Amended proposal for a EUROPEAN PARLIAMENT AND COUNCIL REGULATION concerning sales promotions in the Internal Market (presented by the Commission pursuant to Article 250 (2) of the EC Treaty)

EXPLANATORY MEMORANDUM

The Commission hereby presents a modified proposal for a Regulation of the European Parliament and Council concerning sales promotions in the Internal Market. The modified proposal incorporates those amendments by the European Parliament at the First reading which are acceptable to the Commission.

1. INTRODUCTION.

a) Background.

The Commission adopted its proposal on 2 October 2001 and it was formally transmitted to the European Parliament and Council on 5 October 2001. The Economic and Social Committee gave its opinion on 8 May 2002. The European Parliament adopted a Resolution at its First Reading on 4 September 2002, and proposed amendments to the Commission proposal.

b) Purpose of the regulation.

The objective of the regulation is to ensure the proper functioning of the Internal Market, by eliminating restrictions to the free movement of services between the Member States , ensuring the freedom of establishment and eliminating appreciable distortions of competition between the Member States. In addition, the aim is to facilitate the free movement of goods that benefit from the use of sales promotions.

2. EP AMENDMENTS ACCEPTED BY THE COMMISSION

Of the 57 amendments adopted by the European Parliament at First reading, the Commission can accept 40 in full and 7 in part, making a total of 47.

Amendments accepted in full: 2, 3, 4, 6, 7, 9, 10, 11, 14, 15, 16, 17, 18, 19, 23, 24, 25, 26, 27, 31, 32, 33, 34, 35, 36, 40, 42, 43, 44, 45, 46, 47, 48, 51, 52, 53, 55, 56, 57 and 58.

Amendments accepted in part: 5, 12, 13, 21, 29, 38 and 39.

The Commission has accepted those amendments which:

- strengthen, or at least are in line with, the Internal Market objective of the proposal;

- contribute to a constructive compromise on the treatment of sales below costs;

- contribute to a constructive compromise on promotional games; and

- are of a technical nature that improve the text [1].

[1] In addition, for certain language versions (including English) the Parliament requested to change the term "person" to "individual" throughout the text. The Commission agrees with this proposal.

3. EP AMENDMENTS NOT ACCEPTED BY THE COMMISSION

The Commission has not accepted, in part or full, 17 of the 57 amendments adopted in the Parliament. The reasons are given below, for the not accepted amendments (10 amendments) as well as the partly accepted/partly not accepted (7 amendments). Where possible the amendments have been grouped into broad categories:

Amendments not accepted (rejected) in full: 8, 20 ,22 ,28, 30, 37, 41, 49, 50, 54.

Amendments not accepted in part: 5, 12, 13, 21, 29, 38 and 39.

Amendments that undermine the Internal Market objective of the proposal

(Amendments 12, 13, 28 and 39 (second part))

The second part of Amendment 12 and amendment 28 that would allow Member States to impose general bans on sales promotions on the basis of very general and therefore easy to meet criteria. These undermine the legal security offered by the current proposal.

Amendment 13 (a) that would allow Member States to restrict incoming sales promotions for the liberal professions for unjustified reasons.

Amendment 13 (b) which excludes all sales promotions for pharmaceuticals from the scope of the regulation should be accepted because the Commission's policy has always been not to treat pharmaceuticals as ordinary consumer products.

Amendment 39 (second part) that implies, contrary to the existing acquis that sales promotions from other Member States should be in the language of the Member State of destination.

Amendments that alter existing definitions in the acquis.

(Amendments 20, 21 (second part) and 22)

These exclude illegal gaming activities from commercial communications although they are de facto already excluded from this term.

Amendments that re-impose value limits or bans on sales promotions that have been shown to be disproportionate given the proposed information requirements that would replace them.

(Amendments 29 (first part), 30 and 37)

Amendment 29 (first part) that would allow for existing general value limits on premiums to be maintained. Amendment 30 that re-imposes general bans on discounts prior to seasonal sales periods.

Amendment 37 that would disproportionately interfere with national civil procedures.

