A Challenge for the EU’s Average Consumer Concept
To a certain degree, owing to the informational asymmetry, the difference in negotiating power and the relative lack of transparency that is often inherent to the private law relationships between individual consumers and the businesses selling goods and services, and due to the ever-present risk of falling victim to unfair commercial practices, all consumers can be considered vulnerable or disadvantaged when it comes to business-to-consumer transactions. This is especially the case in those consumer markets that involve particularly complex transactions, such as the financial products and services market: as the European Commission noted in a 2010 paper, consumers are often ill-prepared to make sound decisions about retail financial products not only due to asymmetric information or limited financial literacy, but also due in part to instincts that drive consumers towards choices that might be inconsistent with their long-term preferences. The European Union, while acknowledging the pitfalls of these particularly problematic consumer markets, seems mostly unwilling to deviate from its inflexible standard of consumer behavior, based on the ideal of a rational market participant. In the light of these issues, this article will focus on the concept of the ‘average consumer’ and its interpretation by the European Court of Justice (ECJ), particularly in cases concerning problematic markets, while the only major exception – the narrow scope of consumers acknowledged as ‘particularly vulnerable’ – will be discussed in greater detail in a future article.
The Notion of the ‘Average’ Consumer
When interpreting the legal term ‘consumer’, defined by the Directives 93/13/EEC (Unfair Contract Terms Directive) and 2008/48/EC (Consumer Credit Directive) as “a natural person who, in transactions covered by the Directives, is acting for purposes which are outside his trade, business or profession”, the Court of Justice had to determine the extent of protection that should be afforded to everyone falling under the scope of the term. The question of how the Court should approach the notion of the ‘average consumer’ was answered in Case C-210/96 Gut Springenheide, where the German court asked the ECJ whether, when assessing if statements designed to promote sales are likely to mislead the purchaser, it would base its assessment on an objectified concept of a purchaser, or whether it would consider the actual expectations of the consumers to whom the statements are addressed; and, in the case of the latter, whether it would use the test of the ‘informed average consumer’ or that of the ‘casual consumer’. In its answer, the Court pointed out that there had been several earlier cases – dating back to the late 1980s – in which the Court had to decide whether a description, trademark or promotional text can be considered misleading; and that in these cases, the Court – without specifically referring to it as a test – consistently based its decisions on the presumed expectations of an average consumer who is reasonably well-informed and reasonably observant and circumspect. Out of these pre-Gut Springenheide cases, Case C-470/93 Mars is of particular interest, as paragraph 24 of the Court’s Mars decision marks the first explicit reference to the category of “reasonably circumspect consumers”.
Following the landmark decision in Gut Springenheide, the case-law of the ECJ continued to utilize the ‘Gut Springenheide formula’ when interpreting the behavior of the average consumer: references to the formula in cases such as C-342/97 Lloyd, C-465/98 Darbo and C-239/02 Douwe Egberts show that a clear legal precedent has been established. This consumer benchmark has also made its way into EU consumer protection legislation with the Unfair Commercial Practices Directive (Directive 2005/29/EC), which explicitly refers to the economic behavior of the average consumer of a certain product in its definition of an ‘unfair commercial practice’ (Article 2). Recital 18 of the Preamble clarifies that the Directive “takes as a benchmark the average consumer, who is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors, as interpreted by the Court of Justice”.
This interpretation of the average consumer – which remains the predominant approach of both EU consumer protection legislation and ECJ case law in assessing consumer behavior to this day – is based on the traditional information paradigm which assumes that by increasing the amount of available information and by ensuring complete transparency, consumers will find it easier to make rational decisions, and as such, any ‘weakness’ of the consumer can be eliminated solely through the provision of information. This standard has been criticized by academia and civil society as unrealistically demanding, overly simplified, and generally, a legal fiction far removed from the actual behavior of the individual consumer, both in terms of informedness and reasonability. An actual consumer – whether or not they are considered ‘vulnerable’ – cannot always be expected to be able and willing to thoroughly assess the wealth of information available to them before making a consumer decision; nor can they be expected to make perfectly rational choices that are unclouded by emotions and social influences.
The use of this high standard falls in line with the idea that the EU consumer protection regime is generally ruled by economic, and not social, considerations and, as Norbert Reich writes, “that consumer protection understood as a form of social protection is generally the responsibility of Member States”. In this economy-focused approach, the freedom of the internal market – and particularly, a right to free choice in business-to-consumer contracts – is seen as key to the uninterrupted functioning of market integration, and thus, the EU appears generally wary of restricting the freedom of contract in the name of consumer protection. The information and transparency requirements imposed on the seller by the traditional information paradigm constitute only a minimum deviation from complete contractual freedom, as they do not encroach on the substance of the contract.
Examining the legislation further, we can point out that the EU’s interpretation of the information paradigm does allow for some leeway. Not only does the Consumer Credit Directive (2004/48/EC) require creditors to provide consumers with extensive information, but they are also required to make this information accessible in a standardized form. The Unfair Commercial Practices Directive (2005/29/EC) takes this one step further: its wording shows an attempt at reconciling the two objectives of internal market freedom and adequate consumer protection while also moving from the minimum harmonization approach of previous Directives to one of total harmonization. According to Recital 24 of the Preamble, the objectives of the Directive are “to eliminate the barriers to the functioning of the internal market represented by national laws on unfair commercial practices and to provide a high common level of consumer protection”. This approach restricts the discretion of Member States with regard to the social elements of consumer protection while maintaining their responsibility.
When it comes to business-to-consumer transactions in problematic markets such as the financial services market, consumers are in a particularly difficult position, left at the mercy of a commercial party with considerably stronger bargaining power. The shortcomings of the traditional information paradigm become particularly evident in cases where the sheer amount and complexity of available information paradoxically makes it more difficult for the non-specialist consumer to make informed decisions.
Any deviation from the current European consumer protection regime built on the ideas of the reasonably circumspect consumer and access justice could, however, potentially upset the delicate balance between consumer protection objectives and those of eliminating the barriers to the functioning of the internal market. Understandably, the European Union shows reluctance to raise its standard of consumer protection; however, developments such as the more protective approach taken with regards to services of general economic interest show that there is hope for systemic change.
Author: Daniel Szilágyi, PhD student, University of Debrecen, Faculty of Law
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