p.p1 and whether or not The Directive has managed

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On May 2005, The Unfair Commercial Practices Directive was approved, having the intention of creating a legislative instrument that would provide a uniform and exhaustive standard for governing Unfair Commercial Practices. The Directive has two main objectives of firstly reducing transaction costs of business’ in the internal market by eliminating differences within national laws that would result in the discouragement of businesses from investigating the full aptitude that has been offered by the single market and secondly improving the confidence of consumers in their cross border transactions with high level of consumer protection. The Directive is of fundamental importance since it is a maximum harmonisation directive and because the Directive takes up a broad approach of general clauses. This essay will critically assess the objectives of the Unfair Commercial Practices Directive and whether or not The Directive has managed to achieve it’s objectives.

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A consumer is a person or organization that uses a commodity or service.The scope of consumer law entails regulations and statutes which seek to create a balance that is impartial for the consumers within the market, hinder sellers from exercising with dishonest strategies and imposing product safety. Understanding the rationales of the regulations are of significance for providing remedies and efficiency within the market. It can be argued that most consumer regulations are based on the belief of having a market that moves properly which would ensure consumers having a wide variety of choices, the ability of allocating resources efficiently and would provide freedom. However this idea of having a free market is based on the notion of ‘optimal market’ which is the perfect model market that does not exist in reality. The optimal market concept also incorporates the belief of every individual consumer having ‘perfect information’ where the buyers and the sellers of the market have exact information on the attributions of a good, of the allocation of resources and of the competing goods and services. There are three fundamental techniques of market regulation which are ‘Rights based and Social Relations’, ‘Market Failure’, and ‘Behavioural Analysis’.

Rights based and Social Relations assumes that there isn’t any sort of regulation in the market however that there is the foundation of common law and statute that sustains the market. Secondly, market failures further legitimise the intervention of the state in the market, as the states believes that the most effective way to protect consumers is through the market and that the only time states should intervene should be when the market is not working efficiently. Monopoly and oligopoly markets operating as well as other externalities such as information failures, inequality of bargaining power and market assumptions could be categorised as some of the examples within Market Failures. Information failures occur when consumers do not have perfect information of a particular product where they do not have information of competing products. This information failure thus leads to misallocation of resources. Further, inequality of bargaining power refers to the producers selling products at a much higher price due to having more power than the consumers, which consequently may lead to monopolies operating within the market as competitors decrease. Lastly, market assumptions of the market failure analysis refers to the assumptions of consumers being rational buyers with unlimited will power and self interest, thus produces the belief of consumers disciplining the market. However, behavioural analysis which is another market regulation has rejected the idea of rational consumers. Behavioural analysis has identified various biases towards products by consumers, such as ‘over optimism’, ‘consumer credit’, ‘framing and status quo bias’, ‘anchoring’, ‘availability’, ‘information overload’, and ‘fairness’. The role of behavioural economics holds a crucial position as a source for policy making within consumer law regulations, since it challenges the position of the consumer having unlimited rationality, will power and self-interest. It is of such importance that the European Commission has recommended it’s application when interpreting the Unfair Commercial Practices Directive.

The Unfair Commercial Practices Directive is a crucial European Consumer regulation due to it’s wide scope which applies to all businesses and to all consumer commercial practices, and because it is a ‘maximum harmonisation’ directive. Generally, a directive only sets out a ‘floor’ level of protection of rules where Member States implement the rules to their national laws, however, a maximum harmonisation directive, sets both the ‘floor’ and the ‘ceiling’ level of protection and Member States are not permitted to go beyond the level of protection provided within the Directive. The wide scope of the directive is contained within the structure that consists of ‘General Clause’ which is the “standard of special skill and care, which a trader may reasonably be expected to exercise towards consumers” , ‘Aggressive Practices’ is of importance when assessing issues the enforcement of contractual rights and depth collections, ‘Misleading Practices’ may be actions or omissions such as the act of providing false information within an advertisement or an omission of not including information, and lastly the ‘Black List’ which is a list of commercial practices that in all circumstances are prohibited. Within the European Commissions Guidance of the Unfair Commercial Practices Directive, it states that when courts are deciding whether there has been a breach of the directive or not, the states should first consider the Black List and whether or not the commercial practice is prohibited within the Black List. Once, a practice is prohibited by the virtue of the Black List, it is the final verdict of the case, however, if it is not, then courts should continue to consider the rest of the practices of the Directive following misleading practices, aggressive practices and finally the general clauses. 

In the determination of the scope of the Directive the case of Magyarország is of significance as it provides insight on the scope of the Directive and even though has a wide range of general clauses, it also portrayed that the Directive takes into account detailed situations. A reference from an Hungarian Court was made in the case of Magyarország which involved an individual that that an inquiry with a television service company on the issue of a particular termination right within their contract where the individual was given certain dates by the company to notify the company of the termination however the given dates were incorrect. The European Court of Justice were referred the question of wether a communication of incorrect information made by a professional towards a consumer would be classified as a misleading commercial practice where only one individual consumer was harmed by the particular action and thus whether it falls within the scope of the Directive. The European Court of Justice held that it was in fact a misleading commercial practice, even if the information concerned only a single consumer. 

