LLM PAPER

The paradigm of the weaker party in EU

consumer law just a myth

by

Mikael Aroutiounian

Supervised by R Steennot

LLM in European Law 2011-2012

- 1 -

Table of contents

Table of contents - 1 -

Bibliography - 2 -

Introduction - 10 -

Chapter 1 ndash On the track of the ratio legis of the consumer protection - 11 -

Section 1 ndash The ratio legis in general - 11 -

Section 2 ndash The paradigm of the lsquoweaker partyrsquo - 11 -

Section 3 ndash The consumer as a weaker party - 12 -

Chapter 2 ndash The definition of the consumer under EU Law - 14 -

Section 1 ndash General rule and minor exception - 14 -

Section 2 ndash Is EU consumer law in accordance with the ratio legis of consumer protection - 15 -

Section 3 ndash A possible source of inspiration and a justification for an unstated ratio legis - 16 - sect1 ndash The influence of the economic theory - 16 - sect2 ndash The imperative of legal certainty - 18 -

Chapter 3 ndash The situation at the national level - 20 -

Section 1 ndash The question of derogation from EU law - 20 -

Section 2 ndash National specificities with regard to certain problematic issues - 22 - sect1 ndash Legal persons - 22 - sect2 ndash Mixed-purpose transactions - 23 - sect3 ndash Indirect link with professional activity - 25 -

Chapter 4 ndash Towards full-fledged protection of the weaker party at the EU level - 28 -

Section 1 ndash A noteworthy case in the investment sector - 28 -

Section 2 ndash Motives guiding the particular approach in the MiFID - 30 - sect1 ndash Distinction between standard and tailor-made contracts - 30 - sect2 ndash Complexity of investment services - 31 -

Section 3 ndash Relation to other instruments - 31 -

Chapter 5 ndash Reflections on a possible new definition of consumer that conforms to theratio legis of the consumer protection rules - 33 -

Section 1 ndash The adhering party - 33 - sect1 ndash Standard-form contracts and e-commerce - 33 - sect2 ndash The concept of adhering party with respect to e-contracts - 33 - sect3 ndash A ratio legis friendly criterion - 34 -

Section 2 ndash An approach agrave la franccedilaise - 35 - sect1 ndash The criterion of rapport direct - 35 - sect2 ndash A new interpretation of the definition of consumer in EU law - 36 -

Section 3 ndash A policy of differentiation - 38 -

Chapter 6 ndash Is the weaker party paradigm just a myth - 40 -

Section 1 ndash Historical and political background - 40 -

Section 2 ndash Consumer protection as a corollary of the Internal Market - 41 -

Section 3 ndash Future perspectives - 42 -

Conclusion - 44 -

- 2 -

Bibliography

1 Legislation

11 Regulations

Council Regulation 442001 on jurisdiction and the recognition and enforcement of

judgments in civil and commercial matters (Brussels I) [2001] OJ L 121

Regulation of the European Parliament and of the Council on the law applicable to

contractual obligations (Rome I) [2008] OJ L 1776-16

12 Directives

Council Directive 85577EEC to protect the consumer in respect of contracts

negotiated away from business premises [1985] OJ L 3720031-0033

Council Directive 87102EEC for the approximation of the laws regulations and

administrative provisions of the Member States concerning consumer credit [1987] OJ

L 0420048-0053

Council Directive 90314EEC on package travel package holidays and package tours

[1990] OJ L 158

Council Directive 9313EEC on unfair terms in consumer contract [1993] OJ L

0950029-0034

Directive of the European Parliament and the Council 9447EC on the protection of

purchasers in respect of certain aspects of contracts relating to the purchase of the

right to use immovable properties on a timeshare basis [1994] OJ L 2800083-0087

Directive of the European Parliament and of the Council 977EC on the protection of

consumers in respect of distance contracts [1997] OJ L 1440019-0027

Directive of the European Parliament and of the Council 986EC on consumer

protection in the indication of the prices of products offered to consumers [1998] OJ L

0800027-0031

Directive of the European Parliament and of the Council 199944EC on certain

aspects of the sale of consumer goods and associated guarantees [1999] OJ L

1710012-0016

Directive of the European Parliament and of the Council 200031 on certain legal

aspects of information society services in particular electronic commerce in the

Internal Market (Directive on electronic commerce) [2000] OJ L 1781-16

- 3 -

Directive of the European Parliament and of the Council 200265 concerning the

distance marketing of consumer financial services and amending Council Directive

90619EEC and Directives 977EC and 9827EC [2002] OJ L 27116-24

Directive of the European Parliament and of the Council 200371EC on the

Prospectus to be Published when Securities are Offered to the Public or Admitted to

Trading [2003] OJ L 34564

Directive of the European Parliament and of the Council 200439EC on Markets in

Financial Instruments amending Council Directives 85611EEC and 936EEC and

Directive 200012EC of the European Parliament and the Council and Repealing

Council Directive 9322EEC [2004] OJ L 1451

Directive of the European Parliament and of the Council 200529 concerning unfair

business-to-consumer commercial practices in the internal market and amending

Council Directive 84450EEC Directives 977EC 9827EC and 200265EC of the

European Parliament and of the Council and Regulation (EC) No 20062004 of the

European Parliament and of the Council (lsquoUnfair Commercial Practices Directiversquo)

[2005] OJ L 14922-39

Commission Directive 200673EC implementing Directive 200439EC of the

European Parliament and of the Council as regards organisational requirements and

operating conditions for investment firms and defined terms for the purposes of that

Directive [2006] OJ L 24126-5

Directive of the European Parliament and of the Council 200764EC on payment

services in the internal market amending Directives 977EC 200265EC

200560EC and 200648EC and repealing Directive 975EC [2007] OJ L 3191

Directive of the European Parliament and of the Council 200848EC on credit

agreements for consumers and repealing Council Directive 87102EEC [2008] OJ L

13366

Directive of the European Parliament and of the Council 200965EC on the

Coordination of Laws Regulations and Administrative Provisions relating to

Undertakings for Collective Investment in Transferable Securities (Recast) [2009] OJ

