This book examines the impact of the Lisbon Treaty and the Charter of Fundamental Rights on consumer protection. Traditionally, EU consumer law has mostly been applied in a narrow sense, as an instrument to achieve market integration. However, the Lisbon Treaty, which entered into force on 1 December 2009, grants binding legal force to the EU Charter of Fundamental Rights, which acknowledges for the first time a broader human rights and ‘solidarity’ dimension to consumer protection. The Charter introduces far-reaching social and economic rights and provides new rights, such as the protection of personal data, which may well have significant implications for consumer protection. Furthermore, by requiring the European Union to become a party to the European Convention on Human Rights, the Lisbon Treaty explicitly assigns to human rights a more central role in the EU legal system.
Fundamental rights have already produced important effects in the jurisprudence of the European Court of Justice (ECJ). Recent ground-breaking and sometimes controversial judgments have highlighted the role that fundamental rights can play in consumer-related cases, dealing with questions of effective judicial protection, data protection, and the freedom to receive or impart information.
The novel legal framework suggests that the EU institutions and Member States will give more importance to fundamental rights. However, a closer look reveals that the application of the Charter is limited and remains abstract in practice.
In the light of these developments, a number of important questions emerge: what is the significance of the EU Charter for the protection of individual consumers and collective social and economic interests? Will the new fundamental rights regime have a practical impact on EU consumer law and policy, both in terms of its substance and in terms of the process by which it is formed? Can the new legal framework overcome pressing challenges in the internal market, such as increasing over-indebtedness, and a lack of consumer confidence in cross-border purchases? Above all, is the binding Charter a new step for the EU towards forming a community of values and solidarity which transcends economic integration, or is it only a symbolic declaration?
To put these questions into perspective, it is useful to briefly describe the historical background of consumer protection. Consumer law has changed significantly in recent decades and now plays a central role in both EU market integration and social welfare. Its roots can be traced back to President John F. Kennedy’s famous speech in 1962, which proposed the establishment of four basic consumer rights. This became necessary as product scandals, such as those following the discovery of birth defects caused by the drug Thalidomide, demonstrated that a market without regulation could harm consumers. After years of growth in global trade and expansion in the variety of goods and services, consumer law has developed into a distinct subject in national regulations, and has gained recognition at an international level.
In the EU, consumer protection was introduced in order to improve market integration, with the adoption of an action programme in 1975. The European Community was initially conceived as a means of integrating the economies of the Member States, and was aimed almost exclusively at enhancing transnational market performance. The EU’s approach to integration was influenced by the ordo-liberalist perspective, according to which markets are made at the transnational level, while the Member States control redistribution and formulate social policy. Eventually, the Treaty of Maastricht of 1992 integrated the protection of the consumer into its objectives in Articles 3(s) and 129(a). Article 129(a) stated that the Community should contribute to the attainment of a high level of consumer protection, by adopting measures within the framework of the internal market, and by supporting national policies on consumer protection. In 1997, the Treaty of Amsterdam strengthened consumer protection, by stipulating in Article 153 (now Article 169 TFEU) that the Community should promote a number of consumer rights, such as the rights to information and education.
During the last 30 years, consumer law has undergone a considerable transformation both in the European Union and in the Member States due to market expansion and technological innovation. Today, the European Union, with its 28 Member States, has become one of the largest markets in the world, comprising more than 480 million consumers. The mode of exchanging products and services has changed, with modern forms of distribution and electronic cross-border purchases. EU consumer law is entering a new phase and is facing two interdependent trends. On one side, consumer protection is influenced by the EU’s market efficiency and harmonization objectives. On the other, it is recognized as a fundamental social policy objective and consumers are generally becoming more politically active, for example by expressing ethical values when purchasing products or services.
In this context, consumer protection has become increasingly linked to fundamental rights, with consumers seen as vulnerable individuals who require protection by the state, but also as potentially active promoters of human rights values through ethical purchasing behaviour. At the same time, the rise in consumerism has also led to externalities including environmental degradation, which pose new challenges for the concept of sustainable consumption and may negatively affect fundamental policy objectives.
While the enlarged market enhances competition by favouring an increase in consumer choice and lowering prices, it also generates additional transaction complexity and creates new challenges for consumers. The growing number of cross-border exchanges in anonymous markets heightens the risk of abuse, creates new health hazards, and may render access to both information and justice more difficult. At the same time, increased information asymmetries have caused market failures to be more frequent and grave.
The inability of the market to deliver socially desirable outcomes has become manifest in the damage to health caused by unsafe products and in several other economically important cases of market failure; in particular, in the financial sector and in liberalized services, such as telecommunications and transport. Some claim that market failures are also at the root of modern social problems, such as over-indebtedness of consumers.
These episodes represent ‘market failures’ for several reasons: first, they depart from socially desirable market outcomes, as they impose social ‘costs’ which evidently outweigh the ‘benefits’ reaped by a few, sometimes fraudulent firms, so that the overall balance for society is negative. Secondly, in the absence of a sanction they introduce distortions into the market, as some companies may gain a competitive advantage over other companies which, in contrast, adopt more ‘correct’ behaviour. Finally, these episodes have instilled a high degree of suspicion in consumers towards certain markets (in particular, cross-border markets), thwarting the realization of the benefits of an integrated EU economy.