Amendments that delete information or other redress provisions that are necessary to replace the outdated value restrictions that the proposal lifts and that would reduce the level of consumer protection proposed by the text.

(Amendments 38, 41, 49, 50 and 54)

Amendment 38 that deletes the use of free help lines for complaints when these are offered by the promoter. Amendment 41 exempting small companies from the redress requirements that are not burdensome. Amendment 49 deleting the information requirements in the commercial communications of discounts. Amendment 50 deleting the requirement to indicate the previous price that was in force prior to the offer of the discount. Amendment 54 deleting the requirement to indicate in the commercial communication of a sales promotion the value of the free gift or premium.

4. CONCLUSION

The Commission has accepted 47 of 57 amendments proposed by the European Parliament at First Reading, either in whole or in part.

In accordance with article 250 paragraph 2 of the EC Treaty, the Commission amends its initial proposal, incorporating these amendments.

2001/0227 (COD)

Amended proposal for a A EUROPEAN PARLIAMENT AND COUNCIL REGULATION concerning sales promotions in the Internal Market

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 95(1) thereof,

Having regard to the proposal from the Commission [2],

[2] OJ C [ ], [ ], p. [ ]

Having regard to the opinion of the Economic and Social Committee [3],

[3] OJ C [ ], [ ], p. [ ]

Having regard to the opinion of the Committee of the Regions [4],

[4] OJ C [ ], [ ], p. [ ]

Whereas:

(1) In accordance with Article 14(2) of the Treaty, the internal market comprises an area without internal frontiers in which the free movement of goods, services and the freedom of establishment are ensured; the development of the use and commercial communication of sales promotions within the area without internal frontiers is vital to promote the development of cross-border activities provided that steps are taken to ensure a high level of consumer protection as well as protection of small and medium-sized enterprises (SMEs).

(2) The use and communication of sales promotions contribute to the growth and development of all businesses in the Community; they are particularly important tools for small and medium-sized enterprises who rely on such affordable practices as inputs and outputs to develop their cross-border activities; such promotions therefore stimulate competitiveness in the European economy and accordingly allow consumers to benefit from greater choice and competitive prices.

(3) Community law and the characteristics of the Community legal order are a vital asset to enable European citizens and operators to take full advantage, without consideration of borders, of the opportunities offered by the use and communication of sales promotions. This Regulation therefore has the purpose of ensuring a high level of Community legal integration in order to establish a real area without internal borders for the use and communication of sales promotions and of ensuring a high level of consumer protection.

(4) The use and communication of sales promotions within the Community is hampered by numerous identified legal obstacles [5] to the proper functioning of the Internal Market which make less attractive the exercise of the freedom of establishment and the freedom to provide services; these obstacles arise from divergences in legislation and from the legal uncertainty as to which national rules apply to the use and communication of sales promotions; a relatively narrowly defined set of rules on sales promotions are giving rise to a multiplicity of Internal Market barriers affecting a wide range of businesses. The removal of these barriers will facilitate the free movement of goods associated with the sales promotion.

[5] Green paper on "Commercial communications in the Internal Market": COM(96) 192 final. 18.05.96

(5) In the absence of uniform rules at Community level, obstacles to cross-border services and goods or the freedom of establishment might be justified in the light of the case-law of the Court of Justice as long as they seek to protect recognised public interest objectives and are proportionate to those objectives; in the light of Community objectives, of the provisions, in particular articles 28, 43 and 49 of the Treaty relating to free movement of secondary Community law, and in accordance with the Commission's policy on commercial communications [6], such obstacles can only be eliminated by establishing uniform rules at Community level and by clarifying certain legal concepts at Community level to the extent necessary for the proper functioning of the Internal Market; other restrictions have been identified as requiring replacement by less restrictive measures; remaining restrictions relating to the use and communication of sales promotions should be submitted to the principle of mutual recognition of national legislation.

