Marketing scams, designed to rob traders of their time and money, are in the European Commission’s line of fire. In a recent communication, the Commission outlined planned initiatives to ensure a safer single market for traders to operate in.
Clearly misleading practices, such as those of the rogue directory companies, will be explicitly banned- Mariosa Vella Cardona
Misleading marketing practices share common characteristics. A rogue trader deceives a victim into giving consent and, purportedly, a contract is concluded with little or no service in return. The price charged is often exorbitant and the contractual conditions imposed abusive. Following the conclusion of the contract, the rogue trader seeks to enforce payment using all means possible.
An example of a common misleading marketing practice which has become a widespread phenomenon in Europe is that of certain directory companies which send out forms asking businesses or professionals to update details in their directories, allegedly for free. If the targeted traders sign the form, they are then told that they have signed a contract and will be charged an annual sum. Other schemes involve misleading payment forms disguised as an invoice for services that the trader has purportedly already ordered.
Current EU law on misleading and comparative advertising already provides for minimum, EU-wide protection for business from such misleading marketing practices. Advertisements which mislead or may mislead the people whom they target are forbidden. This law also ensures that comparative advertising compares ‘like with like’ and that it does not denigrate other companies’ trademarks or create confusion.
The Commission has now publicised its intention to take measures to increase the protection for businesses. It has signified its intent to present a proposal in 2013 to revise the current rules on misleading and comparative advertising and make them more robust.
Some clearly misleading practices, such as those of the rogue directory companies, will be explicitly banned so that traders will instantly know that such practices are illegal. The Commission is also geared to strengthen the penalties for infringements and ensure that member states take the necessary action to make provision for effective proportionate and dissuasive penalties in their national laws.
Every member state will be required to designate an enforcement authority with the necessary powers to make sure that the rules on misleading practices are applied as well in business-to-business relations and not only in business-consumer relations. The Commission also intends to establish a cooperation procedure between enforcement authorities, which will enable the relevant authorities to exchange information and request cross-border assistance from each other.
The results of a survey conducted by the European Parliament and a public consultation clearly show that businesses of all sizes and from all sectors strongly feel the need for increased protection at EU level against misleading marketing practices specifically targeting businesses.
An EU-wide survey has documented at least 13,000 complaints about company directory scams. Nonetheless, the actual spread of such misleading practices is difficult to quantify since many misleading marketing practices go unreported. Such practices undoubtedly affect the economy in general and may have a negative effect on economic growth. This is particularly the case for small and medium-sized enterprises which often lack the necessary resources to combat such scams effectively. Any EU measures intended to protect Europe’s traders and economy from such malpractices will surely therefore receive a warm welcome from the business community.
mariosa@vellacardona.com
Mariosa Vella Cardona is deputy chairperson of the Malta Competition and Consumer Affairs Authority and a member of the National Commission for the Promotion of Equality.