Italy
© Springer-Verlag Berlin Heidelberg 2015
Pierre Kobel, Pranvera Këllezi and Bruce Kilpatrick (eds.)Antitrust in the Groceries Sector & Liability Issues in Relation to Corporate Social ResponsibilityLIDC Contributions on Antitrust Law, Intellectual Property and Unfair Competition10.1007/978-3-662-45753-5_2828. Italy
(1)
Bird & Bird, Milan, Italy
28.1 CSR Policies Adopted by Italian Undertakings
The corporate social responsibility (“CSR”) policies adopted by most Italian undertakings can be divided into two types.1
The first group deals with the internal dimension of CSR (focusing on benefits for employees and/or shareholders), which includes benefits and allowances for the human resources (such as facilities for employees, fiscal benefits/loans for employees, flexible working hours), projects for a higher standard of health and safety in the workplace compared to the compulsory legal requirements, and adoption of codes of conduct in order to increase transparency regarding activities of social interest performed by the undertaking dedicated to employees or shareholders.
The second group deals with the external dimension of CSR (focusing on benefits for suppliers and customers), which includes environmental protection, ethical control of the supply chain, and funding of nonprofit organizations.
Within this last group, a widely used code of conduct aimed at setting criteria for ensuring fair and nonmisleading advertising is the Commercial Communication Self-Disciplinary Code (“CAP”).2
The CSR policies involving the most delicate topics are sometimes distinguished by certification marks and/or included in schemes such as technical standards.3
28.2 Sanctions for Breaches of Voluntary Codes of Conduct Under Italian Law
28.2.1 The Implementation of Directive 2005/29/EC on Unfair Commercial Practices
Codes of conduct or CSR policies may be breached by the businesses adopting them as a result of several commercial practices (such as marketing, supply, and advertising).
Generally speaking, advertising can be considered as the practice most likely to give rise to litigation.
Italian undertakings mainly adopt codes of conduct as an additional commercial promotion method. In other words, the principal aim of a company adopting a code of conduct is to increase its appeal to the public since by means of codes of conduct, the company demonstrates its compliance with higher standards (in terms of product quality/ethical awareness) than the mandatory legal ones.4
Therefore, the communication of codes has been crucial for companies.
It is quite significant that the need to regulate advertising also led to one of the first voluntary codes of conduct and self-regulation successfully applied in Italy, the CAP, which provides a system of nonstatutory rules aimed at preventing and sanctioning misleading advertising.5
In addition to this “private” self-regulatory system, several pieces of legislation have been passed over the years to punish unlawful conduct performed by businesses through advertising.
However, no specific regulation has been drafted with the aim of punishing advertising in breach of a voluntary code of conduct.
Nor has any specific legislation been drafted that sanctions other commercial practices, such as marketing, distribution, production, breaching codes of conduct.6
A specific mention of breaches of codes of conduct is made in Directive 2005/29/EC concerning business-to-consumer commercial practices in the internal market7 (the “Directive”).
The Directive concerns both unfair commercial practices and misleading advertising. The Directive was implemented in Italy by two legislative decrees.8
In particular, one of said decrees,9 implementing the provision of the Directive on unfair practices, has been transposed within the Italian Consumer Code, specifically Articles 18–27-quarter. This latter rules deal with breaches of a code of conduct in more detail. Specific reference is made to Articles 21.2.b) and 23 of the Consumer Code.
Before examining possible violations and enforcement, the Consumer Code, in Article 18,10 provides a definition of “code of conduct”.
That definition states that a code of conduct can be either i) an agreement between undertakings, which could be adopted by other companies later, or ii) a set of rules unilaterally issued by an association of businesses or by a single business. In both situations, the code of conduct is adopted on a voluntary basis.11
With reference to the breach by a company of its own voluntarily adopted code of conduct (or CSR policy), Article 21.2.b) states the conditions upon which said breach could constitute a misleading practice: “Misleading practices are defined as practices which, having taken into account all the characteristics and factual circumstances, lead or are liable to lead the average consumer to take a commercial decision that he or she would have not taken otherwise and involve: … b) disregard by the business owner of a commitment included in a code of conduct which he or she has undertaken to comply with, if he or she did so in a firm and verifiable manner and if he or she indicated in a commercial practice that he or she is bound by it.”
