I want everything: the full harmonization of unfair commercial practices as seen in Citroën Belux NV v. Federatie voor Verzekerings- en Financiële Tussenpersonen (FvF))

On 18 July 2013, the Court of Justice of the European Union (CJEU) delivered its judgment in Citroën Belux NV v. Federatie voor Verzekerings- en Financiële Tussenpersonen (FvF)), a case surrounding Directive 2005/29/EC on unfair commercial practices (UCPD) and Art. 56 TFEU.

In 2010, car manufacturer Citroën initiated a campaign offering interested purchasers of a new car six months’ worth of free comprehensive car insurance. The Federation for Insurance and Financial Intermediaries (FvF) considered such offer to constitute a prohibited combined offer in the understanding of Belgian legislation; Art. 72 of the Law of 6 April on market practices and consumer protection (Wet van 6 april 2010 betreffende marktpraktijken en consumentenbescherming/Loi du 6 avril 2010 relative aux pratiques du marché et à la protection du consommateur) prohibits (with certain exceptions) any combined offer to the consumer which has at least one finance service component. The Rechtbank van koophandel te Brussel agreed with the Federation, and Citroën subsequently lodged an appeal with the Hof van beroep te Brussel. It was the latter Court that decided to submit a question to the CJEU for a preliminary ruling in relation to Article 3(9) UCPD:

“Must Article 3(9) of Directive 2005/29 be interpreted as precluding a provision, such as Article 72 [of the Law of 6 April 2010], which generally prohibits – save in the cases exhaustively listed by the statute – any combined offer to the consumer where at least one component is a financial service?”

The CJEU answered in the negative.

It was not the first time that the CJEU was analyzing combined offers. On several other occasions, including in 2009 in the VTB-VAB NV and Galatea joint cases, as well as in 2010 in Zentrale zur Bekämpfung unlauteren Wettbewerbs eV, the Court stated that the UCPD precludes national prohibitions of commercial offers whereby the availability of certain services is linked to the purchase of goods, since they were not listed in the Directive’s black list. Given the list is set in stone and can only be modified by modifying the Directive itself, Member States cannot add to it. Nevertheless, it was the first time when combined offers involved financial services, which are as such outside the boundaries of the process of fully harmonizing unfair commercial practices.

The fact remains that Art. 3(9) UCPD clearly leaves financial services and immovable property out of the scope of full harmonization, since as it is stated in recital 9 to the Preamble, these sectors come with inherent serious risks and great complexity and thus require detailed conditions. This is to say that, as the Court observed in paragraph 27 of the judgment, the EU legislator wanted to leave it to the Member States to impose conditions in respect of governing these sectors in ways that are either more restrictive or prescriptive.

As such, the judgment is straight forward: financial services are not subject to full harmonization, and thus national legislation has a serious degree of discretion to deal with their regulation in relation to commercial practices.

Still, the very line drawn to isolate financial services can lead to an interesting debate, since as far as the case law of the CJEU goes, this line is not always so clear. For instance, back in 2012, in Content Services, the Court leaned on Directive 2002/65/EC on financial services to borrow a definition for “durable medium” which it subsequently applied to its interpretation of Directive 97/7/EC on distance selling, even if the case at hand had no financial service implication whatsoever.

As it is stated in Art. 3(5) of the UCPD, Member States had a transitional period of six years to continue applying their national laws as opposed to the Directive’s unified regime. This period just expired on 12 June this year, so analyzing what legal developments have been triggered by the UCPD so far would be a most curious undertaking. To this extent, earlier in March, the Commission issued a Communication on the application of the UCPD (COM(2013) 138 final), highlighting the improvement it brought to the regulatory environment and the obstacles it removed in cross-border commerce. While some beneficial impacts might be revealed when looking at national case law, the Commission claims the UCPD improved the percentage of consumers willing to engage in cross-border transactions as reflected in Flash Eurobarometer 332 (May 2012). Still, no causation can be inferred from correlating consumer confidence in cross-border trade with the existence of the UCPD or its lack thereof.

More importantly, the Communication emphasizes that unfair practices still linger in the fields of financial services and immovable transactions but that it is inappropriate to change the status quo for the time being. This policy reflects one of the conclusions which had been put forward by Civil Consulting in their Study on the application of Directive 2005/29/EC on Unfair Commercial Practices in the EU conducted for DG Justice in 2011. Civic Consulting claims it is desirable to maintain the competence of Member States to keep on adding to the UCPD’s blacklist (which prohibitions on financial services and immovable property would amount to), since country-specific unfair practices would be easier to deal with.

This suggestion echoes with another Directive well-known for its black list. Directive 93/13/EEC on unfair contract terms employs an Annex which Member States have taken over in order to blacklist certain contract terms. The main difference is, though, that as Martin Ebers shows in the Consumer Law Compendium research done on the implementation of Directive 93/13/EEC, Member States often added more terms to the black list, leading in turn to higher and more tailored protection. This was only possible due to the fact that in the case of unfair terms, unlike with the UCPD, the level playing field was created by virtue of minimum harmonization.

In the current state of affairs, the UCPD does not allow Member States to set up a floor for consumer protection and then play it up depending on the practice of specialized national institutions; it rather sets a minimum standard that simultaneously operates as a ceiling, not allowing Member States to go beyond it – unless they deal with financial services and then minimum harmonization appears to be the desirable level of convergence. That seems to be the problem with full harmonization and wanting everything; sometimes it is better to make do with not having it all.