Opinion of the Economic and Social Committee on the "Proposal for a European Parliament and Council Regulation concerning sales promotions in the Internal Market" (COM(2001) 546 final — 2001/0227 (COD))
Date: 2002-05-29
Institutions: European Economic and Social Committee
Subjects: common commercial policy, consumer protection, sales promotion, trade restriction

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Official Journal of the European Communities

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Opinion of the Economic and Social Committee on the ‘Proposal for a European Parliament and
Council Regulation concerning sales promotions in the Internal Market’

(COM(2001) 546 final — 2001/0227 (COD))

(2002/C 221/17)

On 30 January 2002 the Council decided to consult the Economic and Social Committee, under the first
paragraph of Article 95 of the Treaty establishing the European Community, on the above-mentioned
proposal.

The Section for the Internal Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 8 May 2002. The rapporteur was
Mr Dimitriadis.

At its 391st plenary session (meeting of 29 May 2002), the Economic and Social Committee adopted the
following opinion by 64 votes to 18 with 9 abstentions.

1. General comment on the communication and the

proposal for a regulation

1.1.
The Communication from the Commission on sales
promotions in the internal market analyses the problems
arising in this area across Europe, and looks at the relevant
legislative and statutory measures taken since 1996. The initial
legislative steps, together with the findings of expert groups,
have now created the right conditions for launching a substan-
tial debate which will lead to common action in this area.

1.2.
The Commission’s Proposal for a regulation concern-
ing sales promotions in the Internal Market, addressed to the
European Parliament and the Council, is the first meaningful
attempt to fill the legal gap which exists in the regulatory
framework for the efficient cross-border use and commercial
communication of sales promotions in the EU, consistently
reflecting the Lisbon European Council’s strategic goal for
the Union to become the most competitive and dynamic
knowledge-based economy in the world.

1.3.
At the same time, the Commission has published a
Green Paper on European Union consumer protection, the
purpose of which is to launch an extensive public consultation
on the future direction of EU consumer protection in the area
of commercial practices and, more specifically, opportunities
for improving the functioning of the single market in terms of
business-consumer relations (‘B2C’) (1).

1.4.
These two documents represent a determined attempt
(i) to halt the excessive multiplicity of restrictions on sales
promotion methods, which give rise to very serious problems
on the single market, and (ii)
to ensure consumers are
adequately protected against unfair and illegal sales promotion
practices (2).

( 1) Green Paper on

European Union consumer protection

(COM(2001) 531 final).

( 2) EESC Opinion on the Green Paper on European Union consumer
protection — OJ C 125, 27.5.2002, p. 1 (rapporteur: Ms Davison).

It must be recognised that there is a lack of policy coordination
by the Commission, as the Proposal for a Regulation has been
submitted before the end of the debate on the Green Paper
on European Union consumer protection, which addresses
— inter alia — commercial practices.

The proposal regulates most commercial practices, for which
the Green Paper proposes approximation by means of the
‘general fairness clause’.

1.5.
The communication defines sales promotions as the
priority area in the Commission’s commercial communication
policy, laying particular emphasis on their importance as a
fundamental tool for the development of cross-border trade in
goods and services, and represents a generalised attempt to
remove many of the identified internal market barriers to the
use of sales promotions between Member States.
It also
pinpoints those areas requiring harmonisation while specifying
provisions aimed at harmonising and updating existing
national ones, to the appropriate extent, in order to create a
practical, modern and legally certain regulatory environment,
simultaneously offering guarantees for consumer protection,
protection of minors and protection of public health.

The definitions under examination in the text of the
1.6.
draft regulation, together with the general wording and thrust
of the communication and regulation, clearly show that sales
promotions are of specific and transitory duration, involving a
purely temporary offer. The legal basis for the proposal is
Article 95(1) of the EC Treaty, which seeks the establishment
of the single internal market and the assurance of a high level
of consumer protection and public health.

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2.

