Better by the bundle Contractual consumer rights issues

Better by the bundle? Contractual consumer rights issues with bundled products PEER Regulatory Roundtable on Bundled Products 2/10/2017, Brussels Peter Rott, University of Kassel

Bundling – not a new phenomenon • Bundling of energy supply and telecommunication contracts • Bundling of telecommunication services and (necessary) hardware • Bundling of telecommunication services and pay TV • Bundling of mobile phone contracts and mobile phones • Bundling of services and insurance • Bundling of services and maintenance • Bundling with entirely unrelated ‘attractive products’

Advantages of bundling • Trader’s perspective: Synergy effects in customer relations, increased efficiency – See OLG Dusseldorf, 21. 2. 2001, Multi-Media Recht 2011, 453 (under unfair commercial practices law) • Consumer perspective: The bundle is (or should be) cheaper than the individual parts bought separately.

Risks of bundling Purchase of unnecessary goods or services Lack of price transparency Uncertainty about applicable consumer law provisions Avoidance of sector-specific consumer protection through cross-sectoral contracts • Accumulation of problems • •

Purchase of unnecessary products • Reason for the prohibition of tying in certain sectors – Telecommunications: Art. 10(1) of Directive 2002/22/EC – Basic bank accounts: Art. 16(9) of Directive 2014/92/EU • But there is also a risk that consumers are incentivised to purchase products in bundles that they would not buy otherwise, and therefore spend more. • Link with insufficient price transparency

Price transparency (1) • The law does not require information on the prices of the individual parts of the bundle – See, e. g. BGH, 27. 2. 2003 - I ZR 253/00, GRUR 2003, 538 • The law does not require the trader to offer the individual parts of the bundle separately – Which means that the consumer cannot easily estimate the usefulness of the bundle – Necessity of standard products?

Price transparency (2) Art. 95(1) c) iii) of the Commission’s proposal for a Directive establishing the European Electronic Communications Code, COM(2016) 590 final ‘Before a consumer is bound by a contract or any corresponding offer, providers of publicly available electronic communications services (. . . ) shall provide (. . . ) the following information in a clear and comprehensible manner: as part of the information on price: for bundled services and bundles including both services and equipment the price of the individual elements of the bundle to the extent they are also marketed separately. ’ P. : The individual elements do not need to be marketed separately.

Uncertainty in goods + services bundles Article 9 Consumer Rights Directive 2011/83/EC: (2) (…) the withdrawal period referred to in paragraph 1 of this Article shall expire after 14 days from: (a) in the case of service contracts, the day of the conclusion of the contract; (b) in the case of sales contracts, the day on which the consumer or a third party other than the carrier and indicated by the consumer acquires physical possession of the goods (…). AG Hamburg, 21. 6. 2007 - 6 C 177/07 on an internet provider contract including hardware: which rules concerning the right of withdrawal apply?

Avoidance of sector-specific protection (1) § 19 para. 3 Regulation concerning the general conditions for the supply with electricity of household customers: The supplier of last resort must not disconnect a customer who is in delay with his payment obligations unless the amount due exceeds 100 Euros. The problem: The Regulation only applies to supply of electricity in a supply contract of last resort. A contract on a bundle of services will most likely be outside the scope of application.

Avoidance of sector-specific protection (2) § 46 para. 8 sent. 3 Telecommunications Act: If the consumer moves house, the provider of telecommunication services is obliged to continue to fulfil the contract at the new domicile. (. . . ) If the service is not available at the new domicile, the consumer can terminate the contract with a period of three months to the end of the month. • Does this rule apply to a bundle of services including telecommunication and pay TV? – No equivalent exists in energy law, and the BGH has rejected the application by analogy to gym contracts (BGH, 4/5/2016, NZM 2016, 798). – Art. 100 of the Commission’s proposal for a Directive establishing the European Electronic Communications Code, COM(2016) 590 final § Extension to all elements of the bundle

Avoidance of sector-specific protection (3) Follow-on problem: What if the consumer also received a mobile phone together with the contract (that is subsidised through the monthly payments over say two years)? - Art. 98(4) of the Commission’s proposal for a Directive establishing the European Electronic Communications Code, COM(2016) 590 final: Where an early termination of a contract on a publicly available electronic communications service by the end-user is possible in accordance with this Directive, other provisions of Union law or national law, no compensation shall be due by the end-user other than for the pro rata temporis value of subsidised equipment bundled with the contract at the moment of the contract conclusion and a pro rata temporis reimbursement for any other promotional advantages marked as such at the moment of the contract conclusion. Still a factual impediment to switching and unpredictable for the consumer.

Avoidance of sector-specific protection (4) Art. 95(1) d) iv) of the Commission’s proposal for a Directive establishing the European Electronic Communications Code, COM(2016) 590 final: ‘Before a consumer is bound by a contract or any corresponding offer, providers of publicly available electronic communications services (. . . ) shall provide (. . . ) the following information in a clear and comprehensible manner: as part of the information on the duration of the contract and the conditions for renewal and termination of the contract: for bundled services the conditions of termination of the bundle or of elements thereof. ’

Accumulation of problems § 19 para. 3 Regulation concerning the general conditions for the supply with electricity of household customers: The supplier of last resort must not disconnect a customer who is in delay with his payment obligations unless the amount due exceeds 100 Euros. P. : In one case decided by the first instance court of Dieburg (AG Dieburg, 22. 10. 2012 - 20 C 909/12, Beck. RS 2012, 22185), the energy supplier had added gas debts and electricity debts which both did not reach the threshold so as to disconnect the customer; which the court held to be unlawful. The same would not seem to apply where the customer enters into a mixed contract including energy and other services; to which, first of all, the law on energy supply by the supplier of last resort and the protective rules therein would not apply. Unfair contract terms control would certainly be less clear and therefore offer less protection.