Presentation on theme: "Klaus Viitanen University of Helsinki October-November 2012"— Presentation transcript:
1 Klaus Viitanen University of Helsinki October-November 2012 Consumer LawKlaus ViitanenUniversity of HelsinkiOctober-November 2012
2 1. INTRODUCTION The main aims of these lectures 1) to give an overall picture on different legalinstruments used in consumer law, especially in EU consumer law and in the Nordic countries2) a special attention will be given on the problems connected with consumer´s access to justice
3 1.1. Basic definitions: Consumer law Consumer Trader the class of norms which are especially designated to protect the consumer in his or her dealings with a trader (direct protection)Competition Law and Unfair Competition rules give only indirect protection to consumersConsumera natural person who is acquiring goods or services for an other use than business purposesa new trend: from consumer protection to a more wider user or client protection (.e.g. passenger protection in air, railway, sea and road transport contracts)Tradera natural or legal person who is professionally selling goods or providing services to consumers in order to obtain economic benefit
4 Substantive Consumer Law rules of consumer legislation which define therights and obligations of consumers and tradersConsumers' Access to Justicedifferent methods (often supervisory authorities and dispute settlement bodies) which aim is to ensure that consumers' rights are fulfilled also in practiceAccess to justice –questions are in close relation tosubstantive consumer lawwithout effective means for enforcement and consumer redress, the material improvements in consumer protection legislation will have little or no influence at all in a consumer's daily lifeformal right to take a legal action in a court is not enough
5 Consumer Law -questions may be roughly divided into two groups: 1)protection of consumers' collective interestsinterests where no individual consumer has a right to remedy when an infringement of these interests occursexamples:regulation and supervision of marketingregulation and supervision of product safety2)protection of individual rightshow consumer's rights are fulfilled in individual cases after a contract has been concluded and a consumer is dissatisfied with his purchasecontractual remedies when a product or service is defectiveproduct liability
6 1.2. EU Consumer Law The legal basis and the main aims of EU Consumer Law in The Treaty on the Functioning of The EuropeanUnion (former EC Treaty, originally Treaty of Rome):1)Internal Market -argumentEU is entitled to adopt measures which have as their object the establishment and functioning of the internal market (art. 114)aim is to abolish obstacles of free movement of goods and services2)Consumer Protection -argumentin order to ensure a high level of consumer protection (art. 169)Is there are a conflict between these two aims?in theory no, but how about in practice!
7 The Consumer Images behind Consumer Law The EU Consumer Law:a consumer is an active and critical information-seeker, who is able to make rational choices on the basis of collected information (a rational consumer)the main stress in the legal regulation is in the regulation of information: to ensure the accessibility and quality of informationThe Nordic Consumer Law:a passive consumer, who is neither able to collect information available nor to use it in order to make a rational choice (an irrational consumer)regulation of information is not enough to ensure rational choicesthere is also a need for effective protection of consumers´ individual rights, e.g. by means of contract law
8 Legal Instruments in EU Consumer Law 1)directivesa traditional instrument in EU consumer lawhave to be implemented to the national legislationminimum directivesset only the minimum level of protectionMSs are free to provide better protection in their own legislationmaximum directivessets also the maximum level of protectionMSs are not entitled to provide better or weaker protection2)regulationsare directly applicable in all MSsthere is no need to implement them to the national legislationare becoming more popular in EU consumer law
9 The EU Consumer Law directives and regulations Regulation of MarketingMisleading and Comparative Advertising Directive (1984, amended 1997, a codified version 2006/114/EC, OJ L 376, )Unfair Commercial Practices Directive (2005/29/EC, OJ L 149, )Consumer Information and Contract LawDoorstep Selling Directive (85/577/EEC, OJ L 372, )Package Travel Directive (90/314/EEC, OJ L 158, )Distance Selling Directive (97/7/EC, OJ L 144, )Distance Marketing of Financial Services Directive (2002/65/EC, OJ L 271, )Consumer Credit Directive (2008/48/EC, OJ L 133, )Timeshare Directive (2008/122/EC, OJ L 33, )Consumer Rights Directive (2011/83/EU, OJ L 306, )
10 Contract Law Safety of Products Access to Justice Unfair Contract Terms Directive (93/13/EEC, OJ L 95, )Sale of Consumer Goods Directive(99/44/EC,OJ L 171, )Regulations on passenger´s rights in transport contracts:Regulation on Air Passenger s´Rights on Denied Boarding and on Cancelled or Delayed Flights (EC N:o 261/2004, OJ L 46, )Regulation on Rail Passengers` Rights and Obligations (EC N:o 1371/2007, OJ L 315, )Regulation on Passengers` Rights on Bus Transport (EU N:o 181/2011, OJ L 55, )Regulation on Passengers` Rights on Maritime Transport (EU N:o 1177/2010, OJ L 334, )Safety of ProductsProduct Liability Directive (85/374/EEC, OJ L 210, )Product Safety Directive (01/95/EC, OJ L 11, )Access to JusticeInjunctions Directive (98/27/EC, OJ L 166, )Cooperation Regulation (EC N:o 2006/2004, OJ L 364, )
12 New Trend: Towards full harmonisation The starting point: minimum directivesmost consumer law directives between years were minimum directivesthere were only few exception, e.g., the product liability directive from 1985The new trend from year 2005: maximum directivesUnfair Commercial Practices Directive 2005/29/ECTimeshare Directive 2008/122/ECConsumer Credit Directive 2008/48/ECConsumer Rights Directive 2011/83/EUThe key questions:1)whose interests does full harmonisation promote?2)is full harmonisation in practice possible?
13 Who needs full harmonisation? Official explanations:1) full harmonisation promotes consumers´ confidence on internal marketassessment of this argument: do consumers really need exactly same rules in all MSs?1)most sale of consumer goods takes still place inside MSs, cross-border shopping forms still only a small minority of the total sale2)when cross-border shopping takes place, a certain minimum level of protection (e.g. at least two weeks cooling off -period in distance selling) is usually totally enough for consumers 3)instead more emphasis should be focus on the settlement of cross-border consumer disputes, where there are many problemsin practice many consumers avoid cross-border shopping due to the difficulties in potential disputes with traders domiciled in other countries
14 assessment of this argument: 2)full harmonisation promotes traders´ willingness to cross-border marketing and saleassessment of this argument:are the differences in consumer law rules, e.g., concerning marketing or consumer contracts, in practice so relevant in cross-border marketing and sale compared to, e.g., rules on product design, content, package, or labellingif there are markets for a product, and a company has capacity for cross-border marketing, are the differences in marketing and contract rules really in practice any relevant obstacles to make business?compare to the situation in United States!
15 2. REGULATION OF MARKETING 2.1. GeneralDomestic Marketing (ch. 2 of these lectures)marketing in which traders and consumers are domiciled in a same countryCross-border Marketing (ch. 3 of these lectures)marketing in which traders and consumers are domiciled in different countriesThe regulation of marketing has usually two main aims1)prohibition of unfair marketing practicesto prohibit unfair marketing practices, especially false and misleading advertising2)disclosure of consumer informationto ensure that traders provide to consumers certain basic information during the marketing
16 Prohibition of unfair marketing practices Different techniques to regulate:1)general clausesprohibits the use of all kinds of unfair marketing practices without clearly defining what marketing practices are unfairwhether a marketing practice is unfair or not, is decided by courtsit is question of delegation of legislative power from the Parliament to courtsa general clause is a flexible way to regulate, especially when new unfair marketing practices have been developed (e.g. marketing in internet)whether the system is predictable, depends on the amount of case law and its accessibility in practice
17 2)specific detail rules marketing practices which are regarded as illegal are defined by specific rules in legislationbenefit: detail rules make it for an advertiser easier to predict what kind of marketing practices may be regarded as illegaldefect: in case there is a need to interfere with a totally new kind of marketing practice, legislative changes have to be done first
18 3)combination of general clause and specific rules by using this model, benefits of general clause and specific rules may be achieved at the same timein the Nordic countries the combination of general clauses and more detail rules have traditionally been used in the regulation of unfair marketing practiceshowever, in the Nordic countries the main focus has always been in the use of general clausesdue to this, most principles on unfair marketing practices in the Nordic countries may be found in the case law instead of the written law
19 Duty to Disclose Consumer Information Detail regulationdefines quite precisely what information a trader is obliged to give to consumers during the marketingis much more effective than general clausesis used in several EU consumer law directives: they oblige MSs to adopt rules which set to traders duties to give certain, specific information to consumers concerning:1) cooling-off periodconsumers are not able to use this right, if they are not aware of its existencesee, e.g., Timeshare Directive, art. 5.4.
