Debates

Tuesday, 20 May 2008 - Strasbourg

12. Misleading 'Directory companies' (e.g. 'European City Guides') (debate)

  President. − The next item is the debate on the oral question to the Council on misleading directory companies, (e.g. ’European City Guides’), by Arlene McCarthy, on behalf of the Committee on the Internal Market and Consumer Protection (O-0078/2007 - B6-0152/2008).

  Arlene McCarthy, author. − Mr President, the clear objective of this oral question is to get action and redress for the thousands of small businesses across the EU which are being defrauded daily out of millions of euros by sham European ‘directory companies’. This Parliament has received hundreds of petitions and a mass of correspondence to our constituency offices from businesses who have fallen victim to these prolific scams against small businesses.

We must, of course, recognise that these scams have been in existence for over 40 years, according to the legitimate directory publishers represented by the EADP. But this is without doubt a scam which requires a European response. As an example, the structure of the Maiwolf holding company, which owns the European City Guide and other such companies, is a complex web of European scam companies registered, operating and domiciled in several Member States of the EU and in the EEA countries Switzerland and Liechtenstein. Despite legal action and fines issued by courts in several Member States, it continues to operate, making a mockery of EU cooperation on law enforcement. Indeed it took seven years through the courts for the company to be shut down in Barcelona, only for it to immediately restart trading in Valencia. Maiwolf Holding is a hub of a web of companies operating scams not just at EU level but at global level and continuing – I am afraid – to escape the long arm of the law.

By responding to the European City Guide, businesses were led to believe that they were simply responding to an information request or updating or correcting their data. They were led to believe it was a free service, and then suddenly they found themselves slapped with an invoice for thousands of euros which, if mentioned at all, had only appeared in very fine print in a confusing and misleading manner. The same Maiwolf holding company apparently also owns the debt collection companies which then proceed to harass, bully and threaten businesses to pay up. A website, ‘Stop the European City Guide’, that campaigns against the City Guide fraud, was also subject to legal threats and their ISP had to shut them down, although I am pleased to say that they are currently up and running again.

Many of the activities of this fraudulent company are clearly in breach of the Misleading Advertising Directive of 1984. We need better and more coordinated enforcement to close the loopholes or gaps which are exploited by such companies. I can inform the presidency that my committee will review the implementation and transposition of the Misleading Advertising Directive and, of course, the new Unfair Commercial Practices Directive. We are particularly interested in the example of Austria’s transposition of the Misleading Advertising Directive whereby businesses cannot be bound by a contract unless they have clearly and explicitly signed up to its terms and conditions. This is a model, Presidency, which I hope you will follow in discussions with the other Member States.

Small businesses, of course, are not helped by the Unfair Commercial Practices Directive as it does not cover business-to-business transactions – even for small businesses. Member States must make better use of the cross-border enforcement network to put these cowboy businesses out of business and out of operation once and for all. I certainly share with my colleagues here the sense of frustration of the many small businesses who for years, not months, have continued to suffer harassment and financial loss.

If we believe, as we say we do, that small businesses are the backbone of the EU economy, then it is time to stand up for them, to defend their rights and to defend them against these fraudulent practices. I certainly welcome Commissioner Kuneva’s interest and her commitment to monitoring their activities, but monitoring alone does not get results and does not actively target these companies. It is unacceptable, I believe, that the business complaints have fallen on apparently deaf ears and that the sole trader behind the City Guide has been allowed to continue to peddle his fraudulent practices without facing the full force of European law. So I am calling today on the Member States to urgently take action, to recognise the serious and damaging consequences of allowing this fraudster to continue to rip off our businesses. I want the Member States, and indeed the presidency, today during our debate, to commit to taking action, not just to debate the issues we have known about for many years.

So I urge the presidency to answer these questions and to work together with us to find a resolution for the businesses who continue to suffer from this fraud.

  Janez Lenarčič, President-in-Office of the Council. − (SL) I should like to thank Mrs McCarthy for her question. My thanks go also to the Committee on Internal Market and Consumer Protection. I shall try to answer the question within the framework set by Mrs McCarthy.

