An excerpt from the 2003 Proceedings issued by the Czech Trade Inspection Authority to commemorate its 50th anniversary.
Every society in history, where barter trade existed, has sought to develop a legal framework to define the relationship between the vendor and the buyer. As a result, elements of consumer (buyer) protection have appeared in public and/or private standards for centuries. Even under Roman law we find provisions to protect the buyer who entered into a contract, such as the right to claim defective goods. Under Czech law, the institute for contract law and public market protection developed alongside that of trades, barter and commerce systems. Historic and political events also had considerable influence…
THE START OF MARKET REGULATION
The individual approach of various rulers to the foundations of law, to its codification, and even to individual market entities (e.g. vendors’ guilds) is evident. The relationship between the vendor and the buyer was, in the past, quite localized and the position of these entities was basically balanced. The vendor supplied goods or services in a limited geographical area, often defined by the city walls. He had a regular clientele who he could ill afford to lose.
Any vendor who came to the city to sell his goods had to, upon leaving through the city gates, show a metal amulet. This amulet, obtained from city officials, certified that he had sold his goods on the market legally, had paid the necessary taxes, and had been duly registered by the city’s administration. However, even in these ancient times, attempts to cheat customers or evade the law were not uncommon.
THE SUN SETS, THE MARKET CLOSES
One of the oldest types of contracts is the market agreement. In the villages the barter agreement also held its own in importance for a long time. The next most common contract governed the sale of land and buildings. This was especially true when there was no consistent recordkeeping of land ownership per se, and updating any official records was solely at the discretion of the owner. At this time the custom was that the vendor was liable for any deficiencies of the property being sold, because no other person was in a better position to do this than the vendor. As a result, city laws, for example, prohibited the sale of any such property after sunset. During the sale of personal chattels the vendor typically only guaranteed that he was not selling stolen property – the vendor of stolen goods was, under the law of the day, regarded as an accessory to the theft. Initially there were no guarantees for material defects. Material defects were in part addressed under city law, but that pertained primarily to the sale of horses. The vendor was obliged to disclose, among other things, that the horse was not winded or over-strained. If a problem was subsequently found, the buyer could ask for a refund for up to three days after the purchase.
Of the standards that influenced the relationship between the vendor and buyer in this country, we can, for example, point to the City Laws of the Kingdom of Bohemia published in 1579. Perhaps it was the lawyer Paul Christian of Koldin, knowledgeable in, and a grand admirer of Roman law, who had the largest hand in the final draft of the City Laws. Because of him the City Laws are founded on the principles of Roman law. The City Laws of the Kingdom of Bohemia regulated virtually all events in cities: administration, judiciary, property laws, contracts and rights. In 1581 Paul Christian issued the Short Summary in which each of the laws was interpreted. This code saw twenty different editions, and to ameliorate its adoption, it was even set in verse.
A single city code ensured a uniform interpretation of the law as well as consistent rulings in the municipal courts, thus also guaranteeing and unifying the interpretation of both vendors’ and buyers’ commitments, across all cities. This code was still in use in the 18th century: the last major section was annulled with the release of the General Civil Code in 1811.
MAYORS AND COUNCILMEN – THE FIRST INSPECTORS
The supervision of dishonest merchants came, in the early days, under the town’s jurisdiction. As a result, these scoundrels caused considerable headaches for mayors and councillors. As part of their law enforcement duties, councillors (usually there were twelve) issued directives regarding markets and the protection of buyers, set the price of some goods so that the townspeople were protected against high prices, and controlled commerce and trades. Attempts to decrease dishonesty in public houses was controlled, for example, by forcing each establishment in Prague, from 1390 onwards, to have an official mug with a nail marking the correct level so that each guest could check the amount he was being served. If, during an inspection, the councillor found that the house mug did not match his, a hole was drilled into the house mug and the owner was fined. The main commercial activity, and thus the place where most dishonesty and cheating occurred, was at organized markets. The opening of the weekly market was signalled by the ringing of a bell and raising of a flag or other such banner. As long as the flag was flown, it was possible to buy and sell. Wholesalers, however, were only allowed to buy after the lowering of the flag (after the townspeople had been to the market), because they were seen as the cause of high prices. The largest markets were the biannual fairs which usually took place in the spring and autumn.
