Brussels, 31 October 2003

With the support of The European Commission
DG Health and Consumer Protection

Introduction

EURO COOP welcomes the above proposal for a Directive insofar as it is aimed at implementing one of the aims of the European Commission Consumer Policy Strategy 2002-20062 , namely the achievement of a high, common level of consumer protection across the Community.

EURO COOP sees it as the necessary complement to the proposed Regulation on Sales Promotion3.

The detailed comments below are aimed at ensuring that the final version of the measure to be adopted by the Member States is both clear and effective, which EURO COOP believes to be in the best interests of consumers and traders alike.

Chapter 1: General Principles

EURO COOP believes that consumers should be able to reap the full benefits offered by the Internal Market - including the widest possible choice of goods and services at the most competitive prices.

However, consumers wishing to take advantage of the potential of the Internal Market by purchasing across national borders can incur difficulties which do not arise when purchasing nationally or locally. Such difficulties can include language, lack of price transparency, differing minimum product or services standards, product or service claims, etc.

In most B2C situations, the consumer tends to be the weaker party and therefore worthy of protection; this is even moreso the case with cross-border B2C transactions.

It is against this background that EURO COOP supports the objective of the Directive, namely harmonising the laws, regulations and administrative provisions of the Member States on unfair commercial practices that would otherwise serve to discourage consumers from transacting across the Internal Market.

EURO COOP recognises that such difficulties may also apply to business-to-business transactions. However, the question of unfair business-to-business practices in the Internal Market may be more appropriately covered within the scope of the Commission consultation on a European Contract Law Action Plan5.

EURO COOP fears however that maximum harmonisation may be a double-edged sword. On one hand, the maximum harmonisation of consumer protection ensures that consumers are equally protected regardless of their own or the trader's place of residence. This is of course fundamental to removing the barriers of cross-border trading.

On the other hand, the actual level of maximum harmonisation may inevitably end-up being a compromise. While this may mean better protection for some consumers, for others the compromise may result in poorer protection than heretofore. Moreover, by definition, maximum harmonisation implies very limited possibilities for Member States or regions to improve the protection in the fields that may be of special concern to them. Any major improvement that a consumer organisation or a Member State may wish to implement must be negotiated at the European level. This alone severely limits the speed of action possible for consumers compared to the speed with which a new business practice may enter the scene.

We recognise that national diversity of rules represents an important obstacle to cross-border trading. EURO COOP is therefore satisfied with the concept set out in the proposed directive on unfair commercial practice of a general clause supplemented by a non-exhaustive negative list of commercial practices that are considered unfair.

Chapter 2: Unfair Commercial Practices

EURO COOP welcomes the concept of a general clause prohibiting unfair commercial practices as defined in the Proposal and backed-up by a non-exhaustive blacklist of practices considered unfair.

However, EURO COOP is concerned that the definition of Unfair Commercial Practice is related primarily to the impact of the Practice on the economic behaviour of the "average consumer". EURO COOP finds that this definition leaves vulnerable groups less protected since advertising which is aimed at the "reasonably well-informed average consumer5 " also reaches more vulnerable groups, whether intentionally or otherwise. Indeed, within the context of cross-border trading, vulnerable groups include not only the obvious ones - such as children - but can also include less well-informed or less-educated consumers who are not necessarily at a loss on their domestic or local market. This can expecially be the case in e-commerce.

Language barriers can present a particular problem in the context of cross-border consumer transactions. EURO COOP finds that the Directive does not do enough to address this basic fact despite the acknowledgement in the Explanatory Memorandum of the Proposal that almost 50% of all Europeans speak only their mother tongue6. For example, a consumer may well be able to read the special offer for a household appliance in a foreign language, but may not be able to interpret the special conditions and reservations written in small type only to be found when s/he scrolls down far enough or follows a link to subsite of the respective trader's homepage. EURO COOP nonetheless welcomes the inclusion in the blacklist the lack of provision of after sales service in a language other than the one which the trader used in communications with the consumer prior to a transaction without clearly disclosing this to the consumer before s/he committed to the transaction.

