1. Autorità Garante della Concorrenza e del Mercato U.C.P. DIRECTIVE: ITALIAN TRANSPOSITION Avv. Antonio Mancini Director Banking and Insurance Directorate Consumer Protection Directorate General AGCM - Italy

2. Autorità Garante della Concorrenza e del Mercato Introduction Duties and role of the Italian Competition Authority (“Agcm”) COMPETENT both FOR COMPETITION and for CONSUMER PROTECTION matters

3. Autorità Garante della Concorrenza e del Mercato Agcm (I) Agcm is an independent Authority established by Law No. 287/1990. Under Italian law, it has the status of a public agency whose decisions are taken on the basis of Law No. 287/1990 without any possibility of interference by the Government. The AGCM headquarters are located in Rome.

4. Autorità Garante della Concorrenza e del Mercato Agcm (II) The Authority is a collective body, composed by five members who take their decisions by majority vote. The Chairman and its four Members are appointed jointly by the Presidents of the Senate and the Chamber of Deputies. The Authority’s members remain in office for a seven year non-renewable term (a NEW LAW reduced the number of the future Agcm commissioners: 3 and not 5 like now)

5. Autorità Garante della Concorrenza e del Mercato Agcm (III) The General Secretary of the Authority is appointed by the Economic Development Minister acting on a proposal by the Chairman of the Authority, and he is responsible for overseeing the organisation and operations of the staff and the offices. The Authority currently has about 250 employees, under permanent and fixed term contracts (about 40 inside the whole General Directorate for Consumers’ Protection).

6. Autorità Garante della Concorrenza e del Mercato The Duties of the Agcm (I) Law No. 287/90 was adopted in order to comply with the requirements set out by Article 41 of the Italian Constitution, which protects and guarantees the right of free enterprise, as well as to bring Italian legislation in line with EC law. The main purposes of Law no. 287/90 are: a) to foster and protect market conditions in order to ensure market players equal opportunities to compete on and to gain access to the market; b) to protect consumers by encouraging lower prices and better quality products (concentrations authorizations, cartels, abuses od dominant position, advocacy intervention for laws and project of laws which can affect competition).

7. Autorità Garante della Concorrenza e del Mercato The Duties of the Agcm (II) The Agcm also has responsibility in the field of consumer protection for ruling on: a) UCP under sections 18-27 of Italian Consumer Code adopted in 2005 in order to collect the most important laws in the field of consumer protection; b) misleading and comparative advertising for business offers (b / to b advs) pursuant to Legislative Decree n. 145/2007 (which implements EC Directive No. 114/2006); c) Unfair terms in consumer contracts (new competence ex art. 37bis of the Italian Consumer Code); d) UCP against small traders: the same regime of UCP against consumers

8. Autorità Garante della Concorrenza e del Mercato The Duties of the Agcm (III) Moreover, the Agcm has responsibility for ruling on conflicts of interests under Law No. 215/2004. The Authority is empowered to verify that holders of government office, in the exercise of their functions, devote themselves exclusively promoting the public interest and abstain from taking actions and participating in collegial decisions when they are exposed to a conflict of interest. The Agcm is also required to submit reports to the Parliament and the Government and to provide them through consultancy services.

9. Autorità Garante della Concorrenza e del Mercato The Agcm action plan for Consumer protection Creation of the Consumer Protection Directorate General, which includes 6 Directorates competent for each of the following sectors (“sectorial organisation”): Energy and Industry Telecommunications Banking and Insurance Foodstuffs, Distribution and Transport Services; Unfair terms in consumer contracts

10. Autorità Garante della Concorrenza e del Mercato The Agcm competence in UNFAIR COMMERCIAL PRATICES

11. Autorità Garante della Concorrenza e del Mercato - 11 - The implementation of U.C.P. Directive 29/2005/EC in Italy (I) - Italy was one of the first Member States to implement the Directive 29/2005/EC on “Unfair Commercial Practices”, before the deadline of its transposition (12th December 2007). - This Directive has been defined as a “milestone” in the field of “Consumer Protection” for the huge potentiality of its enforcement. - The Italian Government adopted two different decrees, which entered into force on September 21, 2007.