20 2)other essential information, for example a) Package Travel Directive, art and 4.1.the identity of the trader (name, address, etc.)the legal rights of consumersthe main features of the product or service marketedall relevant information connected to the price of the product or service (including taxes, extra expenses, etc.)b) Consumer Credit Directive, art. 4the annual percentage rate (the total cost of credit to a consumer per an year)
21 2.2.Unfair Commercial Practices Directive replaced Misleading and Comparative Advertising Directive 84/450/EEC in consumer matters, but not in unfair competition matters (a codified version in year 2006)but how is comparative advertising regulated at this moment?on the contrary to the most earlier consumer law directives, UCPD is a full harmonisation directivetaste and decency –questionse.g. discriminatory (sex, ethnic background, religion) advertising has been left outside of the scope of the directive (recital 7)is based on a combination modelgeneral clause (art. 5)more specific rules (art. 6-9)black list of always forbidden practices (Annex I)
22 General clause (art.5)on unfair commercial practices commercial practice, whicha)is contrary to the requirements of professionaldiligence (fairness test, e.g. false or misleading advertising)andb)it essentially distorts or is likely to distort the economic behaviour of the average consumer (effect test),is regarded as unfair (art. 5.2)protection of vulnerable consumerscommercial practices which are directed to a clearly identifiable group of particular consumers (e.g. children, sick or elderly people) are assessed from the perspective of the average member of that group (art. 5.3.)
23 Supplementary specific rules: Misleading commercial practices (art.6-7):A commercial practice shall be regarded misleading ifa) it contains false information and is thereforeuntruthfulorb) it misleads or is likely to mislead the averageconsumer even if the information is factually correctc) it omits certain relevant information that the averageconsumer needsandin all three alternatives this practice causes or is likely to causea consumer to take an economic decision that he would not havetaken otherwise
24 Aggressive commercial practices (art.8-9): A commercial practice shall be regarded as aggressiveifa) it by harassment, coercion, including the use ofphysical force, or undue influenceb) significantly impairs or is likely to significantly impair the average consumer´s freedom of choice and therebyc) causes or is likely to cause him to take economicdecision that he would not have taken otherwise
25 The flexible nature of the general clause the specific rules in art. 6-9 on misleading or aggressive commercial practices clarify, what practices may especially be regarded as unfairthe general clause may be used in cases1)which fall under the scope of the specific rules,but also in cases2)which do not fall under the scope of art. 6-9The black listannex I of the directive contains a list of commercial practices which are in all circumstances unfair, so called typically unfair practices (fairness or effect test is not needed)Supervision of marketingshould be organised in the MSs as during the former Misleading and Comparative Advertising Directive: state authorities or consumer organisations are entitled to start court or administrative procedure (art.11)
26 Problematic questions in the UCPD 1)what is the expected level of knowledge ofaverage consumers?the case law of the ECJ: average consumer is a reasonable well-informed and reasonable observant and circumspecta clear conflict between the common meaning of word average and this definition: an average consumer is certainly not reasonable well-informed and observantimplementation in the Nordic countries:the main stress has been given to the common meaning of word “average” and the word average itself has been left away from the law textremember the different consumer images in EU and Nordic consumer law (an active information-seeker v. a passive , irrational consumer)this implementation may cause different interpretations in MSs, as many MSs adopted also the word average to their law text
27 2)when the condition ”is likely to essentially distort the economic behaviour of consumers” is met?different wording is used in articles 6-9: “is likely to cause him to take an economic decision that he would not have taken otherwise”different wording – different meaning?the latter definition seems to require more stronger effect to the behaviour of consumersshould we assess the effect of, e.g., false informationseparately, when it is hardly never decisive from the viewpoint of consumer´s decision-making procedure (separate effect)together with all other marketing information which effects on consumers (common effect)the choice between these two alternatives might have serious consequencesexample: claims on environmental friendliness of marketed products
28 3)the effect of the taste and decency –doctrine matters related to taste and decency were left outside of the scope of the directive (recital 7)these differ greatly among European countries, e.g., concerning discriminatory (sex, ethnic background, religion) advertisingsometimes these values are overlapping with the protection the economic interests of consumers (which is the main target of the directive)example: marketing to minors in schoolsprotection of economic interests: minors do not expect to face marketing at schools, especially marketing in which teachers are involvedsocial values: schools should be marketing-free zones in a world which is coming more and more commercial
29 2.3. Regulation of Marketing in Finland I. Former regulationrelevant act: Consumer Protection Act 1978, ch. 2the former general clause in the Finnish Consumer Protection Act, ch. 2, art. 1:“Conduct that is contrary to good practice or that is otherwise unfair from the viewpoint of consumers is not allowed in marketing”specific articles, e.g., ch. 2, art. 2:”False or misleading information shall not be conveyed in marketing”whether marketing had impact on the economic behaviour of consumers in the target group, was not relevant from the viewpoint of law textbut was it an implied term which fulfillment was necessary before these rules could be applied?
30 II. Implementation of the UCPD in Finland amendments to chapter 2 of the CPA (561/2008) entered into force on 1 October 2008a new general clause (ch.2, art. 1)”Marketing which(a)is contrary to good practice or(b)is unfair from the viewpoint of consumers,is not allowed in marketing”new separate general clauses on1) marketing contrary to good practice (ch.2, art. 2)based on the taste and decency –restriction2) unfair marketing practices (ch.2, art. 3)based on the idea to prevent the distortion of consumers´ economic behaviourin addition, (3) the CPA contains new and old specific rules on unfair marketing practices
31 1) Marketing contrary to good practice a new general clause (ch.2, art 2):”..is in clear conflict with generally accepted social values, especially ifa)it infringes human rights or religious or political persuasionsb)it contains discrimination on the basis of sex, age, ethical or geographical origin, etc.c)it shows in a positive light activities where health, general safety or environment are put in danger”former Finnish case law on the protection of social values in marketing was based only on the interpretation of the general clause on the consequence that the competence of Consumer Ombudsman and Market Court was sometimes questionedthe implementation of UCPD solved this problem and there is now a clear legal basis: CPA ch. 2, art. 2
32 Some examples from the former case law (still valid!) a) violence in marketingMarket Court decision 1998:18The 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, violence is not an acceptable way of attracting attention in advertising, especially when violence has no connection with the product being advertised (in this case food stuff).b)discrimination based on sexMarket Court decision 2001:6 (Lola –case)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, e.g. following text: ”Lola is not included in the price!”The court stated, that the use of 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 in it. In this case the campaign was regarded as discriminative and unfair.
33 2) Unfair marketing practices a new general clause (ch. 2, art. 3), which scope of application covers also the specific rules (ch. 2, art. 4-14)the general clause is rather identical to art. 5 of the UCPD: according to ch.2 art 3: unfair marketing is marketing, which iscontrary to the requirements of professional diligence andis likely to distort the economic behaviour of consumers who belong to its target groupone relevant difference: average consumer is not mentioned at all!according to Government´s Proposal (HE 32/2008), the concept of average consumer is equivalent to the concept of ordinary consumer on the consequence that there is no need to mention it in the law textsimilar choice has been made also in the other Nordic countrieseffects from the viewpoint of full harmonisation?
34 Protection of vulnerable consumers UCPD: a special attention should be given to the target group in the assessment of legality of a marketing campaignCPA contains now in its general clause a clear provision on the protection of vulnerable consumers (minors, elderly people etc)the protection of vulnerable consumers was in the Nordic countries possible also before the law reform, but it was based on case law onlymarketing aimed at minors provides here a good examplemain principle: marketing to minors is in principle allowed, but it must comply with much more stricter rules than marketing to adultsMarket Court 2000:12: Distribution of advertising magazine in schools and day-care centresFamily magazine was a publication intended for children and young people which contained marketing mainly in the form of articles. The Market Court banned the distribution of the magazine in schools and day-care centres without parents' permission
35 3) Specific rules in ch. 2 of the CPA Identification of marketing (ch.2., art.4)consumers should always be able to make difference between commercial and non-commercial material and to identify the person behind marketingthis 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 2002Market Court decision 1997:6: Commercials must be distinct from programmingKiss FM radio station was forbidden from broadcasting com-mercials unless they are distinguished from other prog-ramming by, for example, a distinctive tune used both before and after commercial breaks.
