Commercial Practices, Aggressive
by Ansgar Ohly
1. Concept and purpose
A consumer can only act as a ‘referee’ between various competitors in the market if he or she can decide freely on the basis of correct information. Since unfair competition law safeguards the conditions of a functioning market economy (unfair competition (basic principles)), it is called upon to protect the basis and the process of consumers’ rational decision-making. The basis of consumer choice is protected by provisions against misleading commercial practices (commercial practices, misleading), whereas rules against aggressive practices protect the consumer’s freedom of choice. They are also closely related to rules of contract law which allow a contract to be rescinded in cases of threat or undue influence or which grant consumers a right of withdrawal for particular business situations such as doorstep selling or distance contracts.
A commercial practice is regarded as aggressive if it is likely to significantly impair the average consumer’s freedom of choice by harassment, coercion or undue influence and thereby causes him or is likely to cause him to take a transactional decision that he would not have taken otherwise (Art 8 of the EU Unfair Commercial Practices Directive (Dir 2005/29), hereinafter UCPD). Hence, unlike mere acts of harassment such as unsolicited telephone calls or e-mails, aggressive practices have an impact on the consumer’s freedom of choice.
2. Development and sources of the law
Prior to the entry into force of the UCPD the protection against aggressive practices in the Member States differed as considerably as the protection against unfair competition in general (unfair competition (basic principles)). The former German law prohibited interferences with the freedom of choice rather strictly by the doctrines of Kundenfang (‘catching consumers’) and belästigende Werbung (harassing advertising), which had been developed by the courts under § 1 of the Act against Unfair Competition (UWG) of 1909. In French law there was no general prohibition of aggressive advertising, but sales promotion practices such as free gifts, combined offers and prize competitions, which had a potentially negative effect on the freedom of choice, were regulated rather strictly. In English law, on the other hand, a contracting party can rescind a contract if the other party has exerted undue influence, but consumers were not protected against unfair practices before the conclusion of a contract. Only the codes of self-regulation contained rules to this effect.
The UCPD now aims at a full harmonization of unfair competition law in business-to-consumer relations (unfair competition (basic principles)). The directive mentions aggressive practices as an example of unfair competition (Art 5(4) UCPD). The concept of ‘aggressive practices’ is defined in Arts 8 and 9 UCPD. This general definition only sets a broad frame which is, inter alia, filled by eight examples of unfair practices listed in Annex I UCPD, the ‘Black List’.
Thus, there is now a Union law standard for protection against aggressive practices, which, outside the narrow exception allowed by Art 3(5) UCPD, pre-empts both more liberal and more restrictive national provisions (see 3. below). For three reasons, however, the harmonizing effect of the directive might remain limited. First, due to the general wording of Art 8 UCPD and due to the limited practical relevance of some of the ‘Black List’ cases, the limits of ‘aggressive practices’ remain indefinite. Only future decisions of the ECJ will be able to concretize this concept. Secondly, the Member States retain the possibility of prohibiting commercial practices ‘for reasons of taste and decency’ (recital 7 UCPD). Thus the Member States can still ban practices like commercial solicitation in the street (explicitly mentioned in recital 7), cold calling (prohibition optional according to Art 13 of the E-Data Protection Directive (Dir 2002/58)) or uninvited home visits by sales agents where they do not interfere with the consumer’s freedom of choice (see eg § 7 of the German UWG). Thirdly, the UCPD leaves the choice between various methods of enforcement to the Member States.
Accordingly, the implementation of the UCPD in the Member States is by no means uniform (unfair competition (basic principles), unfair competition (consequences)). In German law, a provision prohibiting undue influence on consumers (§ 4 no 1 UWG), which largely corresponds to Art 8 UCP, had already existed since 2004 and was only marginally changed in the course of the implementation of the UCPD. Additionally, § 4 no 2 UWG prohibits the exploitation of inexperience, fear or predicament. Thus Germany has chosen an entirely private law model: aggressive practices give rise to a cause of action for competitors, trade organizations and consumer organizations (§ 8 UWG), competitors can also claim damages (§ 9 UWG), consumer and trade organizations can claim disbursement of profits for the benefit of the state budget (§ 10 UWG). In France, Art 8 was implemented by an amendment of the Code de la consommation; a violation predominantly triggers criminal law sanctions. In several Member States, such as Italy, competition authorities are given the powers to take action against aggressive practices. The same applies to British law, where, however, self-regulation is of particular practical importance.
3. Regulatory content and structure
Whether a practice is aggressive is determined by reference to a three-step test, which proceeds from the specific to the general (unfair competition (basic principles)). The paragraphs of Art 5 should thus be applied in reverse order.
