Consumer Protection

Protection against improper business practices

The German government has approved plans to protect consumers and small businesses from unfair and improper business practices. Under the draft law, which will now pass to Germany’s lower house (the Bundestag), costs of so called warning letters will be capped, cold calling will be restricted and debt collection processes will become more transparent. However, even if it is adopted, the new law will not bring an end to file sharing warning letters.

Protection against improper business practices © MS-Fotodesign-Fotolia

Protection against improper business practices © MS-Fotodesign-Fotolia

File sharing legal costs

For some time now, legal costs for sending warning letters have been capped at 100 euros by §97a(2) German Copyright Act. However, due to the vague legal concepts used, the paragraph has been rarely applied in practice. This meant that individuals who received warning letters for allegedly breaching copyright through file sharing were often forced to pay much more.

The problem with the paragraph is that it only applies to cases which concern simple, minor infringements, which are not conducted within the course of business. All three uncertain legal terms have to be present for the cap to apply and in the opinion of the courts this is hardly ever the case.

We have repeatedly criticised the position adopted by the courts and it is shame that the German Federal Supreme Court (Bundesgerichtshof, BGH) has not taken the opportunity to clarify the ambiguities. In a case entitled “summer of our lives” (Sommer unseres Leben) the court indicated that §97a could apply to more cases than the lower courts realised.

Legislation on improper business practices

With the proposed law on improper business practices, the German government is taking the initiative. Paragraph 97a will be replaced with a cap on claim values, which assessed in the light of each individual case, must not be unreasonable. Of course, the courts will need to interpret this piece of legislation and define reasonableness. We hope that the BGH will be given the opportunity to express its opinion on the law before it too is replaced with the next piece of legislation.

This is a summary of the proposed law, taken from the government’s press release:

Improper business practices are increasingly the subject of complaints by citizens: Individuals receive unsolicited telephone calls from suspicious companies offering the chance to win a competition. Sometimes, it later emerges that through the seemingly harmless phone call a contract with a monthly payment of membership fees has been entered.

Another example is law firms which have specialised in combing the internet for copyright infringements. Once they find a consumer who has downloaded a film or music illegally, often for the first time, the consumer receives a warning letter demanding unjustifiable amounts of money.

The federal government has approved a draft law which will address improper business practices and the misuse of legal rights.

Automated cold calling will become illegal and will be punishable by fine. Current legislation only regulates cold calling by employees and provides that a consumer must agree before calls can be made. As a result, ambiguity arose as far as automated calls were concerned. But this will now be addressed.

Whereas under current legislation a fine of 50,000 euros can be incurred, under the new legislation, companies which break the law could face a fine of up to 300,000 euros.

Furthermore, contracts conluded for telephone competitions will have no legal effect. Instead, they will be required to be in written form. This means that businesses will have to demonstrate to consumers, either by post, fax or e-mail, that a contract has been entered.

In future, file sharing warning letters will be subject to a standard claim value. Consequently, the value of a cease and desist claim or claim for redress will be restricted to 1,000 euros. This will apply for first-time minor offences.

Lower claim values result in lower recoverable legal costs. As a result, an individual who receives a warning letter could expect to have to pay the opposition’s legal costs amounting to around 155 euros.

Where a company sends unjustified warning letters, the recipient can expect to recoup legal costs incurred for defending the claim.

In the area of competition law, claim values for warning letters will also be modified so that legal costs are kept within an acceptable range.

Proper debt collection is an important instrument for enforcing legitimate legal rights. Scrupulous debt collection companies often bring claims which have no substance in law. In other situations, it is often unclear which company is bringing a claim. Under the new legislation, debt collection companies will be required to provide consumers with information on who is bringing the claim, what the basis of the claim is and what costs the individual can expect to pay.

The new legislation increases the maximum fine an improper debt collection company could incur from 5,000 euros to 50,000 euros.

Christian Solmecke is a partner at the law firm WILDE BEUGER SOLMECKE. He is the author of numerous legal publications in the area of internet and IT law. He is also an associate lecturer for social media law at the Cologne University of Applied Sciences.

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