Commission steps up fight against misleading marketing practices

The European commission has agreed on a roadmap to help protect small businesses against misleading marketing practices. Gerald Callaghan reports

By Gerald Callaghan

27 Nov 2012

Speaking at a press briefing on Tuesday, commission vice-president Viviane Reding said, "Everyday Europe's small and medium-sized enterprises (SMEs) fall victim to marketing scams".

"Only solid EU-wide rules will allow us to crackdown on these scams", she added

According to the commission, the problem concerns mostly SMEs, non-governmental organisations and independent professionals, like doctors.

These types of businesses have fewer resources and are rarely able to effectively protect themselves from becoming victims of scams because the misleading marketing practices often cross borders.

Nevertheless, even larger multinational companies are affected by these practices and suffer losses as a result. A survey conducted by the European parliament received over 13,000 complaints of scamming, with over 3000 occurring in Belgium alone.

"The effects of market scams are negative on SMEs and consumers end up paying higher prices than they should" - Viviane Reding

"The effects of market scams are negative on SMEs and consumers end up paying higher prices than they should," said Reding, who holds the justice, fundamental rights and citizenship portfolio in the commission.

"We have to ensure that existing rules are enforced… member states must cooperate to create a cross-border network" to ensure that there is cohesion in dealing with this issue, Reding added.

The new roadmap hopes to set up EU-wide protection from these scams, but the "rules have to be crystal clear with no loopholes for fraudsters to exploit", said the Luxembourgish official.

As an immediate course of action, the commission will step up enforcement by improving coordination between member states, allowing national authorities to share information on existing misleading practices and set common priorities.

"We have to ensure that existing rules are enforced… member states must cooperate to create a cross-border network" - Viviane Reding

In the course of 2013, the commission also plans to take legislative action to solve the problem of misleading marketing practices affecting businesses. Although, at the moment, the vast majority of practices are already prohibited by EU law, the rules can be imprecise with regard to some newly emerging schemes.

According to the commission, the proposal to amend the 'misleading and comparative advertising directive' will strengthen the protection by clarifying rules and explicitly banning certain harmful practices.

This will be done by improving cooperation between the responsible authorities of the different member states, ensuring that the authorities have the necessary powers to deal with fraudsters, and ascertain that any sanctions imposed are appropriate and an adequate deterrent.

Any legislative proposal will first be subject to a strict impact assessment by the commission to analyse how any future rules will affect businesses and whether a legislative proposal is really the best option for addressing the problem.

Misleading marketing practices affect the economy in general and may have a negative effect on economic growth, especially for SMEs. Meanwhile, the commission estimates that the financial damage to individual companies that results from misleading scams is between €1000 and €5000 per year per company.

Furthermore, competition is then distorted because a trader using unfair marketing practices may draw consumers away from honest competitors.

In 2013, Reding said the commission aims to "ban very harmful practices, from the outset this will give legal certainties to our companies and guarantee EU-wide protection against those scams".

Read the most recent articles written by Gerald Callaghan - Commission outlines plans to tackle EU's 'throw-away society'

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