Proposal for a EUROPEAN PARLIAMENT AND COUNCIL REGULATION concerning sales promotions in the Internal Market

(Presented by the Commission)

EXPLANATORY MEMORANDUM

1. Choice of a legal instrument

The Community instrument proposed takes the form of a Regulation, which is the most appropriate instrument to:

Establish uniform rules on very targeted issues

The specificity of this proposal is that it is based on intensive preparatory work with Member States and interested parties that was undertaken by the Commission over a period of three years. This has allowed the Commission to identify very precisely the types of provisions which need to be harmonised at Community level as well as their required content, The preparatory work has revealed the need to tackle in a very targeted manner a small number of issues. The analysis shows that the Internal Market objective, for a broad scope of economic activities directly and indirectly related to sales promotions, can be achieved by relatively few precise, unconditional and uniform Community requirements that ensure a high level of protection of the relevant public interest objectives rather than a framework directive establishing general rules. Therefore, the instrument of a Regulation is appropriate for these types of requirements.

Ensure price transparency and strengthen legal security

The specificity of sales promotions is that they are directly linked to price transparency. For the Internal Market to operate it is essential that there be full price transparency allowing for the best offers to be searched for and benefited from by both companies and their customers. Since sales promotions are directly linked to prices and play a key role in the market signalling process, it is essential, if price transparency is to be guaranteed, that they be presented according to uniform rules otherwise there is a risk that market signalling will become less transparent. A Regulation responds to the need for directly applicable, very precise and unconditional Community provisions, the scope of which is exactly the same throughout the European Union. This ensures a level playing field between companies and provides for legal certainty for companies, especially SMEs, and customers.

Respond to the urgency for uniform rules on the eve of the introduction of the EURO

The imminence of the introduction of the Euro will have two specific effects. On the one hand, it will increase the use of sales promotions given that the immediate facility to compare prices will incite customers to look for advantageous offers and consequently promoters will seek to attract their attention by resorting increasingly to the use of sales promotions. On the other hand, however, the increased price transparency brought by the Euro could be countered by the use of non-transparent sales promotions, which are misleading and deprive customers of informed choices.

For these two reasons it is essential that the rules of the game become as rapidly as possible uniform across the Community. Transposition delays and the flexibility associated with a directive would therefore unnecessarily delay the benefits in terms of price transparency arising from the introduction of the Euro.

Finally, the need for fast-track action is further enhanced by the e-commerce directive which is due to be transposed into national law by the end of January 2002. The Council specifically called for additional harmonisation in the field of commercial communications to be brought forward in order to prevent any discrimination between on-line and off-line trading. This again underlines the urgency for a common set of rules in this area.

Secure consistency with the Community's new approach to better regulation

The choice of a Regulation is consistent with the criteria on which such a decision should be based as set out in the Protocol to the Amsterdam Treaty concerning the application of the principles of subsidiarity and proportionality. The Commission considers that it is not appropriate to propose a framework directive in this field given that the Communication of 1998 already established the relevant policy framework. The proposed Regulation does not deal with new policy areas but is rather a concrete application of the Commercial Communications policy adopted in 1998 which has been the basis of work with the Member States over the past three years. The extensive preparatory work has allowed for a very precise identification of the scope and the proposed solutions and a Regulation based on this work avoids a burdensome and lengthy implementation process in the fifteen Member States. The Protocol specifies that the nature and extent of Community action should leave as much scope for national decision as possible, with the clear caveat that this should be consistent with securing the aim of the measure and observing the requirements of the Treaty. In this respect, it should be noted that:

- On the one hand, the aim of the instrument which is to provide as rapidly as possible legal security and a level playing field for companies and customers can best be achieved by directly applicable uniform rules established in a Regulation.

- On the other hand, the proposed Regulation limits itself to a very narrow, precisely targeted set of requirements and provides, in other areas, for mutual recognition. As a result, it leaves in those areas sufficient scope for national decision in line with the spirit of the Protocol.

2. Article by Article description

Article 1 - Objective

This Article presents the objective which 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.

Article 2 - Definitions

All of the following definitions are based on the outcome of the intensive work of the Member States' Expert Group during the twelve meetings held on the cross-border regulation of sales promotions.

Subparagraph (a) "commercial communication"

The definition is based on the definition used in Directive 2000/31 on certain legal aspects on electronic commerce. This is also consistent with the Commission's policy in this area set out in its Communication entitled "The follow-up to the Green Paper on commercial communications in the Internal Market".

