In 2005, the European Union issued the Directive on unfair business-to-consumer commercial practices in the internal market. This directive contains rules to achieve so-called maximum harmonization. This means that member states may not include laxer or stricter rules on unfair commercial practices in their national law, making the legislation on this issue identical in every EU member state. Furthermore, it is important to remember that the directive covers unfair commercial practices by a company towards consumers. An unfair commercial practice by one company towards another falls outside the scope of the directive, and therefore outside the scope of this blog.
The directive defines a commercial practice as unfair if it is contrary to the requirements of professional diligence and materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product. Examples of unfair commercial practices from the directive include:
Claiming the trader has signed a code of conduct when he has not;
Claiming or otherwise giving the impression that a product can be legally sold when it cannot;
Applying a confidence, quality or other similar label without having obtained the required European law authorization.
The European directive has been worked out in the Dutch Civil Code 6 (BW). The law provides a major general standard and minor general standards, namely misleading commercial practices and aggressive commercial practices. Furthermore, black lists can be found in the BW. When a commercial practice is on these black lists, it is unfair in all circumstances.
A commercial practice is considered unfair under the BW when a trader acts (a) contrary to the requirements of professional diligence, and (b) the average consumer's ability to make an informed decision is noticeably impaired or may be impaired, as a result of which the average consumer makes or may make a decision about a contract that he would not otherwise have made. This is the general standard. It can be invoked when a particular commercial practice is not specifically mentioned in the blacklists. In terms of the burden of proof, the black lists are the most convenient, as these commercial practices are considered unfair under all circumstances. In addition, a commercial practice is unfair if a trader engages in a misleading commercial practice or an aggressive commercial practice.
Misleading commercial practices
A commercial practice is misleading if information is provided which is factually inaccurate or which deceives or is likely to deceive the average consumer, whether by the general presentation of the information or not, as in the cases listed in this article. The black list lists cases in which a commercial practice should be considered misleading and thus unfair under all circumstances.
Aggressive commercial practices
The BW provides that a commercial practice in its factual context, taking into account all its characteristics and circumstances, is aggressive if, by harassment, coercion, including the use of physical force, or undue influence, the average consumer's freedom of choice or conduct with regard to the product is significantly impaired or is likely to be significantly impaired, thereby causing the average consumer to take or be likely to take a decision on a contract that he would not otherwise have taken. A commercial practice is in any case aggressive if it is blacklisted.
The distinction between aggressive and misleading commercial practices does not affect the sanctions associated with them, but serves more as a qualification for the different types of unfair commercial practices that may occur.
Penalties for unfair commercial practices
The conduct of unfair commercial practices has both private law and administrative law sanctions. Private law sanctions involve that the trader has acted unlawfully and is therefore liable for the damages incurred by the consumer. Moreover, the contract is voidable.
Administrative sanctions are imposed by the Consumer and Market Authority (ACM). The ACM can impose an order under penalty and an administrative fine. The maximum amount of a fine is € 900.000,-.
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Should you have any questions about unfair trade practices or consumer law in general? Please feel free to contact one of our lawyers.