In its judgment of 4 October 2018, Case C-105/17, the European Court of Justice provides a set of criteria to determine whether a person falls within the concept of a "trader" under the Consumer Rights Directive (Directive 2011/83/EU) and the Unfair Commercial Practices Directive (Directive 2005/29/EC).
In 2014, a consumer bought a watch from a seller on a Bulgarian online marketplace. Following delivery of the watch, the buyer discovered that it did not match the description given in the advertisement. The seller, however, refused to issue a refund prompting the buyer to lodge a complaint with the Bulgarian Consumer Protection Commission (BCPC). The BCPC subsequently found out that the seller, Ms Kamenova, had published a total of eight advertisements for various new and second-hand products (e.g. e-readers, telephones, a wireless telephone charging kit, a car and Turkish tiles) on the online platform. In 2015, the BCPC fined Ms Kamenova for violating the Bulgarian Consumer Protection Law (BCPL) as she had failed to state certain required information in the advertisements, such as the consumer’s right to withdraw from the contract.
Ms Kamenova appealed the administrative penalty on the ground that she was not a ‘trader’ and as such she did not have to comply with the information requirements in the BCPL. As the outcome of the case depended on the interpretation of the relevant provisions of EU law implemented in the BCPL, the Administrative Court in Varna (Bulgaria) requested a preliminary ruling from the European Court of Justice.
The concept of a "trader"
As a preliminary point, the Court of Justice noted that the referring court's question sought an interpretation of the concept of "trader" in the Unfair Commercial Practices Directive. That appeared to be a mistake, as the penalty decision of Ms Kamenova was based on a violation of Articles 47 and 50 of the BCPL, which transposed into Bulgarian law Articles 6 and 9 of the Consumer Rights Directive. That apparent mistake did not prevent the Court of Justice from issuing a preliminary ruling, however, as it noted that the concept of ‘trader’ is almost the same in both Directives and must be interpreted uniformly.
As for the meaning and scope of the notion of ‘trader’, the Court noted that the EU legislature adopted a particularly broad notion of that term. It is a functional concept which must be determined in relation to the related but diametrically opposed concept of ‘consumer". According to the Court, a consumer is typically in a weaker position, as he must be deemed to be less informed, economically weaker and legally less experienced than the trader. The Court ruled that in assessing whether a sale is made as a 'trader', it should be reviewed whether the contractual relationship is among the activities that a person provides 'for purposes relating to his trade, business, craft or profession’ or on behalf of a trader. To establish whether that is the case, the referring court must take a 'case-by-case' approach and verify whether:
- the sale on the online platform was carried out in an organised manner;
- the sale was intended to generate profit;
- the seller had technical information and expertise relating to the products which he/she offered for sale which the consumer did not necessarily have, with the result that he/she was placed in a more advantageous position than the consumer;
- the seller had a legal status which enabled him/her to engage in commercial activities and to what extent the online sale was connected to the seller’s commercial or professional activity;
- the seller was subject to VAT;
- the seller, acting on behalf of a particular trader or on his/her own behalf or through another person acting in his/her name and on her behalf, received remuneration or an incentive;
- the seller purchased new or second-hand goods in order to resell them, thus making that a regular, frequent and/or simultaneous activity in comparison with his/her usual commercial or business activity; and
- whether the goods for sale were all of the same type or of the same value and, in particular, whether the offer was concentrated on a small number of goods.
The Court ruled that these criteria are neither exhaustive nor exclusive. Accordingly, compliance with one or more of those criteria does not, in itself, establish that an online seller is a ‘trader’. More specifically, the Court ruled that the mere fact that a sale is intended to generate profit or that a person publishes a number of advertisements on an online platform for the sale of both new and second-hand goods will not necessarily be sufficient to classify that person as a ‘trader’.
This is the first judgment from the Court ruling that the concept of "trader" under the Unfair Commercial Practices Directive and the Consumer Rights Directive must be interpreted uniformly, which is a logical outcome.
The Court also set out – again for the first time – an extensive set of criteria that should be applied as a starting point when assessing whether a party can be considered a "trader". However, there is no clear guidance about what the relative weight is of each criterion. This is understandable because it will always be difficult to define an exact "cut-off" point where an individual becomes a trader (e.g. an individual selling a thousand phones will most likely be considered a trader, but is that also true for an individual who sells 50 phones?). In any event, the Court makes clear that individuals who incidentally sell second-hand goods on online marketplaces are unlikely to be considered "traders". This judgment strongly suggests that Ms. Kamenova will not be considered a trader, but at the end of the day this will be a matter for the national court to decide.
Finally, while this judgment was issued in a dispute relating to an administrative fine for (allegedly) violating consumer protection rules, we note that the concept of "trader" may also be relevant in civil litigation. For example, Article 6:193j of the Dutch Civil Code states that a contract which has been concluded as a result of a trader employing an "unfair business practice" can be annulled ("vernietigd"). This notion of "trader" is the same as under the Unfair Commercial Practices Directive. Accordingly, the judgment of Case C-105/17 Evelina Kamenova will also be relevant in civil law disputes to determine whether a party should be considered a "trader".