Subparagraph (c) "promoter "

The "promoter " [1] is the natural or legal person on whose behalf a sales promotion is used [2] or communicated. The promoter is most typically a manufacturer, service provider or a retailer offering goods or services.

[1] The term "promoter" is applied in the ICC codes on advertising.

[2] The notion of "use" and "users" was established in COM (1998) 121 final.

Subparagraph (d) "customer "

Any individual that takes up the offer of a sales promotion constitutes a customer. Customers include the following:

- natural or legal persons; and

- in the case of a legal person, all forms of companies and organisations involved in an economic activity.

Subparagraph (e-i) "discount"; "free gift"; "premium"; "promotional contest" and "promotional game"

A sales promotion consists of a temporary offer. This explains why this Regulation obliges "promoters " of sales promotions to indicate the duration of the sales promotion in the associated commercial communication.

Even where the sales promotion consists of a "free" gift or a premium, it is understood that there could be minor additional cost for the person receiving the free gift or premium, such as post and packaging. Any cost associated with the sales promotion must be specified and provided in its associated commercial communication.

Promotional games are distinct from games whose main purpose is to derive money from gambling activities. Such gambling activities are excluded from the scope of this Regulation.

Subparagraph (j ) "child"

There are a number of different definitions of child in Community law. For example Directives 96/5/EC, 91/321/EEC and 73/148/EEC. In this proposed regulation a child has been defined as an individual under the age of 14. This age limit is that adopted in the ICC/ESOMAR International code of marketing and social research practice.

Subparagraph (k) - "alcoholic beverages"

This definition of alcoholic beverages is consistent with that set out in detail in Directive 92/83/EEC.

Subparagraph (m) - "Non-public regulatory body"

This covers, in view of the jurisprudence of the Court, an organisation or association not governed by public law, exercising its legal autonomy to regulate in a collective manner economic activities. It would include for example, self-regulatory bodies, organisations representing and providing codes for the liberal professions etc.

Subparagraph (n) "sale below cost"

This definition is based on existing national definitions and is also consistent with jurisprudence of the Court in the field of competition rules (predatory pricing). A sales below cost is defined as a sale where the price at which the product or service is sold is lower than the net invoice price at which that retailer or wholesaler purchased the product or service from the relevant supplier. The net invoice price is the unit price on the invoice from the supplier or the wholesaler to the promoter including carriage, insurance or other costs and value added tax. The invoice and other costs used for the calculation should be dated the same day of the sales promotion or its commercial communication. Where no such invoice exists, the net invoice price should be based on the most recent invoice supplied to that promoter for such goods or services that are subject to the sales promotion.

Article 3- The use and communication of sales promotions

These provisions apply not only to Member States but also to « any associations or organisations enacting rules aimed at regulating the provision of services in a collective manner », according to the ECJ's wording used for the first time in the Walrave case [3]. This covers, for example, self-regulatory bodies.

[3] Judgment of the Court of 12 December 1974, Walrave, Case 36-74, European Court reports 1974 page 1405. See also Judgment of the Court of 6 June 2000, Angonese, Case C-281/98, European Court reports 2000 page I-4139

Paragraph 1 - Removal of certain restrictions

As explained in section 4.2 of the Communication above a set of national restrictions are prohibited by this paragraph. More specifically, general bans on the use or communication of any one or combination of types of sales promotions are prohibited. Sectoral bans or limits, for example, the special French provisions on premiums relating to live animals and the Belgian requirement that during a "three for the price of two" offer the consumer should be able to buy the same product separately at the full price, are not covered by this provision but are made subject to mutual recognition under paragraph 2 of this article. No general value restrictions can be imposed on sales promotions with the exception of books. An exception is made for books in view of book pricing regulations that impose restrictions on discounts of such products. These will therefore, as provided for by paragraph 2 of this same article, be made subject to mutual recognition. The provision requires that sales below cost must be allowed. Bans on sales promotions (notably discounts) prior to seasonal sales are prohibited, as are pre-authorisation and other related schemes for the use or communication of sales promotions. As explained in the Communication, these prohibitions are required in order to ensure not only free movement in respect of the import of services but also the freedom of establishment and the free movement of exported services, as well as in order to eliminate significant distortions of competition in the Internal Market. They are therefore replaced with uniform detailed transparency rules and targeted bans at Community level. Bans on certain forms of premiums and free gifts which result from non-sectoral provisions such as those that require the premium offer or free gift to be closely associated with the promoted good or service will therefore be prohibited.

