Over the past few years, French courts have held as illicit or abusive many clauses contained in terms of use of Internet access providers and e-commerce sites, such as Free, CDDiscount, SFR, Tiscali, AOL, Orange, and Neuf Cegetel.1 Amazon2 recently has become one of the targets of legal action. Other U.S. companies with consumer sales in France may be affected by this trend.  

In a judgment in late 2008, the Paris Court of First Instance ruled that eighteen clauses in Amazon’s online contracts were abusive and required their removal from Amazon’s online general terms and conditions, privacy policy, and market place terms of use. The clauses held as illicit or abusive included such terms as the exclusion of liability of Amazon, the right of Amazon to use and share personal data from its members with other companies for promotional offers, the jurisdiction clause, and the right of Amazon to terminate the subscription of its members at its sole discretion. Each of these clauses often is contained in online terms of use for Web sites having operations in France. We provide a summary of each of these clauses at the bottom of this IP Update.  

The French court ordered Amazon to remove the eighteen clauses within one month of the decision and to pay €30,000 in damages to the consumer organization UFC, which initiated the lawsuit. In addition, Amazon was ordered to place advertisements announcing the ruling in three renowned French daily newspapers and on the Amazon Web site, for an additional cost of €15,000.  

The decision in the Amazon ruling raises several areas of concern for Web site owners and operators. In addition, it takes place in a more general French regulatory scheme to provide consumers with increased tools to fight against what it considers abusive clauses.  

Some areas of concern resulting from the Amazon case for Web sites

Amazon’s terms of use indicated that the consumer consented to Amazon and its commercial partners sending the users unsolicited e-mails. The court held that this provision conflicted with French law, permitting the sending of unsolicited e-mails by the original vendor on its own behalf but not on behalf of third parties. Therefore, the court’s ruling appears to invalidate any type of consent to the sending of unsolicited commercial e-mails on behalf of third parties, which potentially would jeopardize marketing partnerships such as those entered into by Amazon. We think, however, that the court misapplied French law, which clearly allows unsolicited commercial e-mails, including those sent on behalf of third party “partners,” where the consumer has given his or her prior specific and informed consent.  

In addition, the court’s ruling is unclear as to whether Web site operators may obtain, free of charge, an assignment of IP rights vested in content provided by users. Our understanding is that such assignment is valid, provided that it does not require consumers to take additional steps (e.g., a signature of the actor or a registration) and that the content is not used for marketing purposes; otherwise, Web site operators would need to compensate consumers. In addition, moral rights should always be preserved.3  

The court’s ruling also requires that Web site operators that wish to exclude a consumer from their Web sites must do so based on a breach of the Web site’s terms of use, rather than on a discretionary basis.  

Finally, the court confirmed established case law regarding application of French consumer protection law to Web sites operated from outside of France. French consumer protection law applies whenever a Web site targets French consumers. According to the court, the application of jurisdiction under French law is all the more justified by the fact that the site Amazon EU “is aimed at French-speaking consumers who, for the most part, live in France or in French-speaking countries with similar legal systems.”  

Increased tools to fight against abusive clauses  

France’s recent Law on Modernization of the Economy  

France’s recent Law on Modernization of the Economy authorizes the government to issue by decree two lists of clauses that will qualify automatically as “abusive clauses.” However, this decree, initially planned for release before the end of 2008, has not yet been issued. Two sub-lists also will be created by the French government: a “black clause” list covering clauses that always will be considered as abusive, and a “grey clause” list covering clauses that the business may try to prove are not abusive, thereby creating a rebuttable presumption. The objective is to improve the current system, which was created in 1978 but to date has led to the identification of only three “black clauses.”4  

As far as the “grey list” is concerned, the French Consumer Code already provides for a predefined list of terms that may be regarded as abusive. However, this list is only indicative and not exhaustive. A clause in this list is not deemed abusive unless the consumer can demonstrate that it is. Following the Law on Modernization of the Economy, the burden of proof will now be on the businesses to prove that clauses in the grey list are not abusive.  

In addition to the “black list” and the “grey list” created by the Law on Modernization of the Economy, consumers still can rely on the French administrative authority in charge of identifying abusive clauses in contracts generally made available to the public (the Commission). In February 2007, the Commission recommended the elimination of nineteen clauses in “triple play” contracts (Internet access + TV + telephone). The Commission’s recommendations are non-binding; nonetheless, they significantly influence French courts’ decisions, which means that companies not following the Commission’s recommendations become vulnerable to judicial sanctions. Absent a recommendation from the Commission, consumers also may choose to pursue an action (in general through consumer organizations) to try to obtain a ruling from a French court that some of the clauses in contracts are abusive.  

Extension of the scope of consumer organization actions  

French law does not provide for class actions, but it does allow consumer associations to pursue an action in the following circumstances:5  

  • Associations may claim damages suffered as a result of a criminal offense, provided that “the collective interest” of the consumers has been harmed.6 Absent a criminal offense, the associations may claim damages by joining an action initially pursued by a consumer, provided here again that “the collective interest” of the consumers has been harmed.  
  • Associations may pursue an action for damages if they obtain a power of attorney from at least two consumers. Such cases do not require a showing of harm to the collective interest of the consumers. The action is based primarily on the consumers’ private interests.7  
  • Associations may pursue an action in order to obtain the elimination of abusive clauses. In this case, they typically will be entitled to make a claim for damages.  

