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The Treaty of Rome
In 1957, the Treaty of Rome was signed, establishing the European Economic Community (EEC), which aimed mainly at economic integration. Consumer issues were mentioned only in a few Articles and purely in relation to other policies, namely, the agricultural and competition policies. The improvement of the common market through fundamental freedoms, such as free movement of goods, people, and services, was the absolute priority. The drafters of the Treaty implicitly assumed that consumer protection would automatically result from the development of the internal market. Therefore, an explicit and articulate consumer policy was not considered to be necessary and remained absent.
Consumer protection partially began in the 1970s, prompted by international developments and by the increasing market integration which revealed a need for regulatory standards common to all the Member States. Two main legislative and jurisprudential trends became apparent: positive integration of consumer policy through both soft law and hard law mechanisms, and negative integration driven by the European Court ofJustice.
Positive integration of consumer policy developed through soft law mechanisms in the form of communications and programmes. At the Paris Summit, in October 1972, for the first time an effort was made to improve consumer law at the Community level. Subsequently, in 1975 and 1981, the European Council of Ministers approved two programmes on consumer protection in order to respond to public concern about market risks. These programmes, focusing on health protection and on the quality of goods and services, demonstrated the first sign of political readiness to accept the consumer as a separate category of law. Although without binding effect, these programmes did incidentally serve as an inspirational basis for the ECJ to analyze binding provisions and were used by the Commission as an instrument for the European integration process.
Besides this ‘soft law’ approach, ‘hard law’ harmonization measures were also applied to develop consumer law. As the Community lacked legislative competence in regard to consumer law, measures were based upon Article 100 EEC (later 94 and 95 EC). According to this Article, the Council could adopt directives and harmonize the legislation of the Member States when the latter was in conflic with the development of the internal market. These legislative acts could only be made through unanimity-voting by the Member States, and required a direct link with the common market. As a result, consumer protection goals were seen and presented as a means of overcoming the distortion of competition and the obstacles to the completion of the common market. Numerous legislative consumer acts were adopted following this strategy; among them the directive on misleading advertising and the directive on product liability.
Via these means, the Community was able to develop its consumer policy, thereby expanding its limited competences. However, an explicit consumer policy was not possible under the existing legal framework. As Weatherill points out, this approach was typical of the initial Community consumer policy, and has changed little in practice today. These beginnings are important to understand the economic integration focus that is continuously attached to consumer law.
A second feature of the European system is that its consumer law has developed in an indirect manner through negative integration by the ECJ. This process of deregulation of national provisions meant that the ECJ abolished actions by Member States that would impede cross-border trade in the market. The prohibition of discriminatory behaviour, the four freedoms, and competition law provisions, were the instruments for this approach which served to eliminate national protective barriers and, at the same time, constituted a source of new individual rights.
This negative integration approach is well demonstrated by the seminal Cassis de Dijon case of 1979. Rewe-Zentral AG, a French company, was not authorized to import the liqueur called ‘Cassis de Dijon’ into Germany. The German Federal Monopoly Administration for Spirits refused to grant a licence on the basis of a German law, which forbade liqueurs that contain less than 25 per cent of alcohol content. Rewe-Zentral AG argued that the German measure was contrary to Article 30 EEC, as the measure was equivalent to a quantitative restriction on importation. In contrast, the German government claimed, among other things, that the fixing of a lower limit for the alcohol content of certain liqueurs was designed to protect the consumer against unfair practices by producers and was applied both to domestic and to imported products.
The ECJ held that barriers to trade which result from differences between national laws could only be permitted in exceptional cases ‘in so far as those provisions may be recognized as being necessary in order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of public health, the fairness of commercial transactions and the defence of the consumer’. However, these conditions were not met in the specific case, as in particular less restrictive measures would have been more proportionate to guarantee the fairness of commercial transactions, by requiring the display of the alcohol content on the packaging of products. Therefore, the ECJ decided that the German measure constituted an obstacle to trade that was unlawful.
This case was based upon the principle of mutual recognition, according to which ‘a Member State may not, in principle, prohibit the sale in its territory of a product lawfully produced and marketed in another Member State even if the product is produced according to technical or quality requirements which differ from those imposed on its domestic products’.
The mutual recognition approach of the ECJ improved market functioning and enlarged the choice of consumers. However, it raised concerns over a potential regulatory race to the bottom, especially among countries with high consumer standards: high standards would impose extra costs on national producers, while at the same time not fully benefiting the consumers, as the importation of lower-standard products had to be accepted under certain conditions.
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