36 Misleading or false marketing (ch.2., art. 6-7) prohibition to givea)misleading informationorb)false informationb)omit relevant informationwhich is likely to cause a consumer to take a transactional decision that he would not have taken otherwiserather identical to art. 6-7 of the UCPDonce again, the concept of the average consumer is not at all mentioned in the law text
37 Duty to disclose information (ch.2, art.8) corresponds article 7.4. of the UCPDmarketing of individualized products or services should always contain at least the following information:1) the main features of a product and servicein a scale which is appropriate (a)when taking into account the marketed product or service and (b)the used marketing tooldifferent requirements for TV and newspaper adds!2) trader´s – or his agent´s - name and geographical address3) price information: the total price of the product or service including all taxesthis is based also on the former case law and Decree on Price Markingthe price had to be mentioned in an advertisement where a certain product or service could be identifiedthe price mentioned had to be the total price, included all taxes and service charges
38 Market Court decision 1992:11: Price splitting the most important information for a consumer is normally the total price of the product or serviceit does not matter, whether the procedure to count the total price would in practice be rather easy, the price informed to consumers in marketing has to be always the total priceMarket Court decision 1992:11: Price splittingin advertising of cruise pricesOy Viking Line Ab had marketed its cruise prices without mentioning the passenger tax. The Court stated, that passenger tax is a part of the price which consumers must pay for a cruise. From the 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 form of tax. It is important for consumers that ads clearly indicate the total price charged by the business. Marketing, which do not contain the total price of the product or service is regarded as unfair.
39 Additional benefits (ch.2, art.12) and benefits based on chance (lotteries etc.) (ch.2, art )are accepted in marketing only if the following two conditions are fulfilled:1) benefits should not have a dominant role in the marketingthis condition is based on the general clause, not on the specific rules above2) the means of getting additional benefits should be clearly explained in the marketing3) 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 whether he was purchasing a product or notchange in June 2011: purchase may now be put as a condition to participatereform was argued on basis of ECJ recent case (C-304/08)but was the case misunderstood in Finland?
40 Market Court decision 1995:25: Free gifts and lotteries in the direct marketing of time‑sharesHelsingin Resort Marketing Oy was direct marketing of timeshares by inviting consumers to a special meeting. The predominant focus of an invitation letter sent out by the company to a presentation and sales meeting was on free gifts and lotteries. Based on this information, consumers had difficulty in assessing the true nature of the meeting in question. Many of the consumers arriving at the meeting did so mainly to collect the free gift promised. The marketing was regarded to be in conflict with the general clause because the promised benefits had a dominant position in the marketing.
41 Other specific norms in ch.2 of the CPA: comparative or other marketing may not cause confusion between products of different traders (art.5)the former article concerning comparative advertising was removed to Unfair Competition Actwhat is the role of this removed article in consumer protection?prohibition to use aggressive selling methods (art. 9)prohibition of inertia selling (art. 10)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 he does not clearly refuse or return the goodthe price should not be announced as being reduced more than it actually has been (art. 11)the promised discount should always be real
42 2.4. Case Lawmany leading principles of the Finnish marketing law have been created by the Market Court since 1978 in cases where the former general clause was appliedduring the years, for informative reasons many of these principles have been added as new specific rules into ch. 2 of the CPAhowever, there are still many principles which have not been codified, but are still based on the case law onlymany of them are closely connected to the prevention of misleading and false marketingafter implementation of the UCPD, especially the effect test, the central question will be, what is going to happen to these principles?do they remain or disappear?
43 1) The principle of general impression lawfulness of marketing is evaluated on the basis of what kind of general impression consumers do get after a reasonable short acquaintance of advertisementsrelevant information may not be presented by small letters at the end of an advertisementMarket Court 2001:9.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 trade-in offer was spread across the screen. If a specific subscription is advertised, typical user costs must be indicated clearly. The commercial was regarded as unfair.the significance of the new effect test to the principle of general impression?
44 2)The principle of trader´s burden of proof a trader must always be able to prove facts he presents in his marketinghowever, relevant is the difference between facts and matters of taste“cheapest in the town” is a fact which must be proven“best service in town” is matter of taste which cannot be proventhis principle may also be found in art. 12 of the UCPD, which mean that it will remain also in the future
45 Market Court decision 1997:2: Unproven Price Claims/ Price Guarantee Oy PC‑Superstore used in its marketing, e.g., the following texts:a)Finland’s cheapest computer chain storeb)Price guarantee: we will pay you back the price difference at time of purchase if you could buy the same product at a lower price from another shop.”The company produced no proof that its products were cheaper than similar products marketed by its competitors. According to the Court, claims concerning a ‘lowest price’ are not proven merely by the fact that the advertiser promises to pay the customer the difference if he can find the same product on sale more cheaply somewhere else. The Court regarded marketing to be in conflict with the CPA.
46 3) Comparative advertising may not be false or misleadingone may compare only products which have a similar purpose of usecomparison has to be objectiveonly relevant features may be compared, e.g., pricethe use of test results is accepted if the following conditions are fulfilled:tests itself have been made by objective third partiesonly relevant features have been tested and comparedMarket Court 2003:5 Use of EuroNCAP –testVeho Ltd was marketing: “Mercedes Benz is safer than the most safest Volvo on the basis of a recent EuroNCAP –test.” However, the cars which had been tested by EuroNCAP belonged to different classes. According to EuroNCAP-rules cars from different classes may not be compared with each others due to different technical and other features, e.g., weight. Because this rule had been infringed and the cars were not directly comparable with each others, the advertising was regarded as unfair.
47 4) Claims on environmental friendliness of marketed product Consumer Ombudsman´s decision in 1999: Marketingof green electricity.Kainuu Electricity had marketed eco‑electricity using slogans “Eco‑electricity is the choice of families who care about the environment”. However, in fact electricity with an eco‑label formed only 43% of the company’s total sales. The danger was that the entire company’s electricity production will be given an eco‑label in consumers’ eyes. Emphasizing the environmental effects of consumers choice of electricity was therefore misleading and was regarded as unfair.the influence of effect test in environmental claims?
48 5) The use of word “guarantee” in marketing guarantee should always mean that a consumer receives a certain benefit compared to his legal rights which are based on the lawMarket Court 1994:14 Satisfaction guaranteeA mailorder company used in its marketing concept ”satisfac-tion guarantee” which gave to consumers one week cooling off –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 marketing was regarded as unfair.
49 2.5. Supervision of marketing 1. GeneralDifferent models to supervisein principle there are different possibilities to organise supervision of marketing:1)supervision may be taken care by:a)state authorities orb)consumer organisations orc)self-regulatory bodies2)supervision may be taken care by only one of these alternatives (single model) or more than one at the same time (combined model)3)decision whether a marketing practice is unfair or not, may in principle be made (a) in administrative procedure or (b) in court procedure
50 Supervision according to the EU consumer law: Unfair Commercial Practices Directive obliges (as the Misleadingand Comparative Advertising Directive before it) Member States toensure that:1)state authorities and/or consumer organisations are entitled to start2)court procedure or administrative procedure in order to prohibit unfair commercial practices (art. 11)self-regulatory bodies - based on business self regulation - are accepted only as a supplementary, but not as the only supervisory system (art. 10)
51 2.The Nordic Model in the Supervision of Marketing enforcement of consumers´ collective interests in the Nordic countries is taken care by a special state authority, called as the Consumer Ombudsman (CO)CO is a state authority, whose task is to protect consumers´ collective interests by1)supervising marketing practices2)supervising the use of standard contract terms3)promoting consumer interests in generalthese authorities were established in all four countries between years 1971‑1978the activities of the CO are in Sweden connected to the National Consumer Agency, and in Denmark and Finland (in the latter from January 2013) to the combined Competition and Consumer Agency
52 The most relevant acts in force which regulate the activities of the Nordic COs, arein Denmark the Marketing Act 2005in Finland the Consumer Protection Act 1978in Norway Marketing Act 1972in Sweden the Marketing Act 1995English translations of these acts are available in thefollowing internet-pages:Danish National Consumer Agency (http://www.forbrug.dk)Finnish National Consumer Agency (http://www.kuluttajavirasto.fi)Norwegian Consumer Ombudsman (http://www.forbrukerombudet.no)Swedish National Consumer Agency (http://www.konsumentverket.se)
53 The competence of the Nordic Consumer Ombudsmen in the supervision of marketing1)preventive methods:an extremely typical feature for the supervision of marketing in the Nordic countries is the frequent use of preventive actionsthe aim is to prevent any infringements of law by providing information for the traders who are preparing new advertising campaignsoften these preventive actions are not based on the law, but have been created in practice during the years
54 Different preventive methods Advance opinion is an opportunity (but naturally never an obligation) for an individual advertiser to check beforehand whether a planned marketing campaign is infringing the marketing law or noton request, the CO will give an oral or written statement regarding his view of the lawfulness of the planned marketing arrangementonce the CO has shown “green light”, he will not interfere on his own initiative with an arrangement covered by the advance opinion and implemented within a reasonable time of its deliveryMarketing guidelinesCOs have issued during the years non-binding marketing guidelines in several sectors of businessthey are mainly based on the existing case lawtheir purpose is to inform traders what kind of marketing practices are infringing the lawa new trend: CO and branch organisations have prepared guidelines together