With regard to the first question, namely what Member States have done to close fraudulent directory services, I must inform you that as yet the Council has not received a proposed solution from the Member States. Similarly, it has not been informed either of action taken by the Member States to close such companies or of the intentions of their competent authorities as regards exchanging data on the companies.

With regard to the second question, about taking steps to close the loopholes in transposition of the Misleading Advertising Directive – the European Commission is responsible for this Directive and its implementation, as laid down in Article 211 of the Treaty establishing the European Community. So in my opinion, the European Parliament should address this question to the European Commission.

In connection with these two questions, I should also add that as yet the Council has not been informed of what action the Member States have initiated to make the business world aware of the risk constituted by fraudulent directory services.

With regard to the issue of extending the scope of the Unfair Commercial Practices Directive, I can, however, confirm to Mrs McCarthy that this Directive does not cover the cases described by the Committee on Internal Market and Consumer Protection. In other words, it does not cover cases of fraudulent commercial practices targeting small and medium-sized enterprises.

The reason for this is that the scope of application of the Directive concerned is restricted to business-to-consumer relations. With regard to the possible extension of this Directive to business-to-business relations, I can only say that the Council will adopt a position on this issue as soon as an appropriate legislative proposal is put before it.

I should, however, remind you that the Council has already debated the issue of whether the relevant Directive should also cover business-to-business practices, at the time when the Directive was adopted. I should remind you that in addition to the Commission, most Member States also rejected the idea of extending the Directive to cover unfair commercial practices that do not harm the consumer.

Irrespective of this, however, I must emphasise that companies, including small and medium-sized enterprises, are not without protection against such practices. They are protected by the Misleading Advertising Directive.

I should like to end by explicitly agreeing, on behalf of the Presidency, with the Committee’s view that unfair and fraudulent business practices are unacceptable in any economic area. I also believe that action needs to be taken against such conduct.

The Member States deal with unfair business practices as stipulated by their legislation. The example of the European City Guide, which you mentioned in your question, has also been brought before the courts in at least one Member State.

I should like to thank you again for your question, and I shall in any case listen attentively to the debate.

  Simon Busuttil, on behalf of the PPE-DE Group. – (MT) Mr President, when you open this directory – because this is a big, thick publication – you find hundreds of pages, with thousands of companies, very often small businesses that found themselves in this directory after being cheated. They did not want to be included in it, but were included against their wishes. Parliament’s Committee on Petitions has received about 400 petitions from small businesses caught in this trap. I believe there are three aspects to this issue. Firstly, the small businesses involved are the victims of fraud. Secondly, there is a cross-border, transnational aspect, which should therefore be of interest to us in Europe, in the European Parliament, in the Council and in the Commission. Thirdly, companies like ‘European City Guides’ are profiting from shortcomings that exist in legislation.

What is the European Parliament doing, besides what the Committee on the Internal Market and Consumer Protection is doing, as Mrs McCarthy has told us? The Committee on Petitions will be producing a report on this issue. I will be the rapporteur, and my report will have four aims. Firstly, it will aim to increase awareness of this problem, which is a big one. Secondly, it will continue to encourage the Council and the Commission, in particular, to take clear action, because if they cannot take action today, they need to be in a position to do so. Thirdly, we also need to determine whether there are legislative shortcomings, and this is the role of the Committee on the Internal Market and Consumer Protection. Lastly, it also needs to offer these victims useful advice. The Committee on Petitions will hold consultations and meet with the victims and social partners, as well as with the Commission, before adopting this report, which is expected to be adopted by the end of this year.

  Genowefa Grabowska, on behalf of the PSE Group. – (PL) Mr President, the activities of companies that carry on dishonest commercial and marketing practices are worthy only of condemnation. We must surely protect consumers’ rights against such pseudo-market actions and support them in their battle against companies that, in the current European reality, see themselves as completely beyond punishment. Thousands of companies throughout Europe are taken in by allegedly free advertising in business catalogues, for which they are in reality required to pay anything from a few hundred to a few thousand euros. The publishers of these worthless catalogues – from a business as well as an advertising point of view – not only target specific industries, such as tourist agencies, hoteliers, doctors, restaurateurs and even the world of science, but also, unfortunately, approach state agencies and institutions. This is why EU citizens are asking how it is that the originators of such practices, who have after all been identified by their first name and surname as the proprietors of the companies publishing these catalogues, have been able to make a fortune using fraudulent and dishonest practices profiting from the fears of small European businessmen in the face of vindicatory companies and courts.

