EUROPEAN UNFAIR COMMERCIAL PRACTICE DIRECTIVE 2005/29/EC
Though by no means the first relevant piece of legislation in time, a useful starting point in the consideration of the legislative evolution in this area is the EU directive on unfair commercial practices from 2005. The Directive was the culmination of longstanding concerns that there was a need on a pan European basis to boost the confidence of consumers whilst simultaneously making it easier for businesses to trade on a cross border basis. The emphasis was particularly upon the effects of the EU open market upon small and medium sized businesses together with their ability to trade across borders.
The intention behind this and other EU directives which address unfair commercial practices is best summed up by considering them as an attempt to enable a panoply of national enforcement agencies to limit a very wide range of unfair business and trading practices. Whilst it is right to say that different countries have differing problems in terms of these issues, a series of common points were identified as crossing national boundaries; the provision of untruthful information to consumers and aggressive marketing techniques designed to influence the choices of consumers.
DIRECTIVE (EU) 2019/2161 AND THE NEW DEAL FOR CONSUMERS
The original directive from 2005 was transposed into national laws by the member states and in England and Wales became the Consumer Protection from Unfair Trading Regulations 2008, a piece of legislation with which the putative practitioner in this area will need to become familiar with. However, in terms of the evolution toward CPUT, the 2019 directive came into being on 27th November 2019 addressing better enforcement procedures and a general modernization of the EU’s consumer protection rules. This was all encompassed in what became the EU’s New Deal for Consumers initiative.1
So as to properly understand the way that the legislation has evolved, it is worth digressing briefly to look at this because it explains the fundamental policy approach adopted by the EU which has gone on to inform the formation of domestic legislation in this area.
This initiative was unashamedly aimed at strengthening the enforcement procedures of the bodies tasked with the monitoring and enforcement of consumer law across the EU. There was consensus that the risk of EU wide infringements was a growing one and that in order to combat this it was necessary to modernize the pre-existing EU consumer protection rules. To that end, the Commission adopted this initiative on 11th April 2018.2 In the communication which was issued by the European Commission to the European Parliament, the Commission tellingly begun by stating that the aim was to “build a fair Single Market for consumers and businesses.”3 It is clear from the text of that document that the Commission prided itself on the argument that the EU had the strictest rules on consumer protection in the world at that point and deemed that the rights which had been put in place for consumers at that time gave both predictability and confidence to consumers in their dealings with businesses.
Expressly, the Commission acknowledge that the new and evolving marketplace brought about new challenges and that these challenges required an enhancement of enforcement policies and structures. There can be no doubting upon reading that Communication that the EC gave a centrality to the interests of consumers, perceived or otherwise, in its initiatives.4 The document goes on to signpost negotiations taking place then between the European Parliament, the Council and the Commission in relation to digital contracts proposals which was a central element of the Digital Single Market strategy which aimed to modernize consumer contract rules for the supply of digital content and the for the sale of goods. It stated in clear term that the proposals were so important to the ensuring consumers were provided with a clear and effective rights when accessing digital content and ensuring that both consumers and businesses could rely upon uniform and effective rules, that it was necessary for the measures to be adopted rapidly and on a cross border basis.
Self-congratulatory in tone though aspects of the Communication were – and perhaps at odds with the then experience of many seeking redress before national courts for allegations of alleged or real consumer protection issues – the EU recognized that there were very real policy challenges before it at that time. There had been large scale abusive practices such as ‘Dieselgate; in which car manufacturers had installed technology in cars to apparently cheat emissions tests and the widespread use by banks of unfair contract terms in mortgage contracts.5
Broadly, the New Deal for Consumers legislative proposals encompassed five directives; the Unfair Commercial Practices Directive, the Unfair Contract Terms Directive, the Injunctions Directive, the Consumer Rights Directive and the Price Indication Directive.
As we have already seen, the Unfair Commercial Practices Directive from 2005 aimed to boost consumer confidence and ease the making of cross border transactions and trade but equally providing for the enforcement of rules to curb a broad range of unfair practices. That Directive was amended following presentation by the Commission in May 2016 of an updated version of the 2009 Guidance document.
THE UNFAIR CONTRACT TERMS DIRECTIVE 6
This directive is aimed at the protection of consumers in situations where unfair standard contract terms are imposed upon them by traders. It applied to all kinds of contacts in relation to the purchase of goods and services and has an application to online as well as off-line purchases of consumer goods and financial services. Loans are covered by this directive. As will by now be apparent, in line with the lifespan of practically all European Directives and the initiatives which underpin them, this directive has undergone amendment. In this case it has been amended by Directive (EU) 2019/2161 on 27th November 2019 which, once again addresses the better enforcement and modernization of the consumer protection rules hitherto in operation across the EU as part of the New Deal for Consumers.
Importantly, the obligation for Member states to provide for effective penalties for infringements is stipulated in the amendment, it was not in its predecessor. The current timeframes for the transposing of this provision into national law is 28 November 2021 and it must be applied from 28th May 2022.
Standard contract terms within the purview of this directive are those which facilitate commercial transactions and it is argued that they can be useful in the setting down of rights and commensurate obligations of the parties involved in the formulation of a given contract. Expressly, the commentary to the directive makes reference in relation to standard contract terms to the notion that the seller and suppliers in any such arrangement enjoy a considerable advantage over consumers by defining contractual terms in advance and of course without individual negotiation.7
There is a stipulation that standard contractual terms must be drafted in language deemed to be plain and intelligible with ambiguities within the language to be interpreted in favour of the consumer. Any terms which are unfair are deemed not to be binding upon consumers and this is rooted in the argument that if the terms are contrary to the requirements of good faith, causative of a significant imbalance in the parties’ rights and obligations which are to the detriment of the consumer, that must be axiomatically the right manner of interpretation.
It is not difficult to see how there could be myriad examples of terms which are outside of the ambit of fairness and balance but the Annex to the Directive attempts to provide a non-definitive list of such example terms.
In relation to European founded legislation, this stage perhaps provides a stepping off point to the framing of English legislation in this area. It is important to note that as we depart the European Union, many of the central aspects of the European legislation in this are already implemented within English law and for all practical purposes, as the UK departs from the European Union – with or without an agreement on trade – it is hard so see how there will be much divergence from either the principle or the realities of legislation in this area.
What may change is the evolution of domestic legislation but whilst that is conjecture for the future, the established direction of travel on consumer related legislation is somewhat entrenched now and it is hard to see how there could or would be much by way of substantial departure from that. Irrelevant of that, whatever the future holds, we can see that the development of the European Directives lead to the foundation of the English law which we will now move on to chart.
2 This took the form of two proposals for Directive and a Communication, COM(2018) 183 and COM(2018) 184. The proposed amendment to Directive 2009/22/EC came in COM (2018) 185
4 These took the form at that time of the Digital Single Market strategy which brought about legislation to end mobile phone and data roaming charges, a ban of geoblocking of internet content which prevented consumer access to products and services from a website based in another Member State and cross border portability of online content services from 1st April 2018.
5 The second issue here in relation to mortgages was addressed by Directive 2014/17/EU on credit agreements for consumers relating to immovable property and this amended Directives 2008/48/EC and 2013/36/EU. Regulation (EU) No 1093/2010 is applicable to mortgage contracts concluded as from 21st March 2016. Amongst other things this requires lenders to provide clear and detailed information on loan conditions to consumers and it provides the consumer with the right to repay credit and an earlier point than was determined by the contract.
7 See the discourse on the website of the European Commission about this issue at https://ec.europa.eu/info/law/law-topic/consumers/consumer-contract-law/unfair-contract-terms-directive_en