3. The Black List (Annex I Practices)
Annex I contains a list of commercial practices which are to be considered unfair in all circumstances and which are therefore prohibited. The list was drawn up to enable enforcers, traders, marketing professionals and customers to identify such practices. It therefore contributes to enhancing legal certainty. As stated in Recital (17) of the Directive, these are the only commercial practices which can be deemed to be unfair without a case-by-case assessment against the provisions of Articles 5 to 9. In other words, if it can be proved that the trader has carried out the practice in actual fact, national enforcers do not need to apply the material distortion test (i.e. to consider the impact of the practice on the average consumer's economic behaviour) in order to act and inhibit / sanction the practice.
This provision aims at preventing situations where a trader markets a product or a service and omits to clearly inform the consumer that there are certain legal provisions which may restrict the sale, possession or use of a given product.
The first category of practices which are caught by the prohibition involves products or services for which the sale is banned or illegal in all circumstances. For instance where a trader promotes the sale of drugs, child pornography or protected exotic animals. The assessment of these practices is straightforward and does not require any specific consideration given that it often involves criminal activities and/or dishonest operators and that these practices generally constitute serious violations of other laws which usually are more specific and take precedence over UCP Directive.
Example: A trader offers goods for sale in circumstances in which the consumer cannot legally become their owner by buying them from him, for instance because they have been stolen and he has no legal title to pass on.
The second category of practices concerns products or services which are not illegal in and of themselves and can be legally marketed and sold but only under certain conditions and /or subject to certain restrictions. For instance, pharmaceuticals or weapons which can only be sold under licence and bought with special permission (licence / prescription, etc...). In these situations, under Annex I, n. 9, traders cannot give the impression that there are no legal restrictions or conditions which apply to the sale of those products or services.
This provision covers situations where a trader claims that his product or service can improve or cure certain physical or psychological ailments.
Such claims are already partly covered at Community level under specific legislation. The Directive is without prejudice to those Community rules relating to the health properties of products.
Annex I n°17 therefore applies in a limited manner and only in addition to the existing rules on health and wellness claims. More generally, it should be recalled that any misleading practices with regard to health and wellness products can still be assessed under Article 6 of the Directive (e.g. where the overall presentation is deceptive).
The prohibition involves first of all claims in relation to physical states which are classified as pathologies, dysfunctions or malformations by the medical science. However, the practical utility of Annex I, No 17 in relation to these practices is very marginal.
Food health claims referring to the prevention, the treatment or the cure of a human disease (e.g. "this food can prevent stomach cancer") are already prohibited at Community level by the legislation on the labelling of foodstuff. Other health claims on foods can be authorised if they are scientifically substantiated.
Health claims are also covered by the health and pharmaceutical legislation (both EU and national), which regulates in an exhaustive and specific manner not only advertising but also the authorization regimes and the operators' deontological rules. It follows that only authorized traders are allowed to operate in these fields and market these types of products (which have been, in turn, scientifically tested and approved by the competent bodies).
It should be noted, in addition, that specific limits (i.e. bans) exist concerning the promotion of pharmaceuticals or medical treatments and that these activities concern mainly relations between professionals (traders and doctors or specialists). From a deontological perspective, the choice of the product / treatment rests on the advice of the doctor or specialist who prescribes it. Any issue of misleading advertising in this area (whether it concerns an authorized trader or not) will automatically trigger the relevant EU or national rules and be subject to the respective systems of enforcement and sanctions, which will take precedence over the Directive.
 Directive 2000/13/EC of the European Parliament and of the Council of 20 March 2000 on the approximation of the laws of the Member States relating to the labelling, presentation and advertising of foodstuffs, OJ L 109, 6.5.2000, p. 29. Directive as last amended by Commission Directive 2006/142/EC (OJ L 368, 23.12.2006, p. 110).