12. Autorità Garante della Concorrenza e del Mercato The implementation of U.C.P. Directive 29/2005/EC in Italy (II) A)The Legislative Decree No. 145/2007 on “Misleading and comparative advertisement”, aiming at protecting business men in their commercial relations; B) The Legislative Decree No. 146/2007 concerning “unfair business-to-consumer commercial practices”, had amended articles 18-27 of the 2005 Consumers’ Code (adopted to bring together the most important Italian laws on consumers’ protection).

13. Autorità Garante della Concorrenza e del Mercato - 13 - Agcm Competence In compliance with art. 11 of the UCP Directive, the Italian legislator decided to implement an administrative system control and to delegate it to the Italian Competition Authority (“Agcm”). As mentioned before, 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 is entitled to the control of “misleading and comparative advertisement”. since the adoption in 2002 of Legislative Decrees No. 74/92 and No. 67/00, which have transposed Community Directives 84/450/EEC and 97/55/EC.

14. Autorità Garante della Concorrenza e del Mercato - 14 - 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. It must be underlined that countering UCPs also promotes fair competition in the markets involved. Therefore, Agcm may benefit of important SYNERGIES “between competition policy and consumer protection”.

15. 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 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 in terms of prices and quality, by means of more conscious, rational and informed decisions.

16. Autorità Garante della Concorrenza e del Mercato Antitrust and UCP (other experiences of synergies) Similar synergies exist in EU member States, such as the U.K. (for the activity of the O.F.T. -Office of Fair Trading), Hungary, Poland and Malta. In addition in the U.S., the F.T.C. (Federal Trade Commission) is responsible for antitrust enforcement as well as for consumer protection. Examples of synergies: (a) exchange of information; b) carry out market analysis and joint surveillance activities; c) jointly handle consumer and competitor complaints; d) codes of conduct analysis in the same economic sectors, etc.

17. Autorità Garante della Concorrenza e del Mercato European Parliament Resolution on January 13, 2009 The Italian consumer protection regime complies, for many aspects, with the Resolution adopted by the EP on January 13, 2009, which could be used as a benchmark for best practices even in Albania. For example in the first two years of enforcement of UCP Directive in Italy: –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), tickets on line (2010, 2011), etc. –Italy promoted the creation of a round table to compare national implementation measures, procedures and authorities’ decisions (UCP 2009 COMMON PROJECT).

18. Autorità Garante della Concorrenza e del Mercato Definition of “commercial practice” Unfair commercial practices can been considered as an evolution of misleading and comparative advertisement regime, with a broader field of enforcement. The wider definition od “commercial practices” comprehends all “actions, omission, course of conduct, commercial communication including advertising and marketing directly connected with the promotion, sale or supply of a product to consumers”.

19. Autorità Garante della Concorrenza e del Mercato Definition of UCPs Two basic conditions must be met to define a commercial practice as unfair: A) a practice which is “against professional diligence” in the field of that activity in which the professionist is involveld; B) a practice which is able to “distrort the economic behaviour” of the “average consumers” affecting the ability to take an informed decision related to a transaction that the con sumers would not make otherwise (potential evaluation different from civilistic concept of damages).

20. Autorità Garante della Concorrenza e del Mercato The Average Consumer (I) -Somebody “..reasonably well informed and circumspect, takinginto account social, cultural and linguistic factors..” (Court of Justice); -Benchmark for assessing the unfairness of a comm. Practice.; The European Commission has published in December 2009 some Guidelines on UCP (basic definition, general clauses and specific previsions of the Directive).

21. Autorità Garante della Concorrenza e del Mercato The Average Consumer (II) Not a statistical notion –national courts’ own judgement –In principle no need for a poll or expert’s report Level of knowledge and behaviour influenced by certain factors (ECJ Case law) –Social, cultural and linguistic factors (Estee Lauder) –Category of goods or services in question (AGCM liberalization of energy mkt Italy) Country of origin

22. Autorità Garante della Concorrenza e del Mercato Vulnerable Consumers Specific groups – modulation of the benchmark –Average member of the group Vulnerable Consumers –Infirmity (mental or physical) –Age (e.g. elderly, teenagers) –Credulity Forseeability requirement (proportionality)

23. Autorità Garante della Concorrenza e del Mercato Professional diligence The assessment of the compliance of the traders’ behaviour to professional diligence (and of its of ability to distort the consumers’ behaviour) is carried out in every AGCM decision.  The AGCM is aware that, according to a strict interpretation of the Directive, it could refrain from performing it whenever a blacklisted practice or a practice falling into Directive’s Artt. 6, 7 or 8 are identified. However, such analysis introduces more clarity in the AGCM’s decisions and makes them “safer” under Italian administrative law. In several decisions concerning practices carried out in highly regulated and/or recently liberalized sectors, the AGCM underlined the existence of a significant informative gap affecting consumers’ ability to take informed decisions.

