Brussels, 16.11.2004

COM(2004)753 final

2003/0134(COD)

COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT pursuant to the second subparagraph of Article 251 (2) of the EC Treaty concerning the

common position of the Council on the adoption of a Directive of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the Internal Market and amending Regulation [Consumer Protection Co-operation] and directives 84/450/EEC, 97/7/EC, 98/27/EC and 2002/65/EC (the Unfair Commercial Practices Directive)

2003/0134(COD)

COMMUNICATION FROM THE COMMISSIONTO THE EUROPEAN PARLIAMENTpursuant to the second subparagraph of Article 251 (2) of the EC Treatyconcerning the

common position of the Council on the adoption of a Directive of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the Internal Market and amending Regulation ... [Consumer Protection Co-operation] and directives 84/450/EEC, 97/7/EC, 98/27/EC and 2002/65/EC (the Unfair Commercial Practices Directive)

1- BACKGROUND

+++++ TABLE +++++

2- OBJECTIVE OF THE COMMISSION PROPOSAL

This Proposal addresses barriers to the functioning of the internal market for retail goods and services arising from fragmented national regulation and the consequent costs and uncertainties for businesses, and from variable consumer protection standards which undermine consumer confidence.

It does so by establishing a common, EU-wide framework for the regulation of unfair business-to-consumer commercial practices (notably advertising and marketing) which harm consumers' economic interests. The centrepiece of this framework is a general prohibition of unfair commercial practices, based on common criteria for determining when a commercial practice is unfair. For extra legal certainty, this is supplemented by further elaboration of two key types of unfairness, misleading and aggressive practices, and a blacklist of practices which will always be unfair and are therefore prohibited up-front.

3- COMMENTS ON THE COMMON POSITION

General comments

The Commission supports the Council's common position. It is line with the aims and approach taken in the Commission's original proposal and endorsed by the Parliament in first reading.

Amendments incorporated in the Common Position

The common position reflects the spirit of all or part of 51 of the 58 amendments which were acceptable to the Commission in full, in part or with changes, and 3 amendments which the Commission had originally indicated it was unable to accept.

Legal base

The common position includes a reference to Articles 153(1) and 3(a) in the recitals which reflects the Commission's position on Amendment 112 that it could accept an indication of the priority attached to consumer protection but that Article 95 alone is the right legal base.

Consumer benchmark

The common position retains the average consumer benchmark proposed by the Commission and supported by the Parliament as the default' benchmark against which the impact of potentially unfair commercial practices will be assessed. The drafting has been amended so that there is no longer a definition of the average consumer in the text, following concerns that this would prevent the concept from evolving in line with ECJ jurisprudence. The Commission is satisfied that the retention of the average consumer in the text and the clear link to the ECJ jurisprudence in recital 18 have the same effect as Amendment 107.

The common position also makes specific provision for the protection of vulnerable consumers in Article 5.3 and recital 19. This reflects the concern expressed in a number of Parliament amendments (Amendments 8, 13, 106 and 111 which were acceptable in full or in part to the Commission and Amendment 110 which was not) that the articulation between protection of the average consumer and of vulnerable consumers should be more explicit. The Commission can support these changes because they do not require an assessment of each individual's circumstances, which would be unworkable. They do ensure that vulnerable consumers can be protected when they are particularly at risk while safeguarding legitimate advertising practices, such as statements which are not meant to be taken literally.

Professional diligence

The common position adjusts the concept of professional diligence to incorporate the concept of good faith (thus addressing Amendment 108 and 29) and referring to the standard of skill and care that a trader may reasonably be expected to exercise, in line with Amendment 21.

Economic behaviour

The common position includes a definition of transactional decision' to clarify what is included within a consideration of the consumer's economic behaviour'. In the Commission's view this responds to the aim of Amendments 34, 39 and 45 which include a focus on consumers' economic behaviour'.

Codes

The common position deletes the references to European level codes in line with Amendments 19 and 103. It also clarifies, in recital 20, that consumer associations could be informed and involved in the drafting of codes, as sought by Amendments 10, 61 and 104 and deletes the reference to professional diligence here in line with Amendment 9. The definition of code' has also been adjusted to reflect the change sought by Amendment 17. Article 6.2(b) distinguishes firm from aspirational code commitments, as sought by Amendment 24, and the second indent has been revised to reflect Amendment 40. Amendments 65 and 67 sought to ensure that code owners would not be held liable for non-compliance with the code by those who are bound by it[1]. This has been addressed in the common position by clarifying that action may be taken against code owners where the code itself promotes non-compliance with legal requirements.

Choice of law

The Commission's proposal had included a provision specifying that the law of the country where the trader was established would always be the applicable law (i.e. a choice of law rule). The Parliament's Amendment 26 had proposed excluding the rules which determine the law applicable to non-contractual obligations from this provision. The Commission had indicated that this Amendment was not acceptable because it could have the effect of making traders subject to the public law requirements of one country and, simultaneously, under the laws governing international private law, the law of another member state. In the common position, the choice of law rule was deleted in part because of most Member States' concern that in cross-border disputes consumers could be disadvantaged if the law of the trader were applied. The Commission does not share these concerns because of the full harmonisation and the high level of consumer protection achieved in the proposal. However, the Commission does not consider it essential to insist on this point in this particular case given the considerable simplification arising from the full harmonisation and the consequent internal market benefits. The Commission also considers that deletion of the choice of law rule is a better solution than that proposed in Amendment 26. For these reasons the Commission can agree to the deletion of the choice of law rule from this proposal. In line with normal practice, the applicable law in cross-border disputes will therefore be determined by the courts.