 Regulation (EC) No 1924/2006 of the European Parliament and of the Council of 20 December 2006 on nutrition and health claims made on foods, OJ L 404, 30.12.2006, p. 9 - Corrigendum, OJ L 12, 18.1.2007, p. 3 (1924/2006). Regulation as last amended by Regulations (EC) No 107/2008 and 109/2008 of the European Parliament and of the Council of 15 January 2008 L 39 p.8 and p.14.
Annex I, N. 9 also applies in relation to products or services, such as for instance cosmetics, aesthetic treatments, wellness products and similar, which (based on the way they are marketed) are intended to produce certain improvements of the physical conditions of human or animal bodies but whose marketing is not necessarily regulated by overriding sector specific legislation.
As regards cosmetics products, the Directive 76/768/EEC provides that "Member States shall take all measures necessary to ensure that in the labelling, presentation for sale and advertising of cosmetic products, the wording, use of names, trade marks, images or other signs, figurative or otherwise, suggesting a characteristic which the products in question do not possess, shall be prohibited" (Article 6 (2)).
Annex I point 17 of the Directive on Unfair Commercial Practices thus complements these specific rules and applies to wellness products which are not cosmetics or to false claims which are not covered by specific rules.
Examples include traders who claim that their products can make your hair grow back or claims for detox foot patches which will improve the functioning of kidneys.
In order not to trigger the prohibition, traders must be able to substantiate any factual claims of this type with scientific evidence. The fact that the burden of proof rests on the trader appears to be a logical enforcement approach reflecting the principle, more broadly formulated in Article 12 of the Directive whereby "Member States shall confer upon the courts or administrative authorities powers enabling them in the civil or administrative proceedings [...]: (a) to require the trader to furnish evidence as to the accuracy of factual claims in relation to a commercial practice if, taking into account the legitimate interest of the trader and any other party to the proceedings, such a requirement appears appropriate on the basis of the circumstances of the particular case".
From a trader's perspective, failure to produce the appropriate and relevant evidence on the physical effects that a consumer can expect from a product's use will trigger the prohibition of Annex I, N. 17 on the basis of the fact that the claim is false.
Annex I N. 20 of the Directive aims at preventing a specific misleading use of the word "free" in commercial communications and advertising.
It prohibits traders from describing a product or service as 'gratis', 'free', 'without charge' or similarly if the consumer is eventually asked to pay a price.
While the appraisal of practices under the prohibition is generally straightforward, combined offers (i.e. when more products and/or services are marketed together) require a more complex case by case assessment based on the specific features of the commercial offer and the product or services involved.
This prohibition is based on the idea that consumers expect a "free" claim to be exactly that, meaning they receive something for nothing: no money or other consideration has to be given in exchange.
This is largely reflected in Annex I, n.20 which provides that an offer can be described as free only if consumers pay no more than:
a) the minimum, unavoidable cost of responding to the promotion (e.g. the current public postage rates , the cost of telephoning up to and including the national rate or the minimum, unavoidable cost of sending a text message);
b) the true cost of freight or delivery;
c) the cost, including incidental expenses, of any travel involved if consumers collect the offer.
As a consequence, traders should not charge for packaging, handling or administration.
It also follows that a legitimate promotion of free claims requires full price transparency from traders: traders should make clear in all material featuring "free" offers what is the consumer's liability for costs, if any.
An example of a prohibited practice would be where a consumer is offered a "free" product or a gift but then he or she needs to call a premium number to get it.
An example of a straightforward, legitimate free claim is when a trader hands out a free product sample to passers-by in a shopping centre.
The assessment is more complex when the word "free" is used in the context of combined offers, which are commercial offers involving more than one product or service.
The following are the main principles which should be taken into account when assessing combined offers and which are already largely reflected in some advertising regulatory codes:
The two categories of combined offers are conditional-purchase promotions and package offers.
