COVID-19, unfair commercial practices and online platform liability
An unfortunate result of the coronavirus pandemic has been the increase of deceptive commercial practices that feed off the fear, worry and anxiety in the general public. Since March, the Norwegian Consumer Authority has prioritised the investigation of cases involving misleading advertising and the use of aggressive commercial practices to promote products that claim to cure, prevent or otherwise safeguard consumers from the coronavirus.
This is in line with the Common Position on COVID-19 issued by the consumer protection authorities in the European Union (EU) together with the European Commission on 'Stopping scams and tackling unfair business practices on online platforms in the context of the Coronavirus outbreak in the EU'.
In the Common Position two categories of the most commonly reported breaches of EU consumer protection law are highlighted, namely: (1) unsupported claims that products prevent or cure a COVID-19 infection and (2) pressure selling techniques and excessive pricing. These practices are proscribed by the Unfair Commercial Practices Directive (2005/29/EC), which was implemented in Norway in Chapter 2 of the Marketing Control Act. Chapter 2 prohibits (i) misleading commercial practices, which can either be in the form of misleading actions or misleading omissions, and (ii) aggressive commercial practices. Thus, an advert that contains false information that deceives or is likely to deceive a consumer (misleading action) or that omits material information that is necessary for the consumer to take an informed decision (misleading omission) is prohibited. Where a trader exploits "any specific misfortune or circumstance of such gravity as to impair the consumer's judgement, of which the trader is aware, to influence the consumer's decision with regard to the product" such as fear of the coronavirus, the practice is deemed to be aggressive, c.f. section 9 of the Marketing Control Act and article 9 of the Directive.
What not to do: Some examples from Norway
The Norwegian Consumer Authority has held that the marketing of a pill described as activating and strengthening the immune system, and as protecting against viruses, even though the coronavirus was not explicitly mentioned in the advert, was in breach of the Marketing Control Act. This was because the advert had many connotations to the coronavirus, for example, through the use of an illustration that was similar to that used by the media and by the Norwegian Institute of Public Health to depict the coronavirus. The advert also stated that the product was in high demand right then. The Consumer Authority held that this advert was not just a deceptive marketing practice but also an aggressive commercial practice as it took advantage of the current anxiety and fear of the coronavirus. A fine of NOK 400,000 was imposed by the Norwegian Consumer Authority and is currently pending appeal.
In another case, an advert of a food supplement on Facebook stating that the product strengthened the immune system and inhibited viruses (though not specifically referring to the coronavirus) without providing any documentation and stating that the product was "important during these times" was deemed to be an unfair commercial practice. The firm adverting this product was notified of a NOK 250,000 fine by the Norwegian Consumer Authority.
Common Position on COVID-19: Platform liability
The prohibitions in the Unfair Commercial Practices Directive and in chapter 2 of the Marketing Control Act are directed towards traders who carry out an unfair commercial practice, i.e. any unfair act, omission, course of conduct or representation, commercial communication including advertising and marketing, that is directly connected with the promotion, sale or supply of a product to consumers. However, the Common Position on COVID-19 is primarily directed at online platforms, including online marketplaces. Where such platforms are merely providing hosting services pursuant to article 14 of the E-Commerce Directive (2000/31/EC), the platforms are exempted from liability for the information stored by their users when they have no actual knowledge of illegal activities or content or, as stated in the Norwegian E-Commerce Act, unless the intermediary has shown either intent or culpable negligence (in respect of responsibility for damages). An intermediary who was unaware or had no knowledge of illegal activity or information must, upon obtaining knowledge or awareness thereof, act expeditiously to remove or disable access to the information, in order to retain immunity from liability. Thus, one of the main purposes of the Common Position on COVID-19 was to notify internet platforms of the most commonly reported breaches of EU consumer law, in particular, of the Unfair Commercial Practices Directive, in the context of the coronavirus outbreak.
More effective enforcement measures
Since 17 January 2020, competent consumer protection authorities in the EU have new minimum powers pursuant to Regulation (EU) 2017/2394. These powers apply where no other effective means are available to bring about the cessation or the prohibition of the infringement covered by this Regulation (including infringement of the E-Commerce Directive and the Unfair Commercial Practices Directive) and in order to avoid the risk of serious harm to the collective interests of consumers. These measures may be directed not just at infringing traders but also at hosting service providers, owners of online interfaces such as website and app owners, as well as domain registries and registrars.
Although this Regulation has not yet been incorporated into Norwegian law, the statute containing the necessary amendments is currently awaiting approval by the King in Council. Once the amendments enter into force in Norway, the Consumer Authority will have the power to request a court to order: (a) a hosting service provider or owner of an online interface (e.g. website, app) to remove content from an interface or to order the explicit display of a warning to consumers when they access the online interface; (b) an internet service provider to restrict access to an online interface; (c) a hosting service provider to remove, disable or restrict access to an online interface; and (d) domain registries or registrars to delete or suspend a fully qualified domain name and to allow the Consumer Authority to register it.
Traders should therefore ensure that their marketing campaigns or offers refrain from making unsupported claims that products prevent or cure a COVID-19 infection, ensure that any claims made are supported by documentation as required by the Marketing Control Act, refrain from pressure selling techniques such as giving inaccurate information about market conditions or about the possibility of finding the product in order to cause the consumer to buy the produce, and refrain from excessive pricing.
If you require any assistance with regards to the above matters, please do not hesitate to contact us.