the Association of Estonian Broadcasters, various media agencies, and the

Council of Estonian Public Broadcasting.

In the telecommunications sector, the Board undertook to fight a major

dispute with a company that disagreed with the precept to remove calling

card advertisements, which precept was issued in February. In the opinion

of the Consumer Protection Board the company used several misleading

statements in its advertisements, such as “Take a calling card and get 60

euros” or “Talk to friends free of charge with the calling card”. In reality the

purchaser of a calling card did not get 60 euros, but a bonus to the value of

this sum for offsetting the cost of calls, and additional conditions had to be

fulfilled to ensure this. The friends referred in the second advertising text

28

were actually only other owners of a similar calling card, or a

predetermined circle of persons, not phone numbers that could be specified

by the consumer themself. The Board also found shortcomings in other

advertising texts used in the campaign and in conclusion it considered that

the campaign amounted to misleading advertising, a violation of the

requirements set out for comparative advertising, and an unfair and

misleading method of trading. Although the company disputed the precept,

it remained in force pursuant to a ruling by the Tallinn Administrative

Court in November. At the end of the year the dispute continued with a

appeals procedure at Tallinn District Court.

In the previous year, the Board also focused on problems that were related

to advertisements directed at children and the use of children in

advertising. The main violation in these areas was the fact that

advertisements included a direct or indirect call to purchase goods which

was directed at children. At the same time there were also cases in which

children had been depicted in a dangerous situation or had been guided

towards preferring certain trademarks. To avoid such violations in the

future, a discussion could soon be opened up with undertakings in order to

develop common starting points and a better understanding of the

Advertising Act. The discussion could end with the joint drafting of a

recommended manual, as was done last year with telecommunications

companies.

Table 4. Results of supervision in advertising in 2012

Topic Matters heard

Violations detected

Percentage of violations

General requirements 66 18 27%

Misleading advertisements 117 49 42%

Comparative advertising 2 1 50%

Advertisements directed at children 21 13 62%

Advertising e-cigarettes, hookah, tobacco 18 6 33%

Advertising alcohol 167 85 51%

Advertising financial services 72 57 79%

Advertising gambling 31 12 39%

Advertising pyrotechnic articles 7 1 14%

Commercial lottery 28 5 18%

Total 529 247 47%

29

Table 5. Sanctions in the area of advertising in 2012

Misdemeanour rulings

Precepts Memoranda Fine amounts

(EUR)

7 4 262 2,200

30

Preparations for opening up the electricity market

Although preparation and information related to the opening up of the

electricity market at the beginning of 2013 was a task for the Ministry of

Economic Affairs and Communications, the public also expected guidelines

and opinions from the Consumer Protection Board. Pursuant to the

amended Electricity Market Act, the competency of the Consumer

Protection Board is limited to supervision over the marketing activities of

the electricity providers, ie. sales and advertising as well as contracts that

are concluded with consumers. Therefore, the Board could only start up

active operations in autumn, after the publication of the first offers from the

open market.

The most popular issues were penalty fines that were demanded from

consumers when their fixed-term contracts had been prematurely

terminated. Although in several other sectors it is normal to ask for such

fees from consumers, in the case of electricity contracts this was in conflict

with the Law of Obligations Act. Such an opinion was also expressed by the

Ministry of Justice. The Consumer Protection Board notified electricity

providers in October that if a consumer has not violated a contract and

notifies the electricity provider of their intention to terminate the contract

one month in advance, the request of a penalty fine, a termination fee, or

any other compensation is illegal. Electricity providers did not dispute this

opinion and subsequently amended their terms of contract.

A separate topic was that of the sales methods used by the electricity

providers. As the open market provision of electricity was new to the

Estonian population, the prize campaigns and telephone and internet sales

that were regularly used in marketing other goods and services seemed

strange to people. Therefore, the Board repeatedly reminded consumers of

their rights when they purchased a service via various sales channels and

warned them against falling into potential traps, and this message was

conveyed both in the media as well as in campaign publications that were

issued by the Ministry of Economic Affairs and Communications.

Undertakings were also reminded through the media that electricity supply

in the conditions of an open market may not limit the rights of consumers,

and consumers must be able to make an informed and well-considered

31

choice. In spite of these warnings there were still cases in which consumers

were forced to conclude a contract. Fortunately these were individual cases.

In 2012, the Consumer Protection Board revised the typical terms and

conditions of the sale of electricity for four companies and detected

violations in all four cases.

The sale of electricity on the open market will also probably be an essential

topic for the Consumer Protection Board in the future. Last year consumers

concluded their first contracts, in a more or less hasty fashion. What these

bring along in reality will only become clear for many people in 2013, when

the bills start to arrive. This may increase the number of enquiries that are

submitted to the Board and will again require a reminder of the message of

how electricity suppliers can be changed in the open market and what

should be taken into account upon the conclusion of an contract.