24. Autorità Garante della Concorrenza e del Mercato Professional diligence (II) Court’s judgment TELECOM-FATTURAZIONE PER CHIAMATE SATELLITARI E/O A NUMERAZIONI SPECIALI – PS24 (No. 5625 of June 15, 2009): the UCP discipline requires traders to adopt conducts:  (i) complying with sectoral regulation (where existing); and  (ii) inspired to experience rules applicable to each field of activity; provided that they:  (i) can be objectively requested to traders; and  (ii) are proportionate, in the light of the balance to be pursued between free circulation of goods and the consumers’ right to make informed choices in a competitive market. Special “protection duty” = “enhanced diligence standard”.

25. Autorità Garante della Concorrenza e del Mercato Professional diligence (III) Which conduct traders should adopt in order to comply with the diligence standard, when there is no abstract benchmark to refer to? –Court’s judgment PORTABILITÀ MUTUO-GRUPPO UNICREDIT – PS1191 (No. 3686 of April 6, 2009): stick to the concrete case, taking into account (i) the particular features of the negotiation; (ii) the specific knowledge possessed by the trader; and (iii) the type of contact established with the client. If applicable law does not provide clear guidance: Beware! Furthermore, judgment MERIDIANA - OFFERTE SPECIALI – PS452 (No. 5809 of June 19, 2009): if complex means of communication are used = the way data are presented and/or organized is important; In judgment PS1452 - MOBY-TORNI GRATIS (No. 5695 of June 16, 2009): offers directed to an undifferentiated group of consumers may be concretely understandable even if they require consumers to detect and interpret scattered information provided therein.

26. Autorità Garante della Concorrenza e del Mercato Professional diligence – Open issues Relationship between “professional diligence”and the duty to comply with national sector regulation: 1. is compliance with (national) sector regulation enough to be considered “professionally diligent”? 2. whenever the enforcement of national sector rules is entrusted to an agency which is not the one responsible for the enforcement of the UCP discipline, should it refrain from assessing the traders’ behaviour in the light if the above-mentioned sectoral rules?

27. Autorità Garante della Concorrenza e del Mercato Material distortion of the economic behaviour with regard to the product The relevant assessment is performed in every decision adopted by the AGCM. The underlying assumptions are that:  correctly informed and non coerced consumers always behave rationally and aim at taking welfare-maximizing decisions;  providing more information to consumers always helps them to make better choices and to increase their welfare. Problems:  behavioural economics;  “confusopoly”.

28. Autorità Garante della Concorrenza e del Mercato Material distortion the economic behaviour with regard to the product (II) The risk is:  to wrongly substitute our judgment to the one of the consumers and take for granted that consumers would have taken a certain transactional decision when it is not so sure… The distortion of the economic behaviour must be “material”:  “de minimis” rule, seldom used by AGCM;  AGCM “non-unfairness” decisions...

29. Autorità Garante della Concorrenza e del Mercato UCP Types MISLEADING COMMERCIAL PRACTICES MISLEADING OMISSIONS; AGGRESSIVE COMMERCIAL PRACTICES; Italian Consumers’ Code includes “two” BLACK LISTS of “misleading” and of “aggressive” commercial practices (in the UCP Directive there is one list which covers both misleading and aggressive practices, but the italian legislator has considered more clear two different B.Ls.)

30. Autorità Garante della Concorrenza e del Mercato Black list of misleading practices Related, inter alia, to: –(i) the unauthorized use of trust marks and codes of conduct; –(ii) the refusal to show advertised products; –(iii) false statements on the duration or availability of a promotion; –(iv) hidden advertisement presented as editorial content; –(v) products implying risks for safety; –(vi) claims concerning the ability to cure illness or to enhance the possibility to win in games of chance; –(vii) false declarations concerning the price of products, the consumers’ rights or the identity of the trader.