I am consequently asking the Slovenian Presidency – and I am addressing the Presidency more than the Commission – to instigate coordination of action by Member States, mainly in the sphere of exchange of information and mutual warning against this type of fraudulent practice, to send out information concerning the owners and the boards of these companies, and also to propose the introduction of stricter penal sanctions for this type of activity. Continuation of the current situation will undermine the faith of businesses and citizens of the European Union in the idea of a European common market and will also, unfortunately, erode the differences between honest businessmen and quasi-Mafia activities.

  Diana Wallis, on behalf of the ALDE Group. – Mr President, many thanks to Mrs McCarthy and the Internal Market Committee for presenting this question. I could wish that we had had a rather more robust answer from the Council, I have to say.

The situation is absolutely unacceptable and I am going to start by making a confession. In the early 1980s, I was a lawyer in the UK, but I founded a practice with a lawyer in Germany. We started getting these demands that we had advertised our practice in a European City Guide and, even as a lawyers, we felt harassed and frightened. So if lawyers feel frightened by these people, I am sure ordinary small SMEs must.

But the oddity of this is that EU law ought to be able to provide an answer and it is seemingly failing to do so, even after 20, 30 years that this has been going on. Indeed, if you read some of the letters from these people, they are even quoting EU law back at people to harass them even further as victims. And what do we get from the Council? I am sorry, it is not good enough: well, we might look at misleading advertising and we will think about it. Thirty years on we really need something more.

What are people meant to do? We need a thoroughgoing debate about whether we should redefine who and what is a consumer. We tried to raise it during the discussions on contract law. We need to go further and deeper if we are going to deal with this problem.

Lastly, if the Member States are too timid or too frightened to deal with this, let me make another suggestion that perhaps is a little contentious here. If the Commission gives us a substantial system of collective redress, let us call it class actions, then maybe citizens will be able to take action themselves if nobody else will do it for them. Now there is a thought.

  Mairead McGuinness (PPE-DE). – Mr President, four years later we are at last having a debate on the European City Guides. I could not carry down the files of complaints I have, as other colleagues have outlined. Europe gets beaten about because it does not connect with its citizens and here we have a golden opportunity – and I direct this to the Council – to connect with people who have a real problem and who are coming to their MEPs for a solution.

It is not just businesses that are affected. I have heard from school secretaries who signed this in error and are terrified and who have paid over money. The tragedy with European City Guides is that it works because people are threatened and terrified. Whether you pay or not, they continue to harass and abuse people. But it is a European problem and therefore requires a European solution. I suppose I am celebrating slightly that we are having this debate and that my colleague, Simon Busuttil, is going to have a report and prepare information, but I think the Council needs to be a little more proactive on this, and indeed the Commission likewise.

The question is very specific and it raises five key issues that need to be addressed. In my view, this problem is enormous but we need to have it quantified. Exchanging information is a great idea but it could cause frustration if we do not have action as a result. We must close loopholes. For example, in Ireland, European law is being quoted to those who have signed up to European City Guides. They are being told that they will be taken to court in another Member State and fined and penalised. They are getting phone calls with huge amounts of harassment to themselves and their co-workers. This is not acceptable. We definitely need to redefine what a consumer is because, as I said earlier, this is not just about business. But I repeat the point. We have a golden opportunity here to show people all over Europe that we are active on issues that are hitting them directly. Let us seize the moment and let us not waste it today with just words and no action.

  Marian Harkin (ALDE). – Mr President, the power of many of these fraudulent directory companies is that they are in another Member State, so they seem untouchable unless in some way the EU intervenes. They also instil fear in people, many of them very small businesses without any legal help or advice and many, after being harassed for years, eventually give up and pay the money.

Like many of the other speakers, my office has been inundated with complaints, but usually from sole traders: plumbers, dentists, doctors, people who have been targeted by European City Guide. These people feel as if they are on their own, that they have just made a bad decision, that they got caught out and in some way they almost blame themselves.

