Developments in consumer law: digital economy, telecommunications, energy, sustainability, housing market and travel industry
The COVID-19 pandemic, the shortage on the housing market and the rising energy prices have created some recent tensions in the area of consumer law. These themes are also reflected in the agenda of the Dutch Authority for Consumers and Markets (Autoriteit Consument & Markt, “ACM”) for 2022-2023, in which it has identified the following focus areas: (i) energy and sustainability transition, (ii) the digital economy and (iii) the housing market. In our previous blog, we already noted that the ACM considers the protection of consumers in the digital economy to be one of its core tasks. New, however, is the action taken by the ACM to address the effects of the COVID-19 pandemic for consumers, particularly in the travel industry. On a European level, the European Commission (“Commission”) also commits itself to a high level of consumer protection, in particular with respect to sustainability and the green transition. The development of new products and technologies has additionally led to a tightening of the (European) rules on consumer sales and the introduction of new guidelines and policy rules.
In this blog, we discuss some important developments in consumer law over the past two years:
- Unfair commercial practices
- Digital economy: online stores and platforms
- Housing market
- Travel sector
Unfair commercial practices
A recent high-profile case concerns the action of the ACM against rogue locksmiths. Last year, the ACM already warned against locksmiths who take advantage of the urgent situation in which consumers often find themselves after locking themselves out. When searching on the internet for a locksmith who can operate swiftly, customers often find unreliable locksmiths that set high prices and/or act in an aggressive manner. After the warning, the ACM already blocked the websites of a few locksmiths, asked Google to remove related advertisements, and requested other companies to withhold from redirecting to these parties. KeyService Nederland and its director nevertheless still received a fine from the ACM. The company did not provide any information about the costs of its services in advance, and pressured consumers to pay the high bill for the job immediately afterwards. This resulted in a total fine of €250.000,-.
Another case that came up again recently concerns Servicecollect, a provider of mind games with brands such as Eduspel, Kennisgame, Memory Sports, Quizatlas and Puzzelspel. Servicecollect called consumers to fill in a survey and pretendedly offer its thanks, yet subsequently offered a puzzle subscription for €36,50 per month. When calling these consumers, Servicecollect did not clarify the intention of the call and did not provide any information about the possibility of termination. Since the ACM had already confronted the company with this issue before, it now decided to impose a fine.
The ACM also actively supervises the correct display of information in other sectors. In a recent press release, the ACM pointed out the obligation to state the correct price of (second-hand) cars in the automotive sector. Sellers must state the price including VAT and may for example not deduct any subsidies for electric vehicles from the sales price. Companies that will continue to maintain such practices can expect a fine, according to the ACM.
Digital economy: online stores and platforms
Especially online stores can continue to count on great amount of attention from the ACM. A recent study of the ACM about the online provision of information to consumers showed that online providers often fail to inform consumers correctly and (sufficiently) clearly about their offers and conditions. Last year, the ACM warned consumers about the practices of Perfectionbody, an online provider of personal care products. Perfectionbody offered a ‘free’ product (excluding shipping costs), yet consumers had to pay €58,- if they did not return the product within fourteen days. The ACM sent a similar warning to New Retail Company, the company behind PlatteTV.nl. This company automatically added a service package of €65,- to the (digital) shopping basket when the customer wanted to buy a TV. Empiru B.V., a company that offered commercial mediation for government services, received a penalty of €150.000,- for the unclear indication of prices (see also the episode of the Dutch TV-show BOOS by Tim Hofman). This summer, online stores Spelcomputerkopen.nl and Sneakerstad.nl also received an order subject to penalty from the ACM for, inter alia, failing to timely deliver products and return the sale price if a consumer invoked the statutory cooling-off period of fourteen days. Moreover, Sneakerstad is no longer allowed to request consumers to delete negative reviews before they will be assisted by customer service.
In addition to these relatively small online shops, the ACM has reprimanded a number of large online platforms. Following an investigation by the Commission, the ACM and other national consumer authorities, Amazon promised that Amazon Prime users are now able to cancel their subscription in two clicks. Secondly, the ACM has ensured that Amazon (just as Dutch electronic retailers bol.com, Coolblue and MediaMarkt already committed to) will better inform their consumers about software updates when purchasing smart devices. AliExpress.nl, will, as a result of the approach of the ACM and the Commission, also provide more information on its website about the cooling-off period, legal guarantees, extra costs, the identity of the seller, ranking, general terms and conditions and complaints. In addition, the ACM has a particular interest for sponsored ranking through platforms such as Google or Amazon. In a recent research, the ACM concluded that sponsored rankings could limit competition between providers and have a negative effect on consumer welfare.
