15 Unfair business practices affecting
consumers
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10904/03
COM(03) 356
+ ADD 1
| Draft Directive 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)
Commission staff working paper with an extended impact assessment of the draft Unfair Commercial Practices Directive
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| Legal base | Article 95 EC; co-decision; QMV
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| Department | Trade and Industry
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| Basis of consideration | Minister's letter of 26 February 2004
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| Previous Committee Report | HC 63-xxxii (2002-03), para 6 (17 September 2003)
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| To be discussed in Council | Possibly 17-18 May 2004
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
15.1 In September 2003 we considered this document, which is a
draft framework Directive to improve consumer protection against
unfair commercial practices and a Commission staff working paper
containing an extended impact assessment of the proposal. The
proposed Directive sets a framework for how businesses must deal
with consumers and would apply to pre-sale marketing, advertising
and selling and also to any relationship which existed post-sale
where this was founded on a commitment made before the sale, for
example, the availability of after-sale support. It would cover
only matters affecting the economic interests of consumers: health
and safety, contract law, anti-trust matters and business-to-business
activities are outside the scope of the proposal. It would apply
where there are no specific provisions regulating unfair commercial
practices in sectoral Community legislation. Where other Community
rules govern specific aspects of unfair commercial practices those
would take precedence over the new provisions.
15.2 When we considered the document we noted the
Government's scepticism about the need for the legislation proposed
and its intention to elaborate its policy on the proposal in the
light of the response to the consultations it was undertaking.
We deferred further consideration of the matter until we had
the outcome of the consultation and an indication of the Government's
consequent policy intentions.[39]
The Minister's letter
15.3 The Parliamentary Under-Secretary for Employment
Relations, Competition and Consumers, Department of Trade and
Industry (Mr Gerry Sutcliffe) now tells us the Department has
received 55 written responses from consumer organisations, public
enforcement bodies. a wide range of business sectors (including
retail, advertising, estate agency, financial services and travel),
academics, legal bodies and firms, and others it consulted. He
gives a summary of the responses and says "A large majority
of respondents welcomed the twin objectives of the Directive to
improve consumer protection and tackle internal market barriers.
However, many respondents expressed concern about the potential
impact on existing UK and EU regulation and the need for the Directive
to set proportionate and clear rules."
15.4 The Minister tells us that the Government's
consequent response to the Commission's proposal "sets out
an overall objective of a Directive that is workable, provides
legal certainty, and avoids duplication of regulation".
He goes on to say:
"The Government has therefore welcomed the limited
scope of the Directive, with its specific exclusion for areas
such as contract and competition law. Further to this, the Government
will seek to clarify the relationship with existing consumer protection
Directives and ensure that transposition of the Directive will
not undermine the existing UK consumer protection regime. The
internal market clause — with its application of the country
of origin principle for regulation and mutual recognition for
cross border trade — is crucial for providing business certainty
and the Government will therefore strongly support this provision.
"The Government can welcome the overall structure
of the Directive — a general prohibition on unfair practices
supplemented by categories of misleading and aggressive practices
and an Annex of specific unfair practices. However, it will be
crucial to get the definitions right — most important will
be the 'professional diligence' and 'material distortion' tests
and the 'average consumer benchmark'. The Government will be
seeking to ensure that these definitions ensure the right balance
of responsibility between trader and consumer and that more is
done to protect the vulnerable consumer where the trader seeks
to exploit such consumers.
"The role of self-regulatory codes of conduct
in controlling unfair practices has attracted considerable interest
from stakeholders. Most respondents have wanted the Directive
to acknowledge the usefulness of such codes for particular sectors
such as advertising, but have also wanted to protect the self-regulatory
nature of such codes and the diverse structures that exist. The
Government supports this view and will seek to ensure that the
'light touch' of the current draft is maintained.
"The Directive currently allows member states
flexibility in enforcing the Directive, acknowledging the range
of regimes in member states. The Directive will be added to the
Injunctions Directive and therefore to the 'Stop Now' enforcement
regime in Part 8 of the Enterprise Act 2002. However, any additional
enforcement tools that might be introduced in the UK, such as
remedies in private civil law, will be considered at the time
of transposition when the final form of the Directive is known."
Conclusion
15.5 We are grateful to the Minister for this
further information. We have no further questions and clear the
document.
39 See headnote. Back
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