President. – The next item is the oral question to the Commission by Erminia Mazzoni and Malcolm Harbour, on behalf of the Committee on the Internal Market and Consumer Protection, on misleading business directories (Ο-000087/2011 – Β7-0315/2011).
Simon Busuttil, deputising for the author. – Madam President, two and a half years ago, I presented to this plenary a report on misleading business directories. The message that this Parliament gave was clear: that there is a serious problem with fraudulent practices by misleading business directories, that tens of thousands of our small businesses, voluntary organisations, and even charities, are falling victim to these fraudulent practices, and that we need a concerted approach to stop once and for all such deceptive practices.
Two and a half years later, unfortunately, we are back here in plenary to discuss the same subject because there has been a serious lack of action to combat the problem of misleading business directories. This is not acceptable.
Let me remind colleagues what we are talking about here. Basically, what this involves is that a misleading business directory sends out a form, which appears to simply request people to update their own personal details or their business details, in return for what appears to be a free entry, a free listing in the business directory. At first glance, one does not notice any cost, any payment that might result from filling in this form. However, after submitting the form, victims receive a letter demanding payment of EUR 1 000 per year for three consecutive years. If they do not pay, the misleading business directories resort to what are essentially bullying tactics: harassing telephone calls, threats of legal action and pursuit by debt collectors.
The most worrying thing is that such illegal tactics are being used under the very noses of the authorities of several Member States, who are well aware of these practices and have not taken any action to stop them. The European City Guide, Construct Data, TEMDI, EU Business Services, World Business Directory, Expo Guide and DAD are still operating unabated. The Commission has already stated that such misleading practices are against EU law, but it has not done enough to stop them. This is why we are here today.
Eija-Riitta Korhola, deputising for the author. – Madam President, the volume of complaints regarding misleading directory companies shows that this is a serious problem for SMEs. Rogue business directory companies are both inflicting financial damage and harassing small companies. In the period from 2003 to mid-2008, nearly 14 000 complaints and enquiries were documented. Hundreds of letters of complaint are still being received from new victims.
The difficulties involved in tracking down activities of this nature undermine the very functioning of the Internal Market. Misleading practices are illegal under the Misleading and Comparative Advertising Directive and the Unfair Commercial Practices Directive.
But there is a lack of effective legal remedies and enforcement. The Internal Market and Consumer Protection Committee, as the committee responsible for the legislation, has recently taken up this issue with the Dutch authorities, drawing their attention to fraudulent practices by a business directory company established in the Netherlands.
The answer of the Dutch authorities clearly shows that Member States are mostly concerned about what happens in their own territory. I believe that given the cross-border nature of the problem, more cooperation between Member States on enforcement would also be absolutely crucial to stop the fraudulent practices.
The Commission could itself take a more active role in working together with the Member States on cross-border enforcement using existing EU-wide networks to facilitate cooperation between the Member States. More emphasis should be placed on effective and dissuasive sanctions against such fraudulent practices in all Member States, which would put such directory companies out of business and enable those who run them to be punished.
It should be envisaged to extend the scope for the Unfair Commercial Practices Directive to encompass all commercial practices in a business-to-consumer relationship, whether aiming at the protection of consumers or competitors. In that way, most if not all unfair business-to-business commercial practices in the retail sector would be covered and governed by the same set of rules as unfair business-to-consumer commercial practices, with which they generally overlap.
It is also important to help businesses combat the scam by improving access to information and awareness raising by improving redress mechanisms. I wish to ask the Commissioner: what are the major obstacles for stronger involvement of state authorities in cross-border enforcement cooperation, and what measures does the Commission envisage in the fight against rogue directory companies?
Günther Oettinger, Member of the Commission. – (DE) Madam President, honourable Members, the Commission shares the European Parliament’s concerns and misgivings and its critical analysis of this issue. The misleading practices of business directories are causing problems for numerous companies. Three years ago, we commissioned a survey and received thousands of complaints. We can only assume that this is just the tip of the iceberg, which means that the number of businesses that feel they have been misled could be many times greater.
Mrs Reding, the Commissioner responsible for justice, fundamental rights and citizenship, is currently collecting data in order to establish the scope of the problem. I want to emphasise the fact that practices of this kind are already banned under the terms of Directive 2006/114/EC concerning misleading and comparative advertising and of anti-fraud legislation in the various Member States. However, some of these fraudulent practices take place across national borders and are used in business transactions between different companies and, as things currently stand, it is difficult to prosecute the perpetrators.