55 In case infringements of law are observed: 2) repressive methodsIn case infringements of law are observed:a) in the first step, CO tries to persuade a trader to abandon in avoluntarily way marketing which is regarded as unfairb) in case persuasion fails CO is entitled to impose an injunctionorder together with conditional fines in cases which do not havemajor importanceif the trader resists, this injunction becomes void except in Norway, where the trader has to appeal in case he resiststemporary injunction orders in urgent cases are available in all four countriesc) take legal action against a trader in the courtspecial courts have jurisdiction to decide whether marketing is infringing the law or not
56 The Nordic Market Courts Special courts whose jurisdiction is limited to a certainareas of law onlyin Finland: the Market Court (collective consumer law, unfair competition, competition law, and in the near future also IPR- issues)in Sweden: the Market Court (collective consumer law, unfair competition, competition)in Norway: the Market Council (collective consumer law, unfair competition law)In Denmark: the Maritime and Commercial Court of Copenhagen (also maritime law and other commercial law)
57 If the Nordic Market Courts regards marketing practice as unfair, the following sanctions are available:1) injunction orderthe purpose of this order is to prohibit the trader to carry on its illegal activitiesin most Nordic countries an injunction order is strengthen with a conditional fine (which has to be paid only if the same infringement is repeated)2) corrective advertisingan obligation to correct the information given in unfair marketing, normally by a totally new advertisementin practice the significance of corrective advertising has been rather small, because marketing campaigns have in practice ended a long ago before the judgment is given
58 3) market disruption fee has been available in Sweden since year 1996available if the trader acts intentionally or if he by carelessness violates the detail rules of the Swedish Marketing Actthe ordered fee may be from SEK to , (the latter about EUR ), but not more than ten percent of the trader´s annual turnover.disruption fee is an alternative sanction to an injunction orderit should be used in serious cases only, and in practice it has been used rather seldomNo criminal sanctions or compensation of damagesthese questions are dealt in general courts onlyin practice criminal sanctions have been used very seldom
59 3. Evaluation of the Nordic enforcement system from the viewpoint of effective consumer protection1) in the beginning of the establishment of the Nordic consumer protection system, serious attention was paid, not only to substantive law, but on the enforcement of consumers´ collective interests2) enforcement of consumer protection has been the sole task of the Nordic ombudsmen and consumer authoritiesso far there have been no fear that the fulfilment of other tasks, especially, enforcement of competition law, would have started to dominate their activities by using majority of the available resourceswhat is going to happen in Denmark and Finland where consumer and competition authorities have been merged?3) the channeling of consumers´ collective protection -cases to special courts instead of general courts has created more consumer –friendly case law
60 4) the wide use of soft law –methods has in practice been very successful most of the traders are willing to change their marketing practices voluntarily, especially in clear cases, in order to avoid bad publicity caused by a potential procedure in the Market Court5) soft law need hard law as a backingwithout the possibility to use sanctions if necessary, the persuasive methods would not be so successful as they have been now in practice6) the lack of other sanctions than injunction makes the system sometimes rather toothlessit is possible for unscrupulous traders to continue - at least for a while - and repeat the infringements in some similar, but also unfair form7) larger competence to issue injunction orders?should Cos have larger competence to issue injunction order without a need to start a court case in Market Court?
61 3. Regulation and Supervision of Cross-border Marketing 3.1. GeneralCross-border Marketing means marketing in whicha trader is marketing consumer goods or servicesfrom one country (source country)to consumers who are domiciled in an other country (target country)
62 The basic problems in cross-border marketing: 1) the differences between the substantive rules in source and target countrieseven in areas, where EU has adopted consumer law directives, the aim has been to set a common minimum standard of protection, not to harmonise national lawsmarketing which is full in accordance with the laws of the source country, may infringe the laws of the target country2) the marketing may be directed only to consumers domiciled in other countries than where the trader is domiciledthe consumer authorities/organisations in the source country do not have interest to interfere in such marketing3) there are often differences between MSs how actively the consumer authorities/organisations are supervising marketingthese differences are based on supervisory traditions, level of motivation, available resources, etc.4) the consumer authorities/organisations in the target country are often powerless: in practice it may be difficult to enforce remedies against a foreign trader
63 Two opposite models of regulation and supervision There exists two opposite models to regulate and to supervisecross-border marketing. These systems do not have to excludeeach others; they may also be parallel or supplementaryThe home country principle (principle of the country of origin)the level and substance of regulation is determined by the country in which the trader is domiciled (the source country)also the compliance of regulation is supervised by the authorities and/or organisations of the source countrypolitical background: internal market -argumentThe target country principlethe level and substance of regulation is determined by the country or countries in which the effects of an infringement may be seen (the target country)also the compliance of regulation is supervised by the authorities or organisations situated in the target countrypolitical background: consumer protection -argument
64 3.2. Satellite advertising TV directive (89/552/EEC, OJ N:o L 298, )The transmitting state principleis one application of the home country principleart.2.1.: transmitting Member State must ensure that all television broadcasters under its jurisdiction comply with the law on that Stateart.2.2.: receiving Member State must ensure the freedom of reception and it is not allowed to restrict retransmission of television broadcasters from other Member States, for reasons which fall within the fields coordinated by the directive
65 De Agostini -case: C-34/95 in the ECJ Facts of the case:De Agostini -company was using services of a British company which broadcasted television programmes by satellite from the UK to Denmark, Sweden and NorwayDe Agostini -company advertised a kids magazine which was published in series, each consisting of several issueswith each issue came a part of a model dinosaur: in order to build one dinosaur, all issues of one series had to be collectedthe Swedish CO took legal action against the De Agostini- company in the Swedish Market Court for two reasons:1)television advertising to children under 12 years wasforbidden according to the Swedish Broadcasting Law2)advertising was misleading because it did not containinformation how many issues belong to each series and whatwas the total price of one series and one model dinosaur:it contained only the price of one individual issuethe Swedish Market Court asked ECJ to a give a preliminary ruling
66 Decision of the ECJ was quite predictable: 1) the TV-directive allows advertising to children in case certain basic conditions are fulfilledthe Swedish authorities were not allowed to totally forbid cross-border television advertising which was directed to children2) the TV-directive did not prevent the consumer authorities in the target country to take legal action against cross-border television advertising in those fields which were not coordinated by the TV-directiveas the TV-directive was not regulating misleading advertising, the Swedish authorities were entitled to take legal action against cross-border misleading advertisingSo, in the satellite advertising the both principles maybe used at the same time:1) the home country principle in those fields which are coordinated by the TV-directive2) the target country principle in those fields, which are not coordinated by the TV-directive
67 Audiovisual Media Services Directive (AVMSD) 2007 is in fact a revised version of TV-directive 1989its scope of application was expanded to cover also the so called on-demand AVM –servicessurprisingly, the content of the transmitting state principle was not changed, or even clarified!this means that DeAgostini –case has not lost its significancetarget countries have still right to take legal actions against cross-border TV-advertising in those fields which are not coordinated by the AVMSD-directivea codified version of the AVMSD-directive was published in year 2010 (2010/13/EU, OJ L 95, )
68 3.3. Cross-border e-commerce Electronic Commerce Directive (2000/31/EC, OJ L 178,)is mainly based on the home country principle (art )however, the target country may take measures against cross-border electronic marketing in case two conditions are fulfilled:measures are necessary in order to protect, e.g., public order, public health or consumers (art. 3.4.)the target country has asked - without adequate results - the home country to take measures against illegal marketing (art.3.4)the influence of DeAgostini-case may be clearly seen in this directive
69 3.4. Different methods to develop regulation and supervision of cross-border marketingProblems in enforcementeven if we adopt the target country principle in theregulation and supervision of marketing, one centralproblem still remains:how the authorities in the target countries may in practice enforce sanctions against companies domiciled in other countries?Different alternatives to improve enforcement1)the principle of entity2)free movement of actions for injunction3)cooperation between the national supervisory bodies4)harmonisation of the substantive marketing law
70 1)The Principle of Entity originates from competition law:all companies belonging to the same multi-national group of companies are liable for infringements of law caused by any of its parent or subsidiary companieshas already been used at least in FinlandThe Finnish Market Court 1987:13. McDonalds was marketing its products via satellite television from Britain to Finland. The Finnish CO took legal action in the Finnish Market Court against the Finnish subsidiary company of the multinational company in question – McDonalds Osakeyhtiö. The court stated that the Finnish CPA was applicable in the case due to the fact that marketing was intentionally targeted also to the Finnish consumers. The injunction order with a conditional fine was imposed to McDonalds´ Finnish subsidiary company.
