Commercial practice can be unfair where trader acts with professional diligence, rules CJEU

The Court of Justice of the European Union (CJEU) said that a commercial practice deemed to be misleading could also be found to be unfair without any account having to be given to whether the business engaging in that practice had done so when acting with professional diligence.

The CJEU was ruling in a case referred to it from the Austrian Supreme Court. That Court is considering a dispute between two travel agencies in the country that sell skiing holidays to parties of school children in the UK.

CHS Tour Services (CHS) has accused Team4 Travel (T4T) of engaging in an unfair commercial practice by publishing sales brochures in which it claims to offer rooms at certain hotels on certain dates on an exclusive basis. CHS booked rooms with the same hotels on the same dates.

However, T4T has said that it acted with professional diligence in drafting its sales brochure and that it did not know that CHS had also booked with the same hotels as it until after it had published its brochure.

T4T had entered into contracts with some hoteliers that gave it the exclusive right to sell access to that accommodation to its own customers on certain dates in 2012. The hotels needed T4T's written consent to sell the rooms to others and termination rights and penalties were written into the hotels' contracts with T4T.

T4T claimed that its efforts in ensuring no other tour operator could sell rooms at the hotels for the designated dates on which it claimed to offer exclusivity amounted to acting with professional diligence.

However, the Austrian Supreme Court has said that because the information displayed in T4T's sales brochure was "objectively incorrect" it was therefore "a misleading commercial practice". It asked the CJEU to determine whether the EU's Unfair Commercial Practices Directive requires it to consider the professional diligence of T4T before determining whether they had acted unfairly. The CJEU has now ruled that no such consideration is needed.

"Having regard both to the wording and to the structure of Articles 5 and 6(1) of that directive, and to its general scheme, a commercial practice must be regarded as ‘misleading’ within the meaning of the second of those provisions if the criteria set out there are satisfied, and it is not necessary to determine whether the condition of that practice’s being contrary to the requirements of professional diligence, laid down in Article 5(2)(a) of that directive, is also met," it ruled.

Under Article 5 of the Unfair Commercial Practices Directive, unfair commercial practices are prohibited. The Article contains a broad definition outlining when a commercial practice can be deemed to be 'unfair'.

A commercial practice is unfair if "it is contrary to the requirements of professional diligence, and it materially distorts or is likely to materially distort the economic behaviour with regard to the product of the average consumer whom it reaches or to whom it is addressed, or of the average member of the group when a commercial practice is directed to a particular group of consumers", according to that broad definition.

However, Article 5 also particularly refers to misleading or aggressive commercial practices as being unfair. Separate rules set out within the Directive flesh out what constitutes a misleading or aggressive commercial practice.

Article 6 of the Directive states that a commercial practice is misleading "it contains false information and is therefore untruthful or in any way ... deceives or is likely to deceive the average consumer, even if the information is factually correct ... and in either case causes or is likely to cause him to take a transactional decision that he would not have taken otherwise".

The existence or nature of a product, its main characteristics and the price or the manner in which price is calculated are all elements that can influence whether a commercial practice engaged in by a trader is misleading.