1. Autorità Garante della Concorrenza e del Mercato Issues related to the enforcement of the UCP Directive Ankara, 7 December 2009 Avv. Antonio Mancini Director Telecommunications Directorate Consumer Protection Directorate General AGCM - Italy

2. Autorità Garante della Concorrenza e del Mercato - 2 - The implementation of Directive 29/2005/EC in Italy Italy was one of the first Member States to implement Directive 29/2005/EC, before the deadline for its transposition (12th December 2007). The Italian Government adopted two different decrees, which entered into force on September 21, 2007: A) the Legislative Decree No. 145/2007 on “Misleading and comparative advertisement”, aimed at protecting businesses in their commercial relations; B) the Legislative Decree No. 146/2007 concerning “unfair business-to-consumer commercial practices”, which amended articles 18-27 of the 2005 Consumers’ Code (adopted to collect the most important Italian laws on consumers’ protection).

3. Autorità Garante della Concorrenza e del Mercato - 3 - Agcm Competence In compliance with art. 11 of the UCP Directive, the Italian legislator decided to implement an administrative control system and to delegate it to the Italian Competition Authority (“Agcm”). Agcm is an independent Authority established in 1990 by Law No. 287/90, which is responsible not only for the enforcement of competition policy (concentrations, cartels, abuse of dominant position, advocacy intervention, etc.) but also for consumer protection issues. In particular, the Agcm was entitled to the control of “misleading and comparative advertisement”. since the adoption in 2002 of Legislative Decrees No. 74/92 and No. 67/00, transposing Community Directives 84/450/EEC and 97/55/EC.

4. Autorità Garante della Concorrenza e del Mercato - 4 - Commercial communications and development of consumer protection After the adoption of Legislative Decrees No. 145/2007 and No. 146/2007, the Authority is now also responsible for tackling unfair commercial practices (“UCP”). The Agcm’s decisional practice decisions on misleading and comparative advertisement (pursuant to the Italian Law applicable before the adoption of Directive No. 29/2005/EC) can be considered as an important ENFORCEMENT ADVANTAGE especially in order to tackle misleading commercial practices and omissions. In addition, countering UCPs also promotes fair competition in the markets involved. Therefore, the Agcm may benefit of important synergies between competition policy and consumer protection.

5. Autorità Garante della Concorrenza e del Mercato Competition and UCP There are important elements of convergence between the enforcement of competition rules and consumer protection, since unfair commercial practices are often used as an important “COMPETITION TOOL”. Indeed, commercial practices, and especially comparative advertising, are a powerful tool for the newcomers and a way to lead consumers to choose the best options for them, in terms of prices and quality, by means of more conscious, rational and informed decisions.

6. Autorità Garante della Concorrenza e del Mercato European Parliament Resolution on January 13, 2009 The Italian consumer protection regime complies under many respects with the Resolution adopted by the EP on January 13, 2009. In the first years of enforcement of Directive 29/2005/EC: –consumers benefited of a specific right to file complaints with the Agcm; –national Authorities carried out wide-spread inquiries on websites advertising airline offers (sweep 2007); services for the download ring-tones, wallpapers, etc. for mobile phones (sweep 2008); electronic equipment (sweep 2009). –Italy promoted the creation of a round table to compare national implementation measures, procedures and authorities’ decisions (UCP COMMON PROJECT).

7. Autorità Garante della Concorrenza e del Mercato - 7 - Health and safety problems: increased protection The Italian legislator introduced a stricter discipline to counter practices involving health and safety problems. This has been possible because the scope of the full harmonization provisions of Directive 29/2005/EC does not cover such issues: practices concerning hazardous products that could induce consumers to neglect observing the normal standards of diligence; practices concerning hazardous products that could threaten, even in and indirect way, the safety of children and adolescents.

8. Autorità Garante della Concorrenza e del Mercato - 8 - Aggressive Practices From an Italian standpoint, the main innovation of the UCP Directive is represented by the so called “aggressive practices”. Misleading commercial practices and omissions can be considered as an evolution of misleading and comparative advertising. In this field Agcm has a long-standing and extensive experience, as well as a wide decisional practice. Many cases dealt with by Agcm under the previously applicable discipline concern practices black listed under the new one. On the other hand, it is more difficult to deal with purely aggressive practices, which are more tipically related to commercial behaviour and, therefore, are more difficult to detect, control and interrupt.