L 30232

Directive of the European Parliament and of the Council 201183 on consumer rights

amending Council Directive 9313EEC and Directive 199944EC of the European

Parliament and of the Council and repealing Council Directive 85577EEC and

- 4 -

Directive 977EC of the European Parliament and of the Council [2011] OJ L 30464-

88

13 Commission documents

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo COM (2006) 744

final

Commission lsquoCommunication from the Commission to the Council the European

Parliament and the European Economic and Social Committee - EU Consumer Policy

strategy 2007-2013 - Empowering consumers enhancing their welfare effectively

protecting them SEC(2007) 321 SEC(2007) 322 SEC(2007) 323 COM (2007)

0099 final

Viviane Reding lsquoEuropean Commission seeks contract law solutions to smooth Single

Market for consumers and businessersquo (Brussels July 1st 2010) IP10872

httpeuropaeurapidpressReleasesActiondoreference=IP10872ampformat=HTMLamp

aged=1amplanguage=ENampguiLanguage=fr accessed the 10th

May 2012

Commission lsquoProposal for a Regulation of the European Parliament and of the

Council on a Common European Sales Lawrsquo COM (2011) 635 final

14 Other

Brussels Convention on jurisdiction and the enforcement of judgments in civil and

commercial matters [1968] OJ L 2990032-0042

2 Jurisprudence

21 Court of Justice of the European Union

C-15077 Bertrand v Paul Ott KG [1978] ECR-01431

C-12078 Rewe-Zentral AG v Bundesmonopolverwaltung fuumlr Branntwein [1979] ECR

649

C-12185 Conegate Limited v HM Customs amp Excise [1986] ECR 1007

C-36189 Criminal proceedings v Patrice Di Pinto [1991] ECR I-01189

C-8991 Shearson Lehmann Hutton Inc v TVB Treuhandgesellschaft fuumlr

Vermoumlgensverwaltung und Beteiligungen mbH [1993] ECR I-00139

C-26995 Benincasa [1997] ECR I-3767

Joined Cases C-24098 to C-24498 Oceacuteano Grupo Editorial and Salvat

Editores [2000] ECR I-4941

- 1 -

Table of contents

Table of contents - 1 -

Bibliography - 2 -

Introduction - 10 -

Chapter 1 ndash On the track of the ratio legis of the consumer protection - 11 -

Section 1 ndash The ratio legis in general - 11 -

Section 2 ndash The paradigm of the lsquoweaker partyrsquo - 11 -

Section 3 ndash The consumer as a weaker party - 12 -

Chapter 2 ndash The definition of the consumer under EU Law - 14 -

Section 1 ndash General rule and minor exception - 14 -

Section 2 ndash Is EU consumer law in accordance with the ratio legis of consumer protection - 15 -

Section 3 ndash A possible source of inspiration and a justification for an unstated ratio legis - 16 - sect1 ndash The influence of the economic theory - 16 - sect2 ndash The imperative of legal certainty - 18 -

Chapter 3 ndash The situation at the national level - 20 -

Section 1 ndash The question of derogation from EU law - 20 -

Section 2 ndash National specificities with regard to certain problematic issues - 22 - sect1 ndash Legal persons - 22 - sect2 ndash Mixed-purpose transactions - 23 - sect3 ndash Indirect link with professional activity - 25 -

Chapter 4 ndash Towards full-fledged protection of the weaker party at the EU level - 28 -

Section 1 ndash A noteworthy case in the investment sector - 28 -

Section 2 ndash Motives guiding the particular approach in the MiFID - 30 - sect1 ndash Distinction between standard and tailor-made contracts - 30 - sect2 ndash Complexity of investment services - 31 -

Section 3 ndash Relation to other instruments - 31 -

Chapter 5 ndash Reflections on a possible new definition of consumer that conforms to theratio legis of the consumer protection rules - 33 -

Section 1 ndash The adhering party - 33 - sect1 ndash Standard-form contracts and e-commerce - 33 - sect2 ndash The concept of adhering party with respect to e-contracts - 33 - sect3 ndash A ratio legis friendly criterion - 34 -

Section 2 ndash An approach agrave la franccedilaise - 35 - sect1 ndash The criterion of rapport direct - 35 - sect2 ndash A new interpretation of the definition of consumer in EU law - 36 -

Section 3 ndash A policy of differentiation - 38 -

Chapter 6 ndash Is the weaker party paradigm just a myth - 40 -

Section 1 ndash Historical and political background - 40 -

Section 2 ndash Consumer protection as a corollary of the Internal Market - 41 -

Section 3 ndash Future perspectives - 42 -

Conclusion - 44 -

- 2 -

Bibliography

1 Legislation

11 Regulations

Council Regulation 442001 on jurisdiction and the recognition and enforcement of

judgments in civil and commercial matters (Brussels I) [2001] OJ L 121

Regulation of the European Parliament and of the Council on the law applicable to

contractual obligations (Rome I) [2008] OJ L 1776-16

12 Directives

Council Directive 85577EEC to protect the consumer in respect of contracts

negotiated away from business premises [1985] OJ L 3720031-0033

Council Directive 87102EEC for the approximation of the laws regulations and

administrative provisions of the Member States concerning consumer credit [1987] OJ