Introduction

The types of sales promotions examined by the

3.2.
communication and considered to be of significance are:

2.1.
The Commission first engaged with the need for a
policy for commercial communications in its 1996 green
paper (1), putting the policy into place with its communication
in 1998 (2). The Expert Group, comprising experts from the
Member States, was set up in 1998 in order to consider the
barriers and restrictions affecting cross-border communi-
cations and sales promotions in recognised problem areas of
the internal market, focusing on the necessity of Community
action based on a mix of targeted harmonisation and mutual
recognition.

3. General points concerning the communication

3.1.
The need for Community action is based primarily on
the fact that analysis of the Expert Group’s regulatory tables
revealed that:

i.

ii.

the country where it

if a company cannot effectively communicate across the
is established and
borders of
attract customers’ awareness to its products or services
throughout the European market, it loses the benefit of
the internal market, in turn reducing consumer choice;

the impact of divergences in national regulations was far
greater than the Commission had initially estimated, and
a limited set of measures and practices creates multiple
barriers to a wide range of business activities. More
specifically:

a)

b)

a broad spectrum of service businesses is affected in
the way they operate, apart from those directly
involved in designing sales promotions and advertis-
ing, such as the mass media, direct marketing and
public relations agencies, etc.;

a multiplicity of internal market barriers persists,
mostly affecting freedom of establishment, import
and export of services, distortions in competition,
free movement of goods, complexity of regulations
and issues of legal redress. Particular attention is
drawn to the impact of these barriers on SMEs
which, under
system, are dispro-
portionately disadvantaged in sales promotions
terms compared with larger businesses.

the present

( 1) COM(96) 192 final.
( 2) COM(98) 121 final.

i.

ii.

simple price reductions;

quantity discounts;

iii.

coupons and vouchers;

iv.

free gifts;

v.

premiums considered to be offers other than discounts
which are provided to the consumer once the latter has
ordered or bought the promoted product or service;

vi.

promotional contests;

vii. promotional contests/games (with or without obligation

to purchase).

The communication lays down three types of provision

3.3.
which are needed to remove internal market barriers:

i.

harmonisation of certain provisions concerning the use
and communication of sales promotions;

ii.

replacement of certain restrictions;

iii.

application of mutual recognition.

3.4.

Restrictions requiring harmonisation include:

i.

transparency provisions relating to discounts, premiums,
promotional contests and games;

ii.

information requirements for sales below cost;

iii.

protection of children and minors;

iv.

facilitating extra-judicial redress.

Restrictions that the communication proposes replac-

3.5.
ing with less restrictive measures include:

i.

Bans on sales promotions

— Bans on premiums

— Bans on sales below cost

— Bans on making participation in promotional games

subject to purchase

— Bans on the communication of sales promotions

ii.

Limitations on the value of sales promotions

— Limitations on the level of discounts

— Limitations on the value of free gifts

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— Limitations on the value of premiums

— Limitations on the value of prizes in promotional

contests and games of chance

iii.

Limitations on discounts preceding seasonal sales periods

iv.

Prior authorisation for sales promotions or any other
requirement having equivalent effect.

Restrictions requiring the application of mutual recog-
3.6.
nition may be maintained at national level insofar, of course,
as they are not applied in order to restrict sales promotions
from other Member States. They must also be subject to the
principle of mutual recognition.

This concerns restrictions:

i.

resulting from the application of a general clause on good
market behaviour;

ii.

on value limits of sales promotions offered to minors;

iii.

on the use of sales promotions to promote media;

iv.

regarding the use of sales promotions for non-prescribed
pharmaceutical products;

v.

relating to other sectors.

4. General comments

The EESC agrees with the points the communication

4.1.
makes regarding limitations on:

a)

b)

c)

d)

the level of discounts (3.5.ii.1);

the value of premiums (3.5.ii.3);

the value of free gifts (3.5.ii.2);

the value of prizes in promotional contests and games of
chance (3.5.ii.4).

4.3.
The EESC believes that use of the euro will bring
significant changes in consumer behaviour in the eurozone
countries: consumers are now easily able to compare prices
and identify the most advantageous offers. This possibility
must be safeguarded against any non-transparent or misleading
sales promotion methods.

