Legal Perspective

Legal perspective In this feature l CPrs l r v X ltd l interpretation Finding order in chaos After several court cases, Thomas Samuels tries to make sense of a commercial practice the foundation underpinning the Consumer Protection from Unfair Trading Regulations 2008 A nyone engaged in consumer law over the past decade will doubtless be familiar with the Consumer Protection from Unfair Trading Regulations 2008 (the Regulations). On 8 May 2008, they brought into force in the UK the EUs Unfair Commercial Practices Directive, 2005/29/EC (the Directive). The recital to the Directive roughly sets out a three-pronged purpose: to ensure the harmonisation of the internal market by imposing consistent national rules on unfair practices; to protect businesses from the unscrupulous practices of competitors; and, most importantly, to achieve a high level of consumer protection. To achieve these outcomes, the Directive is deliberately broad in scope and language. Theconsequent width in the Regulations has provided trading standards authorities with an almost unlimited tool to crack down on businesses thought to be causing consumer detriment. Equally, and for much the same reason, there was considerable uncertainty in the earliest prosecutions as to how the Regulations operated. Perhaps the most notable ambiguity arose for consideration in R v X Ltd [2013] CTLC 145, in which the Court of Appeal concluded a single event aimed at a single consumer could constitute a commercial practice. That conclusion has now been confirmed by the Court of Justice of the European Union (CJEU) in Nemzeti Fogyasztvdelmi Hatsg v UPC Magyarorszg Kft (case reference C-388/13). Commercial practice within the regulations The concept of a commercial practice is central to the operation of the Directive and, therefore, the Regulations. It underpins each of the TAP TO NAVIGATE PAGES 1 2 3 4 5 6 Credits Published You might also like Thomas Samuels is a barrister at Gough Monday 3 August, 2015 The not so supermarkets July 2015 Square Chambers. Images: axako / Shutterstock To share this page, click on in the toolbar offences created such that, unless the act or omission of the business can be described as a commercial practice, no offence will have beencommitted. It is defined in very general terms by regulation two and similarly in the Directive as: Any act, omission, course of conduct, representation or commercial communication (including advertising and marketing) by a trader, which is directly connected with the promotion, sale or supply of a product to or from consumers, whether occurring before, during or after a commercial transaction (if any) in relation to a product. That definition is ambiguous. It includes reference to Any act, omission, course of conduct, which distinguishes between one-off versus multiple events, suggesting that both fall within the definition. However, it also refers to consumers in the plural, hinting that more than one consumer must be affected by the act or omission in question. Decision in R v X Ltd The first-instance judge in X Ltd considered that a single event was notenough to constitute a commercial practice under the Regulations and, on that basis, threw out the prosecution on a submission of no case to answer. However, the Court of Appeal disagreed. It concluded that a commercial practice can be derived from a single event. It will depend on the circumstances (paragraph 22). In reaching its decision, the court took the view that reference to Any act, omission outweighed the reference to consumers within the definition of commercial practice. Further, any argument TAP TO NAVIGATE PAGES 1 2 3 4 5 6 to the contrary could be satisfactorily dealt with by reference to regulation2(2): In determining the effect of a commercial practice on the average consumer where the practice reaches, or is addressed to, a consumer orconsumers Background to the UPC case UPC related to a dispute arising from a contract between Mr Szab and UPC Magyarorszg Kft, a Hungarian cable television provider. In or around April 2010, with the intention of terminating the agreement, Mr Szab requested information from UPC as to the specific payment period to which his most recent annual invoice related. He was told that it was 11 January 2010 to 10 February 2011 and, therefore, he contracted with a There was new supplier from 11February. However, the much period did not in fact end until 14 February uncertainty in 2011 and Mr Szab was charged for the extra the earliest prosecutions four-day period, during which time he was as to how the also paying his new provider. UPC conceded Regulations operated that the wrong dates had been given because of an unintentional administrative error on their part. Mr Szab made a complaint to the Budapest Consumer Protection Inspectorate and, on 11 July 2011, the inspectorate fined UPC approximately 85. That decision was upheld by the National Office for Consumer