[6] "The follow-up to the Green paper on Commercial Communications in the Internal Market" Communication from the Commission. COM(1998) 121 final. 04.03.1998

(6) Given the specific nature of the problems to be addressed, in particular, the need to tackle in a very targeted manner a small number of issues, which affect a wide variety of services, there is a need to establish through a Regulation a few precise, unconditional and uniform Community requirements. The use of a Regulation strengthens legal security, in particular, for customers and small and medium-sized companies.

(7) This Regulation covers sales promotions which are all 'temporary' in nature as against, for example, long term price cuts. Its scope includes loyalty programmes and air-miles schemes.

(8) This Regulation does not cover or affect national rules that set conditions for seasonal, clearance or closing down sales except in so far as such rules restrict the offer of discounts.

(9) This Regulation covers promotional contests or games where the purpose is to encourage the sale of goods or services, other than gambling activities, and where payments, if they arise, serve only to acquire the promoted goods or services. This excludes gambling activities, such as games of chance, lotteries and betting transactions, which involves wagering a stake with monetary value, from the scope of application.

(10) This Regulation applies without prejudice to Community and national competition law, which contains specific provisions concerning the press.

(11) By dealing only with those specific identified matters which give rise to problems for the Internal Market, this Regulation is fully consistent with the need to respect the principle of subsidiarity as set out in Article 5 of the Treaty. In particular, the definition of what is included in, or associated with, a book for the purposes of this Regulation is of subsidiary nature. In accordance with the principle of proportionality and the Commission's policy on commercial communications, which through the work of the Expert Group on commercial communications, has sought to apply this principle in as transparent and precise a manner as possible, the measures provided for in this Regulation are strictly limited to the minimum needed to achieve the objective of the proper functioning of the internal market; where action at Community level is necessary, and in order to guarantee an area which is truly without internal frontiers as far as sales promotions are concerned, the Regulation must ensure a high level of protection of objectives of general interest, in particular the protection of minors, consumer protection and in that context fair trading and the protection of public health.

(12) This Regulation does not affect the Community acquis, which is applicable to the use and communication of sales promotions, which covers, in particular, Council Directive 84/450/EEC concerning misleading advertising and comparative advertising [7] , Council Directive 89/552/EEC concerning the pursuit of television broadcasting activities [8] Council Directive 92/59/EEC on general product safety [9], Directive 95/46/EC of the European Parliament and of the Council on the protection of individuals with regard to the processing of personal data and on the free movement of such data [10], Directive 97/66/EC of the European Parliament and of the Council concerning the processing of personal data and the protection of privacy in the telecommunications sector [11], Directive 98/6/EC of the European Parliament and of the Council on consumer protection in the indication of prices of products offered to consumers [12], Directive 98/27/EC of the European Parliament and of the Council on injunctions for the protection of consumers' interests [13], Council Directive 92/28/EEC on the advertising of medicinal products [14], Directive 1999/44/EC of the European Parliament and of the Council on certain aspects of the sale of consumer goods and associated guarantees [15], Council Recommendation "Drinking of alcohol by children and adolescents [16] and Directive 2000/31/EC of the European Parliament and of the Council on electronic commerce [17].

[7] OJ L 250, 19.9.1984, p.17. Directive as amended by Directive 97/55/EC of the European Parliament and of the Council (OJ L 290,23.10.1997,p.18)

[8] OJ L 298, 17.10.1989, p.23. Directive as amended by Directive 97/36/EC (OJ L 202, 30.7.1997, p. 60)

[9] OJ L 228, 11.8.1992, p.24

[10] OJ L 281, 23.11.1995, p.31

[11] OJ L 24, 30.1.1998, p.1

[12] OJ L 80, 18.3.1998, p.27

[13] OJ L 166, 11.6.1998, p.51. Directive as amended by Directive 2000/31/EC (OJ L 178, 17.2.2000, p.1)

[14] OJ L 113, 30.4.1992,.p.13

[15] OJ L 171, 7.7.1999, p.12

[16] COM (2000) 736 final

[17] OJ L 178, 17.7.2000, p.1.