I find it unbelievable when I hear that the majority of Member States do not want any extension of the Directive to do something about the relations between companies. I just wonder, is it because the companies that are being targeted are small businesses, that it is not the big corporations that are being affected? I believe citizens need more and better from the Council and the Commission than they are getting at present. I think the current situation is not good enough and I call on the Council to do something about it immediately.

  Malcolm Harbour (PPE-DE). – Mr President, I want to get straight to the point. Let me address this to the Slovenian Presidency; I think they have been great in their presidency. Minister Lenarčič, just let me give you four things that I would like you to bring up at your next meeting of the Competitiveness Ministers.

The first thing, is for you to ask the Commission to take the SOLVIT mechanism – which is supposed to deal with every single internal market complaint, not just market-related ones – and put this firmly on the agenda. Get them to circulate the information that is already available on independent websites – and we should be ashamed of the fact that it is actually the people affected by this who have taken this up on their own – there is a lot of comprehensive information, and make that part of their remit. That could happen straight away. So that is your first task.

The second task is that you should be saying to all your colleagues that their business information services (because they have services that reach out to SMEs) should also be circulating that information to them in their own languages and you should be putting just a modest amount of your budget behind to actually explain to businesses what is going on.

Thirdly, give those to your law enforcement authorities. And, also say to the Commission and to the people who are running your consumer protection cooperation: put this on your agenda. It will not take very much to do. The information is there. It is not a difficult thing to do. So that is three things you should do.

And the fourth thing you could do as well is to say to your colleagues this: these practices, if practised on individual consumers are absolutely illegal under the Unfair Commercial Practices Directive. Everybody knows that is the case. And the companies affected are essentially taking on the role of private consumers. But, in individual Member States, in your process of implementing that (and I have to say by the way the Member States have not done very well in implementing it, and even my own Member State is actually well behind), you could easily include a clause specifically including directories and small businesses in your implementation. It would not take much to do.

So there are four specific actions there. So I look to you, Minister, and we will look at the agenda, and we expect it to be on the next agenda of the Competitiveness Council. How can we go round saying to small businesses, ‘participate in the internal market’, if we cannot even give them the simplest of safeguards on a simple act like this? It is a disgraceful neglect by all of us of our duties in the single market.

  Richard Corbett (PSE). – Mr President, the European City Guide and the similar guides are essentially a bunch of crooks, but our legislation has not been good enough to enable us to deal with them. This question should equally have been asked of the Commission in terms of initiating a new legislative proposal to tighten up the relevant legislation so that we can deal with them, but pending that my advice to any small business faced with demands from European City Guide and similar guides is simple: do not pay; ignore them; ignore the pressure.

An organisation has been set up called ‘Stop the European City Guide’, an association of victims of this guide. Their website had to be removed because of pressure and legal threats against their internet service provider to make them shut down their website. I now therefore host their website on my website so that they can continue to disseminate information as to how businesses can protect themselves. We need firm action on this. We need it soon.

  Marcin Libicki (UEN). – (PL) Mr President, may I congratulate Mrs McCarthy on an excellently prepared oral question on the subject of the dishonest practices of advertising companies based on ‘European City Guides’. The Committee on Petitions, which I chair, has appointed Mr Busuttil to draw up a report on this matter. We have received an enormous number of petitions complaining about precisely this practice. The Commissioner said that the Commission has not received such complaints that might spur it on to launch an investigation into this matter but, the way I see it, this debate, along with the debate to be held on the basis of Mr Busuttil’s report, will serve as an adequate reason for the Commission to take action in this matter, as these practices are hugely dishonest and harass small business and ordinary people – in other words, people who do not have armies of lawyers at their disposal to protect them.

I urge the Commission to take action in this matter.

  Brian Crowley (UEN). – Mr President, I have dealt with 19 cases of people who have been fraudulently exposed to expenditure and to debt actions because of European City Guides. Of those 19, 17 were small businesses that employed three people or less. And of those 17, six of them were elderly people over the age of 60 who were afraid of seeing a solicitor’s letter coming in the door.

