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Topics: Connected Continent
Organisations: EUTS

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The Consumer Protection Regulation (EC No 2006/2004) allows for the creation of common activities where consumer protection authorities in several EU/EEC countries may work together on specific topics that are covered by the scope of the Regulation. In 2013, the European Unfair Terms Strategy Project under the Consumer Protection Cooperation Committee (CPC) involves the participation of consumer enforcement bodies from 13 Member States of the EU and EFTA, with a view to develop a strategic approach to tackling unfair terms in consumer contracts across Europe. The EUTS project is led by the Office of Fair Trading, UK.

Common position of the majority of participants in the EUTS Project Working Group

on the Commission’s proposal for a Regulation relating to a

European single market for electronic communications and to achieve a

Connected Continent (the ‘proposed Regulation’), 2 December 2013

The majority of participants in the EUTS Project Working Group (‘participants of the Working Group’) are in favour of stimulating competition between telecommunication providers throughout the EU, while making the market easier and safer for European consumers. We see that the proposal for a Regulation aims to achieve this. We would, however, like to raise some concerns about whether the proposals will have an adverse effect on the consumer’s position, reduce the existing protections in some member states and potentially cut across other consumer protection legislation. We do so in light of the draft opinion of the Committee on the Internal Market and Consumer Protection on the proposed Regulation, prepared by Mr Malcolm Harbour MEP as Rapporteur dated 13.11.2013 (the ‘Draft Opinion’). Please refer to the annexe hereto for details of the participants of the Working Group who support this common statement. We note that five participants of the EUTS Project were not in a position to expressly support the statement in this way at present. Level of harmonisation As enforcers of European unfair terms legislation, our main concern is that the proposal contains provisions that aim to fully harmonise certain aspects of the law relating to unfair contract terms in consumer contracts in the electronic communications sector. After many years of experience of handling these issues, we feel strongly that rules that provide for full harmonisation of protection in relation to the terms of consumer contracts is very problematic given that it is likely to change the position under current law in some member states. Fully harmonised provisions on unfair terms in consumer contracts may, in our view, hamper the current level of protection and evolution of consumer protection and have a detrimental effect on established consumer rights. We would therefore like to encourage EU decision makers to consider this carefully in relation to the proposed Regulation. In this regard, we have noted the Draft Opinion concludes that the proposed approach to full harmonisation in the proposed Regulation is inappropriate and would be detrimental to current consumer protection in member states. We broadly support these conclusions, and urge that further consideration is given to this issue. Unfair terms provisions in the proposed Regulation In respect of the content of the proposals on contract terms in the proposed Regulation, our general view is that consumers should be able to choose freely between services in order to promote sound competition between providers, and to ensure that consumers are empowered to

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choose the service provider that best suits their needs, whilst being adequately protected from unfair contract terms and unfair commercial practices. The current unfair terms regime, under the Unfair Contract Terms Directive (93/13/EEC) and parts of the Universal Services and Users’ Rights Directive 2002/22/EC (subsequently amended by Directive 2009/136) (the ‘USD’) together provide a level of consumer protection that is well established and that would change under the proposed Regulation in respect of the electronic communications sector. With this in mind, we would like to point to some particular concerns in relation to the proposal that explain our broad upport for the approach proposed in the Draft Opinion, as set out below.

1.

Cancellation and the use of lock-in periods in telecom contracts: Article 28 (1) and (2) of the proposed Regulation; proposed amendments 16 and 26

