Assessment
© Springer International Publishing Switzerland 2015
Bram B. DuivenvoordeThe Consumer Benchmarks in the Unfair Commercial Practices DirectiveStudies in European Economic Law and Regulation510.1007/978-3-319-13924-1_1111. Assessment
(1)
Hoogenraad & Haak advertising + IP advocaten / University of Amsterdam, Amsterdam, The Netherlands
11.1 Introduction
11.3.1 Introduction
11.3.2 Remove Barriers to Trade
11.3.3 Increase Consumer Confidence
11.3.4 Conclusion
11.5 Conclusion
Abstract
The consumer benchmarks in the Directive present significant shortcomings in terms of all of the Directive’s goals. In relation to the goal of achieving a high level of consumer protection this follows from the fact that the average consumer benchmark focuses on protection of the average rather than the sub-average consumer and from the fact that that the application of the average consumer benchmark by the CJEU imposes high expectations as to the average consumer’s behaviour. Although the target group and vulnerable group benchmarks were meant to provide additional protection, their potential to do so is limited. As to the objective to increase the smooth functioning of the internal market , the benchmarks so far fail to remove barriers to trade. Although Germany, England and Italy have all adopted the CJEUs average consumer benchmark, none of them follow the strict interpretation of the average consumer benchmark of the CJEU. Moreover, there are still significant differences between the application of the consumer benchmarks in the Member States investigated. This also presents problems in terms of consumer confidence, as the idea is that this should improve with uniform protection throughout Europe. Moreover, consumer confidence is not likely to benefit from the shortcomings in terms of the level of protection of the consumer benchmarks as have been identified above. In relation to improving competition, the regime of consumer benchmarks in the Directive is generally effective in preventing over-protection . However, in terms of preventing unfair practices that harm competition, the Directive’s regime of consumer benchmarks is less effective.
Keywords
AssessmentUnfair commercial practices directiveGoalsHigh level of consumer protectionSmooth functioning of the internal marketRemoving barriers to tradeConsumer confidenceImproving competitionOver-protectionIntervention in the market11.1 Introduction
The previous chapters have investigated the consumer benchmarks of the Unfair Commercial Practices Directive in European law and national law, and have discussed the benchmarks from a behavioural perspective . This chapter assesses the benchmarks from the perspective of the Directive’s goals, using the results of the analysis presented in the previous chapters. By doing so, it addresses the main question of this book, namely:
To what extent does the regime of consumer benchmarks in the Unfair Commercial Practices Directive meet each of the goals of the Directive?
As has been discussed in Chap. 2, the two formal goals of the Directive are achieving a high level of consumer protection and increasing the smooth functioning of the internal market.1 Apart from these two goals that were the basis for harmonisation, the Unfair Commercial Practices Directive also aims to improve competition on the market.
The Directive’s benchmarks are assessed from the point of view of each of these three goals. As mentioned in the introduction to this book, the goals of the Directive cannot logically all be met completely at the same time. For example, protection of all consumers in all cases would be optimal in terms of consumer protection, but would at the same time significantly limit the possibility for traders to compete (see also below).2
In the following paragraphs (11.2–11.4), each of the three goals will be discussed, followed by the assessment of the benchmarks in terms of each respective goal. The final conclusion in relation to the main research question of this book is presented in paragraph 11.5.
11.2 Achieving a High Level of Consumer Protection
Achieving a high level of consumer protection is one of the two main objectives mentioned in Article 1 of the Unfair Commercial Practices Directive.3 As pointed out in the discussion on the goals of the Directive in paragraph 2.3 of this book, a clear rationale of consumer protection is absent in the Directive and consumer protection in the context of this assessment is, therefore, understood in a broad sense, i.e., as the degree of protection afforded the consumer in his position vis-à-vis the trader.4 In the context of unfair commercial practices, the level of consumer protection corresponds to the balance between, on the one hand, the responsibility of the trader not to act unfairly and, on the other, the responsibility of the consumer not to be affected by the trader’s potentially unfair behaviour.
What can be said about the Directive’s benchmarks from the perspective of the position of the consumer vis-à-vis the trader? In the previous chapters, the consumer benchmarks have already been questioned on several occasions in relation to the goal to achieve a high level of consumer protection. This applies in particular to the average consumer benchmark. The fact that the CJEU introduced this benchmark to limit what it regarded as ‘excessive’ consumer protection in some Member States, in particular Germany, is already an indication of its tension with the goal of achieving a high level of consumer protection.5
When examining the average consumer benchmark as applied by the CJEU and as codified in the Unfair Commercial Practices Directive, the tension between the benchmark and the objective to achieve a high level of consumer protection becomes clear in three ways.
