CJEU Judgment on Inertia Selling on Pre-loaded SIM Cards

According to the Court of Justice of the European Union, the sale of SIM cards on which services that can incur fees have been pre-loaded and pre-activated constitutes an aggressive unfair commercial practice when the consumers are not informed of that fact in advance.

In Cases C-54/17 Autorità Garante della Concorrenza e del Mercato (‘AGCM’) v Wind Tre SpA and C-55/17, AGCM v Vodafone Italia Spa, the CJEU has ruled that, where a SIM card is sold with embedded services loaded and activated which may require the user to pay fees and the consumer has not been sufficiently informed about that potential liability, the seller may have engaged in an unfair commercial practice. Such conduct constitutes, in particular, ‘inertia selling’, which may be penalised by a national authority other than the authority provided for by EU law on electronic communications. The SIM card providers had alleged that the action could not be brought by the competition authority but was a matter for the Italian communications regulator.

Background

In 2012, Autorità Garante della Concorrenza e del Mercato (the Italian competition authority) imposed penalties on the companies Wind Telecomunicazioni (now Wind Tre) and Vodafone Omnitel (now Vodafone Italia) for selling SIM (Subscriber Identity Module) cards on which internet browsing services and voicemail services had been pre-loaded and pre-activated, the fees for using those services being charged to the user if the user did not expressly ask for them to be deactivated. AGCM accused the two companies of not having sufficiently informed the consumers of the fact that those services had been pre-loaded and pre-activated and that they could incur charges. The internet browsing service could even result in connections without the user’s knowledge, inter alia by means of ‘always on’ applications.

The Tribunale amministrativo regionale per il Lazio (Regional Administrative Court, Lazio, Italy), before which Wind Tre and Vodafone Italia brought proceedings, annulled the AGCM’s decisions stating that such sanctions fell within the competence of another authority, the Autorità per le Garanzie nelle Comunicazioni (the Communications Regulator, Italy; ‘AGCom’).

Hearing the cases on appeal, the Consiglio di Stato (Council of State, Italy) referred some preliminary questions to its Plenary. By judgments delivered in 2016 the Plenary stated that, under Italian law, the competence to sanction a mere infringement of information obligations in the electronics communication sector lay with the AGCom, while penalising a ‘commercial practice that is in all circumstances considered aggressive’ (such as, inter alia, ‘inertia selling’) fell within the AGCM’s competence, even in the electronic communications sector.

The Consiglio di Stato questions, however, whether the interpretation given by the Plenary is compatible with EU law. It therefore decided to refer for a preliminary ruling questions on the interpretation, first, of the Unfair Commercial Practices Directive (the objective of which is to achieve a high level of consumer protection) and, second, of EU law on electronic communications (more specifically the Framework Directive  and the Universal Service Directive  which aim to ensure the availability throughout the EU of good-quality publicly available services through effective competition and choice by giving the national regulatory authorities (‘NRAs’) — in Italy the AGCom — the task of ensuring a high level of protection for consumers in the specific sector of electronic communications). In particular, the Consiglio di Stato asks the Court of Justice whether the conduct of the telecommunications operators at issue can be characterised as ‘inertia selling’ or, more broadly, as ‘aggressive commercial practice’ within the meaning of the Unfair Commercial Practices Directive, and whether EU law on electronic communications precludes national legislation under which ‘inertia selling’ is covered by the Unfair Commercial Practices Directive with the result that the ARN is not competent to penalise such conduct.

Judgment

In its judgment of 13 September, the Court notes that for a service to be solicited the consumer must have made a free choice. When the consumer has been neither informed of the cost of the services in question nor even of the fact that they were pre-loaded and pre-activated on the SIM card that he bought (which is for the national court to verify), it cannot be considered that he freely chose the provision of those services. In that regard, it is irrelevant that the use of the services in question required, in certain cases, conscious action on the part of the consumer. Similarly, it is irrelevant that the consumer could have had the services deactivated or deactivated them himself, since he had not been informed of their existence.

The Court notes that, although it is for the national court to establish the typical reaction of the average consumer, it is not clear that the average buyer of a SIM card might be aware of the fact that it contains pre-loaded and pre-activated services which can incur additional fees or of the fact that applications or the device itself may connect to the internet without his knowing, or that he is sufficiently technically capable of deactivating those services or those automatic connections on his device.

The Court concludes from this that, subject to verifications by the national court, conduct such as that of which the telecommunications operators are accused constitutes ‘inertia selling’ and, therefore, according to the Unfair Commercial Practices Directive, a practice — and more precisely an aggressive practice — that is in all circumstances unfair.

In addition, the Court states that there is no conflict between the Unfair Commercial Practices Directive and the Universal Service Directive as regards the rights of end-users. The latter directive requires the provider of services to include certain information in the contract while the former directive contains rules regulating specific aspects of unfair commercial practices, such as ‘inertia selling’. As a result, the Court declares that EU law does not preclude national legislation under which ‘inertia selling’ must be assessed in the light of the provisions of the Unfair Commercial Practices Directive with the result that, according to that legislation, the ARN, within the meaning of the Framework Directive, is not competent to penalise such conduct.

The full judgment is here.


Published: 2018-09-13T12:25:00

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