General
The Treaty on the Functioning of the European Union article 169 enables the EU to follow the ordinary legislative procedure to protect consumers "health, safety and economic interests" and promote rights to "information, education and to organise themselves in order to safeguard their interests". [1] All member states may grant higher protection, and a "high level of consumer protection" is regarded as a fundamental right. [2] Consumers are entitled to a legislative "charter of rights" to safe and healthy products, fair terms, proper information free from misleading advertising and marketing, and rights of cancellation. Beyond these general principles, and outside specific sectors, there are four main Directives: the Product Liability Directive 1985, Unfair Terms in Consumer Contracts Directive 1993, Unfair Commercial Practices Directive 2005 and the Consumer Rights Directive 2011, requiring information and cancellation rights for consumers. As a whole, the law is designed to ensure that consumers in the EU are entitled to the same minimum rights wherever they make their transactional decisions, and largely follows inspiration from theories of consumer protection developed in California and the Consumer Bill of Rights proclaimed by John F. Kennedy in May 1962. The European Court of Justice has continually affirmed the importance of ensuring more consumer rights than in commercial contracts, both because of information asymmetry, and inequality of bargaining power. [3]
The Product Liability Directive 1985 was the first consumer protection measure. It creates strict enterprise liability for all producers and retailers for any harm to consumers from products, as a way to promote basic standards of health and safety. [4] Any producer, or supplier if the ultimate producer is insolvent, of a product is strictly liable to compensate a consumer for any damage caused by a defective product. [5] A "defect" is anything which falls below what a consumer is entitled to expect, and this essentially means that products should be safe for their purpose. A narrow defense is available if a producer can show that a defect could not be known by any scientific method, thought this has never been successfully invoked, because it is generally thought a profit making enterprise should not be able to externalise the risks of its activities.
The Unfair Terms in Consumer Contracts Directive 1993 was the second main measure. [6] Under article 3(1) a term is unfair, and not binding, if it is not "individually negotiated| and "if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer". The Court of Justice has continually affirmed that the Directive, as recital 16 states, "is based on the idea that the consumer is in a weak position vis-à-vis the seller or supplier, as regards both his bargaining power and his level of knowledge". [7] Terms which are very skewed, are to be conclusively regarded as contrary to "good faith" and therefore unfair. [8] For example, in RWE AG v Verbraucherzentrale NRW eV , clauses in gas supply contracts enabling the German utiliies company RWE to vary unilaterally prices were advised by the European Court of Justice to be insufficiently transparent, and therefore unfair. [9] In Brusse v Jahani BV [10] the Court of Justice of the European Union advised that clauses in a tenancy contract requiring tenants pay €25 per day were likely unfair, and would have to be entirely void without replacement, if they were not substituted with more precise mandatory terms in national legislation. In Aziz v Caixa d'Estalvis de Catalunya , following the financial crisis of 2007–2008, the European Court of Justice advised that even terms regarding repossession of homes in Spain had to be assessed for fairness by national courts. [11] In Kušionová v SMART Capital a.s. , the Court of Justice of the European Union held that consumer law was to be interpreted in the light of fundamental rights, including the right to housing, in the event that a home could be repossessed. [12] Because consumer law operates through Directives, national courts have the final say on applying the general principles set out by the European Court of Justice's case law.
