Abstract
1. Introduction
The Court of Justice of the European Union (the CJEU) discussed pre-installed software from the perspective of unfair commercial practices and consumer protection in a recent preliminary ruling in Case C-310/15 Deroo-Blanquart v. Sony. 1 The case essentially addressed the interpretation of the Unfair Commercial Practices Directive (the UCPD), 2 in particular the notions of unfair commercial practice 3 and misleading omission. 4
The UCPD aims to contribute to the functioning of the Internal Market and achieve a high level of consumer protection by harmonizing the law on unfair commercial practices that harm consumers’ economic interests. 5 The Directive entails a relatively complex system of regulation, including a general prohibition of unfair practices (Article 5) and more specific provisions on practices that are particularly unfair. Moreover, the Directive contains a ‘black list’ of practices which are always considered unfair. 6
In particular, the judgment in Deroo-Blanquart v. Sony clarifies that EU rules prohibiting unfair commercial practices in business-to-consumer (B2C) relationships do not evidently prohibit a sales practice whereby a certain type of computer can only be acquired when it is equipped with pre-installed software. Moreover, when selling a computer with pre-installed software to a consumer, it is sufficient to indicate the overall price of the product; but it is not necessary to communicate the price of each item of software separately.
Observed from a broader EU law perspective, this is not the first time that software and tying products intended for consumers have raised concerns. Under competition law, for instance, similar issues surfaced in the prominent Microsoft case in the context of abuse of a dominant market position. 7 Against this background, cases such as Deroo-Blanquart v. Sony – now discussed by the CJEU solely from the perspective of the UCPD but hypothetically entailing an interesting factual setting from the standpoint of other bodies of norms as well – may also be seen as inviting critical discussion on the fragmented nature of law and enforcement systems targeting unfair commercial practices or unfair trading, competition and related consumer protection in the EU.
2. Factual and legal background
In December 2008, Mr Deroo-Blanquart bought a Sony personal laptop computer model VAIO VGN-NR38E. As is customary, the computer came with pre-installed software, including the Windows Vista Home Premium operating system. Subscribing to the pre-installed operating system requires the user to agree to an ‘end-user licence agreement’ (EULA) the first time the computer is operated. The user can also opt out of using the pre-installed operating system by not agreeing to the EULA, as Mr Deroo-Blanquart decided to do in this particular case. 8
However – and probably unlike other users that opt out of using pre-installed software – Mr Deroo-Blanquart requested reimbursement of the part of the purchase price which corresponded to the software. Sony refused, stating that the computer and software form a unified and non-separable offer. 9 After further discussions, Sony offered to cancel the sale and reimburse the full cost of €549, providing that Mr Deroo-Blanquart returned the computer. Mr Deroo-Blanquart did not accept and eventually, in February 2011, he initiated proceedings in the District Court of Asnières. He claimed reimbursement of €450 for the pre-installed software as well as €2,500 compensation for damage suffered due to unfair commercial practices. The claims were dismissed, and Mr Deroo-Blanquart lodged an appeal with the Versailles Court of Appeal. The earlier judgment was upheld by the Court of Appeal, which stated that the practice in question ‘did not constitute the unfair commercial practice of coercive selling, which is not permitted under any circumstances, an unfair commercial tying practice, or a misleading or aggressive commercial practice’. 10
Mr Deroo-Blanquart pursued a further appeal before the Court of Cassation, which, after noting that the relevant national provisions fell within the scope of the UCPD, stayed the proceedings and submitted to the CJEU a preliminary ruling request entailing the following interpretative questions: Must Articles 5 and 7 of [the UCPD] be interpreted as meaning that a combined offer consisting of the sale of a computer equipped with pre-installed software constitutes a misleading unfair commercial practice where the manufacturer of the computer has, via its retailer, provided information on each item of pre-installed software, but has not specified the cost of each individual component? Must Article 5 of [the UCPD] be interpreted as meaning that a combined offer consisting of the sale of a computer equipped with pre-installed software constitutes an unfair commercial practice where the manufacturer leaves the consumer no choice other than to accept the software or cancel the sale? Must Article 5 of [the UCPD] be interpreted as meaning that a combined offer consisting of the sale of a computer equipped with pre-installed software constitutes an unfair commercial practice where the consumer is unable to obtain a computer which is not equipped with software from the computer manufacturer?