It is nowadays far more likely for consumers to carry-out transactions in other Member States "virtually" than in person or using other forms of distance selling. EURO COOP therefore believes that the recent and rapid rise of e-commerce as a means of cross-border trading across the Internal Market (and beyond) merits specific mention in the Proposal as many of the "traditional" difficulties encountered by consumers in cross-border transactions can be exacerbated when transacting electronically. This was borne out by the recent European Consumer Centre survey of cross-border e-commerce which found that on average, 34% of all cross-border e-commerce orders are not delivered. Of even more concern to consumers was the finding that 8% of ordered products are not delivered even if they are pre-paid. Payment is often instantly withdrawn from consumers' credit cards when orders are placed which of course causes problems when paid goods are not delivered.

As part of the survey, some goods were returned, but only 37% resulted in a reimbursement including the delivery fee.

According to the Distance Selling Directive, the consumer has the right to withdraw from a distance contract without reason within a specified number of days without justification. Nevertheless, 24% of the surveyed webtraders who received returned goods requested justification.7

Indeed, it was the desire to avoid such situations arising and provide safer e-commerce transactions for consumers that led EURO COOP's member organisations to be the drivers behind the "Code of Conduct on Electronic Commerce for Consumer Co-operatives8" recently adopted by Consumer Co-operatives International - the consumer section of the International Co-operative Alliance based in Geneva. This Code is unique in that it aims to ensure a high, common level of protection to consumers when dealing electronically with any signatory consumer co-operative anywhere in the world.

Section 1: Misleading Commercial Practices

Some Member States allow sales promotions such as "Buy two shirts, get a tie free". On the other hand, some Member States prohibit such practices on the grounds that they can contribute to a blurring of prices and a consequent reduction of price transparency for consumers. EURO COOP believes that where such sales promotions are permitted, traders offering them should - where possible - indicate to consumers the market price for the gifts concerned. Consumer should also - where possible - be allowed the opportunity to purchase the good or service without the additional promotion.

The Explanatory Memorandum and Annex refer to both advertorials and product placement, yet neither are defined in the text of the Proposal proper. In line with existing national legislation in some Member States, EURO COOP believes they should be more clearly defined in the proposed Directive, not only to reduce the risk of misleading commercial practices arising, but also to protect vulnerable groups who may not be alert to this more subtle, indirect and increasingly widely-used form of sales promotion.

Chapter 3: Codes of Conduct

As previously stated in its response to the European Commission Communication on Consumer Protection9, EURO COOP believes that Codes of Conduct can be useful instruments in ensuring self-compliance by traders; however, they must provide at least the same level of consumer protection as binding legislation. Monitoring and implementation of such Codes should be responsibility of the relevant trade federation. All such Codes should be easily accessible by consumers.

Chapter 4: Final Provisions

The experience in Member States such as Denmark, Finland and Sweden demonstrates that the success of national general clauses depend on strong supporting enforcement measures such as those employed by the Consumer Ombudsmen of these countries.

At the level of the Internal Market, the success of the Proposal's aim of ensuring a high, common level of consumer protection will depend on the relevant national authorities reaching common understandings of what constitute "unfair commercial practices" supported by appropriate enforcement measures. In this context, EURO COOP welcomes the parallel Proposal for a Regulation on consumer protection co-operation as a means of helping ensure enforcement across the Internal Market10.

In order to guarantee proper enforcement of the general clause, Member States should provide that the national authorities concerned are independent and sufficiently well-resourced in order to be able to act against imminent unfair commercial practices and also be able to act decisively within a reasonable period of time against actual unfair practices so as to prevent further consumer detriment.

EURO COOP also believes that in order to ensure full and efficient compliance with the Proposal, consumers and/or their representative organisations should have easy access to redress procedures - including Alternative Redress Resolution ("ADR"). In this context, EURO COOP would call on the Commission to follow-up its recent Green Paper on ADR via a legislative proposal as quickly as possible. EURO COOP welcomes cross-border ADR schemes such as EEJ-NET11 and FIN-NET12, but believes that both the EU institutions and Member States should do more to promote their use. EURO COOP believes however that ADR should always remain a choice for consumers, never an obligation and recourse to it should not preclude consumers' rights to subsequently call on the courts for redress if necessary.

In order to reflect the growing importance of e-commerce as a means of transacting across borders, EURO COOP believes that the Commission should deliver on its commitment to publish a communication on On-line Dispute Resolutions ("ODR") mechanisms.

In conclusion, EURO COOP believes that the Proposal for a Directive on Unfair Commercial Practices should include a clause reviewing its application within a reasonable period of time (e.g., two years). Such a period of time should allow any deficiencies or difficulties arising from enforcement to come to light which could then be corrected via an updated Proposal.