THE SCOUNDREL SUCCUMBS TO THE EXECUTIONER
The fact that cheating customers has a long tradition is evidenced by records, recovered from 1525, that documented a case at the Prague market of butter being adulterated with fat. Vendors added dried bread crusts to crushed pepper, added lime to peas or salt to wax. Fishermen used the blood of other fish, giving the appearance of a fresh catch to rotting salmon.
In order to ensure that the products sold in the market were of high quality, the municipal administrators appointed a local master for each trade, who checked the wares being sold and unceremoniously confiscated any bad goods. Select aldermen checked the accuracy of weights and measures, which was not an easy task at all, due to the fact that different countries had different measures. Even within the individual towns of Prague the “elbow” measure varied significantly. The councillor could draw on the services of the town magistrate, clerk, or bailiff and catchpoll (the era’s militia) to help out. The magistrate had the right to arrest violators and to contravene his decision meant, in older times, your head would be cut off; in the 16th century it meant the loss of your hand.
Sinners were judged by councillors while minor offenses were dealt with by the bailiff. If dissatisfied with a councillor’s judgment, a citizen could appeal to councillors in specified regional towns (e.g. in Prague, Litoměřice, Jihlava). In 1548 Ferdinand I established the Court of Appeals, located in Prague Castle, for all Czech towns. An appeal was, however, not exactly inexpensive. The process of controls and punishments of dishonest merchants in the late 16th century is shown in the book by Karel Štorkán, where events surrounding the executioner (the Old Town Master) and the pharmacist Jan Mydlář during the reign of Emperor Rudolf II are described as follows:
His Grace Emperor Rudolf II did not like it when various merchants and tradesmen, in an attempt to get rich quickly, robbed citizens, cheated with scales or with the quality of flour and bread. Often, on the Emperor’s orders, the councillor and the old town executioner and his men would be sent out. The councillors walked the streets, visited markets and checked up on merchants. All incorrect weights and measures were loaded on a cart by the executioner, who, to emphasize the humiliation, buried them under the gallows according to the day’s decree. In addition, the executioner had to carry out the punishment. Aside from fines, dishonest miscreants were submerged into the cold Vltava River in an iron basket.
Why Rudolph initiated such measures primarily during the winter months can easily be imagined.
GUILDS AND RULERS
The control of crafts and trades production and the issuing of associated regulations also fell within the jurisdiction of the mayor and councillors in the city’s administration. As guilds began to form, these functions began to fall to them. The Head of the Guild was also responsible for the quality of the tradesmen’s work. The earliest recorded mention of the establishment of a guild dates back to 1318 (Tailors’ Guild) and then in 1324 (Goldsmiths’ Guild). Forming guilds can be seen as an attempt by master craftsmen to come together against newcomers and as a method of protection against unwanted competition.
The towns welcomed the organization of artisans and tradesmen because it made an easier time of controlling and collecting taxes. The sale of goods and services began to be governed by guild regulations. Guilds themselves underwent some critical changes, from an absolute freedom of reign to their violent abolishment. A significant conflict between guilds and their rulers developed during the reign of Charles IV who understood not only the growing influence of the towns’ tradesmen over the governing administrations and their policies, but also the danger of monopolies, which obstructed free competition and thus better quality products and more favourable prices.
The plague between 1348 and 1349 in Europe resulted in labour shortages, which affected the prices of goods and services. To fight against inflation and the guilds’ domination, prices were set in order to protect consumers from the price increases, as well as to remove barriers that limited the influx of new workers into the towns.
After the stringent measures levied against the guilds during the 1340’s and 1350’s the efforts to abolish them was overturned and in the early 15th century guild associations essentially stabilized. The Head of the Guild and older guildsmen ran and oversaw the trades from a professional standpoint. Published guild regulations helped to equalize prices of raw materials, controlled production volumes, limited the volume of goods sold by any single merchant, and even addressed employment issues.