The EESC considers that the communication (a) pro-
4.4.
vides enough elements to form an assessment
takes
adequate account of the experts’ reports and of all the other
necessary factors relating to sales promotion issues in cross-
border trade, and (c) contains careful analysis of data.

(b)

The EESC feels that the communication does not take
local and national sales promotion

4.5.
sufficient account of
practices which have been tried and judged successful.

4.6.
The EESC endorses the need for a regulation on sales
promotions in the internal market, as uniform measures are
required in this area following the introduction of the euro,
provided agreement is reached on the issues under discussion.

The EESC would voice some reservations concerning

4.7.
the distinction made between actions requiring:

i.

harmonisation;

ii.

updating and replacement of existing national provisions;
and

iii. mutual recognition.

4.8.
The EESC feels that examination of the question and
publication of the communication have been late in coming,
and that the communication fails to reflect adequately the
urgency of the difficulties facing SMEs in cross-border commer-
cial communications.

4.2.
In all these areas, the EESC believes that transparency
and accurate information constitute the most effective form of
consumer protection.

The EESC agrees that:

a)

b)

transparency measures must be harmonised in such a
way as to avoid legal uncertainty resulting from reliance
on general or non-detailed terms, and that:

transparency measures must not be open to national
interpretation.

The EESC, aware that a wide range of commercial
4.9.
activities and services provided by SMEs will be affected by the
implementation of the regulation, calls on the Commission
immediately to compile and publish more detailed economic
information on the economic and commercial impact it will
have on cross-border trade.

4.10.
The EESC is doubtful about the effectiveness of the
Member States’ control mechanisms with regard to trans-
parency conditions relating to discounts, premiums, pro-
motional contests and games.

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4.11.
The EESC has serious reservations regarding the
effectiveness of consumer information arrangements for sales
below cost.

5.1.4.
In this area, there must be legislative and supervisory
coordination between the Member States, and transparency in
order to protect consumers and SMEs.

4.12.
The EESC has reservations concerning the definition
of the factors establishing the existence of sales below cost and
the abuse of dominant position at national level.

5.2.

Sales below cost

4.13.
The EESC considers the general thrust of the pro-
visions for the protection of children and minors to be
appropriate but insufficient.

Greater account must be taken of the efforts of large
5.2.1.
wholesalers and retailers to drive SMEs from the market, SMEs
being unable to match such practices.

The EESC is opposed to the adoption of a mechanism
4.14.
based on the principle of mutual recognition for restrictions
which may be maintained at national level provided that they
do not restrict the import of services. There is an urgent need
here to clarify which national
legal provisions might be
affected. Applying this principle must not provoke, in return,
discrimination against companies operating in a Member State
with restrictive regulations on sales promotions.

4.15.
In the EESC’s view, the list of forms of sales promotion
examined by the communication covers a large proportion of
such practices but not all, and cannot include the new forms
which are constantly emerging.

5. Specific recommendations

5.1.

Premiums

5.1.1.
The EESC recognises that premiums are in practice
an important sales promotion instrument, especially for SMEs.

5.1.2.
The EESC does not fully agree with the Commission’s
proposal to remove all bans on price reductions prior to sales
periods for the relevant products. The EESC proposes that
Member States be able to retain measures aimed at ensuring
that announced price reductions during sales periods are
genuine, for example by requiring sellers offering discounts to
display on the article in question the price charged during a
specified period (e.g. one month) preceding the sales period.

5.1.3.
Similarly, in order to prevent consumers from being
deliberately misled by premiums, the following information
should be provided:

5.2.2.
The EESC is in complete disagreement with the
conclusion that small, specialist businesses can use sales below
cost to launch new products or create brand products.

5.2.3.
In the EESC’s view, the statement in the communi-
cation that the objective of sales below cost is to incite
potential customers to try out a retail service at a certain
moment in time is not logical. Since, for each product or
service, an opportunity for substantial discounts or premiums
is provided during a specific period, the reason for such strong
measures is not clear.