Protection on 10 October 2011. UPC then successfully judicially reviewed that conclusion before the TAP TO NAVIGATE PAGES 1 2 3 4 5 6 Budapest Municipal Court, on the ground that an isolated incident could not constitute a commercial practice under the Directive. On appeal, the Hungarian court referred the question to the CJEUfora preliminary ruling on the correct interpretation of commercial practice. Advocate generals opinion Advocate General (AG) Wahls opinion, given on 23 October 2014, began by acknowledging that the broader the interpretation of the Directive, the higher the level of consumer protection. Nevertheless, hestated that conduct directed solely towards a single consumer could not constitute a commercial practice for two reasons. First, for the word practice in the Directive to have any meaning it must refer either to conduct directed towards an unspecified groupof addressees, or to conduct repeated in relation to an individualconsumer. Second, article 3(2) of the Directive (regulation 29 of the Regulations), made the Directive expressly without prejudice to contract law. However, to find that a single incident in relation to a single consumer constituted a commercial practice would mean that a public law remedy pursuant to the Directive could be imposed for each and every contractual breach committed in a business-to-consumer relationship. To do so would go too far beyond the Directives primary purpose of ensuring a high level of consumer protection. TAP TO NAVIGATE PAGES 1 2 3 4 5 6 Judgment of the CJEU Any hopes held by those disappointed by X Ltd arising from AG Wahls opinion were not to be: the CJEU concluded that a single act or omission towards an individual consumer was capable of constituting a commercial practice within the meaning of the Directive. The relevant section of the courts judgment (paragraphs 31 to 60) began by noting that the Directive intended to implement total harmonisation across the EU and reiterated the intention to create a high level of consumer protection. Further, it noted that the Directive was characterised by its deliberately broad drafting. The court then proceeded to consider the requisite elements of the definition of a commercial practice and whether a single event in relation to an individual could properly be said to be incompatible withthem. Three main elements were identified by the court. First, on a proper reading of the definition of commercial practice, the sole criterion was that the act or omission in question was directly connected with the promotion, sale or supply of a product or service to consumers (paragraph 35). Second, that the commercial practice occurred before, during or after the performance of a contract entered into between a business and a consumer (paragraph 36). Third, the commercial practice had to contain false information so as to be regarded as misleading (paragraph 39). On the basis that all of those elements were met in the case of a single complaint in relation to an individual consumer, an offence would have been committed. The CJEU concluded briefly as follows: In this regard, it should be TAP TO NAVIGATE PAGES 1 2 3 4 5 6 stated that the fact that the action of the professional concerned took place on only one occasion and affected only a single consumer is immaterial in this context. (Paragraph 41). In reaching that conclusion, the court considered that there were practical difficulties with UPCs interpretation. First, the relevant threshold was uncertain: where, in terms of frequency or number of consumers, would something become a commercial practice? Second, such an argument implied that it was for consumers to prove that they had all been harmed by the same business in the same way, which would be extremely difficult. Analysis of UPC The decision in UPC is probably correct: neither the Directive nor our domestic Regulations contain anything to explicitly suggest that a single event directed towards a single consumer should be excluded from their scope. Indeed, in regulation 2(2) and the blacklist at Schedule 1 to the Regulations, there are multiple references to the consumer (rather than consumers). Any interpretation to the contrary would have to imply such wording and would diminish the level of protection afforded to consumers accordingly. Certainly the court However, as is often the case in CJEU appears to have judgments, from the perspective of a British sidestepped any lawyer the reasoning in UPC is frustratingly serious analysis of the definition laconic. Certainly the court appears to have of commercial practice sidestepped any serious analysis of the definition of commercial practice. Moreover, the words in this context at paragraph 41 of the judgment (above) teasingly leave the door open for the opposite conclusion in another case at another time. However, without any further explanation, it is difficult to see how or why that might occur. TAP TO NAVIGATE PAGES 1 2 3 4 5 6