Care Credit Consumer Complaints Fined

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					  ITALIAN EXPERIENCE IN
IMPLEMENTING DIRECTIVE
    2005/29/CE ON UNFAIR
 COMMERCIAL PRACTICES.
BRUSSELS 24 FEBRUARY 2009
         Avv. Antonio Mancini
               Director
    Telecommunications Directorate
    Consumer Protection Directorate
               AGCM
                                         Autorità Garante
                                      della Concorrenza e del
                                             Mercato
       The implementation in Italy of Directive
                   29/2005/EC
      Italy was one of the first Member States to implement
      Directive 29/2005, before the deadline for its transposition
      (12th December 2007).
      The Italian Government adopted two different decrees, which
      entered into force on September 21, 2007:

      A) the Legislative Decree No. 145/2007 on “Misleading and
      comparative advertisement”, aimed at protecting businesses in
      their commercial relations;
      B) the Legislative Decree No. 146/2007 concerning “unfair
      business-to-consumer commercial practices”, which has
      amended articles 18-27 of the 2005 Consumer’s Code.

                                                               Autorità Garante
                                                            della Concorrenza e del
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                Italian Choice ex art. 11 Directive
                     (AGCM COMPETENCE)
      In compliance with art. 11 of the UCP Directive, the Italian
      legislator decided to implement an administrative control
      system and to delegate it to the Italian Competition Authority
      (“Agcm”).

      Agcm is an independent Authority established in 1990 by
      Law No. 287/90, which is responsible not only for the
      enforcement of competition policy (concentrations, cartels,
      abuse of dominant position, advocacy intervention, etc.) but
      also for consumer protection issues.

      In particular, the Agcm was already entitled to the control of
      “misleading and comparative advertisement”. since the
      adoption of Legislative Decrees No. 74/92 and No. 67/00,
      transposing Community Directives 84/450/EEC and                Autorità Garante

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      97/55/EC (which modified the 2005 Consumer’s Code).         della Concorrenza e del
                                                                         Mercato
              Commercial communications and
             development of consumer protection
      • After the adoption of Legislative Decrees No. 145/2007 and No.
        146/2007, the Authority is now also responsible for tackling unfair
        commercial practices (“UCP”).

      • There are important elements of convergence between the enforcement
        of competition rules and consumer protection, since unfair commercial
        practices are often used as an important “competition tool”.

      • Actually, countering UCPs also promotes fair competition in the
        markets involved.

      • The Agcm’s decisional practice decisions on misleading and
        comparative advertisement (pursuant to the Italian Law applicable
        before the adoption of UCP Directive) can be considered as an
        important enforcement advantage especially in order to tackle
        misleading commercial practices and omissions.
                                                                               Autorità Garante
                                                                            della Concorrenza e del
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        European Parliament Resolution
             on January 13, 2009

• The Italian consumer protection regime complies
  under many respects with the Resolution adopted
  by the EP on January 13, 2009. In the first year of
  enforcement of Directive 29/2005/EC:
   – consumers benefited of a specific right to file
     complaints with the Agcm;
   – national Authorities carried out wide-spread inquiries
     on airlines (sweep 2007) and ring-tones for mobile
     phones (sweep 2008) with large national enforcement;
   – Italy promoted the creation of a round table to compare
     national implementation measures, procedures and
     authorities’ decisions (seminar to be held in Rome in
     April 2009).


                                                           Autorità Garante
                                                        della Concorrenza e del
                                                               Mercato
                    Health and safety problems:
                       improved protection
      The Italian legislator introduced a stricter discipline to
      counter practice involving health and safety problems. This
      has been possible because the scope of the full harmonization
      provisions of Directive 29/2005/EC does not cover such
      issues:

      • practices concerning hazardous products that could induce
      consumers to neglect observing the normal standards of
      diligence;

      • practices concerning hazardous products that could threaten,
      even in and indirect way, the safety of children and
      adolescents.


                                                                   Autorità Garante
                                                                della Concorrenza e del
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                     Aggressive Practices

      From an Italian standpoint, the main innovation of the UCP
      Directive is represented by the so called “aggressive
      practices”.

      Misleading commercial practices and omissions can be
      considered as an evolution of misleading and comparative
      advertising. In this field Agcm has a long-standing and
      extensive experience, as well as a wide decisional practice.
      Many cases dealt with by Agcm under the previously
      applicable discipline concern practices black listed under the
      new one.