5.2.4.
The EESC disagrees completely with the communi-
cation’s assertion that retailers selling below cost always do so
with well-identified, innovative or branded products.

5.2.5.
The EESC disagrees with the communication’s pos-
ition that as long as sales below cost are transparent, any risk
of abuse of a dominant position should be dealt with by
efficient application of competition rules: it is clear that on
account of their size and financial resources, SMEs are unable
to have recourse to law or the competent bodies in order
to ensure that the competition rules are applied to larger
companies.

6. Specific comments on the explanatory memorandum

and the proposal for a regulation

6.1.
Provided its comments on sales below cost [points 5.2-
6.4-7.2.a)] are accepted, the EESC agrees with a regulation on
sales promotions in the internal market on account of the
need to:

— initial shop price;

i.

establish uniform rules on very targeted issues;

— price of premium.

ii.

ensure price transparency and strengthen legal security;

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iii.

iv.

respond to the urgency for uniform rules as a result of
the introduction of the euro;

secure consistency with the Commission’s new approach
to better regulation.

— situated between producers and final consumers — pursue
this promotion policy, but only ever for selected goods in
specific branches. Although they account for only a small part
of all products, the impression is created that all goods of the
particular branch are equally low-priced, leading to confusion
for the average consumer.

In case the Commission does not accept the above mentioned
comments, the Committee suggests that a directive be adopted
instead of a regulation.

6.2. Article 1 — Objective

6.2.1.
lation.

The EESC endorses the objective of the draft regu-

6.2.1.1.
Comment 1: the EESC agrees with the object of the
draft regulation, provided that all the necessary measures are
taken to protect consumers, minors, and SMEs which are
competing in a difficult European environment, lacking both
up-to-date knowledge and capital.

6.3. Article 2 — Definitions

6.3.1.
The Committee believes that the definitions should
be redrafted to distinguish between business to business
communications and those between business and consumers.
In particular, one-to-one communications from one business
to another single business should be expressly excluded.

6.4. Article 3 — The use and commercial communication of sales

promotions

6.4.1.
The EESC agrees with the prohibition of general
restrictions on the use or communication of any one or
combination of types of sales promotions, but completely
rejects the provision allowing, for the first time, sales below
cost: it considers that this would be particularly damaging to
SMEs, who are unable to apply such practices because of their
size and financial resources.

Comment 1: the EESC urges the Commission to
6.4.1.1.
entirely remove any possibility of sales below cost
from
Article 3. The EESC would point out that sales below cost are
already used — both legally and illegally — in a number of
Member States by large retailers and wholesalers, the result
being to drive SMEs off the market. The practice has already
had a visible impact in many EU countries, particularly in the
more remote areas, where thousands of small — primarily
family-run — businesses have either gone under or contracted,
unable to sustain sales below cost. Retail chains in particular

6.4.1.2.
Comment 2: the EESC would point out that sales
below cost are prejudicial not only to commercial SMEs, but
also to non-brand agricultural, craft and industrial producers,
since large chains can bring huge pressure to bear on producers
to make them agree to such sales.

6.4.1.3.
The Committee regrets that, with regard to adver-
tising and promotions that may affect public health, approval
of the Proposal for a Regulation may reduce the level of
consumer protection and create inconsistencies in Community
legislation. There must be a clear and unequivocal ban on
promoting tobacco products and prescription medicines.

6.5. General information to be provided

6.5.1.
Comment 1: the EESC considers Article 4 to be
particularly important for consumer protection, since con-
sumers can only make appropriate choices when full and
reliable information is available.

6.5.2.
In the view of the Committee the requirement to give
an ‘indication of a sale below cost’ should be deleted. Such
information serves no consumer protection function and could
be misleading. Furthermore, it would be extremely difficult to
determine when it applied in many cases and such a require-
ment would place an unjustified burden on suppliers particu-
larly prejudicing small and medium enterprises.

6.6.

Protection of children and adolescents

Comment 1:

6.6.1.
the EESC agrees entirely with the
measures taken to protect children and adolescents which are
set out in detail in Article 5 of the draft regulation.