The function of guilds was again addressed in 1547, when Ferdinand I abolished them altogether. This was a punishment in retaliation for an uprising in which the city of Prague, and thus also the guilds, had had a large hand. Gradually Ferdinand I returned the guilds’ privileges and influence, but at a cost. Charles VI also tried to limit the guilds’ monopolistic position with various new patents, because of the guilds’ tight regulation of prices, the limiting of the amount goods offered, and their limiting of labour availability. The guilds thus began to be seen as an obstacle to the development of a new form of production: manufacturing.
In 1731 a guild inspectorate was established. The guild inspector’s duty was to oversee all of the guilds’ activities. In 1739 the Article of the Guilds was published, which severely limited guilds’ privileges under the threat of doing away with guilds completely, should they choose to continue to infringe patents. By 1819 in Prague there were 68 guilds which brought together 122 different trades.
The definitive end to the guild system came in 1859, when businesses and trades were declared to be “free”. Anyone who purchased a business license was free to carry out his/her trade at will. The social organization of craftsmen, however, lived on. The Trades License Regulation, issued by imperial patent in 1859, included, among other things, the establishment of business organizations, their definition, the extent of their rights, and their organizational structures. The purpose of an organization was to “cultivate community spirit, maintain and enhance the honour of this state of affairs, as well as sustain the humanitarian, economic and educational interests of its members and associates.”
An example of humanitarianism was the establishment of sickness funds and support funds. Economic interests included the implementation of better production methods, the establishment of warehouses, marketplaces, etc. Organizations published rules regarding apprenticeships, addressed disputes arising from employment or apprenticeship, and resolved disputes amongst their members. They were also able to impose disciplinary measures: reprimands or fines for infringing an organization’s rules. In 1891 Prague had 77 organizations on record, with nearly 10,000 members, 18,000 associates and 6,000 apprentices. The freedom to operate a business meant a rapid growth in the number of craftsmen, but also a significant decline in the quality of products. This led to an amendment to the Trades Licence Regulations in 1883 which consisted of the introduction of the trades license and of the establishment of the small trades licence.
Market Regulation and Consumer Protection in the Modern Era
REGULATORY LAW AND MARKET MILITIA
The Trades Regulations, which came into effect in January of 1860 and which were issued during the reign of Emperor Franz Joseph I, regulated the basic rights and responsibilities of individuals doing businesses. This included such responsibilities as signage for establishments, product pricing, and maintaining sanitary premises. The Licensing Office had “regulatory responsibility” for all activities. The trades regulations were punitive as well: they contained within them a number of coercive tools such as the authority to confiscate goods, to stop machine operations, or to close a business down altogether. A breach of the Trades Regulations could be punished with a reprimand, a fine, imprisonment up to three months, the withdrawal of the right to have apprentices or helpers, or by revoking a business’ license. These regulations also mentioned the existence of a merchant or market militia.
The Trades Regulations of the Austria-Hungarian Empire were adopted by the Legislature of the new Czechoslovak State in 1918 and wasn’t revoked until the 31st of December, 1965. Anyone who felt their rights were infringed by an illegal decision or measure at the hands of the Trades Licence Office could turn to the Supreme Court according to Act 36/1876 of the Supreme Court’s Code.
Protecting the consumer from damages was also included in the Criminal Code (Act 117/1852 of the Criminal Code on Crimes and Misdemeanours). Specifically, damages resulting from the use of incorrect weights or short measures were already classified as a criminal offense. Ignoring tax rates or schedules which were prescribed for some commodities, whether this consisted of incorrect pricing or the selling of phony goods was punished as a misdemeanour. A third-time offender of any such offense was punished by revoking his trade licence.