We note that the Draft Opinion recommends that Article 28 be deleted, and instead amendments be made to the USD (per proposed amendments 16 and 26). We would support this general approach, given the concerns set out below and because it would simplify the regime relating to contract terms in the sector. Considering the proposed Regulation as currently drafted, if Article 28 (1) was adopted, and the provisions fully harmonised, the current level of consumer mobility in several member states would be reduced. Fully harmonised provisions in this area would presumably establish the lock-in period in all member states and for all covered products and markets at the proposed level (currently proposed to be a maximum of 24 months). The provisions would reduce the level of protection in ome member states – for instance in those jurisdictions where the maximum lock-in period is currently six or twelve months1. The proposed provision would then not only represent a reduction of the level of established protection in those jurisdictions, but also reduce the necessary flexibility to assess lock-in periods for new products and markets on the basis of what is reasonable and appropriate in the circumstances. Participants of the Working Group are of the opinion that the proposed provisions should not reduce the existing level of protection for consumers in this field, and support the proposed approach to harmonisation, the deletion of Article 28 and the proposed approach to amend the USD. As drafted, the proposed Article 28(2) of the Regulation gives consumers the freedom to cancel all contracts with one month’s notice, after the contract has been in existence for six months. This is regardless of any circumstances which might make it reasonable or necessary for the consumer to cancel the contract earlier, for example due to a change in circumstances, and regardless of the overall duration of the contract. We would also like to point out that in some jurisdictions consumers may currently cancel contracts with lock-in periods at any time, provided that they pay tandard compensation as set out in the contract.2 The proposal would change this right and reduce the level of consumer protection in these jurisdictions. Proposed Article 28(2) provides for certain customers to waive the rights to cancel the contract pursuant to the opening words ‘Consumers, and other end-users unless they have otherwise agreed, shall have the right to terminate a contract...’. In our view, this wording may be problematic and ambiguous. If the drafting is intended to mean that consumers are able to waive cancellation rights, in our view this is not appropriate and would be open to traders to ask or possible require consumers to waive this right.

1

 In Denmark, consumer contracts in the telecommunications sector may not be of longer duration than 6

months pursuant to national law. For Norway this period is 12 months.

2

 The Norwegian Consumer Ombudsman has agreed a code of conduct with telecommunication providers which

gives consumers a right to cancel a contract at any time upon paying standard compensation. In Estonia, consumers currently have the right to cancel a communications services contract at any time without prior notice by informing the communications undertaking (pursuant to Estonian Electronic Communications Act article 100 subsection 1).

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This may undermine the helpfulness of the provision in practice. If the drafting is intended to mean that only ‘other end-users’ (i.e. non-consumers) may waive their cancellation rights, in our view this hould be made clearer in the drafting. Proposed Article 28(2) also addresses the level of compensation payable by the consumer to the trader in the event of cancellation, for both ‘voluntary’ cancellation and cancellation following variation by the trader. The proposed wording includes the ‘residual value of subsidised equipment... and... reimbursement for any other promotional advantage when the contract marked as such at the moment of the contract conclusion’. We foresee that this could be problematic as it may be open to traders requiring payment of a potentially large fee in relation to equipment (which may be unreasonable as it may not be possible to use the equipment with a different provider, and the fee may be difficult to quantify) and requiring reimbursement for the difference between the ‘standard retail’ price for the contract and any reduction in that provided to the consumer. There appears to be no suggestion that consumers could return unwanted equipment to the trader (and the conditions that should or should not apply to this). Together, these factors are likely to mean that cancellation is unattractive to consumers, and may render the provision redundant in practice. For the reasons given above, participants of the Working Group support the proposed approach in the Draft Opinion, particularly the removal of the proposed limitations in consumers’ rights to terminate contracts at any time. 2. Real financial benefit as compensation for the disadvantage represented by lock-in

periods

The potential disadvantages lock-in periods represent to the consumer must be compensated with a corresponding benefit for the sake of balance between the parties’ rights and obligations cf. Article 3(1) Unfair Contract Terms Directive 93/13/EEC. The proposed Regulation should mandate a real financial benefit to the consumer that makes up for the potential disadvantage of a lock-in period.3 3.

