Draft Report to EU Parliament

Click here to download a copy of the Draft Report to the EU Parliament. I have copied excerpts from the report of the bits that I found interesting. The page references relate to the page in the downloaded pdf file.

Guidance for victims (page 10/13)
The report urges victims to report cases of business scams to national authorities and to seek appropriate advice before settling fees demanded by misleading business-directory companies. Moreover, victims should bring their case to the attention of business and consumer associations as well as their representative in the European Parliament so that the action to combat misleading business directories can be strengthened at European level.

Findings of the report (page 10/13)
Your rapporteur considers that the petitioners do indeed raise a serious problem which appears to be widespread, of a cross-border nature and which has a significant financial impact, notably on small businesses. Moreover, your rapporteur feels that the cross-border nature of this problem places a clear responsibility on Community institutions to provide an adequate remedy to victims. This remedy should enable victims to contest the validity of contracts concluded on the basis of misleading advertising and it should also enable victims to obtain a reimbursement of the money that they paid as a result of misleading practices.
The report regrets that existing national authorities seem to be unable to provide an adequate remedy to victims and also considers that despite the widespread nature of these misleading business practices, EU and national legislation also do not seem to be adequate to provide an effective remedy or are not being properly enforced.

Misleading business-directories based in third countries (page 13/13)
Finally, the report calls on the Commission to pursue international co-operation with third countries and with the competent international organisations so that misleading business directories based in third countries do not cause prejudice to businesses based in the European Union.

Introduction (page 8/13)
Many enterprises, often small businesses, fall victim to scams operated through misleading advertising. A common scam is one whereby victims unwillingly sign up to an advertisement in a business directory after having been led to believe that this would be free of charge.
Victims typically receive forms from misleading business directory companies inviting them to complete, correct or update their business details. They are often told that updating the information is free-of-charge. This entices them to update it and send off the form. But they do not realise that by signing the form they are also signing up to a contract binding them to place an advertisement in a business directory for a minimum period of three years and at an annual cost of around EUR1,000. Victims realise the scam when they receive a letter from the business-directory company informing them that they had actually placed an advert in the directory, along with an invoice requesting payment. Those who do not pay up are often harassed and even threatened with legal action by the directory companies or their debt collection companies. Many simply give in and pay up in order to avoid further harassment.
Thousands of businesses have been affected across the European Union. Considering that the contract costs around EUR1,000 per year and lasts for a minimum of three years, the financial impact across the EU is considered to be significant.
While it is clear that there is an element of misleading business practice, which is usually illegal, it is not entirely clear whether EU law provides a remedy and if it does, whether this is being adequately enforced at national level in different Member States. So misleading directory companies often exploit grey zones in the law or weak enforcement at national level to push the scam. A common element is that misleading business directories are normally established in a country which is different from the country of the victim. This makes it difficult for victims to use national law and national authorities to stand up for them in another Member State. Moreover, businesses often find that national authorities responsible for consumer protection tend to brush off their complaints on the basis that consumer law applies to consumers and not to businesses. This leaves them without an effective remedy and opens the door to business scams of this nature to thrive.
Not all business directories are based on misleading advertising and many business-directory companies are perfectly legitimate. Indeed, they even operate on the basis of a Code of Conduct which makes it clear that orders must be clearly identifiable as an order and that free advertising cannot be mixed with advertising against payment. Yet, some business directories rely on misleading business practices. Most complaints received by the European have singled out the business directory known as the European City Guide which is based in Valencia, Spain but others, such as Construct Data Verlag, Deutscher Adressdienst GmbH and NovaChannel have also been mentioned. Some misleading business directories are also web-based. According to representatives of the European City Guide, some 6.5 million forms are issued this company alone every year.

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