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Directive 2005/29/EC, the Unfair Commercial Practices Directive, is a major reform of the law concerning unfair business practices in the European Union. It was intended to combine a high level of consumer protection with the removal of obstacles to cross-border trade within the European Union arising from differences in fair trading laws from country to country (see Article 1 of the Directive and the recitals to it).
The Directive can be found on the Consumers section of the European Commission's website accessible via the European Union's website at http://europa.eu or directly at http://ec.europa.eu/consumers/cons_int/safe_shop/fair_bus_pract/index_en.htm
The Directive is designed to achieve "maximum harmonisation" of business-to-consumer fair trading law. The idea of "maximum harmonisation" is that as well as requiring member states of the European Union to apply the standards set out in European legislation, the European legislation precludes the member states from applying higher standards.
The Directive requires the member states to pass laws by no later than June 12 2007 giving effect to it in national law by December 12 2007. However, until at least 12 June 2013, Member States will continue to be able to apply more stringent national rules deriving from European directives insofar as it is necessary and proportionate to do so (Article 3(5)), meaning that maximum harmonisation may not be complete before that date. There will be a major review of the operation of the Directive by 12 June 2011 (Article 18).
The Directive is concerned mainly with the substantive law (i.e. the standards of behaviour required of traders). To some extent it leaves to member states the choice of appropriate domestic enforcement procedures and penalties for non-compliance (Articles 11 to 13 of the Directive).
The scheme of the Directive is to start with a general prohibition on unfair business-to-consumer commercial practices (Articles 3(1) and 5(1)) and then to descend into progressively greater detail in setting out what that means. "Unfair commercial practices" are in effect defined as practices which are "contrary to the requirements of professional diligence" (Article 5(2)(a), and see the definition of "profesional diligence" in Article 2(h)) and which are likely to materially distort the economic behaviour of the average consumer (Article 5(2)(b)). The effect of commercial practices on particular kinds of consumers, especially those who are unusually vulnerable, can replace the "average consumer" test if the practices are directed at those kinds of consumers or will foreseeably affect them (Articles 5(2)(b) and 5(3)). The Directive describes two major categories of unfair comercial practices:- those which are misleading (Articles 5(4)(a), 6 and 7) and those which are aggressive (Articles 5(4)(b), 8 and 9). Annex 1 to the Directive sets out a list of "commercial practices which are in all circumstances considered unfair". These are divided into "misleading commercial practices" (23 examples) and "aggressive commercial practices" (8 examples).
On a literal reading of the Directive, misleading or aggressive commercial practices which would not affect the average consumer's economic behaviour, but would distort the economic behaviour of particular kinds of consumer, may be prohibited only by the general clause in Articles 5(1) to 5(3), and not by the specific clauses in Articles 6 to 9. This is because the latter provisions refer exclusively to the "average consumer" (although Article 9(c) also refers to the "exploitation of any specific misfortune or circumstance of such gravity as to impair the consumer's judgement, of which the trader is aware..."). However, it might be fairer to read Articles 5(2)(b) and 5(3) as supplanting the references to the "average consumer" in Articles 6 to 9 in appropriate cases. The UK Government's Department for Trade and Industry published a consultation paper in December 2005 which suggested that that was indeed the intention. There is no clear basis in the text for the favoured interpretation, but the UK Government supports its interpretation with reference to the European Commission's Explanatory Memorandum.
The Directive is expressly "without prejudice to contract law and, in particular, to the rules on the validity, formation or effect of a contract" (Article 3(2) of the Directive, and see also the 9th recital to the Directive). It does not seek to harmonise unfair competition law regulating "commercial practices which, although not harming consumers, may hurt competitors and business customers" (8th recital to the Directive).
The provisions made within the actual text of the Directive in relation to codes of conduct are quite limited (e.g. Article 6(2)(b), prohibiting non-compliance with codes of conduct in some circumstances, and Article 10). However, the 20th recital states:- "It is appropriate to provide a role for codes of conduct ... In sectors where there are specific mandatory requirements ... these will also provide evidence as to the requirements of professional diligence in that sector. ... consumers' organisations could be informed and involved in the drafting of codes of conduct." Subscribers to a code of conduct drafted with the input of and endorsed by a major consumers' organisation could seek to argue during enforcement proceedings that compliance with the code of conduct is therefore evidence that they have not engaged in unfair commercial practices. Those charged with promoting and administering membership of codes of conduct will take note that Article 11(1) in effect contemplates the possibility of class-actions brought by consumer groups against code-owners where the code promotes non-compliance with legal requirements. Taken together, these provisions may be an incentive for those who administer and promote codes of conduct to consult with consumers' groups and take careful legal advice in relation to the drafting of such codes.
References
- Official Journal of the European Union, L149/22 - L149/39, 11th June 2005