PayPal to replace unfair contract terms and conditions

Italy - 22 March 2016

Italian Competition Authority declares as unfair some of PayPal’s contract terms. PayPal will replace its Terms and Conditions on 23 March 2016

 On 2 March 2016, the Italian Competition Authority (AGCM) closed a formal investigation concerning some of the Terms and Conditions used by PayPal, especially through the Italian version of its website

The formal procedure was started in August 2015 after complaints filed by two consumer associations and by single consumers, and concerned three companies belonging to the PayPal group, namely PayPal s.à.r.l. et Cie, S.C.A. (Luxembourg), PayPal SE (UK) and PayPal Italia S.r.l.. The T&C’s under scrutiny were:

  • a)     the clause limiting the Purchase Protection Programme (Programma Protezione Acquisti – PPA, clause nr. 13 in the Italian version): the protection programme does not cover consumers when the item bought is “not significantly non-compliant to the description” or it is “materially different from the last description received by the seller”; this clause is unclear and the non-exhaustive examples provided by PayPal do not clarify it, thus giving to PayPal full discretionality to assess conformity of the item bought;
  • b)    the clause under which the applicable jurisdiction must only be UK law and UK courts or in alternative a Luxembourg court (clause 14 in the Italian version), thus derogating to the principle of the competent court being the place of residence of the consumer.

The above mentioned T&C’s allegedly infringe article 3 par. 1 and 2, article 4 par. 2 and article 5 of the Directive 93/13/EEC (the Unfair Contract Terms Directive – UCTD) as transposed into article 33, par. 1 and 2 letters b), p), t), u), article 34 par. 2 and article 35, par. 1 and 2, of the Italian Consumer Code (Codice del Consumo), since they can cause a significant imbalance in the parties’ rights and obligations arising under the contract, to the detriment of the consumer.

The procedure included a public consultation on the allegedly illicit T&C’s to which some consumer associations took part, stressing the unfairness of the two clauses. On 29 December 2015 PayPal amended the two clauses. First, in clause nr. 13 it introduced a longer and clearer description of consumer rights on product conformity,  on the limitations of the Protection Programme, on the definition of “SNAD” (“significantly not as described”). Secondly, PayPal clarified in clause 14 that consumers are entitled to all protections of their rights stated by Italian law, that competence of UK or Luxembourg courts concerns business-to-business litigations, and that for litigations concerning consumers the only competent court is the one where the consumer has his residence. The changes in the Terms and Conditions have already been published on the website, users will be informed of the changes by e-mail and the new version of T&C’s will finally replace the current from 23 March 2016.

The AGCM assessed that the original version of the clauses qualified as unfair contract terms under the UCTD as transposed into Italian law, while on the other hand the new version of the T&C’s removes the legal concerns. The decision is addressed to PayPal s.à.r.l. et Cie, S.C.A. (Luxembourg), only, as it is the company which drafts the T&C’s and which enters into the contracts with users.

PayPal has also declared to the AGCM that the changes in the T&C’s will be introduced in the English version too, which will be applicable to all users in Europe.

We then encourage CPC agencies to verify whether the same illicit clauses are included in their national version of PayPal’s T&C’s and whether they will be replaced on 23 March 2016.

The full text in Italian of the press release with the link to the decision can be found on AGCM’s website:'antitrust-e-paypal-modifica-le-condizioni-d'uso.html