Temporary derogation

The common position includes in Article 3 a temporary derogation for national laws based on the minimum clauses in existing directives, which reflects that proposed in Amendment 109. It also includes a clause calling for a review of the application of the directive after four years, reflecting Amendment 69. The Commission is prepared to accept this derogation on the basis that it is limited and temporary, to enable Member States to manage the transition from minimum to full harmonisation.

Annex 1

The Common Position incorporates the clarification of the status of the Annex sought by the Parliament in Amendments 7 and 33 through changes to Article 5.5 and a new recital 12a. Although the common position does not specify that Annex 1 can only be amended through the co-decision procedure, this remains the case and no alternative procedure is specified.

Other

Amendments 1, 5, 6, 23, 25 (first part), 47 (second part), 68, 99 (second part), 71, 73, 84, 85, 87, 91, and 92 have been incorporated verbatim or with minor drafting changes. The Commission is prepared to accept Amendment 91, which it had originally indicated it could not accept, in the light of concern from both the Parliament and the Council about abuses arising from demands to return unsolicited products.

The content of Amendment 105 is reflected in new text in recital 6 which clarifies the relationship with national rules governing aspects of unfair competition which are outside the scope of the directive, in line with the Commission's intention.

Amendment 14 is partially reflected in the definition of Article 2(b) which the common position amends to clarify that anyone acting in the name of or on behalf of a trader is captured. The Commission can support this clarification.

Amendment 27 has been captured through the introduction of points 3.8 to 3.10 which deal with authorisation schemes and areas requiring specific provision.

Amendment 28 has been addressed through a fuller explanation of the scope of the Directive in recital 9.

Article 6.1(f) of the Commission's proposal was deleted in the common position, with the Commission's agreement, because of confusion about the implications for the burden of proof. This deletion deals with the concern underlying Amendment 37.

Article 7 has been amended to take appropriate account of the physical limitations of the communication medium used for the commercial practice, reflecting Amendments 43, 44 and 45. The Commission can accept this solution although it did not originally support Amendment 43 because there is no requirement included for consumers to specifically ask for information.

The criterion in Article 9(c) has been tightened to refer to the "exploitation" of grave misfortune, to address the concern underlying Amendment 59.

In Annex 1, the drafting of point 12 of the list of misleading practices in the Commission's proposal has been re-worked to avoid the problem created by the phrase "liquidation sale" which Amendment 76 sought to address. Point 4 of the list of aggressive practices has been deleted, which addresses the concern about legitimate sales to bereaved or seriously ill consumers raised in Amendment 88. Point 6 of that list has also been revised to ensure that it covers an appeal to any adult to buy a product for a child, not just the parent, in line with Amendment 90.

In the light of the significant degree of alignment between those of Parliament's amendments acceptable to the Commission and the common position, the Commission was prepared to accept a compromise which did not include a small number of amendments which it could have accepted at least in part (Amendments 2, 4, 60, 62, 72, 80, 89).

New provisions introduced in the Council's common position

No significant new areas have been introduced in the common position. It includes minor adjustments to the criteria for misleading actions in Article 6 and several new examples in Annex 1, all of which are coherent with the criteria set out in the substantive provisions in the body of the directive (i.e. they are unfair in accordance with the tests established in the directive).

Some clarifications of the scope have been included in the recitals (eg recitals 8, 15 and 21) and technical changes have been made to Articles 14 to reflect changes elsewhere in the directive, in Article 15 to ensure consistent treatment of the two directives dealing with distance selling[2], and in Article 16 to reflect the adoption of the regulation on consumer protection co-operation[3].

4. CONCLUSION

The Commission welcomes the common position which in its view will achieve the objectives of the Commission's original proposal and which retains the approach to achieving those aims which the Parliament had endorsed in its first reading of the Commission's proposal.

5. COMMISSION DECLARATIONS

The Commission made a declaration which was attached to the minutes of the Council and is also attached in Annex to this communication.

ANNEX: COMMISSION DECLARATION

The Commission can only agree to the deletion of article 4.1 of its proposal on the understanding that the present directive provides for a full harmonisation of the domain covered by the directive and that for this reason article 4.1 is not legally required to ensure the proper functioning of the internal market in this field. The practical implementation of this directive will be actively monitored by the Commission so as to achieve its uniform application.

[1] Amendment 64 contained the same text as Amendment 65 but with a different justification which was not acceptable to the Commission. The change sought by Amendment 64 has been incorporated in including Amendment 65.

[2] Directive 97/7/EC concerning the protection of consumers in respect of distance contracts and Directive 2002/65/EC concerning distance marketing of consumer financial services.

[3] COM(2003)443 final, 2003/0162(COD).