In order to address and resolve this problem, Mrs Reding plans to issue a communication by the end of the year which will report on the status of the implementation of the existing directive concerning misleading and comparative advertising and on the current opportunities for revising it and which will provide an evaluation of the situation. She is considering improving the content and looking at the conclusions to be drawn from misleading practices. She is also focusing on how the cooperation between the national authorities on the prosecution of cross-border cases can be improved.
She also plans to propose that citizens and companies should be made more aware of the growing problem of misleading business directories and to highlight the need for more public relations activities in this area. The 2006 directive has been implemented by all the Member States. Nevertheless, the Commission has asked the Member States to inform us about the implementation and the measures they have taken and to submit a status report as soon as possible, before the planned communication is issued. This process was supported by a conference organised at the end of May by the Commission involving national authorities, interest groups and independent experts. The conference focused on the fraudulent practices of business directories and, in particular, cross-border activities.
During the debate, it became clear that better and more systematic cooperation between the authorities in the Member States is needed and this will be incorporated into Mrs Reding’s communication at the end of the year. I can assure you that we see this issue as being just as urgent as you do. This is why we want to take the next steps as quickly as possible. However, for formal reasons, we must ensure that those businesses which are affected are involved in an appropriate way and, therefore, we need the time to do this. On the basis of the results of the consultation process and after examining all the arguments, the Commission intends to take further corrective measures to prevent misleading and illegal cross-border practices. Thank you very much for your broad support on this matter.
Georgios Papanikolaou, on behalf of the PPE Group. – (EL) Mr President, Commissioner, no one could disagree with what you have said. I wish to relate the trouble suffered by a fellow Greek, who complained to me about a similar misadventure as the result of misleading advertising and gave me all the relevant documents. It says at the top of the letter sent out by the misleading company that the information is free of charge. Seeing that he had to enter certain information, my fellow countryman entered the information and sent off the letter. In tiny print at the bottom of the letter, it said, as Mr Busuttil said earlier, that he had to pay EUR 1 000 a year. Some time after that, the alleged legal department of the company sent out letters, which I have here, asking my fellow countryman to pay EUR 3 529.38, which apparently included interest and the company’s legal costs.
Commissioner, obviously, there is a legislative framework. However, we do not know if these directives are being applied and have been adequately transposed by the Member States. The Stockholm programme says that we need to address these issues directly. We stand next to our fellow citizens; we are involved in their day-to-day problems. Our fellow citizens need to understand that we are not in some far off place, that we do not deal only with major European issues. We are with them in their day-to-day lives. We need to resolve this issue immediately.
Monika Flašíková Beňová, on behalf of the S&D Group. – (SK) Madam President, it is clear, first and foremost, that these companies are not only misleading, but are also fraudulent.
Entrepreneurship is meaningful insofar as it contributes to society as a whole, but if someone engages in pseudo-business in order to lure other, honest traders and companies to a directory purely for the sake of their own enrichment, and in doing so uses subterfuge, this is downright fraud, no matter how much they protest that they are not doing anything illegal. Nor should we lose sight of the fact that these directory company practices clearly are outside the law according to the directive on misleading and comparative advertising.
Nevertheless, there is no need to introduce new legislation. Rather, we should be concentrating on applying the law in practice as quickly and effectively as possible. The problem is that these companies often swoop on undertakings in another EU Member State, and these frequently small family businesses either do not have the knowledge or the ability to put up a legal defence, or find that it will cost them a lot of money and effort. I have only one additional question: does the Commission believe there is scope for a public campaign to name the individual companies involved and call on honest business not to associate with them?
Marian Harkin, on behalf of the ALDE Group. – Madam President, I would say to the Commissioner that over the last number of years, I have met many Irish citizens who have been victims of misleading business directory companies.
For example, I met a school secretary who paid over EUR 2 000 because the school could not afford to pay it as she felt responsible because she had signed the form. She also felt very foolish. She thought nobody could be so stupid as to do what she had done, not realising of course that this happens to people all the time.