(13) For purposes of enforcement this Regulation has strong complementary links with Council Directive 84/450/EEC; non compliance with the information requirements of this Regulation shall be considered as breaches of the ban on misleading advertising established by Council Directive 84/450/EEC.

(14) This Regulation provides for a high level of consumer protection in order to enhance trust and confidence in the Internal Market for sales promotions by setting down a detailed number of information requirements; these provisions ensure that the commercial communications relating to sales promotions are transparent and that an individual interested in a communicated sales promotion will be able to easily obtain all the relevant information announced in that communication. In view of the need to protect minors and public health, it also makes the use and commercial communication of sales promotions subject to a number of harmonised targeted bans and precise restrictions;

(15) The requirement preventing Member States from imposing prohibitions on the use or commercial communication of a sales promotion may apply only to those prohibitions that relate to sales-promoting activities generally.

(16) This regulation does not apply to restrictions by Member States in relation to the use and commercial communication of sales promotions for the marketing of pharmaceuticals, whether or not subject to a prescription.

(17) The heightened protection that the Regulation provides by the establishment of these uniform rules allows for the removal of certain national bans or limitations. This removal is necessary to eliminate the barriers to establishment and the export of services as well as the substantial distortions of competition that they give rise to; other cross-border barriers to the use and commercial communication of sales promotions are submitted to the application of the principle of mutual recognition of national legislation; requirements at national level which are subject to mutual recognition cover only those relating to the use of sales promotions or references to them in commercial communications and not general requirements on advertising such as those relating to health and ethical claims, advertising for certain products and services, nor requirements relating to other marketing practices.

(18) Without verifiable prior consent this Regulation, in order to protect the health of children and consistent with Directive 92/59/EEC, prohibits promoters of free gifts or premiums from dispatching promotional products or providing services to children unless the promoters ensure that the products dispatched or services provided are not of a nature suchthat they could harm a child's health.

(19) In view of the recognised need for reasons of public health to prevent inciting children and adolescents to drink alcoholic beverages; given the objective underlying the use of sales promotions which is to encourage consumption of promoted products and services, this Regulation bans the offer of free alcoholic beverages as promotional gifts to minors.

(20) Commercial communications of sales promotions for tobacco products and restrictions thereon are addressed in the proposed Directive on advertising and sponsorship of tobacco products [18].

[18] COM (2001) 283 final

(21) This regulation lays down a number of obligations on promoters to ensure that, in the event of them breaching obligations relating to the use and communication of sales promotions, complainants will be able to identify the promoter and have easy access to in-house redress systems; the provisions of this Regulation will also encourage best-practice in the field of in-house customer complaint schemes as well as promote and facilitate the access to affordable out of-court redress schemes.

(22) Complainants may also make use of other out-of-court mechanisms (conciliation, mediation) to settle disputes, along the lines of the self-regulation arrangements applied in the advertising sector and based for example on working methods to be defined during the pilot stage of the European Extra-judicial Network (EEJ-Net).

(23) For purposes of achieving the Internal Market for commercial communications of which this Regulation is the first step, the work of the Expert Group on Commercial Communications will be accelerated in the other areas that the Commission recognised as requiring priority attention in its 1998 Communication.

(24) This instrument demonstrates how targeted and complete harmonisation can be achieved by reliance on a regulation that offers full legal security. In line with the object of achieving better regulation, harmonisation in this field should be targeted such that regulations rather than directives should be relied upon to maximise the benefits of the Internal Market for European Citizens.

(25) Neither consumers nor businesses are assisted by requiring excessive information in sales promotions.

HAVE ADOPTED THIS REGULATION:

Article 1

Object

This Regulation establishes rules concerning the use and commercial communication of sales promotions in order to ensure the proper functioning of the internal market and a high level of consumer protection.

