Vol. X No.3
March 2005


New European Directive to Improve Romanian Business-to-Consumer Practices

New European Directive to Improve Romanian Business-to-Consumer Practices
On February 24th, 2005, the European Parliament approved in a second reading the Commission’s Proposal for a Directive of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the Internal Market, and amending directives 84/450/EEC, 97/7/EC and 98/27/EC (the Unfair Commercial Practices Directive, hereinafter “the Directive”)1. The Directive introduces a single EU-wide regime for consumer protection with regard to unfair commercial practices, which is expected to be implemented across the EU by 2007, thus preventing rogue retailers from benefiting from the existing discrepancies in national legislation. Also, the new harmonized European regime is meant to boost cross-border transactions within the Internal Market by increasing consumers’ confidence in such transactions as well as by helping businesses to develop their activities at European scale.

The existing Romanian legislation does not comprise a general legal framework with regard to the unfair business-to-consumer commercial practices. There are only specific rules regulating various forms of such commercial practices, such as sales promotion, misleading advertisements or aggressive sales. Romanian Government Ordinance 21/1996 regarding consumers’ protection states, in general terms, that retailers have the obligation to avoid using abusive commercial practices in their relations with consumers. However, the term “abusive” is not defined and there are no general principles in use in the case of commercial practices that do not fall under the existing special regulations. Obviously, special regulations alone cannot assure efficient protection for consumers. Under such circumstances, the adoption of the Directive by Romania will substantially improve the existing regime.
[1] COM (2003) 356 final.

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Business-to-Consumer Practices Under Romanian Law
As noted above, Romanian legislation only provides for special rules to be applied to specific commercial practices.

- Misleading advertising is forbidden by Law 148/2000 related to advertisements. According to this law, the misleading character of a commercial advertisement is to be evaluated by taking into consideration various aspects such as the characteristics of goods and services, their price and distribution manner, the legal and economic conditions of the acquisition of goods/services, the services to be rendered following the sale of goods or services, and the nature, attributions and rights of the person for whom the advertisement is made, etc. Also, Decision 254/2004 of the National Audiovisual Council states that commercials must not mislead consumers, either directly or by omission, with regard to the characteristics, properties and effects of the products, their price or manner of distribution.

- Sales promotions are currently regulated by Government Ordinance 99/2000 related to the trading of market goods and services (hereinafter the “G.O.”). The G.O. mainly refers to sales at lower costs, multilevel marketing and lotteries organized for commercial purposes. Sales below cost are forbidden in some cases, but this is more of a measure against dumping prices so as to assure fair competition, having only an indirect effect on consumer protection (thus, the preservation of a healthy competition environment is meant to ensure the existence of a wide offer of products at competitive prices). However, sales below cost are allowed when they are close downs or clearance sales (meant to accelerate the sale of a stock of products when retailers cease, suspend, transform or relocate their activities), seasonal discount sales (which take place twice a year during a precise period of time), factory shop sales (sales by the producers of goods within their own selling structures), sales of perishable goods, etc. The G.O. also forbids premium sales. A commercial practice is a premium sale when a retailer offers consumers a supplemental product or service for free (the premium). Nevertheless, premiums are allowed, for example, when they are identical with the goods/service to be sold, when their value is a maximum of 10% of the sale or when the free goods/services are indispensable to the normal use of the product/service to be sold. With few exceptions, retailers are not allowed to condition a sale of a certain good/service on the obligatory buying of another product/service or of a certain quantity of the main good/service. One other form of aggressive selling is also expressly forbidden -- retailers are not allowed to perpetrate forced sales, defined as the delivery of a good or the rendering of a service without a prior order from the consumer, by forcing the consumer to either buy the good/service, or send it back in case of a refusal to buy.

In 2002, the European Commission drafted a proposal for a European Parliament and Council Regulation concerning sales promotions in the Internal Market2 (hereinafter “the Proposed Regulation”). The aim of such law is to facilitate the free movement of goods that benefit from the use of sales promotions, as “The use and communication of sales promotions contribute to the growth and development of all businesses . . . provided that steps are taken to ensure a high level of consumer protection as well as protection of small and medium-sized enterprises.” (Recitals 2 and 1) Consumer protection is strengthened by a series of information requirements3 that “. . .ensure that commercial communications relating to sales promotions are transparent and that an individual interested in a communicated sales promotion will be able to easily obtain all the relevant information announced in that communication.” (Recital 14) The Proposed Regulation covers sales promotions which are all “temporary” in nature, loyalty programs, air-miles schemes and promotional contests or games where the purpose is to encourage the sale of goods or services, other than gambling activities. However, the national rules providing for conditions that apply to seasonal, clearance or close down sales are not affected by the Proposed Regulation, except in so far as they restrict the offer of discounts. If the Proposed Regulation is enforced, the Member States will no longer be able to impose general prohibitions on or any requirement to obtain prior authorization for the use or commercial communications of sales promotions (unless required by Community law), nor will they be allowed to impose limitations on the value of the sales promotions or prohibitions on discounts preceding seasonal sales.

