1. Introduction
2. The need to harmonise marketing law in the EU
3. Which building blocks should be the foundation for general harmonisation
4. Co-regulation in a European perspective
5. Expanding authority co-operation and making it more efficient
6. Time schedule for necessary harmonisation
In the Nordic countries, we have operated with an general clause on good marketing practice for more than 25 years. The clause is a framework provision that sets out a minimum requirement for fair trading practices.
The general clause cannot stand alone, however, but must be interpreted with due regard to the consumer, business and societal conditions prevailing from time to time. Thus in making their interpretations, consumer ombudsmen must use soft law.
The term soft law is not an unambiguous, well-defined concept. Here I can refer to a report that DG Sanco has just published on the subject. In Nordic marketing practice, we use soft law in the sense of co-regulation. That is, guidelines drawn up in co-operation between representatives of the business community, consumers and the consumer ombudsmen.
The business community's self-regulation also has a certain influence in a complementary function. For example, ICC codes are a great help when we need to interpret what is in keeping with fair trading in a specific area. Therefore in Nordic practice there is no real tension in the field between the general clause and self-regulation.
The real problem is the extent to which the business community upholds its own ethical rules. One example is article 12 on advertising identification in the ICC International Code of Advertising Practice, which is infringed frequently. Hidden advertising is thus found in all media.
In accordance with Nordic practice, self-regulation alone as the partner to legislation is not sufficient. Some of the specific drawbacks of self-regulation are
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that there are no effective, competition neutral enforcement options tied to self-regulation, and
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that there is no guarantee that all of the affected parties are involved or
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that consumer and societal considerations are met.
The advantages of co-regulation, as practised under Nordic marketing practices legislation, is that the business community usually has an interest in abiding by the rules that they have helped design, and that it is possible to set rules that are perhaps not suitable for more permanent legislation.
Thus the Nordic experience has demonstrated generally the existence of effective instruments for intervening in improper marketing practices on national markets. In addition, the Nordic consumer ombudsmen have also been able to co-operate on joint Nordic guidelines about environmental marketing, TV commercials and trading and marketing on the Internet, for example.
The Nordic consumer ombudsmen have decided to seek an agreement on co-operation between their countries on cases to be handled in accordance with the Injunctions Directive, in the first half of 2001. We will also try to draw up rules on the exchange of internal documents and reports for use in national case processing and fact finding.
Can Nordic experience thus serve as inspiration for a European solution?
Companies have acquired their Single Market through regulation. The e-commerce directive is a recent example. But do we also want to realise the vision of the Single Market for consumers?
The answer should be yes. But in that case the prerequisites must also be in place. If consumers are going to shop across national borders, they should also be able to expect that they will not be exposed to marketing that they are not accustomed to on their national market. Otherwise consumers will not have the confidence to shop in a Single Market.
Consumers should have the right to expect that consumer protection is harmonised in the EU, so that they are as effectively protected in other Member States as they are in their own. Just as suppliers want to be able to do business throughout the EU without having to comply with widely different legal requirements.
This presupposes that the countries' marketing regulations are brought into better harmony with each other, particularly in relation to cross-border marketing.
There are still big differences between the countries' regulations for marketing goods and services. This problem can be solved by harmonising the basic marketing rules, regardless of form. It is important for the EU to profile its support for consumer protection.
All known studies and standpoints point in this direction. Please allow me to refer to the reports from two of the previous speakers at this conference as clear documentation of this need.
It is expedient for harmonisation to comprise the following set of rules:
An general clause on good marketing practice
The regulation should contain an general clause on good marketing practice, which takes account of continental European regulation and Northern European pragmatism.
The general clause should contain a dynamic element, yet be reasonably precise in indicating its field of application.
The general clause should ban action that conflicts with good marketing practice, taking account of the conditions at the point of marketing. The effects of marketing must be seen in relation to the people who are targets of the marketing, and must also be fair to consumers and traders.
The general clause should give non-exhaustive examples of actions that are undesirable, possibly in an annex (such as the model in the Directive on Unfair Contract). This will provide room to consider regional traditions, cultures and perceptions of justice in the larger Single Market that will one day encompass the Eastern European applicant countries.
The dynamic element may be supplemented by a procedure for information to the Commission and access for the Commission to bring crucial interpretation problems before the European Court of Justice. That is a model like that used in other directives such as the exceptions of the "internal market clause" in the e-commerce directive.
Sales promotion offers
There would appear to be a need to harmonise special advertising offers such as discounts, premiums and gifts, as well as other sales promotion offers like competitions or games. This could be done generally through a framework provision, which could be termed a "small general clause". Inspiration for implementing such a measure can be found in the ICC International Code of Sales Promotion and the e-commerce directive. A lot of unnecessary detailed regulation could thus be avoided, and we would also escape the well-known "testing of limits" that follows this type of regulation.
Sender and advertising identification
I mentioned earlier the example of the business community often infringing the requirement on advertising identification set out in the ICC International Code of Advertising Practice. A directive must therefore contain invariable requirements for identification of the sender of a marketing message. In addition, commercial communication should clearly be identifiable as such. We have a model for this in article 6 of the e-commerce directive.
Why should we have two sets of regulations - one for ordinary distance contracts and one for electronic commerce? Doesn't this make life difficult for both consumers and companies?