CHANGES TO THE CIVIL CODE
The General Civic Code, the first section of which was published on November 1st, 1786 made a substantial contribution in acknowledging the rights of the buyer. The final version of this Code was announced on June 6th, 1811. The codification of civil law, however, had already begun in the first half of the 18th century, when a conglomerate commission was established. The commission’s work, a compendium of laws in six volumes, was presented to the Empress Maria Theresa in 1766. The work was found to be impractical by the Empress and was returned to be revised by the commission.
A substantial leap in the codification of civil laws occurred after the ascension of Joseph II to the throne. It was his reign that gave rise to the General Civil Code. Its laws stemmed from both Roman and city law, and was used in our country, with minor changes, until 1950. It was indeed an extensive code, numbering some 1,502 sections. The Code addressed, among other issues, the circumstances surrounding the creation and duration of a barter contract, a market trade contract, and damages.
DOOR-TO-DOOR SELLING AND OTHER DISHONEST DEALINGS
Establishing the conditions of sale of individual commodities and services also contributed towards the protection of consumers. Examples include the law pertaining to glasses used in public houses from 1875, the law regarding the sale of food from 1897, the law of wine trade from 1907, or the regulations governing the production and distribution of food (Codes), which were replaced in 1948 by national, corporate or industry standards.
Among others were Act 252/1852 (door-to-door sales), Act 26/1895 (discount sales),
Regulation 25/1918 which deals with consumer protection from false in-store claims of quality and production methods, Act 111/1927 Coll. regarding unfair competition. Misleading advertising, false location of origin, or the incorrect use of corporate brands were already defined as unfair competition at the beginning of the last century.
The development of new industrial products and technical equipment are also reflected in the legislation. In the 19th century, for example, there already are standards governing the testing and verification of certain products, such as steam boilers (enacted in 1871 and remaining in effect until 1952) or firearms (1891).
MARKET AND CONSUMER PROTECTION AFTER 1948
Consumer protection is concerned with issues such as Act No. 160/1949 Coll. which deals with internal trade (abolished in the 1980s). This Act enabled the Ministry of Domestic Trade to pass measures to protect and control the distribution of goods, among other things. These included establishing business hours, ensuring and adjusting supply, demand for specific goods, the calculation of net weight and the weighing process, the return (purchase) of bottles, etc. In 1954, several health directives were issued: the cleanliness of dispensing equipment, requirements for the transportation and the storage of foodstuffs, health regulations for barbers and hairdressers, etc. Also of note is the Ministry of Domestic Trade’s ruling 13/1968 Coll., which required the vendor to have proper signage in his establishments and which also spoke to the sale of personal items by citizens.
The Civil Code was responsible for protecting the private citizen (first Act 141/1950 Coll., and later Act 40/1964 Coll., which with some modifications is applicable to this day). Retail shops and restaurants were controlled by civic inspectors, based on Act 21/1953 Coll. which deals with civil inspection of trade. (This was replaced by government Act 59/1959 Coll., which was applicable until 1967). The civic inspector was appointed and controlled by the local (communist) National Committees or ROH (communist “Revolutionary Trade Union Movement”). In case of infringements, the inspector could demand immediate resolution. If the shop failed to make corrections, or if the shop was a repeat offender, the inspector was to inform the National Committee or Trade Inspection Office.
NATIONAL TRADE INSPECTION AUTHORITY
With Act 98/1952 Coll. enacted on December 2nd, 1952 the National Trade Inspection Authority (Státní obchodní inspekce) was formed as part of the Ministry of Internal Trade. It was headed by the Chief Inspector of Trade with regional inspectors who reported to him (they were appointed and dismissed by the Chief Trade Inspector on the recommendation of the Minister of Domestic Trade). The National Trade Inspectorate supervised commerce under these regulations:
a) The correctness of sale of goods to consumers – namely the accuracy of net weights and measures;
b) Retail prices and trade margins set by the state must be strictly observed by all state enterprises;
c) The prescribed product range and inventory of goods must be maintained;
d) The composition and quantity of meals served in restaurants must comply with set standards;
e) Stores and services must have enough change on-hand in order to return correct change to consumers;
f) Health and work-safety regulations in state enterprises must be upheld;
g) The accuracy and precision of weighing and measuring devices must be maintained, and they must be officially calibrated; enterprises where measuring devises are mandatory must also have control measuring devices with the necessary set of weights;
h) Regulations on the transport, storage and warehousing of goods must be complied with, as well as ensuring that enterprises are equipped with the necessary inventory and equipment; the integrity of the inventory and equipment must be maintained; and
i) Regulations governing the distribution of goods and the selling of goods on the market must be complied with.