I met an elderly lady whose husband was a taxi driver. She received a form on which there were some errors. She merely thought she was correcting the errors, sent the form back and subsequently received threatening letters for two years. She was terrorised by those letters to the extent that she was afraid to open the letter when it arrived at her door. I could not tell her not to pay the money. All I could say was that if I were in her position, I would not pay the money. That was the best advice I could give her.
There are lots of other examples, which I know you have heard. The truth is that citizens expect to be protected by European legislation and they cannot understand why European legislation does not protect them in this respect. There is an ambiguity here. As I said, I tell citizens that I believe that they are protected, but I cannot guarantee it. It is my understanding, for example, that one of these companies was convicted in one region of Spain, and yet all it did was simply move to another region and continue its work.
One of the matters that concerns citizens is that they are not sure of how legal systems operate in other countries. They may feel that within their own Member State they will be protected, but they are not sure what happens in another Member State. Equally, if these companies move outside the EU, they also have concerns about that.
It is good to hear, therefore, that the Commission shares our concern and that it is pushing for cooperation between Member States and again looking at cross-border cases and trying to inform citizens and companies.
Commissioner, you said the situation was urgent, but it has been urgent for a very, very long time. Citizens see many areas where EU legislation impacts on their lives, and so they cannot understand why they are not protected from fraudulent companies. I would ask you, Commissioner, to understand that the word ‘urgent’ means ‘now’.
Struan Stevenson, on behalf of the ECR Group. – Madam President, I absolutely agree with what Mrs Harkin has just said. In my constituency in Scotland, it is the elderly and people who run bed-and-breakfast establishments or self-catering holiday cottages that fall foul of this criminal activity. They enter addresses into this directory and then receive a bill for a thousand euro. The elderly are terrified when they get these threatening letters from the supposedly legal representatives of these companies.
This is a cross-border criminal activity. These companies give their identities and they give their addresses. We have to track them down, close them down, prosecute them and protect the citizens of the European Union. When any member of the public contacts me in my constituency, I simply say to them to write back to the company and tell it to send all future correspondence to me. They never hear another thing. However, these people must also be imprisoned.
Keith Taylor, on behalf of the Verts/ALE Group. – Madam President, this motion is badly needed. Even though we have the 2006 directive, it is plain that it is not working as well as it should. The companies we have heard of exist solely to swindle unsuspecting and sometimes over-stretched organisations, and I find that particularly outrageous when they are damaging community enterprises, often with limited budgets.
Using tactics like those of bully-boys and racketeers, they dangle promises in front of unsuspecting people, but I think the message has got to be that if an offer seems to be too good to be true, then most probably it is. These companies are like predatory sharks and they should be stopped.
Certainly, our group welcomes this resolution, it is very timely and we will be supporting it, as it calls on the Commission to require Member States to adequately enforce the directive.
Derek Roland Clark, on behalf of the EFD Group. – Madam President, I know the European City Guide best and, in spite of attempts to close it down, this menace continues. In the UK in May 2008, the Misleading Marketing Regulations came into force. They outlaw using the small print of any document to hide the true cost of a service. So the Office of Fair Trading can now take action against UK companies, but there is a serious drawback.
The OFT does not have jurisdiction to tackle any scams from elsewhere, including from other Member States, so the problem continues and I continue to receive my share of complaints. More to the point, while they may operate elsewhere due to lax policing, why can my own government not prevent what comes from mainland Europe? The answer to that lies at the heart of this useless EU, which has demolished national frontiers. The free movement of people, goods and services provides perfect cover for the people traffickers, the terrorists and for threatening, traumatising scams aimed at fleecing the unwary.
Philippe Boulland (PPE). – (FR) Madam President, Commissioner, ladies and gentlemen, we can summarise in figures the situation regarding misleading business directories that are supposed to be free. Four hundred petitions have been sent to the European Parliament’s Committee on Petitions. Fifty thousand very small businesses, associations or organisations have been affected and harassed into paying. An average of EUR 1 000 is required to be paid over three years for unwanted contracts, as Mr Busuttil has already mentioned.
These figures only partly reflect the suffering of the victims of these scams. These people are already taking risks by starting up their company, and quickly have to face the challenges of business, the economic crisis and the uncertainties of the future. We must prevent them from being subjected to these fraudulent practices, which they do not have the financial or human resources to resist.
