E C Directive 1999/44/EC Belgrade, Serbia March 2011 drd. Mircea POPA

WHY ? FOR WHAT? “Consumer markets are evolving rapidly. “ “Consumer markets are evolving rapidly. “ “Products, services and sales channels are becoming increasingly sophisticated and consumers have to make ever more complex choices resulting in enhanced risk of detriment. “ “Products, services and sales channels are becoming increasingly sophisticated and consumers have to make ever more complex choices resulting in enhanced risk of detriment. “ “We need to make sure good law does not remain a dead letter. We intend to focus on the real impact in terms of consumer welfare and confidence in a better functioning internal market.” “We need to make sure good law does not remain a dead letter. We intend to focus on the real impact in terms of consumer welfare and confidence in a better functioning internal market.” “We need to continue working towards a set of common and clear rules that provide legal certainty. These rules need to take into account the balance between protecting the rights of consumers without adding an excessive regulatory burden on businesses. “ “We need to continue working towards a set of common and clear rules that provide legal certainty. These rules need to take into account the balance between protecting the rights of consumers without adding an excessive regulatory burden on businesses. “ “Businesses indeed have an interest and responsibility in complying. Compliance may be perceived as burdensome. I believe it should be seen as an investment in both securing consumer confidence and in building a solid reputation and a loyal customer base for the business. “ “Businesses indeed have an interest and responsibility in complying. Compliance may be perceived as burdensome. I believe it should be seen as an investment in both securing consumer confidence and in building a solid reputation and a loyal customer base for the business. “ “ John Dalli - Member of the European Commission, responsible for Health and Consumer Policy Enforcement of Consumer Rights European Economic and Social Committee, European Consumer Day - Madrid, Spain, 15 March 2010

Legal problems: Legal problems: Written law – inconsistencies, lack of clarity, lack of experience; Written law – inconsistencies, lack of clarity, lack of experience; Institutions enforcing it – public administration, courts; Institutions enforcing it – public administration, courts; Legal culture! Legal culture! Economic and social problems: Economic and social problems: Markets in transition – lack of resources, lack of awareness, need for fair competition; Markets in transition – lack of resources, lack of awareness, need for fair competition; Birth of civic society and self-regulation (business self-control, consumer movement, associations and organisations); Birth of civic society and self-regulation (business self-control, consumer movement, associations and organisations); Legal culture again! Legal culture again!CONCLUSION? Incomplete law, inefficient enforcement, lack of knowledge of what is legitimate and what is not – both on the business and consumer side  UNFAIR COMMERCIAL PRACTICES. THE REALITY OF LAWS AND MARKETS IN TRANSITION:

E C Directive 1999/44/EC Title: EC Directive 1999/44/EC on certain aspects of the Sale of Consumer Goods & associated Guarantees EC Directive 1999/44/EC on certain aspects of the Sale of Consumer Goods & associated Guarantees Intended effective date: 1 January January 2002

E C Directive 1999/44/EC Objectives: To harmonise consumer protection law across the EU To harmonise consumer protection law across the EU To provide a minimum standard of legal protection - in some instances lower standards than already exist in the national legislation To provide a minimum standard of legal protection - in some instances lower standards than already exist in the national legislation

E C Directive 1999/44/EC Rationale: A uniform protection system encourages confidence in cross border trade A uniform protection system encourages confidence in cross border trade Internet shopping is transnational Internet shopping is transnational

The scope of application Business to consumer sale Business to consumer sale The definition of consumer The definition of consumer Definitions of seller and producer Definitions of seller and producer Sale of consumer goods Sale of consumer goods Definition of goods: tangible, movable items Definition of goods: tangible, movable items Exceptions: Exceptions: - Goods sold by authority of law; - Goods sold by authority of law; - Water/gas where not put up for sale in a limited volume or set quantity; - Water/gas where not put up for sale in a limited volume or set quantity; - Electricity - Electricity