Unilateral variation: Article 28 (4); proposed amendments 16 and 26

Valid reasons Under the current unfair terms regime, several factors are relevant in assessing fairness of variation clauses. Distinctions are made between fixed term and indeterminate contracts, and there are requirements as to how variation clauses must be communicated to the consumer. Moreover, a mere right to cancel does not repair unfair variation terms, and in any case, the right to cancel must be exercisable. Of particular relevance in the Unfair Contract Terms Directive (93/13/EEC) (‘UTD’) is the indicative list of terms that may be unfair in the schedule thereto, which includes a term which allows variation without a valid reason for the variation. The requirement for valid reasons for variation is not included in the USD, and is not included in the proposed Regulation, which may result in a lower level of protection for consumers against arbitrary or capricious variations in this sector. We would suggest that this is an opportunity to ensure that whatever new provisions are introduced in relation to variation are in line with the provisions of the UTD rather than the existing wording in the USD (which focuses on the consumer’s right to cancel the contract).

3

 This is set out as a legal requirement in the Norwegian Telecoms Act, section 2-­‐4.

4

To support this position regarding the usefulness of ‘valid reasons’, we point to case law of the Court of Justice of the European Union in which variation clauses were considered and principles et out by the court.4 The courts considered the importance of valid reasons for the variation, as well as the costs to consumers of switching to other providers, whether this is possible in the circumstances, and other relevant factors in cases of variation by a trader. Compensation to trader in the event of cancellation Of particular concern in proposed Article 28 is the requirement for the consumer to compensate the trader in these circumstances (i.e. to reimburse the trader in relation to the residual value of ubsidised equipment, and for promotional advantages, as discussed ante). In the circumstances of variation of the contract by the trader, Article 28(4) appears to be weighted in favour of allowing variation, providing cancellation rights, but requiring a large degree of reimbursement by the consumer to the trader. This is unlikely to provide a disincentive to traders to comply with the terms on which the contract was entered into. It follows from the above that we presume the wording ‘Paragraph 2 shall apply mutatis mutandis’ in proposed amendment 26 (proposed new Article 20(a)(4) USD) is included in error, and should be deleted. This was the wording in proposed Article 28 that appears to provide that compensation hould be payable by consumers to traders in relation to equipment and promotional advantages in the event of cancellation after variation. Participants of the Working Group would object to such a provision, for the reasons outlined above. Proposed amendment 26 (proposed new Article 20(a)(4) USD) We would also note that proposed new Article 20(a)(4) USD refers to ‘consumers and end users o requesting’ having the right to terminate a contract in circumstances of variation. We would uggest this wording is clarified, as at present the meaning is not clear. We presume that consumers should have the right to terminate the contract under all circumstances, whether or not they have requested the right. We appreciate the position may be intended to be different for nonconsumers. 4.

Information requirements: Proposed amendment 24

Participants of the Working Group support proposed amendment 24, being the inclusion of a new provision to the USD that member states may require additional information to that outlined in the USD. We support this because other information may be relevant, and the pre-contractual information is clearly intended to be in addition to any other information obligations that are provided by consumer protection legislation generally. For example, the Unfair Commercial Practices Directive provides consumer protection where important information is incorrect or is not provided by a trader. We would suggest considering including a provision that makes it clear the required pre-contract information is both a minimum and is in addition to any other consumer protection provisions provided in other legislation. Conclusion Participants of the Working Group broadly support the approach outlined in the Draft Opinion, with the comments set out in this document. We would welcome the opportunity to be involved in future discussions regarding the proposed Regulation.

4

 For example, RWE Vertrieb (Case C-­‐92/11), Invitel (Case C-­‐472/10)

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Annexe

Participants of the Working Group who support this common position

Office of Fair Trading, United Kingdom Norwegian Consumer Ombudsman National Authority for Consumers' Protection, Romania Consumer Protection Board of Estonia The Slovak Trade Inspection Consumer Agency, Sweden Competition and Consumer Affairs Authority (Malta) State Consumer Rights Protection Authority of the Republic of Lithuania

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