Paragraph 2. Application of the principle of mutual recognition

This paragraph imposes the principle of mutual recognition on the application of remaining national restrictions relating to sales promotions which are not covered by paragraph one of this same article. As explained above, the preparatory work, in particular the three years of discussions in the Expert Group, has allowed the Commission to identify precisely a number of national restrictions which may affect a wide variety of services. Therefore this provision has as its objective the prevention of restrictions relating to the use and communication of sales promotions on incoming services from other Member States that are incompatible with Article 49 of the Treaty. The free movement of goods benefiting of the use of sales promotions will be ensured. It applies to all services that have been identified as being affected by such restrictions. In addition to sales promotion design and advertising agency services it also concerns media services, media planning and sales services, direct marketing operations, retail services and customer relations services. It prohibits all forms of restrictions on such services coming from other Member States on the grounds of the use of sales promotions and references to them in commercial communications i.e. any actions on the part of a Member State liable to hamper or otherwise make the provision or communication of such sales promotions less attractive. However, this covers only restrictions on sales promotions as such. It does not concern, for example, general restrictions on advertising for certain products or services, general media restrictions on advertising to certain consumers (e.g. children) or restrictions on certain claims (e.g. health and ethical claims). Such restrictions which, do not relate to sales promotions as such, continue to apply in so far as they are compatible with Community law.

Article 4 - General information to be provided

The transparency rules set out in Annex 1 to the proposed Regulation seek to protect both consumers and companies, in particular small companies, by ensuring that the sales promotion is presented in such a manner that an informed decision can be made as to whether or not the relevant sales promotion makes it worthwhile to purchase the promoted product or service.

The obligation for meeting these transparency conditions is imposed on the "promoter " who is normally distinct from the medium carrying the sales promotion. Depending on the type of promotion used, the promoter must apply all the provisions relating to its commercial communications and must also apply all the relevant information requirements to be made available on request. This removes any ambiguity as to liability for the use and communication of sales promotions and will thus facilitate redress. These Community-wide provisions represent a major value-added to the existing level of protection of consumers and against unfair trading in the Union.

The transparency requirements are harmonised in a detailed manner so that there is no risk of legal uncertainty resulting from reliance on general transparency terms that could be subject to differing national interpretations. The requirements can be divided into:

1. information to be provided in the commercial communication of a sales promotion (including on a promotional coupon or voucher); and

2. information to be made available to customers on request unconditional on purchase of the promoted product or service. These information requirements ensure that the consumer is not forced to buy a product or service in order to be able to have access to the conditions applying to the relevant sales promotion. The promoter must make these available as soon as the relevant sales promotion is launched.

Article 5 - Protection of children and adolescents

Paragraph 1 - protection against data collection.

Certain sales promotions, in particular promotional contests and games but also discounts in the form of coupons or vouchers, are used to collect and process personal data. This provision seeks to reduce the exploitation of the inexperience or credulity of children to incite them to release personal data.

Paragraph 2 - distribution of free gifts and premiums.

This provision is seeking to ensure that sales promotions that are sent directly to households or distributed outside of a point of sale are such that the gift or premium cannot harm an unattended child. It will not apply to households where children are known not to reside. To minimise the risk of harming children, the promoter must make sure that a good that is sent as a part of a sales promotion to a household or given to an unattended child does not pose any danger for a child's physical health. The promoter should in particular take into account:

- the characteristics of the product, including its composition, in view of Directive 92/59/EEC on general product safety; and

- packaging, i.e. "child proof" packaging possibilities.

Paragraph 3 - free gifts consisting of alcoholic beverages.

A number of Member States allow individuals under the age of 18 [4] to purchase alcoholic beverages for their personal use and this provision will not impose any ban relating to purchase. However, there is no doubt that excessive consumption by minors will have negative implications for public health. Moreover, for reasons of public health, it is recognised that consumption of alcohol by minors is not to be incited. A free gift of an alcoholic beverage would both incite a minor to consume such a product and could encourage excessive consumption. A free gift is usually offered on a local level at the point of sale, restaurants or clubs, but many promotional campaigns are designed centrally by multi-national brands and then executed and communicated via various cross-border services making them subject to Community law.

