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Changes in markets and regulation
The last few decades in Europe have been characterized by dramatic changes in the markets, driven by technological development and regulatory reforms. This trend has had a positive impact on consumer welfare, as it has spurred innovation, leading to lower prices and to a greater range of choice. The downside has been the exacerbation of old-standing problems of free-market economies: asymmetric information, externalities, and increased risks. On the other hand, the powers of Member States freely to determine matters of consumer protection have shrunk, without being replaced by an equivalent framework at EU level.
Global markets have entailed a socio-political and economic change. They have become more anonymous and they are now characterized by long and complex production chains. All this has had a number of effects. First, externalities in the international context are difficult to measure and to compensate for, as they stretch across national boundaries and affect larger numbers of individuals. Secondly, products have become more complex and varied, which makes effective choices more difficult, and in the case of related damage, this may render the proof of causal links between damage and product defects more challenging. Furthermore, consumer rights enforcement is particularly challenging at the cross-border level. Finally, markets have become increasingly anonymous, severing the trust relationship that used to exist in local markets. This has caused a sense of alienation and reluctance to participate in cross-border markets, reinforced by the fact that negative events such as food scandals and financial frauds have become, if not more frequent, better known to the general public owing to improved means of communication.
At the same time, multinationals have increased their influence on the lives of individuals because of a reduction in the scope of welfare states. Privatization renders consumers increasingly dependent on businesses for the purchase of services of general interest, such as telecommunications or energy. As a result, in some cases companies have taken over functions that were previously a state prerogative, substituting the (at least theoretical) ‘public good’ objective with a private profit objective.
Moreover, the formation of large business groups has meant greater economic and lobbying power for firms to defend their interests at EU policy level. Consumer organizations, in contrast, often lack the necessary financial means and are too fragmented to have the same impact on international regulators, contributing to a tilting of the balance of power in favour of large companies.
At the same time, national powers are slowly diminishing in the area of consumer protection. Member States are increasingly unable to protect their citizens independently, as they are influenced by supra-national institutions such as the EU. As some scholars have pointed out, this is accompanied by a growing legitimacy deficit in the European decision-making process, which has inadvertently brought about a progressive alienation of citizens from public institutions and political participation. Just as the powers of single states are weakening, so is the ability of citizens to influence important decisions that affect their lives.
In such a context, consumer law finds a new raison d'etre and a novel role: that of protecting from risks, but also of ensuring ‘substantive freedoms’ for consumers, enabling them to participate actively in policy-making and in the market. Human rights could support such a process as, according to some, they may empower consumers and help create a ‘level playing field’ in the changing global marketplace. Furthermore, a human rights perspective in law and policy may promote ethical market behaviour, which will be discussed in the next section.
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