Individual customers who want to obtain individual redress face barriers in terms of access, effectiveness, affordability, and profitability, particularly because French law does not acknowledge elements such as punitive damages.8  

In the Amazon ruling, the Court ordered Amazon to pay a total amount of €45,000 (€30,000 in damages and €15,000 in advertisement costs). This amount may appear “reasonable” in light of U.S. standards; however, it is quite high from a French law perspective. Part of the explanation may be that Amazon was sued after years of fruitless negotiations over the contract clauses, and therefore the Court was probably heavy-handed. However, this decision may foreshadow stiffer rulings from French courts.  

It is not clear on what ground the consumer association UGC obtained damages from Amazon. UGC appears to be the party which initiated the proceeding as well as the sole plaintiff. (Therefore it did not join an action initially brought by a consumer.) Moreover, the abusive clauses and the illicit clauses do not appear to constitute the criminal offenses normally required for consumer organizations to pursue an action. Therefore, this decision may be an indicator that consumer organizations will have more standing in the future to bring such actions.  

This comment should be put in perspective with EU Commission’s recent Green paper dated November 11, 2008, on consumer collective redress. Making the statement that “the overall performance of the existing consumer redress and enforcement tools designed at EU level is not satisfactory,” the Green paper intends “to assess the current state of redress mechanisms, in particular in cases where many consumers are likely to be affected by the same legal infringement, and to provide options to close any gaps to effective redress identified in such cases.” Recently, a French bill proposed the introduction in France of class actions. Although the bill was abandoned, the issue is debated regularly. In his campaign platform for the presidency, Nicolas Sarkozy promoted the introduction of class actions in France. The project appears to be on hold currently, but it could be put back on the agenda at any time.  

Practical Recommendations for Companies Selling Through a Web site in France  

In addition to the award of damages, not complying with French abusive clause legislation raises risks of bad publicity. Therefore, companies should take steps to modify their agreements to avoid having terms held as unfair or abusive. In this regard, we propose the following suggestions:  

  • Any company that operates a Web site that might be determined to be “aimed at Frenchspeaking consumers who, for the most part live in France or in French-speaking countries with similar legal systems” should review its terms of use and privacy policy in light of French mandatory laws, French case law on abusive clauses, and the Commission’s recommendations relevant to its sector of activity.  
  • These companies should monitor the soon-to-be-issued decree setting forth a “black list” and a “grey list” of abusive clauses and further adapt its online terms to conform with the decree.  
  • In the context of a clear temptation by French and EU authorities to recognize class actions, these companies also may consider legislative efforts at the EU and French levels in order to increase awareness of the risks linked to excessive litigation due to class action.  

The Court held abusive the following eighteen clauses:  

In Amazon’s general terms of use:  

  • The clause that excludes Amazon’s liability for indirect damages suffered as a result of Amazon’s failure to comply with its obligations. The court held that Amazon is bound by an “obligation of result,” as opposed to an obligation to provide best efforts.9  
  • The IP assignment clause requiring consumers to assign all relevant IP rights to Amazon and to take all necessary steps in order to make effective such assignment.10  
  • The clause that puts the sole liability on the consumer in case of action brought by a third party in relation to content provided by the user.11  

In Amazon’s Data Privacy policy:  

  • The clause that allows Amazon to share personal data with other companies when the purposes of the transfer are not well identified.  
  • The clause that allows Amazon to use personal data for the benefit of other companies in relation to promotional offers
  • The clause that authorizes the use by Amazon of personal data in relation to “any agreement” without any details regarding the kind of agreement covered by the clause.  
  • The clause that authorizes Amazon to use personal data for any partnership, without any details regarding the kind of partnership covered by the clause.  

In Amazon’s conditions for participation in Marketplace Amazon:

  • The clause that authorizes all commercial offers from affiliated companies.  
  • The clause that exonerates Amazon from any liability with respect to the lawfulness of articles posted on the forum.  
  • The clause that exonerates Amazon from liability in case of dispute between participants.  
  • The clause that requires the consumer to pay attorneys fees and damages in relation to any actual or potential action against Amazon.  
  • The clause that requires an assignment of IP rights for marketing purposes.  
  • The clause that authorizes Amazon to terminate, at its discretion, the participation of a member in the forum.
  • The clause giving jurisdiction to the laws and courts of Luxembourg in case of dispute.  
  • The clause that authorizes Amazon to set limits to the transactions, without further details.  
  • The clause whereby Amazon reserves the right to postpone payment to the seller, without specifying a time frame and the reasons for doing so.  
  • The clause that authorizes Amazon to refuse payment to the seller, to make a deposit of such payment or to reimburse the purchaser, without further details.  
  • The clause that requires that re-collection costs be born by seller.