Several proposals are possible: firstly, we must put a stop to these scams that are weakening our economy. To do so, Commissioner, it would be advisable to speed up the revision of the Misleading and Comparative Advertising Directive, in light of the fact that fraudulent advertising is increasing and becoming more sophisticated.
We should then create a blacklist of these companies, serving as a reference based on the principle of ‘naming and shaming’. With help from the national authorities responsible for fighting fraud and from the affected businesses, we could have a simple and effective tool for deterrence and prevention. Finally, we must severely punish those involved in this system. The penalties and fines incurred are often lower than the amounts collected in these scams. We should encourage Member States to be stricter in this area.
Evelyne Gebhardt (S&D). – (DE) Madam President, Mr Oettinger, the Commission shares the European Parliament’s concerns. This is very nice, but we have been waiting for years for the Commission to take action and to make some genuine progress in this area. We have Mr Busuttil’s report in front of us. In the last parliamentary term, the Committee on the Internal Market and Consumer Protection repeatedly highlighted the fact that we finally need to do something to help people. The problem is that people are still waiting for this help to arrive.
Many of the small voluntary organisations that are affected do not have the financial means or the chutzpah to defend themselves. Only last week I received another letter asking: ‘How can I defend myself? I do not have the money for a lawyer, so I cannot take legal proceedings’. I believe that we must finally give the citizens of Europe an effective means of ridding themselves of this problem.
Catherine Stihler (S&D). - Madam President, dodgy scams, which are fraudulent in nature and prey on small businesses using a veil of legitimacy – often with Europe in their titles – must be made illegal. These scams do not just damage small businesses, which are threatened, harassed and bullied into paying fees for something they believed to be free; they damage the European Union when we do not take firm action to help.
It is the mantra of the European Commission, after all, to ‘think small first’, yet I have been raising this issue, as many colleagues have said, for many, many years, and yet no direct action has been taken: why not? We hear about surveys, information gatherings, and stakeholder meetings. We need action not words, and if we say that we will only wait to the end of this year, or give it another few years, then that is just too little too late: we must act now.
So, given the nature of these scams and their EU-wide and cross-border nature, will the Commission consider introducing a form of legal aid to assist SMEs in tackling these scams? These types of scams will continue until the Commission takes tough action.
Phil Prendergast (S&D). - Madam President, the European Parliament has received hundreds of petitions from small businesses across the EU who claim to have fallen victim to these schemes. While paying these outrageous fees may put innocent companies under severe financial hardship, the victims are often too small to afford the legal costs of bringing actions against these directory companies.
These companies often target victims that are based in another Member State. This creates legal uncertainty for the victims, as they often do not know what the legal status is of such contracts in another country. The directory companies play on that uncertainty.
Whilst the Commission has clearly stated that the directive on misleading and comparative advertising outlaws the misleading practices of these directory companies, it must also look at the transposing of that directive by the Member States in order to clarify whether citizens are protected equally across Europe. The fact that this directive has been transposed by Member States does not necessarily mean that these measures are either comprehensive or in conformity with one another.
Sylvana Rapti (S&D). – (EL) Madam President, unfair commercial practices are like water. As soon as they find a crack, in they go. They have found two cracks here. One crack is the 2006 directive, which has already been mentioned; the other crack is the regulation on cooperation between the Member States.
Commissioner, as you have the support of all the factions in Parliament, of the entire Parliament, you should act quickly, because time is money. As my fellow Members have already said, at least three years have passed, three years during which these people, these hustlers, as they have rightly been called by numerous fellow Members – and I am with them – are misleading colleagues and are misleading small and medium-sized enterprises, which are the backbone of the European economy. You need to act and to act quickly.
Marc Tarabella (S&D). – (FR) Madam President, Commissioner, ladies and gentlemen, it is indeed vital to know whether the directive on misleading and comparative advertising has been properly transposed and applied in the Member States. However, we must also quickly and fully address other fundamental aspects of this problem, which can also be applied to other forms of cross-border scams.
Firstly, the Commission, Member States and their organisations must provide consumers with information upstream. It is unacceptable that more and more citizens are being scammed.
Secondly, victims should have access to class actions in order to assert their rights. We have been waiting for these actions for over 20 years.
Thirdly, the current discussion on the reform of alternative dispute resolutions could also include provisions to deal with these scams.
