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Transactional decisions - a European perspective

Procurement iStock 000002542569XSmall 146x219In a significant ruling for trading standards law and practice, the Court of Justice of the European Union has clarified the meaning of a 'transactional decision' by a consumer. Jonathan Spicer examines the judgment.

When we decide to buy a product or service, we have often made decisions that precede the final decision to purchase. What brand should we go for? Which merchant should we purchase it from? Online or in the shop? How much are we prepared to pay? When do we want the goods?

These decisions can be influenced by the information supplied by traders. In a recent case, Trento Sviluppo srl, Centrale Adriatica Soc. coop. arl v Autorità Garante della Concorrenza e del Mercato [1], the Court of Justice of the European Union considered the extent of these “transactional decisions” in business to consumer trading covered by the Unfair Commercial Practices Directive [2] (“UCPD”).

The UCPD was given effect in the United Kingdom by the Consumer Protection Against Unfair Trading Regulations 2008 [3] (“CPUT”), which came into force on 26 May 2008. It is a maximum harmonisation directive with the purpose that Both consumers and business will be able to rely on a single regulatory framework based on clearly defined legal concepts regulating all aspects of unfair commercial practices across the EU” [4].

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In interpreting the CPUT regulations it is important to consider the European context. In Office of Fair Trading v Purely Creative [2011] EWHC 106 (Ch), Briggs J described the process of interpreting CPUT:

“Domestic regulations designed to implement EU Directives, and in particular maximum harmonisation Directives, must be construed as far as possible so as to implement the purposes and provisions of the Directive….[where interpreting similar word and phrases used in the Directive and domestic regulations] ..the primary recourse of the Court is to the jurisprudence of the ECJ”. [5]

Article 5 (1) of the UCPD provides a general prohibition on unfair commercial practices, whilst at 5 (2) it reads:

“2. A commercial practice shall be unfair if:

(a) it is contrary to the requirements of professional diligence,

and

(b) it materially distorts or is likely to materially distort the economic behaviour with regard to the product of the average consumer whom it reaches or to whom it is addressed, or of the average member of the group when a commercial practice is directed to a particular group of consumers”.

“To materially distort the economic behaviour of a consumer” is defined as meaning “using a commercial practice to appreciably impair the consumer’s ability to make an informed decision, thereby causing the consumer to take a transactional decision he would not have taken otherwise”. [6]

The Directive elaborates on the general prohibition on unfair commercial practices, by specific provision for the most common unfair commercial practices being misleading commercial practices and aggressive commercial practices.

Article 6 (1) of the Directive provides:

“A commercial practice shall be regarded as misleading if it contains false information and is therefore untruthful or in any way, including the overall presentation, deceives or is likely to deceive the average consumer, even if the information is factually correct, in relation to one or more of the following elements, and in either case causes or is likely to cause him to take a transactional decision that he would not have taken otherwise:…

(b) the main characteristics of the product, such as its availability, …”

The brief facts of the Trento case are as follows. Trento is a supermarket operator affiliated to the Italian COOP retail group whilst Centrale Adriatica provide services to stores within the group. In March 2008, Centrale began a promotion in COOP outlets where goods were offered at attractive prices, including “reductions of up to 50%”. Amongst the products offered at a reduced price was a laptop computer.

On 10 April 2008, (the day after the promotion period had finished), a consumer complained to the AGCM (the Italian enforcement authority) that the advertisement was inaccurate as the laptop computer had not been available throughout the period of the promotion. The AGCM agreed and fined the two companies. On a second appeal (the first having been dismissed), the Italian appeal court referred the case to the CJEU for a preliminary ruling.

The Italian court’s question was whether, for the purposes of Article 6 (1), a commercial practice must be regarded as misleading on the sole ground that the practice contains false information or that it is likely to deceive the average consumer, or whether it is also necessary that that practice be likely to cause the consumer to take a transactional decision that he would not have taken otherwise.

The 6th Chamber of the CJEU, noted that the issue had arisen due to the differences in the translation of the Directive in the different languages of member states. Drawing on established case law the Court interpreted the provision by reference to the purpose and general scheme of the rules of which it forms a part.

The Court noted that Article 6 (1) provided a specific category of unfair commercial practice within the context of the general prohibition in Article 5. The Court determined that therefore the misleading commercial practices referred to in Article 6 (1) must necessarily combine all the constituent elements of unfairness (within Article 5), including the ability of that practice to distort the behaviour of a consumer by causing him to take a transactional decision he would not have taken otherwise. Thus the Court decided that for a commercial practice to be regarded as misleading under Article 6 (1) it must also be likely to cause the consumer to take a transactional decision he would not have taken otherwise.

From a United Kingdom perspective, that interpretation of Article 6 of the Directive accords with the natural reading of the English language version of the Directive and also the way it has been transposed into UK law by Regulation 5 (2) of CPUT, which is framed in similar terms.

However, the Court moved on to consider the scope of the concept of “transactional decision”. The Court noted that the commercial practice at issue involved the provision of information about the availability of a product at an attractive price during a certain period and stated that it must be determined whether acts preparatory to the purchase of a product, such as the consumer’s trip to the shop or the act of entering the shop, may be regarded as constituting transactional decisions for the purposes of the Directive.

Article 2 (k) of the Directive defines “transactional decision”:

“‘transactional decision’ means any decision taken by a consumer concerning whether, how and on what terms to purchase, make payment in whole or in part for, retain or dispose of a product or to exercise a contractual right in relation to the product, whether the consumer decides to act or to refrain from acting;”

The Court observed that “transactional decision” was broadly defined and concluded that the phrase included not simply the decision whether or not to purchase a product but also decisions directly related to that decision, in particular the decision to enter the shop. The Court drew support from Article 3 of the Directive which indicates that the Directive applies to unfair commercial practices before, during and after a commercial transaction in relation to a product.

Under CPUT, “transactional decision” is defined in Regulation 2 (1) in almost identical terms to the Directive. The OFT in its 2010 report on the “Online Targeting of Advertising and Prices” concluded at paragraph 8.17: “Both “commercial practice” and “transactional decision” are given a wide definition. In the context of an online environment, the OFT considers that “transactional decision” may include the decision to visit a trader's site in the first place, as opposed to that of its competitors, and the decision to click through to another page on a site to view further content”.

In the High Court in OFT v Purely Creative, Briggs J had regarded with scepticism European Commission guidance that a transactional decision included a decision to step into a shop having viewed an advertisement, saying that it was debatable as to whether this went too far.

The decision of the CJEU clarifies the position that “transactional decision” does not simply begin at the shop door or the website home page, but also includes the decision to visit that shop or website. Thus misleading actions under regulation 5 can include either false or likely to deceive information provided by traders simply to entice consumers to their shop or webpage.

Jonathan Spicer is a consumer law and trading standards barrister at 36 Bedford Row, London and a contributing editor to Consumer and Trading Standards: Law and Practice (Jordans 3rd Edition 2013).


[1] Case C‑281/12

[2] Directive 25/2009/EC

[3] S.I. 2008/1277

[4] Recital 12 to the Directive

[5] At paragraph 40

[6] Article 2 (e) of Directive

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