71 2)The free movement of actions for injunction The directive on injunctions for the protection of consumers‘interests (injunction directive) (98/27/EC, OJ N:o L 166, )(a codified version 2009/22/EC, OJ N:o L 110, )The main content of the injunction directivetraditionally the right to take legal action against traders have been reserved only to the consumer authorities/organisations in the same country where trader is domiciledMSs are obliged to ensure so that also qualified entities (which may be consumer authorities, consumer organisations or trade organisations) in target countries are entitled to take legal actions for injunction in source countries when an infringement affects to the interests of consumers in the target country where the qualified entity has its domicilethe right to bring an action for injunction is limited to those consumer issues where the EU has adopted consumer law directives (as transposed into the internal legal order of the MSs)
72 Evaluation of the injunction directive: the injunction directive does not solve problems which arebased on differences in substantive law between the MSsthe right to bring an action for injunction in the source country is 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 Agostini-case)who finances the cross-border actions?legal expenses cause an economic risk which in practice prevents cross-border litigation in a quite effective way when authorities and organisations are working with limited financial resourcespractical relevance of this directivehow many times it has been used in practice?
73 3)Cooperation Between National Supervisory Bodies I. Informal cooperationthe International Consumer Protection and Enforcement Network (ICPEN) (www.icpen.org)was established in 1992it consists of national, normally supervisory bodies from more than 40 different countriesexchange of information, collaboration (e.g. sweep days in internet), yearly meetings, etc.may be used between all countries, not only between the EU Member States
74 II. Formal collaboration Regulation on Consumer Protection Cooperation (N:o 2006/2004,OJ N:o L 364, )every MS must have a consumer authority, who has jurisdiction to deal with cross-border marketingindirect effect in some countries, e.g., in Netherlandconsumer authority in the source country (requested authority) is obliged, on the request of consumer authority in the target country (applicant authority), to take all necessary measures to cease illegal cross-border marketing in the source country (art. 8.1.)the requested authority may, however, determine which measures will be taken (art. 8.2.)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 defendant if the case is lost (art )
75 4)Harmonisation of the Substantive Law The starting points1) collaboration between supervisory bodies is useless if cross-border marketing which infringes the law of the target country is in accordance with the laws of source country2) directives which are based on minimum clauses(a)do not eliminate the differences in substantive rules betweenthe MSs on the consequence(b) that they are conflicting with the Internal Market -argumentFull harmonisation of legislation on unfair marketing practicesfirst efforts: Unfair Commercial Practices Directive 2005shows the new trend in the EU Consumer Lawinstead of minimum clauses (and minimum level of protection), the aim is now full harmonisation (and abolishment of the differences between the national legislation of the MSs)in case it works, the choice between home and target country principles becomes less important than nowadays
76 UCPD: will its aims be achieved? 1) is it really possible to harmonise national rules concerningmarketing by using general clauses?general clauses are legal instruments which delegate the decision-making power from the Parliament to courtsgeneral clauses will be applied by the national courts in 27 different MSswhen taking into account (a)unclear concepts used in the UCPD (e.g., average consumer, effects on consumers’ economic behaviour) and (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 MSsthe consequence: the differences between the substantive laws of the Member States may not be abolished by the UCPD2) is it really possible to ensure that the supervision of marketing would in practice be at the same level in all Member States?the efficiency of supervision often depends on motivationand available resources of the supervisory bodiesmost probable there will be remarkable differences
77 4) is UCPD based on home or target country principle? 3) if full harmonisation of the national legal rules may not be achieved, the choice between home and target country principle still remains relevant from the viewpoint of consumer protectionin the home country principle the lawfulness of marketing may be determined by a country in which the level is lowest if the trader is domiciled in that country4) is UCPD based on home or target country principle?Commission´s first proposal (COM (2003) 356 final)Traders shall only comply with the national provisions of the Member State in which they are established (art. 4.1.)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 this Directive (art. 4.2.)due to resistance of many MSs the article 4.1 was dropped away and only article 4.2 was left to the final Directivewhat does it mean? Is the home country principle the onlypossible principle of regulation and supervision or may targetcountries also take measures against cross-border marketingwhich infringes the laws of target countries?this issue will be decided later on by the ECJ
78 4. CONSUMER CONTRACT LAW Traditional view how contracts are concluded: basic presumption: (1)equal parties (2) agree individually each contract terms (3)after negotiationspacta sund servanda: the contract binds both parties according to its termsthe legitimacy of pacta sund servanda –principle is based on the presumption of equal parties
79 Reality in consumer contracts: The parties, consumers and traders, are in most casesunequal1) the lack of information: consumers do not in the most cases have enough information (quality, price, other terms) which is necessary to conclude a good contract2) the unbalanced negotition power: even if well informed, consumers do not have as much as influence on the content of contract terms than tradersgood example: the wide use of standard contract terms in practicethe presumption on equal parties does not correspond with the realityconsumers need protection in their contractual relations with traders
80 Different Methods to Provide Protection in Consumer Contracts 1) Cooling off -periodsdefinition: consumer's right to withdraw from a contract with in a certain time (normally from 7 to 14 days), without penalty and not having to give a reasoncooling off- periods, based on the law, are normally provided in those types of contracts in which it is typical that:a)consumers do not have the possibility to compare the price and quality of the marketed product with other similar products before making their decisionDoorstep Selling Directive, art.5
81 the product before the contract is made b)consumers do not have an opportunity to checkthe product before the contract is madeDistance Selling Directive, art.6c)aggressive methods of marketing are often usedTimeshare Directive, art. 6d)there is a risk of consumer´s over-indeptednessConsumer Credit Directive (2008), art. 14the length of cooling off-period in these directivesdepends on whether or not the trader has fulfilled his obligation to provide to a consumer certain information referred to in the directivesCooling off –periods based on a contractcooling off-periods based on law should not be confused with cooling off-periods based on an individual contract only (latters are usual, e.g., in big department stores)
82 2) Mandatory provisions of consumer contract law definition: the parties are not entitled to conclude individual contracts imposing worse terms regarding to the weaker party than is provided by the mandatory provisions of lawSale of Consumer Goods Directive (99/44/EC)especially in the sale of goods the essential questions on consumer contracts have often been regulated by mandatory provisions of law. These question are, for example:a) goods conformity with the contractwhen a product is defectiveSale of Consumer Goods Directive, art. 2
83 b) burden of proof concerning when the lack of conformity existsSale of Consumer Goods Directive, art. 5.3.:any lack of conformity which becomes apparent within six months of delivery is presumed to have existed at the time of delivery, unless proved otherwise (so called legal guarantee)c) rights of the consumer (remedies) in the case of a lack of conformitySale of Consumer Goods Directive, art. 3.:in the first place, repair free of charge or replacementif not possible or if not done, reduction of price or the right to have the contract rescinded (the latter only in case the lack of conformity is not minor)
84 d) minimum time limit for liability Sale of Consumer Goods Directive, art. 5.1.:at least two years from the delivery of the goodsin Finland there is no maximum time for seller*s liabilityhowever, consumer has the burden of proof whether a four year ago bought product was defective already at the time of deliverye) minimum time limit for complainingSale of Consumer Goods Directive, art. 5.2.:consumer must inform the seller within two months from the date on which he detected the lack of conformity (in Finland no exact time limit, only in reasonable time)However, it is not possible or even sensible to regulateall potential contract terms by mandatory provisionsa wide area of different kind of questions will always stay at the parties to agreethat is why, there is also a need for other methods to balance the contractual relationship between the parties
