Public bodies can be subject to rules on unfair commercial practices, rules CJEU

The Court of Justice of the European Union (CJEU) ruled that the Unfair Commercial Practices Directive must be interpreted as protecting consumers against the unfair actions of traders, regardless of whether or not the organisation is a public or private sector one. 

The CJEU said that how 'trader' and 'consumer' are defined under the Directive had led it to its conclusions. 

The Court was ruling in a case referred to it from a court in Germany where there has been a dispute between a body tasked with managing a statutory health insurance fund, BKK, and the country's competition regulator. The regulator had accused BKK of publishing misleading information in breach of the Unfair Commercial Practices Directive on its website in relation to the cancellation rights of individuals. However, BKK, which was established as a public body under German law, claimed that its activities do not fall within the scope of the Directive. 

The CJEU has now ruled, though, that BKK's activities are within the scope of the regime. 

"In a situation such as that at issue in the main proceedings, BKK’s members, who must manifestly be regarded as consumers within the meaning of the Unfair Commercial Practices Directive, could be deceived by the misleading information circulated by that body thus preventing them from making an informed choice ... and leading them to take a decision they would not have taken in the absence of such information... In those circumstances, whether the body at issue or the specific task it pursues are public or private is irrelevant," the CJEU's judgment said. 

"In view of the above, a body such as BKK must be considered a ‘trader’ within the meaning of that directive. The foregoing interpretation is the only one which is able to give full effect to the Unfair Commercial Practices Directive, by ensuring that, in accordance with the requirement of a high level of consumer protection, unfair commercial practices are effectively combated," it added. 

Under Article 5 of the Unfair Commercial Practices Directive, unfair commercial practices by traders in their interaction with consumers are prohibited. The Article contains a broad definition outlining when a commercial practice can be deemed to be 'unfair'. A 'trader' is defined as "any natural or legal person who, in commercial practices covered by this Directive, is acting for purposes relating to his trade, business, craft or profession and anyone acting in the name of or on behalf of a trader". 

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.

Consumer protection law expert Clare Francis of Pinsent Masons, the law firm behind Out-Law.com, said that public bodies are likely to have systems in place already to ensure that they don't mislead consumers. 

“The main driver behind this legislation is to ensure that consumers are treated fairly and that the information they receive is not misleading, including through omission," said Francis. "The majority of public bodies will already have in place systems and processes to ensure that their engagement with consumers is not misleading in any way.  These procedures should ensure that they factor in the directive so that public bodies do not inadvertently fall foul of its tests”.

Editor's note 15/10/13: This story was updated to include Clare Francis's comments.