On 13 September 2018, the Court of Justice of the European Union (the "ECJ") handed down a judgment clarifying the concepts of "aggressive commercial practice" and "inertia selling" within the meaning of Directive 2005/29/EC of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market ("Directive 2005/29/EC") (ECJ, 13 September 2018, Joined Cases C-54/17 and C-55/17, Autorità Garante delle Concorrenza e del Mercato v. Wind Tre SpA and Vodafone Italia SpA). Inertia selling is the practice involving the request for immediate or deferred payment of products supplied by the trader, but not solicited by the consumer. The practice falls within the category of aggressive commercial practices which are in all circumstances considered unfair and, hence, prohibited.
The ECJ delivered its judgment in response to a request for a preliminary ruling from the Italian Council of State (the "Council of State") in proceedings between two Italian mobile telephone operators, Vodafone Italia SpA ("Vodafone") and Wind Tre SpA ("Wind"), and the Italian competition authority (the "Competition Authority"). Under Italian law, the Competition Authority has the competence to challenge improper commercial practices of traders.
Vodafone and Wind had been selling mobile phones with SIM cards including certain pre-loaded and pre-activated paying telephony services (including internet browsing and voicemail services), without first providing information to or obtaining permission from the consumer, thereby exposing consumers to possible debts which they were unaware of.
Considering that this practice qualifies as an aggressive commercial practice within the meaning of Directive 2005/29/EC, the Competition Authority imposed fines on Vodafone and Wind in the amount of EUR 250,000 and EUR 200,000.
On appeal by Vodafone and Wind, the Regional Administrative Court of Lazio, Italy, (the "Court") annulled these fining decisions on the ground that the Competition Authority lacked the competence to impose fines. The Court held that the Italian Communications Regulator had exclusive competence to sanction the practices at issue as: (i) these practices are covered by specific Italian legislation giving the Communications Regulator the exclusive power to inspect, prohibit and sanction with regard to electronic communication services; and (ii) Article 3(4) of Directive 2005/29/EC provides that "[i]n the case of conflict between the provisions of this Directive and other [EU] rules regulating specific aspects of unfair commercial practices, the latter shall prevail and apply to those specific aspects" (i.e., the so-called "principle of specification").
The Competition Authority appealed the Court's judgments to the Council of State, which decided to stay the proceedings and question the ECJ on whether:
- the practices of Vodafone and Wind qualify as aggressive commercial practices and/or as inertia selling within the meaning of Directive 2005/29/EC; and
- Directive 2002/21/EC of 7 March 2002 "on a common regulatory framework for electronic communications networks and services" (the "Framework Directive") and Directive 2002/22/EC of 7 March 2002 "on universal service and users' rights relating to electronic communications networks and services" (the "Universal Service Directive"), which provide for a specific sector regulator and concern the provision of electronic communications networks and services to end-users, preclude the application of Directive 2005/29/EC having regard to the principle of specification and whether, as a result, they cause the Competition Authority to lack the competence to sanction the practices in question.
The ECJ first confirmed that the practices of Vodafone and Wind qualify as inertia selling. It noted that the services were unsolicited as the customers did not freely choose the provision of the services in question. They were neither informed about the cost of the services, nor about the fact that these were pre-loaded and pre-activated on the purchased SIM cards.
The ECJ found it irrelevant that the use of the services in question required, in certain cases, conscious action on the part of the consumer. Similarly, the ECJ deemed it irrelevant that the consumers could have opted to disable the service, since it was highly unlikely that they would genuinely be able to make use of this option before being charged for the service.
Competence of Competition Authority to Act on Basis of Directive 2005/29/EC
Second, as regards the question whether the Framework Directive and the Universal Service Directive preclude the Competition Authority from sanctioning Vodafone and Wind for violations of Directive 2005/29/EC, the ECJ held that a conflict within the meaning of Article 3(4) of Directive 2005/29/EC only arises if: (i) the conflict is between EU rules and not between national rules; and (ii) provisions, other than those of Directive 2005/29/EC, regulating specific aspects of unfair commercial practices, introduce obligations which are incompatible with those laid down in Directive 2005/29/EC, leaving them no margin of discretion.
On the facts of the case, the ECJ held that the Competition Authority was competent to sanction Vodafone and Wind on the basis of Directive 2005/29/EC. It considered that the provisions in the Framework and Universal Service Directives pertaining to end-users do not qualify as rules regulating specific aspects of unfair commercial practices, such as inertia selling. Consequently, the ECJ found that there is no conflict between the provisions of Directive 2005/29/EC and the rules laid down in the Universal Service Directive with respect to the rights of end-users. Moreover, the ECJ noted that the Universal Service Directive provides expressly that its provisions concerning end-users' rights are to apply without prejudice to the EU rules on consumer protection, which include Directive 2005/29/EC.
The Council of State will now have to rule on the merits of the case, applying the interpretation put forward by the ECJ in its judgment.
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