In other words, a breach of a code of conduct is considered to be an unfair practice (specifically, a misleading practice) only if the following conditions are fulfilled: a) the breach of the code of conduct is liable to lead the average consumer to take a commercial decision that s/he would not have taken otherwise, b) the commitment of the business to the code is “firm and verifiable,” and c) the commitment was clearly indicated by the business in a commercial practice.
Therefore, the intention of the legislator is to sanction only breaches of a code of conduct that have an actual impact on consumers.12
In addition to the general provision contained in Article 21.2 of the Consumer Code, other misleading practices listed under Article 23.1 may be relevant. Although not specifically referring to breach of a code of conduct, they include the situation where a business claims the application of and commitment to a code of conduct in a misleading manner.
Reference is specifically made to the false statement by a business owner about the adoption of a code of conduct (para. a), the production of a quality or certification mark without the necessary authorization (para. b), and the false statement that a code of conduct has obtained the approval of a public body or other authority (para. c).
Legislative Decree no. 145/2007 on misleading advertising applies when advertising cannot be considered as a commercial practice aimed at promotion, sale, or supply to consumers (i.e., commercial practices included in the scope of the provisions of the Consumer Code relating to unfair commercial practices) but only relates to other competitors.13
No express reference to codes of conduct is made in this case.
28.2.2 Statutory Provisions Governing Unfair Competition
Finally, another set of rules, though not specifically focusing on breaches of codes of conduct, may apply, due to their broad general scope: the unfair competition rules contained in Article 2598 onwards of the Italian Civil Code.14
In particular, reference is made to Article 2598.3, which states that “without prejudice to the application of the rules for the protection of distinctive signs and patent rights, whoever … 3) directly or indirectly uses any other means not compliant with the principles of professional fairness and liable to cause damage to another business performs acts of unfair competition.”15
28.2.3 Parties Entitled to Take Proceedings for Breach of Codes of Conduct
The provisions sanctioning breach of a code of conduct are enforced differently, depending on whether the complainant relies on the rules governing unfair commercial practices included in the Consumer Code, the rules on misleading advertising (Legislative Decree no. 145/2007), or the unfair competition legislation.
Therefore, when examining which parties are entitled to take proceedings against a breach of codes of conduct, where appropriate, it will be stated which legislative provisions allow proceedings to be taken by respectively regulatory authorities, consumers, competitors, or suppliers of the business breaching its own code of conduct.
28.2.3.1 Proceedings Initiated by the Regulatory Authority, AGCM
The Italian Competition and Market Authority (“AGCM”)16 is the regulatory authority with power to rule, from a regulatory point of view, on claims relating to unfair commercial practices governed by the Consumer Code and claims relating to misleading advertising governed by Legislative Decree no. 145/2007.
AGCM holds broad powers, including the power to file ex officio proceedings against businesses performing unfair commercial practices and businesses performing misleading advertising.17
28.2.3.2 Proceedings Initiated by Consumers
Unfair Commercial Practices Governed by the Consumer Code
With reference to breaches of a code of conduct entailing an unfair commercial practice under the Consumer Code, consumers may file proceedings before the administrative regulatory authority, i.e. the AGCM, or before the civil courts.
With reference to proceedings before the AGCM, Article 27 of the Consumer Code states that “any party or organization having an interest” can file a claim before the AGCM.
This implies that consumer associations18 are among the parties entitled to start such proceedings.
Moreover, according to Article 27-ter of the Consumer Code, consumers have the option of starting proceedings before the AGCM or under the self-regulatory system of enforcement provided by the code of conduct, if any. In the system illustrated by the Directive,19 enforcement under the self-regulatory system is suggested as preliminary to starting proceedings before the AGCM, in order to reinforce the role of codes of conduct and reduce the workload of the administrative authority. However, this suggestion has not been fully implemented in the Italian legislation since preliminary proceedings before the self-regulatory body are subject to the agreement of the parties (i.e., the consumer and the business involved), which is usually unlikely to be obtained.
In addition to proceedings before the AGCM, consumers can file proceedings in the civil courts.
In particular, consumer associations may seek relief entailing discontinuance of the unfair practice and an injunction to prevent the continuation of said practice and may also claim damages (in a class action pursuant to Article 140-bis of the Consumer Code).
It is debatable whether an individual consumer would actually be successful in filing an action before the civil courts (by filing an action in tort pursuant to Article 2043 of the Italian Civil Code), as it would be quite difficult to prove that the consumer has a concrete legal interest in obtaining an injunction and to prove the actual loss suffered.20
Breaches of Unfair Competition Rules
Article 27.15 of the Consumer Code expressly provides for proceedings to be filed in the “ordinary courts pursuant to Article 2598 of the Italian Civil Code…” in addition to proceedings based on the provisions of the Consumer Code.
