On 18 June 2003, the European Commission adopted a proposal for legislation on unfair business-to-consumer commercial practices within the European Union.
The Proposed Directive aims to regulate business-to-consumer commercial practices via cross-border rules that are harmonised across EU Member States.
The Proposed Directive will replace the various existing national rules and court rulings on commercial practices in the EU Member States – which are often seen as a barrier to companies wanting to trade across the EU – with a single set of common rules. Traders will no longer have to comply with different rules in each Member State. Instead, they must comply with the requirements of their country of origin. Other Member States will not be able to impose additional requirements.
The Proposed Directive is intended to regulate how businesses influence consumers to purchase their products and services. It does not cover:
- Business-to-business transactions
- Contract law
- Any matters of taste, decency, health and safety of products.
The Proposed Directive contains a general prohibition on unfair commercial practices. A commercial practice will be considered unfair if:
- It is contrary to the requirements of professional diligence
- It materially distorts or is likely to materially distort the economic behaviour of an average consumer.
The Proposed Directive further defines two specific categories of unfair commercial practices: misleading and aggressive practices. Either practice automatically will be considered unfair.
Traders will be prohibited from taking misleading actions or making misleading omissions. They will have a duty not to misstate or omit material information on the products (including information such as price, additional taxes, the products’ characteristics or the need for additional parts or service). Aggressive practices include harassment, coercion or an undue influence that significantly impairs the consumer’s freedom of choice, and causes or is likely to cause the consumer to make an impulsive decision.
The benchmark for assessing the impact of commercial practices will be the average consumer who is reasonably well informed and reasonably observant and circumspect.
The Proposed Directive lists 19 commercial practices that will be considered unfair. Some of the misleading practices include:
- False claims to be a signatory to a code of conduct.
- False claims that a code of conduct has an endorsement from a public or other body.
- Advertising “special offer” products without having the items in stock.
- False statements that the product is available for a limited time to elicit an immediate decision and deprive consumers of sufficient opportunity or time to make an informed choice, e.g., liquidation sales when the trader is not ceasing business.
- False statements that a product can be sold legally.
- Advertorials, i.e., using editorial content in the media to promote a product where a trader has paid for the promotion without making that clear in the content.
- False statements that the personal security of the consumer or his/her family is at risk if the consumer does not purchase the product.
- Establishment, operation or promotion of a pyramid promotional scheme.
Aggressive practices include:
- Leading consumers to believe they cannot leave the premises until the contract is signed or the payment is made.
- Conducting prolonged and/or repeated personal visits to the consumer’s home, ignoring the consumer’s request to leave.
- Making persistent and unwanted solicitations by telephone, fax, email or other remote media.
- Targeting consumers who have recently suffered a bereavement or serious illness in their family to sell a product which bears a direct relationship with the misfortune.
- Advertising to children in a way which implies that acceptance by peers is dependent on buying a particular product.
- Demanding payment for pro ducts supplied by the trader, but not solicited by the consumer (inertia selling).
The Proposed Directive now goes to the European Parliament and the Council for adoption through the EU’s co-decision procedure. This process will take some time and it is expected that the Proposed Directive will not come into force before the beginning of 2005. Following its formal adoption, Member States will have 18 months to enact the Directive’s provisions into national law. Provisions of the Directive will likely become enforceable in some Member States at the end of 2006.
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