Obligations of the National Trade Inspection were then defined as follows:
a) Wage a decisive war for the early detection of theft, fraud and deceit, as well as the degradation of goods and the damage to state property; and
b) Ensure a timely and proper investigation of complaints and notifications from consumers with respect to inadequacies of practices of stores and restaurants and to verify the measures taken by store managers on the basis of these complaints and notifications.
To state stores and restaurants that did not comply with these regulations, inspectors assessed fines or turned over material for prosecution to investigating state authorities. These regulations held for 10 years (December 30th, 1952 – December 28th, 1962) without a single amendment.
By the government decree Act 76/1958 Coll. the Inspection of Food and Agricultural Product Quality was established. This supervisory authority which examined the quality and storage of food products and raw materials for their production, as well as agricultural products, came under the Minister of the Food Industry and the Purchase of Agricultural Products.
THREE NATIONAL INSPECTION AGENCIES
In 1962, Regulations 98/1952 Coll. and 76/1958 Coll. were repealed and replaced by Act 122/1962 Coll. which pertained to national agricultural, food and trade regulation. This law defined three national Inspectorates and delineated their tasks. The first was the National Agricultural Inspection Agency which fell under the Central Administration for the Purchase of Agricultural Products. The second was the National Food Product Quality Inspection Agency which was governed by the Ministry of the Food Industry. Lastly the National Trade Inspection Agency fell under the Ministry of Domestic Trade. The agencies consisted of a central inspectorate and subordinate regional inspectorates. The head of each agency was a Director, who was appointed and recalled by the head of the Central Authority. The roles and responsibilities are clear from the agency names. In the case of the Trade Inspection Agency, their competencies were defined as follows:
The National Trade Inspection Agency monitors compliance or regulations and policies in matters of domestic trade. Specifically this encompasses the correct purchase and sale of goods; compliance with pricing; compliance with the material standards in the production of foods and beverages; compliance with regulations on hygiene and sanitation; methods for the storage and transport of goods; quality; product range and the packaging of goods; the correctness and accuracy of measurements, weights and other equipment used in the industry; and both the qualitative and quantitative transfer of goods.
IN THE CONSUMERS’ INTEREST…
With the 1968 amendment (Act 31/1968 Coll.) the law authorised regional committees to assign tasks in the region to inspectors of the National Trade Inspection Authority, in the interest of consumer protection. Specifically:
– to monitor compliance with retail prices and the rules of doing business; with the quality of goods sold; with the rules for stall sales; for market or bazaar sales; for the sale of private property; stipulations for assigning company accommodation and canteens to a certain price group; with material standards in the production of food and beverages (including company and school canteens, and cafeterias for retirees); for hygiene and sanitation; with the precision and accuracy of measurements, weights and other devices used in the industry; with supply regulations; and with the storage and transport of goods;
– to monitor consumer demand.
Inspectors could impose fines for violations according to the current regulations of the block system (Decree 61/1961 Coll. regarding Block Management, which remained in effect until 1990, allowed, within the block system, the awarding and collection of fines up to 100 CZK) or to impose pecuniary fines of up to 2,000 CZK based on the decision of the Regional Trade Inspector. Further, employees of the trade inspectorate could: prohibit the purchase, sale, delivery, or use of defective products or materials; prohibit the use of weights or measures that did not meet applicable regulations; and the Regional Directors were authorized to grant workers of controlled organizations a reprimand, a public reprimand or recommend that the culprit be relocated to another job.