As mentioned, those rules sanction conduct that constitutes unfair competition.
Although, in principle, the application of the unfair competition rules is subject to the condition that a competition relationship must exist between the parties to the proceedings (and no such relationship obviously exists between the consumer and the business performing the unfair competition), some Authors21 consider that consumers’ associations can also file proceedings under Article 2598 of the Italian Civil Code.
Breaches Entailing Misleading Advertising
The terms of Legislative Decree no. 145/2007 relating to misleading advertising are specifically intended to protect competitors, not consumers, from misleading advertising.
Therefore, in principle, consumers are excluded from the application of these provisions.22
However, misleading advertising of a code of conduct that has the characteristics of an unfair commercial practice is punishable under the relevant provisions of the Consumer Code, as mentioned in the first paragraph of this section.23
28.2.3.3 Proceedings Initiated by Competitors
Unfair Commercial Practices Governed by the Consumer Code
With reference to competitors, some Authors state that competitors are not entitled to invoke the provisions of the Consumer Code concerning breach of codes of conduct (i.e., Articles 21 onwards) because those provisions are only intended to protect consumers.24
According to Article 21, breach of a code of conduct only constitutes a misleading practice if “it is liable to induce the average consumer to take a commercial decision s/he would not have taken if the breach had not occurred.” The focus on “consumers” would exclude competitors from taking proceedings under these provisions.
However, another interpretation25 gives the provisions a broader scope and also allows competitors to take proceedings against breach of a code of conduct.
Article 27 states that “any party or organization having an interest” can seek enforcement against a misleading practice; there is no doubt that the breach of a code of conduct liable to divert the commercial decisions of consumers has an adverse impact on competition and on business competitors, thus entitling them to start proceedings before the AGCM.
Breaches of Unfair Competition Rules
With reference to enforcement according to the unfair competition rules, especially those relating to acts of unfair competition (Article 2598 no. 3 of the Italian Civil Code), competitors can file proceedings in the civil courts if the necessary conditions are fulfilled (such as the existence of a competition relationship between the parties, the existence of an act of unfair competition, and the ability of such act to harm the competitor’s business).
Breaches Entailing Misleading Advertising
Should the breach of the code of conduct be performed through advertising, competitors can either start proceedings before the AGCM or file a claim in the civil courts.
28.2.3.4 Proceedings Initiated by Suppliers
Unfair Commercial Practices Governed by the Consumer Code
Suppliers, purchasers, or other businesses not directly competing with the business performing the unlawful activity may start proceedings before the AGCM under the terms of the Consumer Code governing misleading practices, claiming breach of Article 21 and 23. As already stated in the case of competitors, “any party or organization having an interest therein” may start proceedings before the AGCM.
Breaches of Unfair Competition Rules
With specific reference to the unfair competition rules, the condition that a competition relationship must exist between the parties also applies where the businesses do not operate at the same level, e.g., supplier versus producer. A competition relationship would exist anyway since “the end result of the activities of both undertakings will concern the same group of consumers, thus the actions performed by one would poach customers attracted to the products of the other business.”26
Therefore, suppliers are also entitled to start proceedings against the undertaking breaching its own code of conduct pursuant to Article 2598 of the Italian Civil Code.
Breaches Entailing Misleading Advertising
Suppliers may also start proceedings according to the rules on misleading advertising, both before the AGCM and before the civil courts. As this system is designed to protect the interests of businesses (not consumers), it can be assumed that other entities in the supply chain of the breaching business in question are also included in the said definition.
28.2.4 Causes of Action and Remedies Available to the AGCM
As stated, according to Article 27 of the Consumer Code, the AGCM can start ex officio proceedings against a business performing a misleading practice, such as breach by said business of a voluntarily adopted code of conduct, according to Articles 21.2.b) and 23 of the Consumer Code.
The causes of action on which the AGCM can rely are that the practice violating the code is liable to lead the consumer to make a decision that he or she would not have taken if the misleading practice had not occurred, the business has made a firm and verifiable commitment on the adoption of the code, and, finally, the business has indicated in a commercial practice that it is bound by the code.