Firstly, the average consumer benchmark presents shortcomings in terms of the objective to achieve a high level of consumer protection because of the fact that less than averagely informed, observant and circumspect consumers are not protected if the average consumer is not considered to be affected by the commercial practice. This per definition means that a—possibly large—group of consumers is left unprotected. Since the benchmark functions as a requirement in the context of the general clauses of the Directive, in principle traders can act contrary to professional diligence as long as their conduct does not affect the average consumer.6 Offering protection ‘beyond’ the average consumer is thought to be excessive protection, unless a particular target group or vulnerable group is affected. In this sense the average consumer benchmark leaves open the possibility for traders to earn at the expense of less well-informed, observant and circumspect consumers.7
In this context, it is important to indicate that many practices that are widely regarded as unfair are not likely to affect the majority of consumers, because most consumers would suspect that the deal is ‘too good to be true’ and would thus involve a ‘catch’. Hence, these practices generally do not affect the average consumer. Some of the per se unfair practices on the Directive’s black list, such as pyramid schemes, are examples of such practices.8 Examples can also be found in the case law in Member States, such as the Purely Creative case in England.9 The commercial practice in issue (i.e., the assignment of ‘prizes’ that required the consumer to incur considerable costs that exceeded the value of the prize) was clearly designed to mislead consumers, and was thus found to be unfair by the High Court. Yet, it seems likely that the majority of consumers would suspect that spontaneously winning a prize does not come without cost, and that there would thus be a ‘catch’. Strictly seen this should lead to the conclusion that the average consumer is not misled and that this practice is thus, in principle, allowed. This is remarkable as the practice is designed to mislead consumers, making it likely that many people would find such a practice unfair. From the perspective of the aim of achieving a high level of consumer protection, it seems that consumers should at least be protected against those practices that are clearly designed to mislead them.
The second issue related to the average consumer benchmark that presents shortcomings in terms of the objective of achieving a high level of consumer protection is that the CJEU in its case law on the average consumer benchmark has unrealistically high expectations of the average consumer. It has been shown that the CJEU in its case law applying the average consumer benchmark leans towards an image of the consumer as a rational decision maker, who takes into account the available information and who has a critical attitude towards potentially unfair commercial practices.10 Behavioural studies have clearly shown that this image of a rational decision-maker is unrealistic. People structurally make mistakes in their decision-making because of biases in their thinking, and particularly struggle deciding if they have to process complex or large amounts of information.11 Hence, although on the basis of its name the benchmark’s intention would appear to be to protect the average consumer, the actual average consumer is not always protected.12 It is important to stress in this context that many traders know how consumers behave, including their flaws. Fraudulent traders design their marketing strategies in such a way to abuse these flaws.13 In this sense, the average consumer benchmark places a strong responsibility on the side of the consumer not to be misled, rather than on the trader not to mislead.
The third way in which the average consumer benchmark presents shortcomings in relation to the objective to achieve a high level of protection follows from the fact that the average consumer benchmark assumes ‘typical’ consumer behaviour. As has been shown, this idea ignores many factors that influence the decision-making process and that cause numerous differences in the behaviour of different consumers.14 It ignores factors that concern the person of the consumer (personality traits, such as the consumer’s need for cognition), but it also disregards other factors such as a consumer’s earlier experiences, knowledge and, to a large extent, cultural backgrounds. These factors all influence the different stages of the decision-making process, resulting in the average consumer benchmark becoming a fiction that is more disconnected from reality than one might expect. This provides opportunities for traders to make use of, for example, the inexperience of novice consumers, or of consumers with a low need for cognition, who tend to focus less on ‘hard information’ such as technical product attributes and who, as a consequence, are less likely to make detailed product comparisons.
The average consumer benchmark thus presents significant shortcomings in relation to the objective to achieve a high level of consumer protection. This follows from the fact that it sets the benchmark at the average rather than the sub-average consumer, but also from the unrealistically high expectations of the average consumer’s behaviour and from the fact that the average consumer benchmark presumes typical consumer behaviour. In line with this, the position of the consumer vis-à-vis the trader can be characterised by a rather strong responsibility of the consumer not to be affected by potentially unfair practices, regardless of how ‘unfair’ the practice is and whether or not the practice was intended to mislead the consumer or abuse his weaknesses. Based on these shortcomings, it is not surprising that the average consumer benchmark has been criticised in the legislative process preceding the Unfair Commercial Practices Directive.15 This has also been reiterated in academic literature on the topic. For example, shortly after the adoption of the Unfair Commercial Practices Directive, Wilhelmsson pointed to the average consumer benchmark as the main way in which the Directive fails to contribute to the goal of achieving a high level of consumer protection.16
What can be said about the level of protection offered by the other benchmarks? The target group and vulnerable group benchmark have the potential, at least in theory, to offer additional protection, and thus to close the gaps in protection created by the average consumer benchmark. In particular the vulnerable group benchmark was explicitly adopted for this purpose.17
These benchmarks, however, are subject to significant limitations in relation to their potential to offer additional consumer protection. The target group benchmark only applies if a specific group is targeted by a practice and not if other consumers are also targeted. Many unfair practices, although they only affect some consumers, are still directed at the public in general, meaning that the target group benchmark does not provide for a solution.