The Directive states that a commercial practice would be unfair if it “(a)it contravenes the requirements of professional diligence; and (b) it materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product” The notion of ‘professional diligence’ could be described as the expected standard of special ‘skill and care’ provided by the seller or trader towards the consumer, were the appropriate behaviour of the trader should be ‘honest market practice’ and ‘the general principle of good faith’. However it can be argued that professional diligence, due to its broad definition may be open to interpretation by individuals and may be understood under a different light compared to it’s intention. Furthermore, a significant element to the directive is the “average consumer” benchmark. The case of Gut defined a consumer as being “an average consumer who is reasonably well-informed and reasonably observant and circumspect”. The case of Estée Lauder establishes that an average consumer may be decided based on an ‘overall impression’ and that social, cultural and linguistic factors may leaf to different national understandings of what an average consumer is. Further, the case of Rocher established that an average consumer is not the ‘passive glancer’. It has been an issue of debate when tackling the economic behaviour of the average consumer since some argue that the concept of having an average consumer would only leave the ‘vulnerable’ group of consumers even more unprotected when it comes to unfair and deceptive commercial practices. Thus it could be argued that due to the broad definitions of both professional diligence, average and vulnerable groups, the Directives principles may be open to interpretation and may be unclear to some member states. However, on a different note, the Directive also states that for practices that are not enlisted within the Black List, for a practice to be prohibited by the States, it must materially distort the economic behaviour of the average consumer, and this is dealt on a case-by-case basis. Therefore, it could also be argued that since the Directive does handle issues of prohibition on a case by case basis, with the decisions of present and future cases, the interpretations may decrease the lack of clarity and would provide a more efficient consumer protection practices. 

The case of Purely Creative concerned a series of personalised letters which were sent out to consumers stating that they had won a prize, however in order to receive the prize the winners had to pay a certain amount of money which although was a small amount of payment, the court held that any cost for a prize is prohibited. This case is of importance because it is a clear evidence of the strict interpretation of the courts and that it was held that the provisions contained within the regulations must be interpreted independent of any Member States understanding of any particular concepts. 

Article 4 of the Directive states that “Member States shall neither restrict the freedom to provide services nor restrict the free movement of goods for reasons falling within the field approximated by this Directive.” which in it’s essence states that Member States are prohibited of going beyond the directive . The case of Total Belgium & Galatea is a key example when evaluating the internal market clause. The case concerned a ‘combined offer’ which was prohibited in Belgium Law and the question referred to the European Court of Justice was whether or not the Internal Market Clause had contained within the Directive, prohibited the existence of National Rules that restricted particular types of practices in all conditions, where the practices were no enlisted in the Black List. The Court half that, Member States could not adopt rules that are stricter than those which have been provided within the Directive, even when the aim is to achieve a higher level of consumer protection. The case Mediaprint was an Australian case which concerned the prohibition of sales with bonuses, where the court held that the Australian National Law enforcing a general prohibition on sales with bonuses was incompatible with the Directive thus was prohibited. The case of Köck was another Australian case referred which concerned a prohibition on announcing clearance sales without obtaining prior authorisation. The case involved a trader that has implemented a clearance sale, however, had not gotten an authorisation for the sale which was required by the Australian Law. The Court, took the same approach as in the case of Mediaprint and held that there could not be a complete prohibition on specific types of commercial practices which were not prohibited by the Black List. Furthermore, the case of Plus Warenhandelsgesellschaft  is further evidence of The Directive restraining Member States from adopting certain consumer protection regulations due to the full harmonisation element of the Directive.

The maximum harmonisation provision of the Unfair Commercial Practices Directive requires that the Members States must adapt their national laws in accordance with The Directive and must obstruct any distinction from the requirements that have been set by the Directive. Thus, the execution procedure requires the application of the Directive but additionally requires the alteration of national laws that breach the Directives requirements. It is still a subject of debate of whether or not all Member States have accomplished this. Since the Directive delivers a maximum harmonisation, only the practices that fall under the Black List would be considered as unfair commercial practices under all circumstances and would be prohibited. All other commercial practices would only be considered unfair when they fall within the scope of the General Clauses.

In conclusion, the Unfair Commercial Practices Directive had been proposed in order to create a legislative instrument which would provide a uniform guideline for the governance of Unfair Commercial Practices. The Directive had the objective of creating an environment where the consumer protection was at it’s highest, and the directive is one of importance since it sought to achieve this objective through interpretation and it’s maximum harmonisation element. It should be stated that European Legislations take a great length of time no matter what issue it aims to tackle, since it needs to take into consideration of different social norms, cultures, political stances and national laws. Therefore, the Unfair Commercial Practices Directive could be assessed as a fairly new Directive within the Courts, and some Member States have yet to alter their practices in accordance with the Directive. However it could be argued that the advantages of full harmonisation can be seen in respect with the common rules within the transactions of the European Countries, the assurance of consumers and traders are able to depend on a ‘single regulatory framework based on clearly defined legal concepts’ These examples are proof that the Directive not only protects consumers, but also, encourages a fair competition between international producers, businesses. However, it would not be correct to argue that the Unfair Commercial Practices Directive has achieved its aim of creating a unity between the Member States and it’s maximum protection of consumers with it’s maximum harmonisation element. This could be argued because of the strictness of the Directive and it’s limited scope.