An insurer has been fined by the Italian Antitrust Authority for its “unfair and aggressive” practice of issuing claims other than in consumers’ local courts.
By order dated 07 to 12 October 2015 the Italian Antitrust Authority (the Authority) issued a €2m fine to a major Italian insurance company (the Insurer).
The Authority was asked to consider a commercial practice adopted by the Insurer by which it issued proceedings against consumers in a court other than that of the consumers’ place of residence, a practice which was ultimately held to be unfair and aggressive pursuant to Articles 20(2), 24 and 25 of Legislative Decree 06 September 2005, no. 206 (as subsequently amended and supplemented, the Italian Consumer Act).
According to Article 20(2) of the Consumer Act, a commercial practice is unfair when, inter alia, it is contrary to the professional standards of diligence and capable of altering the consumer’s economic behaviour. In addition, pursuant to Article 20(4), a commercial practice which is aggressive is always deemed to be unfair.
In order to assess whether a commercial practice is aggressive, consideration should be given to whether it is capable of materially restricting, or actually restricts, the average consumer’s freedom of choice or behaviour with respect to a certain product and therefore is capable of leading, or actually leads, the consumer to take a commercial decision that he would not otherwise have taken (according to Article 24 of the Consumer Act).
Finally, any threat to issue legal proceedings which then turn out to be manifestly unfounded or reckless is conclusive as to a commercial practice being aggressive.
The Authority’s sanctions procedure
The Authority ascertained that the Insurer had issued more than one thousand judicial proceedings against consumers in the same court, which was not the court of the consumers’ place of residence at the relevant time, in breach of Italian rules on jurisdiction. In addition, the date of the first hearing referred to in the claim form was held to be fictitious, and the legal proceedings were never filed with the court following the service of the claim form on the consumers (the Insurer’s Commercial Practice).The Insurer was fined €2m for unfair and aggressive practices.
A sanctions procedure was also commenced by the Authority against two other companies which had been engaged by the Insurer for the purpose of, inter alia, carrying out credit collection activities on its behalf and acting as service providers (the Service Providers) to the Insurer. The Service Providers, however, were ultimately found not to have any liability in that, inter alia, they issued judicial proceedings in the consumers’ local court.
In the circumstances, the Authority held that the Insurer’s Commercial Practice was to be deemed unfair and aggressive, since it was not aimed at protecting the Insurer’s rights in court, but, rather, at unlawfully manipulating the average consumer into believing that it would be more profitable in the circumstances to pay his debt rather than to defend himself in court proceedings. The consumers had all been summoned to appear before the same court which was located far away from their place of residence, and this fact led them to conclude that it was not convenient for them to incur huge costs litigating the claim in a distant forum, irrespective of whether they were in a strong position vis-à-vis the Insurer or not.
The above decision by the Authority is quite significant for a number or reasons, including the level of the fine, the involvement of a major insurance player and, most importantly, because it seems to be the first time that issuing legal proceedings, in the circumstance referred to above has been considered to be an unfair and aggressive commercial practice.
The order of the Authority can be appealed before the Administrative Court of Rome within a time limit of 60 days from service on the Insurer, and if that happens in this case it will be interesting to read the Administrative Court’s decision.
In addition, it is worth noting that if any damage occurred to the debtors (eg including costs and fees for legal assistance) as a result of the Insurer’s Commercial Practice, the relevant debtors would be entitled to start class action proceedings against the Insurer to claim compensation for any and all damages borne.