Brussels, 27/11/2012 (Agence Europe) - Misleading directory companies that claim that a contract has been signed or provide false or misleading information about services and conceal the commercial intent or claim to provide free offers when in fact they have to be paid for, are all unfair trading practices that inflict huge harm against businesses in Europe, and the Commission intends to put a stop to it. A communication it presented on Tuesday 27 November outlines a strategy for action to tackle direct marketing fraud and better protect companies, market operators and NGOs everywhere in Europe against unscrupulous operators who do not respect the rules. Small enterprises are easy prey for the fraudsters, who often operate in different legal jurisdictions in the EU, which make sanctions being imposed against them difficult. This explains why the Commission is seeking to take action to toughen up current legislation (Directive 2006/114/EC on Misleading and Comparative Advertising) by explicitly banning certain harmful practices and enhancing effective application of regulation in cross-border situations. To update current legislation, the Commission is planning to present a proposal in 2013, after having carried out an exhaustive impact study.
Viviane Reding, the Commission vice president for legal affairs explained that, “Only solid Europe-wide rules will allow us to crack down on these scams and make sure the culprits cannot hide behind national borders. Practices like misleading business directories, fake invoices and similar scams must be stopped now”. The commissioner also explained that small businesses provided the spinal cord of the European economy and could scarcely afford to lose money from these kinds of misleading practices, which was why they were determined to improve the security environment for business in Europe.
The most common kinds of misleading practices often involve a scam in which a dishonest operator misleadingly obtains the agreement of his victim. A contract is therefore claimed to have been signed, which fails to offer a complete service or no service at all but charges an exorbitant price in abusive contractual conditions. The dishonest operator subsequently employs a whole range of different scams to obtain payment for the said service.
The communication, “Protecting businesses against misleading marketing practices and ensuring effective enforcement” provides a whole range of action to enhance the protection of businesses.
Enhancing rules banning certain practices. This will involve explicitly banning certain clearly misleading practices, such as professional directory fraud (directory companies send out forms asking businesses to update details in their directories, seemingly for free. If the targeted traders sign the form, they are then told that they have signed a contract and will be charged a yearly sum). Perpetrators will therefore immediately know that these practices are covered by the directive and target misleading and comparative advertising. It will involve tougher penalties against offenders, to ensure everyone respects the rules. Member states will have to ensure that effective sanctions are included in their laws and that they are proportionate and dissuasive.
Effective application of rules tackling misleading trade practices in cross-border situations. Each member state will be obliged to appoint an authority for applying the rules in inter-enterprise relations, which will be given the appropriate powers for carrying out its task. Such a body has not yet been set up throughout the EU; - the Commission will establish a cooperation procedure to enable the authorities concerned to carry out their tasks, whether this is in the competition or consumer protection areas. These bodies will also promote the exchange of information and mutual international assistance, in an effort to put an end to misleading trade practices affecting companies.
Every day companies and market operators, as well as civil society organisations in the EU fall victim to marketing fraud. The figures reveal a new and extremely frightening trend that is likely to affect business throughout the world. With the spread of mass-marketing techniques, the most notorious operators of misleading directories can reportedly send up to 6 million forms a year. According to some estimates, the financial losses suffered by different companies that had been victims to this kind of fraud range from between €1,000 and €5,000 a year for each company. The 23 million SMEs in Europe accounted for 99% of EU companies and generated 85% of new jobs in the EU between 2002 and 2010. They are the main driver of economic growth, which explains the importance of protecting their rights.
The Commission strategy comes in response to a request made by the European Parliament in 2008 and June 2011. An EU wide survey documented 13,000 complaints about company directory scams but these are just the tip of the iceberg. The European Commission's public consultation revealed that companies of all sizes and in all sectors wanted better protection EU wide. 84% of participants said they were in favour of introducing European legislation to tackle trade practices that harmed business. (AN/transl.fl)