definitions CONSUMER: shall mean any natural person who, in the contracts covered by this Directive, is acting for purposes which are not related to his trade, business or profession CONSUMER: shall mean any natural person who, in the contracts covered by this Directive, is acting for purposes which are not related to his trade, business or profession SELLER/RESELER: shall mean any natural or legal person who, under a contract, sells consumer goods in the course of his trade, business or profession SELLER/RESELER: shall mean any natural or legal person who, under a contract, sells consumer goods in the course of his trade, business or profession PRODUCER: shall mean the manufacturer of consumer goods, the importer of consumer goods into the territory of the Community or any person purporting to be a producer by placing his name, trade mark or other distinctive sign on the consumer goods PRODUCER: shall mean the manufacturer of consumer goods, the importer of consumer goods into the territory of the Community or any person purporting to be a producer by placing his name, trade mark or other distinctive sign on the consumer goods Guarantee: shall mean any undertaking by a seller or producer to the consumer, given without extra charge, to reimburse the price paid or to replace, repair or handle consumer goods in any way if they do not meet the specifications set out in the guarantee statement or in the relevant advertising; Guarantee: shall mean any undertaking by a seller or producer to the consumer, given without extra charge, to reimburse the price paid or to replace, repair or handle consumer goods in any way if they do not meet the specifications set out in the guarantee statement or in the relevant advertising; Repair: shall mean, in the event of lack of conformity, bringing consumer goods into conformity with the contract of sale Repair: shall mean, in the event of lack of conformity, bringing consumer goods into conformity with the contract of sale

E C Directive 1999/44/EC Key Features I: Applies to all MOVEABLE CONSUMER GOODS (exception water, gas, electricity and goods sold at auction, goods bought by HP) Applies to all MOVEABLE CONSUMER GOODS (exception water, gas, electricity and goods sold at auction, goods bought by HP)

E C Directive 1999/44/EC Key Features II: Applicable to new AND second-hand goods Applicable to new AND second-hand goods Applicable only when sold by business to individual consumers Applicable only when sold by business to individual consumers Introduces a minimum 2 YEAR claim period from DATE OF DELIVERY of goods Introduces a minimum 2 YEAR claim period from DATE OF DELIVERY of goods

E C Directive 1999/44/EC 2 Year Liability and Limitation Period I: Basic premise is that goods must conform with contract of sale Basic premise is that goods must conform with contract of sale Seller liable for any lack of conformity which exists at the time of delivery and which becomes apparent within 2 years of the date of delivery Seller liable for any lack of conformity which exists at the time of delivery and which becomes apparent within 2 years of the date of delivery

E C Directive 1999/44/EC 2 Year Liability and Limitation Period II: UNLESS UNLESS –Consumer was aware of the defect at the time of sale –Consumer could not reasonably be unaware of the defect at the time of sale

E C Directive 1999/44/EC Criteria for Conformity I: Comply with a description given by the seller and possess quality of the goods that seller has held out as sample model Comply with a description given by the seller and possess quality of the goods that seller has held out as sample model

E C Directive 1999/44/EC Criteria for Conformity II: Fit for the purposes for which goods of the same type are normally used Fit for the purposes for which goods of the same type are normally used Fit for any particular purposes which the consumer has made known to the seller AND the seller has accepted Fit for any particular purposes which the consumer has made known to the seller AND the seller has accepted

E C Directive 1999/44/EC Criteria for Conformity III: Show the quality and performance normal in goods of this type - vis a vis Show the quality and performance normal in goods of this type - vis a vis –The nature of the goods –Taking into account public statements/ advertising/labelling re specific characteristics of the goods made about them by the seller, the manufacturer or his representative

E C Directive 1999/44/EC Criteria for Conformity IIII: NOTE - The seller is not liable for goods not conforming to the manufacturers’ statements if he can show that: NOTE - The seller is not liable for goods not conforming to the manufacturers’ statements if he can show that: –He was not aware of the statement –He had corrected the statement –He can show that the consumer’s decision to buy was not influenced by the statement