- The right of the consumer to unilaterally and unconditionally terminate the contract is a universal remedy against unfair commercial practices and more particularly against aggressive selling, as stipulated by every law dealing with special consumer contracts, such as Government Ordinance 130/2000 related to distance contracts, Government Ordinance 106/1999 related to the conclusion of contracts outside commercial areas, Law 282/2004 related to the protection of the consumer in respect of timeshare property, and Law 289/2004 regarding consumer credit.

The fragmentized approach of Romanian legislation in dealing with unfair business-to-consumer commercial practices is similar to the situation which exists at the EU level. This approach was dictated by the general trend of literally transposing European laws without taking into consideration the possibility of improving them at the national level. It is obvious that in absence of a general prohibition and of a definition of unfair practices, retailers are free to imagine all sorts of rogue commercial techniques in order to avoid falling under the scope of the existing specific regulations. Moreover, as there are no general principles regulating unfair practices, in those fields which do not benefit from a special regulation, there is not even little protection for consumers from retailers who are intent upon committing abuses. In these circumstances, the new Directive will fill in the gaps by implementing a general framework to be used where there are no specific provisions.
[2] COM (2002) 585 final. The initial proposal was amended to incorporate the amendments by the European Parliament – 2001/0227 (COD). The amended proposal is currently being examined by the Permanent Representatives Committee in view of reaching a common position within the Council of Ministers.
[3]  See art. 4 and the Annex.

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The European Directive: Identifying Unfair Commercial Practices
When drafting the general framework regarding business-to-consumer commercial practices, the European Commission has defined “unfairness” instead of providing a definition of what should be fair practices. Thus, any commercial practice is presumed fair until the contrary is proved. “This leaves room for businesses4 to innovate in developing new fair commercial practices,” as a different approach would create “uncertainty and extra costs for honest businesses” . The Directive therefore introduces not only a general prohibition of unfair commercial practices, but also a three-step mechanism to be used in order to establish whether a certain commercial practice is unfair or not:

(1) Black list: Annex 1 to the Directive contains a list of commercial practices “which shall in all circumstances be regarded as unfair.” Such practices are classified either as misleading (e.g., claiming to be a signatory to a code of conduct when the trader is not or falsely stating that the product will only be available for a very short time) or aggressive (e.g., creating the impression that the consumer cannot leave the premises until the contract is signed or the payment made).

(2) Defining misleading and aggressive practices: If a commercial practice cannot be found on the black list, then it should be determined whether it can be qualified as misleading or aggressive. The Directive states that “. . . commercial practices shall be regarded as unfair if they are misleading or aggressive.” A misleading action is defined as a commercial practice which “in any way, including overall presentation, causes or is likely to cause the average consumer to take a transactional decision that he would not have taken otherwise because it deceives or is likely to deceive him” in relation to the aspects provided for by the Directive. Also, a commercial practice is a misleading omission if, “in its factual context, taking account of all its features and circumstances, it omits material information that the average consumer needs, according to the context, to take an informed transactional decision that he would not have taken otherwise.” According to the Directive, “A commercial practice shall be regarded as aggressive if, in its factual context, taking account of all its features and circumstances, by harassment, coercion or under influence, it significantly impairs or is likely to significantly impair the average consumer’s freedom of choice or conduct with regard to the product and thereby causes him or is likely to cause him to take a transactional decision that he would not have taken otherwise.”

(3) General definition of the unfair practices: If following step 2, a commercial practice cannot be qualified as being misleading or aggressive, it must be determined whether it can be deemed to be unfair based on the general definition provided in the Directive. “A commercial practice shall be regarded as unfair if: - it is contrary to the requirements of professional diligence, and – it materially distorts or is likely to materially distort the economic behavior 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 specifically directed to a particular group of consumers.”

The Directive establishes a common level of consumer protection in those fields which are not regulated by the European legislation as yet. Where there are specific provisions and in case of conflict between these provisions and those of the Directive, the former prevail and apply to specific aspects of unfair commercial practices.
[4] See “Questions and Answers on the Unfair Commercial Practices Directive”, MEMO/05/64, Brussels and Strasbourg, 24 February 2005.

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According to EU Health and Consumer Protection Commissioner Markos Kyprianou, the Directive “marks a big step forward for consumers and for EU competitiveness. It boosts the protection consumers enjoy across the EU, while simplifying the regulatory environment for businesses”5. As for the Romanian law, the adoption of the general principles provided for by the Directive will most certainly ameliorate the flaws in the existing legal framework concerning business-to-consumer commercial practices, by adding a touch of coherence and by transforming a fragmentized legal approach into a fairly complete protection system. This is another example of how the EU adhesion process helps in the renewal and modernization of the legal system of candidate countries.
[5] See “Questions and Answers on the Unfair Commercial Practices Directive”, MEMO/05/64, Brussels and Strasbourg, 24 February 2005.

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Editors Note: It is our policy not to mention our clients by name in The Romanian Digest™ or discuss their business unless it is a matter of public record and our clients approve. The information herein is correct to the best of our knowledge and belief at press time. Specific advice should be sought from us, however, before investment or other decisions are made.

Copyright 2005 Rubin Meyer Doru & Trandafir, societate civila de avocati. All rights reserved. No part of The Romanian Digest™ may be reproduced, reused or redistributed in any form without prior written permission from the publisher.

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