9. Autorità Garante della Concorrenza e del Mercato - 9 - Legislative Decrees 145/2007 and 146/2007: New rules concerning procedure  Agcm is entitled to investigate unfair practices and misleading and comparative advertising not only upon reception of consumers’ complaints, but also on its own initiative (EX OFFICIO INVESTIGATION POWER).  Increased SANCTIONS (up to € 500,000)  INSPECTIONS in cooperation with Financial Police;  Possibility to accept COMMITMENTS;  Possibility to try a “MORAL SUASION”.

10. Autorità Garante della Concorrenza e del Mercato Legislative Decrees 145/2007 and 146/2007 SANCTIONS: Noncompliance with the Agcm’s decisions from 2.000 to 20.000 € False information Prohibition of the unfair practice from 4.000 to 40.000 € from 5.000 € to 500.000 € the penanlty shall not be less than 50.000 € in the case of practices endangering the health and safety of consumers or those of children and adolescents In case of non compliance with the Agcm’s decisions from 10.000 to 150.000 €

11. Autorità Garante della Concorrenza e del Mercato Legislative Decrees 145/2007 and 146/2007 ► COMMITMENTS: Unless the commercial practice is manifestly unfair and of a serious nature, the Agcm may accept traders’ undertakings to bring the infringement to an end or to modify their behaviour in order to remove its unlawfulness. In this cases the investigation is closed without imposing fines.

12. Autorità Garante della Concorrenza e del Mercato Commitments Traders have submitted commitments in the course of many investigations initiated by the Agcm. However, the Agcm often refused to accept them because they related to serious violations or to manifestly unfair practices (“admissibility test”) or due to the fact that they were inadequate to remove all unlawful aspects of the practice concerned (“efficiency test”).

13. Autorità Garante della Concorrenza e del Mercato Inspections Agcm has carried out many inspections. Inspections have been notably used to gather evidence on the following practices: A) promotions in TLC sector; B) promotion linked to unsolicited supplies in the Energy and TLC sectors; C) foodstuffs packaging and certifications of professional associations.

14. Autorità Garante della Concorrenza e del Mercato - 14 - Agcm’s action plan on Consumer Protection In December 2007 the Authority set up a special toll-free number “800.166.661” for consumers wishing to report alleged cases of unfair practices and misleading advertising. In this first period of activity the Agcm’s Call Center has collected more than 10,000 complaints.

15. Autorità Garante della Concorrenza e del Mercato AGCM action plan for Consumers protection A Consumer Protection General Directorate has been created, which is divided into 5 Directorates competent for each of the following sectors (the same fields of the 5 Competition Directorates inside Agcm / SYNERGY POURPOSES). Energy and Industry Communications Banking and Insurance Foodstuffs, Distribution and Transport Services An Impact Analysis Office dealing with consumers issues has been created.

16. Autorità Garante della Concorrenza e del Mercato UCP figures Since January 2008, the AGCM: initiated about 500 FORMAL investigations; adopted about 430 official decisions (for both misleading and aggressive commercial practices); imposed fines for a total amount of more than € 67 MILLION ; collected about 15,000 complaints (a lot from our Call Center); sent about 4,000 letters to communicate the decision to file the case; adopted about 80 moral suasion decisions and about 20 decisions accepting commitments.

17. Autorità Garante della Concorrenza e del Mercato Most involved sectors So far, the AGCM has been mostly involved in the following practices in the areas of the five sectoral Directorates (inside the General Directorate for C.P.): Telecommunications (a) Tele-selling and unsolicited supplies; (b) Onerous or disproportionate non-contractual barriers imposed where a consumer wishes to exercise rights under the contract; (c) Subscriptions to ringtones and wallpaper services for mobile phones; (d) Services provided through premium rate numbers; (e) Internet in mobility service; (f) Misleading advertising (fixed/mobile/internet offers); (g) Hidden advertising;

18. Autorità Garante della Concorrenza e del Mercato Most involved sectors Foodstuffs and Transport (a) Quality certifications; (b) Beneficial properties of products (“healthy claims”); (c) Rebates; (d) Effectiveness of cosmetics; (e) Large retailers’ advertising campaigns; (f) Air/Rail/Ferry promotional fares and related advertising campaigns (including on-line purchase) Energy and Industry (a) Unsolicited supply of gas / electricity; (b) Fixed price offers