E C Directive 1999/44/EC Wear and Tear I: NOTE - goods only need to “Show the quality and performance normal in goods of the same type and which the consumer can reasonably expect, given the nature of the goods” NOTE - goods only need to “Show the quality and performance normal in goods of the same type and which the consumer can reasonably expect, given the nature of the goods”

E C Directive 1999/44/EC Wear and Tear II: Seller is only liable for faults that were there at delivery, and not for wear and tear. The liability period is not a durability requirement Seller is only liable for faults that were there at delivery, and not for wear and tear. The liability period is not a durability requirement

E C Directive 1999/44/EC Installation: If installation forms part of the contract of sale, incorrect installation by or on behalf of the seller is deemed to be equivalent to a lack of conformity of the goods. This also applies if the product is incorrectly installed by the consumer due to shortcomings in the installation instructions If installation forms part of the contract of sale, incorrect installation by or on behalf of the seller is deemed to be equivalent to a lack of conformity of the goods. This also applies if the product is incorrectly installed by the consumer due to shortcomings in the installation instructions

E C Directive 1999/44/EC Key Features III: Reversed burden of proof - any lack of conformity (defect) which becomes apparent within the first 6 months of delivery is presumed to have existed at the time of delivery Reversed burden of proof - any lack of conformity (defect) which becomes apparent within the first 6 months of delivery is presumed to have existed at the time of delivery UNLESS UNLESS –Proved otherwise –Presumption is incompatible with the nature of the goods or the lack of conformity

E C Directive 1999/44/EC Key Features IV: Hierarchy of Remedies : Hierarchy of Remedies : –In the event of any lack of conformity, the consumer is entitled to free repair or replacement whichever is the most economical and practical, within a reasonable time and without any significant inconvenience –If a repair or replacement is not possible or practical, or the seller has not completed a remedy within a reasonable time or has caused significant inconvenience, the consumer is entitled to a price reduction or refund

Key rules If the goods were defective at the time of delivery the consumer may ask the seller for: If the goods were defective at the time of delivery the consumer may ask the seller for: - Repair or replacement of goods  If these remedies were not completed within reasonable time and without significant inconvenience then the consumer may ask for: - Reduction of price or termination of the contract - Reduction of price or termination of the contract The seller is liable where the lack of conformity becomes apparent within two years as from delivery of the goods. The seller is liable where the lack of conformity becomes apparent within two years as from delivery of the goods. During the first six months from the time of delivery reversal of burden During the first six months from the time of delivery reversal of burden

Key rules – part II Rules on (commercial) guarantees: Rules on (commercial) guarantees: The definition of guarantee The definition of guarantee A guarantee (commercial) is binding upon guarantor A guarantee (commercial) is binding upon guarantor Requirements of transparency Requirements of transparency Right of redress Right of redress The seller can claim a remedy against any The seller can claim a remedy against any party responsible in the chain (B2B relation) within limits of national law.

E C Directive 1999/44/EC Comparison of Remedies under Existing Law/Directive: Existing Law: Existing Law: –Very short time to reject and claim refund –Damages (typically equivalent to a repair/replacement) Directive: Directive: –Repair or replacement –Price reduction or refund

E C Directive 1999/44/EC Limitation Periods: Current position in other MS legislation for breach of contract; 6 years from date of breach Current position in other MS legislation for breach of contract; 6 years from date of breach Directive; 2 years from delivery Directive; 2 years from delivery other MS - no desire to derogate from existing regime other MS - no desire to derogate from existing regime

E C Directive 1999/44/EC Second Hand Goods: Member States have discretion to reduce the claim period to minimum 1 year. Member States have discretion to reduce the claim period to minimum 1 year. Is not necessary to accept limitation in the consumers detriment

E C Directive 1999/44/EC Commercial Warranties: Voluntarily given without extra charge Voluntarily given without extra charge Will be legally binding Will be legally binding Query: are they already binding in the MS? Query: are they already binding in the MS? Must comply with Directive criteria Must comply with Directive criteria