85 3) Prohibition to use unfair contract terms in consumer contracts the main aim: to prevent the use of unfair terms inconsumer contractsUnfair Contract Terms Directive (93/13/EEC)Definition: unfair contract term is a contractual term which causes a significant imbalance in the parties´ contractual rights and obligationsscope of application:only standard contract terms, not individually negotiatedco called core terms, included price terms, stays out of the scope of directivethe MSs have a right to choose whether to regulate unfair contract terms by (1) a general clause or(2) more specific rules or by (3) a combination model
86 The annex of Unfair Contract Terms Directive it contains so called grey list of contract terms which may be regarded as unfairtypically unfair contract terms in the list are often connected to the following items:trader has a right to make changes to the contract terms including the price without consumer´s approvaltrader has excluded or limited his legal liability in case he breaches the contractsanctions which are available for consumer´s breach of contract are very hardarbitration clause which excludes access to the courts
87 Supervision: Unfair Contract Terms Directive, art. 7: MSs are obliged to ensure that adequate and effective means exist in order to prevent the use of unfair contract terms in standard contractsthe choice between different supervision systems has been left to the MSs: they may give to authorities and organisations1)a right to take legal action against a trader who is using unfair terms in standard contracts (court procedure) or2)only a right to complain to an authority which task it is to decide whether a contract term is unfair or not (administrative procedure)supervisory system is similar to the UCPD
88 In the Nordic countries the system to regulate and supervise unfair contract terms is rather similar thanin the marketing:1) the fairness of contract terms is mainly regulated by general clausesno combination model has been used herecase law is in practice the main source of information2) the Consumer Ombudsman tries to prevent the use of unfair contract termsa)the CO first tries to persuade a trader to abandon the use of unfair contract termsb)in case persuasion fails, the CO may issue a permanent (in case trader does not resist) or a temporary (in urgent cases) injunction orderc)finally the CO is entitled to take legal action against trader in the Market Court
89 3)negotiations with branch organisations a preventive methodis not based on the law, but has been created in practice during the yearsstandard contract terms have been negotiated between CO and branch organisations in several branches of businessa good example in Finland: Package Travel Contract Termsnegotiations does not necessarily mean that the CO approves all the contract terms in the negotiated standard contract terms, but he approves most of them
90 Benefits connected to these negotiations: 1)from traders´ point of view:the probability that CO would take actions against negotiated contract terms is in practice quite smallit makes the system more predictable2)from consumers´ point of view:law prohibits only the use of unfair contract termsby negotiations it is possible to add to the standard contracts new terms which improve consumers´ contractual position compared to the earlier used terms, and even compared to the mandatory provisions of consumer contract lawexample: consumer´s right to withdraw from a package travel contract with rather small expenses
91 4)voidness and adjustment of unfair contract terms in individual contracts it is a repressive control methodUnfair Contract Terms Directive, art. 6.1:unfair contract term do not bind on a consumer in an individual contractin disputed cases consumer has to take the case to a court or another dispute settlement body, which will consider the unfairness of a contract termweakness of this method is that1)consumer has to be active - and sometimes wealthy enough - to take the case to a dispute settlement body2)it has directly legal effect on the disputed case only: other similar unfair terms in contracts made by other - passive - consumers stays still valid
92 Two possible legislative alternatives when a contract term is regarded as unfair:a) the court or an other dispute settlement body declares the unfair contract term as voidb) the court or an other dispute settlement body may adjust the unfair contract termAdjustment of a contract term:a court or an alternative dispute resolution body changes the content of an individual contract termis a typical feature to the Nordic consumer laweven the so called core terms including the price of the product may be adjusted in the Nordic countries
93 5) transparency and interpretation of contract terms Unfair Contract Terms Directive, art. 5:1)contract terms must always be drafted in plain andintelligible language2)in case there is any doubt about the meaning of astandard contract term, the interpretation which ismost favourable to the consumer prevails (in dubiocontra stipulatorem)
94 Future of EU Consumer Contract Law review of former consumer protection rules (so called consumer acquis)all former contract law directives have been based on minimum clausesthe review of the consumer acquis is based on the idea of full harmonisationthis means that minimum clauses will no more be usedthose MSs who have used their right to provide better protection to their consumers (especially the Nordic countries) are afraid that new directives will mean weaker consumer protection in the future
95 Proposal for Directive of Consumer Rights2008 the draft was published in October 2008 (COM(2008) 614 final)was based on full harmonisationits aim was to replace four former minimum directives from yearsSale of consumer goods (99/44/EC)Unfair contract terms (93/13/EC)Distance selling (97/7/EC)Doorstep selling (85/577/EC)
96 The main problems in the proposal 1)from the viewpoint of consumer protection: the proposal was mainly based on the former minimum directives without any bigger changesminimum level of protection had suddenly became also the maximum level of protection!how did this fulfil the requirement of EC Treaty: high level of protection to consumers?those countries who had used the opportunity to give better protection to their citizens, would have been forced to lower down their former level of protection2)from the viewpoint of internal market: many relevant contract law issues (e.g. right to compensation), which harmonisation would have been utmost essential had been left totally open in the proposal
97 Some examples Time limit for seller´s liability maximum time limit for seller´s liability would have been two years from the delivery of the goodsin the present directive two years is only the minimum timein Finland no fixed time limit is usedhowever, consumer has the burden of proofnew time limit and sustainable consumptioncars, televisions and other durable goodswhat kind of message it will sent to the producers?the new role of commercial guarantees?
98 Remediesthe conditions for compensation of damages had been left totally unregulatedthe decision-making power on these questions had been left to the MSs:under what conditions is the seller liable to compensate the damages?strict liability, liability based on negligence (with or without turned burden of proof)what damages should be compensated?only direct damaged or also indirect damaged?calculation of the size of damagesonly real damages or also punitive damages?
99 Full harmonisation of Consumer Contract Law Is it desirable?this is naturally a highly political questionanswers to the question:from the viewpoint of businessmen: yesfrom the viewpoint of consumers: no, minimum protection is enough, especially when the new proposals are not based on high level of protection
100 Is it possible? 1) practical problems: poor quality in law drafting the new full harmonisation directives are not based on careful preparationthey contain a lot of unclear definitions, which will be most probable interpreted differently in the MSsthey contain a lot of unregulated questions (e.g. tort law), which will be still regulated differently in MSs2) principal problems: differences between the Members States in legal traditions, social values, etc.even full harmonisation directives are implemented in a way which fits to their legal system, correspond their social values, and enforced in way that fits to their traditions3) experiences from the new UCPD do not convince
101 5. SAFETY OF PRODUCTSBasic division: product safety and product liabilityI. Product Safetylegislation and supervisory activities which aim is to prevent that dangerous products are sold to consumersis a part of the protection of the consumers´ collective interestsGeneral product safety:all areas of product safety which are not regulated by sectoral legislationSpecial product safety:product safety regulation which scope of application is limited to a certain consumer goods only (e.g. toys, cosmetics, medicines, electrical appliances)
102 General Product Safety Product Safety Directive (2001/95/EC, OJ N:o L 11, )producers may place on the market only safe products (art.3.1)directive sets rules for market surveillanceprior acceptance given by authoritiesis only needed in the Member State where the product was first placed on the marketthis principle is not mentioned in the directive, but is based on the case law of the ECJ (Cassis de Dijon –principle)
103 Member States are obliged to: 1)establish or nominate authorities which task it is totake care of the supervision (art.6.2)the supervisory task may not be left to consumer organisations alone2)take care that these supervisory authorities have necessary measures available in case they suspect (checks, information, samples) or notice unsafe products in the market (sale prohibition, recall, etc.)(art.6.2., art. 7, art.8)the authorities are entitled to make by themselves a decision whether a product is dangerous or not without a need to take legal action in a courtcompare the system to the supervision of unfair marketing and unfair contract terms!!