With the implementation of Directive 2019/2161 in 2022, stricter rules now apply specifically to online retailers. This new framework for example prohibits fake reviews and creates the obligation for online sellers to inform consumers if they receive a personalised offer based on previous purchases. In addition, online platforms (such as bol.com and Amazon) and online marketplaces (such as marktplaats.nl and Vinted), in their capacity as intermediaries, must clearly indicate the matters for which they are responsible, and for which matters the consumer must contact the seller.
On a national level, the ACM is also working on updating its Guidelines on the protection of the online consumer. In these guidelines, the ACM describes how companies should inform online consumers and explains the specific rights of consumers. A new (draft) guide is expected to appear next year.
The Digital Content Directive has also introduced additional obligations for products with digital content and digital services. For example, consumers are now explicitly entitled to (security) updates, and the warranty period for services that are provided on a continuous basis now extends to the entire duration of the service provided. One could think of the provision of training schedules for a smartwatch (such as Garmin Coach), an app with traffic data (such as Flitsmeister) or other services with digital content, such as e-books or cloud storage services. The general statutory warranty period has also been extended from six months to one year as a result of the implementation of the new Consumer Sales Directive (see also Article 7:18 paragraph 2 of the Dutch Civil Code). If a product presents a deviation within one year of delivery, it is presumed to have already existed at the time of delivery. It is then up to the seller to prove otherwise.
In the telecommunications sector, the District Court of Rotterdam ruled on several enforcement decisions of the ACM. Firstly, the court confirmed the ACM’s fine on two providers of call forwarding services, Telemedia and Cadena, for misleading consumers. Whilst advertising with and pretending to be a direct customer service, they in reality functioned as a call forwarding service for which customers had to pay significantly.
Last year, the court also delivered four judgments concerning the fines imposed on multiple mobile telephone providers. In the first ruling, the court scrutinised the website of Vodafone, which mentioned certain discounts that only applied in combination with an internet subscription with Ziggo, and did not clearly mention one-off costs that were to be charged. The second case concerned KPN, which, through its brands Telfort and Simyo, offered subscriptions with unlimited mobile calls, whilst the calls were in fact not unlimited. For other subscriptions, the one-off mandatory costs were not specified. The third and fourth cases, concerning T-Mobile, Ben and Tele2, also involved the mentioning of unlimited calling/data usage (within the EU), and again, the applicable one-off costs. In its judgment, the court confirmed that the wording ‘unlimited’ may be used only when there is no actual limit. Moreover, one-off costs must be clearly stated. In all four cases, the Rotterdam District Court upheld the infringements, but reduced the fines by more than half a million euros in view of the recently amended Fining policy rules and the increase in the maximum amount of fines.
In addition to (ex-post) enforcement, the ACM also actively tries to help consumers in making an informed choice about mobile subscriptions. For instance, the ACM has created its own certificate for price comparison websites for telecommunications providers, such as prijsvergelijken.nl and belsimpel.nl. In order to qualify for a certificate, the price comparison site must satisfy eight quality requirements. These requirements relate to the way in which information is provided, the degree of independence and the accuracy of the website. As of yet, no companies have been awarded such a certificate. In the future, this possibility will also be available for price comparators of energy contracts.
The ACM has also been active in the energy market. At the end of last year, it imposed an order subject to penalty on energy company Enstroga for cancelling fixed energy contracts and cutting off the supply if the consumer did not agree to an increase in the applicable rates. Especially in the winter months, consumers should be assured that the utilities will not be cut off. The increase in energy prices is also no reason to terminate the contract or the supply, according to the ACM.
For DGB and Budget Thuis, misleading practices in telemarketing sales of energy contracts even led to substantial fines. By not (or tardively) mentioning important information about the duration, cancellation fee, conditions and/or applicable rates, the fine for Budget Thuis even amounted to €1.8 million.
At the same time, the Rotterdam District Court overruled a decision of the ACM in the energy sector earlier this year. In 2020, the ACM fined an energy supplier for wrongly classifying a group of small users as small-business customers instead of consumers, as a result of which these customers had to pay a higher cancellation fee. With due observance of the principle of legal certainty, the court ruled that the applicable legal framework does not provide any basis for the distinction in the ACM’s relevant guidelines between consumers and small-business customers. The court subsequently annulled the fine of €1.25 million imposed by the ACM.
