ITALIAN EXPERIENCE IN IMPLEMENTING DIRECTIVE 200529CE ON UNFAIR COMMERCIAL PRACTICES. BRUSSELS 24 FE

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ITALIAN EXPERIENCE IN IMPLEMENTING DIRECTIVE
2005/29/CE ON UNFAIR COMMERCIAL PRACTICES.
BRUSSELS 24 FEBRUARY 2009

• Avv. Antonio Mancini
• Director
• Telecommunications Directorate
• Consumer Protection Directorate
• AGCM

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The implementation in Italy of Directive
29/2005/EC

• Italy was one of the first Member States to
  implement Directive 29/2005, before the deadline
  for its transposition (12th December 2007).
• The Italian Government adopted two different
  decrees, which entered into force on September
  21, 2007
• the Legislative Decree No. 145/2007 on
  Misleading and comparative advertisement, aimed
  at protecting businesses in their commercial
  relations
• B) the Legislative Decree No. 146/2007 concerning
  unfair business-to-consumer commercial
  practices, which has amended articles 18-27 of
  the 2005 Consumers Code.

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Italian Choice ex art. 11 Directive (AGCM
COMPETENCE)

• In compliance with art. 11 of the UCP Directive,
  the Italian legislator decided to implement an
  administrative control system and to delegate it
  to the Italian Competition Authority (Agcm).
• Agcm is an independent Authority established in
  1990 by Law No. 287/90, which is responsible not
  only for the enforcement of competition policy
  (concentrations, cartels, abuse of dominant
  position, advocacy intervention, etc.) but also
  for consumer protection issues.
• In particular, the Agcm was already entitled to
  the control of misleading and comparative
  advertisement. since the adoption of Legislative
  Decrees No. 74/92 and No. 67/00, transposing
  Community Directives 84/450/EEC and 97/55/EC
  (which modified the 2005 Consumers Code).

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Commercial communications and development of
consumer protection

• After the adoption of Legislative Decrees No.
  145/2007 and No. 146/2007, the Authority is now
  also responsible for tackling unfair commercial
  practices (UCP).
• There are important elements of convergence
  between the enforcement of competition rules and
  consumer protection, since unfair commercial
  practices are often used as an important
  competition tool.
• Actually, countering UCPs also promotes fair
  competition in the markets involved.
• The Agcms decisional practice decisions on
  misleading and comparative advertisement
  (pursuant to the Italian Law applicable before
  the adoption of UCP Directive) can be considered
  as an important enforcement advantage especially
  in order to tackle misleading commercial
  practices and omissions.

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European Parliament Resolutionon January 13, 2009

• The Italian consumer protection regime complies
  under many respects with the Resolution adopted
  by the EP on January 13, 2009. In the first year
  of enforcement of Directive 29/2005/EC
• consumers benefited of a specific right to file
  complaints with the Agcm
• national Authorities carried out wide-spread
  inquiries on airlines (sweep 2007) and ring-tones
  for mobile phones (sweep 2008) with large
  national enforcement
• Italy promoted the creation of a round table to
  compare national implementation measures,
  procedures and authorities decisions (seminar to
  be held in Rome in April 2009).

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Health and safety problems improved protection

• The Italian legislator introduced a stricter
  discipline to counter practice involving health
  and safety problems. This has been possible
  because the scope of the full harmonization
  provisions of Directive 29/2005/EC does not cover
  such issues
• practices concerning hazardous products that
  could induce consumers to neglect observing the
  normal standards of diligence
• practices concerning hazardous products that
  could threaten, even in and indirect way, the
  safety of children and adolescents.

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Aggressive Practices

• From an Italian standpoint, the main innovation
  of the UCP Directive is represented by the so
  called aggressive practices.
• Misleading commercial practices and omissions can
  be considered as an evolution of misleading and
  comparative advertising. In this field Agcm has a
  long-standing and extensive experience, as well
  as a wide decisional practice. Many cases dealt
  with by Agcm under the previously applicable
  discipline concern practices black listed under
  the new one.
• On the other hand, it is more difficult to deal
  with purely aggressive practices, which are more
  tipically related to commercial behaviour and,
  therefore, are more difficult to detect, control
  and interrupt.

