Unfair Commercial Practices Directive: Case C-611/14 Canal Digital Danmark A/S
If a trader separates the price of a product or service into a number of components, and then gives more prominence to particular components in advertising, will this amount to a misleading action or omission under the Unfair Commercial Practices Directive?
The Unfair Commercial Practices Directive (UCPD), implemented in the UK by the Consumer Protection from Unfair Trading Regulations 2008 (CPRs), prohibits businesses from engaging in unfair commercial practices when dealing with consumers. Two practices which are prohibited under the UCPD are misleading actions and misleading omissions. To recap:
Misleading actions (Art. 6) – Under the UCPD, a commercial practice will be regarded as a misleading action if it contains false information or gives an overall impression that deceives, or is likely to deceive, the average consumer (even if the information is factually correct). The false information must relate to certain matters set out in Art. 6(2) UCDP which includes the price (or the way the price is calculated). The practice must cause or be likely to cause the average consumer to take a transactional decision that he would not have otherwise taken.
Misleading omissions (Art. 7) – a commercial practice will be misleading if, taking into account the relevant circumstances and the limitations of the communication medium, it omits material information that the average consumer needs to take an informed transactional decision. Again, this must cause or be likely to cause the average consumer to take a transactional decision that he would not have otherwise taken. Art. 7(3) makes clear that when the medium used to communicate the practice has time or space limitations (such as a television advert), then these limitations must be taken into account when considering whether information has been omitted.
The case arose out of a referral from the Danish court to CJEU following the alleged infringement by Canal Digital Danmark A/S (Canal) of Dutch law implementing the UCPD. Criminal proceedings had been brought against Canal in respect of an advertising campaign selling TV subscriptions which had featured on TV, the internet and Canal’s website.
The price of the two different packages advertised consisted of a either a 99 DKK or a 149 DKK monthly subscription charge (Subscription Charge), plus a six-monthly “card service” charge of DKK 389 (the Card Service Charge). Whilst the relevant Subscription Charge featured prominently in all of the adverts in question, the Card Service Charge either featured less prominently or (in the case of two of the online banner ads) was omitted altogether. The essence of the case against Canal was that it did not provide consumers with suffciently clear information in the adverts about the requirement to pay the Card Service Charge as well as the Subscription Charge. The Danish court referred the case to the CJEU and asked for guidance on a number of issues, including the following:
• where a trader states the price, so that the consumer must pay both a monthly charge and a six-monthly charge, will it be considered a misleading action if the monthly charge is particularly highlighted, whilst the six-monthly charge is omitted or is less prominent?
• will such a practice also (or alternatively) be considered a misleading omission?
• when assessing whether a commercial practice should be considered a misleading omission, should consideration be given to the context in which that practice takes place (in particular the limitations of time and space imposed by the medium)?
The CJEU considered that when the price of a product is divided into several components, with one being emphasized and other(s) being completely omitted or downplayed, an assessment should be made as to whether that presentation is likely to lead to a mistaken perception of the overall offer. This will particularly be the case if the overall impression leads the consumer to believe that he only has to pay the emphasised element of the price.
The CJEU also confirmed that it was relevant to consider whether the omitted/ less visible element was a significant part of the total price. This is important when assessing if the practice is likely to lead a consumer to take a transactional decision he would not have otherwise taken.
Finally, it was confirmed that, unlike in the case of a misleading omission (see below), limitations such as space and time constraints (eg in a television ad) should not be taken into account when assessing if the commercial practice constitutes a misleading action.
The CJEU confirmed that the practice could constitute a misleading omission “if such failure causes the consumer to take a transactional decision that he would not have taken otherwise”. However, this would be for the referring court to assess.
In making such an assessment, the CJEU confirmed that consideration should be given to the context in which that practice takes place, in particular the limitations of time and space imposed by the medium. However, the CJEU also stated that this should be balanced against the objectives pursued by the UCPD (ie to give a high level of consumer protection). Accordingly, only when it is impossible (due to time and space limitations) to present the consumer with all of the material information concerning the main characteristics of a product would the trader be permitted to refer the consumer to their website for such information.
Why is this important?
The CJEU has confirmed that the practice of dividing a price up into a number of components, and giving particular components more prominence than the others, can amount to a misleading action and a misleading omission under the UCPD.
We have already seen a shift by the UK Regulators to encourage traders in particular sectors to present all cost components prominently, noting that CAP released new guidance on Telecommunications Price Claims on 31 October 2016 (just 6 days after this judgment was handed down by the CJEU). In the Guidance, CAP sets out key principles which telecommunications providers should follow in order to avoid their pricing claims being considered misleading. One of these principles is that they must “present all compulsory elements of the total financial commitment (up-front costs, ongoing costs and contract length) together, avoiding undue emphasis on any one element.”
Any practical tips?
Take care when adopting a pricing practice that divides the overall cost into a number of separate components. You will need to ensure that the presentation of the different pricing elements is not likely to lead to a mistaken perception of the overall offer.
Ensure that all material information about pricing is included in advertising. Whilst the CJEU has confirmed that space and time limitations can be considered when assessing if a practice is a misleading omission. It is only permissible for material information about a product to be omitted from an ad if it is “impossible” to include such information due to time or space constraints.
The case underlines just how high the bar is being set on clarity over material information, particularly pricing. The challenge we face as lawyers is to work out ways of integrating this information in an ad, without incurring the wrath of the marketing department by overloading the creative with small print.