L 0420048-0053

Council Directive 90314EEC on package travel package holidays and package tours

[1990] OJ L 158

Council Directive 9313EEC on unfair terms in consumer contract [1993] OJ L

0950029-0034

Directive of the European Parliament and the Council 9447EC on the protection of

purchasers in respect of certain aspects of contracts relating to the purchase of the

right to use immovable properties on a timeshare basis [1994] OJ L 2800083-0087

Directive of the European Parliament and of the Council 977EC on the protection of

consumers in respect of distance contracts [1997] OJ L 1440019-0027

Directive of the European Parliament and of the Council 986EC on consumer

protection in the indication of the prices of products offered to consumers [1998] OJ L

0800027-0031

Directive of the European Parliament and of the Council 199944EC on certain

aspects of the sale of consumer goods and associated guarantees [1999] OJ L

1710012-0016

Directive of the European Parliament and of the Council 200031 on certain legal

aspects of information society services in particular electronic commerce in the

Internal Market (Directive on electronic commerce) [2000] OJ L 1781-16

- 3 -

Directive of the European Parliament and of the Council 200265 concerning the

distance marketing of consumer financial services and amending Council Directive

90619EEC and Directives 977EC and 9827EC [2002] OJ L 27116-24

Directive of the European Parliament and of the Council 200371EC on the

Prospectus to be Published when Securities are Offered to the Public or Admitted to

Trading [2003] OJ L 34564

Directive of the European Parliament and of the Council 200439EC on Markets in

Financial Instruments amending Council Directives 85611EEC and 936EEC and

Directive 200012EC of the European Parliament and the Council and Repealing

Council Directive 9322EEC [2004] OJ L 1451

Directive of the European Parliament and of the Council 200529 concerning unfair

business-to-consumer commercial practices in the internal market and amending

Council Directive 84450EEC Directives 977EC 9827EC and 200265EC of the

European Parliament and of the Council and Regulation (EC) No 20062004 of the

European Parliament and of the Council (lsquoUnfair Commercial Practices Directiversquo)

[2005] OJ L 14922-39

Commission Directive 200673EC implementing Directive 200439EC of the

European Parliament and of the Council as regards organisational requirements and

operating conditions for investment firms and defined terms for the purposes of that

Directive [2006] OJ L 24126-5

Directive of the European Parliament and of the Council 200764EC on payment

services in the internal market amending Directives 977EC 200265EC

200560EC and 200648EC and repealing Directive 975EC [2007] OJ L 3191

Directive of the European Parliament and of the Council 200848EC on credit

agreements for consumers and repealing Council Directive 87102EEC [2008] OJ L

13366

Directive of the European Parliament and of the Council 200965EC on the

Coordination of Laws Regulations and Administrative Provisions relating to

Undertakings for Collective Investment in Transferable Securities (Recast) [2009] OJ

L 30232

Directive of the European Parliament and of the Council 201183 on consumer rights

amending Council Directive 9313EEC and Directive 199944EC of the European

Parliament and of the Council and repealing Council Directive 85577EEC and

- 4 -

Directive 977EC of the European Parliament and of the Council [2011] OJ L 30464-

88

13 Commission documents

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo COM (2006) 744

final

Commission lsquoCommunication from the Commission to the Council the European

Parliament and the European Economic and Social Committee - EU Consumer Policy

strategy 2007-2013 - Empowering consumers enhancing their welfare effectively

protecting them SEC(2007) 321 SEC(2007) 322 SEC(2007) 323 COM (2007)

0099 final

Viviane Reding lsquoEuropean Commission seeks contract law solutions to smooth Single

Market for consumers and businessersquo (Brussels July 1st 2010) IP10872

httpeuropaeurapidpressReleasesActiondoreference=IP10872ampformat=HTMLamp

aged=1amplanguage=ENampguiLanguage=fr accessed the 10th

May 2012

Commission lsquoProposal for a Regulation of the European Parliament and of the

Council on a Common European Sales Lawrsquo COM (2011) 635 final

14 Other

Brussels Convention on jurisdiction and the enforcement of judgments in civil and

commercial matters [1968] OJ L 2990032-0042

2 Jurisprudence

21 Court of Justice of the European Union

C-15077 Bertrand v Paul Ott KG [1978] ECR-01431

C-12078 Rewe-Zentral AG v Bundesmonopolverwaltung fuumlr Branntwein [1979] ECR

649

C-12185 Conegate Limited v HM Customs amp Excise [1986] ECR 1007

C-36189 Criminal proceedings v Patrice Di Pinto [1991] ECR I-01189

C-8991 Shearson Lehmann Hutton Inc v TVB Treuhandgesellschaft fuumlr

Vermoumlgensverwaltung und Beteiligungen mbH [1993] ECR I-00139

C-26995 Benincasa [1997] ECR I-3767

Joined Cases C-24098 to C-24498 Oceacuteano Grupo Editorial and Salvat

Editores [2000] ECR I-4941

- 2 -

Bibliography

1 Legislation

11 Regulations

Council Regulation 442001 on jurisdiction and the recognition and enforcement of

judgments in civil and commercial matters (Brussels I) [2001] OJ L 121

Regulation of the European Parliament and of the Council on the law applicable to

contractual obligations (Rome I) [2008] OJ L 1776-16

12 Directives

Council Directive 85577EEC to protect the consumer in respect of contracts

negotiated away from business premises [1985] OJ L 3720031-0033

Council Directive 87102EEC for the approximation of the laws regulations and

administrative provisions of the Member States concerning consumer credit [1987] OJ

L 0420048-0053

Council Directive 90314EEC on package travel package holidays and package tours

[1990] OJ L 158

Council Directive 9313EEC on unfair terms in consumer contract [1993] OJ L

0950029-0034

Directive of the European Parliament and the Council 9447EC on the protection of

purchasers in respect of certain aspects of contracts relating to the purchase of the

right to use immovable properties on a timeshare basis [1994] OJ L 2800083-0087

Directive of the European Parliament and of the Council 977EC on the protection of

consumers in respect of distance contracts [1997] OJ L 1440019-0027

Directive of the European Parliament and of the Council 986EC on consumer

protection in the indication of the prices of products offered to consumers [1998] OJ L