Other fair trading regulation
The three areas mentioned above would be the requisite foundation for harmonised community legislation on fair trading. With such a set of rules, supplemented by the other directives comprised by the Injunctions Directive, the EU will have come a long way towards ensuring a high level of consumer protection in step with the realisation of the Single Market.
This does not rule out the consideration of even more building blocks for the foundation platform of the harmonisation process. For example, one could consider a rule on a general duty of disclosure.
Sanctions
The Injunction Institute, as set out in the Injunctions Directive, seems suitable in most situations. Administrative injunctions in areas where the legal situation is sufficiently clear are one possibility - with access to bring cases before the courts. Penalties cannot be ruled out, but their retroactive character makes them less effective than compensation.
Assurances from companies which have infringed the rules on good marketing practice that they will refrain from doing so again should trigger access to administrative injunctions, should the company nonetheless commit another infringement.
This area is well suited for class-action. If this is too much to swallow at this time, a consolidation provision could be a temporary solution in cases where many consumers have been exposed to the effects of unfair trading.
I started off by concluding that Nordic experience indicates that co-regulation - not self-regulation - is the way forward. But where do we put the dividing line between regulation by directives and co-regulation
This is an interesting question, for which I do not have a final answer ready today. The Commission could consider instigating a closer study of the question - without delaying the process of moving on to harmonise fair trading, however.
When we talk about co-regulation at the European level, it is only acceptable if consumers, the business community and the authorities negotiate the rules to supplement the general framework set by directives. All experience shows that the business community's own guidelines - regardless of how good they are - are insufficient. General consideration for society and the function of the Single Market in particular mean that representatives of consumers and the relevant, national authorities must participate in the process of co-regulation.
It should be possible to have complementary guidelines that are national, regional and European, which can underpin directive regulation of relevant areas.
As an example of a successful European effort, I can mention the work on guidelines for using environmental claims in marketing, which DG Sanco is putting the final touches on. These guidelines have been drafted through negotiations by a broad group of experts with the Commission, the national authorities, non-governmental organisations and other vested interests. Together they set up guidelines to determine the requirements for non-misleading use of environmental claims in marketing.
We already have IMSN Europe to represent the national authorities, and they could have a new role to play here. Using IMSN Europe would also ensure contact to the global perspective through IMSN and OECD. For example, OECD has drawn up its own guidelines for electronic commerce, which contain elements for an general clause on fair trading.
As examples of regional guidelines, I have already mentioned the work of the Nordic consumer ombudsmen.
It would not be appropriate to cut off access to national guidelines, since an general clause on good practice must also take into consideration the situation on the marketplace to which the marketing is targeted.
Both regional and national guidelines should be covered by an information procedure to the Commission, as I mentioned previously.
In 1992 my Nordic colleagues and I took the initiative to form the International Marketing Supervision Network (IMSN) among the OECD countries, which was supplemented by a sub-group for the European countries (IMSN Europe) in 1999.
This co-operation has proved to be robust and increasingly useful in tackling cross-border marketing, also on the Internet.
Homepages and an Intranet with databases are part of both systems. If required, the IMSN Europe database could be used as the hub of co-operation on practice between the authorities.
Impending regulation of fair trading should be able to be enforced effectively. Enforcement cannot be separated from the issue of harmonisation, however, if the Single Market is to function effectively.
Traditionally, the consumer protection directives have used the country of destination principle. However, in the radio/TV broadcast directive and the electronic commerce directive, a country of origin principle has been introduced. A discussion on these principles should be less crucial, however, if we have a directive with a high level of consumer protection, where the same rules apply for all Member States. Our task must be to solve the problem of more effective options for intervention to stop cross-border marketing that does not live up to the requirement for fair trading.
The function of the Single Market is the free movement of goods, after all. Therefore, the enforcement of consumer protection must also follow free movement.
Why don't we combine the principles of country of origin and country of destination? That would give supervisory authorities the opportunity to intervene according to both principles. We could also consider adding the obligation to first request the authority of the country of origin to step in, and if that is not possible, to carry out the intervention in the country of destination.
This means that Member States are obligated to ensure that their authorities can intervene with their own companies at any time - intervene at the source - even when marketing is directed solely at the market of another Member State. Intervention should be handled in accordance with the laws of the authority's own state or the foreign state, which are largely identical.
Finally, the directive should be incorporated in the annex to the Injunctions Directive, so that the system which the Member States are now developing for the mutual recognition of the capacity to sue can also be applied here.
The time has come for the Commission to present a draft directive to regulate fair trading. The Commission did not hesitate to regulate electronic commerce and show the ability to act. So I must challenge the Commission to act in the same way now to ensure consumer confidence in the Single Market.
Naturally, it would have been nice if everyone had started preparing general regulations on fair trading long ago, instead of starting with detailed regulation of individual areas. But now is the time to look forward.
Please allow me to sum up my points of view:
- The Single Market needs general regulation of fair trading.
- Regulation should be implemented through general framework legislation including precise rules as well as dynamic elements.
- Supplementary regulation should be ensured through co-regulation, for example, through European, regional and national guidelines that incorporate global considerations, however.
- Reasonable and necessary harmonisation of the regulations should be ensured through an information procedure to the Commission, which can bring important questions of interpretation before the European Court of Justice.
- Regulations should be able to be effectively enforced, and enforcement must follow the free movement of goods.
I call on the Commission to start preparing a draft directive immediately.