19. Autorità Garante della Concorrenza e del Mercato Most involved sectors Banking and insurance (a) Commission on the highest debit balance; (b) Mortgage portability; (c) Distance marketing of financial and insurance services; (d) Consumer credit; (e) Risk assessment certificate Services (a) Education; (b) Telemarketing and retail sales; (c) False job offers; (d) Tourism; (e) Entertainment, lotteries and prize games

20. Autorità Garante della Concorrenza e del Mercato Preliminary findings from the AGCM’s decisional practice It appears from the first period of enforcement of the UCP discipline in Italy that: aggressive practices are most common: in the TLC, Energy, Financial services and Transport sectors; misleading / omissive advertising is most frequent: in the Foodstuffs, Services, Industry and Tourism sectors.

21. Autorità Garante della Concorrenza e del Mercato Telecommunications: Mobile internet services (shock billings) The Agcm dealt with mobile internet services that lead to abnormally expensive bills for consumers and related advertising campaigns. In particular, the above-mentioned campaigns promoted hi-speed web-surfing, up to a 5 GB monthly download threshold, for a very low monthly rate. The Agcm fined the companies under investigation: a) for providing insufficient information to consumers, with specific regard to the (very expensive) tariff applicable after overcoming the 5 GB monthly threshold; b) for not giving consumers the possibility to monitor their download traffic in order to stay safely under the 5 GB monthly threshold or assess their over-the-threshold traffic; c) for providing insufficient information to consumers about the areas not covered by the H3G network.

22. Autorità Garante della Concorrenza e del Mercato - 22 - Energy: “Enel Energia” Fine amounts to a total of €1.1 million ENEL ENERGIA’S CONDUCT Enel Energia, a company of the Enel group operating on the electricity supply free market, adopted UCPs: a) by moving customers from the so-called “protected market” to the “free market”; b)in initiating an unsolicited supply of natural gas; The company started unsolicited electricity and gas supplies and in some cases demanded payment, hindering the exercise of the right to second thoughts and using aggressive marketing procedures.

23. Autorità Garante della Concorrenza e del Mercato - 23 - Transports: “Meridiana” (Sweep 2007) Total f ines: € 970,000 The Agcm fined Meridiana for violating the Consumers’ Code in a number of different ways. Specifically, the Agcm deemed unfair the company’s practices in the following areas: 1.Transparency of fares (fine: € 220,000): On its website, Meridiana included a fuel surcharge linked to oil prices within the category “airport taxes and charges”; 2. Insurance Policy (fine: € 270,000): Absent a precise choice by the consumer to refuse the insurance policy (by un-ticking a box on Meridiana’s website), the company took for granted his consent; 3. Compensation to Passengers for Flight Delays (fine: € 300,000): The airline did not comply with the current regulations and did not offer consumers adequate information; 4. The “HI-FLY 2007/2009” Loyalty Program (fine: € 180,000): Consumers wishing to join the loyalty program had to purchase a “co- branded” credit card: therefore, some consumers were not admitted to the program, while some costs and charges were not clearly explained by the airline.

24. Autorità Garante della Concorrenza e del Mercato - 24 - CONCLUSIONS -The Consumer Protection System countering UCP represents a good way for Member States to promote competition and enhance the smooth functioning of tne market. -On the one hand, the enforcement of the new UCP rules entails a widening of the national competition authorities’ powers that may allow consumers and businesses to receive more effective protection. -On the other hand, companies might take advantage of the new provisions by using the black-lists of specifically prohibited practices as benchmark to self-assess their day- to-day commercial conduct.

25. Autorità Garante della Concorrenza e del Mercato - 25 - CONCLUSIONS There are important elements of convergence between the enforcement of competition rules and consumer protection, due to the fact that commercial practices are an important COMPETITION TOOL. Accordingly, action to tackle UCP can be used to promote “fair competition” in the various markets involved. The EP resolution issued in January 2009 defined Directive 29/2005/EC as a “cornerstone” of consumer protection policy and this first year of enforcement in Italy appears to confirm the huge potential of this discipline.