If you can’t stand the heat: kitchen retailers fined for misleading consumers
There is a new enforcement trend in the Netherlands; consumer protection is shifting from private enforcement before the civil courts, to public enforcement through the Dutch Authority for Consumers and Markets (ACM), the combined antitrust and consumer protection authority. This is not mere cheap talk from the authority; multimillion fines have already been imposed on Dutch telecom operators and a Dutch energy company, whereas fines approximating one million euro have been imposed on three kitchen retailers, all for allegedly misleading consumers.
On 24 September 2020, the District Court of Rotterdam handed the ACM a clear victory when it dismissed all appeals by the kitchen retailers. The takeaway? Consumer protection compliance is fast becoming as important as antitrust and privacy compliance.
An investigation by ACM into three kitchen retailers – all part of the same group – revealed that, between 2015 and 2017, they had misled consumers during consumer events in the Netherlands. Consumers had to fill out forms which looked like purchase agreements in order to be eligible for a special event discount. These forms stated prices and terms of payment and mentioned that consumers had to pay 30% if they decided not to finalize the purchase. According to the ACM, the entire process was aimed at giving consumers the impression that they had bought a kitchen, whereas, in reality, consumers were not legally bound by the offer. In 2019, the three retailers were fined for providing consumers with misleading information, which is an ‘unfair commercial practice’ under the Dutch rules implementing the EU Unfair Commercial Practices Directive.
The three retailers appealed their fines before the Rotterdam District Court; this appeal was unsuccessful. The court agreed with the ACM’s assessment that the retailer’s trading practices were misleading, as the average consumer could be led to believe that it had entered into a binding purchasing agreement through the act of signing the discount form. The court dismissed the retailers’ argument that the ACM’s focus on the text of the forms was too narrow, and that it should have instead looked at the entire sales process, during which the consumers were allegedly informed orally that they were not legally bound by the form. The court stressed that a “reasonably well-informed and reasonably observant and circumspect consumer” would tend to afford more weight to the misleading text of the form, as opposed to a trader’s oral commitment. Accordingly, the discount forms were likely to materially distort the economic behaviour of the targeted consumers.
This judgment is further evidence of the ACM’s priority to tackle unfair, deceptive and fraudulent business practices. Although a trader’s voluntary commitment to end a certain practice can sometimes be sufficient to avoid a full-blown investigation, there is no guarantee that the ACM will be satisfied by such commitment. Instead, as this case shows, the ACM will not shy away from imposing high fines if it believes the facts warrant it. Consumer protection compliance is therefore fast becoming as important for companies as antitrust and privacy compliance.
This article was published in the Competition Newsletter of October 2020. Other articles in this newsletter:
- EU merger control: Dutch clause to catch future killer acquisitions
- Waiting for the EC: third-party platform bans and RPM still on radar
- Cigarettes producers fined for alleged indirect info exchange
- Directors' liability due to competition law infringements by the company
- What to expect when you are expecting: broader investment screening in the Netherlands