11
Because the provisions in question, namely Articles 5 and 7 of the UCPD, lay down a general prohibition of unfair commercial practices and the prohibition of misleading omissions respectively, and are deliberately written in an open ended-manner, every clarification from the CJEU is valuable. 12
3. Reasoning of the CJEU
The CJEU, which proceeded to judgment without an Opinion from the Advocate General, started by examining the second and third questions together. In essence, the issue here was whether the sale of a computer with tied-in software, with no possibility of buying the same computer without the software, constituted an unfair commercial practice under Article 5(2) of the UCPD. 13
The CJEU first addressed the technicalities of the issue. It noted that the practice of so-called combined offers indeed falls within the purview of commercial practices as defined in Article 2(d) of the UCPD and in the established case law. 14 Moreover, only the practices that are explicitly listed in Annex I to the UCPD are automatically considered to be unfair. Combined offers are not included in that closed list; thus they are not and may not be categorically prohibited, which meant that a closer examination of the situation was required. 15
The CJEU pointed out that in order to find a practice unfair, Article 5(2) of the UCPD requires that two cumulative conditions are fulfilled. First, the practice must be contrary to standards of professional diligence. Second, the practice must materially distort or be likely to materially distort the economic behaviour of the average consumer with regard to the product. At this point the CJEU carefully stressed the notion of the average consumer, which is, as explained in Recital 18 of the Preamble to the UCPD, central to the Directive’s application. 16 The average consumer is defined as an individual ‘who is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors’. 17
Moving on to the analysis of the first condition under Article 5(2), the CJEU remarked that professional diligence is defined, in Article 2(h) of the UCPD, as the special standard of skill and care that the trader can reasonably be expected to demonstrate towards the consumer, proportionate with honest market practice and/or the applicable principle of good faith in the particular field. 18 Studying the circumstances of the present case, the CJEU noted, on the basis of a market analysis provided to it, that the sale of computers with pre-installed software meets the expectations of most consumers and a significant portion of consumers prefer the arrangement. Additionally, Mr Deroo-Blanquart was appropriately informed about the items of software pre-installed on the relevant computer. Furthermore, he had been offered the option of subscribing to an EULA and using the pre-installed software or cancelling the sale. 19 The CJEU concluded that the circumstances in this case ‘are likely to satisfy the requirements of honest market practices or of the principle of good faith’ and the trader thus demonstrated necessary care towards the consumer. 20
In its evaluation of the second condition of Article 5(2), the CJEU again relied on the concept definitions contained in the UCPD, particularly Article 2(e) of the Directive, which defines the concept of ‘materially distort[ing] the economic behaviour of consumers’ as ‘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 that he would not have taken otherwise’. 21
The CJEU underlined the relevance of whether the consumer was sufficiently aware of the fact that the computer was only available with pre-installed software and whether, as a result, the consumer could have made an informed decision by choosing a different brand’s computer, which would be more suitable for his purposes. The level of care by the trader (Sony) and the consumer’s (Mr Deroo-Blanquart’s) level of information about the nature of the product were already illustrated in the examination of the previous condition. Additionally, the CJEU highlighted the importance of clarifying the conditions and consequences of the sales contract, since this is ultimately the information most relevant to decision-making by the consumer. 22 The CJEU stated that it was up to the referring court to decide whether the ability of the consumer to make an informed transactional decision was notably impaired in the circumstances of the present case, where the consumer was explicitly informed that the computer model in question was sold only with pre-installed software. 23
The CJEU concluded that the answer to the second and third questions should be that the practice of selling computers with tied-in software, with no option to purchase the same model without the software, is not an unfair commercial practice contrary to Article 5(2) of the UCPD, unless it appears that the practice is contrary to the requirements of professional diligence and materially distorts or is likely to distort the economic behaviour of the average consumer with regard to the product. Whether such problems are present in the circumstances of the case in the main proceedings was for the referring court to determine (in the light of the relatively straightforward guidance provided by the CJEU). 24
The CJEU then went on to examine the first question, which, in essence, asked whether the commercial practice of not specifying the price of each component, that is the computer and the pieces of software, constituted a misleading commercial practice. Specifically, the issue was whether this would be unfair as a misleading omission, according to Article 5(4)(a) and Article 7 of the UCPD. 25
