RECOMMENDATION FOR SECOND READING 

7.2.2005 - (11630/2/2004 – C6‑0190/2004 – 2003/0134(COD)) - ***II

on the Council common position for adopting a directive of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC and European Parliament and Council Directives 97/7/EC, 98/27/EC and 2002/65/EC and European Parliament and Council Regulation (EC) No /2004 ("Unfair Commercial Practices Directive")
Committee on the Internal Market and Consumer Protection
Rapporteur: Mercedes Bresso

Errata/Addenda

• ERR01 (PDF - 112 KB)
• ERR01 (DOC - 39 KB)

Amendments

• 001-019 (PDF - 126 KB)
• 001-019 (DOC - 50 KB)

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

on the Council common position with a view to adopting a directive of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC and European Parliament and Council Directives 97/7/EC, 98/27/EC and 2002/65/EC and European Parliament and Council Regulation (EC) No /2004 ("Unfair Commercial Practices Directive") (11630/2/2004 – C6‑0190/2004 – 2003/0134(COD))

(Codecision procedure: second reading)

The European Parliament,

–   having regard to the Council Common Position (11630/2/2004 – C6‑0190/2004),

–   having regard to its position at first reading[1] on the Commission´s proposal to the Parliament and the Council (COM(2003)0356)[2],

–   having regard to Article 251(2) of the EC Treaty,

–   having regard to Rule 62 of its Rules of Procedure,

–   having regard to the recommendation for second reading of the Committee on the Internal Market and Consumer Protection (A6‑0027/2005),

