Author: Fabrizio Esposito

Time-traveling prices that should empower consumers confuse a German judge

Jurisprudência

Imagine this situation. You are buying a pair of shoes. You are undecided between two models. They both cost 60 EUR, but is now discounted to 60 EUR and used to cost 80 EUR. You will likely opt for the discounted one. It looks like more value per money. Traders know this.

And unscrupulous traders take advantage of this. How? By increasing the price from, say, 70 EUR to 80 EUR for a short time and then telling you that the discount is of 20 EUR instead of 10 EUR.

For some time now, Portuguese law has tried to stop practices such as this with Article 5 of Decreto-Lei n.º 70/2007. Recently, the European legislator has essentially extended the idea to the whole Union by introducing a new provision in the Price Indication Directive (Directive 98/6/EC). The new Article 6a paragraph 1 and 2 recite as follows:

1. Any announcement of a price reduction shall indicate the prior price applied by the trader for a determined period of time prior to the application of the price reduction.

2. The prior price means the lowest price applied by the trader during a period of time not shorter than 30 days prior to the application of the price reduction.

A German judge found it difficult to apply this provision and asked for guidance from the Court of Justice of the European Union (ECJ). The judgment was rendered on 25 September 2024. The facts are these. Aldi, a well-known supermarket company, distributes weekly a booklet with commercial information. The consumers’ association of the Land of Baden-Württemberg, Germany, took issue with how the price of bananas and pineapples were displayed, as they considered it violating Article 6a.

We will focus on the display of the price of bananas, for simplicity. Following a practice common in trademark cases but new – as far as I can tell – in consumer law matters, the ECJ includes a picture of the advertisement in its ruling:

The writing in white means: ‘Previous sale price. Lowest price in the last 30 days: 1.29’.

In essence, Aldi claims that the information in white is sufficient to comply with Article 6a, even if the discount is calculated as a percentage of the ‘chronologically prior’ price. The consumer association disagrees and points out that the 2021 Interpretive Guidelines on Article 6a by the European Commission support their view.

The referring judge has the doubts that the text of the directive requires the more demanding interpretation, despite what the guidelines say. The Court of Justice of the European Union sides with consumers. The answer is convincing and predictable, as it relies on a well-established practice in the interpretation of EU consumer law.

First, the ECJ points out that the interpretation of a provision of EU law requires one to look at its literal meaning, its objectives, and the system of norms it belongs to. Second, the Court finds that the plain meaning of the provision does to solve the interpretive doubt raised by the German judge.

Third, once teleological and systematic considerations come into play, the answer becomes clear. The directive aims to empower consumers by providing them with reliable and transparent information about prices (Recital 12). This objective is part of ensuring a high level of consumer protection, enshrined in Article 38 of the Charter of Fundamental Rights and 169 TFEU.

The interpretation proposed by the German judge would not be effective in protecting the interests of consumers. Therefore, the ECJ rejected it, confirming the consumers’ association view that Aldi’s conduct was not compliant. Thus, discounts must be calculated based on the ‘legal prior’ price as defined by Article 6a and not based on the ‘chronological prior’ price.

One point connected to Article 6a remains unclear to me. I wonder if Article 6a should not be interpreted as prohibiting displaying the ‘chronological prior’ price. After all, EU law deems it deceptive compared to the ‘legal prior’ price. I believe that, sooner rather than later, this question will be asked to the Court of Justice of the European Union.

This decision confirms that Article 6a has increased the level of transparency of a critical information such the final price. Price stability over time is a crucial element in this regard. Traders are free to adjust prices as often as they want, but should refrain from using this freedom to artificially increase the attractiveness of a price reduction.

The concept of a ‘reference price’ in consumer law is a novelty at first glance. Yet, this has an important predecessor in anti-usury laws. An often-used technique to fight usury is calculating a ceiling interest rate that can be legally charged. Rates about it are prohibited (with criminal sanctions).

The reference price of Article 6a is different in that it is based only on the prices offered by the specific trader. This concept represents a telling example of the two-fold challenge of consumer law and market law: a nuanced understanding of business practices must be coupled with ingenious regulatory solutions.

Regarding the relationship between EU ad national law, the decision illustrates an important point. A part of EU legal scholarship is very vocal about the vices of EU law, which is seen as systematically underperforming in comparison to national law. The present decision is an excellent example of the positive role of EU law: in comparison to the interpretation given by the ECJ, the German judge preferred a reduced level of consumer protection.