CZECH TRADE INSPECTION AUTHORITY
In 1986 a number of separate laws were adopted: Act 63/1986 Coll. pertaining to the Czech Agriculture and Food Inspection Authority and Act 64/1986 Coll. pertaining to the Czech Trade Inspection Authority, which is applicable to this day. The Act pertaining to the on the Czech Trade Inspection Authority (CTIA) has undergone many changes and its current format comprises of, either directly or indirectly, 10 legislations. The original 1968 version established the CTA’s competencies as follows:
“The Czech Trade Inspection Authority controls both organizations engaged in commercial activities on the domestic market and citizens selling goods on the domestic market. Specifically:
a) The principles of a unified socialist trade policy;
b) Compliance with a prescribed product offering, the proper supply of stores and other outlets, service quality, the delivery of goods according to the prescribed quantity and quality that ensures the product’s safety, including, in particular, compliance with the production and preparation of food and drink, the conditions for the storage and transport of goods, and requirements for personal hygiene and general hygiene of the business;
c) Whether the goods are sold at the right level, price, quantity, weight, and quality as defined by the law, by technical standards or by other mandatory means;
d) The proper purchase of goods from citizens by businesses;
e) Whether scales or other measuring equipment are all verified according to national or industry technical standards;
f) Compliance with other legal regulations or other binding contracts used in the operation of retail and wholesale business, providing business services, catering services, accommodation services, travel agency services, and for the sale of private property.
The Czech Trade Inspection Authority controls organizations whose manufacturing or other activities are involved in securing the needs of citizens in the domestic market, and ensuring the quality and product range of goods intended for inventory or for transport of the goods. ”
EXPANDING THE SCOPE OF POWER
In their original version, the laws governing the CTIA dealt with the regional inspectorates of the CTIA and the limiting of fines to 200 CZK. Furthermore, they allowed the Director of the Regional Inspectorate to reprimand or impose fines of up to 5,000 CZK on employees of state-controlled companies, and up to 50,000 CZK for defective quality, failure to meet the conditions for storage and transport, etc. The Regional National Committees were entitled to require the Regional Inspectorates to inspect compliance with:
a) Engaging in commercial activities, particularly of maintaining correct retail prices, product quality, including health and safety requirements for personal hygiene and general hygiene of the business;
b) Stall sales, sales in markets or bazaars, and the sale of personal property; and
c) Restaurants being were classified (on their recommendation) into categories and groups and company canteens and accommodations being classified into categories and classes.
The CTIA was entitled, based on an agreement between the Ministry of Trade of the Czech Socialist Republic and the respective departments of the central government, to control the sale of drugs or medical supplies, or equipment operated by a single health care system, the sale of periodicals of organizations or the networking and business development between organizations managed by the Czechoslovak Ministry of Culture. As a result of the agreement between the Czechoslovak Ministry of Trade and the Czechoslovak Union Council, the CTIA also regulated company canteens.
THE CONSUMER PROTECTION ACT
In the 1992 amendment to the laws governing the CTIA, the regional national committees ceased to exist, the terms “reprimand” and “regional” were removed, and fines were tied to the minimum wage (100x the wage for an individual who caused a defect, 500x for an organization). The upper limit of block fines has since been changed to 2,000 CZK.
The most significant legal action for the protection of the consumer was adoption of Act 634/1992 Coll. pertaining to consumer protection. Its present format is the result 15 successive legislations to date. This legislation, since its enactment, is slowly but surely coming to the attention of increasingly more and more of citizens and consumers, thanks to the daily efforts of all current employees of the Czech Trade Inspection Authority.
Prepared by: Kateřina Hájková
Resources and references:
České právo v minulosti, author Karel Malý, 1995
Dějiny českého a československého práva do roku 1945, author Karel Malý and coll., 1997
Pražské cechy, author Jan Diviš – Muzeum hl.m. Prahy, 1992
O ochraně spotřebitele, author M. Zdražil, 2000
Zlatá doba měst českých, author Z. Winter,1913, updated edition 1991
ASPI Legislative Norms