The reality was that what actually happened here was a misrepresentation under the Sale of Goods and Supply of Services Act or the Unfair Commercial Practices Directive, as Mr Harbour was talking about. That in itself is a fraud because, if you agree to do something, you expect to get something in return that should be offered in consideration. What actually happened was a misrepresentation as regards the service that was being provided. I think, as some of my colleagues have said, this is probably a matter best dealt with at Commission level. However, it would be right that the Competitive Council and each Minister be made aware of it, and would be empowered to introduce legislation at a national level which may be quicker to do than to actually try and bring forward a revised European directive on this matter.

  Arlene McCarthy (PSE). – Mr President, I just want to echo my colleagues. We have to stop passing the buck on this issue. We must stop allowing these companies to ‘catch me if you can’. That is the game they are playing with this. I am not leaving the plenary, Minister, without some commitment to action.

Mr Harbour gave you some ideas, but what I want you to do is to raise specific things that I did actually raise in my intervention at the beginning. I want you to raise at the Council working group the Austrian model where, under the Misleading Advertising Directive, they already ban these practices. Not all Member States do it. You could ask other Member States to follow suit, take the Austrian model and ban these practices by introducing amendments in their national legislation.

I also want you to ask the Council to agree that we have cross-border enforcement networks for consumers. I want you to instruct them to accept, investigate and act on the directory companies in the context of the cross-border enforcement network. That, I believe, will enable us to have some action across the border and to stop these people escaping the long arm of the law. So, please, if I could have that from you, I think we can all go away somewhat happier.

  Janez Lenarčič, President-in-Office of the Council. − (SL) Thank you very much, Mr President, for allowing me to speak. I should also like to thank all our colleagues who have taken part in the debate.

Let me start by making one thing clear. Nobody in the Council, neither the Presidency nor any Member State, supports the continuation, or even the occurrence, of fraudulent conduct in the internal market constituted by the European Union. Quite the reverse, and that is why this debate is so welcome, and why I personally welcome it on behalf of the Presidency.

Secondly, I can assure you that the Presidency has taken note of the unanimous demands for increased activity and immediate action. You can rely on us to pass these demands on to our partners in the Council.

Thirdly, I am delighted that the Committee on Petitions has decided to prepare a special report, and we look forward with pleasure to this report by Mr Busuttil. This should generate additional impetus for appropriate activities at European level.

However, I should like to emphasise one thing. Mrs McCarthy, you mentioned the example set by Austria. Good examples certainly serve to encourage others to follow them. And I also believe and hope that this debate will play a part in this. I must stress, however, that the Commission is responsible for transposition of the directives.

As has already been mentioned, and as you also thought in your question, this issue involves two directives. The Unfair Commercial Practices Directive does not cover this segment. One solution would be either to redefine the concept of the consumer or to extend the scope of application of the Directive. I expect both these options to be on the table when a decision is taken on these matters.

We are aware that the Unfair Commercial Practices Directive has not been in place for long. It has only been in force since December, and I think we shall soon have to assess how it is being applied.

Secondly, I wish to stress again that the Misleading Advertising Directive covers this area. Swindles and fraud of this kind definitely involve misleading advertising, which means that certain legal remedies are already available.

Finally, let me stress again that I have followed the debate very attentively, and that the Presidency will convey the mood of this plenary to Council members.

  President. − The debate is closed.

Written statements (Rule 142)

  James Nicholson (PPE-DE) , in writing. – The 'European Cities Guide' and similar outfits are fraudulent operations which specifically target SMEs. They urge companies to sign up to directory services which are presented as being free of charge.

However, due to dubious and complex 'fine print', theses schemes then proceed to harass people for money in an extremely threatening and malicious manner. Ironically, these fraudulent companies quote EU law in order to intimidate their targets further.

Of course, these scams represent no value whatsoever to the consumer or businesses. In fact, they flout numerous examples of EU legislation, such as the 1984 Directive on Misleading Advertising. This problem is evident in countries throughout the EU and therefore requires urgent action.

The solution lies in EU level cooperation, namely in the form of some tough legislation. We must ensure that any EU directive tackling this issue contains no loopholes and that it is satisfactorily implemented in all member states.

I call on the Council and Commission to assist the work of Parliament and take action which reflects the urgency of this situation. If we are encouraging our SMEs to compete within the single market, we must at least be able to guarantee their protection against these appalling scams.