Blindsiding SIM Card Users With Preloaded Service Unfair, EU Court Says

(CN) – The European Court of Justice ruled Thursday that selling consumers SIM cards with preloaded and preactived services that can charge them fees is an unfair commercial practice when the buyers are not told of these fees and services in advance.

The ruling comes in the wake of a magistrate’s recommendation that the two phone companies at the center of the case, Wind Tre and Vodafone Italia, not be fined over their failure to inform consumers that the SIM cards they were selling had been preloaded with voicemail and internet services.

As recounted in Thursday’s ruling, the controversy began in 2012, when the Italian competition authority, Autorità Garante della Concorrenza e del Mercato, fined the two companies selling SIM cards on which internet browsing services and voicemail services had been pre-loaded and pre-activated, the fees for using those services being charged to the user if the user did not expressly ask for them to be deactivated. The regulator said the two companies did not sufficiently inform the consumers of the fact that those services had been pre-loaded and pre-activated and that they could incur charges.

A regional administrative court judge in Lazio, Italy annulled the regulator’s action, finding that they’d exceeded their authority, and that the power to impose such sanctions fell to another entity, the communication’s regulator Autorità per le Garanzie nelle Comunicazioni, or “AGCom.”

The case was appealed to Italy’s Council of State, which asked its Plenary to look at some preliminary issues.

The plenary held that under Italian law, the authority to sanction businesses for falling to meet their obligations to inform consumers belonged to AGCom.

But it also went on to say that when the commerce practice being complained about — in this case, so-called inertia-selling — rises to the level of an “aggressive commercial practice,” then the violation falls within AGCM’s jurisdictions.

The Council of State, however, was not completely satisfied with this answer, and asked the European Court of Justice whether the plenary’s interpretation was compatible with EU law, and then whether the businesses’ practices did indeed amount to “Inertia selling” or an unfair commercial practice.

In coming to its decision, the Court of Justice first looked at whether consumers had made a free choice to activate the services.

“It should be noted that Article 8 of Directive 2005/29 defines the concept ‘aggressive commercial practice’ in particular by the fact that it impairs or is likely to significantly impair the average consumer’s freedom of choice or conduct with regard to the product. It follows that for a service to be solicited the consumer must have made a free choice,” the ruling said.

When the consumer has been neither informed of the cost of the services in question nor even of the fact that they were preloaded and preactivated on the SIM card that he bought, it cannot be considered that he freely chose the provision of those services ,” the court said.

The opinion states that while it is for national courts to establish the typical reaction of the average consumer, it is not clear that the average buyer of a SIM card might be aware of the fact that it contains preloaded and preactivated fee-bearing services or that the device itself may connect to the internet without their knowledge.

Even if they do know these things, the court said, the consumer may not be technically capable of deactivating those services or those automatic connections on his device.

The EU judges concluded that such behavior constitutes inertia selling that is in all circumstances unfair.

As a result, the court said, EU law does not preclude national legislation under which inertia selling is deem an aggressive and therefore unlawful commercial act.

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