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In Search of the Theory of Harm in EU Consumer Law: Lessons from the Consumer Fitness Check

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Consumer Law and Economics

Part of the book series: Economic Analysis of Law in European Legal Scholarship ((EALELS,volume 9))

Abstract

Recently, EU Consumer law has undergone a ‘Fitness Check’ (or REFIT). We thought that checking the fitness for purpose of a body of law would involve revisiting its purpose. This is why we expected to find in the rich REFIT documentation (over 4000 pages of studies and Commission documents) an explicit discourse on the goals of consumer law. Our aim was to connect this discourse to two lines of scholarship: a doctrinal line pointing out that EU consumer law lacks a clear direction and that, to the extent it does have one, it is too strongly geared towards market integration to the detriment of protection of the weakest, and an economically informed approach seeking to formulate a theory of harm that could underpin the enforcement of consumer law, by analogy with the practice in competition law. We agree that a clearer direction and a stronger conceptualisation of what harms the law seeks to protect consumers against would improve EU consumer law. This paper defines a ‘theory of harm’, illustrates what a theory of harm for consumer law could look like and analyses the REFIT documentation in search for elements of such a theory. Our findings are largely disappointing. We looked for something that is not there. The REFIT’s tour de force is to check fitness for purpose without discussing purpose. It does so by adopting a circular approach and defining consumer harm as instances of under-enforcement of the law. This presupposes that all possible harms are already accounted for in the law and only occur when the law is not properly enforced. We uncover an irony instead of a theory of harm. What the REFIT does delineate is a normative space in which to develop a theory of harm for the future. It consists of a virtuous triangle of empowerment, trust and a well-functioning internal market. The REFIT also suggests that an economic-based theory of harm would need to interact with several legal elements. Consumer weakness, empowerment and legitimate expectations constitute ingredients for an economically grounded, behaviourally sensible and legally workable theory of harm.

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Notes

  1. 1.

    Art. 38 Charter of Fundamental Rights of the European Union. See also Art. 169 TFEU and Art 12 TFEU.

  2. 2.

    At the time of writing, of the two legislative proposals making up the ‘New Deal for consumers’, it is very likely that one will be adopted: the European Parliament and European Council have reached an agreement on the Proposal for a ‘Modernisation directive’ (European Commission 2018b). The fate of the companion proposal for a Directive on representative actions for the protection of the collective interests of consumers, (European Commission 2018a) is more uncertain (legislative procedure 2018/0089/COD).

  3. 3.

    Howells et al. (2018) p. 2; Twigg-Flessner (2007).

  4. 4.

    The first and notable contribution on this theme is Siciliani et al. (2019) (hereafter ‘Consumer Theories of Harm’).

  5. 5.

    It was initially to help the Office of Fair Trading (UK) prioritise enforcement that Siciliani developed the models presented in Consumer Theories of Harm (supra note 4).

  6. 6.

    Communication for the Commission, European Commission (2002). It is difficult to know exactly how many REFITs have been conducted even after the publication in April 2019 of the results of a stock-taking exercise on the Better Regulation Agenda: European Commission (2019a) and accompanying Staff Working Document European commission (2019b). The Commission reports having conducted ‘more than 150 REFIT initiatives’ in the first 3 years of the Juncker Commission (‘initiative’ is not defined and seems to be co-extensive with the 150 measures to simplify Union legislation presented during the same period). Cost estimates suggest that 60 to 70 fitness checks are conducted every year, European Commission (2019b).

  7. 7.

    European Commission (2015b), p. 53; European Commission (2017e), p. 52.

  8. 8.

    The ‘more economic approach’ in competition aimed to inform individual decisions rather than new rules, but it nonetheless has a policy component as evidenced in the Communication from the Commission—European Commission (2009).

  9. 9.

    Gerber (2001).

  10. 10.

    See e.g. Judgment of the Court of 18 May 1962, C-13/60, Ruhrkohlen-Verkaufsgesellschaft mbH and others v. High Authority of the European Coal and Steel Community, EU:C:1962:15. See also Rueff (1965), p. 13.

  11. 11.

    Sibony (2008), part II, esp. p. 714.

  12. 12.

    For example, assessing whether a contract term is unfair requires a comparison between the term and the default rule which would apply under national law in the absence of such term. See e.g. Howells et al. (2018), pp. 141 sq.

  13. 13.

    The Court can also be called to rule on infringement proceedings, when a Member States does not enforce EU directive properly (in which case the Court also does not adjudicate a case relating to a consumer aggrieved by an alleged violation of consumer rights). In competition law, by contrast, the EU courts review the legality of Commission decisions applying competition provisions to the conduct of undertakings and thus adjudicate cases in the last instance.

  14. 14.

    Cited n. 3.

  15. 15.

    The Unfair Contractual Terms Directive (UCTD) (Council of the European Union 1993) is a case in point. Howells et al. (2018) 133 sq.