0800027-0031

Directive of the European Parliament and of the Council 199944EC on certain

aspects of the sale of consumer goods and associated guarantees [1999] OJ L

1710012-0016

Directive of the European Parliament and of the Council 200031 on certain legal

aspects of information society services in particular electronic commerce in the

Internal Market (Directive on electronic commerce) [2000] OJ L 1781-16

- 3 -

Directive of the European Parliament and of the Council 200265 concerning the

distance marketing of consumer financial services and amending Council Directive

90619EEC and Directives 977EC and 9827EC [2002] OJ L 27116-24

Directive of the European Parliament and of the Council 200371EC on the

Prospectus to be Published when Securities are Offered to the Public or Admitted to

Trading [2003] OJ L 34564

Directive of the European Parliament and of the Council 200439EC on Markets in

Financial Instruments amending Council Directives 85611EEC and 936EEC and

Directive 200012EC of the European Parliament and the Council and Repealing

Council Directive 9322EEC [2004] OJ L 1451

Directive of the European Parliament and of the Council 200529 concerning unfair

business-to-consumer commercial practices in the internal market and amending

Council Directive 84450EEC Directives 977EC 9827EC and 200265EC of the

European Parliament and of the Council and Regulation (EC) No 20062004 of the

European Parliament and of the Council (lsquoUnfair Commercial Practices Directiversquo)

[2005] OJ L 14922-39

Commission Directive 200673EC implementing Directive 200439EC of the

European Parliament and of the Council as regards organisational requirements and

operating conditions for investment firms and defined terms for the purposes of that

Directive [2006] OJ L 24126-5

Directive of the European Parliament and of the Council 200764EC on payment

services in the internal market amending Directives 977EC 200265EC

200560EC and 200648EC and repealing Directive 975EC [2007] OJ L 3191

Directive of the European Parliament and of the Council 200848EC on credit

agreements for consumers and repealing Council Directive 87102EEC [2008] OJ L

13366

Directive of the European Parliament and of the Council 200965EC on the

Coordination of Laws Regulations and Administrative Provisions relating to

Undertakings for Collective Investment in Transferable Securities (Recast) [2009] OJ

L 30232

Directive of the European Parliament and of the Council 201183 on consumer rights

amending Council Directive 9313EEC and Directive 199944EC of the European

Parliament and of the Council and repealing Council Directive 85577EEC and

- 4 -

Directive 977EC of the European Parliament and of the Council [2011] OJ L 30464-

88

13 Commission documents

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo COM (2006) 744

final

Commission lsquoCommunication from the Commission to the Council the European

Parliament and the European Economic and Social Committee - EU Consumer Policy

strategy 2007-2013 - Empowering consumers enhancing their welfare effectively

protecting them SEC(2007) 321 SEC(2007) 322 SEC(2007) 323 COM (2007)

0099 final

Viviane Reding lsquoEuropean Commission seeks contract law solutions to smooth Single

Market for consumers and businessersquo (Brussels July 1st 2010) IP10872

httpeuropaeurapidpressReleasesActiondoreference=IP10872ampformat=HTMLamp

aged=1amplanguage=ENampguiLanguage=fr accessed the 10th

May 2012

Commission lsquoProposal for a Regulation of the European Parliament and of the

Council on a Common European Sales Lawrsquo COM (2011) 635 final

14 Other

Brussels Convention on jurisdiction and the enforcement of judgments in civil and

commercial matters [1968] OJ L 2990032-0042

2 Jurisprudence

21 Court of Justice of the European Union

C-15077 Bertrand v Paul Ott KG [1978] ECR-01431

C-12078 Rewe-Zentral AG v Bundesmonopolverwaltung fuumlr Branntwein [1979] ECR

649

C-12185 Conegate Limited v HM Customs amp Excise [1986] ECR 1007

C-36189 Criminal proceedings v Patrice Di Pinto [1991] ECR I-01189

C-8991 Shearson Lehmann Hutton Inc v TVB Treuhandgesellschaft fuumlr

Vermoumlgensverwaltung und Beteiligungen mbH [1993] ECR I-00139

C-26995 Benincasa [1997] ECR I-3767

Joined Cases C-24098 to C-24498 Oceacuteano Grupo Editorial and Salvat

Editores [2000] ECR I-4941

- 3 -

Directive of the European Parliament and of the Council 200265 concerning the

distance marketing of consumer financial services and amending Council Directive

90619EEC and Directives 977EC and 9827EC [2002] OJ L 27116-24

Directive of the European Parliament and of the Council 200371EC on the

Prospectus to be Published when Securities are Offered to the Public or Admitted to

Trading [2003] OJ L 34564

Directive of the European Parliament and of the Council 200439EC on Markets in

Financial Instruments amending Council Directives 85611EEC and 936EEC and

Directive 200012EC of the European Parliament and the Council and Repealing

Council Directive 9322EEC [2004] OJ L 1451

Directive of the European Parliament and of the Council 200529 concerning unfair

business-to-consumer commercial practices in the internal market and amending

Council Directive 84450EEC Directives 977EC 9827EC and 200265EC of the

European Parliament and of the Council and Regulation (EC) No 20062004 of the

European Parliament and of the Council (lsquoUnfair Commercial Practices Directiversquo)

[2005] OJ L 14922-39

Commission Directive 200673EC implementing Directive 200439EC of the

European Parliament and of the Council as regards organisational requirements and

operating conditions for investment firms and defined terms for the purposes of that