6.6.2.
Comment 2: the EESC considers the protection of
personal data to be an issue of the greatest importance,
especially since the new technologies, and new electronic sales
promotion techniques, now entail the use of such information.
More specifically, the EESC calls for minors to be completely
and absolutely protected from the collection of such data.

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6.6.3.
Comment 3: the EESC considers that Article 5(2)
should be expanded to include gifts or premiums that could
be damaging to their psychological, as well as physical, health.
This might include, for example, gifts containing immoral
material, or premiums intended to exert a psychological
influence.

Any participation by a child in a promotional game
6.6.3.1.
or contest must be subject to the prior consent of the child’s
legal guardian.

6.6.4.
Comment 4: the EESC views Article 5(3), completely
prohibiting the use of alcoholic drinks for individuals under
the age of 18, as necessary. The EESC also urges the Council
to monitor regularly the impact of its recommendation on the
drinking of alcohol by children and adolescents (1) and to
progress rapidly to more binding legislative initiatives.

6.7. Redress

6.7.1.
Comment 1: the EESC is in full agreement with the
experts on the lack of affordable judicial redress providing
adequate,
legal protection for consumers. The EESC
therefore advocates the introduction of non-judicial forms of
redress, with which consumer organisations, professional
associations and chambers of commerce might be associated.

full

6.7.2.
Comment 2: the EESC agrees with the obligation for
promoters to bear the burden of proof, since they have all the
requisite information at their disposal. However, this obligation
in particular for
should not become an excessive burden,
SMEs.

6.7.3.
Comment 3: A promoter shall at the request of a
court or administrative authority, provide evidence as to the
accuracy of the information in respect of sales promotion
referred to in Article 4, up to six months after the end of the
commercial communication.

7. Recommendations

7.1.
The EESC recommends that the Commission com-
pletely revise the Proposal for a Regulation in line with this
Opinion and, in particular, the results of the public debate on
the Green Paper on consumer protection, while safeguarding
the consistency of the various Community policies.

( 1) COM(2000) 736.

Brussels, 29 May 2002.

However, if the Commission decides to proceed with

7.2.
its legislative proposal, the EESC recommends that:

a)

b)

c)

d)

e)

f)

g)

the possibility of sales below cost be entirely removed
from the draft regulation, and that no other opportunity
for such sales exist;

rigorous and specific measures be taken to protect
consumers by banning the commercial promotion of
pharmaceutical products and tobacco products. With
regard to adolescents and minors, protection measures
must be taken to prevent an increase in the consumption
of alcoholic beverages;

children be comprehensively shielded against collection
without consent of personal data;

the present communication mark the outset of regular
supervision of these issues and of the presence of a
permanent means of
intervention when required by
changing internal market conditions;

every effort be made to ensure that SMEs, which have the
means and prospects, understand they must be present
on the European and international market, using sales
promotions and new technologies to this end;

the Commission give careful consideration in its future
activities to legislative coordination and the availability of
effective supervisory machinery in the Member States,
which will guarantee that fair competition rules apply in
the internal market;

the fundamental information obligations set out in the
annex be codified and incorporated into the regulation.
A distinction must also be made in the way information
is to be provided between retail sales mostly made in
commercial establishments, and those through other
channels (such as television, e-commerce, etc.);

h)

the provisions of the directive apply to sales promotions
by both private businesses and those broadly defined as
belonging to the public sector.

The President

of the Economic and Social Committee

Göke FRERICHS

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APPENDIX

to the Opinion of the Economic and Social Committee

The following amendments, which received at least one quarter of the votes cast, were rejected during the discussions:

Point 5.2

Replace by the following.

‘The EESC regards the proposed obligation to supply information regarding sales below cost as unnecessary and
inappropriate. There are no grounds for the authorities to interfere in a company’s pricing or to require it to indicate
to competitors and customers how prices are calculated. In cases where ’sales below costs’ are a reflection of a
company abusing its dominant position, the situation should be dealt with under competition law.’