  16. 16.

    Micklitz (2012), pp. 283–296.

  17. 17.

    Micklitz (2012), Weatherill (2016), Howells et al. (2018) p. 2 arguing that EU consumer law is at risk of overstating the internal market goal and ought to be rebalanced towards protecting weak consumers).

  18. 18.

    See, among many other illustrations, Unfair Terms Directive (Dir. 93/13/EC), recital 6; European Commission (2010), p. 2; Directive on certain aspects concerning contracts for the supply of digital content and digital services (2015/0288/COD), recital 1.

  19. 19.

    Weatherill (2016). Weatherill does not regret per se that EU law has not developed a policy targeted at vulnerable consumers, but that, due to the choice of maximum harmonization, Member States have limited leeway to do so.

  20. 20.

    Whitman (2007), p. 340.

  21. 21.

    Howells et al. (2018), pp. 131, 164. On the different orientation of EU and US law on unfair contract terms, Sibony (2019).

  22. 22.

    Subject to the proposal for a Modernisation directive being adopted, European Commission (2018b).

  23. 23.

    On article 101: Lianos (2007); on merger control: Vesterdoft (2005); on article 102: Economic Advisory Group on Competition Policy (2005) and European Commission (2009) (cited n. 8).

  24. 24.

    Art. 196, para. 2 TFEU (or similar provisions under national law).

  25. 25.

    Report by the EAGCP (Economic Advisory Group on Competition Policy (2005)), cited above n. 23.

  26. 26.

    E.g., Judgment of the Court of 15 February 2005, C-12/03 P, Commission v. Tetra Laval, EU:C:2005:87, para. 44.

  27. 27.

    E.g. Judgment of the Court of 14 October 2010, C-280/08 P, Deutsche Telekom v. Commission, EU:C:2010:603, para. 163 (sq). As in Tetra (cited above n. 26), the case revolved around the exact circumstances in which the alleged scenario of harm is credible.

  28. 28.

    Israeli Antitrust Authority (2014, 2017).

  29. 29.

    Text at footnotes 20 and 21.

  30. 30.

    Deutsche Telekom v. Commission, cited above n. 27.

  31. 31.

    Judgment of the Court of 11 July 1985, C-42/84, Remia v. Commission, EU:C:1985:327, para 34.

  32. 32.

    Tetra (cited above n. 26), para 39; Sibony (2007), pp. 747 sq; Castillo de la Torre and Gippini-Fournier (2017), 6.084.

  33. 33.

    Siciliani et al. (2019), p. 80.

  34. 34.

    Siciliani et al. (2019), pp. 109–136.

  35. 35.

    Siciliani et al. (2019), p. 110.

  36. 36.

    The authors call them ‘consumer theories of harm (CToHs)’.

  37. 37.

    Akerlof (1970).

  38. 38.

    Seminal in this regard, Korobkin (2003). Broad overview in Esposito (2017).

  39. 39.

    Siciliani et al. (2019), pp. 111–112.

  40. 40.

    European Commission (2017a).

  41. 41.

    European Parliament (2018a).

  42. 42.

    Proposal European Commission (2018b), p. 4.

  43. 43.

    Two documents fall in this category: European Commission (2015a, c) [on file with the authors].

  44. 44.

    A number of documents fall in this category: the main report (CIVIC 2017), which is based on 28 national reports evaluating the application of existing directives; a separate study on the application of the Consumer Rights Directive written by RPA, CSES and EPRD (European Commission 2017g); a study on the costs and benefits of the minimum harmonisation under the Consumer Sales and Guarantees Directive (European Commission 2017h); a study on the costs and benefits of extending certain rights under the Consumer Sales and Guarantees Directive (European Commission 2017i); a set of empirical studies (survey, mystery shopping field study and lab experiments) designed to test how consumers understand and use information in various contexts: GfK Belgium, Consumer Market Study to support the Fitness Check of EU consumer and marketing law (all available from the Consumer REFIT page: http://ec.europa.eu/newsroom/just/item-detail.cfm?item_id=59332.

  45. 45.

    European Commission (2017f) and separate report European Commission (2017d) (all available from the Consumer REFIT page, see previous note).

  46. 46.

    Cited n. 2.

  47. 47.

    European Commission (2017b).

  48. 48.

    European Commission (2017c). A similar study had been done a decade before: Europe Economics (2007).

  49. 49.

    Art 169 TFEU. This provision contains a reference to article 114 TFEU (on measures having as their object the establishment and functioning of the internal market), which also refers to a high level of consumer protection (art. 114, para. 2, TFEU).

  50. 50.

    European Commission (2017f) p. 18.

  51. 51.

    See European Commission (2007, 2011).

  52. 52.

    Micklitz (2012), cited n. 16.

  53. 53.

    Weatherill (2016), p. 312.

  54. 54.