Market expansion, along with financial and technological innovation, is thus generating new challenges for consumer protection. The EU has responded to these challenges by strengthening its consumer policy and by creating an autonomous consumer protection competence at the EU level. The Treaties of Maastricht and Amsterdam endowed the EU with the competence to regulate consumer matters. An analysis of this competence, however, reveals limitations which stem from an approach based upon a narrow concept of the consumer. Indeed, the notion of the consumer introduced by the European Court ofJustice is often ‘instrumental’ to the functioning of the market. The same narrow approach is evident in the law-making process of the EU, which usually approves new legislation on the basis of Article 114 TFEU (ex Article 95 EC). This norm allows harmonization measures only when they have a beneficial impact on the efficiency of the market. Alternatively, Article 169(2)(b) TFEU (ex Article 153 EC), which allows consumer protection independently of market rationales, has hardly ever been applied in order to make legislative initiatives.
The limitations stemming from this conception of the consumer are now more visible than in the past. Initially, the EU’s focus on economic integration was less problematic, because national regulators could often adopt higher standards of consumer protection if necessary. However, the growing impact of EU law through full harmonization has altered the structural equilibrium between EU and national consumer competences. Some argue that this has led to a social deficit, because, inter alia, with the current EU policy direction towards the full harmonization of consumer law, Member States are increasingly unable to provide more stringent protective standards for con- sumers. The influence of the primary goal (namely, economic integration) might de facto prevail over high-standard national consumer law and does not fully take account of different legal cultures. Thus, the question arises of how certain values can be maintained in an expanding market with growing competition and less control. How can consumers be taken account of as human beings? Finally, why should the EU be better placed to decide on consumer standards than the Member States?
These challenges have been met by a revitalized discourse about human rights and consumer law, sustained by the re-emergence of social movements and crowned at an EU level by the inclusion of consumer protection in the Charter of Fundamental Rights. The Charter was created with a detailed catalogue of fundamental rights, encompassing core values that are common to the Member States and defining a society founded on pluralism, non-discrimination, justice, and solidarity. Consumer protection is included in chapter IV of the Charter on ‘Solidarity’, recognized as a fundamental policy objective.
Such high-level recognition of consumer protection is a clear departure from the traditional approach discussed earlier in the chapter. Furthermore, the Charter and the Lisbon Treaty introduce a number of new provisions that are relevant for consumer protection. However, some doubts exist as to whether the Charter will be able to complement the existing approach effectively. Can the Lisbon Treaty and the Charter lead the way in broadening the traditional consumer model of market integration? Importantly, what is the role of the
ECJ in this regard and how will economic freedoms and fundamental social rights be balanced in practice?
To date, few theoretical enquiries exist into the relationship between consumer law, the EU constitutional framework and human rights. This book addresses this gap by analyzing the implications of the Lisbon Treaty and the Charter of Fundamental Rights on consumer protection. It provides a novel perspective on consumer law, centered on human rights and inspired by economic, social and legal theories.
The links between fundamental rights and different theoretical approaches, and their bearing on consumer protection, will be systematically assessed in three core areas of consumer law: consumer credit regulation, electronic communication, and access to justice. An analysis of consumer credit regulation will show how financial capability can be achieved in practice, illustrating the impact of fundamental rights, and other EU laws and principles on the provision of fair contractual conditions. In the second area, regarding electronic communication services, the book will examine the key role played by the fundamental right to data protection and the freedom to receive or impart information, which have to be balanced against other fundamental rights, such as the right to property. Moreover, the provision of electronic communication services will be shown to be an effective tool for consumer participation in society. Finally, moving to the third area, this work will consider the role of alternative dispute resolution, collective actions, and litigation funding in strengthening the fundamental right of access to justice. These case studies are of particular importance because they touch upon typical problems engendered by enlarged markets and privatization and offer fresh insights into how to empower and protect consumers.
Conceptually, this book is divided in two parts, comprising eight chapters. The first part (Chapters 1-4) analyzes the content and limitations of the current European framework, proposing a new theoretical approach to consumer law. In the second part (Chapters 5-7), this approach is explored in three relevant areas, as detailed below.
Chapters 1-2 sketch the development of consumer law and analyze the legal framework and policy approach of the EU in this area. Chapter 3 explores the progressive convergence of consumer protection and fundamental rights, examining the possible implications of consumer protection as a human right. Chapter 4 proposes a new theoretical approach to consumer law and human rights, which can be promoted by fundamental rights and may reconcile economic integration and social principles. Chapters 5 to 7 make the proposed consumer approach operational in three key areas of consumer law: consumer credit, services of general interest (electronic communication in particular), and finally access to justice. The concluding Chapter 8 summarizes and proposes new directions for consumer law and policy in the EU.