UNFAIR COMMERCIAL
PRACTICE
Marko Baretić
Faculty of Law
University of Zagreb
DEVELOPMENT
Directive 84/450/EEC on misleading
advertising
 Directive 97/55/EC amending
Directive 84/450/EEC to include
comparative advertising
 Directive 2005/29/EC (unfair
commercial practice)
 Directive 2006/114/EC on misleading
and comparative advertising
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MAIN CHARASTRISTICS
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Innovative rules
• CONCEPTUALY, IN TERMS OF CONTENT,
TERMINOLOGY AND STILE – EXTREMELY
COMPLEX REGULATION
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State imposed rules – part of a legal
system
Horizontal rules
Public law rules – market regulation
Rules with preventive function
General rules
INNOVATIVE CONCEPT
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New concept of regulation aiming at
creating:
• an overall regulation
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Horizontal rules
• an all-European autonomous regulation
which departs from well-established national
concepts of unfair practices regulation
 autonomous terminology
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• Inescapable and “future-proof”
regulation
STATE IMPOSED RULES
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Regulation of unfair commercial practices:
• Voluntary
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Industry level
Commercial community level
• Mandatory
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National level
Supranational level
Directive 2005/29/EEC is aimed at
creating mandatory public law rules (state
imposed rules), at the European level
• These rules are without prejudice to voluntary
rules (deontological codes of conduct) of
regulated professions
HORIZONTAL RULES
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Rules of the Directive 2005/29/EC apply
to:
every product
every service
every commercial sector
every industry sector
every type of practice
every type of communication
every mode of trading
PREVENTIVE RULES
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Rules aimed at preventing traders from
using unfair commercial practices
Irrelevant whether the practice have
caused any harm to any consumer or
whether it actually caused any consumer
to take wrong transactional decision
• The possibility to ban even the practice which
is likely to materially distort economic
behaviour of consumers
GENERAL RULES

Rules embodied in the Directive
2005/29/EEC should apply only if
there are no specific community
rules on unfair commercial practice
• In the case of conflict between the
provisions of this Directive and other
Community rules regarding specific
aspects of unfair commercial practices,
the latter shall prevail and apply to
those specific aspects. (Art. 3/4)
AUTONOMOUS EUROPEAN
REGULATION
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New type of regulation which should by applied and
interpreted autonomously, without recourse to national
legislation, national concepts, national tradition
To that purpose
• autonomous terminology
 Consumer, trader, product
 B2C commercial practices
 “to materially distort the economic behaviour of
consumers”
 Professional diligence
 Invitation to purchase
 Undue influence
 Transactional decision
 Average consumer
• Autonomous concept of unfairness of commercial
practices
DEFINITION OF UNFAIR
COMMERCIAL PRACTICE
Autonomous definition
 Inescapable and “future-proof”
definition
 Conceptually complex definition
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• Three levels of definition
GENERAL
 GENERIC
 SPECIFIC (CASUISTIC)
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DEFINITION – GENERAL LEVEL
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A commercial practice is unfair if:
• It is contrary to the requirements of
professional diligence
• It materially distorts or is likely to materially
distort the economic behaviour with regard to
the product of the average consumer whom it
reaches or to whom it is addressed, or of the
average member of the group when a
commercial practice is directed to a particular
group of consumers
DEFINITION – GENERAL LEVEL
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Four elements of the general level of
the definition
• Commercial practice
• Practice contrary to the requirements of
professional diligence
• Material distortion of the economic
behaviour of consumer
• An average consumer
DEFINITION – GENERAL LEVEL
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Commercial practice
Any act, omission, course of conduct or
representation, commercial communication
including advertising and marketing, by a
trader, directly connected with the
promotion, sale or supply of a product to a
consumers
DEFINITION – GENERAL LEVEL
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Practice contrary to the requirements of
professional diligence
Professional diligence – the standard of
special skill and care which a trader may
reasonably be expected to exercise towards
consumers, commensurate with honest
market practice and/or general principle of
good faith in the trader’s field of activity
DEFINITION – GENERAL LEVEL
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Material distortion of the economic behaviour of
consumer
To materially distort the economic behaviour of
consumers’ means using a commercial practice to
appreciably impair the consumer’s ability to make an
informed decision, thereby causing the consumer to
take a transactional decision that he would not have
taken otherwise
Transactional decision means any decision taken by a
consumer concerning whether, how and on what
terms to purchase, make payment in whole or in part
for, retain or dispose of a product or to exercise a
contractual right in relation to the product, whether
the consumer decides to act or to refrain from acting
DEFINITION – GENERAL LEVEL
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Material distortion of the economic
behaviour of consumer
• This rule is without prejudice to the common
and legitimate advertising practice of making
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exaggerated statements
• Gillette – the best for the men
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or statements which are not meant to be taken
literally
• Red Bull – gives you the wings
DEFINITION – GENERAL LEVEL
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The concept of average consumer
• Abstract concept
• Objective evaluation
 To be evaluated in accordance with the
interpretations of the ECJ
A consumer who is reasonably well-informed and
reasonably observant and circumspect, taking into
account social, cultural and linguistic factors (18 of
the Preamble)
• To be determined with regard
 The consumers whom the practice reaches
 The consumers to whom the practice is addressed
 The consumers who are average member of the
group to which the practice is directed
DEFINITION – GENERIC LEVEL
Formed on the basis of past
experience with unfair practices
 Two types of unfair practices
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• Misleading commercial practices
• Aggressive commercial practices
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Ill-adapted to changes of commercial
practice
DEFINITION – GENERIC LEVEL
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Misleading commercial practice
• Misleading actions
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If it contains false information and is therefore
untruthful or in any other way deceives or is likely to
deceive the average consumer, even if the
information is factually correct
• Misleading omissions
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If it omits material information that the average
consumer needs, which makes him to take
transactional decision that he would not have taken
otherwise
• Account shall be taken of all features of practice and
circumstances including the limitations of the
communication medium
DEFINITION – GENERIC LEVEL
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Aggressive commercial practices
• If it by harassment, coercion and undue influence it
significantly impairs or is likely to significantly impair the
average consumer’s freedom of choice or conduct with regard
to the product and thereby causes him or is likely to cause him
to take a transactional decision he would not have taken
otherwise
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Use of harassment, coercion and undue influence in
practice – shall be determined taking into account:
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timing, location, nature and persistence
the use of threatening or abusive language or behaviour
the exploitation by the trader of any specific misfortune
onerous or disproportionate non-contractual barriers imposed
by the trader where a consumer wishes to exercise rights
under the contract
• any threat to take any action that cannot legally be taken
DEFINITION – SPECIFIC LEVEL
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Black list of
Misleading commercial practices
• Claiming to be a signatory of conduct when the trader is not
• Claiming that the trader is about to cease trading or move
premises when he is not
• Falsely claiming that a product is able to cure illnesses,
dysfunction or malformations
• …
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Aggressive commercial practices
• Creating the impression that the consumer cannot leave the
premises until a contract is formed
• Conducting personal visits to the consumer’s home ignoring
the consumer’s request to leave
• Explicitly informing a consumer that if he does not buy the
product or service, the trader’s job or livelihood will be in
jeopardy
• …
PROHIBITION OF UNFAIR
COMMERCIAL PRACTICE
Unfair commercial practices shall be
prohibited
 Enforcement
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• Collective protection of consumers
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civil or administrative proceedings
• Penalties for infringements
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must be effective, proportionate and
dissuasive