Commissioner, we expect you to take swift and concrete measures in this regard.
Seán Kelly (PPE). - Madam President, the position is exactly as colleagues have pointed out. I know this because in my own constituency, particularly in Cork, a company called the European City Guide has been fraudulently engaging with businesses all over the place. Despite the fact that, as I understand it, it was asked to cease trading by the high court in Catalonia in 2001 and was found to be guilty of misleading practices in the Belgian courts and by the United Kingdom Office of Fair Trading, it continues to trade. This is not good enough.
It is very important that we do two things: firstly, we have to try and raise awareness amongst businesses right across Europe to ensure they are vigilant and do not fall foul of these misleading companies and, secondly, we have to bring in legislation that ensures that, when they are taken to court, they either cease trading or are put behind bars. It is as simple as that.
Zuzana Roithová (PPE). – (CS) Madam President, Parliament has received over 400 petitions, and I myself have received many complaints from businesses, non-profit organisations, schools, charities and even government institutions which have become victims of the fraud perpetrated by business directory companies. They make costly financial commitments in the belief that they are updating their information. The operations of rogue directory companies are deliberately managed across borders or from third countries. We need a clear pan-European solution, but the European Commission, which holds the legislative initiative, has done nothing for years, despite all the efforts of the European Parliament.
In my role as shadow rapporteur, I have put forward numerous solutions in Parliament’s report. In reality, all the Commission need do is propose blacklisting these prohibited deceptive advertising practices under the relevant directive. We need a robust European legislative solution, and we need it quickly.
I urge the Commission to apply the accelerated legislative procedure. Many honest citizens have lost a lot of money because of the Commission’s blameworthy laxity in this case. In my opinion, a Europol investigation is also warranted.
Olga Sehnalová (S&D). – (CS) Madam President, the unfair practices of some of these so-called business directory companies continue to pose a serious problem. Their operations always rely primarily on circumventions of the law and on very poor law enforcement. Many entities are deterred from taking legal action by the cost. Conversely, there have been many instances of absurd judgments based on the formalistic approach taken by judicial and other supervisory bodies.
What these swindlers mostly rely on, however, is the poor level of legal knowledge among the institutions responsible and, regrettably, their lack of willingness and courage in many cases, and a certain indolence. Their formalistic interpretation of the law allows them to avoid getting involved, to avoid prosecuting these cases, and to wash their hands of them. Paradoxically, it is then the swindlers’ interests that are protected rather than their victims.
The question put to the Commission rightly asks how the Member States approach this issue. How have they applied the directive on misleading and comparative advertising? Unless the state plays an active and not just a formal role, this problem will remain truly intractable and the petitions from defrauded victims will accumulate. And yet we are not powerless in this matter.
Andreas Schwab (PPE). – (DE) Madam President, Mr Oettinger, the Group of the European People’s Party (Christian Democrats) strongly supports the move to free small and medium-sized businesses from the menace of business directories, which allegedly provide a service for these companies, but which ultimately do not have any real consequences except invoices. However, as you, Mr Oettinger, have rightly said, Directive 2006/114/EC provides a legal basis for this which has obviously not been successfully implemented in some Member States. Therefore, I hope that the Commission will tackle the root of the problem and take a systematic approach to resolving it as quickly as possible in the Member States where the situation is particularly bad. Of course, because of the cross-border nature of the entries, the problem can spill over from these Member States into other neighbouring countries.
A broad-brush approach will not work in this case because it is clear that the problem lies with certain Member States.
Elena Băsescu (PPE). – (RO) Madam President, business directories are one of the most widely used sources of information about the offerings available in a particular business sector. They enjoy a high standing among European consumers thanks to their prestige. This is why misleading business directories cause harm to the people who use them. This practice can be ended by implementing the directive on misleading and comparative advertising properly. Unfortunately, not all Member States have transposed this text into their legislation. This means that the victims cannot be compensated for the harm they have suffered. Revising the directive would provide the instruments needed to combat this practice. Supplementing EU legislation with specific provisions would also limit the appearance of misleading business directories. I think that the victims of these practices must have the opportunity to have direct recourse to the justice system.