As a first step, the ‘Black List’ concretizes the general ban on aggressive practices by defining practices which are to be regarded as unfair in all circumstances (Art 5(5) UCPD in connection with Art 5(5)). Such practices include creating the impression that the consumer cannot leave the premises until a contract is formed (No 24), conducting personal visits to the consumer’s home and ignoring the consumer’s request to leave (No 25), persistent and unwanted solicitations by telephone, telefax or e-mail (No 26), Art 13 of the E-Data Protection Directive (Dir 2002/58) goes further by prohibiting e-mail spamming and unsolicited telefax advertising as such; (for the possibilities of national law to provide for stricter regulations, see above), inertia selling (No 29) and creating the false impression that a consumer has won a prize (No 31, which, however, is a misleading rather than an aggressive practice). Difficulties of interpretation are created by no 28, according to which a ‘direct exhortation to children to buy advertised products or persuade their parents or other adults to buy advertised products for them’ is deemed to be unfair. It is both unclear what is meant by ‘direct exhortation’ and whether the term ‘child’ refers to minors or only to persons under the age of 14.
The second step is the general prohibition of aggressive practices in Art 8 UCPD, which sets out three conditions: (i) The act must constitute a business-to-consumer commercial practice (Art 2(d) UCPD), ie an act done by a trader which is directly connected with the promotion, sale or supply of a product to consumers. Aggressive practices in business-to-business relations are outside the ambit of the UCPD; thus the Member States retain discretion to proscribe such activities. (ii) As unfair means of influencing consumers Art 8 UCPD lists harassment, coercion and undue influence. The latter is defined as ‘exploiting a position of power in relation to the consumer so as to apply pressure, even without using or threatening to use physical force, in a way which significantly limits the consumer’s ability to make an informed decision’ (Art 2(j) UCPD). The trader, in other words, causes the consumer to believe that he or she will suffer a serious disadvantage unless he or she does what the trader wants him to do. Helmut Köhler and Tobias Lettl distinguish between structural dominance, which results from a familial, social, economic, organizational or intellectual position of superiority, and situational dominance, where the trader takes advantage of a particular situation (such as the practical difficulty of leaving a shop or causing a sales representative to leave the consumer’s home, see nos 24, 25 Annex I UCPD). (iii) The practice must influence the consumer’s freedom of choice. The point of reference is the behaviour of an average consumer, unless the practice is specifically directed at a particularly vulnerable group of consumers (Art 5(2), (3) UCPD).
Even practices outside the ambit of Art 8 may be caught by the general ban on unfair practices (Art 5(1) UCPD), which thus constitutes step three.
The UCPD does not explicitly deal with sales promotion activities such as free gifts, discounts, combined offers or prize promotions. These practices used to be subjected to strict restrictions in some European countries. The Commission’s attempt to regulate these practices by means of a regulation on sales promotions failed; the proposal was withdrawn in 2001. Since there are almost no specific provisions on sales promotion in the UCPD, these practices have to be assessed under the general prohibitions of misleading and aggressive practices. For example, an offer must not be described as ‘free’ if the consumer has to pay more than the cost of payment and delivery (No 20 Annex I UCPD), prize competitions must not be offered without actually awarding the prize (no 19 Annex I UCPD) and traders must not falsely create the impression that the consumer has won a prize (no 31 Annex I UCPD). Apart from these specific cases it is still not entirely clear which information a trader has to give in relation to sales promotion activities (commercial practices, misleading). The proscription of aggressive practices is only of minor relevance in this respect because an average consumer can be expected to assess the advantages of free gifts, discounts and similar promotions rationally. Stricter standards may apply with respect to particularly vulnerable groups of consumers such as minors (see Art 5(3) UCPD).
National provisions which prohibit certain sales promotion practices per se, ie regardless of their influence on consumer choice, are only reconcilable with the UCPD in those instances where the practice is specifically outlawed by the ‘Black List’. Thus the ECJ has held that a Belgian provision which prohibits combined offers per se, a German provision which prohibits lotteries or prize promotions that are tied to the purchase of particular products and an Austrian ban on free gifts are incompatible with the UCPD (ECJ Joined Cases C-261/07 and C-299/07 – VTB-VAB, Galatea  ECR I-2949; ECJ Case C-304/08 – Plus (nyr) and ECJ Case C-540/08 – Mediaprint (nyr)).
4. Conclusion and perspectives
Consumer protection from aggressive practices belongs to the core area of unfair competition law. While in the past in Europe liberal jurisdictions such as English law stood in stark contrast to highly regulated systems such as German law, the UCPD is an important step in a process of convergence which started as early as the 1990s and continues today. It is to be expected, however, that national courts will still differ as to how aggressively the consumer may be canvassed. The ECJ will have a central role to play in the concretization of the concept of ‘aggressive practices’. What is more, the European jurisdictions will remain different with respect to the enforcement of unfair competition law in general and the sanctioning of aggressive practices in particular.
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