E C Directive 1999/44/EC Mandatory requirements of commercial warranties I: Legally binding on offeror under conditions set out in guarantee Legally binding on offeror under conditions set out in guarantee State that statutory rights not affected by guarantee State that statutory rights not affected by guarantee plain intelligible language plain intelligible language

E C Directive 1999/44/EC Mandatory requirements of commercial warranties I: essential particulars essential particulars  how to make a claim  duration of guarantee  territorial scope  name and address of guarantor  jurisdiction

E C Directive 1999/44/EC Choice of law: There are complex and unpredictable rules which deal with assigning law to a given contract when the contract itself is silent There are complex and unpredictable rules which deal with assigning law to a given contract when the contract itself is silent The directive raises difficult questions about the conflict between European state laws The directive raises difficult questions about the conflict between European state laws

E C Directive 1999/44/EC Choice of law II:  There is no homogeneous worldwide system of contract law  Common law is different to European Civil law; precedent as opposed to Code  English law mirrored in the U.S and commonwealth states  The faintly ambiguous language of civil law is anathema to common lawyers

Requirements of proper implementation Minimum harmonization clause: MS may maintain more stringent provisions as long as these are compatible with the Treaty. Minimum harmonization clause: MS may maintain more stringent provisions as long as these are compatible with the Treaty. Legislative options within the Directive: Legislative options within the Directive: Exempting second-hand goods sold at public auctions where consumers have the opportunity of attending in person Exempting second-hand goods sold at public auctions where consumers have the opportunity of attending in person Providing that the consumer must inform the seller of the lack of conformity within a period of two months from the moment he detected the lack of conformity Providing that the consumer must inform the seller of the lack of conformity within a period of two months from the moment he detected the lack of conformity Providing for a language requirement of the (commercial) guarantee Providing for a language requirement of the (commercial) guarantee Providing shorter time period for the liability of the seller in case of second–hand goods (minimum one year). Providing shorter time period for the liability of the seller in case of second–hand goods (minimum one year).

Requirements of proper implementation The importance of the consistent use of terminology (e.g. consumer, seller). The importance of the consistent use of terminology (e.g. consumer, seller). The need to achieve coherence between implementing measures and existing contract law. The need to achieve coherence between implementing measures and existing contract law.

E C Directive 1999/44/EC Seller’s Rights of Redress: Ostensibly the Directive is only concerned with consumer rights however it provides that seller can pursue remedies back to its own supply source Ostensibly the Directive is only concerned with consumer rights however it provides that seller can pursue remedies back to its own supply source Query; what law will apply and will it be excludable ? Query; what law will apply and will it be excludable ?

E C Directive 1999/44/EC Areas for action: The form, content and presentation of all commercial guarantees The form, content and presentation of all commercial guarantees Review of advertising material Review of advertising material Review all self-assembly / installation instructions Review all self-assembly / installation instructions Business to Business purchase and supply contracts Business to Business purchase and supply contracts

E C Directive 1999/44/EC Areas for action II: Assess exposure to foreign laws and jurisdictions Assess exposure to foreign laws and jurisdictions Train sales and after sales teams Train sales and after sales teams Withdraw out of date literature from resellers as far as possible Withdraw out of date literature from resellers as far as possible Consider using the web as the primary source for current product data Consider using the web as the primary source for current product data

E C Directive 1999/44/EC Areas for action III: Consider the practicality of segregating “consumer” and “non-consumer” sales records Consider the practicality of segregating “consumer” and “non-consumer” sales records Consider systems of recording sales dates for consumer products to identify: Consider systems of recording sales dates for consumer products to identify:  The end of the 6 month period  The end of the 2 year period (or as may be)

The Directive in context The following may apply as well: The following may apply as well: Rules on selling methods: Rules on selling methods: Door to Door Selling Directive Door to Door Selling Directive (85/577/EC) (85/577/EC) Distance Selling Directive (97/7/EEC) Distance Selling Directive (97/7/EEC) Rules on terms of contract: Rules on terms of contract: Directive on Unfair Contract Terms Directive on Unfair Contract Terms (93/13/EEC) (93/13/EEC)

Thank you!