31. Autorità Garante della Concorrenza e del Mercato Black list of aggressive practices Elements for the evaluation of an exerted pressure on the consumer: timing, location, nature and persistence. Blacklisted practices include, inter alia: –(i) persistent and unwanted solicitations by telephone; –(ii) personal visits at the consumers’ home; –(iii) practices aimed at giving the impression that the consumer cannot leave the premises of the professional until a contract is signed; –(iv) direct exhortation to children; –(v) practices falsely implying that consumer won money or benefits; –(vi) request of money for unsolicited supplies.

32. Autorità Garante della Concorrenza e del Mercato UCP and UTC (possible relationship) With special regard to the aggressive practices it is possible to envisage some kind of relationship between UCP and UTC discipline. For example, investigations against aggressive UCPs can lead to discover UTC in the general contract clauses of the trader involved. More in detail, an investigation concerning the aggressive behaviour of a trader – for example, aiming at hindering the exercize of contractual rights (e.g., withdrawal) - could be a good opportunity to ask for the amendment of its general contract terms, in order to eliminate all possible unfair contract terms

33. Autorità Garante della Concorrenza e del Mercato - 33 - Health and safety problems under UCP regime: increased protection in Italy (italian transposition) The Italian legislator introduced a stricter discipline to counter practice involving health and safety problems. This has been possible because the scope of the full harmonization provisions of EC Directive No. 29/2005 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.

34. Autorità Garante della Concorrenza e del Mercato Ucp Evaluation Stages Three steps for UCP evaluation based on 3 questions. Does the commercial practice: …fall in the black list of unfair commercial practices (31 cases of Annex I of the UCP Directive)? …constitute a misleading (Art 6 and 7) or an aggressive practice (Art 8 and 9)? … infringe professional diligence and materially distorts the economic behaviour of the average consumer (Art 5(1))? Practice is prohibited yes no

35. Autorità Garante della Concorrenza e del Mercato - 35 - Aggressive Practices From an Italian standpoint, the main innovation of the UCP Directive is represented by the so called “aggressive practices”. Aggressive practices imply an important challenge for investigators, since they are typically related to the commercial behaviour of firms and, therefore, are more difficult to detect, control and interrupt.

36. 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.

37. Autorità Garante della Concorrenza e del Mercato - 37 - Ucp Enforcement And Agcm Powers  The AGCM is entitled to investigate on UCPs and misleading/comparative advertising upon reception of consumers’ complaints or on its own initiative (EX OFFICIO INVESTIGATION POWER);  Interim measures (precautionary measures to stop serious violations: “fumus boni juris and periculum in mora”) ;  SANCTIONS (up to € 500,000): very recent new law which has increased the maximum level of Agcm fines up to 5 millions euro (from August 2012);  INSPECTIONS, in cooperation with Financial Police;  Possibility to accept COMMITMENTS;  Possibility to initiate informal proceedings (“MORAL SUASION”).

38. Autorità Garante della Concorrenza e del Mercato Ucp Fines In Italy SEVERAL FINES FOR DIFFERENT VIOLATIONS 1)False or omissive information: 2)- from 4.000 to 40.000 €); 3)Prohibition of the unfair practice: - from 5.000 € to 500.000 € the penalty shall not be less than 50.000 in the case of protection of health and safety of consumers and protection of children and adolescents FROM AUGUST 2012: NEW VERY RECENT FINES (MAXIMUM LEVEL BOTH FOR UCP CASES AND FOR NON COMPLIANCE CASES): UP T0 5 MILLIONS EURO (for practices after August 2012).