104 II. Product liability Product Liability Directive (85/374/EEC) it is a part of the protection of consumers´ individual rightsis a part of tort lawit is question ofliability for damages caused by a defective productto a person or other property than the defective product itselfProduct Liability Directive (85/374/EEC)it is a full harmonisation directivescope of application:a) personal injuries caused by defective products irrespective whether the product was in private use or notb) damages to property other than the defective product itself if the defective product was meant for private use or consumption and primarily used for such purposes
105 The injured person has to prove: The liable parties:1)a producer, who is domiciled in one of the MSs2)if the product has been produced outside the internal market,the trader who has imported it to the internal market3)a trader, who presents himself as its producer by putting, e.g.,his trade mark on the productThe injured person has to prove:1)the damage or injury2)the causal relationship between the defect in the product andthe injury or the damage3)the lack of safety in the defective product: the product is not assafe as consumers may reasonable expectproducer´s liability is strict: negligent behaviour from his side is no more neededimporter´s and seller´s liability is still based on negligence
106 The Cross-border Nature of Product Liability Cases a person who has suffered damages may have to start a cross-border litigation in case he prefers to claim compensation on the basis of strict liabilityfor example, an Estonian consumer has bought in Estonia an electrical appliance, which has been made in Italy. In case this appliance causes an accident in Estonia due to its poor quality, the Estonian consumer has to take legal action against the Italian producer instead of Estonian seller or importerthe court procedure may take place in Estonia, but the judgment has to be enforced in Italyit might be a better idea to take legal action against the Estonian seller or importer on the basis of negligence
107 Case studies: Product Liability and Tobacco Two Finnish court cases - is a producer of tobaccoproducts responsible for personal injuries caused byhis products?The first case: Pentti Aho v. Rettig Oy and SuomenTupakka Oythe case started already in 1988 (being the first tobacco case in Europe), two years before the Finnish Product Liability Act (PLA) and strict liability entered into force: at that time producer´s liability was still based on negligencethe plaintiff smoked from year 1941 to 1986 and got several serious diseases which are typical for heavy smokers, including cancerhe died of these diseases during the procedure in 1992, but his inheritors continued the case
108 Before the PLA plaintiff had burden of proof on negligence of the tobacco companiescausal relationship between smoking and his diseasesdamage and its sizeNegligencethe medical relationship between smoking and cancer was statistically clear already in 1950´sthe advertising of tobacco products was banned in Finland by the Tobacco Act 1976 and warning labels in cigarette boxes came compulsory in 1986before year 1976 tobacco companies had advertised their products decades without warning their customers about the dangers connected to their products
109 The Helsinki Court of First Instance dismissed the case in 1992 for the following reasons:1)the tobacco companies had not act in negligent waya)because selling tobacco products had been legalduring all these yearsb)tobacco companies had not been shown to infringethe rules which regulated advertising of tobaccoproducts before advertising of tobacco products wastotally banned in 1976 (the CPA into force in 1978)2)because the existence of negligence was a basiccondition for liability, the Court did not study att allthe causal relationship between plaintiff´s smokingand his diseases
110 The Helsinki Court of Appeal dismissed the case in 1998 : 1)the tobacco companies had mislead consumers – and had beennegligent – because they had not informed consumers on thehealth risks connected to the smoking2)however, the plaintiff had not been able to prove the individualcausal relationship between smoking and his diseasesThe Supreme Court dismissed the case in 2001:1)the causal relationship between smoking and the diseases ofthe plaintiff had been shown by a strong statistical relationship2)in spite of the fact that advertising of tobacco products hadbeen misleading, the tobacco companies had not acted in anegligent way, because the plaintiff had been aware of the healthrisks
111 Assessment of the first tobacco case 1)The causal relationship between smoking and cancer:what amount of evidences is in practice needed to proof the causal relationship in tobacco liability cases?smoking is not the only possible reason for these diseases, although it is the most probable reason when the patient has been a heavy smokerin individual cases it may be in practice impossible to prove that smoking has been the main reason for the plaintiff´s cancerrelevant questions in this context:should the case be dismissed always when there is even a small possibility that a cancer has not been caused by tobaccoshould the evaluation of evidences be based more on the fact which reason has been most probable?the Finnish Supreme Court chose the latter alternative in 2001: a strong statistical relationship was enough
112 2)The significance of smoker´s contributory negligence smoker´s do nowadays certainly know that smoking may cause cancer because of health education and warning labels in each cigarette boxshould the compensation be totally or partly denied because of this reason?the Finnish Supreme Court in 2001: smoker´s own behaviour was a reason to deny the compensation totallyinteresting questions in this context are:how does the smoker`s impression on the size of risk correspond with the real size of the risk?smoking causes a strong addiction especially after long and continuous use. Is a heavy smoker in a position where he/she is able to make totally free choices any more?this latter question was not dealt at all in the first case!
113 The second case: the light cigarette case four light cigarette smokers took legal action against Amer-Yhtymä Oyj and British American Tobacco Nordic Oy in March 2005the plaintiffs claimed that the defendants had, by marketing light cigarettes, given intentionally an impression that smoking of light cigarettes was less dangerous than smoking of ordinary cigarettesconcerning time period after September 1991, these cases are based on Product Liability Act and on strict liability
114 Finnish Product Liability Act (694/1990) “This Act applies to the compensation for injury or damage caused by a producta)to a personb)property meant for private use and primarily used for such purposes by the injured party” (Art. 1)“Compensation shall be paid for an injury or damage in case the product has not been as safe as could have been expected” (Art. 3)Government´s Proposal on Product Liability Act(119/1989)“an injured person may not claim compensation for damages caused by well-known dangers, such as smoking of tobacco products”
115 Parliament´s Second Law Committee (II LaVM 4/1990) because tobacco industry still denies that smoking has negative consequences on health and has not warned consumers on the base of its own initiative, the official warnings (labels in tobacco packets) may not release producers from their liabilityattention should also be paid to the strong addictioncaused by continuous smokingConclusions on the basis of Law Committeetobacco is without any doubts a product which is meant in Product Liability Act art. 1 and the Act is applicable also to tobacco productsstill 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 (lack of safety)”
116 The Helsinki Court of First Instance dismissed the case in 2008 for the following reasons:1) the plaintiffs were able to prove the causal relationship between smoking and their diseases2) 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´s3) for the same reason, they had taken a conscious risk by continuing smoking4) light cigarettes are less dangerous than normal cigarettes, so the marketing of light cigarettes had not been misleading5) nicotine addiction makes its more difficult to stop smoking, but not impossiblethe Helsinki Court of Appeal dismissed the case in May 2010the 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 parties would take care of their own expenses they have had in the previous instances of court
117 What happens if a plaintiff wins next time? the general effects may remain quite small, because the so called punitive damages are not known in Finlandtobacco companies have to take into account in their economic calculations the possibility of other similar cases in the future, which might rise the prices of tobacco productshowever, it is obvious that the amount of court cases will be quite small because the risk of legal expenses (which in these kinds of principal cases are normally very high)the public health care system reduces the need to seek monetary compensation by court actionsare the court actions a right way to distribute the costs of tobacco deceases or are other methods, e.g., taxation, more effective?
118 6. THE SETTLEMENT OF INDIVIDUAL CONSUMER DISPUTES 6.1. GeneralDifferent types of consumer disputes:1)individual consumer disputes: one consumer against one trader2)mass consumer disputes : several individual consumers have disputes in which both the facts and norms are identical to each others (mainly against the same trader)3)domestic and cross-border disputes: the disputing parties have domicile in the same country (domestic dispute) or in different countries (cross-border dispute)
119 Domestic Consumer Disputes consumer disputes in which consumers and traders have their domicile in the same countriesin principle there are two alternative ways to settleindividual consumer disputes if the two-partynegotiations between a consumer and a trader have failed:1) normal civil procedure in a court2) alternative dispute resolution (ADR) mechanisms,mainly some kind of out-of-court procedures
120 Civil ProcedureThe basic problem in the normal civil procedure in courts: theordinary civil court procedure is in most cases inapplicable for thesettlement of consumer disputes for the following reasons:1)expenses: the high costs of litigation especially whencompared to the economic interest of the casethe cost rules: a losing party is often obliged to pay also the legal expenses of the winner2)the slowness of the procedureespecially because of the appeals to the higher instances3)psychological barriers: many people are not willing toparticipate in a court procedure even if the legal expenses stayin a moderate level4)inapplicability to solve mass consumer disputes: in a traditionalsystem all consumers who want to obtain redress have to takepart in the trial
121 6.2. Alternative Dispute Resolution means alternative to a normal civil procedure, in most cases some kind of out-of court procedureit is possible to identify several different ADR- models to settle individual consumer disputes in the EU Member States, e.g., the following ones:1) the Nordic model: public dispute boardsestablished and financed by the statedecisions of these boards are only recommen-dations and cannot be put into force (except in Norway)
122 general jurisdiction: they handle complaints concerning most sectors of business, including non-organised tradersno firm and fast rules concerning how the procedure should be carried outthe procedure is totally written: no oral hearingsthe number of decisions complied with varies between per centensuring that decisions are obeyed:-the use of bad publicity (Finland)-guarantees given by trade organisations, etc.(Sweden)-enforceable decisions (Norway): the bestalternative!