Reason

Rules which place a general ban on ‘sales below cost’ are inappropriate for many different reasons, e.g.:

— As a principle it is unacceptable in a market economy for authorities to be able to interfere in a firm’s pricing.
In cases where ‘sales below cost’ are a reflection of a firm abusing its dominant position through price cutting,
this should be tackled through competition law.

— To prevent firms from adjusting their pricing to the market situation and introducing themselves and new
products on markets through ‘promotional offers’ both hinders the consumer from making an advantageous
purchase and restricts the capacity of firms — perhaps particularly small firms — to establish themselves on
markets.

— Where markets are not just small local markets, it can be hard to implement rules banning prices below cost in
a reasonable manner since a firm’s cost price for supplying a product may vary significantly — due to major
differences in purchase and transport costs etc. — from one market area to another. A retailer operating on
several national markets who wishes, in connection with a marketing campaign, to apply a uniform extra price
(in euro) can be prevented from doing so because the lowest price cut necessary to make any impact on one
part of the market — e.g. in Belgium — can mean that the price is below the firm’s cost price for the product
in southern Germany. A provision banning sales under cost could therefore run counter to the key aim of the
Commission’s proposal on sales promotions, viz. to reduce fragmentation on the single market.

Result of the vote

For: 31, against: 53, abstentions: 7.

The following Section opinion texts were rejected in favour of amendments adopted by the assembly:

Point 6.2.1

‘The EESC endorses the requirements and objective the draft regulation sets out to meet, i.e. to ensure the proper
functioning of the internal market by eliminating restrictions on the free provision of services and guaranteeing the
freedom of establishment.’

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Result of the vote

For: 39, against: 40, abstentions: 6.

Point 6.6.2

‘Comment 2: the EESC disagrees with the blanket obligation for promoters to bear the burden of proof, since this
category often includes SMEs which do not have the financial ability to conduct protracted legal disputes or to
provide the mandatory information set out in the annex. More specifically, it should be left up to judges to decide
who should bear the burden of proof, in line with the relevant circumstances.’

Result of the vote

For: 27, against: 48, abstentions: 8.

Opinion of the Economic and Social Committee on the ‘Proposal for a Council Directive on the
short-term residence permit issued to victims of action to facilitate illegal immigration or
trafficking in human beings who cooperate with the competent authorities’

(COM(2002) 71 final — 2002/0043 (CNS))

(2002/C 221/18)

On 20 February 2002 the Council decided to consult the Economic and Social Committee, under
Article 262 of the Treaty establishing the European Community, on the above-mentioned proposal.

The Section for Employment, Social Affairs and Citizenship, which was responsible for preparing the
Committee’s work on the subject, adopted its opinion on 13 May 2002. The rapporteur was Mr Pariza
Castan˜ os.

At its 391st plenary session of 29 and 30 May 2002 (meeting of 29 May), the Economic and Social
Committee adopted the following opinion by 44 votes to two with no abstentions.

1. Summary of the proposal for a directive

1.1.
The aim of the draft directive is to step up the fight
against illegal immigration and trafficking in human beings
through cooperation with its victims. They are to be granted a
special
they cooperate in combating
these activities. Cooperation may take the form of providing
information, lodging a complaint, or giving evidence in a trial.

residence permit

if

1.3.
The draft directive considers victims of trafficking in
human beings to be those so defined in the UN Protocol
on trafficking, basically meaning the women and children
concerned. It deems the victims of action to facilitate illegal
immigration to be persons who have suffered harm, such as
having their lives endangered or being physically injured.

1.4.
Once the authorities have come into contact with
victims, they are to inform them of the possibility of obtaining
the residence permit, and grant a 30-day reflection period in
which they can decide on whether to cooperate. During this
period, they will receive assistance and care.

The residence permit granted to such persons will be
1.2.
valid for six months, and may be renewed if the conditions
under which it was initially granted continue.

The directive makes no provision for victim or witness
1.5.
protection, since this is already governed by European or
national legislation.