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Legislative Decrees 145/2007 and 146/2007New
rules concerning procedure

• Agcm is entitled to investigate unfair practices
  and misleading and comparative advertising not
  upon reception of consumers complaints, but also
  on its own initiative (EX OFFICIO INVESTIGATION
  POWER).
• Increased SANCTIONS (up to 500,000)
• INSPECTIONS in cooperation with Financial Police
• Possibility to accept COMMITMENTS
• Possibility to try a MORAL SUASION.

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Agcm action plan for Consumer protection

• On December 2007 the Authority set up a special
  toll-free number 800.166.661 for consumers
  wishing to report alleged cases of unfair
  practices and misleading advertising.
• In this first period of activity the Agcms Call
  Center has collected about 8,000 complaints.

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UCP figures (ONE YEAR AFTER)

• Since January 2008, Agcm
• started about 350 formal investigations
• adopted 220 official decisions (for both
  misleading commercial practices/omissions and
  aggressive commercial practices)
• imposed 328 fines for a total amount of about
  40 million
• collected about 10,000 complaints (8,000 from the
  call center and 2,000 written complaints)
• sent about 2,000 letters to communicate the
  decision to close the file
• adopted about 50 moral suasion decisions and 15
  decisions to accept commitments.

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Most involved sectors

• So far, the Agcm has been mostly involved in the
  following sectors
• Telecommunications (about 35)
• Loans and financing (mortgages, consumer credit,
  banking services)
• Energy
• Cosmetics (e.g. slimming products, etc.)
• Foodstuffs (healthy claims) dietary supplemets
• Large retailers (bargain sales, prize awarding
  competitions, etc.)
• Tourism and various services.

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Telecommunications Satellite and premium calls

• The investigation involved 13 companies
  (Globalstar Europe, Csinfo, Eutelia, Karupa,
  10993 S.r.l, Teleunit and Voiceplus, etc.).
• Many consumers alleged that they had been charged
  for calls and connections to international
  satellite numbers and premium non-geographic
  numbers, which they had never made and were due
  to illegal installation of diallers on the
  subscribers hardware, occurred while surfing the
  Net.
• The Authority prohibited the Italian TLC
  incumbent Telecom from cutting off subscribers
  for non-payment of expensive telephone bills due
  to the above calls
• A pre-emptive measure was adopted to stop the
  companies under investigation from pursuing their
  alleged unfair commercial practices.

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Telecommunications Satellite and premium calls

• It provides Globalstar satellite mobile
  services, data and voice.

Premium rate (892, 899, 166) and international
phone calls offers. Controls effective gains and
the number of phone calls. The call center
manages the entering phone calls and all the
related services.
Numero speciale
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Final decision

• In the final decision adopted in november 2008
  the Agcm decided to fine 13 companies for
  unsolicited and illegal supplies related to
  satellite and premium calls (never willingly made
  by consumers)
• TOTAL AMOUNT OF FINES 2,430,000
• Since there were elements of criminal
  responsibility, the Agcm forwarded the
  information gathered to the locally competent
  Courts.

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Telecommunications Tele 2 - telephone contracts

• TELE2 'S CONDUCT
• In the Agcm's view, Tele2 violated its duty of
  professional diligence in the following ways
• by activating TLC services not knowingly
  requested by the subscriber (distance contracts,
  teleselling and vocal ordering)
• by limiting conditions and timing for exercising
  the right of withdrawal
• by activating services not corresponding to those
  requested or promised.