39. Autorità Garante della Concorrenza e del Mercato Agcm’s Fines And Consumer Associations A portion of the fines imposed by Agcm, both for competition and UCP violations, have been used to finance some projects of Italian Consumers’ Associations. This is a way to create a connection between the Agcm’s activity and more general projects to enhance consumers’ welfare and awareness (information, training, studies, reports, consumer complaints classification, market surveillance, etc.). From this point of view it is interesting the activity of your “Information Directorate” (specially the articles on relevat consumer protection matters published each week on the press directly from your senjor information officer, Ms Odette Vella)

40. Autorità Garante della Concorrenza e del Mercato Consumer Associations Italy has many consumers associations (42 at national level and 21 bigger associations within the CNCU (national representative organization) National representative (art. 136 Consumers’ Code): is coordinated by the Ministry of Economic Development

41. Autorità Garante della Concorrenza e del Mercato Another oppurtunity for UCP enforcement : commitments regime (I) In Italy AGCM may accept the traders’ undertakings to end an UCP and to cease its spreading, or to modify it so as to remove all unlawful aspects. This solution is not possible for commercial practices that are manifestly and/or seriously unfair. In such cases the procedure is closed without fines.

42. Autorità Garante della Concorrenza e del Mercato The traders may submit undertakings within the 30 days following the receipt of the communication of the initiation of proceedings. The Agcm will assess the undertakings and: a) if such undertakings are adequate, may make them binding without any declaration of infringment and without fines; b) if the AGCM deems the undertakings partially adequate, it shall set a deadline by which the professional may complete them; c) if the proposed undertakings refer to manifestly unfair commercial practices or are inadequate to remedy to the AGCM’s concerns, the Authority shall reject them. Commitments (II)

43. Autorità Garante della Concorrenza e del Mercato Commitments (III) Traders have submitted commitments in many proceedings initiated by the Agcm. In 2008 and 2009 the Agcm adopted a very restrictive approach in order to assert its role. Therefore, it refused to accept commitments very often, as they concerned practices deemed to be very serious or manifestly unfair (starting test) or were inadequate to remove the unlawful aspects (effectiveness test). From 2010 the Agcm accepted them more often, while keeping its more restrictive approach when very serious offences are at stake.

44. Autorità Garante della Concorrenza e del Mercato Another issues for UCP enforcement: Inspections Even inspections can represent an useful instrument to find documents and proof for more complex UCP cases. The AGCM carried out many surprice inspections for UCP enforcement (in cooperation with a specialized body of our Financial Policy and usually at the beginning of the investigations): The most involved sectors are at the moment: a) Telecommunications; b) Energy; c) Services; d) Foodstuffs.

45. Autorità Garante della Concorrenza e del Mercato Publication of the decision and rectification statements When the Authority declares the commercial practice of the trader unfair, it may order it to publish, at its own expenses, the full text (or parts) of the final decision or a statement of rectification. The Authority may also order the publication of the undertakings entered into by the trader.

46. Autorità Garante della Concorrenza e del Mercato European Cooperation Network (EC Regulation No. 2006/2004) EC Regulation n. 2006/2004 introduced a cooperation system between the national Authorities responsible for the enforcement of consumer protection law (the so called Regulation on consumer protection cooperation – “CPC”). In a document attached to EC Regulation n. 2006/2004, 15 directives are mentioned, dealing with misleading advertising, consumer credit, television activities, tourist offers, unfair contractual terms, timeshare, distance contracts, guarantees, electronic trade, medical products, financial services, assistance to air passengers, etc. The Regulation came into force in December 2006.

47. Autorità Garante della Concorrenza e del Mercato CPC A network of public enforcement authorities provided with the means to cooperate intensively for consumer protection; A database/IT system to support the network, allowing a fast and secure workflow and effective exchange of information (similar aim with respect to ECN among Competition Authorities) Most important CPC activities under EC Regulation No. 2004/2006: –Article 6 : Exchange of information on request. –Article 7 : Exchange of information without request. –Article 8 : Requests for enforcement measures

48. Autorità Garante della Concorrenza e del Mercato Conclusions The Consumer Protection System established to counter UCP represents a good way to promote free and undistorted competition and to enhance the smooth functioning of the markets involved, as: -first, the enforcement of the new UCP rules may allow consumers and businesses to receive more effective protection; -second, companies may take advantage of the new provisions by using the UCP directive’s black-lists of prohibited practices as benchmark to self-assess their day- to-day commercial conduct. The recent EP resolution defined the UCP discipline as a “milestone” of consumer protection policy and its first period of Agcm enforcement in Italy appears to confirm the huge potential of this discipline.