Directive [2006] OJ L 24126-5

Directive of the European Parliament and of the Council 200764EC on payment

services in the internal market amending Directives 977EC 200265EC

200560EC and 200648EC and repealing Directive 975EC [2007] OJ L 3191

Directive of the European Parliament and of the Council 200848EC on credit

agreements for consumers and repealing Council Directive 87102EEC [2008] OJ L

13366

Directive of the European Parliament and of the Council 200965EC on the

Coordination of Laws Regulations and Administrative Provisions relating to

Undertakings for Collective Investment in Transferable Securities (Recast) [2009] OJ

L 30232

Directive of the European Parliament and of the Council 201183 on consumer rights

amending Council Directive 9313EEC and Directive 199944EC of the European

Parliament and of the Council and repealing Council Directive 85577EEC and

- 4 -

Directive 977EC of the European Parliament and of the Council [2011] OJ L 30464-

88

13 Commission documents

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo COM (2006) 744

final

Commission lsquoCommunication from the Commission to the Council the European

Parliament and the European Economic and Social Committee - EU Consumer Policy

strategy 2007-2013 - Empowering consumers enhancing their welfare effectively

protecting them SEC(2007) 321 SEC(2007) 322 SEC(2007) 323 COM (2007)

0099 final

Viviane Reding lsquoEuropean Commission seeks contract law solutions to smooth Single

Market for consumers and businessersquo (Brussels July 1st 2010) IP10872

httpeuropaeurapidpressReleasesActiondoreference=IP10872ampformat=HTMLamp

aged=1amplanguage=ENampguiLanguage=fr accessed the 10th

May 2012

Commission lsquoProposal for a Regulation of the European Parliament and of the

Council on a Common European Sales Lawrsquo COM (2011) 635 final

14 Other

Brussels Convention on jurisdiction and the enforcement of judgments in civil and

commercial matters [1968] OJ L 2990032-0042

2 Jurisprudence

21 Court of Justice of the European Union

C-15077 Bertrand v Paul Ott KG [1978] ECR-01431

C-12078 Rewe-Zentral AG v Bundesmonopolverwaltung fuumlr Branntwein [1979] ECR

649

C-12185 Conegate Limited v HM Customs amp Excise [1986] ECR 1007

C-36189 Criminal proceedings v Patrice Di Pinto [1991] ECR I-01189

C-8991 Shearson Lehmann Hutton Inc v TVB Treuhandgesellschaft fuumlr

Vermoumlgensverwaltung und Beteiligungen mbH [1993] ECR I-00139

C-26995 Benincasa [1997] ECR I-3767

Joined Cases C-24098 to C-24498 Oceacuteano Grupo Editorial and Salvat

Editores [2000] ECR I-4941

- 4 -

Directive 977EC of the European Parliament and of the Council [2011] OJ L 30464-

88

13 Commission documents

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo COM (2006) 744

final

Commission lsquoCommunication from the Commission to the Council the European

Parliament and the European Economic and Social Committee - EU Consumer Policy

strategy 2007-2013 - Empowering consumers enhancing their welfare effectively

protecting them SEC(2007) 321 SEC(2007) 322 SEC(2007) 323 COM (2007)

0099 final

Viviane Reding lsquoEuropean Commission seeks contract law solutions to smooth Single

Market for consumers and businessersquo (Brussels July 1st 2010) IP10872

httpeuropaeurapidpressReleasesActiondoreference=IP10872ampformat=HTMLamp

aged=1amplanguage=ENampguiLanguage=fr accessed the 10th

May 2012

Commission lsquoProposal for a Regulation of the European Parliament and of the

Council on a Common European Sales Lawrsquo COM (2011) 635 final

14 Other

Brussels Convention on jurisdiction and the enforcement of judgments in civil and

commercial matters [1968] OJ L 2990032-0042

2 Jurisprudence

21 Court of Justice of the European Union

C-15077 Bertrand v Paul Ott KG [1978] ECR-01431

C-12078 Rewe-Zentral AG v Bundesmonopolverwaltung fuumlr Branntwein [1979] ECR

649

C-12185 Conegate Limited v HM Customs amp Excise [1986] ECR 1007

C-36189 Criminal proceedings v Patrice Di Pinto [1991] ECR I-01189

C-8991 Shearson Lehmann Hutton Inc v TVB Treuhandgesellschaft fuumlr

Vermoumlgensverwaltung und Beteiligungen mbH [1993] ECR I-00139

C-26995 Benincasa [1997] ECR I-3767

Joined Cases C-24098 to C-24498 Oceacuteano Grupo Editorial and Salvat

Editores [2000] ECR I-4941

- 5 -

Joined cases C-54199 and C-54299 Cape Snc v Idealservice Srl and Idealservice MN

RE Sas v OMAI Srl [2001] ECR I-9049

C-9600 Rudolf Gabriel [2002] ECR I-06367

C-46401 Johann Gruber v Bay Wa AG [2005] ECR I-00439

Case C-16805 Mostaza Claro [2006] ECR I-10421

C-4008 Asturcom Telecomunicaciones SL v Cristina Rodriacuteguez Nogueira [2009]

ECR I-09579

22 National Case Law

221 English Case Law

R amp B Customs Ltd v United Dominions Trust Ltd (1988) 1 WLR 321

Stevenson v Rogers (1999) 1 All ER 613

222 French Case Law

Cass 1re

civ 28 April 1987 Bull Civ I no 134

Cass 1re

civ 24 January 1995 Bull Civ I no 54

Cass 1re

civ 15 March 2005 Bull Civ 2005 I no 135

Cass 1re

civ 23 June 2011 Syndicat des coproprieacutetaires du 68 rue Albert c

Somaillet Jurisdata no 2011-012279

3 Literature

31 Books and book chapters

Costa O and Magnette P Une Europe des eacutelites Reacuteflexions sur la fracture

deacutemocratique de lUnion europeacuteenne (Editions de lrsquoUniversiteacute de Bruxelles 2007)

Ferrier D La protection des consommateurs (Dalloz 1996)