    CIVIC (2017), pp. 41–43.

  55. 55.

    Intrusive here is meant both with reference to national laws and to business strategies.

  56. 56.

    European Commission (2011).

  57. 57.

    European Commission (2012), p. 5.

  58. 58.

    European Commission (2002), p. 2. See also European Commission (2007), p. 9.

  59. 59.

    To use the terminology of Siciliani et al. (2019) (See above 1.3).

  60. 60.

    See in particular European Commission (2016).

  61. 61.

    See Competition and Markets Authority (2019).

  62. 62.

    European Commission (2017c).

  63. 63.

    European Commission (2017f), pp. 72–73.

  64. 64.

    European Commission (2017c).

  65. 65.

    European Commission (2017c), p. 38.

  66. 66.

    European Commission (2017c), pp. 38–39.

  67. 67.

    European Commission (2017c), p. 39.

  68. 68.

    European Commission (2017c), p. 40.

  69. 69.

    The difference between pre- and post-redress harm reveals that compensation reduced harm of an amount between EUR 5.8 and 14.606 billion. It would be of interest to compare these data with the turnover and profit level in the studied industries, but the relevant data are not available on Eurostat (https://ec.europa.eu/eurostat/web/short-term-business-statistics/data/database).

  70. 70.

    See, in particular, European Commission (2017f), p. 74: “The Fitness Check shows that there has not been significant progress on traders’ compliance with consumer protection rules … . On the other hand, this is still an overall positive outcome, as infringements happening online can now harm more consumers across the EU at the same time”.

  71. 71.

    European Commission (2017f), pp. 18–33.

  72. 72.

    European Commission (2017f), pp. 31–33.

  73. 73.

    European Commission (2017f), p. 35.

  74. 74.

    European Commission (2017c), p. 24.

  75. 75.

    European Commission (2017c), p. 24.

  76. 76.

    Howells et al. (2018), p. 163; Micklitz (2012).

  77. 77.

    Europe Economics (2007) pp. 42–58.

  78. 78.

    Howells et al. (2018), pp. 132 and 163 make a case for the principle of protection of legitimate expectation to be given greater consideration in the development of the law.

  79. 79.

    Europe Economics (2007).

  80. 80.

    European Commission (2017c), p. 26.

  81. 81.

    European Commission (2017c), p. 26.

  82. 82.

    Trebilcock (1997).

  83. 83.

    Europe Economics (2007), p. 11.

  84. 84.

    Europe Economics (2007), p. 41.

  85. 85.

    European Commission (2017c), p. 27.

  86. 86.

    European Commission (2017f), p. 35.

  87. 87.

    Europe Economics (2007), p. 46.

  88. 88.

    European Parliament and Council (2009), paras. 1 and 45 and Art. 3(3).

  89. 89.

    European Commission (2017f), p. 7; also European Commission (2017d), p. 9. There is no elaboration of what these phases describe, they are indeed quite intuitive.

  90. 90.

    Judgment of the Court of 4 October 2018, C-105/17, Kamenova, EU:C:2018:808, para. 34.

  91. 91.

    Esposito (2018).

  92. 92.

    Sibony (2014), pp. 903–942.

  93. 93.

    European Commission (2017f), pp. 65–66.

  94. 94.

    CIVIC (2017), p. 245: “efficient implementation of EU consumer and marketing law across Member States … requires striking a balance between the gains from flexibility and the costs arising from the failure to realise the full potential gains from trade across the borders of Member States”, referring to the trade-off between the effectiveness of EU consumer law and the chilling effects that legal uncertainty may cause on trading activities within the Internal Market.

  95. 95.

    European Commission (2017f), p. 28 (ex officio doctrine), pp. 89–90 (UCPD) and pp. 58–62 (overlapping information duties).

  96. 96.

    European Parliament (2018b), p. 38.

  97. 97.

    BEUC (2018), pp. 8–9.

  98. 98.

    Howells (2005).

  99. 99.

    Gal and Elkin-Koren (2017).

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Authors and Affiliations

  1. Faculty of Law, University of Louvain, Louvain-La-Neuve, Belgium

    Fabrizio Esposito & Anne-Lise Sibony

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  1. Fabrizio Esposito
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  2. Anne-Lise Sibony
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Correspondence to Anne-Lise Sibony .

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  1. Faculty of Law, University of Lucerne, Lucerne, Switzerland

    Klaus Mathis

  2. The School of Law, University of Notre Dame, Notre Dame, IN, USA

    Avishalom Tor

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Esposito, F., Sibony, AL. (2021). In Search of the Theory of Harm in EU Consumer Law: Lessons from the Consumer Fitness Check. In: Mathis, K., Tor, A. (eds) Consumer Law and Economics. Economic Analysis of Law in European Legal Scholarship, vol 9. Springer, Cham. https://doi.org/10.1007/978-3-030-49028-7_12

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