      On the other hand, it is more difficult to deal with purely
      aggressive practices, which are more tipically related to
      commercial behaviour and, therefore, are more difficult to
      detect, control and interrupt.
                                                                  Autorità Garante
                                                               della Concorrenza e del
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        Legislative Decrees 145/2007 and 146/2007:
              New rules concerning procedure
       Agcm is entitled to investigate unfair practices and
        misleading and comparative advertising not upon reception
        of consumers’ complaints, but also on its own initiative
        (EX OFFICIO INVESTIGATION POWER).

       Increased SANCTIONS (up to € 500,000)

       INSPECTIONS in cooperation with Financial Police;

       Possibility to accept COMMITMENTS;

       Possibility to try a “MORAL SUASION”.

                                                                Autorità Garante
                                                             della Concorrenza e del
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       Agcm action plan for Consumer protection

      • On December 2007 the Authority set up a
        special toll-free number “800.166.661” for
        consumers wishing to report alleged cases of
        unfair practices and misleading advertising.

      • In this first period of activity the Agcm’s Call
        Center has collected about 8,000 complaints.



                                                         Autorità Garante
                                                      della Concorrenza e del
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         UCP figures             (ONE YEAR AFTER)
         Since January 2008, Agcm:

         • started about 350 formal investigations;
         • adopted   220 official decisions               (for both misleading
           commercial practices/omissions and aggressive commercial practices);

         • imposed 328      fines for a total amount of about €     40
            million;
         • collected about 10,000 complaints (8,000 from the call center and
           2,000 written complaints);
         • sent about 2,000 letters to communicate the decision to close the file;
         • adopted about 50 moral suasion decisions and 15 decisions to accept
           commitments.

                                                                                   Autorità Garante
                                                                                della Concorrenza e del
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                      Most involved sectors
             So far, the Agcm has been mostly involved in the
             following sectors:
         •   Telecommunications (about 35%);
         •   Loans and financing (mortgages, consumer
             credit, banking services);
         •   Energy;
         •   Cosmetics (e.g. slimming products, etc.);
         •   Foodstuffs (healthy claims) dietary supplemets
         •   Large retailers (bargain sales, prize awarding
             competitions, etc.);
         •   Tourism and various services.
                                                              Autorità Garante
                                                           della Concorrenza e del
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     Telecommunications: Satellite and premium calls

         • The investigation involved 13 companies (Globalstar
           Europe, Csinfo, Eutelia, Karupa, 10993 S.r.l, Teleunit and
           Voiceplus, etc.).
         • Many consumers alleged that they had been charged for
           calls and connections to international satellite numbers and
           premium non-geographic numbers, which they had never
           made and were due to illegal installation of “diallers” on
           the subscribers’ hardware, occurred while surfing the Net.
         • The Authority prohibited the Italian TLC incumbent
           Telecom from cutting off subscribers for non-payment
           of expensive telephone bills due to the above calls;
         • A pre-emptive measure was adopted to stop the
           companies under investigation from pursuing their alleged
           unfair commercial practices.                              Autorità Garante
                                                                            della Concorrenza e del
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         Telecommunications: Satellite and premium
                          calls
                 It provides Globalstar satellite mobile services, data and voice.



                                                        Premium rate (892, 899, 166)
                                                        and international phone calls
                                                        offers. Controls effective gains
                                                        and the number of phone calls.
                                                        The call center manages the
                                                        entering phone calls and all the
                                                        related services.

                   Numero
                   speciale




                                                                                    Autorità Garante
                                                                                 della Concorrenza e del
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                            Final decision

         • In the final decision adopted in november 2008 the Agcm
           decided to fine 13 companies for unsolicited and illegal
           supplies related to satellite and premium calls (never
           willingly made by consumers);

         • TOTAL AMOUNT OF FINES: € 2,430,000;

         • Since there were elements of criminal
           responsibility, the Agcm forwarded the
           information gathered to the locally competent
           Courts.


                                                                    Autorità Garante
                                                                 della Concorrenza e del
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         Telecommunications: Tele 2 - telephone contracts

         TELE2 'S CONDUCT

           In the Agcm's view, Tele2 violated its duty of professional
           diligence in the following ways:

         • by activating TLC services not knowingly requested by the
           subscriber (distance contracts, teleselling and vocal ordering);

         • by limiting conditions and timing for exercising the right of
           withdrawal;

         • by activating services not corresponding to those requested or
           promised.