1.  Amends the common position as follows;

2.  Instructs its President to forward its position to the Council and Commission.

Council common position	Amendments by Parliament
Amendment 1 RECITAL 7
(7) This Directive addresses commercial practices directly related to influencing consumers' transactional decisions in relation to products. It does not address commercial practices carried out primarily for other purposes, including for example commercial communication aimed at investors, such as annual reports and corporate promotional literature. It does not address legal requirements related to taste and decency which vary widely among the Member States. Commercial practices such as, for example, commercial solicitation in the streets, may be undesirable in Member States for cultural reasons. Member States should accordingly be able to continue to ban commercial practices in their territory, in conformity with Community law, for reasons of taste and decency even where such practices do not limit consumers' freedom of choice.	(7) This Directive addresses commercial practices directly related to influencing consumers' transactional decisions in relation to products. It does not address commercial practices carried out primarily for other purposes, including for example commercial communication aimed at investors, such as annual reports and corporate promotional literature. It does not address legal requirements related to taste and decency which vary widely among the Member States. Commercial practices such as, for example, commercial solicitation in the streets, may be undesirable in Member States for cultural reasons. Member States should accordingly be able to continue to ban commercial practices in their territory, in conformity with Community law, for reasons of taste and decency even where such practices do not limit consumers' freedom of choice. Full account should be taken of the context of the individual case concerned when applying this Directive, in particular the general clauses hereof.
Amendment 2 Recital 17
(17) It is desirable that those commercial practices which are in all circumstances unfair be identified to provide greater legal certainty. Annex I therefore contains the full list of all such practices. These are the only commercial practices which can be deemed to be unfair without a case-by-case assessment against the provisions of Articles 5 to 9.	(17) It is desirable that those commercial practices which are in all circumstances unfair be identified to provide greater legal certainty. Annex I therefore contains the full list of all such practices. These are the only commercial practices which can be deemed to be unfair without a case-by-case assessment against the provisions of Articles 5 to 9. The list may only be modified by revision of the Directive.
Amendment 3 Recital 18
(18) It is appropriate to protect all consumers from unfair commercial practices; however the Court of Justice has found it necessary in adjudicating on advertising cases since the enactment of Directive 84/450/EEC to examine the effect on a notional, typical consumer. In line with the principle of proportionality, and to permit the effective application of the protections contained in it, this Directive takes as a benchmark the average consumer as interpreted by the Court of Justice but also contains provisions aimed at preventing the exploitation of consumers whose characteristics make them particularly vulnerable to unfair commercial practices. Where a commercial practice is specifically aimed at a particular group of consumers, such as children, it is desirable that the impact of the commercial practice be assessed from the perspective of the average member of that group. The average consumer test is not a statistical test. National courts and authorities will have to exercise their own faculty of judgement, having regard to the case-law of the Court of Justice, to determine the typical reaction of the average consumer in a given case.	(18) It is appropriate to protect all consumers from unfair commercial practices; however the Court of Justice has found it necessary in adjudicating on advertising cases since the enactment of Directive 84/450/EEC to examine the effect on a notional, typical consumer. In line with the principle of proportionality, and to permit the effective application of the protections contained in it, this Directive takes as a benchmark the average consumer, who is reasonably well-informed and reasonably observant and circumspect, as interpreted by the Court of Justice, and taking into account social, cultural and linguistic factors, but also contains provisions aimed at preventing the exploitation of consumers whose characteristics make them particularly vulnerable to unfair commercial practices. Where a commercial practice is specifically aimed at a particular group of consumers, such as children, it is desirable that the impact of the commercial practice be assessed from the perspective of the average member of that group. It is therefore appropriate to include in the list of practices which are in all circumstances unfair a provision which, without imposing an outright ban on advertising directed at children, protects them from direct exhortations to purchase. The average consumer test is not a statistical test. National courts and authorities will have to exercise their own faculty of judgement, having regard to the case-law of the Court of Justice, to determine the typical reaction of the average consumer in a given case.
Amendment 4 ARTICLE 3, PARAGRAPH 5
5. For a period of six years from [3]*, Member States shall be able to apply national provisions within the field approximated by this Directive which are more restrictive or prescriptive than this Directive and which implement directives containing minimum harmonisation clauses. These measures must be essential to ensure that consumers are adequately protected against unfair commercial practices and must be proportionate to the attainment of this objective. The review referred to in Article 18 may, if considered appropriate, include a proposal to prolong this derogation for a further limited period.	5. For a period of six years from [4]*, Member States shall be able to continue to apply national provisions within the field approximated by this Directive which are more restrictive or prescriptive than this Directive and which implement directives containing minimum harmonisation clauses. These measures must be essential to ensure that consumers are adequately protected against unfair commercial practices and must be proportionate to the attainment of this objective. The review referred to in Article 18 may, if considered appropriate, include a proposal to prolong this derogation for a further limited period.
_______________________	_______________________
* 24 months after the entry into force of this Directive.	* 24 months after the entry into force of this Directive.
Justification
It is clear from this article that the intention is to move gradually towards maximum harmonisation. It is therefore better not to allow the Member States to use the time margin allowed them in which to legislate more strictly than this Directive allows in order to increase still further any difference between existing national legislation and this Directive.
Amendment 5 ARTICLE 5, PARAGRAPH 3
3. Commercial practices which reach the generality of consumers, but are likely to materially distort the economic behaviour only of a group of consumers who are particularly vulnerable to the practice or the underlying product because of their mental or physical infirmity, age or credulity in a way which the trader could reasonably be expected to foresee, shall be assessed from the perspective of the average member of that group. This is without prejudice to the common and legitimate advertising practice of making exaggerated statements or statements which are not meant to be taken literally.	3. Commercial practices which are likely to materially distort the economic behaviour only of a clearly identifiable group of consumers who are particularly vulnerable to the practice or the underlying product because of their mental or physical infirmity, age or credulity in a way which the trader could reasonably be expected to foresee, shall be assessed from the perspective of the average member of that group.This is without prejudice to the common and legitimate advertising practice of making exaggerated statements or statements which are not meant to be taken literally.
Amendment 6 Article 5, paragraph 5
