Content:
The Development of Consumer Legislation in Denmark
The Difference between Competition Authorities and Consumer Authorities
The Danish Marketing Practises Act
Why should we have a CO?
A Call for More Tasks for the CO
CO Objectives and Strategies
The CO strategy covers four high profile areas
What is 'Best Practise'?
International Co-operation
Nordic Co-operation
ICPEN (International Consumer Protection Enforcement Network) and ICPEN-Europe
The Marketing Practises Act can be improved
Concluding Remarks
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Neytendasamtökin has invited me to give a talk on my experiences as a Consumer Ombudsman and the reason why consumers are in need of an independent public body - a Consumer Ombudsman - to safeguard their interests.
The period from the mid-1950s onwards has seen sporadic concerns in the area of competition legislation gradually turn into a comprehensive and widely ramified legislative area covering public, private and formal fields.
The Consumer Ombudsman (CO) institution has existed in Denmark for nearly 30 years.
Do the competition authorities handle consumer questions different from the consumer authorities? In some areas the competition authorities and the CO have a mutual interest in regulating practises in trade and business, e.g. in connection to unfair contractual terms. In other areas their interests conflict, e.g. in connection to price transparency and the extent to which considerations in regard to competition should prevail.
The CO often invites the competition authorities to participate in negotiations on guidelines on good marketing practises.
The main difference between the CO and the competition authorities rests on the assumption that competition benefits business and trade. Consumer policy is not a key factor; this is evident from the lack of attention given to consumer concepts in the competition legislation.
The objective of the CO, on the other hand, is to work for the protection of collective consumer rights. Legal considerations and the best possible protection of consumers in regard to competition remain his main priority. The Danish Marketing Practises Act, the Act on Payment Instruments, the Injunction Act and the E-Commerce Act are used to enforce these considerations.
The Danish Marketing Practises Act dates back to 1975. The purpose of the law was partly to regulate market behaviour in the way that previous competition legislation did, partly to introduce the Consumer Ombudsman institution.
The Marketing Practises Act is a general law. The keyword is ‘marketing’, which covers all initiatives taken for business purposes. The provisions of this act cover advertising, promotion and sales campaigns along with instructions, guarantees, contracts and agreements
The most important provision in this Act deals with the overriding principles in sections 1, 2 and 3 (now sections 1, 2, 3 and 7) on misleading information and instructions - add to this a number of specific market regulation rules and specific prohibitions: section 4 (now section 12) on 'warranties/guarantees', section 6 (in effect until 1 January 2007) on collateral gifts (i.e. the use of gifts as sales promotion), section 7 (in effect until 1 January 2007) on quantitative restrictions, section 8 (now section 10) on trading stamps etc. and section 9 (now section 11) on drawing lots and prize competitions. Further, the Marketing Practises Act includes provisions concerning enforcement of the law, the CO, his authority and method of work that emphasises the negotiation principle. Pursuant to section 16 (now section 23) the CO should, via negotiation, seek to induce business and trade to act according to the principles of good marketing practises and according to the provisions of this act in general.
The CO establishes the principle of good marketing practises; however, the courts have the final say. The principle of good marketing practises is a legal standard. The principle itself has no meaning. When defining and interpreting fraud in this or that area, due consideration must be given to the interests of not only consumers but also business and trade.
Different enforcement possibilities used in matters investigated by the CO:
- Public relations in general (www.forbrugerombudsmanden.dk)
- Guidelines and instructions – often as a result of negotiation with the sectors involved and trade organisations
- General instructions
- Legal proceedings
The Danish Consumer Agency puts staff and other resources at the disposal of the CO and the Consumer Complaints Board – the latter deals with specific complaints/matters pertaining to civil law.
The CO is a regulatory agent, a 'watchdog', who acts as a lawyer, public prosecutor and negotiator in relation to trade and business.
One might ask the question why the CO institution is thought to be useful and, in my opinion, necessary?
I believe the strength, effectiveness and credibility of the CO lies in the fact that the institution is a real person rather than the usual, anonymous bureaucracy people normally associate with legislation. Though appointed by the government, the CO is independent, and has the right to investigate whatever matters he sees fit. The minister cannot interfere with matters brought forth by the CO. And his decisions may be tried at court alone - it does not involve the minister.
However, the CO has a duty to inform the public about his work.
The CO is, of course, a public body, but it is one identified with a person speaking on behalf of the consumers; in other words, a body that business, trade and media easily can relate to.
We are only a small unit. Apart from myself, 9 lawyers make up the section at present, along with a head of the legal division, a secretary and a student. This obviously does limit the number of cases we can bring to public attention. However, there is also strength in being a small team of people highly committed to their work. We believe we make a difference and our results speak for themselves.
That the Danish government, business, trade and the Consumer Council share our view on our efficiency is evident from their call for the CO to supervise the Danish Price Marking and Display Act, which is to be incorporated into the Marketing Practises Act. Also, the act needs to be extended in order to include the so-called concept of 'free choice' – i.e. when the consumer is in a position to choose freely between a number of service providers within a specific area. In the public sector this covers health care, childcare, schools etc. Further, the CO has also been asked to protect business and trade against aggressive marketing. Finally, people educated as lawyers but with no authorisation will soon be allowed, under CO supervision, to marketing themselves in competition with professional lawyers.
At first sight, this delegation of responsibility to the CO may appear to be an acknowledgement; however, it is likely that some have a hidden agenda of wanting to give a lower priority to the CO’s role as a safeguard of consumer interests against business and trade. The allocation of resources will show. The need to select and prioritise is more important than ever.