Last year, the ACM introduced its Guidelines on Sustainability Claims. The guidelines provide some rules of thumb and practical examples to assist companies with formulating sustainability claims and to prevent consumers from being misled. As a result, the ACM initiated investigations in the energy, clothing and dairy industries in 2021. With regard to the dairy industry, the ACM wrote to more than forty companies and identified risks related to, for example, (allegedly reduced) CO2 emissions. In the energy market, the ACM analysed the sustainability claims of sixty suppliers. These included companies that claimed that the majority of their (green) electricity was generated in the Netherlands, whilst this was in fact only 20%. Two energy suppliers are currently still under investigation by the ACM.
Especially the clothing industry remains in the crosshairs of the ACM, for example in the context of ‘greenwashing’. More and more clothing brands introduce sustainability collections and claim the (exclusive) use of organic cotton. Earlier this month, the ACM published a commitments decision as regards H&M and Decathlon. After a preliminary investigation of the ACM, H&M* and Decathlon have committed to change the use of their sustainability initiatives Conscious and Ecodesign, or to entirely withhold from using these claims in some cases. They will also donate a considerable amount to various sustainable causes as a matter of compensation.
Earlier this year, the Commission also submitted a proposal for a new directive as regards the information provided by companies on sustainability claims. It for example introduces a prohibition on advertising statutory product requirements as a distinguishing factor from other products and to create sustainability labels that have not been verified by a regulatory authority. The updated Guidelines to the Unfair Commercial Practices Directive now also explicitly mention the obligation to substantiate sustainability claims and contain a prohibition on misrepresenting sustainability benefits. From now on, these practices will automatically lead to a misleading commercial practice.
In the housing market, the ACM has taken particular enforcement action against rental agencies. For example, Amsterdam Housing, De Huissleutel and Verkoopwijs Makelaars received a fine last year for charging rental agency fees to consumers. They charged these costs under the name of contract costs, rental costs, administration costs and/or a registration fee. Rental agencies working on behalf of landlords may not also charge costs to tenants, according to the ACM.
Earlier this year, the Dutch Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven, “CBb”) also issued an important ruling on the prohibition of double remuneration in the housing market. In 2019, the ACM imposed an order subject to penalty clause on intermediary Duinzigt for charging both registration and administration costs to the consumer tenant. Although this in principle entails double remuneration, the CBb ruled that it did not constitute an unfair trading practice as Duinzigt had been transparent about these costs. This enabled the consumer to make an informed decision. The CBb annulled the order subject to a penalty.
Due to the COVID-19 pandemic, the travel industry has also been high on the ACM’s priority list. In a recent press release, it stated that travel providers must better inform their consumers about the applicable risk levels in the country of destination. The ACM also imposed a symbolic fine on an online travel agent for charging an administration fee for flight cancellations during the outbreak of the COVID-19 pandemic.** Consumers who did not agree to a voucher and requested a refund instead had to pay €55,- for that service. According to the ACM, consumers were not sufficiently informed about the fee (beforehand). Given the exceptional circumstances and the huge number of cancellations by airlines, the ACM decided to only impose a symbolic fine of €1000,-.
More generally, the ACM continues to insist on price transparency when booking trips and holidays. It emphasises that prices should be clear to the consumer at first glance. In that regard, the ACM has already announced an investigation into misleading travel prices, starting with providers of accommodation at holiday parks.
Furthermore, the Commission is currently reviewing the Package Travel Directive. Under this directive, companies that offer package holidays, such as Sunweb and TUI, are obliged to offer consumers extra protection. Package holiday operators are for example obliged to arrange accommodation for stranded travellers, and consumers are protected against their bankruptcy. The Commission noted that European Member States dealt with the issuing of vouchers and refunds in various ways during the COVID-19 crisis. As a result, the specific rules of the directive were not always (strictly) complied with. The Commission will take this into account when revising the directive.
Supervision and enforcement in the field of consumer law appears to still be the primary focus of the ACM. Both in the digital economy and with regard to physical products and services, the ACM applies a very active enforcement policy. A lack of clarity in prices and conditions and the presentation of misleading information are strictly addressed or even heavily fined. Although the ACM shows some understanding for exceptional circumstances – especially in the context of the COVID-19 pandemic – the ACM emphasises that consumers should not take the brunt of it. At the same time, the ACM and the Commission are introducing more specific guidelines and policy rules. This way, they provide more clarity to companies about their specific obligations, and provide consumers with a better understanding of their rights. The Dutch judiciary nevertheless underlines that the regulator must always observe the principle of legal certainty when doing so.
Bas Braeken – Demi van den Berg
* Bas Braeken has been involved in the procedure regarding H&M.
** Bas Braeken, Jade Versteeg and Demi van den Berg assisted the travel agent in these proceedings.