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Telecommunications Tele 2-telephone contracts

• Specifically, Tele 2 induced consumers to
  believe that the contract would enter into force
  only after the signing of the form sent to the
  consumers home address, without clarifying that
• the voice recording of consent meant that the
  contract had been bindingly entered into
• in several cases consumers realized they had
  changed their phone company only when they began
  receiving Tele 2 bills
• Tele 2 did not allow consumers to choose, based
  on their own interests and requirements, between
  the immediate activation procedure through
  telephone consent and the possibility of delaying
  the order (to be perfected by sending back a
  signed copy of the written contract)
• Fine 215,000, subsequently reduced to
  165,000 due to the company's collaborative
  behaviour.

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Telecommunications SMS/premium calls

• The Agcm fined 18 companies and individuals for
  UCP. Hundreds of consumers were induced by an SMS
  text message to call numbers with a 899 prefix,
  thus paying up to 15 per call.
• Total fine 570,000.

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Telecommunications SMS/Premium calls

• These proceedings were initiated in February
  2008 upon reception of several written complaints
  and approximately 160 phone calls to the Agcm's
  call center.
• Consumers complained that they received text
  messages inviting them to call high-cost 899
  numbers to access a voicemail system where a
  personal message had been recorded. In fact, the
  aim of these text messages was to have the
  consumers activate services connected to the
  899 numbers at a cost reaching 15.00 for each
  call made.

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Telecommunications Mobile phone ring-tones
(Sweep 2008)

• The Agcm closed UCP investigations concerning the
  subscription of services that allow users to
  download non-premium content for mobile phones,
  such as ringtones and wallpapers.
• 4 Decisions before 2008 Community Sweep
• 2 Decision after 2008 Sweep
• 5 decisions on additional proceedings started
  after the 2008 Sweep are forthcoming (next days).
• The above-mentioned services are often offered to
  ADOLESCENT, without providing clear information,
  either on the web or by text messages and SMS.
  From this point of view this kind of commercial
  practices need to be dealt with care.

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Telecommunications Mobile phone ringtones (Sweep
2008)

• The Agcm adopted 6 urgency decisions to stop the
  web advertising of ringtones which
• Used false free claims
• Did not clarify their nature of subcription
  contracts
• Omitted to mention the full costs of this
  services
• Did not clarify the procedures to enter into and
  to withdraw from the contract
• Did not underline that the services were
  reserved to people over 18 years old
• JOINT RESPONSIBILITY OF TLC OPERATOR TOGETHER
  WITH CONTENT PROVIDERS

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Example of misleading advertising about mobile
ring tones 10 sms gratis

• .

22
Telecommunications Re-framing off tariff plans

• The Agcm fined a few days ago Tim and Vodafone
  for adopting unilateral and reiterated
  modifications of their tariff plans without
  providing adequate information to their
  customers.
• This lack of information and transparency
  affected the consumers ability to assess and
  evaluate the new tariffs, as well as to
  understand the ways to require the portability of
  their number to competing operators and to obtain
  the reimbursement of their unused credit.
• ? Fines 500,000 for each company.

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Telecommunications Mobile internet services
(shock billings)

• The Agcm also dealt with mobile internet services
  that lead to abnormally expensive bills for
  consumers and related advertising campaigns. In
  particular, the above-mentioned campaigns
  promoted hi-speed web-surfing, up to a 5 GB
  monthly download threshold, for a very low
  monthly rate.
• The Agcm fined the companies under investigation
• a) for providing insufficient information to
  consumers, with specific regard to the (very
  expensive) tariff applicable after overcoming the
  5 GB monthly threshold
• b) for not giving consumers the possibility to
  monitor their download traffic in order to stay
  safely under the 5 GB monthly threshold or assess
  their over-the-threshold traffic
• c) for providing insufficient information to
  consumers about the areas not covered by the
  Mobile network.