5. Annex I contains the list of those commercial practices which shall in all circumstances be regarded as unfair.	5. Annex I contains the list of those commercial practices which shall in all circumstances be regarded as unfair. The same single list shall apply in all Member States and may only be modified via revision of this Directive.
Amendment 7 ARTICLE 6, PARAGRAPH 1, POINT (G)
(g) the consumer's rights, or the risks he may face.	(g) the consumer's rights, including the right to replacement or reimbursement under Directive 1999/44/EC of the European Parliament and ofthe Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees1, or the risks he may face. ___________ 1 OJ L 171, 7.7.1999, p. 12.
Justification
This amendment stresses, in this specific context, the consumer's right to make an informed choice, taking up Parliament's resolution of 13 March 2003 on the implications of the Commission Green Paper on European Union Consumer Protection for the future of EU consumer policy (Patrie report, P5_TA(2003)0101), as well as an amendment adopted by Parliament at first reading.
Amendment 8 ARTICLE 7, PARAGRAPH 2
2. It shall also be regarded as a misleading omission when a trader hides or provides in an unclear, unintelligible, ambiguous or untimely manner such material information as referred to in paragraph 1 or fails to identify the commercial intent of the commercial practice if not already apparent from the context.	2. It shall also be regarded as a misleading omission when a trader, taking into account the matters described in paragraph 1, hides or provides in an unclear, unintelligible, ambiguous or untimely manner such material information as referred to in that paragraph or fails to identify the commercial intent of the commercial practice if not already apparent from the context and where, in either case, this causes or is likely to cause the average consumer to take a transactional decision that he would not have taken otherwise.
Justification
Legal certainty is improved by specifying the transactional decision test.
Amendment 9 ARTICLE 10, PARAGRAPH 1 A (new)
	Recourse to such control bodies shall never be deemed the equivalent of foregoing a means of judicial or administrative appeal as provided for in Article 11.
Justification
Recourse to codes of conduct is optional and cannot replace the means of judicial and administrative appeal provided for in Article 11 of the Directive.
Amendment 10 ARTICLE 11, PARAGRAPH 1
1. Member States shall ensure that adequate and effective means exist to combat unfair commercial practices and for compliance with the provisions of this Directive in the interest of consumers.	1. Member States shall ensure that adequate and effective means exist to combat unfair commercial practices in order to enforce compliance with the provisions of this Directive in the interest of consumers.
Amendment 11 ARTICLE 18, PARAGRAPH 1
1. The Commission shall not later than four years after…submit to the European Parliament and the Council a comprehensive report on the application of this Directive, in particular of Article 4 and Annex I, on the scope for further harmonisation and simplification of Community law relating to consumer protection, and, having regard to Article 3(5), on any measures that need to be taken at Community level to ensure that appropriate levels of consumer protection are maintained. The report shall be accompanied, if necessary, by a proposal to revise this Directive or other relevant parts of Community law.	1. The Commission shall not later than four years after…submit to the European Parliament and the Council a comprehensive report on the application of this Directive, in particular of Articles 3(9) and 4 and Annex I, on the scope for further harmonisation and simplification of Community law relating to consumer protection, and, having regard to Article 3(5), on any measures that need to be taken at Community level to ensure that appropriate levels of consumer protection are maintained. The report shall be accompanied, if necessary, by a proposal to revise this Directive or other relevant parts of Community law.
Justification
Article 3 (9) in relation to financial services, should be included in the Commission’s review with a view to encouraging further harmonisation in this field. By the time of the review, Member States should be capable of making a more informed judgement on whether financial services should continue to be subject to additional rules at national level.
Amendment 12 ANNEX I, POINT 4
(4) Claiming that a product has been approved, endorsed or authorised by a public or private body when it has not or making such a claim without complying with the terms of the approval, endorsement or authorisation.	(4) Claiming that a trader (including his commercial practices) or a product has been approved, endorsed or authorised by a public or private body when he/it has not or making such a claim without complying with the terms of the approval, endorsement or authorisation.
Justification
Paragraph 4 of the Annex currently prohibits claiming false product endorsement but does not cover the scenario where a trader falsely claims to be affiliated with a well-known business, or government department without actually linking the product to the endorsement.
Amendment 13 ANNEX I, POINT 7
(7) Falsely stating that the product will only be available for a very limited time in order to elicit an immediate decision and deprive consumers of sufficient opportunity or time to make an informed choice.	(7) Falsely stating that the product will only be available for a very limited time, or that it will only be available on particular terms for a very limited time, in order to elicit an immediate decision and deprive consumers of sufficient opportunity or time to make an informed choice.
Justification
This amendment is in keeping with the spirit of the European Parliament’s amendment 75 at first reading.
Amendment 14 ANNEX I, POINT 12A (new)
	(12a) Promoting a product similar to a product made by a particular manufacturer in such a manner as deliberately to mislead the consumer into believing that the product is made by that same manufacturer when it is not.
Justification
In Article 6(2) the Commission recognises that there may be consumer confusion between products. There is a need for further clarification of this in the annex. Whilst companies have the right to produce cheaper alternatives to any product, consumers too must have the strongest possible protection against 'passing off'.
Amendment 15 ANNEX I, POINT 20A (new)
	(20a) Falsely claiming or creating the impression that the trader is not acting for purposes relating to his trade, business, craft or profession, or falsely representing oneself as a consumer.
Amendment 16 ANNEX I, POINT 20B (new)
	(20b) Creating the false impression that after-sales service in relation to a product is available in a Member State other than the one in which the product is sold.
Amendment 17 ANNEX I, POINT 24
(24) Requiring a consumer who wishes to claim on an insurance policy to produce documents which could not reasonably be considered relevant as to whether the claim was valid, in order to dissuade the consumer from exercising his contractual rights.	(24) Requiring a consumer who wishes to claim on an insurance policy to produce documents which could not reasonably be considered relevant as to whether the claim was valid, or failing systematically to respond to pertinent correspondence, in order to dissuade the consumer from exercising his contractual rights.
Amendment 18 ANNEX I, POINT 25
(25) Including in an advertisement a direct appeal to children to persuade their parents or other adults to buy advertised products for them. This provision is without prejudice to Article 16 of Directive 89/552/EEC.	(25) Including in an advertisement a direct exhortation to children to buy or to persuade their parents or other adults to buy advertised products for them. This provision is without prejudice to Article 16 of Directive 89/552/EEC on television broadcasting.
</Amend>
Amendment 19 ANNEX I, POINT 28
(28) Creating the impression that the consumer has already won a prize without needing to make a purchase when in fact the opportunity to win the prize or the award of the prize are dependent on the consumer buying a product.	(28) Creating the false impression that the consumer has already won, will win, or will on doing a particular act win, a prize or other equivalent benefit, when in fact either:
	- there is no prize or other equivalent benefit, or
	- taking any action in relation to claiming the prize or other equivalent benefit is subject to the consumer paying money or incurring a cost.