The aims:
- The CO institution must be trustworthy and inspire confidence – both from a consumer and business perspective
- The CO wants to be visible, efficient and influential
- The CO wants to strengthen the dialogue and the co-operation with trade, business and their organisations
- The CO wants to ensure a consistent compliance with the law
- Cross-border commerce and marketing is an important and integrated part of the CO’s activities
- The CO wishes to use his resources and organise his activities so that the efforts taken will meet the aims in the best possible way
- Readiness to take into consideration consumer responses and dialogue
- Dialogue and co-operation with trade, business and their organisations (ethics, dialogue and responsibility)
- Active communication
- Efficient enforcement
This spring, a new feature with the name 'What is Best Practise' was launched on our website. It gives a possibility for business, trade and consumers to get a clear understanding of what is meant by best practise principles.
The idea is to facilitate the search for information, also for small businesses, on best practise, and the cases and guidelines forming part of the basis of these principles.
The site encourages dialogue and self-regulation, e.g. to stop attaching unsolicited enquiries to bills when no products have been ordered.
At present, the site covers the area connected to section 1 of the Marketing Practises Act on good marketing practise. The site will expand over the next couple of months.
The CO participates to a great extent in international co-operation. It remains an important source of inspiration for our work to exchange information and experiences with colleagues abroad, even if legislation and administration may differ widely from the very homogenous and internationally acknowledged 'Nordic' model.
The Danish CO works closely together with the other Nordic COs. This is a natural consequence of the many similarities in Nordic marketing law and our administration, which owes much to a long tradition of co-operation on legal matters. Among other things, we have drawn up an agreement to give mutual assistance in trials pursuant to the injunction directive. Likewise, we have submitted joint statements to enquiries presented by the EU on new EU legislation concerning the marketing area. We prepare positions on commerce and marketing on the Internet together, and last but not least, we meet together in negotiations with e.g. SAS and other airline companies.
We, the Nordic COs, also took the initiative to form the International Consumer Protection Enforcement Network in 1990. Today the network comprises more than 30 countries worldwide such as Mexico, the USA, Canada, Japan, South Korea, New Zealand and Australia, along with most European countries. The Baltic countries have been the latest to join while Chile is in waiting position.
The network meets a couple of times annually to discuss practical measures in relation to actions to be taken against unethical cross-border marketing. The increasing use of Internet and other communication media for marketing purposes give rise to concern in particular.
ICPEN-Europe came into being in 1999 as a European forum for national authorities responsible for the implementation of a harmonised, European consumer legislation. In this forum we discuss, exchange views and experiences and look for common ground in regard to problems related to the implementation of a European standard in consumer legislation.
Both organisations have their own websites/intranet.
At the moment, a committee is working on a modernisation of the Marketing Practises Act. The CO holds the view that this is strongly required as evident from the bullet points listed below.
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Children and Young People
Special provisions on marketing directed at children and young people are needed.
The Marketing Practises Act does not include specific provisions in relation to marketing targeted at children and young people, and the CO is under the necessity, as a basis, to apply to matters pertaining children and young people the overriding principle in section 1 on good marketing practises.
The never-ending, intense and increasing interest in directing marketing to children and young people has brought about the need for more precise guidelines in the Marketing Practises Act in relation to the special precautions to be taken by business and trade concerning children and young people.
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Identification of Commercial Messages and Hidden Advertising (Product Placement etc.)
Provisions on identification of commercial messages that open up the possibility for punishment are needed.
Commercial messages not immediately recognisable as such are proliferating, e.g. marketing 'disguised' as articles. Another example is the Internet where advertising, information, entertainment and games often merge and hence become more difficult to distinguish.
In my opinion, commercial messages should be presented as such so that consumers then know when they are exposed to advertising.
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Advertising should have a Binding Effect
Provisions that give binding effect to advertising are needed.
According to civil law, an 'offer' is not binding but just seen as an appetiser. Thus consumers can only to a very limited extent base a claim on a commercial statement. If an offer turns out to be wrong or misleading it does not mean that consumers for this reason alone can raise claims against the business or trade presenting the offer in order to obtain compensation.
This present state of the law makes it difficult to enforce the ban on misleading statements included in the Marketing Practises Act – to the detriment of the consumers.
Rules on class action are needed.
Misleading marketing, manipulative selling methods or unfair/invalid standard terms of contract may lead many consumers to form a contract and hence incur a loss. However, our experience shows that only a minor part of the affected consumers bring forward claims of damages because their legal costs often will exceed the awarded compensation.
The present rules laid down in the Marketing Practises Act are not always useful in practise, as every party – in this case every consumer – has to present individual claims for compensation, prove the claim and substantiate the loss. To try a case like this at court one has to identify all consumers who wish to present claims for damages. Secondly, individual matters for each consumer have to be substantiated and are to be treated individually during the case with a great workload as a result for all parties.
Class action in general will be discussed in the Administration of Justice Committee this autumn.
It should be easier for the CO to issue enforcement notices.
Section 19, subsection 2 (now section 27) of the Marketing Practises Act should be amended to make it possible for the CO to issue an enforcement notice if an action violates the law and if this action cannot be changed through negotiation. Following this, the demand that the action has to be a clear contravention of the law should hence be repealed.
So what would the benefits of having a CO in Iceland be? This is summed up in the following points:
- Competition authorities protect and safeguard business and trade in that their primary concern is the economy. The CO, on the other hand, safeguards the interests of consumers through legal rules
- An independent CO will be more flexible and can initiate dialogue with trade and consumer organisations on finding solutions for current consumer problems – something which statutory prescription falls short of doing
- Compared to ordinary institutions, a CO may inspire a special confidence and have a greater impact to the benefit of the consumers
- Even for a small institution like the CO, help and assistance is never far away with colleagues in the Nordic countries as well as worldwide.
I wish you good luck with the project, and I would be more than happy to see you in Nordic and international co-operation
The speech is available in both Danish and English on the website: www.forbrugerombudsmanden.dk