Consumer Law

CJEU case C-371/20 and the concept of ‘payment’ in the Unfair Commercial Practices Directive

CJEU case C-371/20 and the concept of ‘payment’ in the Unfair Commercial Practices Directive

Case C‑371/20 (here)
deals with an interesting question that has been receiving increasing
regulatory attention: whether the concept of ‘payment’ in consumer-related
contracts covers only monetary consideration or whether other types of
counter-performances can also be considered as ‘payment’. We have reported on
this issue before (see here).
However, the CJEU had so far not discussed this matter so directly, so this
case is most welcome. This case concerns the Unfair Commercial Practices
Directive, particularly point 11 of Annex I. Annex I of the Unfair Commercial
Practices Directive contains a list of practices that are considered unfair in
all circumstances. Point 11 of the Annex states that it is not allowed to use
editorial content in the media to promote a product if the professional party
has paid for that promotion and if that is not made clear to the consumer (known
as an ‘advertorial’). In other words, it must be made clear that that editorial
content is paid advertising.

The case concerns two competitors in the clothing retail business –
Peek & Cloppenburg Düsseldorf and Peek & Cloppenburg Hamburg -, and the
main issue at hand was whether to use editorial content as an advertising
campaign was an unfair commercial practice. P&C Düsseldorf published a
nationwide editorial campaign in a fashion magazine (Grazia magazine). In it,
P&C Düsseldorf invited customers to a night of private shopping. The editorial
content in question also displayed several images of goods to be sold on the
night of the event. P&C Hamburg claimed that this practice was contrary to Point
11 of Annex I of the Unfair Commercial Practices Directive (and to the
transposing German legislation) because P&C Düsseldorf used editorial
content without disclosing that it had been paid for. The legal issue was
therefore whether this campaign could be considered an ‘advertorial’ in the
context of Point 11. The referring court’s doubt arose from that fact that, as
argued by P&C Düsseldorf, no monetary sum was paid concerning the editorial
content in question, as the costs of the event were to be shared between P&C
Düsseldorf and the company that publishes the fashion magazine and the pictures
used were provided by P&C Düsseldorf free of charge. In other words,
P&C Düsseldorf argued that this was not an ad that was paid by them,
which meant that it would fall outside the scope of Point 11 of Annex I. As a
result, the referring court asked the CJEU whether in the context of the Unfair
Commercial Practices Directive the terms ‘paid’ and ‘payment’ must necessarily
involve a monetary sum in exchange for the editorial content or whether it also
covers the supply of services or assets other than monetary performances. In
this case, the pictures provided by P&C Düsseldorf without cost could be
seen as non-cash consideration for the advertisement. Furthermore, in case the
concept of ‘payment’ should be broadly interpreted, the referring court asked
whether there is a payment where there is a joint promotional event intended to
promote the sales of both organizing parties (in this case, P&C Düsseldorf and
Grazia magazine).

In its reformulation of the referred question, the CJEU already
hints at a delimitation of the concept of ‘payment’: in order to be considered
‘payment’, a counter-performance must entail an economic advantage to the
party. When answering the questions, the CJEU explicitly took into account
other language versions. In fact, it is interesting to note that while some
language versions use explicit terms connected with a monetary sum (such as ‘paid
for’ in the English version), other versions employ more neutral, broader terms
(such as ‘financier’ in the French version). The CJEU clarified that, when
interpreting EU law, the literal term only has indicative value since it is
also necessary to take into account the context surrounding and the goals of
the provision. The CJEU reminded that the goal of the Unfair Commercial
Practice Directive is to achieve a high level of consumer protection,
particularly when it comes to tackling the frequent information asymmetries
between consumers and traders. The CJEU also highlighted that the goal of Point
11 of Annex I is to guarantee consumer protection and consumers’ confidence in
the neutrality of the press. According to the CJEU, whether the payment of such
editorial content is made through the provision of a monetary sum or through
the provision of any other assets is irrelevant when it comes to achieving
these goals. In that sense, the CJEU agreed with the Advocate-General and
stated that interpreting the concept of ‘payment’ as meaning only the payment
of a monetary sum would deprive this provision of effectiveness. This
interpretation makes sense. In fact,
as pointed out by
the referring court, the goal of Point 11 of Annex I is to allow the consumer
to identify the promotional character of a commercial practice. This seems to
point towards a broad interpretation of the concept of ‘payment’.

Additionally, determining whether the performance at hand consisted
of ‘payment’ (or of a performance that carried a benefit for the party) is for
the national court to do. However, the CJEU stated that it is important to
identify a link between the material benefit provided and the editorial
content. In this case, the free provision of copyright protected images by
P&C Düsseldorf to the fashion magazine can be considered as payment, since
these images are an asset value directly related to the editorial content.

This interesting decision has implications for several other
consumer law issues, such as the payment of products with personal data (which
is the case mainly in digital content contracts, whereby consumers often
acquire products or services apparently gratuitously but while agreeing to
disclose unnecessary personal data in return) and influencer marketing (whereby
social media ‘celebrities’ often advertise products or brands without making it
clear to their followers that this is not a genuine opinion but a paid review).
Interestingly, the CJEU referred to the ‘reality of journalistic and
advertising practice’ and to how social media comments or posts that appear
genuine but are actually hidden advertising or commercial practices are harmful
to consumer confidence and competition law. A broad interpretation of the concept
of ‘payment’ – not only under the Unfair Commercial Practices Directive but
also under other EU consumer legislative instruments – is an important step
towards adapting existing legislation to ever-changing digital business models.

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