Article 2

Definitions

For the purposes of this Regulation:

(a) 'commercial communication' means any form of communication designed to promote, directly or indirectly, the goods, services or image of a company, organisation or individual pursuing a commercial, industrial or craft activity or exercising a regulated profession. The following do not constitute commercial communications:

- information allowing direct access to the activity of the company, organisation or individual in particular a domain name or an electronic-mail address; and

- communications relating to the goods, services or image of the company, organisation or individual compiled in an independent manner, particularly when this is without financial consideration;

(b) 'sales promotion' means the offer of a discount, a free gift, a premium or an opportunity to participate in a promotional contest or game,

(c) 'promoter' means a user of a sales promotion, meaning a company, organisation or individual by whom or on whose behalf a sales promotion is undertaken,

(d) 'customer' means a company, organisation or individual who purchases the good or service promoted by the promoter;

(e) 'discount' means the temporary offer of:

- a price reduction;

- an additional quantity of the identical good or service purchased which is offered at no additional cost to the purchaser;

- a coupon or voucher entitling a purchaser of a good or service to a reduction on the price of an identical good or service on a subsequent purchase;

f) 'free gift' means the temporary offer to provide free of charge a good or service independently of any obligation to purchase whatsoever;

(g) 'premium' means the temporary offer to provide a good or service of a type which is not identical to the good or service with which it is offered for purchase;

(h) 'promotional contest' means the temporary offer to participate in a contest which may be subject to a prior obligation to purchase a good or service, in which the winner is designated primarily by means of skill;

(i) 'promotional game' means the temporary offer to participate in a game, in which the winner is designated primarily by chance and no fee is required to participate and where participation is not subject to a prior obligation to purchase or to order the provision of a service. Such promotional games shall not include gambling activities which involve wagering a stake with monetary value in games of chance, including lotteries and betting transactions.

(j) 'child' means a individualunder the age of 14 years, unless other age-limits apply to the sale of specific products;

(k) 'alcoholic beverages' means alcoholic beverages within the meaning of Articles 2, 8, 12, 17 and 19 of Directive 92/83/EEC;

(l) 'general prohibition on the use or commercial communication of a sales promotion' means a prohibition that is not specific to a particular type of promoted good or service.

(m) 'Non-public regulatory body" means an organisation or association not governed by public law, exercising its legal autonomy to regulate in a collective manner economic activities; and

(n) 'sale below cost' means a discount consisting of a sale of a product or service by a retailer below the retailer's net invoice price inclusive of carriage, insurance and other delivery costs as well as tax.

Article 3

The use and commercial communication of sales promotions

1. Member States or non-public regulatory bodies shall not impose:

- a general prohibition on the use or commercial communication of a sales promotion unless required by Community law;

- a limitation on the value of a sales promotion, except for discounts on fixed-price products and sales below cost;

- a prohibition on discounts preceding seasonal sales; or

- a requirement to obtain prior authorisation, or any requirement having equivalent effect, for the use or commercial communication of a sales promotion.

2. Member States or non-public regulatory bodies shall neither restrict the freedom to provide services nor restrict the free movement of goods benefiting from the use of sales promotions on the grounds of the use of sales promotions and references to them in commercial communications; Community and national competition law shall remain unaffected.

3. This article is without prejudice to national provisions governing sales or resales below cost.

Article 4

Information to be provided in respect of sales promotions

In addition to other information requirements deriving from Community law, the promoter shall ensure that the commercial communication of a sales promotion complies with the requirements set out at Annex to this Regulation. All the information requirements set out in Annex shall be provided in a clear and unambiguous manner. The information that the promoter must make available to the client on request must be available on the launch of the relevant sales promotion.

Article 5

Protection of children and adolescents

1. A promoter, when making a sales promotion, shall not collect personal data from a child without the verifiable consent of that child's legal guardian, except where it is necessary to ask a child for contact details of his legal guardian in order to seek the consent of the latter.

2. A promoter is prohibited, in accordance with general product safety legislation, from providing directly to a child a free gift or a premium or a service if it is of a nature that could in any way harm its health.

3. A promoter is prohibited from providing a free gift consisting of a product the sale of which is prohibited to minors, in particular an alcoholic beverage to individuals under the age of 18.

Article 6

Redress

1. A promoter shall at the request of a court or administrative authority, provide evidence as to the accuracy of the information referred to in Article 4.