EXPLANATORY STATEMENT

The proposal for a directive on unfair business-to-consumer commercial practices in the internal market, amended by Parliament at first reading on 20 April 2004, continues the line of the green paper on consumer protection^[5]3, proposing a general ban on unfair commercial practices and, in the annex, an indicative, non-exhaustive list of general and specific examples of unfair commercial practices, with a view to facilitating interpretation by national jurisdictions.

Your rapporteur endorses the approach and objectives of the Commission's initial proposal for a directive on unfair commercial practices,^[6]4 notably its key aim, namely to achieve a high degree of consumer protection coupled with the smooth functioning of the internal market in such a way as to favour commercial transactions and, therefore, economic growth.

Furthermore, the original text, with its basis in sufficient harmonisation of consumer protection as well as application of the country-of-origin principle and mutual recognition of national legislation, implied a properly balanced proposal for a directive.

It is also to be welcomed that Parliament, at first reading, introduced amendments aimed at further improving the balance of the proposal, adding supplementary consumer protection provisions. In this connection, Parliament in the first place proposed extending the legal basis, inserting Article 153 of the Treaty (consumer protection) alongside Article 95 (internal market) as proposed by the Commission, with a view to furthering the objective of sufficient harmonisation in the interests of full consumer protection.

To allow the directive to be phased in more smoothly, Parliament introduced the option for Member States of retaining, for a period of five years from the directive's entry into force, stricter national consumer protection legislation adopted under earlier directives on minimum harmonisation levels. To that five-year derogation Parliament added, with a view to proper implementation, an obligation on the Commission to report to Parliament on the application of the directive and to propose, every five years, the updating of Annex I (the list of unfair commercial practices outlawed).

Further amendments by Parliament at first reading concerned: insertion of definitions of vulnerable consumers; codes of conduct and consumer participation in their drawing-up; the binding nature of codes of conduct on professionals; and the need to take account of the means of communication used by professionals when evaluating unfair commercial practices.

The Council's common position and Parliament's second reading

In her examination of the common position, your rapporteur has decided in the first place to base herself solely on Parliament's amendments at first reading, so as to avoid reopening the debate on points already settled in the initial discussions or unnecessarily prolonging the time devoted to examining the proposal.

