The Court of Justice of the European Union ("CJEU") has declared that the prohibition on selling at a loss set out in article 14 of the Spanish Retail Act ("LOCM"), which imposes a general prohibition on the sale of goods at a price lower than the invoiced purchase price, is contrary to the European Unfair Commercial Practices Directive.

BACKGROUND

The CJEU has given its ruling on the questions referred to it by Administrative Court No 4 of Murcia, Spain (Juzgado de lo Contencioso-Administrativo No 4 de Murcia) for a preliminary ruling in the context of an appeal lodged by Europamur Alimentación, S.A. ("Europamur"), a company that sells household and food products, against the Directorate General for Trade and Consumer Affairs of the Autonomous Region of Murcia, Spain (the "Directorate General for Commerce" or the "Regional Authority").

The CJEU's ruling was given in the context of a decision dated 23 February 2015 by which the Regional Authority fined Europamur €3,001 for breach of the prohibition under article 14 LOCM on account of it having sold certain products at a loss. In particular, the Regional Authority considered that Europamur's sole aim was to offer products as bait to encourage consumers to other purchase goods or services at the same establishment, to the serious detriment of consumers.

Europamur appealed against that decision claiming, among other things, that the fine imposed was contrary to Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market (the "Unfair Commercial Practices Directive" or the "Directive"). In the appellant's view, article 14 LOCM generally prohibits selling at a loss but this practice is not among those practices which are considered unfair by nature by the Unfair Commercial Practices Directive. Besides, article 14 LOCM provides for a series of grounds of derogation from the prohibition that are based on criteria not appearing in the Directive. The Directorate General for Trade argued that there was no conflict between national and European legislation.

Given the circumstances, Administrative Court No 4 of Murcia decided to refer a series of questions to the CJEU for a preliminary ruling.

THE PRELIMINARY RULING

Administrative Court No 4 of Murcia asked the CJEU whether the Unfair Commercial Practices Directive should be interpreted as precluding national legislation, such as that at issue in this case, which contains a general prohibition on offering for sale or selling goods at a loss and which lays down grounds of exemption from the prohibition that are based on criteria that do not appear in the Directive.

When resolving this issue, the CJEU pointed out that the Unfair Commercial Practices Directive fully harmonises the rules relating to unfair business-to-consumer commercial practices and that the Member States may therefore not adopt stricter measures than those provided for in the Directive, even in order to achieve a higher level of consumer protection.

In line with the ruling, and given that selling at a loss is not included among those practices which are considered unfair by nature by the Unfair Commercial Practices Directive, article 14 LOCM implies a presumption of wrongdoing that traders are required to rebut. This reversal of the burden of proof constitutes a stricter measure than those provided for in the Unfair Commercial Practices Directive and is therefore prohibited by European law.

Finally, the CJEU declared that the Unfair Commercial Practices Directive is contrary to a national provision, such as that at issue in this case, which contains a general prohibition on offering for sale or selling goods at a loss and which lays down grounds of exemption from that prohibition that are based on criteria that do not appear in the Directive.

CONSEQUENCES

As a result of the CJEU ruling, Spanish provisions governing the selling at a loss must be consistent with the provisions of the Unfair Commercial Practices Directive. As such, the companies may be punished for these practices only if the administration proves that the requirements of articles 5 to 9 of the Directive are satisfied. In other words, the onus is on the administration to prove that selling at a loss is unfair or aggressive or that it is contrary to the requirements of professional diligence, and distorts or is likely to materially distort economic behaviour.