Transcript Slide 1

Unfair Commercial Practices and Self Regulation
Sarmite Kapeika
Chief lawyer of Commercial practice, advertisement and ecommerce surveillance division
Consumer Rights Protection Centre of Latvia
Unfair Commercial Practices (1)
• A commercial practice shall be unfair if (UCP
Directives Article 5):
(a) it is contrary to the requirements of professional diligence,
and
(b) it materially distorts or is likely to materially distort the
economic behavior with regard to the product of the average
consumer whom it reaches or to whom it is addressed, or of the
average member of the group when a commercial practice is
directed to a particular group of consumers.
Unfair Commercial Practices (2)
• In particular, commercial practices shall be unfair
which:
(a) are misleading as set out in UCP Directives Articles 6 and 7,
or
(b) are aggressive as set out in UCP Directives Articles 8 and 9.
! UCP Directives Annex I contains the list of those commercial
practices which shall in all circumstances be regarded as
unfair.
Misleading commercial practice (1)
• A commercial practice shall be regarded as
misleading if it contains false information and is
therefore untruthful or in any way, including overall
presentation, deceives or is likely to deceive the
average consumer, even if the information is
factually correct, in relation to one or more of the
elements given in UCP Directive, and in either
case causes or is likely to cause him to take a
transactional decision that he would not have
taken otherwise.
Misleading commercial practice (2)
• A commercial practice shall also be regarded as misleading
if, in its factual context, taking account of all its features and
circumstances, it causes or is likely to cause the average
consumer to take a transactional decision that he would not
have taken otherwise, and it involves:
(a) any marketing of a product, including comparative advertising,
which creates confusion with any products, trade marks, trade
names or other distinguishing marks of a competitor;
(b) non-compliance by the trader with commitments contained in
codes of conduct by which the trader has undertaken to be
bound.
Example
I like to receive cheaper
bills!
[...] The first bill from Bite
already was 75%
cheaper than they were
at the last operator. [...]
Example
• We asked to trader to provide proof that information in the ad
is truthful.
• The trader couldn’t provide such proof – in fact, the trader
answered that concrete information comes from Kristine
Locmele and she is responsible for that.
• We did a calculation – could it be possible to get 75% more
expensive bills from other mobile communication operators
at similar conditions.
• Our suspicious confirmed – no possibility.
Example
• Our decision:
Considering that trader received concrete information and
rights to use it in his marketing campaigns, the trader, taking
into account good market practice and principle of good faith
of the relevant field of economic or professional activity, as a
professional in mobile communication field was obligated to
make sure that information provided by Kristine Locmele is
truthful. Only after that the trader could give an ad with
particular information.
Example
• Additionally we find out that the contract between trader and
Kristine Locmele (when Kristine Locmele gave the
permission to use her name, her picture and information she
gives in traders ads) was concluded on 26.03.2009., but the
first bill from the trader Kristine Locmele received not sooner
than on 01.04.2009. (for the period from 01.03.2009. till
31.03.2009.).
• So the trader knew that information about 75% cheaper bills
was false, because Kristine Locmele had no bill from the
trader at the moment.
Misleading commercial practice (3)
• A commercial practice shall be regarded as misleading if, in
its factual context, taking account of all its features and
circumstances and the limitations of the communication
medium, it omits material information that the average
consumer needs, according to the context, to take an
informed transactional decision and thereby causes or is
likely to cause the average consumer to take a transactional
decision that he would not have taken otherwise.
Misleading commercial practice (4)
• It shall also be regarded as a misleading omission when a
trader hides or provides in an unclear, unintelligible,
ambiguous or untimely manner the material information that
the average consumer needs, according to the context, to
take an informed transactional decision, or fails to identify
the commercial intent of the commercial practice if not
already apparent from the context, and where, in either case,
this causes or is likely to cause the average consumer to
take a transactional decision that he would not have taken
otherwise.
Example
„New from Lattelecom:
internet without a phone!
From 6,90 LVL per
month. Order
www.lattelecom.lv, calling
177 or in Lattelecom
shops.”
Example
• During the investigation, we found out:
– this offer is possible only in case if you conclude an agreement for 18
month;
–
the price 6,90 LVL per month is only first 6 month. After the 6 month
period, the rest of the time (12 month) the price is 11,90 LVL per month.