Other causes of action are those set out in Article 23.1.a), b), c) of the Consumer Code, included in the “blacklist” of misleading practices (see Sect. 28.2.1. above).
The remedies that can be granted by the AGCM are an injunction and an order reestablishing the situation prior to the misleading practice (Article 27.2), which can be preceded by suspension of the misleading practice in urgent cases.
Moreover, AGCM can order the publication of the decision in the press or a declaration aimed at preventing the further spread of the effects of the misleading practice (Article 27.8).
If the unfair commercial practice is not considered very serious, AGCM can request a formal undertaking from the business to stop the misleading practice or to remedy the effects of the misleading practice (Article 27.7).
Finally, together with the inhibitory order, AGCM can impose fines ranging from EUR 5,000 to EUR 500,000.00. The applicable fine, in principle, depends on the seriousness and duration of the breach.27
The same remedies and range of fines are available to the AGCM in relation to misleading advertising according to Legislative Decree no. 145/2007.28
28.2.5 Causes of Action and Remedies Available to Private Undertakings
As mentioned above, private undertakings, such as competitors, are also entitled to take proceedings against misleading practices performed by another business in breach of its code of conduct.
In proceedings before the AGCM,29 competitors can rely on the same causes of action and request the same remedies as granted ex officio by AGCM.30
Therefore, the competitor is entitled to obtain an injunction prohibiting the misleading practice and publication of the order and to request the regulatory authority to impose a fine.
Private undertakings are also entitled to claim the remedies provided for by Article 2598 of the Italian Civil Code on unfair competition if they can prove a competition relationship with the business to which the proceedings relate and that the breach entails a violation of the principles of fair competition according to Article 2598.3 of the Italian Civil Code.
The remedies available under the Italian Civil Code are the injunction referred to in Article 2599 of the Italian Civil Code,31 damages, and publication of the decision pursuant to Article 2600 of the Italian Civil Code.32
28.2.5.1 Damages and Criteria for Their Calculation
With specific reference to damages, the requirements for obtaining monetary compensation are (1) subjective, i.e. intentional or negligent harm to one business by another (although in the case of negligence, an assumption operates: a ruling of unfair conduct implies negligence, and the victim is not bound by the very difficult burden of proof), and (2) objective, i.e. the existence of actual unlawful harmful conduct (and not just the likelihood of prejudice33) and its causal link to the loss suffered by the complainant.
Calculation of the compensation is not straightforward, due to the difficulty of effectively establishing the extent to which the effects of the unfair competition have spread.
In principle, damages include both actual loss and potential loss suffered by the complainant.
Actual loss is easier to calculate; it usually includes the cost of the advertising required to counteract the effects of the unfair competition.
Potential loss, which is more difficult to calculate, generally corresponds to the net profits lost by the complainant, which can be causally linked to the conduct in dispute. In practice, it is often calculated as the profit earned by the defendant, which is usually easier to establish on the basis of its profit and loss account from its books of account.34
The difficulty of proving the exact amount of the loss could be overcome by asking the court to calculate an equitable sum as damages on the basis of the evidence produced and the legal arguments, which can be inferred from the pleadings submitted to the court.
28.2.5.2 The Locus Standi of Collective Organizations of Suppliers
Collective organizations of suppliers enacting a CSR policy may also file proceedings against a business breaching the CSR policy it has voluntarily adopted.
Foremost, they can start proceedings before the AGCM according to Article 27 of the Consumer Code since, as already stated, anyone having an “interest” is entitled to start proceedings.
As indicated, if such kind of action is filed, injunction can be obtained but not damages.35
With reference to the unfair competition regulation, there has been a great deal of discussion as to whether organizations of suppliers (or business associations in general) are entitled to take proceedings against a producer performing acts of unfair competition (constituted, in the present case, by the breach of the CSR policy by said businesses).
The legal framework is based on Article 2601 of the Italian Civil Code, which states that “when unfair competition prejudices the interests of a category of businesses, unfair competition proceedings can be taken by associations of businesses and by the bodies representing them.”
Although the majority of the legal literature36 recognizes the locus standi of organizations of businesses to claim unfair competition pursuant to Article 2601 of the Italian Civil Code, courts in a number of decisions have been quite reluctant to recognize the locus standi of said collective organizations.
In particular, the locus standi of organizations of businesses to take proceedings for unfair competition has been denied on the ground that the organization lacks a commercial purpose.37 This, in particular, was claimed against the body regulating the use of a collective trademark used by a number of businesses.38