Figure 8. Number of enquiries related to the sale of electricity in 2011-2012

0

100

200

300

400

500

600

700

2011 2012

115 156 13

10

265

466 telefoninõustamised

kaebused

selgitustaotlused

32

Commentary by the Estonian Competition Authority

The year 2012 will be remembered as the year in which the way was prepared for opening up the electricity market. Electricity supply is a service, one without which we cannot imagine life today. Also, the process of electricity supply contains some level of emotion. Although we need to pay for our electricity supplies, we always feel that they are something that is fixed and certain in our lives. We are used to have medical assistance, the option of gaining an education, a postal service, and the police force. Electricity supply belongs in the same category.

An essential key phrase that is associated with the opening up of the electricity market for consumers is one of a significant increase in price. Depending on the consumer, the costs may not always be too high. For example, a two-room flat, where gas is used for cooking can manage with less than 100kWh of electricity per month, and a few euros added to the invoice will not mean a major increase in expenses. At the same time there are electrically-heated private residences that have already strayed into bills that top several hundred euros even before the market has been opened up. Just as electricity is taken as being something that is forever there, people prefer our major energy company as a clear and definable provider; they hate it, but do not want to abandon it. A good example is the loyalty of clients before the market is opened up: although it had been possible to change seller, most consumers have remained loyal to their long-term provider.

Press briefing on the theme of the open electricity market at the Consumer

Protection Board on 6 November 2012. Speakers: Ando Leppiman and Rasmus

Ruuda from the Ministry of Economic Affairs and Communications, and the

director general of the Board, Andres Sooniste.

33

From 2013 we will have to get used to the new market and be aware that in the future electricity prices will start to change in a way that is similar to that of the petrol market, one which depends on a variety of factors, such as oil prices on the global market and decisions by neighbouring countries either to build a new nuclear power plant or not to build one. A parallel can be drawn with the opening up of the communications market more than ten years ago. At that time we were used to Eesti Telefon, who took Elion as their new name after the market was opened up. However, when choosing communications services now, it is entirely normal to compare different service providers or to consider whether to abandon a traditional telephone and transfer to a modern fourth generation (4G) connection which is being distributed through mobile telecommunications. While changes have been very fast in the communications sector, the technology will not probably develop at such a speed in the energy sector, and wireless energy transfer is still rather more science fiction than fact. The energy network will also remain in place in the future, but there will now be competition between sellers and freedom of choice for the consumer.

Many people have asked why we couldn’t continue as before, with a conventional and solid monopoly. However, the European Union has decided to wake up the old monopolies that have been accustomed to a definite market position over the past few decades, to separate energy networks as natural monopolies, and to allow electricity producers and providers to compete with each other. In a sense this is innovative thinking and part of an economic trend, because not all developed countries in the world, including the USA, are reorganising their energy sector in this way. Even so, the main trend is undoubtedly the right one, despite this economic experiment. Free competition, efficiency, and innovation are the driving powers of the world’s economies. Without these, we would not have the internet or smartphones, not to mention other achievements without which we cannot imagine our lives today. Without a guaranteed market share the energy producers have no choice but to make their production more efficient. To survive in close competition, energy providers must also increase their efficiency and develop their customer service levels. And we all win from this.