Howells G G Micklitz H-W Wilhelmsson T European Fair Trading Law The

Unfair Commercial Practices Directive (Ashgate 2006) 65

Mazeaud D lsquoDroit commun du contrat et droit de la consommationrsquo in Meacutelanges

Calais-Auloy (Dalloz 2004)

Payet M-S Droit de le concurrence et droit de la consommation (Dalloz 2001)

Stuyck J and Schulze R Towards European Contract Law (Sellier European Law

Publishers 2011)

- 6 -

32 Journal articles

Barral I lsquoConsumers and New Technologies Information Requirements in E-

Commerce and New Contracting Practices in the Internetrsquo (2008-2009) 27 Penn St

Intrsquol L Rev 609

Becher S lsquoA ldquoFair Contractsrdquo Approval Mechanism Reconciling Consumer Contracts

an Conventional Contract Lawrsquo (2009) Vol 42 University of Michigan Journal of Law

Reform 747

Calais-Auloy J lsquoLa notion de consommateur en droit franccedilais et en droit

communautairersquo in Luc Theacutevenoz and Norbert Reich (dir) Liber amicorum Bernd

Stauder Droit de la consommation (Collection Geneacutevoise Nomas Schulthess

Geneva 2006)

Cherednychenko O lsquoThe Regulation of Retail Investment Services in the EU

Towards the Improvement of Investor Rights (February 2010) Vol 33 No 4 Journal

of Consumer Policy 403

Dacheux E lsquoRapprocher lrsquoEurope des citoyens une neacutecessiteacute Analyse critique de la

politique de communicationdes institutions europeacuteennesrsquo (2002) 18 Recherches en

Communication 1

Guillemard S lsquoLe laquo cyber consommateur raquo est mort vive lrsquoadheacuterent raquorsquo (2004) 1 JDI ndash

Clunet

Hatzis A N lsquoAn Offer You Cannot Negotiate Some Thoughts on the Economics of

Standard Form Consumer Contractsrsquo in Hugh Collins (ed) Standard Contract Terms

in Europe A Basis for and a Challenge to European Contract Law (Wolters Kluwer

Law amp Business Private Law in European Context Series Vol 15 2008) 45

Hondius E lsquoThe protection of the Weak Party in a Harmonised European Contract

Law A Synthesisrsquo (2004) 27 Journal of Consumer Policy 245

Johnston A and Unberath H lsquoThe Double-Headed Approach of the ECJ Concerning

Consumer Protectionrsquo (2007) 44 Common Market Law Review 1237

Laffineur J lsquoLa proposition de directive du Parlement europeacuteen et du Conseil relative

aux droits des consommateurs du 8 octobre 2008rsquo (2008) 81 DCCR

Leveneur L lsquoContrats entre professionnels et leacutegislations des clauses abusivesrsquo (April

1996) Contrats concurrence consommation 1

- 6 -

32 Journal articles

Barral I lsquoConsumers and New Technologies Information Requirements in E-

Commerce and New Contracting Practices in the Internetrsquo (2008-2009) 27 Penn St

Intrsquol L Rev 609

Becher S lsquoA ldquoFair Contractsrdquo Approval Mechanism Reconciling Consumer Contracts

an Conventional Contract Lawrsquo (2009) Vol 42 University of Michigan Journal of Law

Reform 747

Calais-Auloy J lsquoLa notion de consommateur en droit franccedilais et en droit

communautairersquo in Luc Theacutevenoz and Norbert Reich (dir) Liber amicorum Bernd

Stauder Droit de la consommation (Collection Geneacutevoise Nomas Schulthess

Geneva 2006)

Cherednychenko O lsquoThe Regulation of Retail Investment Services in the EU

Towards the Improvement of Investor Rights (February 2010) Vol 33 No 4 Journal

of Consumer Policy 403

Dacheux E lsquoRapprocher lrsquoEurope des citoyens une neacutecessiteacute Analyse critique de la

politique de communicationdes institutions europeacuteennesrsquo (2002) 18 Recherches en

Communication 1

Guillemard S lsquoLe laquo cyber consommateur raquo est mort vive lrsquoadheacuterent raquorsquo (2004) 1 JDI ndash

Clunet

Hatzis A N lsquoAn Offer You Cannot Negotiate Some Thoughts on the Economics of

Standard Form Consumer Contractsrsquo in Hugh Collins (ed) Standard Contract Terms

in Europe A Basis for and a Challenge to European Contract Law (Wolters Kluwer

Law amp Business Private Law in European Context Series Vol 15 2008) 45

Hondius E lsquoThe protection of the Weak Party in a Harmonised European Contract

Law A Synthesisrsquo (2004) 27 Journal of Consumer Policy 245

Johnston A and Unberath H lsquoThe Double-Headed Approach of the ECJ Concerning

Consumer Protectionrsquo (2007) 44 Common Market Law Review 1237

Laffineur J lsquoLa proposition de directive du Parlement europeacuteen et du Conseil relative

aux droits des consommateurs du 8 octobre 2008rsquo (2008) 81 DCCR

Leveneur L lsquoContrats entre professionnels et leacutegislations des clauses abusivesrsquo (April

1996) Contrats concurrence consommation 1

- 7 -

Leveneur L lsquoProposition de directive relative aux droits des consommateurs recul de

la protection des acheteurs en Francersquo (2009) Contrats Concurrence Consommation

Repegravere 8

Luczak A lsquoEvolution of the Consumer Protection Law in the Light of the Proposal for

a Horizontal Directive on Consumer Rights and Rome I Regulationrsquo (2011) Vol 12

