Unfair commercial practices defined

It is perfectly legitimate for a trader to entice customers to participate in a lottery free of charge on condition that they purchase a certain quantity of items. Such a measure does not, as a rule, constitute an unfair commercial practice in terms of EU law and is permissible, the European Court of Justice has recently concluded.

The EU directive regulating unfair business-to-consumer commercial practices within Europe is one of the legal measures specifically intended to offer consumers a high level of protection wherever they might make their purchases. This law provides for a general prohibition of unfair commercial practices and lays down rules on misleading and aggressive commercial practices. It also contains a list of commercial practices which ought to be considered as being unfair in all circumstances.

The judgment came about as a result of the following facts. A German retailer launched a promotional campaign in which the public was invited to purchase goods sold in its shops in order to collect points. After collecting a certain amount of points, customers could then participate free of charge in certain lotteries. The German association founded to combat unfair competition considered such a practice to be unfair in terms of German law on unfair competition.

The latter lays down a general prohibition on combining a prize competition and lottery with the obligation to purchase goods. The retailer was ordered to discontinue the practice. The German national court which took cognisance of the case made a preliminary reference to the European Court of Justice for guidance as to whether the EU directive precludes a prohibition such as that laid down by German law.

The European Court of Justice asserted that national laws cannot, without taking into account the specific circumstances of individual cases, introduce a blanket provision which prohibits - in all circumstances - a commercial practice where the participation of consumers in a prize competition or lottery is made conditional on the purchase of goods or the use of services.

The fact that such a practice constitutes a commercial practice as defined by EU law cannot be contested, the ECJ asserted. EU law fully harmonises at community level the rules relating to unfair business-to-consumer commercial practices. Therefore, in line with the EU directive, member states cannot adopt stricter rules than those provided for in the directive itself, even in order to achieve a higher level of consumer protection.

The court noted that the commercial practice at issue in this particular case is not listed in annex one of the directive. This annex provides for an exhaustive list of those commercial practices which can be prohibited without a case-by-case assessment.

This means that therefore national laws cannot introduce a blanket prohibition of the contested practice.

Provision had to be made for an assessment which takes into consideration the facts of each particular case in order to ascertain whether the practice could, in the light of the individual case, be deemed to be unfair or not in terms of EU law.

The criteria to be applied in such an assessment are defined by EU law and include an analysis as to whether the practice materially distorts, or is likely materially to distort, the economic behaviour of the average consumer with regard to the product concerned.

This judgment serves to provide further clarification of what ought to be considered as unfair in terms of the EU directive which regulates unfair commercial practices. Indeed, since the transposition of the directive by the member states into their national legal regimes, the Commission and the national enforcers have cooperated to ensure a common understanding of this far reaching directive.

A guide published by the Commission and accessible at the following address: http://ec.europa.eu/consumers/rights/docs/Guidance_UCP_Directive_en.pdf also seeks to clarify what ought to be considered as an unfair commercial practice in order to ensure that all EU citizens are afforded equivalent protection wherever they might be.

Dr Vella Cardona is a practising lawyer and a freelance consultant in EU, intellectual property, consumer protection and competition law. She is also a visiting lecturer at the University of Malta.

mariosa@vellacardona.com