At the same time, the issue of the prior price is telling about another controversy regarding the EU-national relation. In fact, the Price Indication Directive is a minimum harmonization directive, which enabled Portugal to ‘experiment’ and find a solution earlier than the EU. Most probably, the Portuguese solution was actually transplanted by the EU in all Member States. Had the directive been a maximum harmonization one, or even a regulation, this dynamic from one Member State to the whole Union would not have been possible.

Considering that EU law has moved towards an increased use of maximum harmonization directives and regulations, there is indeed reason for concern about the loss of flexibility and regulatory innovation in the Union.

The matter of prices is particularly prominent in this regard. One of the main preoccupations in the digital economy is the use of personalized or surveillance prices in digital markets. As I argued elsewhere, the ‘legal prior’ price of Article 6a confirms that the law can (and arguably does) force traders to show personalized prices as variations of the impersonal price. In sum, to empower us, the consumers, the law can make prices through time. What else can we make it do? Imagination, not the sky, is the limit.

Publication alert: Dziubak is a Fundamentally Wrong Decision

Jurisprudência

To protect consumers against unfair terms, Article 6(1) Unfair Contract Terms Directive (UCTD) makes unfair terms inapplicable. For example: the contract includes an unfair penalty clause for early termination? The consumer does not have to pay anything for early termination. Kásler and Káslerné Rábai carved an exception to this rule: national judges can substitute unfair terms when not doing so would have excessively negative consequences for the consumer.

In Dziubak, the Court of Justice of the European Union (hereinafter, “the Court”) was asked to develop this exception further. In a recent publication in the European Review of Contract Law, I explain that the Court – with all due respect – got it fundamentally wrong. This blogpost summarizes the main mistakes in this decision.

What is ultimately at stake in Dziubak is nothing less than the level of protection enjoyed by consumers under EU law and the institutional autonomy of Member States. The Court restricted both legal values with surprisingly poor reasoning. Two of the questions asked by the national judge deserve particular attention. First, to what extent Article 6(1) allows the judge to change “the form of the legal relationship”. Second, whether one could rely on “national provisions not of supplementary law but of a general nature”.

In essence, the answers to these two questions are fundamentally wrong because they: 1) misquote both the directive and a relevant precedent; 2) rely on party autonomy in an asymmetric relation; 3) fail to consider basic EU law principles such as sincere cooperation and effectiveness, but also the institutional autonomy that directives grant to the Member States; 4) finally, the Court ignores the pertinent submission of the professional about the content of national law. Let us consider these points in turn.

1) The Court misquotes the UCTD in holding that the only provisions of national law that can be presumed to be fair are those that “have been subject to a specific assessment by the legislature”. Actually, the relevant provision and recital of the UCTD mention the “provisions or principles of international conventions” as well as the “provisions of the Member States which directly or indirectly determine the terms of consumer contracts”. Do you have a specific assessment by the legislature of a principle of international conventions or of provisions that indirectly determine the terms of contracts? Not necessarily, if at all.

Moreover, the Court cites Dunai to hold that the specific term under consideration in Dziubak belongs to the main subject matter of the contract. The problem is that Andriciuc had explained exactly why this is not the case! Long story short, the Court quoted the wrong paragraph of Andriciuc (43 instead of 40) in past decisions. This error led to an obvious mistake in Dziubak.

2) EU consumer law is premised on the existence of an imbalance in the relationship between consumers and professionals. The asymmetrical character of the relationship justifies suspicion over the fairness of the exchange. It is thus perplexing that both the Advocate General and the Court show preoccupation for an “intervention capable of altering the balance of interests sought by the parties and excessively encroaching on contractual autonomy”.

3) On multiple occasions, the Court has invoked the need to ensure the effectiveness of consumer rights to limit the institutional autonomy of Member States. The most famous example of this trend is the ex officio doctrine – the duty of judges to review of their own motion contract terms. This move is accompanied with suspicion by some commentators, as it touches upon the procedural autonomy of Member States. It is thus perplexing that, without carefully identified grounds in EU law, the Court stepped over the institutional autonomy of Member States enshrined in directives – the choice of how to best allocate the power to protect the rights granted by directives in the national legal system.

4) Finally, the professional had pointed out that there was a provision of national law that is clear enough to be applicable even under the strict parameters given by the Court. This is the case since the provision relied upon in Kásler and Káslerné Rábai to fill the gap was obviously vaguer than the one mentioned by the professional in the present case.

For the reasons sketched here and the additional ones that you can read in the European Review of Contract Law, Dziubak is a fundamentally wrong decision and it belongs to the dustbin of history.