2. A promoter shall provide, free of charge, an address to which complaints can be directed to him. Where a promoter provides a telephone advice service and/or e-mail address in connection with a sales promotion, the promoter shall ensure that this is provided free of charge and that appropriate resources are dedicated to its operation.

3. A promoter shall respond to an initial complaint relating to a sales promotion, within four weeks of the promoter's receipt of that complaint. The initial complaint and the response shall be in writing, which may include by electronic means. The response shall be in the language of the communication of the sales promotion.

4. In the event of a out-of-court settlements of disputes the national law shall apply. If the sales promotion is being conducted from another Member State the promoter shall be required to state under which national law sales promotions are being offered.

Article 7

Revision clause

Not later than * [two years of the entry into force of this Regulation], the Commission shall submit to the European Parliament and the Council a comprehensive impact assessment report on the application of the Regulation, accompanied, ifappropriate, with a proposal for its revision.

This report shall include an assessment of the impact of sales promotions law on both consumers and business in the European Community.

The report shall also contain a detailed evaluation of the Internal Market effects on the differing national prohibitions on sales below cost and an assessment of the impact of a potential liberalisation of such sales.

Article 8

This Regulation shall enter into force on 1 January 2005.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, []

For the European Parliament

The President

[]

For the Council

The President

[]

ANNEX

Information to be provided in respect to the use and the commercial communication of

sales promotions

1. All sales promotions

1.1. Information to be provided in the commercial communication:

- the price (inclusive of taxes) of the promoted good or service and any additional costs associated with freight, delivery or postage;

- the promoter's name and address;

- the duration of the offer including the start date and either the end date or the quantity of stock available;

- where the offer is subject to conditions, an indication of where these conditions or any other information can be obtained; and

- an indication of how the terms and conditions governing the sales promotion can be obtained.

2. Discounts

2.1. Information to be provided in the commercial communication:

- the exact amount of the discount represented as either a percentage or a unit cost; and

- an indication of a sale below cost.

2.2. Information to be made available on request unconditional on purchase of the promoted product or service:

- any conditions or limitations applicable to the discount;

- the preceding price of the promoted good or service and the length of time (including dates) that this preceding price was applied; and

- where the good or service in question has previously been bundled and/or distributed in a format that prevents a direct price comparison with the promotional offer, the basis for assessing the pre-discount price.

2.3. Information to be made available on a coupon or voucher:

- the redemption value of the coupon or voucher, which may be a good or service, or where the coupon or voucher can be exchanged for cash, the cash value;

- any limitation on its use including its expiry date; and

the goods or services against which the coupon or voucher may be redeemed.3. Free gifts and Premiums

3.1. Information to be provided in the commercial communication:

- the actual value of the free gift or premium; and

- any costs associated with obtaining the free gift or premium.

3.2. Information to be made available on request unconditional on purchase of the promoted product or service:

- any conditions or limitations applicable to the free gift or premium.

4. Promotional contests and promotional games

4.1. Information to be provided in the commercial communication:

- the commercial value and nature of the prize;

- the closing date for receipt of entries;

- any geographical or personal restrictions such as location or age;

- the need to obtain permission to enter from an adult or employer;

- any associated costs other than the purchase of the promoted good or service in the participation in the promotional contest or promotional game; and

- in the case of a promotional game, sufficient information for any participant in the promotion to understand their likely chance of winning.

4.2. Information to be made available on request unconditional on purchase of the promoted product or service:

- any conditions applicable to the promotional contest or game including any limitations on entries or prizes;

- the number of prizes which may be won and the number of prizes of any one type if more than one type of prize is on offer;

- the rules governing who is eligible to participate and the award of prizes;

- the criteria for judging entries;

- the selection procedure for the award of prizes and, where the selection is made by jury, the composition of the jury;

- the date of the results and the manner in which they are to be announced;

- the means by which prizes may be delivered or collected and any associated costs;

- the time period during which prizes must be collected;

- any intention and conditions to use winners in post event publicity; and

- details of prize-winning entries subject to the agreement of prize winners and data protection rules.