Seminar

Unfair Commercial PracticesBelgrade, 27-28 November 2013

Dr Christine Riefa

Unfair commercial practices typology

Scope of legislation (Art 3)

Banned Practices

Examples of banned practices

Bait & Switch practices

• A camera firm advertises nationally using the line ‘digital cameras for £3’. They only planned to have a very small number of such cameras available at that price. In fact they only have 50.

• Breaches Directive because the number of cameras available for £3 would not be sufficient to meet the demand (scale of advertising is national). Advert fails to explain limited quantities available.

Examples of banned practices (2)

Pester power • Advertising a comic book for children stating

‘read about the adventures of Fluffy the Bunny in this new comic book each week – ask your mum to buy it from your local newsagents.

• Technique that was used in the past by Mac Donald’s using Ronald MacDonald’s visiting school (US example).

Misleading action test

‘Elements on the list’

Example of a misleading action (1)• A trader tries to sell a consumer a satellite

television package. The consumer is falsely told that the package includes certain key channels, which are in fact available at an additional subscription cost.

• Trader provides false information about the main characteristics of the product, causing the average consumer to take a different transactional decision about the package (i.e. to buy it, when he may not have if he had known he had to pay extra to get the channels).

Example of a misleading action (2)Thierry bought a television on a website. It arrived yesterday. He is disappointed by the quality of the picture and wishes to return it for a refund. When he contacts the trader, he is told that he has bought it and unless it is broken he cannot return the television•Thierry is within the period for cancellation under the Distance Selling Directive. He has a right to return the goods. •The trader is giving untruthful information about the extent of Thierry’s consumer rights that are likely to cause him to make a different transactional decision, i.e. not return the television.

Scope: before, during and after a commercial transaction!

Scope: before, during and after a commercial transaction!

Specific misleading action

Misleading omission test

Material information concerning invitation to purchase

Article 7 (5) • Annex II – information

requirements established by Community law

• Includes distance selling Directive, package travel Directive, timesharing, price indication Directive, electronic commerce Directive, consumer credit Directive, etc.

Article 7(4) • Main characteristics of

product• Contact details & Identity of

the trader • Price including taxes, and

postage and packing • Arrangements for payment,

delivery, complaint handling policy if different than professional diligence

• Right to cancel

Example of a misleading omission • Snezana heard an advert on the radio for cheap flights to Spain

from 10 euros per way. She is buying a 2 flight tickets for her holidays in Spain with her husband. She flies with a well known low cost airline and is using their website. She has selected a return flight for 40 euros both ways for 2. As she continues booking, she now realises that this does not include adding a piece of luggage for 25 euros each way per person. She is happy that she managed to secure the low price for the ticket, and not sure what the information on luggage means, so she proceeds with adding luggage as well. As she is about to enter her credit card details, she realises that she will be charged an additional 5 euros per way per passenger for processing the credit card payment.

• Her total bill is not 40 euros as she thought but 40 + (100 for luggage) + 20 (card payment) = 160 euros. But she is now feeling committed to the purchase and worries that if she does not take the tickets now, she will not find a better price later.

Example of a misleading omission • The airline has given the information about

the total price of the flight tickets but in an untimely fashion.

• This has caused Snezana to take a transactional decision she would not have otherwise taken. She feels committed to the purchase.

Aggressive practices test

Assessing harassment, coercion and undue influence

Example of an aggressive practice

• Staff working in a funeral parlour put pressure on a recently bereaved relative, who is deciding on a coffin, to buy a more expensive coffin to avoid bringing shame to the family.

• This could amount to coercion or undue influence (exploitation of a specific misfortune, timing)

General prohibition – Art 5

Cumulative test

General Prohibition

• Safety net – used for all practices that cannot be caught under other tests

• future proof • Practice tested against standard of

professional diligence • Would a good trader in the same trade use

this practice?

Unfair commercial practices typology

Case study SCRATCH CARDS

Case study SCRATCH CARDS

Case study – SCRACTH CARDS• CJEU case C-428/11 of 18 October 2012, Purely

Creative Ltd v Office of Fair Trading• Interpretation of Annex 31: ‘creating the false

impression that the consumer has already won, will win or will on ding a particular act win, a prize or other equivalent benefit, when in fact either: – There is no prize or equivalent benefit, or– Taking any action in relation to claiming the prize or

other equivalent benefit is subject to the consumer paying money or incurring a cost’

Case study – SCRACTH CARDS• Paragraph 31, second indent, of Annex I to Directive 2005/29/EC must be interpreted

as prohibiting aggressive practices by which traders, such as those at issue in the main proceedings, give the false impression that the consumer has already won a prize, while the taking of any action in relation to claiming that prize, be it requesting information concerning the nature of that prize or taking possession of it, is subject to an obligation on the consumer to pay money or to incur any cost whatsoever;

• It is irrelevant that the cost imposed on the consumer, such as the cost of a stamp, is de minimis compared with the value of the prize or that it does not procure the trader any benefit;

• It is also irrelevant that the trader offers the consumer a number of methods by which he may claim the prize, at least one of which is free of charge, if, according to one or more of the proposed methods, the consumer would incur a cost in order to obtain information on the prize or how to acquire it;

• It is for the national courts to assess the information provided to consumers in the light of recitals 18 and 19 in the preamble to Directive 2005/29 and Article 5(2)(b) thereof, that is to say, by taking into account whether that information is clear and can be understood by the public targeted by the practice.

Case study – CLOCKED ODOMETER• Rob is a car salesman. He specialised in second

hand car. He sells this lovely BMW to Tamara. The odometer shows 20,000 miles on the clock. Tamara is delighted as this is a very good price for a car that has such low mileage.

• A few days later, the car does not start and the engine is no longer usable.

• After closer inspection the odometer had been altered and the car in fact had 120,000 miles. Tamara discovers the car sales man knew about it but did not tell her.

Case study – CLOCKED ODOMETER• Misleading action on the part of the person who

clocked the car (false information + in relation to main characteristics of the car + need for a service, part, replacement or repair + causing average consumer to take a different decision – buy the car – than he would otherwise have take)

• Misleading omission on the part of the sales man if he did not clock the car (car salesman did hide information about main characteristics that the average consumer needs to take an informed decision + causes a different decision to be taken)

Case study – HOME VISITS• Bob repairs roofs. He stopped by Nina’s home and told her

the roof was clearly in need of repair. She did not let him into the house. She spoke to him outside and said, she was going to call her husband to see what he thought of having repairs to the roof. While she is inside calling, Bob lets himself in the garden and climbs on the roof removing some tiles…

• As Nina re-appears she finds Bob on the roof and asks him to leave… Bob refuses saying he has started work and if she wants him to stop she will have to pay him for the work he has already carried out.

• He demands 200 euros. Nina does not have this kind of money at home. Bob say not to worry, he will drive her to the cash point!

Case study – HOME VISITS• Aggressive practices for getting on the roof and

refusing to leave before he is paid – Annex 1 – practice 25 ‘conducting personal visits to

the consumer’s home ignoring the consumer’s request to leave or not to return…’

• Aggressive practices for offering to drive her to the cash point (coercion to pay since will get the consumer to the cash point + this impairs consumer’s freedom of choice or conduct taking a transactional decision she would not have otherwise taken.

Any questions? Christine.riefa@brunel.ac.uk

Key bibliographyMost of the examples used in this presentation and many

more can be found in: OFT guidance Consumer protection from unfair trading,

http://www.oft.gov.uk/shared_oft/business_leaflets/cpregs/oft1008.pdf