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EU Consumer Rights Directive and the Distance Selling Directive
Including an analysis of the directive in the light of Secondary Ticket Market in
the live performance sector
1. Directive on Consumer Rights – new proposal for the legislation
Draft available from: http://ec.europa.eu/consumers/rights/docs/Directive_final_EN.pdf
Treaty Basis - Article 38
The principle of consumer protection corresponds to the fundamental political objective: ensuring a
high level of consumer protection.
It includes the political commitment of the Member States, as set out in the article of the Treaty to
ensure a high level of consumer protection. The pursuance of this objective must be integrated into the
EU's policies. In accordance with the provisions of the Treaty, the implementation of consumer
protection is also ensured via the recognition of the protection of other rights: protection of health and
safety, the right to information and education and the right of association for the protection of a
person's interests.
The Aim of the proposal for the Directive on Consumer Rights
The proposal was adapted on October 8, 2008 by the European Commission and aims at ensuring a high
level of consumer protection and establishing the real retail internal market, making it easier and less
costly for traders to sell cross border and providing consumers with a larger choice and competitive
prices. The Consumer Rights Directive merges four existing EU consumer directives in one set of rules. At
the same time it updates and modernises existing consumer rights, bringing them in line with
technological change and strengthening provisions in the key areas where consumers have experienced
problems in recent years – particularly in sales negotiated away from business premises (e.g. door to
door selling).
Recent Developments
In the end of 2009 the Commission has conducted the Eurobarometer qualitative study on sales
remedies. The study provides analysis of consumers' behaviour and preferences in relation to different
sales remedies i.e. repair, replacement, reduction of price and contract rescission. Report of the study
The draft Directive is being considered by the European Parliament’s Committee on the Internal Market
and Consumer Protection; the Rapporteur is Andreas Schwab. As at the date of this note the Committee
had yet to report. The European Parliament will discuss the Committee’s report in Plenary Session on 22
November 2010 (indicative date).
The Committee of the Regions published an Opinion on 22 April 2009.
The Economic and Social Committee published an Opinion on 16 July 2009.
The Council of Ministers published two discussion papers on the draft Directive on 13 May 2009 (Council
doc 9833/2009) and on 29 May 2009 (Council Doc 10516/2009 ) The Council also published a progress
report on 25 May 2009 (Council doc 10163/2009).
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Further discussion took place in the Competitiveness Council on 3- 4 December 2009 as summarised in
the draft minutes (Council Doc 17038/2009).
Members of the European Parliament are expected to make their views on the proposed Directive by
the end of 2010.
In January 2010, the new EU Justice commissioner Viviane Reding said that she will push ahead with the
proposal of consumer rights Directive, stressing that the Commission supports a maximum level of
harmonisation of consumer rights across the EU. This regime will give businesses the certainty they need
to sell products anywhere in the EU.
More broadly, Ms Reding also floated the possibility of a “28th regime for contracts” (it is an alternative
method for harmonising national laws and allowing better lawmaking at Community level), which she
suggested could exist in parallel with national contract laws and offer standard terms and conditions.
History of the proposal
The Proposal is the result of a bottom-up approach to policy making. The Proposal is part of the Review
of the Consumer Acquis Communautaire. It has been subject to an impact assessment and extensive
public consultations. In the course of the impact assessment process, the Commission consulted
business and consumer stakeholders.
The main findings of the Impact Assessment confirm the need for a legislative action at EU level:
 The existing consumer protection directives are based on minimum harmonisation. This means
that Member States can go beyond the degree of protection granted to consumers in EC law by
introducing or maintaining stricter national consumer rules.
 Regulatory fragmentation is one of the main obstacles to cross-border trade identified by the
traders. The additional cost of complying with different national laws regulating consumer
transactions – which is in the scope of the current review of the EU Consumer Acquis – is
considered as an important barrier for traders.
 The need for the Proposal also stems from the inconsistencies generated by the sector specific
approach to the consumer regulatory framework. The Commission believes that the
fragmentation is creating internal market problems.
The proposed Directive would repeal four existing Directives and replace them with one new Consumer
Rights Directive. The four soon-to-be repealed Directives are:
Directive 85/577/EEC on contracts negotiated away from business premises,
Directive 93/13/EEC on unfair terms in consumer contracts,
Directive 97/7/EC on distance contracts, and
Directive 1999/44/EC on consumer sales and guarantees.
All four Directives currently set minimum rights and standards for the protection of consumers.
The European Court of Justice cases to be codified in the new Directive Proposal are the following ones:
Travel Vac SL v Manuel José Antelm Sanchis. Directive 85/577/EEC - Scope - Time-share contracts - Right
of renunciation. Case C-423/97. Judgement given 22 April 1999
Pannon GSM Zrt. v Erzsébet Sustikné Győrfi. Directive 93/13/EEC - Unfair terms in consumer contracts Legal effects of an unfair term - Power of and obligation on the national court to examine of its own
motion the unfairness of a term conferring jurisdiction - Criteria for assessment. Case C-243/08.
Judgement given 4 June 2009.
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easyCar (UK) Ltd v Office of Fair Trading. - Protection of consumers in respect of distance contracts Directive 97/7/EC - Contracts for the provision of transport services - Meaning - Contracts for car hire.
Case C-336/03. Judgement given 10 March 2005.
Quelle AG v Bundesverband der Verbraucherzentralen und Verbraucherverbände. -Consumer protection
- Directive 1999/44/EC - Sale of consumer goods and associated guarantees - Right of the seller, where
goods not in conformity are replaced, to require the consumer to pay compensation for the use of those
goods - No charge for the use of the goods not in conformity. Case C-404/06. Judgement given 17 April
2008.
Details to look at for the performing arts sector regarding second ticket market:
The main concern for the sector in the light of secondary ticket market is Article 7 in the proposal:
Article 7 Specific information requirements for intermediaries
1. Prior to the conclusion of the contract, the intermediary shall disclose to the consumer, that he is
acting in the name of or on behalf of another consumer and that the contract concluded, shall not be
regarded as a contract between the consumer and the trader but rather as a contract between two
consumers and as such falling outside the scope of this Directive.
In the scope of the Directive according to Article 2(19) 'intermediary' means a trader who concludes the
contract in the name of or on behalf of the consumer;
2. Distance Selling Directive - revision
The aim of EC legislation in the field of distance selling is to put consumers who purchase goods or
services through distance communication in a similar position to consumers who buy goods or services
in shops. The directive applies to most contracts where a consumer and a supplier running an organised
distance-selling scheme do not meet face to face at any stage until after the contract has been
concluded.
The Distance Selling Directive applies to any consumer distance contract made under the law of an EUMember State as well as the European Economic Area. It provides a number of fundamental legal rights
for consumers in order to ensure a high level of consumer protection throughout the EU. These include:
- Provision of comprehensive information before the purchase;
- Confirmation of that information in a durable medium (such as written confirmation);
- Consumer's right to cancel the contract within a minimum of 7 working days without giving any
reason and without penalty, except the cost of returning the goods (right of withdrawal);
- Where the consumer has cancelled the contract, the right to a refund within 30 days of
cancellation;
- Delivery of the goods or performance of the service within 30 days of the day after the
consumer placed his order;
- Protection from unsolicited selling;
- Protection from fraudulent use of payment cards;
- Non validity of any waiver of the rights and obligations provided for under the directive,
whether instigated by the consumer or the supplier.
Some types of contracts are excluded from all the provisions of the directive. The exemptions include
contracts for financial services and contracts concluded through an auction. Contracts for financial
services are covered by the Distance Marketing of Financial Services Directive 2002/65/EC.
Other types of contracts are excluded from the core provisions of the directive, such as the provision of
comprehensible information before the purchase and the right to cancel the contract. These include
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contracts for services to be performed on a specific date or within a specific period such as hotel room
bookings, travel or concert tickets.
There are also some exemptions from the right of withdrawal. These will apply unless the consumer and
supplier agree otherwise. These exemptions cover, for instance, goods made to the consumer's
specifications and perishable goods.
The directive had to be implemented into national legal systems by 4 June 2000. The directive also
allows for the introduction or maintenance of further national rules to create a higher level of consumer
protection.
The Commission is currently conducting a review of 8 directives protecting consumers' economic
interests, including the Distance Selling Directive.
The Commission’s Report: http://ec.europa.eu/consumers/cons_int/safe_shop/mis_adv/rep01_en.pdf
To conclude, there are no any specific provisions in the EU law concerning ticket secondary market. Only
some general provisions applicable to other goods and services can be useful, including, for example, EU
Unfair Commercial Practices Directive.
Do we need to regulate secondary ticket market? – to address this question here is the research
example from the USA.
Consumer protection and Secondary Tickets Market in the USA
The following overview is based on the article ‘Some Economics of Ticket Resale’ by Pascal Courty
published in the Journal of Economics Perspective.
In order to understand how the secondary tickets market works, first of all it is necessary to understand
how the primary ticket market works:
Primary Market
Tickets are first sold in primary markets. To give an idea of the different parties involved in the primary
market, let’s have a look at an entertainment event, like a concert: a promoter hires an act, rents a
venue and the three agree on a revenue sharing rule.
The promoter, sometimes together with the act, chooses the price of tickets and when to start
advertising and selling tickets. The venue sells tickets through the box office where the event will be
held and the promoter (or the venue) also contracts with a ticketing agency. Tickets issued at the box
office or by the ticketing agent have a price printed on them also known as the “face price.” The
ticketing agency charges a processing fee on top of the face price; it typically sells a majority of the
tickets, because it can reach a much wider audience than the box office.
Secondary Market: Brokers and Scalpers
Although some of the exchanges in the secondary market are driven by early buyers who genuinely
intended to attend the event at the time of purchase and changed their mind, the majority of exchanges
are initiated by professional brokers who buy tickets early intending to resell them at a profit.
By the term ‘broker’ we should understand independent agents who are not affiliated with, nor
endorsed by, the event promoter.
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Research shows that broker markets are usually quite competitive. In US they advertise in places like
phone directories and on the Internet and some even post bonds to guarantee the service they provide.
They typically carry a large inventory of tickets for many events with a variety of seats, although they
tend to concentrate on the best seats in the venue. Brokers may also provide seating charts, updated
event calendars and sometimes packages including accommodation and other travelling arrangements.
Brokers usually sell tickets at prices above face price.
Research shows that while most concert venues divide the house in a few sections and offer the
majority of tickets at two or three price points, brokers may charge different prices for different seats
within the same section.
Event promoters and ticketing agencies typically tend to limit brokers’ access to the primary market.
Brokers obtain tickets through many channels, including box office, ticketing agency, first-time buyers,
and by other methods. They also exchange tickets through national networks. Ticketsnow.com, for
example, is a website that offers clearinghouse services for U.S. brokers.
There is a wide range of evidence that promoters and ticketing agencies do not support brokers and that
they attempt to exclude brokers from the secondary market. As mentioned above, promoters and
ticketing agencies try to prevent brokers from buying tickets in many ways. For example, promoters
restrict the number of tickets a single buyer can purchase at the box office and control large purchases
made by credit cards at the ticketing agency. Ticketmaster stipulates in its contract with independent
outlets that physically deliver tickets that “the providing of tickets to third party scalpers or brokers
through preferential sale or otherwise… will be consider a material breach of this Agreement.” (Office of
New York State Attorney General, 1999).
Finally, some concert promoters have gone as far as issuing bracelets, rather than tickets, that are
distributed in advance and that cannot be removed without obvious sign of manipulation.
Legal Basis for the Secondary ticket market regulation in US
About one third of the states in the United States regulate resale, but the nature of these legislations
varies greatly across states. According to the National Conference of State Legislatures, at least 16
states prohibit resale or limit the mark-up above face price, at least 4 states require a license to broker
tickets effectively regulating entry, and four states grant localities or municipalities the ability to
license or prohibit resale of tickets.
A number of municipal ordinances govern ticket resale, as well. However, no federal laws restrict ticket
resale, which means that even if an event takes place in a state where resale is restricted, tickets can
still be traded in other states where resale is allowed.
Resale laws have been enforced. For example, New York, which is the largest local market in the US for
entertainment events, has run several large scale investigations, which have resulted in prosecution,
against resellers who sell tickets above the regulated premium defined as five dollars or ten percent
of the face price (Office of New York State Attorney General, 1999).
How the secondary ticket market influences even organisers’ welfare?
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The author of the research concludes that there are no recommendations in favor or against brokers. If
resale were prohibited, ruling out brokers, then the surplus appropriated by brokers would either go to
promoters or to consumers depending on the price that promoters would charge in the late market.
Overall, it would be welfare neutral since there would be no net change in total surplus. More
realistically, however, one should go beyond the model to assess the welfare impact of brokers.
On the one hand, one may argue that brokers just take advantage of the situation and waste resources.
Although brokers make profits, one would expect that due to competition and entry - for example,
through distribution and promotion activities - at least part of these profits would be diluted.
On the other hand, brokers provide a service: availability of tickets in the late market. They invest in
activities that may create value in three ways:
- First, they seek new consumers that may not consume otherwise. Brokers aggregate tickets for
multiple events, satisfying a broad range of consumer demands.
- Second, brokers help market-clearing. In fact, brokers sometimes earn large profits but at other
times are left with unsold tickets. Some brokers even argue that they insure the event promoter
by buying tickets early and endorsing the event.
- Third, they help the promoter price discriminate and it is possible that the promoter ends up
selling more tickets with the presence of brokers. Under that interpretation, brokers are welfare
enhancing since they help the promoter to sell to consumers whom the promoter would find it
hard to reach or otherwise attract.
Secondary Ticket Market Regulation in Europe and recent developments
France
French legislation, banning the resale of tickets for a profit has been around for almost 100 years. The
applicable law is dated June 27, 1919 and entitled "An Act for Suppression of Trafficking theater tickets".
It authorizes the resale of tickets subsidised by the condition of not giving a price higher than their
original purchase price (face value).
In France, in order to get the best prices on buying a ticket, it is often necessary to make it very far in
advance, but with one caveat, they are normally non-refundable tickets.
Recent innovation: French secondary ticketing marketplace zePASS.com is a pioneer in linking Internet
users to purchase and resale of tickets in the French market. The site offers the opportunity to find at
the last minute tickets for concerts complete with very reasonable rates, with an average 15% discount,
since it is forbidden to sell tickets more expensive than its initial value, according to French law.
UK
In the UK the secondary ticketing is legal, although some specific rules apply in relations to certain
events.
The only law which covers secondary ticketing for the theatre industry is the prohibition on unfair
commercial practices under the Consumer Protection from Unfair Trading Regulations 2008 (CPUT
Regulations), which applies to producers, venue managers and primary agents as well. These regulations
implement the EU Unfair Commercial Practices Directive.
In order to avoid contravening the CPUT Regulations, secondary ticket agents should ensure that their
promotional material does not contain false or misleading information, or omit to include key
information. The CPUT Regulations do not go into any detail, but on the basis of previous legislation, we
take this to mean that, for example, consumers should be given the price, location of the seat, features
of the seat that would adversely affect the consumer's use or enjoyment, and any other detail which
relates to their rights prior to purchase in a comprehensible, legible manner.
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Taking into account guidance (this is not law) given by the Committee of Advertising Practice (a body set
up by the advertising industry for the purposes of self-regulation), they should advertise any additional
fees when advertising the actual price of the ticket, tell the consumer about anything which means it is
not fit for purpose, and not mislead consumers in relation to the nature, attributes and rights of the
secondary ticket agent, e.g. its affiliations or connections with the primary agent, producer or venue, or
any approval to resell the tickets from those parties.
Breach of the CPUT Regulations could lead to an enforcement notice, a fine up to £5,000 and/or
imprisonment up to 2 years. The consumer would have to pursue this through the Office of Fair Trading
or the trading standards officer of the local government authority.
Following a recent investigation into the matter of secondary ticketing in the theatre and music
industries, the UK Government took a conscious decision not to introduce specific legislation to deal
with it, preferring instead to leave it to those industries to self-regulate.
Netherlands
On the 6th of April 2010 the Dutch Parliament approved a bill to legislate the secondary ticket market in
The Netherlands, It is an initiative of the Members of Parliament Arda Gerkens of the Socialist Party (SP)
and Nicolien of Vroonhoven-Cook of the Christian Democratic Appeal (CDA). The Bill still has to pass the
Senate (Eerste Kamer) for final approval before becoming Law.
There was an amendment to the Bill initially introduced by the authors of the draft law (Gerkens and
Vroonhoven-Kok) which raised the markup cap from ten per cent to 20 per cent, and switched the
expected enforcement of the Bill away from the Consumer Authority to EUSTA, the self regulatory body
which represents the secondary ticketing market in The Netherlands who are expected to now arbitrate.
Consumers can also take secondary ticketing companies to court to recoup money, under the amended
law.
Dutch Minister Maria van der Hoeven of Economic Affairs of the Christian Democratic Appeal (CDA)
party is doubting whether the even law fits within the European Union rules. Van der Hoeven stated
that she hopes the industry itself does more to the problems and that it was more or less up to the
concert industry to put in place the necessary technology to stop the secondary ticket industry from
buying tickets in bulk. She added that arbitration would help with resolving disputes and help to avoid
clogging up the courts.
It is now expected, in about two months, to receive the first results of a full investigation into the illegal
resale of tickets for events such as concerts or sporting events from a study conducted by the Consumer
Authority which was announced in September last year.
The study focuses on traders who buy primary market tickets and resell them at a profit and by offering
misleading information on their websites, for example, by impersonating the official seller, and
therefore commit unfair commercial practices. The minister expects the first results from research in the
second half of May.
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