                                                                       Autorità Garante
                                                                    della Concorrenza e del
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             Telecommunications: Tele 2-telephone contracts

              Specifically, Tele 2 induced consumers to believe that the
              contract would enter into force only after the signing of the
              form sent to the consumers’ home address, without clarifying
              that:
         -    the voice recording of consent meant that the contract had
              been bindingly entered into;
         -    in several cases consumers realized they had changed their
              phone company only when they began receiving Tele 2 bills;
         -    Tele 2 did not allow consumers to choose, based on their own
              interests and requirements, between the immediate activation
              procedure through telephone consent and the possibility of
              delaying the order (to be perfected by sending back a signed
              copy of the written contract)
         -    Fine: € 215,000, subsequently reduced to € 165,000 due to the
              company's collaborative behaviour.
                                                                         Autorità Garante
                                                                      della Concorrenza e del
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         Telecommunications: SMS/premium calls


         • The Agcm fined 18 companies and individuals for
           UCP. Hundreds of consumers were induced by an
           SMS text message to call numbers with a 899
           prefix, thus paying up to € 15 per call.

         • Total fine: € 570,000.




                                                          Autorità Garante
                                                       della Concorrenza e del
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          Telecommunications: SMS/Premium calls

         These proceedings were initiated in February 2008
         upon reception of several written complaints and
         approximately 160 phone calls to the Agcm's call
         center.

         Consumers complained that they received text
         messages inviting them to call high-cost “899”
         numbers to access a voicemail system where a
         personal message had been recorded. In fact, the aim
         of these text messages was to have the consumers
         activate services connected to the “899…” numbers
         at a cost reaching €15.00 for each call made.

                                                           Autorità Garante
                                                        della Concorrenza e del
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         Telecommunications: Mobile phone ring-tones
                      (Sweep 2008)
         The Agcm closed UCP investigations concerning the
         subscription of services that allow users to download non-
         premium content for mobile phones, such as ringtones and
         wallpapers.
         • 4 Decisions before 2008 Community Sweep
         • 2 Decision after 2008 Sweep
         • 5 decisions on additional proceedings started after the 2008
         Sweep are forthcoming (next days).

         The above-mentioned services are often offered to
         ADOLESCENT, without providing clear information, either
         on the web or by text messages and SMS. From this point of
         view this kind of commercial practices need to be dealt with
         care.
                                                                       Autorità Garante
                                                                    della Concorrenza e del
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         Telecommunications: Mobile phone ringtones
                      (Sweep 2008)
         The Agcm adopted 6 urgency decisions to stop the web
         advertising of ringtones which :
         • Used false “free” claims;
         • Did not clarify their nature of “subcription contracts”;
         • Omitted to mention the full costs of this services;
         • Did not clarify the procedures to enter into and to
         withdraw from the contract;
         • Did not underline that the services were reserved to
         people over 18 years old;
         •JOINT RESPONSIBILITY OF TLC OPERATOR
         TOGETHER WITH CONTENT PROVIDERS
                                                                Autorità Garante
                                                             della Concorrenza e del
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             Example of misleading advertising about
                mobile ring tones: “10 sms gratis”
         .




                                                          Autorità Garante
                                                       della Concorrenza e del
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          Telecommunications: Re-framing off tariff
                          plans
         The Agcm fined a few days ago Tim and Vodafone for
         adopting unilateral and reiterated modifications of their
         tariff plans without providing adequate information to
         their customers.

         This lack of information and transparency affected the
         consumers’ ability to assess and evaluate the new
         tariffs, as well as to understand the ways to require the
         portability of their number to competing operators and
         to obtain the reimbursement of their unused credit.

          Fines: € 500,000 for each company.
                                                               Autorità Garante
                                                            della Concorrenza e del
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Telecommunications: Mobile internet services
            (shock billings)
The Agcm also dealt with mobile internet services that lead to
abnormally expensive bills for consumers and related
advertising campaigns. In particular, the above-mentioned
campaigns promoted hi-speed web-surfing, up to a 5 GB
monthly download threshold, for a very low monthly rate.

The Agcm fined the companies under investigation:
    a) for providing insufficient information to consumers,
with specific regard to the (very expensive) tariff applicable
after overcoming the 5 GB monthly threshold;
    b) for not giving consumers the possibility to monitor
their download traffic in order to stay safely under the 5 GB
monthly threshold or assess their over-the-threshold traffic;
    c) for providing insufficient information to consumers
about the areas not covered by the Mobile network.
                                                               Autorità Garante
                                                            della Concorrenza e del
                                                                   Mercato
                   Other Relevant Cases

         Relevant cases in the most involved sectors
          (other than TLC):

         • Energy and Industry: “Enel Energia”;

         • Banking and Insurance: Bank mortgages
           portability;

         • Transports: “Trenitalia”, “Meridiana”;
                                                          Autorità Garante
                                                       della Concorrenza e del
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                        Energy: “Enel Energia”
                 Fine amounts to a total of €1.1 million
         ENEL ENERGIA’S CONDUCT

           Enel Energia, a company of the Enel group operating on
            the electricity supply free market, adopted UCPs:

         a) by moving customers from the so-called “protected
            market” to the “free market”;
         b) in initiating an unsolicited supply of natural gas;

            The company started unsolicited electricity and gas
            supplies and in some cases demanded payment, hindering
            the exercise of the right to second thoughts and using
            aggressive marketing procedures.


