EU Magistrate Lashes Out at Residency Rules for Online Debits

(CN) - Taking aim at the German railway Deutsche Bahn on Thursday, an EU magistrate said customers should not have to be German residents to buy tickets online via direct debit.

Austria’s Supreme Court referred the discrimination case to the European Court of Justice last year, after a lower court in Vienna ruled against the consumer-protection association Verein für Konsumenteninformation.

On Thursday, however, Advocate General Maciej Szpunar advised the court that Deutsche Bahn is in the wrong. Maciej's opinion is not binding on the court, but says cross-border payments are one of many examples of the continuing conflict between competition law governing the private market and the the fundamental freedoms guaranteed for public activity.

“My principal argument can be summarized as follows: a company is not required to offer its customers payment by way of direct debit,” Szpunar wrote. “However, once that possibility has been provided for, it must be offered in a nondiscriminatory manner.”

Later in the opinion, Szpunar calls it “a fact of life that in the vast majority of cases in the European Union a person’s residence corresponds with his or her payment account.”

“Requiring a payer to be resident in a certain member state is therefore tantamount to specifying in which member state a payment account must be located,” the opinion states. “Besides, as is rightly stressed by Verein für Konsumenteninformation, requiring the consumer, as a condition for payment by direct debit, to establish a residence in Germany leads to an even more serious restriction than the (mere) opening of a payment account in Germany.” (Parentheses in original.)

Deutsche Bahn attempted to defend its residency bar on debit payments by noting that it would be the one carrying the risk of nonpayment if it allows a direct debit that the customer cannot pay.

Though it noted that a credit check for customers residing in Austria would be “15 times more expensive than for customers whose place of residence is in Germany,” Szpunar found a flaw in the company’s line of argument.

“The reason that there is, in commercial practice, no internal market for records of debtors and assessing creditworthiness cannot in itself justify the residence requirement at issue,” the opinion states. “Besides, such a line of reasoning is dangerously close to that of a pure economic argument in the context of the four freedoms. That argument cannot be sustained. As is well known, purely economic arguments cannot be invoked by member states as overriding reasons relating to the public interest. Arguably, in the case of horizontal situations, public interests are not at stake – while private interests tend to be of an economic nature. Still, the mere assertion of the absence of an internal market for records of debtors is not sufficient.”

Szpunar noted that it might make sense for companies to bar direct debit payments altogether. “If the result is that, instead of offering discriminatory forms of payment, a payee decides not to offer a specific form of payment at all, that is an economic reality which one would have to accept," the ruling states.

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