Annex I n. 20 does not prevent traders from using the word "free" when customers are required to buy other items (e.g. "buy one get one free" type of offers), provided their liability for all costs is made clear and:
(a) the quality or composition of the paid-for items has not been reduced and;
(b) the price of the paid-for items has not been inflated, to recover the cost of supplying the free item.
The key distinguishing feature of a conditional-purchase promotion is that the item described as "free" is genuinely separate from and additional to the item(s) that the customer is required to pay for.
A free offer can qualify as a conditional-purchase promotion in either (or both) of two ways:
The assessment becomes more complex when free conditional-purchase promotions are run on a time-limited or channel-limited basis, or on an invariable, long-term, channel-neutral basis. The basic principle remains that when a customer is told that an item is "free" when another item is bought, the customer has the right to believe that the trader will not directly seek to recover any of the "free" item's cost by marking up the item's price that has to be bought or by the substitution of inferior merchandise.
Therefore, it is reasonable to conclude that, to demonstrate that an item is genuinely being supplied for free, conditional on the purchase of another item, traders must be able to show:
(i) either that the free item is genuinely additional to the item(s) usually sold for that price or that the free item is genuinely separable from the paid-for item(s);
(ii) that, unless the customer complies with the terms of the promotion, they do not supply the "free" item with the paid-for item(s); and
(iii) that consumers are aware of the stand-alone price of the item(s) they are paying for and that that price remains the same with or without the free item.
For example, assuming that the paid-for item's quality and composition are not reduced and its price is not inflated to cover the cost of the free item:
After what has been said about conditional-purchase promotions, it is reasonable to conclude that Annex I n. 20 prohibits the use of "free" to describe "an individual element of a package if the cost of that element is included in the package price.
A package is a pre-arranged combination of features offered for a long-term single, inclusive price where customers cannot exercise genuine choice on how many elements of the package they receive for that price.
For example: if a car is advertised with leather seats, air conditioning and a CD player for a standard price of EUR 10,000, that combination of features is a package. The consumer pays one all-inclusive price for the car as advertised. If any of the advertised features were to be removed, the quality and composition of the car the customer is paying EUR 10,000 for would be diminished. If he wants to claim that the CD player is free and that the EUR 10,000 relates to the other elements, the trader would need to demonstrate either (a) that the requirements of a conditional-purchase promotion are satisfied, or (b) that the CD player was a new additional feature and that the price of the car had not increased (see below).
To take another example, a mobile-phone subscription offers a certain amount of airtime, a certain number of text messages and a voicemail facility for one all-inclusive price. Each element is intrinsic to the quality and composition of the package being advertised for the package price. Because customers cannot exercise genuine choice over how many elements they receive for the price paid, the elements are all included in the package price and may not be described as "free".
Within a package, the goods or services that are bundled together and sold for one single inclusive price could be different in nature: for example, if a single monthly subscription price is charged for a package that includes a range of television channels, access to the Internet and "free" calls to other subscribers, those services are intrinsic elements of the service that the customer is buying and, in practice, the customer has to take all three elements to pay the advertised price. Because customers cannot exercise genuine choice over how many elements they receive for the price paid, the elements are all included in the package price and may not be described as "free".
There is one exception to what stated in the previous paragraph. Traders sometimes add elements to their existing packages without increasing the price of the package or reducing the quality or composition of the elements that are already included in the package. In those circumstances, consumers are likely to regard the element that has been added to the package as additional to the established package for a period after its introduction; once the element has formed part of the package for a long time, consumers are likely to regard it as a standard feature of the package. Annex I n. 20 should not prevent traders from describing elements that have been added to those pre-existing packages as "free" for a reasonable period (e.g. 6 months) after their introduction.
If the price of a package increases or its quality or composition is reduced after a new element is added, the new element may not be described as "free.
To summarise, if a package price is payable, marketers, in order to comply with Annex I n. 20, may describe elements that are included in the package as "at no extra cost" or "inclusive" but may not describe them as "free" unless they have been recently added to an established package without increasing its price.