Märt Ots, Director General of the Competition Authority

34

The Consumer Protection Board in figures

Table 6. Monitoring work, general data 2001-2012

Year Number of

inspections* Precepts

Number of fines

2001 3,476 56 867

2002 4,155 113 926

2003 3,794 173 916

2004 3,930 112 822

2005 3,839 206 751

2006 3,798 144 698

2007 3,837 89 518

2008 5,018 108 862

2009 5,030 67 981

2010** 7,373 44 772

2011 5,221 66 409

2012 4,802 108 454

* inspection reports and correction notices

** an increase in the number of inspections related to monitoring how prices were shown in two

currencies during the transfer to the euro

Table 7. General enquiry data 2001-2012

Year Information

line calls Written

enquiries Complaints

2001 7,873 * 1,570

2002 8,788 * 1,763

2003 10,610 * 2,022

2004 13,110 * 2,063

2005 13,594 * 1,891

2006 13,882 1,274 1,904

2007 13,726 2,308 1,633

2008 12,808 3,809 2,164

2009 14,038 5,940 2,037

2010 23,551 5,987 2,870

2011 26,096 7,051 1,785

2012 26,639 7,760 2,192

* details unavailable

Table 8. Topic of enquiries. Top three complaints 2012

Topic Complaints

E-commerce 387

Footwear 326

Tourism 284

35

Table 9. Topic of enquiries. Top three enquiries 2012

Topic Enquiries

E-commerce 1,089

Tourism service 302

Telephone service 289

Table 10. Topic of enquiries. Top three in telephone counselling 2012

Topic Calls

Claim, guarantee 4,444

Footwear 1,210

E-commerce 789

Table 11. Topic of enquiries. Top three receptions 2012

Topic Receptions

Footwear 383

Telephones and other communications equipment

134

Claim and guarantee 120

Table 12. Consumer Complaints Committee 2004-2012

2004 2005 2006 2007 2008 2009 2010 2011 2012

Number of complaints

111 310 263 205 209 263 197 225 259

Number of sessions

116 337 295 232 242 297 228 277 285

Complaints related to manufactured goods

90 266 159 161 157 187 131 173 171

Complaints related to services

21 45 97 44 48 76 66 82 88

Number of decisions in favour of consumers

73 170 174 115 136 140 106 154 154

Percentage of decisions positive for consumers

66% 55% 66% 56% 65% 53% 54% 68% 59%

Number of companies not obeying the decisions

7 16 17 10 17 28 21 22 27

Percentage of decisions ignored

6% 5% 6% 5% 8% 11% 11% 10% 10%

36

Table 13. Inspections and violations in commerce 2011-2012

2011 2012

Area Inspections Violations Inspections Violations

Sales requirements for alcoholic drinks

633 10% 534 29%

Requirements for repair shops 163 7% 147 40%

Displaying the euro and kroon prices during the parallel turnover period

1754 11% 0 0%

Price displays in shop windows 48 16% 41 0%

The conformity of pricing information in the sales areas and at the checkout

1040 7% 550 22%

Price information, including discount notifications

378 5% 307 12%

Labelling and safety for personal protective equipment

354 12% 263 38%

Labelling on footwear 176 9% 116 16%

The volumetric measurement of drinks

27 22% 29 14%

Strong alcohol revenue stamp 487 0% 358 0%

Labelling on chemicals 493 23% 659 24%

Labelling home appliances / supplying information

94 6% 75 8%

Labelling on cosmetic products 341 31% 417 31%

Fuels and lubricants 210 16% 146 28%

Labelling on and the safety of candles

269 18% 207 15%

Labelling on and the safety of childcare products

71 13% 60 23%

The safety of children’s clothing

165 30% 201 29%

Labelling organic products 64 6% 0 0%

Measuring equipment verification in the sale of industrial goods

166 16% 74 30%

Labelling on and the safety of toys

338 34% 335 34%

Returnable packaging 278 6% 348 8%

Problem products* 331 11% 151 8%

Labelling on pyrotechnic products

93 9% 54 11%

Labelling on clothing and textile products

270 14% 268 26%

Labelling on smoke detectors / supplying information

59 0% 17 6%

Weighing food 56 9% 52 8%

Labelling on food colourings 87 21% 68 16%

Presenting information in catering establishments

297 10% 285 9%

37

Fulfilling the requirements of the Tobacco Act in catering establishments

94 1% 84 8%

Imitation products** 48 10% 49 6%

Accuracy of product names for food products

357 10% 217 17%

Promoting tobacco products 104 4% 158 3%

Tobacco product packaging and price indicators

420 3% 374 1%

Labelling on and safety of lighters

228 21% 156 23%

Labelling tools / supplying information

161 11% 60 7%

Reduced fire risk cigarettes 40 0% 81 0%

Labelling on precious metal articles

102 19% 99 26%

Total 10,296 12% 7,040 19%

* products handled after use as hazardous waste ** products that are similar in appearance to food Table 14. Testing food products 2012

Product / test Number of tests

Non-conforming products

Alcohol content in drinks 0 0

Volumetric measurement of drinks 29 4

Synthetic food colourings 8 3

Other food products 4 0

Total 41 7

Table 15. Testing industrial goods 2012

Product / test Number of tests

Non-conforming

products

Hazardous products

Personal protective equipment

0 0 0

DMF content* 9 3 3

Cosmetic products 12 0 0

The volumetric measurement of fuel

37 3 0

Other industrial goods 38 7 1

Toys 17 7 7

Heavy metal content 11 6

6 (hazardous to the

environment) Articles of precious metal

17 12 0

Total 141 38 11 or 17

* Testing for dimethyle fumarate content banned in the EU

38

Table 16. Assessing the legibility of labelling on goods 2012

Products Number of

tests Non-conformities

Food products

14 14

Industrial goods

12 12

Total 26 26

39

Issued by:

Estonian Consumer Protection Board 2013

Rahukohtu 2, 10130 Tallinn

Phone: 1330/ 6 201 707

E-mail: info@tarbijakaitseamet.ee

Website: www.tarbijakaitseamet.ee

Video channel: www.youtube.com/tarbijakaitseamet

Facebook: www.facebook.com/tarbijakaitseamet