On the country-of-origin principle (Article 4(1) of the original Commission proposal), your rapporteur believes it is no longer necessary to include it, in view of the level of harmonisation of consumer protection now achieved.

The common position has incorporated many of Parliament's amendments, notably those relating to the definition of vulnerable consumers, the notion of a binding commitment, the participation of consumers' associations in the drawing-up of codes of conduct, and the inclusion among aggressive practices of undue influence and the threat of physical force.

The Council has also included Parliament's proposal regarding a derogation to permit the application of stricter consumer protection legislation. The time-period for this derogation is extended to six years. Also accepted is the obligation on the Commission to report to Parliament on the implementation of the directive and to propose updates when necessary.

Your rapporteur therefore believes that the common position represents a satisfactory compromise, while also being aware that certain of the amendments from first reading aimed at boosting consumer protection need to be reintroduced.

The amendments proposed by the rapporteur for second reading

Your rapporteur's aim in the amendments tabled has been to re-propose points on consumer protection relating to the following: severely restricted after-sales guarantees; artificially high reference prices; and the right to exchange or compensation.

The final amendment, which concerns the protection of minors, is not aimed at outlawing advertising aimed at children but at tightening the ban, already included in the common position, on commercial practices which could put children under undue pressure.

In conclusion, your rapporteur considers that, subject to the small changes proposed, it is necessary to adopt this directive without delay, since it will mark, for both consumers and professionals in the EU, a step forward in terms of a more secure legal framework and the fuller protection of the rights enshrined in the Charter of Fundamental Rights of the Union.

PROCEDURE

Title	the Council common position for adopting a directive of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC and European Parliament and Council Directives 97/7/EC, 98/27/EC and 2002/65/EC and European Parliament and Council Regulation (EC) No /2004 ('Unfair commercial practices directive')
References	11630/2/2004 – C6-0190/2004 – 2003/0134(COD)
Legal basis	Articles 251(2) and 95 EC
Basis in Rules of Procedure	Rule 62
Date of Parliament’s first reading – P5	20.4.2004		P5_TA(2004)0298
Commission proposal	COM(2003)0356 – C6-0190/2004
Amended Commission proposal
Date receipt of common position announced in plenary	18.11.2004
Committee responsible   Date announced in plenary	IMCO 1.9.2003
Rapporteur(s)   Date appointed	Mercedes Bresso 31.8.2004
Previous rapporteur(s)	Fiorella Ghilardotti
Discussed in committee	24.11.2004	18.1.2005				1.2.2005	2.2.2005
Date adopted	2.2.2005
Result of final vote	for: against: abstentions:			35 0 0
Members present for the final vote	Mercedes Bresso, Charlotte Cederschiöld, Mia De Vits, Bert Doorn, Janelly Fourtou, Evelyne Gebhardt, Małgorzata Handzlik, Malcolm Harbour, Christopher Heaton-Harris, Anna Hedh, Edit Herczog, Pierre Jonckheer, Henrik Dam Kristensen, Alexander Lambsdorff, Lasse Lehtinen, Arlene McCarthy, Toine Manders, Manuel Medina Ortega, Zita Pleštinská, Guido Podestà, Marco Rizzo, Zuzana Roithová, Luisa Fernanda Rudi Ubeda, Heide Rühle, Leopold Józef Rutowicz, Andreas Schwab, Eva-Britt Svensson, József Szájer, Marianne Thyssen, Jacques Toubon, Bernadette Vergnaud, Barbara Weiler, Phillip Whitehead, Joachim Wuermeling
Substitutes present for the final vote	Simon Coveney, Sérgio Ribeiro, Alexander Stubb, Diana Wallis
Substitutes under Rule 178(2) present for the final vote	Martine Roure
Date tabled – A6	7.2.2005		A6-0027/2005
Comments	...

• [1]  Texts Adopted,
• [2]  Not yet published in OJ.
• [3] ^*              24 months after the entry into force of this Directive.
• [4] ^*              24 months after the entry into force of this Directive.
• [5] ³ COM(2001)0531.
• [6] ⁴ COM(2003)0356.