Gerald Häfner (Verts/ALE). – (DE) Madam President, Mr Oettinger, ladies and gentlemen, it seems to me that this is really a European problem. Everyone is familiar with these cases and we are hearing stories from a number of different countries. I have a whole stack of these cases on my desk and I admit that I would have fallen for most of them. The problem is, and we have covered this on numerous occasions, we have Directive 2006/114/EC, we discussed the matter in 2008 in the Committee on Petitions, and we have held debates here in plenary, but the problem is continuing and even growing in size.
Mr Oettinger, I heard what you said at the beginning and I have the impression that the problem has landed with you. Perhaps a new Commissioner will have a new opportunity to take action in this area. I would like to ask you to take the problem seriously. It may seem to be a small problem, but it has a serious economic impact and it affects small, medium-sized and family-run companies in particular and they form the backbone of our national economies and our society. If we do not succeed in stopping this in all the Member States and in implementing the directive uniformly and effectively throughout Europe, even greater damage will be caused.
Günther Oettinger, Member of the Commission. – (DE) Madam President, honourable Members, I am grateful for the wide-ranging and consistent description of the situation given by the committed Members who are here today. I will inform Mrs Reding about this and encourage her to draw up a comprehensive communication covering the strengths and the weaknesses of current European and national law and to revise the directive on this basis.
It is clear that the 2006 directive has been implemented by the Member States. Therefore, this is not primarily a problem of adapting national law. Firstly, in the event of cross-border problems, the law is often not even applied in many cases, as a result of the less than ideal cooperation between the authorities in the different Member States, and, therefore, these cases are not investigated at all. Secondly, there is often a failure to prosecute. Criminal law is a matter for the Member States, both in terms of setting penalties and of formal investigations of these cases by the authorities, public prosecutors or the courts.
Thirdly, and now I am coming to the heart of the matter, the 2006 directive only covers unfair practices in business dealings between businesses and consumers and not between one business and another. This means that it mainly provides protection for private citizens against these fraudulent companies. It does not protect citizens who are entrepreneurs, sole traders, retailers, businesspeople and tradesmen or who own small or medium-sized businesses against this type of fraud. However, it is precisely this point, extending the scope of the directive to include business dealings between companies, which was opposed by the majority of the Member States during the legislative process at the time. This means that we quite deliberately restricted ourselves on the basis of this directive to European regulation of dealings between fraudulent companies and citizens and not between fraudulent companies and small businesses. European regulation of the issue which you are rightly complaining about on the basis of practical experience was not wanted at the time.
The directive was an ambitious European project and, at the time, the Commission was concerned that the whole proposal would be sabotaged and that there would be no directive at all if it had insisted on extending the directive beyond the relationship between fraudsters and citizens. In the light of the specific examples you have mentioned here and the cases of abuse uncovered by the Commission, it may be possible to broaden the scope of the directive beyond the relationship between fraudulent companies and citizens in the revision which is due to take place next year. We will start work on this immediately.
Finally, there are Member States which have satisfactory provisions under substantive and criminal law covering the relationship between fraudsters and citizens and which prosecute cases of this kind. Good examples include Austria, Belgium and France. There are other Member States, and you have referred to some of them here, where the national regulations are not adequate. We must wait and see whether these Member States will be prepared in the Council in a year’s time to vote in favour of a general, EU-wide, standardised regulation to protect citizens who are also businesspeople.
President. – I have received one motion for a resolution from the Committee on Petitions tabled in accordance with Rule 115(5) of the Rules of Procedure(1).
The debate is closed.
The vote will take place today at 12:00.
Written statements (Rule 149)
Ildikó Gáll-Pelcz (PPE), in writing. – (HU) The problem is real, unfortunately very widespread and can be observed almost across the whole European Union. The victims sign a contract in good faith to be advertised in a business directory after having been led to believe that this would be free of charge. Then the operators require payment on different grounds, and continuously harass, put under psychological stress and even threaten with legal action those who do not pay up. A review as to whether the corresponding Union law is effectively implemented by Member States is inevitable in order to avoid further misleading advertising and, if necessary, a new amendment of the relevant Union law should be proposed in order to solve the current problem. The most important thing now is to demonstrate to the enterprises in trouble that we not only understand their plight but also fully support them. At the same time, it is imperative to ask misleading business directory companies to cease and desist their deliberately misleading business activities, because they are contrary to the spirit of the Union’s competition policy.