Wroclaw Review of Law Administration amp Economics 121 125

Mak V lsquoStandards of Protection In Search of the ldquoAverage Consumerrdquo of EU Law in

the Proposal for a Consumer Rightes Directiversquo (June 17 2010) 18 European Review

of Private Law

Paisant G lsquoLe consommateur proteacutegeacute par la directive du 5 avril 1993 sur les clauses

abusives est une personne physiquersquo (March 20 2002) 12 La Semaine Juridique

Edition Geacuteneacuterale II 10047

Paisant G lsquoA la recherche du consommateur ndash Pour en finir avec lrsquoactuelle confusion

neacutee de lrsquoapplication du critegravere du ldquorapport directrdquorsquo (March 26 2003) 13 La Semaine

Juridique Edition Geacuteneacuterale I 121

Raymond G lsquoLibeacuteralisme et consommateursrsquo (November 2009) 11 Contrats

Concurrence Consommation repegravere 10

Reich N lsquoHarmonisation of European Contract Law ndash with special emphasis on

Consumer Lawrsquo (2011) China-EU Law Journal 551

Sizaire C lsquoChamp drsquoapplication du droit de la consommation et personne moralersquo

(October 2011) 10 Construction ndash Urbanisme comm 145

Steennot R lsquoProtecting Investors through Information Requirementsrsquo in S M

Kierkegaard (ed) Private Law ndash Rights Duties amp Conflicts (2010)

Stuyck J and Terryn E lsquoLe droit europeacuteen de la consummation ndash deacuteveloppements

reacutecentsrsquo (November 2007) 143 JTDE 257

Tang Z lsquoExclusive Choice of Forum Clauses and Consumer Contracts in E-

Commercersquo (October 2005) 1 Journal of Private International Law 237

Tison M lsquoDe bescherming van de belegger in het kapitaalmarktrecht de hobbelige

weg naar een Europees Ius Communersquo in Synthegraveses de droit bancaire et financier

Liber Amicorum Andreacute Bruyneel (Bruylant 2006)

Van Dam C lsquoDe gemiddelde consument in Europa een pluriforme verschijningrsquo in

D Busch en H Schelhaas (red) VergelijkenderWijs - Promoti-bundel Prof mr EH

Hondius (Deventer Kluwer 2007) 59

- 8 -

33 Web ressources

Basedow J Christiandl G Doralt W Fornasier M Illmer M Kleinschmidt J Martens

S A E Roumlsler H Schmidt J P and Zimmermann R lsquoPolicy Options for Progress

towards a European Contract Law ndash Comments on the issues raised in the Green Paper

from the Commission of 1 July 2010 COM (2010) 348 finalrsquo (2011) Max Planck

Private Law Research Paper ndeg 112 1 31 para 71

httppapersssrncomsol3paperscfmabstract_id=1752985 accessed the 10th

May

2012

Cauffman C lsquoThe Consumer Rights Directive Adoptedrsquo (February 6 2012) 1

httpssrncomabstract=2000132 accessed the May 2012

Hesselink M W lsquoTowards a Sharp Distinction between B2B and B2C On Consumer

Commercial and General Contract Law after the Consumer Rights Directive (8th

of

June 2009) Centre for the Study of European Contract Law Working Paper Series

200906 1 21-23 httpssrncomabstract=1416126 accessed the 10th

May 2012

Hillman R A and Rachlinski J J lsquoStandard-Form Contracting in the Electronic Agersquo

(2001) 1 7 Available at httpssrncomabstract=287819 accessed the 10th

May 2012

Hilton M lsquoGlobalising consumers the history of consumerism as a socio-political

movementrsquo httpwwwpolitik-konsumdeenpdffnsb_hiltonpdf accessed the 10st

May 2012

Kingisepp M and Vaumlrv A lsquoThe Notion of Consumer in EU Consumer Acquis and the

Consumer Rights Directive ndash a Significant Change of Paradigmrsquo (2011)

httpwwwjuridicainternationaleuindexphpid=14841 accessed the 10th

May 2012

Kruithof M and Gerven W lsquoA Differentiated Approach to Client Protection The

Example of MiFIDrsquo (June 8 2010) Ghent University Financial Law Institute Working

Paper No 2010-07 Available at httpssrncomabstract=1622682 accessed the 10th

May 2012

Mak V lsquoTwo Levels One Standard The Multi-Level Regulation of Consumer

Protection in Europersquo (April 7 2010) TISCO Working Paper Series on Banking

Finance and Services No 012010 5 Available at httpssrncomabstract=1585786

or httpdxdoiorg102139ssrn1585786 accessed the 10th

May 2012

Micklitz H-W and Reich N lsquoThe Commission Proposal for a ldquoRegulation of a

Common European Sales Law (CESL)rdquo ndash Too broad or not broad enough rsquo (2012)

EUI Working Papers ndash Law 201204 14-15

- 8 -

33 Web ressources

Basedow J Christiandl G Doralt W Fornasier M Illmer M Kleinschmidt J Martens

S A E Roumlsler H Schmidt J P and Zimmermann R lsquoPolicy Options for Progress

towards a European Contract Law ndash Comments on the issues raised in the Green Paper

from the Commission of 1 July 2010 COM (2010) 348 finalrsquo (2011) Max Planck

Private Law Research Paper ndeg 112 1 31 para 71

httppapersssrncomsol3paperscfmabstract_id=1752985 accessed the 10th

May

2012

Cauffman C lsquoThe Consumer Rights Directive Adoptedrsquo (February 6 2012) 1

httpssrncomabstract=2000132 accessed the May 2012

Hesselink M W lsquoTowards a Sharp Distinction between B2B and B2C On Consumer

Commercial and General Contract Law after the Consumer Rights Directive (8th

of

June 2009) Centre for the Study of European Contract Law Working Paper Series

200906 1 21-23 httpssrncomabstract=1416126 accessed the 10th

May 2012

Hillman R A and Rachlinski J J lsquoStandard-Form Contracting in the Electronic Agersquo