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Other Relevant Cases

• Relevant cases in the most involved sectors
  (other than TLC)
• Energy and Industry Enel Energia
• Banking and Insurance Bank mortgages
  portability
• Transports Trenitalia, Meridiana

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Energy Enel EnergiaFine amounts to a total of
1.1 million

• ENEL ENERGIAS CONDUCT
• Enel Energia, a company of the Enel group
  operating on the electricity supply free market,
  adopted UCPs
• a) by moving customers from the so-called
  protected market to the free market
• in initiating an unsolicited supply of natural
  gas
• The company started unsolicited electricity and
  gas supplies and in some cases demanded payment,
  hindering the exercise of the right to second
  thoughts and using aggressive marketing
  procedures.

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Banking and InsuranceBank mortgages portability

• The Agcm found that Banks prevented consumers
  owning a mortgage loan from the use of their
  right (set out by the so called Bersani Law) to
  transfer it at no cost to another Bank and
  created undue obstacles in this respect.
• The Agcm held that the above practice was
  misleading, in that the Banks provided consumers
  with incomplete or wrong information, as well as
  aggressive, in that it created an undue non
  contractual obstacle, both onerous and
  disproportionate, to consumers wishing to exert
  the right to withdraw from their contract and/or
  to switch to another Bank (the assessment has
  been made also in the light of Art. 23(1), t), of
  the Consumers Code, i.e. providing wrong
  information on market conditions to push
  consumers to choose less favorable options).
• ? Fined 23 pincipal Italian Banks for a total
  amount of
• 10 million

27
Transports Trenitalia Fines amounted to a
total of 845,000.

• In the Agcms view, several aspects of
  Trenitalias commercial behaviour amounted to
  UCPs.
• In particular
• limitations in the recognition and payment of a
  bonus for train delays (fine 200,000)
• limitation of the number of seats available for
  theAmica and Familia fares (fine 280,000)
  
• improper denomination of trains (fine
  280,000)
• incomplete information on the Cartaviaggio
  loyalty program (fine 80,000)
• availability of some services only through call
  center (fine 5,000 - the minimum set out by
  Law).

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Transports Meridiana (Sweep 2007)Total fines
970,000

• After the 2007 Sweep, the Agcm fined Meridiana
  for violating the Consumer Code in a number of
  different ways. Specifically, the Agcm deemed
  unfair the companys practices in the following
  areas
• 1. Transparency of fares (fine 220,000)
• On its website, Meridiana included a fuel
  surcharge linked to oil prices within the
  category airport taxes and charges
• 2. Insurance Policy (fine 270,000)
• Absent a precise choice by the consumer to
  refuse the insurance policy (by un-ticking a box
  on Meridianas website), the company took for
  granted his consent
• 3. Compensation to Passengers for Flight Delays
  (fine 300,000)
• The airline did not comply with the current
  regulations and did not offer consumers adequate
  information
• 4. The HI-FLY 2007/2009 Loyalty Program (fine
  180,000)
• Consumers wishing to join the loyalty program
  had to purchase a co-branded credit card
  therefore, some consumers were not admitted to
  the program, while some costs and charges were
  not clearly explained by the airline.

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CONCLUSIONS

• The Consumer Protection System countering UCP
  represents a good way for Member States to
  promote competition and enhance the smooth
  functioning of tne market.
• On the one hand, the enforcement of the new UCP
  rules entails a widening of the national
  competition authorities powers that may allow
  consumers and businesses to receive more
  effective protection.
• On the other hand, companies might take advantage
  of the new provisions by using the black-lists of
  specifically prohibited practices as benchmark to
  self-assess their day-to-day commercial conduct.

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CONCLUSIONS

• There are important elements of convergence
  between the enforcement of competition rules and
  consumer protection, due to the fact that
  commercial practices are an important COMPETITION
  TOOL.
• Accordingly, action to tackle UCP can be used to
  promote fair competition in the various markets
  involved.
• The recent EP resolution defined Directive
  29/2005/EC as a milestone of consumer
  protection policy and this first year of
  enforcement in Italy appears to confirm the huge
  potential of this discipline.