                                                                     Autorità Garante
                                                                  della Concorrenza e del
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                  Banking and Insurance:
                 Bank mortgages portability

 The Agcm found that Banks prevented consumers owning a mortgage loan
  from the use of their right (set out by the so called “Bersani Law”) to transfer it
  at no cost to another Bank and created undue obstacles in this respect.

 The Agcm held that the above practice was misleading, in that the Banks
  provided consumers with incomplete or wrong information, as well as
  aggressive, in that it created an undue non contractual obstacle, both
  onerous and disproportionate, to consumers wishing to exert the right to
  withdraw from their contract and/or to switch to another Bank (the assessment
  has been made also in the light of Art. 23(1), t), of the Consumer’s Code, i.e.
  providing wrong information on market conditions to push consumers to
  choose less favorable options).

    Fined 23 pincipal Italian Banks for a total amount of €

   10 million                                                                 Autorità Garante
                                                                           della Concorrenza e del
                                                                                  Mercato
                       Transports: “Trenitalia”
                Fines amounted to a total of € 845,000.
             In the Agcm’s view, several aspects of Trenitalia’s
             commercial behaviour amounted to UCPs.

             In particular:

         •   limitations in the recognition and payment of a bonus for
             train delays (fine: € 200,000);
         •   limitation of the number of seats available for the“Amica”
             and “Familia” fares (fine: € 280,000);
         •   improper denomination of trains (fine: € 280,000);
         •   incomplete information on the “Cartaviaggio” loyalty
             program (fine: € 80,000);
         •   availability of some services only through call center (fine:
             € 5,000 - the minimum set out by Law).
                                                                       Autorità Garante
                                                                    della Concorrenza e del
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               Transports: “Meridiana” (Sweep 2007)
                       Total fines: € 970,000
            After the 2007 Sweep, the Agcm fined Meridiana for violating the
            Consumer Code in a number of different ways. Specifically, the Agcm
            deemed unfair the company’s practices in the following areas:
         1. Transparency of fares (fine: € 220,000):
            On its website, Meridiana included a fuel surcharge linked to oil prices within
            the category “airport taxes and charges”;
         2. Insurance Policy (fine: € 270,000):
            Absent a precise choice by the consumer to refuse the insurance policy (by
            un-ticking a box on Meridiana’s website), the company took for granted his
            consent;
         3. Compensation to Passengers for Flight Delays (fine: € 300,000):
            The airline did not comply with the current regulations and did not offer
            consumers adequate information;
         4. The “HI-FLY 2007/2009” Loyalty Program (fine: € 180,000):
            Consumers wishing to join the loyalty program had to purchase a “co-
            branded” credit card: therefore, some consumers were not admitted to the
            program, while some costs and charges were not clearly explained by theAutorità Garante

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            airline.                                                            della Concorrenza e del
                                                                                       Mercato
                           CONCLUSIONS

         - The Consumer Protection System countering UCP
           represents a good way for Member States to promote
           competition and enhance the smooth functioning of tne
           market.

         - On the one hand, the enforcement of the new UCP rules
           entails a widening of the national competition authorities’
           powers that may allow consumers and businesses to
           receive more effective protection.

         - On the other hand, companies might take advantage of the
           new provisions by using the black-lists of specifically
           prohibited practices as benchmark to self-assess their day-
           to-day commercial conduct.
                                                                      Autorità Garante
                                                                   della Concorrenza e del
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                     CONCLUSIONS
         • There are important elements of convergence
           between the enforcement of competition rules and
           consumer protection, due to the fact that
           commercial practices are an important
           COMPETITION TOOL.
         • Accordingly, action to tackle UCP can be used to
           promote “fair competition” in the various markets
           involved.
         • The recent EP resolution defined Directive
           29/2005/EC as a “milestone” of consumer
           protection policy and this first year of enforcement
           in Italy appears to confirm the huge potential of
           this discipline.
                                                               Autorità Garante
                                                            della Concorrenza e del
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