[4] Under Art 21 of the Austrian Civil Code, majority is fixed at the age of 19 years. Using the lower age of 18 instead of 19 will not lead to a decreased level of consumer protection in the area of interest for the current proposal (a ban on the free gifts of alcohol to minors). This is because relevant legislation in the field of youth protection in Austria is subject to Federal states (Bundesländer) legislation and allows minors over the age of 16 to purchase alcoholic beverages for their own consumption.

A number of Community initiatives already seek to prevent abuse or excessive use of alcoholic beverages such as: Article 15 in the Television without frontiers Directive (89/552/EEC) that states that advertising for alcoholic beverage may not be aimed specifically at minors or, in particular, depict minors consuming these beverages and the recently adopted Council recommendation "Drinking of alcohol by children and adolescents" according to which promoters should not be allowed to offer promotions that are appealing to young people. One example mentioned in the recommendation is that free distribution of alcoholic drinks for promotional purposes should be prevented. Since the current proposal harmonises only specific provisions relating to sales promotions, it does not include horizontal provisions on the advertising of alcoholic beverages.

Article 6 - Redress

Although good progress has been made in the field of self-regulation to establish cross-border extra-judicial complaint systems for commercial communications [5], all the Expert Group members recognised the lack of affordable cross-border judicial redress. Given the call to strengthen redress provisions in general, a number of redress provisions are needed to improve consumer protection and enhance consumer trust in the Internal Market. In this manner enforcement efficiency will be improved and the development of alternative dispute resolution schemes will be further encouraged. These provisions will minimise the costs and difficulties that consumers may face when seeking redress against an illegal or untruthful sales promotion and facilitate their possibilities for triggering legal action when this proves necessary. Precise and uniform harmonisation, implemented at the same time and in exactly the same way across the Member States will help ensure that non-domestic consumers benefit from exactly the same level of protection as domestic ones throughout the European Union.

[5] In particular national advertising self-regulatory bodies have worked together to deal with such complaints through the Brussels based European Advertising Standards Alliance. This is the only area to date where such a cross-border complaint system has been established in the field of self-regulation and it should be seen as a pilot for future development in self-regulation at the European level.

Paragraph 1 - burden of proof

This regulation places the burden of proof as to the accuracy of the information provided on the "promoters". They must be able to, on request from a national court or an administrative body, provide evidence that their sales promotions are compatible with the information requirements required by article 4 of this proposed regulation.

Paragraphs 2-3 - contact details, free telephone advice services and obligations concerning the handling of complaints

The promoter must provide an address to which any complaints relating to the sales promotion can be addressed. This should be made available free of charge i.e. at the point of sale, on the promoted product or in the commercial communication announcing the sales promotion.

When a promoter provides a free telephone advice service that is associated with a specific sales promotion the proposal imposes that this should be both operational and not subject to premium rates tariffs. This is to avoid the situation where help-lines are announced to suggest to the consumer that the sales promotion is of a high quality when in fact such help-lines are either not manned or are simply used as a means to gain additional revenue.

Initial complaints made by a consumer in writing, including by electronic means (e.g. e-mail), will have to be responded to in a specified delay of not more than six weeks in written form. The promoter must initially respond in the language that the consumer was solicited in within the relevant commercial communication. This ensures that in the event of a problem where the consumer wishes to take action against a promoter, he will always have written proof to trigger such action in the form of his complaint and a lack of a written reply.

Paragraph 4 - communication of subscription to codes and alternative dispute resolution schemes

This ensures that if a "promoter" wishes to communicate the fact that he subscribes to an out of court redress system or code of conduct that he will be obliged to make available, free of charge, information on the relevant system or code. This provision ensures that such communications are backed by commitment on the part of the promoter to apply the relevant provisions found in such systems and codes.

2001/0227 (COD)

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 [6],

[6] OJ C [ ], [ ], p. [ ].

Having regard to the opinion of the Economic and Social Committee [7],

[7] OJ C [ ], [ ], p. [ ].

Having regard to the opinion of the Committee of the Regions [8],

[8] 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.

(2) The use and communication of sales promotions are key 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.

(4) The use and communication of sales promotions within the Community is hampered by numerous identified legal obstacles [9] 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) [9] Green paper on "Commercial communications in the Internal Market": COM(96) 192 final. 18.05.96.

(6) 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 of the Treaty relating to free movement, of secondary Community law, and in accordance with the Commission's policy on commercial communications [10], 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.

(7) [10] "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.

(8) 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.

(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) 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 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.