123 2)the Dutch model: the co-operative sectoral boards the system consists of separate boards in several branches of businessthese boards have been established and are run by trade and consumer organisations togetherthere is a common umbrella organisation, e.g. to issue minimum procedural standards and to distribute economic resourcesboards accept only complaints against organised tradersoral hearings usualthe decisions are enforceable
124 3)The Common law model: simplified court procedure special simplified procedures in ordinary courts of first instance or totally new and separate courts for small claimsoften called as small claims courts or tribunalsoriginates and still most popular in common law -countriesbasic idea: there is no need for lawyers, parties should be able to appear in a court without a legal assistantin Britain, Ireland and Maltanowadays possible also in Denmark and Norway
125 The common features of these courts: the procedure has been made simpler and more informal in comparison to the normal civil procedurea no-cost rule has been adoptedthe judge should try to mediate between the parties in order to achieve a conciliationthe possibility of appealing to higher courts is strongly restrictedthe procedure is available in most civil law disputes, but only if the amount involved in the dispute does not exceed a certain sum of money
126 Disappointing experiences concerning small claims courts: they are mainly used in collecting debts by tradersattorneys are frequently used in these courts, largely by traderscourt personnel do not advise the ordinary citizens enoughjudges often find it difficult to change from a passive to a more active roleLegal reforms in some countries (at least in Ireland,Australia, New Zealand and in some states in the USA):the use of attorney's has been prohibited in small claims courtsthe use of small claims courts in normal debt collecting by traders has been prohibited
127 4) the Iberian model: consumer arbitration procedure special arbitration procedure for consumer disputes, especially used in Spain and Portugaldecisions are enforceableprocedure covers only those tradersa)who are members of a certain branch organisation orb)who have given their acceptance to the procedure in some other way5) the Central-European model: private sectoral boardsprivate, sectoral boards established and financed mainly by trade organisations onlycommon, e.g., in Germany, Belgium and Austria6) the Baltic modelconsumer disputes are solved by administrative bodies, who also has task to protect consumer´s collective interestsadministrative fines may be imposed to traders who neglect to comply with the decisionsused in Estonia, Latvia, Lithuania
128 Conclusions and EU initiatives the amount and quality of ADR –bodies varies a lot betweenvarious MSsone of the central problems has been the coverage of ADR-bodies: in many countries there exists several branches ofbusiness where consumers have no access to any ADR –bodyEU adopted in years 1998 and 2001 two recommendationshowever, the purpose of these recommendations was to ensurethat already existing ADR -bodies fulfil certain minimumrequirements, not to solve the problem of lacking coveragefinally, in November 2011, EU published a proposal on ADR-directive (COM (2011) 793 final)the purpose of this directive isoblige MSs to establish an ADR-system which covers all consumer disputes (by using the already existing system, if desired)make certain procedural minimum requirements binding
129 6.3. Group Action for Compensation Group action is a court action in whicha)a plaintiff, either a member or a non-member of a specified groupb)brings a legal action in a court for the benefit of a specified groupc)without the express permission of the group members, andd)this results in a judgement that is binding both for and against all the members of the group
130 Based on who the plaintiff may be, group actions may be divided into three different types:1) class actions (plaintiff is a private person)2) actions by organizations (plaintiff is, e.g.,a consumer or environmental organization)3) public actions (plaintiff is a state or municipial authority)In the area of consumer protection, group action can be used:a) action for injunctionin most European countries action for injunction is available asa method to protect consumer´s collectice interestsb) action for compensationat this moment this kind action is still quite rare in Europe outside the Nordic countriesmore common outside Europe (the United States, Canada and Australia as most famous examples)
131 Nordic group actions for compensation 1) The Swedish Group Action Act (SFS 2002: 599)entered into force in January 2003so far about 10 cases altogether, many still pending2) The Norwegian Group Actionchapter 35 of the new Norwegian Act on Civil Procedureentered into force in January 20083) The Finnish Group Action Act (444/2007)entered into force in October 2007so far no cases4) The Danish Group Actionso far at least one pending case
132 Types of group action available Scope of application:is in most Nordic countries general: group action is possible in all kinds of civil disputes on the condition that they fulfil the general requirements of group actions, e.g.,1)it is question of disputes where the facts are identical or at least identical and2)it is sensible to handle these disputes together in one trialin Finland scope of application is restricted to only mass consumer disputesTypes of group action availablein Denmark, Norway and Sweden the plaintiff may be a member of the group (class action), an organisation, who is protecting the interests of a certain group of citizens (action by organisation), or state authority, as the Consumer Ombudsman (public action)in Finland only a public action, in which the CO acts as a plaintiff, is possible
133 How the group is formed?in group actions judgements have legal effect for all members of the group, although they are not parties to the casethere are two opposite ways how the group may be formed: opt out or opt inopt out:all persons who fill certain requirements become automatically members of the groupthose, who do not want to be members of the group have to use their right to opt outopt in:only those persons, who have joined the group by registration, will be members of the group and will be covered by the judgement.in Sweden and Finland only opt in –alternative is availablein Norway and Denmark (in the latter country in public actions only) 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 interest of individual cases is so low
134 The costs of litigation in all Nordic countries the main rule is that the losing party is obliged to pay the legal expenses of the winnerin Finland and Sweden only the parties in the group action are responsible for the costsin Denmark and Norway the members may become partly responsible of the legal expensesthe ceiling of members´ liability will be decided by the court already in the beginning of the trialin case the ceiling is individual and not collective, this makes it possible for the potential members of the group to assess, whether it is economically sensible to opt in or not
135 Evaluation of the Nordic group actions 1) who has afford to a group action for compensation?The major obstacle to the use of group action for compensation inthe Nordic countries is the high costs of litigationso far there have been rather few cases, e.g., in Sweden only new cases per year since 2003Several possible ways to reduce the high costs of litigation:a)no members liability as it is now possible in Denmark andNorwayb)ceiling for liability to pay the legal expenses of the winnerc)no-cost rule (so called American rule)d)conditional fee -payment (no results, no payment -system)e)public or private funding systems (e.g. in Canada)
136 2) long duration of the procedure seems also to be one the main problems connected to these actionsin Sweden many of the started group actions are still pending casesusual tactics for defendants: a plea of trial and separate appeal on the procedural requirementscentral questions: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 preconditions for a group action has been rejected in the District Courtwhether there should be some kind of priority system in the Courts of Appeal, when these kinds of actions are dealt with
137 3) the problem of low-value claims in spite of the fact that the combined monetary interest of the mass dispute can be millions of euro, the damages suffered by individual consumers may be rather lowthis will often discourage consumers to register when a group action is based on opt in –model onlyone alternative would be the adoption of opt out -model at least when it is question of low-value claims also in Sweden and Finlandhowever, even opt out –model seems to be rather ineffective when the damages caused to individual group members are, e.g., only 100 euro or even less.second alternative: group action for collective compensation of damages (instead of distribution of the profit, the plaintiff e.g. a consumer organisation would keep it in order to finance future actions)
138 6.4. Cross-border Consumer Disputes disputes, where a consumer and a trader are domiciled in different countriesTypical problems in cross-border consumer disputes:1)communicative problemslanguage problems, identification of the trader, etc.2)what is the applicable law?3)what dispute settlement bodies are available/ have jurisdiction in case the parties do not reach a settlement in two-party negotiations
139 The Applicable Law in Cross-Border Consumer Contracts The Rome I Regulation n:o 593/2008entered into force in December 2009replaced the Rome Convention on the Law Applicable to Contractual Obligations from year 1980 except in UK and Denmarkincludes an article concerning consumer contracts (art. 6). According to it, if the tradera)is carrying on business activities in the country where the consumer has his habitual residence orb)direct such activities to that countrythe contract is governed by the law of the country in which the consumer has his habitual residencea trader cannot deprive the protection given by the Regulation by using a choice-of-law clause
140 Jurisdiction of Courts in Cross-Border Consumer Disputes the starting point: court decisions are traditionally not enforceable in other countriesThe Regulation N:o 44/2001 on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters (OJ L 12, )contains a provision (art. 15) which gives protection to consumers if:1)it is question of credit or instalment contract connected to the sale of goods or2)it is question of consumer contract and the contract has been concluded with a tradera) who is carrying on business activities in the Member State where the consumer is domiciled orb) who is directing such activities to the Member State where consumer is domiciled
141 In case one of these conditions are fulfilled: 1) a consumer is entitled to take legal action against a trader in the courts of the Member State where he is domiciled (art )2) proceedings may be brought against a consumer only in the courts of that Member State where he is domiciled (art )3) judgment given by the court of the Member State where the consumer is domiciled may be enforced in an other MS where the trader has his domicile or property
142 The European Consumer Centres Network (ECC-Net) the starting point: in cross-border litigation the costs are normally much higher than in purely domestic litigation and thus form a much higher obstacle to the use of ordinary court procedureECC-Net started in the beginning of year 2005replaced the former European Extra-Judicial Network (EEJ-Net) which started as a pilot program in October 2001The new network is based on1)at least one European Consumer Centre in eachMember State2)ADR- bodies in all Member States
143 The activities of European Consumer Centres 1)to give legal advice to consumers who have faced cross-border consumer problems2)to give assistance in the settlement of disputes by clarifying the facts and mediating between the disputing parties3)to serve as a special clearing house in unsettled casesa)to find out competent out-of-court dispute settlement body in MS where trader has his domicileb)translates consumer´s complaint and sends it to the competent dispute settlement body in other MS
144 the idea is that cross-border disputes will be settled in some of the out-of-court procedures in the Member State where the trader is domiciledthe existing ADR-bodies in MSs may be found in a database which is updated by the Commission: