Lectures on Nordic
and European
Consumer Law
Klaus Viitanen
University of Helsinki
October 2014
1. INTRODUCTION
The main aims of these lectures
1) to give an overall picture on different legal
instruments used in consumer law, especially in EU
consumer law and in the Nordic countries
2) a special attention will be given on the problems
connected with consumer´s access to justice
1.1. Basic definitions:
Consumer law


the class of norms which are especially designated to protect
the consumer in his or her dealings with a trader (direct
protection)
Competition Law and Unfair Competition rules give only
indirect protection to consumers
Consumer


a natural person who is acquiring goods or services for an
other use than business purposes
a new trend: from consumer protection to a more wider user or
client protection ( e.g. passenger protection in air, railway, sea
and road transport contracts)
Trader

a natural or legal person who is professionally selling goods or
providing services to consumers in order to obtain economic
benefit
Substantive Consumer Law

rules of consumer legislation which define the
rights and obligations of consumers and traders
Consumers' Access to Justice

different methods (often supervisory authorities and dispute
settlement bodies) which aim is to ensure that consumers'
rights are fulfilled also in practice
Access to justice –questions are in close relation to
substantive consumer law


without effective means for enforcement and consumer
redress, the material improvements in consumer protection
legislation will have little or no influence at all in a
consumer's daily life
formal right to take a legal action in a court is not enough
Consumer Law -questions may be roughly
divided into two groups:
1)protection of consumers' collective interests




interests where no individual consumer has a right to remedy
when an infringement of these interests occurs
examples:
regulation and supervision of marketing
regulation and supervision of product safety
2)protection of individual rights




how consumer's rights are fulfilled in individual cases after a
contract has been concluded and a consumer is dissatisfied
with his purchase
examples:
contractual remedies when a product or service is
defective
product liability
1.2. EU Consumer Law
The legal basis and the main aims of EU Consumer
Law in The Treaty on the Functioning of The European
Union (former EC Treaty, originally Treaty of Rome):
1)Internal Market -argument


EU is entitled to adopt measures which have as their object the
establishment and functioning of the internal market (art. 114)
aim is to abolish obstacles of free movement of goods and
services
2)Consumer Protection -argument

in order to ensure a high level of consumer protection (art. 169)
Is there are a conflict between these two aims?

in theory no, but how about in practice!
The Consumer Images behind Consumer Law
The EU Consumer Law:


a consumer is an active and critical information-seeker, who is
able to make rational choices on the basis of collected
information (a rational consumer)
the main stress in the legal regulation is in the regulation of
information: to ensure the accessibility and quality of
information
The Nordic Consumer Law:



a passive consumer, who is neither able to collect information
available nor to use it in order to make a rational choice (an
irrational consumer)
regulation of information is not enough to ensure rational
choices
there is also a need for effective protection of consumers´
individual rights, e.g. by means of contract law
Legal Instruments in EU Consumer Law
1)directives




a traditional instrument in EU consumer law
have to be implemented to the national legislation
minimum directives

set only the minimum level of protection

MSs are free to provide better protection in their own
legislation
maximum directives

sets also the maximum level of protection

MSs are not entitled to provide better or weaker protection
2)regulations



are directly applicable in all MSs
there is no need to implement them to the national legislation
are becoming more popular in EU consumer law
The EU Consumer Law directives and
regulations
Regulation of Marketing

Misleading and Comparative Advertising Directive (1984,
amended 1997, a codified version 2006/114/EC, OJ L 376,
27.12.2006)


in consumer issues relevant only in comparative advertising
Unfair Commercial Practices Directive (2005/29/EC, OJ L 149,
11.6.2005)
Consumer Information and Contract Law

Package Travel Directive (90/314/EEC, OJ L 158, 23.6.1990)





proposal for a new directive (COM (2013) 512 final)
Distance Marketing of Financial Services Directive (2002/65/EC,
OJ L 271, 9.10.2002)
Consumer Credit Directive (2008/48/EC, OJ L 133, 22.5.2008)
Timeshare Directive (2008/122/EC, OJ L 33, 3.2.2009)
Consumer Rights Directive (2011/83/EU, OJ L 306, 22.11.2011)

replaced former directives on doorstep selling (85/577/EEC, OJ L 372,
31.12.1985) and distance selling (97/7/EC, OJ L 144, 4.6.1997)
Contract Law



Unfair Contract Terms Directive (93/13/EEC, OJ L 95, 21.4.1993)
Sale of Consumer Goods Directive(99/44/EC,OJ L 171, 7.7.1999)
Regulations on passenger´s rights in transport contracts:




Regulation on Air Passengers´ Rights on Denied Boarding and on
Cancelled or Delayed Flights (EC N:o 261/2004, OJ L 46, 17.2.2004)
Regulation on Rail Passengers` Rights and Obligations (EC N:o
1371/2007, OJ L 315, 3.12.2007)
Regulation on Passengers` Rights on Bus Transport (EU N:o
181/2011, OJ L 55, 28.2.2011)
Regulation on Passengers` Rights on Maritime Transport (EU N:o
1177/2010, OJ L 334, 17.12.2010)
Safety of Products


Product Liability Directive (85/374/EEC, OJ L 210, 7.8.1985)
Product Safety Directive (01/95/EC, OJ L 11, 15.1.2002)

proposal for regulations concerning consumer product safety (COM (2013)
78 final) and market surveillance (COM (2013) 75 final)
Access to Justice
Protection of consumers´ collective interests
 Injunctions Directive (98/27/EC, OJ L 166, 11.6.1998)
 Cooperation Regulation (EC N:o 2006/2004, OJ L 364, 9.12.2004)
Protection of consumers` individual rights
 Alternative Dispute Resolution (ADR) Directive (2013/11/EU, OJ
L 165, 18.6.2013)
 Consumer Online Dispute Resolution (ODR) Regulation (EU N:o
524/2013, OJ L 165, 18.6.2013)
EU Commission websites for further information
http://ec.europa.eu/consumers/dyna/az/az_index_consumers.cfm
New Trend: Towards full harmonisation
The starting point: minimum directives


most consumer law directives between years 1985-2002 were
minimum directives
there were only few exception, e.g., the product liability
directive from 1985
The new trend from year 2005: maximum directives




Unfair Commercial Practices Directive 2005/29/EC
Timeshare Directive 2008/122/EC
Consumer Credit Directive 2008/48/EC
Consumer Rights Directive 2011/83/EU
The key questions:
1)whose interests does full harmonisation promote?
2)is full harmonisation in practice possible?
Who needs full harmonisation?
Official explanations:
1) full harmonisation promotes consumers´ confidence
on internal market
 assessment of this argument: do consumers really
need exactly same rules in all MSs?
1)most sale of consumer goods takes still place inside MSs,
cross-border shopping forms still only a small minority of the
total sale
2)when cross-border shopping takes place, a certain minimum
level of protection (e.g. at least two weeks cooling off -period
in distance selling) is usually totally enough for consumers
3)instead more emphasis should be focus on the settlement of
cross-border consumer disputes, where there are many
problems
•
in practice many consumers avoid cross-border shopping due to
the difficulties in potential disputes with traders domiciled in other
countries
2)full harmonisation promotes traders´ willingness to
cross-border marketing and sale

assessment of this argument:



are the differences in consumer law rules, e.g., concerning
marketing or consumer contracts, in practice so relevant in
cross-border marketing and sale compared to, e.g., rules on
product design, content, package, or labelling?
if there are markets for a product, and a company has
capacity for cross-border marketing, are the differences in
marketing and contract rules really in practice any relevant
obstacles to make business?
compare to the situation in United States!
2. REGULATION OF MARKETING
2.1. General
Domestic Marketing (ch. 2 of these lectures)

marketing in which traders and consumers are domiciled in a
same country
Cross-border Marketing (ch. 3 of these lectures)

marketing in which traders and consumers are domiciled in
different countries
The regulation of marketing has usually two main aims
1)prohibition of unfair marketing practices

to prohibit unfair marketing practices, especially false and
misleading advertising
2)disclosure of consumer information

to ensure that traders provide to consumers certain basic
information during the marketing
Prohibition of unfair marketing practices
Different techniques to regulate:
1)general clauses

prohibits the use of all kinds of unfair marketing practices
without clearly defining what marketing practices are unfair

whether a marketing practice is unfair or not, is decided by
courts

it is question of delegation of legislative power from the
Parliament to courts

a general clause is a flexible way to regulate, especially when
new unfair marketing practices have been developed (e.g.
marketing in internet)

whether the system is predictable, depends on the amount
of case law and its accessibility in practice
2)specific detail rules

marketing practices which are regarded as illegal are defined
by specific rules in legislation

benefit: detail rules make it for an advertiser easier to predict
what kind of marketing practices may be regarded as illegal

defect: in case there is a need to interfere with a totally new
kind of marketing practice, legislative changes have to be done
first
3)combination of general clause and specific rules

by using this model, benefits of general clause and specific
rules may be achieved at the same time

in the Nordic countries the combination of general clauses and
more detail rules have traditionally been used in the regulation
of unfair marketing practices

however, in the Nordic countries the main focus has always
been in the use of general clauses

due to this, most principles on unfair marketing practices in the
Nordic countries may be found in the case law instead of the
written law
Duty to Disclose Consumer Information
Detail regulation



has shown to be much more effective than general clauses
defines quite precisely what information a trader is obliged to
give to consumers during the marketing
is used in several EU consumer law directives: they oblige
MSs to adopt rules which set to traders duties to give certain,
specific information to consumers concerning:
1) cooling-off period


consumers are not able to use this right, if they are not aware
of its existence
see, e.g., Timeshare Directive, art. 5.4.
2)other essential information, for example
a) Package Travel Directive, art. 3.2. and 4.1.




the identity of the trader (name, address, etc.)
the legal rights of consumers
the main features of the product or service marketed
all relevant information connected to the price of the product or
service (including taxes, extra expenses, etc.)
b) Consumer Credit Directive, art. 4

the annual percentage rate (the total cost of credit to a consumer
per an year)
2.2.Unfair Commercial Practices Directive



replaced Misleading and Comparative Advertising Directive
84/450/EEC in consumer matters, but not in unfair
competition matters (a codified version in year 2006)
but how is comparative advertising regulated at this
moment?
on the contrary to the most earlier consumer law directives,
UCPD is a full harmonisation directive

taste and decency –questions

e.g. discriminatory (sex, ethnic background, religion)
advertising has been left outside of the scope of the
directive (recital 7)

is based on a combination model

general clause (art. 5)

more specific rules (art. 6-9)

black list of always forbidden practices (Annex I)
General clause (art.5)on unfair commercial practices

commercial practice, which
a)is contrary to the requirements of professional
diligence (fairness test, e.g. false or misleading
advertising)
and
b)it essentially distorts or is likely to distort the economic
behaviour of the average consumer (effect test),
is regarded as unfair (art. 5.2)

protection of vulnerable consumers

commercial practices which are directed to a clearly
identifiable group of particular consumers (e.g. children,
sick or elderly people) are assessed from the perspective of
the average member of that group (art. 5.3.)
Supplementary specific rules:
Misleading commercial practices (art.6-7):
A commercial practice shall be regarded misleading if
a) it contains false information and is therefore
untruthful
or
b) it misleads or is likely to mislead the average
consumer even if the information is factually correct
or
c) it omits certain relevant information that the average
consumer needs
and
in all three alternatives this practice causes or is likely to cause
a consumer to take an economic decision that he would not have
taken otherwise
Aggressive commercial practices (art.8-9):
A commercial practice shall be regarded as aggressive
if
a) it by harassment, coercion, including the use of
physical force, or undue influence
b) significantly impairs or is likely to significantly impair the
average consumer´s freedom of choice and thereby
c) causes or is likely to cause him to take economic
decision that he would not have taken otherwise
The flexible nature of the general clause


the specific rules in art. 6-9 on misleading or aggressive
commercial practices clarify, what practices may especially be
regarded as unfair
the general clause may be used in cases
1)which fall under the scope of the specific rules,
but also in cases
2)which do not fall under the scope of art. 6-9
The black list

annex I of the directive contains a list of commercial practices
which are in all circumstances unfair, so called typically unfair
practices (fairness or effect test is not needed)
Supervision of marketing

should be organised in the MSs as during the former
Misleading and Comparative Advertising Directive: state
authorities or consumer organisations are entitled to start court
or administrative procedure (art.11)
Problematic questions in the UCPD
1)what is the expected level of knowledge of
average consumers?



the case law of the ECJ: average consumer is a reasonable
well-informed and reasonable observant and circumspect
a clear conflict between the common meaning of word average
and this definition: an average consumer is certainly not
reasonable well-informed and observant
implementation in the Nordic countries:

the main stress has been given to the common meaning of
word “average” and the word average itself has been left
away from the law text

remember the different consumer images in EU and Nordic
consumer law (an active information-seeker v. a passive ,
irrational consumer)

this implementation may cause different interpretations in
MSs, as many MSs adopted also the word average to their
law text
2)when the condition ”is likely to essentially distort the
economic behaviour of consumers” is met?

different wording is used in articles 6-9: “is likely to cause him
to take an economic decision that he would not have taken
otherwise”

different wording – different meaning?

the latter definition seems to require more stronger effect to
the behaviour of consumers

should we assess the effect of, e.g., false information

separately, when it is hardly never decisive from the
viewpoint of consumer´s decision-making procedure
(separate effect)

together with all other marketing information which effects
on consumers (common effect)

the choice between these two alternatives might have
serious consequences
• example: claims on environmental friendliness of
marketed products
3)the effect of the taste and decency -restriction




matters related to taste and decency were left outside of the
scope of the directive (recital 7)
these differ greatly among European countries, e.g.,
concerning discriminatory (sex, ethnic background, religion)
advertising
sometimes these values are overlapping with the protection the
economic interests of consumers (which is the main target of
the directive)
example: marketing to minors in schools

protection of economic interests: minors do not expect to
face marketing at schools, especially marketing in which
teachers are involved

social values: schools should be marketing-free zones in a
world which is coming more and more commercial
2.3. Regulation of Marketing in Finland
I. Former regulation





relevant act: Consumer Protection Act 1978, ch. 2
the former general clause in the Finnish Consumer Protection
Act, ch. 2, art. 1:
“Conduct that is contrary to good practice or that is
otherwise unfair from the viewpoint of consumers is not
allowed in marketing”
specific articles, e.g., ch. 2, art. 2:
”False or misleading information shall not be conveyed in
marketing”
whether marketing had impact on the economic behaviour of
consumers in the target group, was not relevant from the
viewpoint of law text
but was it an implied term which fulfillment was necessary
before these rules could be applied?
II. Implementation of the UCPD in Finland




amendments to chapter 2 of the CPA (561/2008) entered into
force on 1 October 2008
a new general clause (ch.2, art. 1)
”Marketing which
(a)is contrary to good practice or
(b)is unfair from the viewpoint of consumers,
is not allowed in marketing”
new separate general clauses on
1) marketing contrary to good practice (ch.2, art. 2)

based on the taste and decency –restriction
2) unfair marketing practices (ch.2, art. 3)

based on the idea to prevent the distortion of consumers´
economic behaviour
in addition, (3) the CPA contains new and old specific rules on
unfair marketing practices
1) Marketing contrary to good practice

a new general clause (ch.2, art 2):
”..is in clear conflict with generally accepted social values,
especially if
a)it infringes human rights or religious or political
persuasions
b)it contains discrimination on the basis of sex, age,
ethical or geographical origin, etc.
c)it shows in a positive light activities where health,
general safety or environment are put in danger”

former Finnish case law on the protection of social values in
marketing was based only on the interpretation of the general
clause on the consequence that the competence of Consumer
Ombudsman and Market Court was sometimes questioned

the implementation of UCPD solved this problem and there is
now a clear legal basis: CPA ch. 2, art. 2
Some examples from the former case law
a) violence in marketing
Market Court decision 1998:18
The Raisio Group was forbidden from showing a TV
commercial called Gone with the Winchester, where a soldier
was shot in the back. According to the Court, violence is not an
acceptable way of attracting attention in advertising, especially
when violence has no connection with the product being
advertised (in this case food stuff).
b)discrimination based on sex
Market Court decision 2001:6 (Lola –case)
Maskun Kalustetalo Oy was marketing sofas by using ex-Miss
Finland who was lying in one of sofas dressed with her bikinis
only. The advertisement contained, e.g. following text: ”Lola is
not included in the price!”The court stated, that the use of halfnaked woman in an advertisement may, as such, not be
regarded as unfair. However, the ad may be considered as
insulting due to a way how woman is treated in it. In this case
the campaign was regarded as discriminative and unfair.
2) Unfair marketing practices





a new general clause (ch. 2, art. 3), which scope of application
covers also the specific rules (ch. 2, art. 4-14)
the general clause is rather identical to art. 5 of the UCPD:
according to ch.2 art 3: unfair marketing is marketing, which is

contrary to the requirements of professional diligence and

is likely to distort the economic behaviour of consumers
who belong to its target group
one relevant difference: average consumer is not mentioned at
all!

according to Government´s Proposal (HE 32/2008), the
concept of average consumer is equivalent to the concept
of ordinary consumer on the consequence that there is no
need to mention it in the law text
similar choice has been made also in the other Nordic
countries
effects from the viewpoint of full harmonisation?
Protection of vulnerable consumers






UCPD: a special attention should be given to the target group
in the assessment of legality of a marketing campaign
CPA contains now in its general clause a clear provision on the
protection of vulnerable consumers (minors, elderly people etc)
the protection of vulnerable consumers was in the Nordic
countries possible also before the law reform, but it was based
on case law only
marketing aimed at minors provides here a good example
main principle: marketing to minors is in principle allowed, but
it must comply with much more stricter rules than marketing to
adults
Market Court 2000:12: Distribution of advertising magazine in
schools and day-care centres
Family 2000 -magazine was a publication intended for
children and young people which contained marketing
mainly in the form of articles. The Market Court banned the
distribution of the magazine in schools and day-care
centres without parents' permission
3) Specific rules in ch. 2 of the CPA
Identification of marketing (ch.2., art.4)



consumers should always be able to make difference between
commercial and non-commercial material and to identify the
person behind marketing
this rule it is not based on the UCPD, but was initially created in
case law already in 1980´s, and was added to CPA in year 2002
Market Court decision 1997:6: Commercials must be
distinct from programming
Kiss FM radio station was forbidden from broadcasting commercials unless they are distinguished from other programming by, for example, a distinctive tune used both before
and after commercial breaks.
Misleading or false marketing (ch.2., art. 6-7)

prohibition to give
a)misleading information
or
b)false information
or
b)omit relevant information
which is likely to cause a consumer to take a transactional
decision that he would not have taken otherwise

rather identical to art. 6-7 of the UCPD

once again, the concept of the average consumer is not at all
mentioned in the law text
Duty to disclose information (ch.2, art.8)


corresponds article 7.4. of the UCPD
marketing of individualized products or services should always
contain at least the following information:
1) the main features of a product and service in a scale which is
appropriate
(a)when taking into account the marketed product or
service
and
(b)the used marketing tool
• different requirements for TV and newspaper adds!
2) trader´s – or his agent´s - name and geographical address
3) price information: the total price of the product or service
including all taxes


the most important information for a consumer is normally the
total price of the product or service
it does not matter, whether the procedure to count the total
price would in practice be rather easy, the price informed to
consumers in marketing has to be always the total price
Market Court decision 1992:11: Price splitting in
advertising of cruise prices
Oy Viking Line Ab had marketed its cruise prices without
mentioning the passenger tax. The Court stated, that passenger
tax is a part of the price which consumers must pay for a
cruise. From the viewpoint of the consumer it makes no
difference that the business which sells the cruise forwards
part of the price to the state in the form of tax. It is important for
consumers that ads clearly indicate the total price charged by
the business. Marketing, which do not contain the total price of
the product or service is regarded as unfair.
Additional benefits (ch.2, art.12) and benefits based on
chance (lotteries etc.) (ch.2, art. 13-14)

are accepted in marketing only if the following two conditions
are fulfilled:
1) benefits should not have a dominant role in the marketing

this condition is based on the general clause, not on the
specific rules above
2) the means of getting additional benefits should be clearly
explained in the marketing
3) a former requirement until year 2011: consumers´ right to
take part on lottery or in other kind of competition could not be
connected to the fact whether he was purchasing a product or
not

change in June 2011: purchase may now be put as a
condition to participate

reform was argued on basis of ECJ recent case (C-304/08)

but was the case misunderstood in Finland?
Market Court decision 1995:25: Free gifts and lotteries
in the direct marketing of timeshares

Helsingin Resort Marketing Oy was direct marketing of
timeshares by inviting consumers to a special meeting. The
predominant focus of an invitation letter sent out by the
company to a presentation and sales meeting was on free gifts
and lotteries. Based on this information, consumers had
difficulty in assessing the true nature of the meeting in
question. Many of the consumers arriving at the meeting did so
mainly to collect the free gift promised. The marketing was
regarded to be in conflict with the general clause because the
promised benefits had a dominant position in the marketing.
Other specific norms in ch.2 of the CPA:




comparative or other marketing may not cause confusion
between products of different traders (art.5)

the former article concerning comparative advertising was
moved to Unfair Competition Act

what is the role of this moved article in consumer
protection?
prohibition to use aggressive selling methods (art. 9)
prohibition of inertia selling (art. 10)

it is prohibited to deliver a products or a service without an
express order in case a consumer is expected to pay it in
case he does not clearly refuse or return the good
the price should not be announced as being reduced more than
it actually has been (art. 11)

the promised discount should always be real
2.4. Case Law




many leading principles of the Finnish marketing law have
been created by the Market Court since 1978 in cases where the
former general clause were applied
during the years, for informative reasons many of these
principles have been added as new specific rules into ch. 2 of
the CPA
however, there are still many principles which have not been
codified, but are still based on the case law only
many of them are closely connected to the prevention of
misleading and false marketing
1) The principle of general impression




lawfulness of marketing is evaluated on the basis of what kind
of general impression consumers do get after a reasonable
short acquaintance of advertisements
relevant information may not be presented by small letters at
the end of an advertisement
Market Court 2001:9.
In TV commercial subscription costs of mobile phones were
shown at the bottom of the screen in very small print, while the
call time and trade-in offer was spread across the screen. If a
specific subscription is advertised, typical user costs must be
indicated clearly. The commercial was regarded as unfair.
the significance of the new effect test to the principle of general
impression?
2)The principle of trader´s burden of proof

a trader must always be able to prove facts he presents in his
marketing

however, relevant is the difference between facts and matters
of taste

“cheapest in the town” is a fact which must be proven

“best service in town” is matter of taste which cannot be
proven

this principle may also be found in art. 12 of the UCPD, which
mean that it will remain also in the future
Market Court decision 1997:2: Unproven Price Claims/
Price Guarantee
Oy PC-Superstore used in its marketing, e.g., the following
texts:
a)Finland’s cheapest computer chain store
b)Price guarantee: we will pay you back the price
difference at time of purchase if you could buy the same
product at a lower price from another shop.”
The company produced no proof that its products were
cheaper than similar products marketed by its competitors.
According to the Court, claims concerning a ‘lowest price’ are
not proven merely by the fact that the advertiser promises to
pay the customer the difference if he can find the same product
on sale more cheaply somewhere else. The Court regarded
marketing to be in conflict with the CPA.
3) Comparative advertising






may not be false or misleading
one may compare only products which have a similar purpose
of use
comparison has to be objective
only relevant features may be compared, e.g., price
the use of test results is accepted if the following conditions
are fulfilled:

tests itself have been made by objective third parties

only relevant features have been tested and compared
Market Court 2003:5 Use of EuroNCAP –test
Veho Ltd was marketing: “Mercedes Benz is safer than the
most safest Volvo on the basis of a recent EuroNCAP –test.”
However, the cars which had been tested by EuroNCAP
belonged to different classes. According to EuroNCAP-rules
cars from different classes may not be compared with each
others due to different technical and other features, e.g.,
weight. Because this rule had been infringed and the cars were
not directly comparable with each others, the advertising was
regarded as unfair.
4) Claims on environmental friendliness of marketed
product
Consumer Ombudsman´s decision in 1999: Marketing
of green electricity.
Kainuu Electricity had marketed eco-electricity using slogans
“Eco-electricity is the choice of families who care about the
environment”. However, in fact electricity with an eco-label
formed only 43% of the company’s total sales. The danger was
that the entire company’s electricity production will be given an
eco-label in consumers’ eyes. Emphasizing the environmental
effects of consumers choice of electricity was therefore
misleading and was regarded as unfair.

the influence of effect test in environmental claims?
5) The use of word “guarantee” in marketing

guarantee should always mean that a consumer receives a
certain benefit compared to his legal rights which are based on
the law

Market Court 1994:14 Satisfaction guarantee
A mailorder company used in its marketing concept ”satisfaction guarantee” which gave to consumers one week cooling off
–period. Due to the fact, that consumers already had the same
right on the basis of CPA ch. 6, the use of word guarantee in
marketing was regarded as unfair.
2.5. Supervision of marketing
1. General
Different models to supervise

in principle there are different possibilities to organise
supervision of marketing:
1)supervision may be taken care by:
a)state authorities or
b)consumer organisations or
c)self-regulatory bodies
2)supervision may be taken care by only one of these
alternatives (single model) or more than one at the same time
(combined model)
3)decision whether a marketing practice is unfair or not, may in
principle be made (a) in administrative procedure or (b) in court
procedure
Supervision according to the EU consumer law:
Unfair Commercial Practices Directive obliges (as the Misleading
and Comparative Advertising Directive before it) Member States to
ensure that:

1)state authorities and/or consumer organisations are entitled
to start

2)court procedure or administrative procedure in order to
prohibit unfair commercial practices (art. 11)

self-regulatory bodies - based on business self regulation - are
accepted only as a supplementary, but not as the only
supervisory system (art. 10)
2.The Nordic Model in the Supervision of Marketing

enforcement of consumers´ collective interests in the Nordic
countries is taken care by a special state authority, called as
the Consumer Ombudsman (CO)

CO is a state authority, whose task is to protect consumers´
collective interests by
1)supervising marketing practices
2)supervising the use of standard contract terms
3)promoting consumer interests in general

these authorities were established in all four countries between
years 1971-1978
the activities of the CO are in Sweden connected to the National
Consumer Agency, and in Denmark and Finland (in the latter
from January 2013) to the combined Competition and
Consumer Agency

The most relevant acts in force which regulate the
activities of the Nordic COs, are




in Denmark the Marketing Practices Act 2012
in Finland the Consumer Protection Act 1978
in Norway Marketing Control Act 2009
in Sweden the Marketing Act 2008
English translations of these acts are available in the
following internet-pages:




Danish National Consumer Agency (http://www.forbrug.dk)
Finnish National Consumer Agency
(http://www.kuluttajavirasto.fi)
Norwegian Consumer Ombudsman
(http://www.forbrukerombudet.no)
Swedish National Consumer Agency
(http://www.konsumentverket.se)
The competence of the Nordic Consumer Ombudsmen
in the supervision of marketing
1)preventive methods:

an extremely typical feature for the supervision of marketing in
the Nordic countries is the frequent use of preventive actions

the aim is to prevent any infringements of law by providing
information for the traders who are preparing new advertising
campaigns

often these preventive actions are not based on the law, but
have been created in practice during the years
Different preventive methods
Advance opinion



is an opportunity (but naturally never an obligation) for an
individual advertiser to check beforehand whether a planned
marketing campaign is infringing the marketing law or not
on request, the CO will give an oral or written statement
regarding his view of the lawfulness of the planned marketing
arrangement
once the CO has shown “green light”, he will not interfere on
his own initiative with an arrangement covered by the advance
opinion and implemented within a reasonable time of its
delivery
Marketing guidelines




COs have issued during the years non-binding marketing
guidelines in several sectors of business
they are mainly based on the existing case law
their purpose is to inform traders what kind of marketing
practices are infringing the law
a new trend: CO and branch organisations have prepared
guidelines together
2) repressive methods
In case infringements of law are observed:
a) in the first step, CO tries to persuade a trader to abandon in a
voluntarily way marketing which is regarded as unfair
b) in case persuasion fails CO is entitled to impose an injunction
order together with conditional fines in cases which do not have
major importance
 if the trader resists, this injunction becomes void except in
Norway, where the trader has to appeal in case he resists
 temporary injunction orders in urgent cases are available in all
four countries
c) take legal action against a trader in the court
 special courts have jurisdiction to decide whether marketing is
infringing the law or not
The Nordic Market Courts
Special courts whose jurisdiction is limited to a certain
areas of law only

in Finland: the Market Court (collective consumer law, unfair
competition, competition law, and from year 2013 also IPRissues) http://www.oikeus.fi/markkinaoikeus/index.htm

in Sweden: the Market Court (collective consumer law, unfair
competition, competition) http://www.marknadsdomstolen.se

in Norway: the Market Council (collective consumer law, unfair
competition law) http://www.markedsradet.no

in Denmark: the Maritime and Commercial Court of
Copenhagen (also maritime law and other commercial law)
www.shret.dk
If the Nordic Market Courts regards marketing practice
as unfair, the following sanctions are available:
1) injunction order


the purpose of this order is to prohibit the trader to carry on its
illegal activities
the injunction order is strengthen with a conditional fine (which
has to be paid only if the same infringement is repeated)
2) corrective advertising


an obligation to correct the information given in unfair
marketing, normally by a totally new advertisement
in practice the significance of corrective advertising has been
rather small, because marketing campaigns have in practice
ended a long ago before the judgment is given
3) market disruption fee





has been available in Sweden since year 1996
available if the trader acts intentionally or if he by carelessness
violates the detail rules of the Swedish Marketing Act
the ordered fee may be from SEK 5 000 to 5 000 000, (the latter
about EUR 500 000), but not more than ten percent of the
trader´s annual turnover.
disruption fee is an alternative sanction to an injunction order
it should be used in serious cases only, and in practice it has
been used rather seldom
No criminal sanctions or compensation of damages


these questions are dealt in general courts only
in practice criminal sanctions have been used very seldom
3. Evaluation of the Nordic enforcement system

from the viewpoint of effective consumer protection
1) in the beginning of the establishment of the Nordic consumer
protection system, serious attention was paid, not only to
substantive law, but on the enforcement of consumers´
collective interests
2) enforcement of consumer protection has been the sole task of
the Nordic ombudsmen and consumer authorities

so far there have been no fear that the fulfilment of other
tasks, especially, enforcement of competition law, would
have started to dominate their activities by using majority of
the available resources

what is going to happen in Denmark and Finland where
consumer and competition authorities have been merged?
3) the channeling of consumers´ collective protection -cases to
special courts instead of general courts has created more
consumer –friendly case law
4) the wide use of soft law –methods has in practice been very
successful

most of the traders are willing to change their marketing
practices voluntarily, especially in clear cases, in order to
avoid bad publicity caused by a potential procedure in the
Market Court
5) soft law need hard law as a backing

without the possibility to use sanctions if necessary, the
persuasive methods would not be so successful as they
have been now in practice
6) the lack of other sanctions than injunction makes the system
sometimes rather toothless

it is possible for unscrupulous traders to continue - at least
for a while - and repeat the infringements in some similar,
but also unfair form
7) larger competence to issue injunction orders?

should Cos have larger competence to issue injunction
order without a need to start a court case in Market Court?
3. Regulation and Supervision of Crossborder Marketing
3.1. General
Cross-border Marketing means marketing in which


a trader is marketing consumer goods or services
from one country (source country)
to consumers who are domiciled in an other country or
countries (target country)
The basic problems in cross-border marketing:
1) the differences between the substantive rules in source and
target countries

even in areas, where EU has adopted consumer law
directives, the aim has been to set a common minimum
standard of protection, not to harmonise national laws

marketing which is full in accordance with the laws of the
source country, may infringe the laws of the target country
2) the marketing may be directed only to consumers domiciled in
other countries than where the trader is domiciled

the consumer authorities/organisations in the source
country do not have interest to interfere in such marketing
3) there are often differences between MSs how actively the
consumer authorities/organisations are supervising marketing

these differences are based on supervisory traditions, level
of motivation, available resources, etc.
4) the consumer authorities/organisations in the target country are
often powerless: in practice it may be difficult to enforce
remedies against a foreign trader
Two opposite models of regulation and
supervision
There exists two opposite models to regulate and to supervise
cross-border marketing. These systems do not have to exclude
each others; they may also be parallel or supplementary
The home country principle (principle of the country of origin)
 the level and substance of regulation is determined by the
country in which the trader is domiciled (the source country)
 also the compliance of regulation is supervised by the
authorities and/or organisations of the source country
 political background: internal market -argument
The target country principle
 the level and substance of regulation is determined by the
country or countries where the effects of marketing may be
seen (the target country)
 also the compliance of regulation is supervised by the
authorities or organisations situated in the target country
 political background: consumer protection -argument
3.2. Satellite advertising
TV directive (89/552/EEC, OJ N:o L 298, 17.10. 1989)
The transmitting state principle



is one application of the home country principle
art.2.1.: transmitting Member State must ensure that all
television broadcasters under its jurisdiction comply with the
law on that State
art.2.2.: receiving Member State must ensure the freedom of
reception and it is not allowed to restrict retransmission of
television broadcasters from other Member States, for reasons
which fall within the fields coordinated by the directive
De Agostini -case: C-34/95 in the ECJ
Facts of the case:





De Agostini -company was using services of a British company
which broadcasted television programmes by satellite from the
UK to Denmark, Sweden and Norway
De Agostini -company advertised a kids magazine which was
published in series, each consisting of several issues
with each issue came a part of a model dinosaur: in order to
build one dinosaur, all issues of one series had to be collected
the Swedish CO took legal action against the De Agostinicompany in the Swedish Market Court for two reasons:
1)television advertising to children under 12 years was
forbidden according to the Swedish Broadcasting Law
2)advertising was misleading because it did not contain
information how many issues belong to each series and what
was the total price of one series and one model dinosaur:
it contained only the price of one individual issue
the Swedish Market Court asked ECJ to a give a preliminary
ruling
Decision of the ECJ was quite predictable:
1) the TV-directive allows advertising to children in case certain
basic conditions are fulfilled
 the Swedish authorities were not allowed to totally forbid
cross-border television advertising which was directed to
children
2) the TV-directive did not prevent the consumer authorities in the
target country to take legal action against cross-border
television advertising in those fields which were not
coordinated by the TV-directive
 as the TV-directive was not regulating misleading advertising,
the Swedish authorities were entitled to take legal action
against cross-border misleading advertising
So, in the satellite advertising the both principles may
be used at the same time:
1) the home country principle in those fields which are
coordinated by the TV-directive
2) the target country principle in those fields, which are not
coordinated by the TV-directive
Audiovisual Media Services Directive (AVMSD)
(2007/65/EC, OJ L 332, 18.12.2007)






is in fact a revised version of TV-directive 1989
its scope of application was expanded to cover also the so
called on-demand AVM -services
surprisingly, the content of the transmitting state principle was
not changed, or even clarified!
this means that DeAgostini case has not lost its significance
target countries have still right to take legal actions against
cross-border TV-advertising in those fields which are not
coordinated by the AVMSD-directive
a codified version of the AVMSD-directive was published in
year 2010 (2010/13/EU, OJ L 95, 15.4.2010)
3.3. Cross-border e-commerce
Electronic Commerce Directive (2000/31/EC, OJ L 178,
17.7.2000)

is mainly based on the home country principle (art.3.1.-3.2.)

however, the target country may take measures against crossborder electronic marketing in case two conditions are
fulfilled:

measures are necessary in order to protect, e.g., public
order, public health or consumers (art. 3.4.)

the target country has asked - without adequate results - the
home country to take measures against illegal marketing
(art.3.4)
3.4. Different methods to develop regulation
and supervision of cross-border marketing
Problems in enforcement

even if we adopt the target country principle in the
regulation and supervision of marketing, one central
problem still remains:

how the authorities in the target countries may in practice
enforce sanctions against companies domiciled in other
countries?
Different alternatives to improve enforcement
1)the principle of entity
2)free movement of actions for injunction
3)cooperation between the national supervisory bodies
4)harmonisation of the substantive marketing law
1)The Principle of Entity

originates from competition law:

all companies belonging to the same multi-national group
of companies are liable for infringements of law caused by
any of its parent or subsidiary companies

has already been used at least in Finland
The Finnish Market Court 1987:13. McDonalds was marketing
its products via satellite television from Britain to Finland. The
Finnish CO took legal action in the Finnish Market Court
against the Finnish subsidiary company of the multinational
company in question – McDonalds Osakeyhtiö. The court
stated that the Finnish CPA was applicable in the case due to
the fact that marketing was intentionally targeted also to the
Finnish consumers. The injunction order with a conditional fine
was imposed to McDonalds´ Finnish subsidiary company.
2)The free movement of actions for injunction
The directive on injunctions for the protection of consumers‘
interests (injunction directive) (98/27/EC, OJ N:o L 166, 11.6.1998)
(a codified version 2009/22/EC, OJ N:o L 110,1.5.2009)
The main content of the injunction directive
 traditionally the right to take legal action against traders have
been reserved only to the consumer authorities/organisations
in the same country where trader is domiciled
 MSs are obliged to ensure that also qualified entities (which
may be consumer authorities, consumer organisations or trade
organisations) in target countries are entitled to take legal
actions for injunction in source countries when an infringement
affects to the interests of consumers in the target country
where the qualified entity has its domicile
 the right to bring an action for injunction is limited to those
consumer issues where the EU has adopted consumer law
directives (as transposed into the internal legal order of the
MSs)
Evaluation of the injunction directive:
1) the injunction directive does not solve problems which are
based on differences in substantive law between the MSs

the right to bring an action for injunction in the source
country is useless when the substantive rules or the case
law are stricter in the target country than in the source
country (as it was in De Agostini-case)
2) who finances the cross-border actions?

legal expenses cause an economic risk which in practice
prevents cross-border litigation in a quite effective way
when authorities and organisations are working with limited
financial resources
3) practical relevance of this directive

how many times it has been used in practice?
3)Cooperation Between National Supervisory
Bodies
I. Informal cooperation







the International Consumer Protection and Enforcement
Network (ICPEN) (www.icpen.org)
was established in 1992
it consists of national, normally supervisory bodies from more
than 40 different countries
exchange of information, collaboration (e.g. sweep days in
internet), yearly meetings, etc.
no obligation to give assistance to colleagues in other
countries
may be used between all countries, not only between the EU
Member States
most helpful in cross-border marketing problems which have
global effects
II. Formal collaboration
Regulation on Consumer Protection Cooperation (N:o 2006/2004,
OJ N:o L 364, 9.12.2004)




every MS must have a consumer authority, who has
jurisdiction to deal with cross-border marketing

indirect effect in some countries, e.g., in Netherland 2006
consumer authority in the source country (requested authority)
is obliged, on the request of consumer authority in the target
country (applicant authority), to take all necessary measures to
cease illegal cross-border marketing in the source country (art.
8.1.)
the requested authority may, however, determine which
measures will be taken (art. 8.2.)
in case legal action in a court is taken, the applicant authority
has to pay the legal expenses which the plaintiff is liable to pay
to the defendant if the case is lost (art. 15.1.)
4)Harmonisation of the Marketing Law
The starting points
1) collaboration between supervisory bodies is useless if crossborder marketing which infringes the law of the target country
is in accordance with the laws of source country
2) directives which are based on minimum harmonisation do not
eliminate the differences in substantive rules between the MSs
One possible alternative: Full harmonisation of legislation on
unfair marketing practices
 first effort: Unfair Commercial Practices Directive 2005
 shows the new trend in the EU Consumer Law

instead of minimum clauses (and minimum level of
protection), the aim is now full harmonisation (and
abolishment of the differences between the national
legislation of the MSs)
 in case it works, the choice between home and target country
principles becomes less important than nowadays
UCPD: will its aims be achieved?
1) is it really possible to harmonise national rules concerning
marketing by using general clauses?

general clauses are legal instruments which delegate the
decision-making power from the Parliament to courts

general clauses will be applied by the national courts in 27
different MSs

when taking into account (a)unclear concepts used in the
UCPD (e.g., average consumer, effects on consumers’
economic behaviour) and (b)differences in cultural and legal
traditions of the MSs, it is more than obvious that the case
law (created by national courts) will differ between MSs

the consequence: the differences between the substantive
laws of the Member States may not be abolished by the
UCPD
2) is it really possible to ensure that the supervision of marketing
would in practice be at the same level in all Member States?

the efficiency of supervision often depends on motivation
and available resources of the supervisory bodies

most probable there will be remarkable differences
3) if full harmonisation of the national legal rules may not be
achieved, the choice between home and target country
principle still remains relevant from the viewpoint of consumer
protection
 in the home country principle the lawfulness of marketing may
be determined by a country in which the level is lowest if the
trader is domiciled in that country
4) is UCPD based on home or target country principle?
 Commission´s first proposal (COM (2003) 356 final)
Traders shall only comply with the national provisions of the Member
State in which they are established (art. 4.1.)
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 (art. 4.2.)



due to resistance of many MSs the article 4.1 was dropped
away and only article 4.2 was left to the final Directive
what does it mean? Is the home country principle the only
possible principle of regulation and supervision or may target
countries also take measures against cross-border marketing
which infringes the laws of target countries?
this issue will be decided later on by the ECJ
4. CONSUMER CONTRACT LAW
Traditional view how contracts are concluded:

basic presumption: (1)equal parties (2) agree individually each
contract terms (3)after negotiations

pacta sund servanda: a contract binds both parties according
to its terms

the legitimacy of pacta sund servanda –principle is based on
the presumption of equal parties
Reality in consumer contracts:
Consumers and traders, are in most cases unequal
1) the lack of information: consumers do not in the most cases
have enough information (quality, price, other terms) which is
necessary to conclude a good contract
2) the unbalanced negotiation power: even if well informed,
consumers do not have as much as influence on the content
of contract terms than traders
good example: the wide use of standard contract terms in
practice
Conclusions
 the presumption on equal parties does not correspond with the
reality
 consumers need protection in their contractual relations with
traders
Different Methods to Provide Protection in
Consumer Contracts
1) Cooling off -periods


definition:
a) consumer's right to withdraw from a contract
b) with in a certain time
c) without penalty and
d) not having to give any reason
cooling off- periods, based on the law, are normally provided in
those types of contracts in which it is typical that:
a) consumers do not have the possibility to compare the price
and quality of the marketed product with other similar products
before making their decision (doorstep selling)
Consumer Rights Directive, art. 9
b) consumers do not have an opportunity to check
the product before the contract is made (distance selling)
Consumer Rights Directive, art. 9
c) aggressive methods of marketing are often used
Timeshare Directive, art. 6
d) there is a risk of consumer´s over-indeptedness
Consumer Credit Directive, art. 14

the length of cooling off-period in these directives

normally 14 days, but depends on whether or not the trader
has inform the consumer about his right to withdraw the
contract

in case this obligation has been neglected, the maximum
time to use cooling off -period is 12 months

Cooling off -periods based on a contract

cooling off -periods based on law should not be confused
with cooling off -periods based on an individual contract
only (latters are usual, e.g., in big department stores)
2) Mandatory provisions of consumer contract law

definition:
a) the parties are not entitled to conclude individual contracts
b) imposing worse terms
c) regarding to the weaker party
d) than is provided by the mandatory provisions of law
Sale of Consumer Goods Directive (99/44/EC)

especially in the sale of goods the essential questions on
consumer contracts have often been regulated by mandatory
provisions of law. These question are, for example:
a) goods conformity with the contract

when a product is defective
Sale of Consumer Goods Directive, art. 2
b) burden of proof concerning when the lack of conformity exists
Sale of Consumer Goods Directive, art. 5.3.:

any lack of conformity which becomes apparent within six
months of delivery is presumed to have existed at the time of
delivery, unless proved otherwise (so called legal guarantee)
c) rights of the consumer (remedies) in the case of a lack of
conformity
Sale of Consumer Goods Directive, art. 3.:


in the first place, repair free of charge or replacement
if not possible or if not done, reduction of price or the right to
have the contract rescinded (the latter only in case the lack of
conformity is not minor)
d) minimum time limit for liability
Sale of Consumer Goods Directive, art. 5.1.:
 at least two years from the delivery of the goods

in Finland there is no maximum time for seller´s liability

however, consumer has the burden of proof whether a four
years ago bought product was defective already at the time
of delivery
e) minimum time limit for complaining
Sale of Consumer Goods Directive, art. 5.2.:
 consumer must inform the seller within two months from the
date on which he detected the lack of conformity (in Finland no
exact time limit, only in reasonable time)
However, it is not possible or even sensible to regulate all
potential contract terms by mandatory provisions

a wide area of different kind of questions will always stay at
the parties to agree

that is why, there is also a need for other methods to
balance the contractual relationship between the parties
3) Prohibition to use unfair contract terms in
consumer contracts

the main aim: to prevent the use of unfair terms in
consumer contracts
Unfair Contract Terms Directive (93/13/EEC)
Definition: unfair contract term is
a) a contractual term
b) which causes a significant imbalance
c) in the parties´ contractual rights and obligations
 scope of application:

only standard contract terms, not individually negotiated

co called core terms, included price terms, stays out of the
scope of directive
 the MSs have a right to choose whether to regulate unfair
contract terms by (1) a general clause or
(2) more specific rules or by (3) a combination model
The annex of Unfair Contract Terms Directive

it contains so called grey list of contract terms which may be
regarded as unfair

typically unfair contract terms in the list are often connected to
the following items:

trader has a right to make changes to the contract terms
including the price without consumer´s approval

trader has excluded or limited his legal liability in case he
breaches the contract

sanctions which are available for consumer´s breach of
contract are very hard

arbitration clause which excludes access to the courts
Supervision: Unfair Contract Terms Directive, art. 7:

MSs are obliged to ensure that adequate and effective means
exist in order to prevent the use of unfair contract terms in
standard contracts

the choice between different supervision systems has been left
to the MSs: they may give to authorities and organisations
1)a right to take legal action against a trader who is using
unfair terms in standard contracts (court procedure)
or
2)only a right to complain to an authority which task it is to
decide whether a contract term is unfair or not
(administrative procedure)

supervisory system is similar to the UCPD
In the Nordic countries the system to regulate and supervise
unfair contract terms is rather similar than in the marketing:
1) the fairness of contract terms is mainly regulated by general
clauses

no combination model has been used here

case law is in practice the main source of information
2) the Consumer Ombudsman tries to prevent the use of unfair
contract terms
a) the CO first tries to persuade a trader to abandon the use of
unfair contract terms
b) in case persuasion fails, the CO may issue a permanent
(in case trader does not resist) or a temporary (in urgent
cases) injunction order
c) finally the CO is entitled to take legal action against trader in
the Market Court
3) negotiations with branch organisations



a preventive method
is not based on the law, but has been created in practice during
the years
standard contract terms have been negotiated between CO and
branch organisations in several branches of business

example in Finland: Package Travel Contract Terms
Benefits connected to these negotiations:
a) from traders´ point of view:
 the probability that CO would take actions against negotiated
contract terms is in practice quite small
b) from consumers´ point of view:
 by negotiations it is possible to add to the standard contracts
new terms which improve consumers´ contractual position
compared to the earlier used terms, and even compared to the
mandatory provisions of consumer contract law

example: consumer´s right to withdraw from a package travel contract with
rather small expenses
4) voidness and adjustment of unfair contract terms in
individual contracts




it is a repressive control method
Unfair Contract Terms Directive, art. 6.1:
unfair contract term do not bind on a consumer in an individual
contract
however, in disputed cases the consumer has to take the case
to a court or another dispute settlement body, which will
consider the unfairness of a contract term
weakness of this method is that
1) the consumer has to be aware of the unfairness or a contract
term
2) the consumer has to be active - and sometimes wealthy
enough - to take the case to a dispute settlement body
3) decision has directly legal effect (res judicata) on the
disputed case only: other similar unfair terms in contracts
made by other (passive) consumers stays still valid
Two possible legislative alternatives when a contract
term is regarded as unfair:
a) the court or an other dispute settlement body declares the
unfair contract term as void
b) the court or an other dispute settlement body may adjust the
unfair contract term
Adjustment of a contract term:
 a court or an alternative dispute resolution body changes the
content of an individual contract term
 is a typical feature to the Nordic consumer law
 even the so called core terms including the price of the product
may be adjusted in the Nordic countries
5) transparency and interpretation of contract terms
Unfair Contract Terms Directive, art. 5:
1) contract terms must always be drafted in plain and
intelligible language
2) in case there is any doubt about the meaning of a
standard contract term, the interpretation which is
most favourable to the consumer prevails (in dubio
contra stipulatorem)
Future of EU Consumer Contract Law





review of the former consumer protection rules (so called
consumer acquis)
all former contract law directives have been based on minimum
clauses
the review of the consumer acquis is based on the idea of full
harmonisation
those MSs who have used their right to provide better
protection to their consumers (especially the Nordic countries)
are afraid that new directives will mean weaker consumer
protection in the future
a good example here: the proposal for Directive of Consumer
Rights in October 2008 (COM(2008) 614 final)

was based on full harmonisation

its aim was to replace four former minimum directives from
years 1985-1999 (Sale of consumer goods (99/44/EC), Unfair
contract terms (93/13/EC), Distance selling (97/7/EC) and
Doorstep selling (85/577/EC))
The main problems in the proposal
1) from the viewpoint of consumer protection: the proposal was
mainly based on the former minimum directives without any
bigger changes
 minimum level of protection had suddenly became also the
maximum level of protection!
 how did this fulfil the requirement of EC Treaty: high level of
protection to consumers?
 those countries who had used the opportunity to give better
protection to their citizens, would have been forced to lower
down their former level of protection
2) from the viewpoint of internal market: many relevant contract
law issues (e.g. right to compensation), which harmonisation
would have been utmost essential had been left totally open in
the proposal
Full harmonisation of Consumer Contract Law
Is it desirable?
 this is naturally a highly political question
Is it possible?
1) principal problems: differences between the Members States in
legal traditions, social values, etc.
 even full harmonisation directives are implemented in a way
which fits to their legal system, correspond their social values,
and enforced in way that fits to their traditions
2) practical problems: poor quality in law drafting
 the new full harmonisation directives are not based on careful
preparation
 they contain a lot of unclear definitions, which will be most
probable interpreted differently in the MSs
 they contain a lot of unregulated questions (e.g. tort law), which
will be still regulated differently in MSs
 experiences from the new UCPD do not convince
5. SAFETY OF PRODUCTS
Basic division: product safety and product liability
I. Product Safety


legislation and supervisory activities which aim is to prevent
that dangerous products are sold to consumers
is a part of the protection of the consumers´ collective interests
General product safety:

all areas of product safety which are not regulated by sectoral
legislation
Special product safety:

product safety regulation which scope of application is limited
to a certain consumer goods only (e.g. toys, cosmetics,
medicines, electrical appliances)
General Product Safety




Product Safety Directive (2001/95/EC, OJ N:o L 11,
15.1. 2002)
producers may place on the market only safe
products (art.3.1)
directive sets rules for market surveillance
prior acceptance given by authorities
 is only needed in the Member State where the
product was first placed on the market
 this principle is not mentioned in the directive, but
is based on the case law of the ECJ (Cassis de
Dijon –principle)
Member States are obliged to:
1)establish or nominate authorities which task it is to
take care of the supervision (art.6.2)

the supervisory task may not be left to consumer
organisations alone
2)take care that these supervisory authorities have
necessary measures available in case they suspect
(checks, information, samples) or notice unsafe
products in the market (sale prohibition, recall,
etc.)(art.6.2., art. 7, art.8)


the authorities are entitled to make by themselves
a decision whether a product is dangerous or not
without a need to take legal action in a court
compare the system to the supervision of unfair
marketing and unfair contract terms!!
II. Product liability



it is a part of the protection of consumers´ individual rights
is a part of tort law
it is question of

liability for damages caused by a defective product

to a person or other property than the defective product
itself
Product Liability Directive (85/374/EEC)


it is a full harmonisation directive
scope of application:
a) personal injuries caused by defective products irrespective
whether the product was in private use or not
b) damages to property other than the defective product itself if
the defective product was meant for private use or
consumption and primarily used for such purposes
The liable parties:
1)a producer, who is domiciled in one of the MSs
2)if the product has been produced outside the internal market,
the trader who has imported it to the internal market
3)a trader, who presents himself as its producer by putting, e.g.,
his trade mark on the product
The injured person has to prove:
1)the damage or injury
2)the causal relationship between the defect in the product and
the injury or the damage
3)the lack of safety in the defective product: the product is not as
safe as consumers may reasonable expect


producer´s liability is strict: negligent behaviour from his side
is no more needed
importer´s and seller´s liability is still based on negligence
The Cross-border Nature of Product Liability Cases




a person who has suffered damages may have to start a crossborder litigation in case he prefers to claim compensation on
the basis of strict liability
for example, an Estonian consumer has bought in Estonia an
electrical appliance, which has been made in Italy. In case this
appliance causes an accident in Estonia due to its poor quality,
the Estonian consumer has to take legal action against the
Italian producer instead of Estonian seller or importer
the court procedure may take place in Estonia, but the
judgment has to be enforced in Italy
it might be a better idea to take legal action against the
Estonian seller or importer on the basis of negligence
Case studies: Product Liability and Tobacco
Two Finnish court cases - is a producer of tobacco
products responsible for personal injuries caused by
his products?
The first case: Pentti Aho v. Rettig Oy and Suomen
Tupakka Oy



the case started already in 1988 (being the first tobacco case
in Europe), two years before the Finnish Product Liability Act
(PLA) and strict liability entered into force: at that time
producer´s liability was still based on negligence
the plaintiff smoked from year 1941 to 1986 and got several
serious diseases which are typical for heavy smokers,
including cancer
he died of these diseases during the procedure in 1992, but his
inheritors continued the case
Before the PLA plaintiff had burden of proof on



negligence of the tobacco companies
causal relationship between smoking and his diseases
damage and its size
Negligence



the medical relationship between smoking and cancer was
statistically clear already in 1950´s
the advertising of tobacco products was banned in Finland by
the Tobacco Act 1976 and warning labels in cigarette boxes
came compulsory in 1986
before year 1976 tobacco companies had advertised their
products decades without warning their customers about the
dangers connected to their products
The Helsinki Court of First Instance dismissed the case
in 1992 for the following reasons:
1)the tobacco companies had not act in negligent way
a)because selling tobacco products had been legal
during all these years
b)tobacco companies had not been shown to infringe
the rules which regulated advertising of tobacco
products before advertising of tobacco products was
totally banned in 1976 (the CPA into force in 1978)
2)because the existence of negligence was a basic
condition for liability, the Court did not study att all
the causal relationship between plaintiff´s smoking
and his diseases
The Helsinki Court of Appeal dismissed the case in
1998 :
1)the tobacco companies had mislead consumers – and had been
negligent – because they had not informed consumers on the
health risks connected to the smoking
2)however, the plaintiff had not been able to prove the individual
causal relationship between smoking and his diseases
The Supreme Court dismissed the case in 2001:
1)the causal relationship between smoking and the diseases of
the plaintiff had been shown by a strong statistical relationship
2)in spite of the fact that advertising of tobacco products had
been misleading, the tobacco companies had not acted in a
negligent way, because the plaintiff had been aware of the health
risks
Assessment of the first tobacco case
1)The causal relationship between smoking and
cancer:
 what amount of evidences is in practice needed to
proof the causal relationship in tobacco liability
cases?



smoking is not the only possible reason for these diseases,
although it is the most probable reason when the patient
has been a heavy smoker
in individual cases it may be in practice impossible to prove
that smoking has been the main reason for the plaintiff´s
cancer
relevant questions in this context:



should the case be dismissed always when there is even a
small possibility that a cancer has not been caused by
tobacco
should the evaluation of evidences be based more on the
fact which reason has been most probable?
the Finnish Supreme Court chose the latter alternative in
2001: a strong statistical relationship was enough
2)The significance of smoker´s contributory negligence

smoker´s do nowadays certainly know that smoking
may cause cancer because of health education and
warning labels in each cigarette box



should the compensation be totally or partly denied
because of this reason?
the Finnish Supreme Court in 2001: smoker´s own
behaviour was a reason to deny the compensation totally
interesting questions in this context are:



how does the smoker`s impression on the size of risk
correspond with the real size of the risk?
smoking causes a strong addiction especially after long and
continuous use. Is a heavy smoker in a position where
he/she is able to make totally free choices any more?
this latter question was not dealt at all in the first case!
The second case: the light cigarette case

four light cigarette smokers took legal action against
Amer-Yhtymä Oyj and British American Tobacco
Nordic Oy in March 2005

the plaintiffs claimed that the defendants had, by
marketing light cigarettes, given intentionally an
impression that smoking of light cigarettes was less
dangerous than smoking of ordinary cigarettes

concerning time period after September 1991, these
cases are based on Product Liability Act and on
strict liability
Finnish Product Liability Act (694/1990)


“This Act applies to the compensation for injury or damage
caused by a product
a)to a person
b)property meant for private use and primarily used for
such purposes by the injured party” (Art. 1)
“Compensation shall be paid for an injury or damage in
case the product has not been as safe as could have been
expected” (Art. 3)
Government´s Proposal on Product Liability Act
(119/1989)

“an injured person may not claim compensation for
damages caused by well-known dangers, such as smoking
of tobacco products”
Parliament´s Second Law Committee (II LaVM 4/1990)


because tobacco industry still denies that smoking has
negative consequences on health and has not warned
consumers on the base of its own initiative, the official
warnings (labels in tobacco packets) may not release
producers from their liability
attention should also be paid to the strong addiction
caused by continuous smoking
Conclusions on the basis of Law Committee


tobacco is without any doubts a product which is meant in
Product Liability Act art. 1 and the Act is applicable also to
tobacco products
still open question: is tobacco always a product which is meant
in art.3. :”a product which is not as safe as could have been
expected (lack of safety)”
The Helsinki Court of First Instance dismissed the case in 2008 for
the following reasons:
1) the plaintiffs were able to prove the causal relationship
between smoking and their diseases
2) the lack of safety did not exist as consumers must have been
aware of the dangers connected to tobacco products at least
starting from 1970´s
3) for the same reason, they had taken a conscious risk
by continuing smoking
4) light cigarettes are less dangerous than normal cigarettes, so
the marketing of light cigarettes had not been misleading
5) nicotine addiction makes its more difficult to stop smoking,
but not impossible

the Helsinki Court of Appeal dismissed the case in May 2010

the plaintiffs sent a leave to appeal to the Supreme Court in
August 2010, but cancelled it when they agreed with the
tobacco companies that both parties would take care of their
own expenses they have had in the previous instances of court
What happens if a plaintiff wins next time?





the general effects may remain quite small, because the so
called punitive damages are not known in Finland
tobacco companies have to take into account in their economic
calculations the possibility of other similar cases in the future,
which might rise the prices of tobacco products
however, it is obvious that the amount of court cases will be
quite small because the risk of legal expenses (which in these
kinds of principal cases are normally very high)
the public health care system reduces the need to seek
monetary compensation by court actions
are the court actions a right way to distribute the costs of
tobacco deceases or are other methods, e.g., taxation, more
effective?
6. THE SETTLEMENT OF INDIVIDUAL
CONSUMER DISPUTES
6.1. General
Different types of consumer disputes:
1)individual consumer disputes: one consumer against one
trader
2)mass consumer disputes : several individual consumers have
disputes in which both the facts and norms are identical
(mainly against the same trader)
3)domestic and cross-border disputes: the disputing parties
have their domicile in the same country (domestic dispute) or
in different countries (cross-border dispute)
Domestic Consumer Disputes


consumer disputes in which consumers and traders have their
domicile in the same country
in principle there are two alternative ways to settle
individual consumer disputes if the two-party
negotiations between a consumer and a trader have failed:
1) normal civil procedure in a court
2) alternative dispute resolution (ADR) mechanisms,
mainly some kind of out-of-court procedures
Civil Procedure
The basic problem in the normal civil procedure in courts: the
ordinary civil court procedure is in most cases inapplicable for the
settlement of consumer disputes for the following reasons:
1)expenses: the high costs of litigation especially when
compared to the economic interest of the case
 the cost rules: a losing party is often obliged to pay also the
legal expenses of the winner
2)the slowness of the procedure
 especially because of the appeals to the higher instances
3)psychological barriers: many people are not willing to
participate in a court procedure even if the legal expenses stay
in a moderate level
4)inapplicability to solve mass consumer disputes: in a traditional
system all consumers who want to obtain redress have to take
part in the trial
6.2. Alternative Dispute Resolution


means alternative to a normal civil procedure, in most cases
some kind of out-of court procedure
it is possible to identify several different ADR -models in the EU
Member States, e.g., the following ones:
1) the Nordic model: public dispute boards







established and financed by the state
decisions of these boards are only recommendations and
cannot be put into force (except in Norway)
general jurisdiction: they handle complaints concerning most
sectors of business, including non-organised traders
no firm and fast rules concerning how the procedure should be
carried out
the procedure is totally written: no oral hearings
the number of decisions complied with: between 70-75 per cent
ensuring that decisions are obeyed: the use of bad publicity
(Finland), guarantees given by trade organisations, etc.
(Sweden), enforceable decisions (Norway): the best
alternative!
2)the Dutch model: the co-operative sectoral boards





the system consists of separate boards in several branches of
business
these boards have been established and are run by trade and
consumer organisations together
there is a common umbrella organisation, e.g. to issue
minimum procedural standards and to distribute economic
resources
boards accept only complaints against organised traders
oral hearings usual and the decisions are enforceable
3)the Common law model: simplified court procedure






special simplified procedures in ordinary courts of first
instance or totally new and separate courts for small claims
often called as small claims courts or tribunals
originates and still most popular in common law -countries
basic idea: there is no need for lawyers, parties should be able
to appear in a court without a legal assistant
in Britain, Ireland and Malta
nowadays possible also in Denmark and Norway
The common features of these courts:
the procedure has been made simpler and more informal in
comparison to the normal civil procedure
 the no-cost rule has been adopted
 the judge should try to mediate in order to achieve a
conciliation
 the possibility of appealing to higher courts is restricted
 the procedure is available in most civil law disputes, but only if
the amount involved does not exceed a certain sum of money
Disappointing experiences concerning small claims courts:
 they are mainly used in collecting debts by traders
 attorneys are frequently used in these courts, largely by traders
 court personnel do not advise the ordinary citizens enough
 judges find it difficult to change from a passive to an active role
Legal reforms in some countries (at least in Ireland, Australia, New
Zealand and in some states in the USA):
 the use of attorney's has been prohibited in small claims courts
 the use of small claims courts in normal debt collecting by
traders has been prohibited

4) the Iberian model: consumer arbitration procedure



special arbitration procedure for consumer disputes, especially
used in Spain and Portugal
decisions are enforceable
procedure covers only those traders
a)who are members of a certain branch organisation or
b)who have given their acceptance to the procedure in some
other way
5) the Central-European model: private sectoral boards


private, sectoral boards established and financed mainly by
trade organisations only
common, e.g., in Germany, Belgium and Austria
6) the Baltic model



consumer disputes are solved by administrative bodies, who
also has task to protect consumer´s collective interests
administrative fines may be imposed to traders who neglect to
comply with the decisions
used in Estonia, Latvia, Lithuania
Conclusions


the quality of ADR –bodies varies a lot between various MSs
one of the biggest problems has been the coverage of ADRsystem: in many countries there exists several branches of
business where consumers have no access to any ADR -body
EU initiatives




in 2013 EU adopted ADR -directive (2013/11/EU, OJ L 165,
18.6.2013)
the purpose of this directive is

oblige MSs to establish an ADR-system which covers all
consumer disputes (by using the already existing system, if
desired)
• small claims courts are not regarded as ADR -bodies

make certain procedural minimum requirements binding
(previously regulated only by two recommendations)
the ADR -bodies do not to have to produce enforceable
decisions (recommendation or even conciliation is enough)
effects on Nordic countries are much smaller than to the MSs
where the ADR-system is based on private, sectoral boards
6.3. Group Action for Compensation
Group action is a court action in which
1) a plaintiff, either a member or a non-member of a specified
group
2) brings a legal action in a court for the benefit of a specified
group
3) without the express permission of the group members, and
4) this results in a judgement that is binding both for and against
all the members of the group
Based on who the plaintiff may be, group actions may be divided
into three different types:
1) class actions (plaintiff is a private person)
2) actions by organizations (plaintiff is, e.g.,
a consumer or environmental organization)
3) public actions (plaintiff is a state or municipial authority)
In the area of consumer protection, group action can be used:
a) action for injunction
 in most European countries action for injunction is available as
a method to protect consumer´s collectice interests
b) action for compensation
 at this moment this kind action is still quite rare in Europe
outside the Nordic countries
 more common outside Europe (the United States, Canada and
Australia as most famous examples)
Nordic group actions for compensation
1) The Swedish Group Action Act (SFS 2002: 599)