For both conditional purchase promotions and packages, one-off up-front costs incurred, for example, to buy or install equipment, do not negate claims that products or services supplied without subscription are "free" within the meaning of Annex I, n.20. For example, digital free-to-air television channels are available only to consumers who have the necessary digital receiving equipment and call packages are available only to consumers who have a telephone and line. Other types of one-off, up-front costs, for example connection fees payable to a third party to activate an internet service, will also not negate claims that the internet service is free, provided the price payable has not been inflated to recover the cost of supplying the free service. Traders must nevertheless adequately inform consumers about the requirement for any of such up-front payments.
Traders might want to run introductory offers for new customers, for example, "Free calls for the first three months" of a telephone call plan. Or they might want to offer a "free" incentive item with a new product, for example, "Free binder with issue one" of a magazine.
Annex I n. 20 does not prevent traders to make free claims when they market existing products to potential new customers, as long as the criteria set out above are fulfilled.
Below are two illustrative examples:
"Free sports bag for new members" of a gym would be justified if the sports bag was offered to all new members, who could choose whether or not to take it, and new members paid the same price whether or not they took the bag. The claim "Free calls for the first three months" could be justified, even on an ongoing basis where the paid-for item is a package, if the trader showed that the offer was open only to new customers and that existing customers who paid the same price did not receive inclusive calls but received an otherwise identical service; the trader would have demonstrated that the calls were more than was usually supplied for the price and justified the use of "free".
"Free broadband for new customers of our Anytime call plan" could be justified if, for example, the trader showed that broadband was a new feature added to a pre-existing call plan without increasing its price or reducing its quality, and that only new customers received the broadband feature. In that example, the claim would be valid only for a reasonable period after the broadband was added; after that time, because all new customers automatically receive the broadband element, consumers are likely to regard it as a standard, inclusive element of the package. (If the broadband service was automatically supplied to existing customers as well, the "free" claim would be valid but the implication that it was a special benefit for new customers would not be.)
If the introductory offer relates to a product that has never been sold before, the trader cannot demonstrate that the "free" item is more than what is usually supplied for the price or that it has added the item to an established package without increasing the price. Annex I, n.20 of the UCP Directive does not prohibit free claims in relation to new products. However, to justify the use of the word "free" in that situation, the marketer would need to show that customers paid the same price regardless of whether they received the "free" element
(i.e. either that the free item is genuinely additional to the item(s) usually sold for that price or that the free item is genuinely separable from the paid-for item(s); that is, satisfying test (i) for conditional purchase promotions).
For example, if the marketer launched a new magazine with the offer "Free binder with issue one" and showed that consumers had a genuine choice of whether they took the binder, that marketer would have shown that the offer was a conditional-purchase promotion and justified the use of "free".
The aim of this prohibition is to prevent dishonest market operators from luring consumers into a transaction or into paying money or other consideration by falsely creating the illusion that they have won or may win a price. It also precludes traders from charging consumers for claiming a prize, given that - in principle - the payment of any consideration inevitably undermines the credibility of the use of the word "prize".
The assessment of the first category of situations (i.e. no prize) described in the first indent of the provision is fairly straightforward. In order not to violate the prohibition, traders must always be in a position to demonstrate that they have awarded the prize/s or the equivalent benefit/s in the exact terms stated in his/her announcement to the consumer. Failing this, the practice would be caught by the prohibition.
The second part of Annex I, n. 31 (i.e. the prize or benefit is subject to the consumer paying money or incurring a cost) covers dishonest practices whereby, for instance, consumers are informed that they have won a prize but that they have to call a premium rate line to claim it.
Another example concerns cases where the consumer is initially informed that he has won a prize and then he finds out that he must order another good or service to receive the advertised prize or the equivalent benefit.
E.g. Advertising leaflet distributed in the mail stating "You have won a free CD", where the consumer is eventually told "order now our selection of shower gels, fill in your address and you will receive your "prize".