(11) This Regulation complements 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 [11], Council Directive 89/552/EEC concerning the pursuit of television broadcasting activities [12]Council Directive 92/59/EEC on general product safety [13], 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 [14], 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 [15] 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 [16], Directive 98/27/EC of the European Parliament and of the Council on injunctions for the protection of consumers' interests [17], Council Directive 92/28/EEC on the advertising of medicinal products [18], Directive 1999/44/EC of the European Parliament and of the Council on certain aspects of the sale of consumer goods and associated guarantees [19], Council Recommendation "Drinking of alcohol by children and adolescents [20] and Directive 2000/31/EC of the European Parliament and of the Council on electronic commerce [21].

(12) [11] 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).

(13) [12] OJ L 298, 17.10.1989, p.23. Directive as amended by Directive 97/36/EC (OJ L 202, 30.7.1997, p. 60).

(14) [13] OJ L 228, 11.8.1992, p.24.

(15) [14] OJ L 281, 23.11.1995, p.31.

(16) [15] OJ L 24, 30.1.1998, p.1.

(17) [16] OJ L 80, 18.3.1998, p.27.

(18) [17] OJ L 166, 11.6.1998, p.51. Directive as amended by Directive 2000/31/EC (OJ L 178, 17.2.2000, p.1).

(19) [18] OJ L 113, 30.4.1992,.p.13.

(20) [19] OJ L 171, 7.7.1999, p.12.

(21) [20] COM (2000) 736 final.

(22) [21] OJ L 178, 17.7.2000, p.1.

(23) 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.

(24) 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;

(25) 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.

(26) Without verifiable prior consent this Regulation, in order to protect the physical health of children and consistent with Directive 92/59/EEC, prohibits promoters of free gifts or premiums from dispatching promotional products to children unless the promoters ensure that the products dispatched are not of a nature, in view of their intrinsic qualities or their packaging (notably through reliance on child-proof packaging), that they could harm a child's physical health.

(27) 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.

Commercial communications of sales promotions for tobacco products and restrictions thereon are addressed in the proposed Directive on advertising and sponsorship of tobacco products. [22](29) [22] COM (2001) 283 final

(30) 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.

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.

Article 2

Definitions

For the purposes of this Regulation:

(a) 'commercial communication': any form of communication designed to promote, directly or indirectly, the goods, services or image of a company, organisation or person 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 person, in particular a domain name or an electronic-mail address; and

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

(b) 'sales promotion': a discount, a free gift, a premium or an opportunity to participate in a promotional contest or game;

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

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

(e) 'discount': 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': the temporary offer to provide free of charge a good or service independently of an obligation to purchase a good or service of an identical type;

(g) 'premium': 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': 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': 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 may be subject to a prior obligation to purchase. 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': a person under the age of 14 years;

(k) 'alcoholic beverages': 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': a prohibition that is not specific to a particular type of promoted good or service.

(m) 'Non-public regulatory body": 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': a discount consisting of a sale of a product or service below the 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 books;

- 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;

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 prior consent from that child's legal guardian.

2. A promoter is prohibited from providing directly to a child a free gift or a premium if it is of a nature that could harm its physical health.

3. A promoter is prohibited from providing a free gift consisting of 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 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 six 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. A promoter shall:

- indicate in the commercial communication relating to the sales promotion any out of court dispute settlement system or code of conduct that he/she subscribes to ; and

- make available upon request information concerning any such dispute settlement system or code of conduct.

Article 7

Revision clause

Before the end of [...], the Commission shall submit to the European Parliament and the Council a comprehensive report on the application of the Regulation, accompanied, if appropriate, with a proposal for its revision.

Article 8

This Regulation shall enter into force on the [ ] day following that of its publication in the Official Journal of the European Communities.

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:

- an indication of the discount, free gift, premium, promotional contest or promotional game;

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

- the promoter's identity;

- the duration of the offer including the start and end date; and

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

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

- the name and geographic address of the promoter; and

- the terms and conditions relevant to the sales promotion.

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; and

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

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

- the cash value of the coupon or voucher;

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

- the goods or services against which the coupon or voucher may be redeemed.

2.4. Information to be made available on request of a manufacturer or a service provider from whom goods or services have been purchased:

- information of a sale below cost in conformity with prior contractual agreements.

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 value and nature of the prize;

- the closing date for receipt of entries;

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

- any requirements for proof of purchase;

- 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, the actual or estimated odds of winning the prize.

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;

- whether a cash alternative can be substituted for any prize;

- 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.