• We took a decision, recognizing this commercial practise as
unfair (misleading omission) under UCP Directives article 7.
We put a penalty LVL 2000,00 (about 2850,00 EUR).
Aggressive commercial practice (1)
• A commercial practice shall be regarded as aggressive if, in
its factual context, taking account of all its features and
circumstances, by harassment, coercion, including the use of
physical force, or undue influence, it significantly impairs or
is likely to significantly impair the average consumer's
freedom of choice or conduct with regard to the product and
thereby causes him or is likely to cause him to take a
transactional decision that he would not have taken
otherwise.
Aggressive commercial practice (2)
• In determining whether a commercial practice uses
harassment, coercion, including the use of physical force, or
undue influence, account shall be taken of:
(a) its timing, location, nature or persistence;
(b) the use of threatening or abusive language or behaviour;
(c) the exploitation by the trader of any specific misfortune or circumstance
of such gravity as to impair the consumer's judgement, of which the
trader is aware, to influence the consumer's decision with regard to the
product;
(d) any onerous or disproportionate non-contractual barriers imposed by
the trader where a consumer wishes to exercise rights under the
contract, including rights to terminate a contract or to switch to another
product or another trader;
(e) any threat to take any action that cannot legally be taken.
Example
• The bank „Aizkraukles banka” sent to her clients who had
mortgage credit a letter in which the bank:
– asked the consumers to provide certain documents that confirm their
and their family members incomes;
– gave an information: “we would like to inform you, that documents (their
originals) mentioned above have to be submit till [...]. We inform that if
you won’t fulfil established duty, the bank is empowered to apply a
penalty defined in the contracts”;
– additionally bank informed consumers that bank is raising cost for
current account from 0 LVL to 5 LVL (~ 8 EUR), but consumers have an
opportunity to conclude an addition to their mortgage credit contract
and open a specific credit repayment account which will be for free.
Example
• We found out that in the additions to mortgage credit
contract about specific credit repayment accounts opening
were not only change of terms concerning credit repayment
account, but also change of essential terms (like interest
rate, repayment term (from ~ 25 years to 2 years with
possibility to prolong the term if bank accept it), etc).
Annexes contained unfair contract terms.
Example
• Our decision:
– aggressive commercial practice;
– misleading commercial practice (misleading omission);
– commercial practice which doesn’t conform with professional diligence
and negatively affects or may negatively affect the economic behaviour
of average consumer.
• First we took a decision of provisional regulation obligating
the bank to fulfil the duty to suspend the unfair commercial
practice.
Example
• After evaluating the case we took a final (binding) decision
obligating the bank to fulfil the duty to terminate the unfair
commercial practice, forbidding the bank to offer to
consumers (who wanted to conclude an addition to
mortgage credit contract) an additions to mortgage credit
contract in which not only change of terms concerning credit
repayment account, but also change of essential terms were
made.
• Administrative fine 8000 LVL (~ 14 000 EUR) from maximum
10 000 LVL fine was charged.
• The bank appealed decision in the court, but it doesn’t stop
the implementation of the decision.
Black List
• UCP Directive identifies commercial practices which are in
all circumstances unfair to provide greater legal certainty.
• UCP Directives Annex I contains the full list of all such
practices – Black List with 31 commercial practices.
• These are the only commercial practices which can be
deemed to be unfair without a case-by-case assessment
against the provisions of UCP Directives Articles 5 to 9.
Self Regulation (1)
• In UCP Directive is provided a role for codes of conduct,
which enable traders to apply the principles of this Directive
effectively in specific economic fields.
• In sectors where there are specific mandatory requirements
regulating the behaviour of traders, it is appropriate that
these codes will also provide evidence as to the
requirements of professional diligence in that sector.
Self Regulation (2)
• The positive aspect is that the control exercised by code
owners at national or Community level to eliminate unfair
commercial practices may avoid the need for recourse to
administrative or judicial action and that is way it should be
encouraged.
• The issue is that there are no administrative sanctions for the
codes owners, for example in case if some trader has
breached the code of conduct, but the codes owner doesn’t
take any control measure.
Thank you for your attention!
Sarmite Kapeika
Chief lawyer of Commercial practice,
advertising and e-commmerce surveillance
division
Consumer Rights Protection Centre of Latvia
[email protected]