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European Union: European Court of Justice Rules Sellers Must Inform Consumers of Fee-Incurring Preloaded and Preinstalled Services on SIM Cards

(Sept. 28, 2018) On September 13, 2018, the European Court of Justice (ECJ) held that selling SIM cards with preinstalled and preloaded fee-incurring services constitutes an aggressive unfair commercial practice. It stated that consumers must be informed in advance of such services so that they can make a free choice. The ECJ concluded that such behavior from sellers can be characterized as “inertia selling,” which is prohibited as an aggressive unfair practice according to the Unfair Commercial Practices Directive of the European Union (EU). ( Joined Cases C‑54/17 and C‑55/17 , Autorità Garante della Concorrenza e del Mercato (‘AGCM’) v. Wind Tre SpA and AGCM v. Vodafone Italia Spa, Sept. 13, 2018, ECLI:EU:C:2018:710, InfoCuria website; Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 Concerning Unfair Business-to-Consumer Commercial Practices in the Internal Market and Amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (Unfair Commercial Practices Directive) arts. 5, 8, 2005 O.J. (L 149) 22, EUR-Lex website.)
Facts of the Case
The plaintiffs in the case, the telecommunications operators Wind Telecomunicazioni (now Wind Tre) and Vodafone Omnitel (now Vodafone Italia), were fined by the Italian competition authority AGCM for selling SIM cards on which fee-incurring internet browsing services and voicemail services had been preloaded and preactivated. Users were not informed of these facts and had to expressly ask for the services to be deactivated. (Joined Cases C‑54/17 and C‑55/17 at 23 & 24.) The AGCM categorized these practices as prohibited aggressive commercial practices. ( Id . at 24.) The plaintiffs appealed those decisions. ( Id . at 25.) The Italian Consiglio di Stato (Court of Appeals) decided to stay the proceedings and request a preliminary ruling from the ECJ on whether the conduct of the companies constitutes “inertia selling” or, more broadly, an “aggressive commercial practice” within the meaning of the Unfair Commercial Practices Directive as implemented into Italian law. ( Id. at 34.)
Legal Framework
Article 5 of the Unfair Commercial Practices Directive prohibits unfair commercial practices. In particular, commercial practices are categorized as unfair when they are aggressive. Article 8 defines a commercial practice as “aggressive” if
in its factual context, taking account of all its features and circumstances, by harassment, coercion, including the use of physical force, or undue influence, it significantly impairs or is likely to significantly impair the average consumer’s freedom of choice or conduct with regard to the product and thereby causes him or is likely to cause him to take a transactional decision that he would not have taken otherwise.
Article 9 provides guidance to determine whether a commercial practice uses harassment, coercion, or undue influence.
Annex I contains a list of commercial practices that are in all circumstances considered unfair. Point 29 under the title “Aggressive commercial practices” states that “demanding immediate or deferred payment for … products supplied by the trader, but not solicited by the consumer … (inertia selling)” constitutes an unfair commercial practice.
Ruling
The ECJ stated that neither the provision of the services on the SIM card nor the billing of those services by the trader were contested. The only question to be answered was whether these services were solicited by the consumer. ( Id . at 44.) It noted that article 8 of the Unfair Commercial Practices Directive defines an “aggressive commercial practice” as impairing the consumer’s freedom of choice. The ECJ concluded that for a service to be solicited the consumer must have made a free choice and be given clear and adequate information. ( Id . at 45.) It held that information given before a contract is concluded, in particular with regard to pricing, is essential and determining information for the consumer. ( Id . at 46 & 47.)
The ECJ ruled that in the present case, the consumer had been informed neither of the preloaded services nor of the costs and was therefore unable to make a free choice and hence solicit the services. ( Id . at 48.) In the opinion of the Court, it was irrelevant that some of the services in question required conscious actions by the consumer or that they could have been deactivated, because the consumer might not be aware of the services until they are first billed. ( Id . at 49 & 50.) Finally, the ECJ stated that the Unfair Commercial Practices Directive relies on the average consumer, “who is reasonably well informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors.” ( Id . at 51; Unfair Commercial Practices Directive, recital 18.) Average consumers might not be aware of such preloaded and preactivated services on a SIM card, and some consumers might inadvertently load them or not be aware of how these services can be deactivated, although this is up to the national court to verify. (Joined Cases C‑54/17 and C‑55/17 at 52.) The ECJ concluded that the term “inertia selling” as defined in annex I of the Unfair Commercial Practices Directive covers the conduct in question. ( Id . at 53.)

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