Unfair commercial practices

SUMMARY OF:

Directive 2005/29/EC concerning unfair business-to-consumer commercial practices

WHAT IS THE AIM OF THE DIRECTIVE?

Directive 2005/29/EC:
- defines the unfair business-to-consumer commercial practices that are prohibited in the European Union (EU);
- applies to any act or omission directly related to the promotion, sale or supply of a product* by a trader to consumers* protecting the economic interests of consumers before, during and after a commercial transaction has taken place;
- ensures the same level of protection to all consumers irrespective of the place of purchase or sale in the EU.
Directive (EU) 2019/2161 amends Directive 2005/29/EC as regards the better enforcement and modernisation of EU consumer protection rules, addressing new developments on the market, in particular online marketing.

KEY POINTS

Unfair commercial practices are those which:
- are contrary to the requirements of professional diligence*; and
- are likely to materially distort the purchasing behaviour of the average consumer.
Certain consumers enjoy a higher level of protection due to their particular vulnerability to the practice or the product, their age (children or the elderly), their naivety or their mental or physical infirmity.
Directive 2005/29/EC distinguishes two categories of commercial practice that are unfair if they cause the average consumer to make a purchasing decision that they would not have taken otherwise: misleading commercial practices (by action or omission) and aggressive commercial practices.
Furthermore, Annex I to Directive 2005/29/EC contains a list of practices that are prohibited in all circumstances (a ‘blacklist’).

Misleading commercial practices

Misleading actions

A practice is misleading if it contains false or untrue information or is likely to deceive the average consumer, even though the information may be correct, and cause them to make a purchasing decision they would not have taken otherwise. Examples of such actions include false or deceptive information regarding:

the existence or nature of the product;
the main characteristics of the product (its availability, benefits, risks, composition, geographical origin, results to be expected from its use, etc.);
the extent of the trader’s commitments (in codes of conduct by which the trader has agreed to be bound);
the price or the existence of a specific price advantage;
the need for service or repair.

Amending Directive (EU) 2019/2161 introduces a specific rule addressing the misleading marketing of goods as being identical when in reality their composition is significantly different in different Member States (this is often referred to as the ‘dual quality’ of goods).

Misleading omissions

A practice is also misleading if material information needed by the average consumer to take an informed purchasing decision is omitted or provided in an unclear, unintelligible, ambiguous or untimely manner and is likely to cause them to take a purchasing decision that they would not have taken otherwise.
Directive 2005/29/EC provides a general list of information that should be regarded as material, such as the price and main characteristics of the product. Amending Directive (EU) 2019/2161 includes additional requirements for online sales, such as obligations for online marketplaces* to inform consumers about the main criteria determining the ranking* of the offers provided in response to a search query, and the obligation to inform whether and how the authenticity of consumer reviews is checked.

Aggressive commercial practices

Purchasing decisions must be made freely by the consumer. A practice is aggressive and unfair if by harassment, coercion or undue influence* it significantly impairs the average consumer’s freedom of choice and causes them to take a purchasing decision they would not have taken otherwise .
Several elements must be taken into consideration in order to determine whether a commercial practice is aggressive or not. These include:
- the nature, location and duration of the practice;
- the possible use of threatening or abusive language or behaviour;
- the exploitation by the trader of any specific circumstance of such seriousness (e.g. a death or a serious illness) as to impair the consumer’s judgment in order to influence their decision with regard to the product;
- any disproportionate, non-contractual condition imposed on the consumer wishing to exercise their contractual rights (such as terminating or changing a contract).
Annex I to Directive 2005/29/EC contains a list of 35 commercial practices that are considered unfair in all circumstances.

Practices prohibited in all circumstances (‘blacklist’)

Directive 2005/29/EC contains a list of commercial practices that are prohibited in all circumstances. Amending Directive (EU) 2019/2161 has added to the list several additional practices prohibiting the publication of fake consumer reviews, hidden advertising in search results and the resale of tickets that the trader has acquired using automated means (known as bots).

Redress and penalties

Amending Directive (EU) 2019/2161 adds a requirement for Member States to ensure that consumers have the right to individual remedies (e.g. compensation, a price reduction, etc.) when they are harmed by unfair commercial practices.
EU Member States must introduce effective, proportionate and dissuasive penalties to punish traders who break national rules on unfair commercial practices.
Amending Directive (EU) 2019/2161 introduces criteria to be applied when imposing penalties. It requires Member States to provide for fines of at least 4% of the trader’s turnover or €2 million when information about the turnover is not available in cases where national authorities of several countries are working together on major cross-border infringements affecting consumers in several Member States.

Guidance document

In 2021, the European Commission issued updated guidance on the implementation and application of Directive 2005/29/EC. It explains key concepts and rules and gives practical examples taken from the case-law of the Court of Justice of the European Union and from national courts and administrations to make enforcement easier for national authorities and to ensure greater legal certainty for traders. The guidance covers the amendments introduced by Directive (EU) 2019/2161.

FROM WHEN DOES THE DIRECTIVE APPLY?

Directive 2005/29/EC had to become law in the Member States by 12 June 2007. Member States had to apply the rules of the directive by 12 December 2007.
Amending Directive (EU) 2019/2161 had to become law in the Member States by 28 November 2021. Member States must apply the rules of the directive from 28 May 2022.

BACKGROUND

For further information, see:

Unfair commercial practices directive (European Commission)
Factsheet – New Deal: What benefits will I get as a consumer? (European Commission).

KEY TERMS

Product. Any good or service, including immovable property, digital services and digital content.

Consumer. An individual who, in the commercial practices covered by Directive 2005/29/EC, is acting for purposes outside of their trade, business, craft or profession.

Professional diligence. The standard of special skill and care that a trader may reasonably be expected to exercise towards consumers corresponding to honest market practice and/or the general principle of good faith in the trader’s field of activity.

Online marketplace. A service using software – including a website, part of a website or an application – operated by or on behalf of a trader, which allows consumers to conclude distance contracts with other traders or consumers.

Ranking. The relative prominence given to products, as presented, organised or communicated by the trader, irrespective of the technological means used for such presentation, organisation or communication.

Undue influence. Exploiting a position of power in relation to the consumer so as to apply pressure, even without using or threatening to use physical force, in a way which significantly limits the consumer’s ability to make an informed decision.

MAIN DOCUMENT

Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘unfair commercial practices directive’) (OJ L 149, 11.6.2005, pp. 22–39).

Successive amendments to Directive 2005/29/EC have been incorporated into the original text. This consolidated version is of documentary value only.