In theory, the vulnerable group benchmark could address this problem, because for this benchmark to be applicable, the commercial practice does not have to be targeted at the vulnerable group. However, application of this benchmark is subject to requirements that, if followed, do not offer additional protection in many cases. In particular, the vulnerable group must be ‘clearly identifiable’, and the affection of the group must be ‘reasonably foreseeable’ to the trader. Although much remains uncertain about how the benchmarks should be applied from the perspective of the Directive, these requirements—if they are taken into account18—significantly limit the potential of the vulnerable group benchmark to offer additional protection.19
In this context, it is important to note that on the basis of consumer behaviour research, it is clear that every consumer faces vulnerability and that this vulnerability is not limited to certain groups. In fact, while consumer behaviour studies indicate that everyone tends to make structural mistakes and is vulnerable depending on the situation at hand, there is little evidence that the groups indicated by the Directive (except for children and perhaps teenagers) are indeed generally more vulnerable.20 This clarifies that the approach of the Directive of having a rather low general level of protection (i.e., the average consumer benchmark) in combination with specific additional protection for vulnerable groups (i.e., the target group and vulnerable group benchmarks) does not fully deal with the problem of consumer vulnerability . The target group and vulnerable group benchmarks do not significantly raise the level of consumer protection compared to the average consumer benchmark, and consumers still seem to be open to exploitation in many ways without being protected by the Directive.21
Moreover, the approach of only protecting particular groups of vulnerable consumers also raises the question whether it is desirable to protect some groups of consumers, while others facing vulnerability are denied protection. Should it, from a consumer protection perspective, really matter whether someone is vulnerable by virtue of social isolation as a result of old age, or due to social isolation for other reasons? Should having limited cognitive abilities due to young age result in extra protection, while having limited cognitive abilities for other reasons (e.g., genetic, cultural or educational reasons) does not?22 From a consumer protection perspective, this approach is questionable.
Taking into account the gaps in protection presented by the system of consumer benchmarks in the Directive, it is perhaps not surprising that none of the national legal systems investigated follow the strict interpretation of the average consumer benchmark as laid down by the CJEU.23 In this sense, the national legal systems each find ways to raise the level of protection compared to the consumer benchmarks in the Directive in their own way. In Germany, the Bundesgerichtshof does so by arguing that the average consumer, depending on the situation at hand, only observes casually.24 In England, the courts have created the necessary flexibility by simply arguing that the average consumer is affected if a practice is found unfair, even if it seems unlikely that the actual average consumer is affected.25 Finally, Italian law shows a general flexibility in application of the consumer benchmarks, including the flexible use of the vulnerable group benchmark, as well as indicating that the average consumer is vulnerable to specific types of commercial practices.26
11.3 Increasing the Smooth Functioning of the Internal Market
11.3.1 Introduction
The other formal goal in the Unfair Commercial Practices Directive is to increase the smooth functioning of the internal market . As pointed out in the discussion on the goals of the Directive in paragraph 2.3 of this book, this objective is two-fold. Firstly, the Directive is supposed to remove barriers to trade, so that traders can offer their products throughout the European Union without having to face different regulations in different Member States.27 Secondly, the Directive is intended to increase the consumer’s confidence in cross-border shopping.28 Both objectives should lead to an increase in cross-border trade, leading to an increase in competition and, hence, a better functioning of the internal market. This should, in the end, lead to greater choice and lower prices for consumers, and, as a consequence, to a rise in consumer welfare and economic growth.29 In the following sections, the sub-goals will be discussed separately, including the assessment of the Directive’s consumer benchmarks for each sub-goal.
11.3.2 Remove Barriers to Trade
The Preamble to the Directive stresses that differences between the rules on unfair commercial practices in the laws of Member States act as barriers to trade on the internal market.30 The Preamble notes in this context that:31
[T]hese barriers increase the cost to business of exercising internal market freedoms, in particular when businesses wish to engage in cross border marketing, advertising campaigns and sales promotions.
Hence, if companies attempt to sell their products in different markets within the European Union in which the rules on unfair commercial practices are not harmonised, they face compliance costs as a result of having to satisfy different rules in each Member State.32 As a result of harmonisation, businesses should thus be optimally able to offer their products throughout the European Union, without having to face different sets of regulations. This cost-reduction should lead to an increase in cross-border trade, and thus to a more competitive and efficient internal market, leading to higher consumer welfare.33
Since the idea is that harmonisation leads to the removal of barriers to trade, the assessment of the benchmarks in relation to this sub-goal requires an answer to the question to what extent the benchmarks are suitable to fully harmonise the national laws. In the process of adoption of the Unfair Commercial Practices Directive, the European Commission identified differences between the consumer benchmarks in different Member States as one of the main areas of divergence between the national legal systems, and thus as one of the main obstacles to cross-border trade.34 Indeed, if courts in Member States apply different consumer benchmarks , this will clearly lead to different outcomes in each Member State, and from the point of view of harmonisation this should be prevented. In the context of the free movement of goods, the average consumer benchmark has clearly been used as an instrument to limit differences between the laws of Member States, trying to facilitate companies who wish to trade cross-border and use the same marketing strategies across Europe.35 The forced liberalisation of the German Gesetz gegen den unlauteren Wettbewerb (Act Against Unfair Competition, UWG) as a result of the case law of the CJEU is a good example of how the introduction of the average consumer benchmark can promote conformity with European law.36 In this sense, the consumer benchmarks could have played an important role in achieving uniform application of the general clauses of the Directive.