The CJEU repeated the definition of a misleading omission as per Article 7(1) of the UCPD as an omission that in given circumstances ‘omits material information that the average consumer needs in order to make an informed transactional decision and thereby causes or is likely to cause the average consumer to make a transactional decision that he would not have taken otherwise’. 26 Additionally, the CJEU highlighted Article 7(4)(c) of the UCPD, which addressed one of the pieces of material information that has to be included: the price. Under these provisions, the material information consisted of the full price including taxes, or if the price is not available in advance the method of calculating it, including possible delivery costs, or at the very least notification that these costs might be included. The CJEU pointed out that Article 7 concerns only the price of the overall product as material information, and does not require that the price of individual components are displayed. 27
Because of the nature of the question asked and the facts of the case, the CJEU further clarified the issue. It turned to Recital 14 of the Preamble to the UCPD and noted that it followed from its phrasing that key items of information which are needed by a consumer in order to make an informed transactional decision constituted material information. 28 Furthermore, under Article 7(1) of the UCPD, the issue of whether a piece of information is material should be evaluated, in casu, against the relevant factual background. 29 In this case, a computer was offered for sale only with the pre-installed software, and the CJEU, by answering the two other questions, established that there was nothing inherently unfair in that commercial practice. 30 Hence, the CJEU concluded that failure to indicate the price of each separate component in a combined offer like the one at issue did not prevent the average consumer from making an informed decision. Thus, the price of each piece of pre-installed software did not constitute material information, and it was not a misleading commercial practice to not indicate the price of those items of software. 31
4. Discussion
A. Clarifications in the ruling and room for discretion left for the national court
The ruling in Deroo-Blanquart v. Sony provides clarification in terms of the treatment of a computer with pre-installed software as a combined offer and a commercial practice. Importantly, it states that selling computers equipped with pre-installed software, without the option of buying the device minus the software, does not in itself constitute an unfair commercial practice under Article 5(2) of the UCPD, unless a national court finds in the circumstances of a concrete case that the practice is contrary to the requirements of professional diligence and distorts, or is likely to distort, the economic behaviour of the average consumer with regard to the product. 32 To guide the related evaluation by the referring national court, the CJEU especially emphasized the relevance of accurate information about tied-in software and its implications being communicated to the consumer and of the possibility to cancel the sale afterwards. 33
Furthermore, the fact that including pre-installed software seemed to meet the expectations of a notable proportion of consumers was important for the in casu evaluation of the appropriateness of the business practice. The CJEU underlined that circumstances such as those in Deroo-Blanquart v. Sony are likely to satisfy the requirements of professional diligence and appropriate business behaviour. The national court was thus given relatively clear guidance as to what its conclusion on this point should be. 34
Additionally, the role of information provided to the consumer was highlighted in Deroo-Blanquart v. Sony in a manner which strongly guides the referring court. This is the case even though the final evaluation as to whether the practice of selling computers with pre-installed software, but without the option of merely buying the computer, might affect the consumer’s decisions or ability to make informed decisions about the relevant product, was left to the national court’s consideration. 35
Moreover, the judgment in Deroo-Blanquart v. Sony highlights that in terms of material information to be communicated to consumers in the case of a computer with pre-installed software, it is the overall price of the package which is relevant. The prices of individual pieces of software need not be indicated. 36 The CJEU presented this finding as a result of interpreting the provisions on misleading omissions and material information (Articles 5(4)(a) and 7 of the UCPD). 37 The fact that the computer model relevant to the case was only offered for sale with the pre-installed software contributed to this conclusion. 38 The ruling illustrates that even though further details could be considered interesting, the law focuses only on what information is absolutely necessary.
Considering the substantive findings and interpretations presented in the ruling, the conclusions of the CJEU are not surprising. As illustrated above, the CJEU relied on its previous judgments, which examined the interpretation of the UCPD, in particular VTB-VAB v. Total Belgium.