entered into force in January 2003
more than 10 cases altogether
2) The Norwegian Group Action


chapter 35 of the new Norwegian Act on Civil Procedure
entered into force in January 2008
3) The Finnish Group Action Act (444/2007)


entered into force in October 2007
so far no cases
4) The Danish Group Action


entered into force in January 2008
so far at least one pending case
Scope of application:


is in most Nordic countries general: group action is possible in
all kinds of civil disputes on the condition that they fulfil the
general requirements of group actions, e.g.,
1)it is question of disputes where the facts are identical or at
least identical and
2)it is sensible to handle these disputes together in one trial
in Finland scope of application is restricted to only mass
consumer disputes
Types of group action available


in Denmark, Norway and Sweden the plaintiff may be a member
of the group (class action), an organisation, who is protecting
the interests of a certain group of citizens (action by
organisation), or state authority, as the Consumer Ombudsman
(public action)
in Finland only a public action, in which the CO acts as a
plaintiff, is possible
How the group is formed?






in group actions judgements have legal effect for all members
of the group, although they are not parties to the case
there are two opposite ways how the group may be formed: opt
out or opt in
opt out:
•
all persons who fill certain requirements become
automatically members of the group
•
those, who do not want to be members of the group have to
use their right to opt out
opt in:
•
only those persons, who have joined the group by
registration, will be members of the group and will be
covered by the judgement.
in Sweden and Finland only opt in –alternative is available
in Norway and Denmark (in the latter country in public actions
only) also opt out -alternative is possible in mass disputes,
where individual court actions are not sensible, e.g., due to the
fact that the monetary interest of individual cases is so low
The costs of litigation

in all Nordic countries the main rule is that the losing party is
obliged to pay the legal expenses of the winner

in Finland and Sweden only the parties in the group action are
responsible for the costs

in Denmark and Norway the members may become partly
responsible of the legal expenses
•
the ceiling of members´ liability will be decided by the court
already in the beginning of the trial
•
in case the ceiling is individual and not collective, this
makes it possible for the potential members of the group to
assess, whether it is economically sensible to opt in or not
Evaluation of the Nordic group actions
1) who has afford to a group action for compensation?
The major obstacle to the use of group action for compensation in
the Nordic countries is the high costs of litigation
 so far there have been rather few cases, e.g., in Sweden only
1-2 new cases per year since 2003
Several possible ways to reduce the high costs of litigation:
a)no members liability as it is now possible in Denmark and
Norway
b)ceiling for liability to pay the legal expenses of the winner
c)no-cost rule (so called American rule)
d)conditional fee -payment (no results, no payment -system)
e)public or private funding systems (e.g. in Canada)
2) long duration of the procedure




seems also to be one the main problems connected to these
actions
in Sweden many of the started group actions are still pending
cases
usual tactics for defendants: a plea of trial and separate appeal
on the procedural requirements
central questions:

whether the defendant should have a right to make a
separate appeal in the beginning of the procedure if his plea
of trial concerning the preconditions for a group action has
been rejected in the District Court

whether there should be some kind of priority system in the
Courts of Appeal, when these kinds of actions are dealt with
3) the problem of low-value claims





in spite of the fact that the combined monetary interest in the
mass disputes can be millions of euro, the damages suffered
by individual consumers may be rather low
this will often discourage consumers to register when a group
action is based on opt in -model only
one alternative would be the adoption of opt out -model at least
when it is question of low-value claims also in Sweden and
Finland
however, even opt out -model seems to be rather ineffective
when the damages caused to individual group members are,
e.g., only 100 euro or even less.
second alternative: group action for collective compensation of
damages (instead of distribution of the profit, the plaintiff e.g. a
consumer organisation would keep it in order to finance future
actions)
Initiatives in the EU -level
Green Paper on Consumer Collective Redress (COM (2008) 794)
 the problem to solve mass consumer disputes was clearly
recognised
 several alternative legislative option were presented from no
action to binding legislation
 in later hearings consumer organisations were in favour of
binding legislation, but business representatives were against
Commission Recommendation on Collective Redress Mechanisms
(2013/396/EU, OJ L 201, 26.7.2013)
 collective redress mechanisms for compensation actions
should be available in all MSs at latest on summer 2015
 these procedures should follow certain basic principles set out
in the recommendation
 attention is paid on the financing of actions, but on a way
which will probably rise the threshold to start an action instead
of lowering it

e.g. the use of no-cost rule is forbidden
6.4. Cross-border Consumer Disputes
Cross-border consumer disputes:

disputes, where a consumer and a trader are domiciled in
different countries
Typical problems in cross-border consumer disputes:
1)communicative problems

language problems, identification of the trader, etc.
2)what is the applicable law?
3)what dispute settlement bodies are available and have
jurisdiction in case the parties do not reach a settlement in
two-party negotiations
The Applicable Law in Cross-Border Consumer
Contracts
The Rome I Regulation n:o 593/2008


entered into force in December 2009
replaced the Rome Convention on the Law Applicable to
Contractual Obligations from year 1980



except in UK and Denmark
includes an article concerning consumer contracts (art. 6).
According to it, if the trader
1)is carrying on business activities in the country
or
2)is directing such activities to that country where the
consumer has his habitual residence
the contract is governed by the law of that same country
a trader cannot deprive the protection given by the Regulation
by using a choice-of-law clause
Jurisdiction of Courts in Cross-Border
Consumer Disputes
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the starting point: court decisions are traditionally not
enforceable in other countries
The Regulation N:o 44/2001 on Jurisdiction and the
Recognition and Enforcement of Judgments in Civil and
Commercial Matters (OJ L 12, 16.1.2001)
contains a provision (art. 15) which gives protection to
consumers if:
1)it is question of credit or instalment contract connected
to the sale of goods
or
2)it is question of consumer contract and the contract has
been concluded with a trader who
a) is carrying on business activities
or
b) is directing such activities
to the Member State where consumer is domiciled
In case one of these conditions is fulfilled:
1) a consumer is entitled to take legal action against a trader in the
courts of the Member State where he is domiciled (art. 16.1.)
2) proceedings may be brought against a consumer only in the
courts of that Member State where he is domiciled (art. 16.2.)
3) judgment given by the court of the Member State where the
consumer is domiciled may be enforced in an other MS where
the trader has his domicile or property
European Small Claims Procedure Regulation (EU N:o
861/2007, OL L 199, 31.7.2007)
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as a regulation national implementation is not needed
available for cross-border disputes (not necessarily consumer
disputes) where the interest does not exceed 2000 euros
legal action is started by filling a special standard form (found
in the annex of regulation) and lodging it to the competent
court (determined by Bryssel I -regulation) together with the
relevant written evidences
problems:
1)procedure is written, but an oral hearing has to be
arranged if one of the parties insists (art. 5.1.)
2)the standard form should be filled in the language of the
court (art. 6.1.)
3)loser pays all expenses –cost rule is applied (art. 16)
due to these problems the practical relevance of this regulation
is - for cost reasons - more or less questionable
The European Consumer Centres
Network (ECC-Net)
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the starting point: in cross-border litigation the costs are
normally much higher than in purely domestic litigation and
thus form a much higher obstacle to the use of ordinary court
procedure
ECC-Net started in the beginning of year 2005
replaced the former European Extra-Judicial Network (EEJ-Net)
which started as a pilot program in October 2001
The ECC -network is based on
1)at least one European Consumer Centre in each
Member State
2)ADR- bodies in all Member States
 the effects of the new ADR-directive: will the gaps be fulfilled?
The tasks of European Consumer Centres
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1)to give legal advice to consumers who have faced crossborder consumer problems
2)to give assistance in the settlement of disputes by clarifying
the facts and mediating between the disputing parties
3)to serve as a special clearing house in unsettled cases
a)to find out competent out-of-court dispute settlement
body in MS where trader has his domicile
b)to translate consumer´s complaint and send it to the
competent dispute settlement body in an other MS
the idea is that cross-border disputes will be settled in some of
the out-of-court procedures in the Member State where the
trader is domiciled
the existing ADR-bodies in MSs may be found in a database
which is updated by the Commission:
http://ec.europa.eu/consumers/redress_cons/schemes_en.htm
The out-of-court settlement of ecommerce disputes
Consumer Online Dispute Resolution (ODR) Regulation (EU N:o
524/2013, OJ L 165, 18.6.2013)
 will enter into force from the beginning of year 2016
 is applicable for domestic and cross-border consumer disputes
caused by online shopping
 the EU Commission will establish a special European ODR
platform in order to help the settlement of e-commerce
disputes
 ODR -platform is an interactive website which serves as a
single point of entry
 each MS should nominate on ODR -contact point (e.g. their
ECC)
 a special electronic complaint form will be available
 problems:
1) parties have to agree which ADR-body will solve the case
2) also the chosen ADR-body should agree to solve the case
3) language problems?