Another aspect of the case is the critique that arose from other fields of law, in particular that the CJEU missed an opportunity to address some burning issues in the ambit of IT law. Despite the relatively few critical voices regarding this ruling, the common underlying objection seems to be that the CJEU did not understand the significance of its decision and therefore missed an opportunity to catch up with the demands of rapidly developing technology and especially the free software movements. 39 While these critiques hold some merit, it is at the same time necessary to recognize that the CJEU is, firstly, confined by the limits of the question referred to it, which in the present case was the interpretation of the UCPD. Secondly, in its interpretation, the CJEU has to maintain a fine line between the relevant legal starting points and the real life consequences of its rulings. Additionally, one must also consider the tension within the goals of the UCPD itself, specifically the goal of balancing consumer protection on the one hand, and the smooth operation of the internal market on the other. 40 This combination of goals signifies, amongst other things, that the protection of consumers, let alone increased consumer choice, may not be promoted without limitations.
Some further remarks should also be presented from the standpoint of the interrelationships of full harmonization by the UCPD, interpretations by the CJEU, and the role of national courts. The nature of the approach of the UCPD and its provisions as open-ended legislation, which underlines the significance of the reasoning by national courts applying the law to the particular circumstances of each case, may be critically contrasted with the idea of the intended full harmonization. 41
The systematic choices of the UCPD are prone to leave notable room for discretion by national courts. In turn, this may also mean that the UCPD and the law implementing it may be applied in a divergent manner. As is well known, it is for the domestic courts to apply the law to the facts, whereas it is for the CJEU to provide information on the correct interpretation of EU law. 42 Nonetheless, judgments such as Deroo-Blanquart v. Sony illustrate that when answering preliminary ruling questions, the CJEU is willing, at least at points, to take a significantly active role in guiding national courts to such an extent that the ‘correct’ conclusions are salient on the basis of the CJEU’s reasoning. This contributes towards achieving full harmonization. 43 However, amongst other things, the proportion of cases where preliminary ruling requests are not made may potentially lead to divergent interpretations and applications of EU law.
B. Pre-installed software and appropriate business practices from a broader perspective
The UCPD, which constitutes B2C legislation, with a ‘side-effect’ of granting certain protection to companies, 44 is part of a broader European picture of law on appropriate and inappropriate business behaviour and trading practices. The whole picture, which includes EU and national legislation on unfair commercial practices and on unfair contract terms as well as EU law on free movement and EU and national competition law, is not as coherent and clear as one could hope for. 45 Even though the judgment in Deroo-Blanquart v. Sony is neither highly surprising nor remarkable as observed from the perspective of the UCPD, factual situations such as that visible in the case naturally raise questions about interfaces and interrelationships between unfair trading, consumer protection, competition law regimes, and enforcement systems.
The relevant bodies of rules and systems of enforcement are significantly separate from each other and are planned to ‘keep within their own boxes’ – thus, resolving the correct application of one directive does not mean that all is well with regard to a given factual situation. The practice of selling computers only with certain pre-installed software could hypothetically be problematic from the perspective of competition law, in particular the prohibition of the abuse of dominance contained in Article 102 TFEU. 46 An evaluation from the standpoint of the UCPD does not explore this issue, or other matters beyond the scope of the UCPD.
Nevertheless, it should be noted that even when observed in a broader EU law context, tying is not perceived as absolutely and universally harmful. For instance, the seminal Microsoft case highlighted the complexity of tying as a concept and further provided a detailed analysis of the factors that can affect evaluation in terms of illegality. 47
The several potentially relevant bodies of norms signify that a practice such as selling pre-installed software would have to be questioned from the perspective of several sources of rules, likely, at least to some extent, in separate proceedings, in order to gain a full picture of whether the factual situation entails illegal aspects. 48 In some of the proceedings needed, the position of a consumer-complainant may be weak. This could be said, in particular, about the field of competition law. 49 Moreover, in the EU, the availability and practical usefulness of collective redress mechanisms, which can be especially useful in situations involving multiple weak parties such as consumers, remain dependent on the national laws of the Member States. 50
It is evident that no simple legal solution and related comprehensive enforcement framework, covering unfair commercial practices and similar issues, competition matters and consumer protection – and combining the EU and national system levels in a smart manner – is easily available. Nevertheless, any possibility to increase coherence and cooperation between different legal ‘approaches’ should be discussed and embraced.