(2001) 1 7 Available at httpssrncomabstract=287819 accessed the 10th

May 2012

Hilton M lsquoGlobalising consumers the history of consumerism as a socio-political

movementrsquo httpwwwpolitik-konsumdeenpdffnsb_hiltonpdf accessed the 10st

May 2012

Kingisepp M and Vaumlrv A lsquoThe Notion of Consumer in EU Consumer Acquis and the

Consumer Rights Directive ndash a Significant Change of Paradigmrsquo (2011)

httpwwwjuridicainternationaleuindexphpid=14841 accessed the 10th

May 2012

Kruithof M and Gerven W lsquoA Differentiated Approach to Client Protection The

Example of MiFIDrsquo (June 8 2010) Ghent University Financial Law Institute Working

Paper No 2010-07 Available at httpssrncomabstract=1622682 accessed the 10th

May 2012

Mak V lsquoTwo Levels One Standard The Multi-Level Regulation of Consumer

Protection in Europersquo (April 7 2010) TISCO Working Paper Series on Banking

Finance and Services No 012010 5 Available at httpssrncomabstract=1585786

or httpdxdoiorg102139ssrn1585786 accessed the 10th

May 2012

Micklitz H-W and Reich N lsquoThe Commission Proposal for a ldquoRegulation of a

Common European Sales Law (CESL)rdquo ndash Too broad or not broad enough rsquo (2012)

EUI Working Papers ndash Law 201204 14-15

- 9 -

httppapersssrncomsol3paperscfmabstract_id=2013183 accessed the 10th

May

2012

Rouja S lsquoDirective droit des consommateurs projet et proposition de loi le point sur

les mesures en matiegravere dacutee-commercersquo (April 6 2011)

httpwwwjuriscomnetactuvisuphpID=1308 accessed the 10th

May 2012

Say J-B Traiteacute drsquoeacuteconomie politique Livre III De la consommation des richesses

[1803] 7 Available on httpsbisrvntwebuqaccaarchivage13868104t3pdf accessed

10th

May 2012

Schulte-Noumllke H (ed) in cooperation with Twigg-Flesner C and Ebers M Annotated

Compendium including a comparative analysis of the Community consumer acquis

(Universitaumlt Bielefeld April 2007) 1 215-216

Available at

httpeceuropaeuconsumerscons_intsafe_shopacquiscomp_analysis_enpdf

accessed the 10th

May 2012

Twigg-Flesner C lsquoComment The Future of EU Consumer Law ndash The End of

Harmonisationrsquo (December 15 2010) in Mike Kenny and James Devenney

European Consumer Protection ndash Theory and Practice (Cambridge University Press

Forthcoming) Available at httpssrncomabstract=1786717

Von Bar C Clive E and Schulte Noumllke H (eds) Principles Definitions and Model

Rules of European Private Law Draft Common Frame of Reference (DCFR)

(Munich Sellier 2009) available at httpeceuropaeujusticecontractfileseuropean-

private-law_enpdf accessed the 10th

May 2012

Williams A lsquoSMEs balk at new Consumer Rights Directiversquo (27 June 2011)

httpwwweuractivcomconsumerssmes-balk-new-consumer-rights-directive-news-

505974 accessed the 10th

May 2012

httpwwwdellcombefrentreprisesp~ck=mn accessed the 10th

May 2012

httpwwwlesoirbeservicesabonnementsupport=numeriqueampcode=numeriqueampap

p= accessed the 10th

May 2012

httpwwwlesoirbeservicesabonnementformulepage=entreprises accessed the

10th

May 2012

httpwwwcoplacleancomconsultation-gratuite accessed the 10th

May 2012

httpwwwseficleanbedevisphp accessed the 10th

May 2012

httpwwwsitabedirect_offerte_aanvargen_frhtml accessed the 10th

May 2012

- 10 -

Introduction

lsquoConsumption is the sole end and purpose of all production and the interest of the producer

ought to be attended to only so far as it may be necessary for promoting that of the consumerrsquo

said Adam Smith from a purely economic perspective

The view that we take in this paper is different We would like to analyse the notion of

consumer from a legal perspective More particularly the idea is to determine the ratio legis

of the consumer protection our assumption being that the EU legal order does not conform

itself to that rationale Adam Smithrsquos quotation precisely is not irrelevant with regard to that

problem Indeed our thinking is that EUrsquos inspiration may well come from the economic

theory Be it the case or not it remains certain that the political and the macro-economic

situation has played a crucial role when the definition of the consumer was elaborated We

can effectively see that behind the promises of Commissionrsquos senior officials to devote more

attention on the lsquosocialrsquo aspect of the EU the initial economic purpose of the Union is still the

main guideline

Next to this political debate as regards more specifically some legal issues within this topic

the picture is not clearer Some curious exceptions are present in the landscape and the share

of competences between the EU and the Member States is not always easy to determine

All those clarifications are the necessary preliminaries to reach the ultimate purpose of this

paper that is the proposal of several equitable solutions as a reaction to the rather illogical

legal approach adopted by the EU in its consumer protection policy However before getting

there it will be first necessary to determine what is the exact ratio legis of consumer

protection (Chapter 1) Afterwards we will shed some light on the approach that the EU has

adopted with respect to that issue The possible origin of that approach as well as its main

advantage the legal certainty will also be discussed within this chapter (Chapter 2)

Subsequently we will assess the freedom from which Member States still dispose as regards

the determination of the scope of the consumer protection (Chapter 3) The next chapter will

present the interesting approach that the EU has adopted in the investment area In this

chapter we will also introduce the idea of a lsquopolicy of differentiationrsquo that will be strongly

recommended in the fifth chapter (Chapter 4) The accomplishment of our reflections on the

current EU approach the situation in some Member States and some other theories will be

exposed in the fifth chapter that will contain all our proposals as so many ways to improve

EUrsquos consumer protection policy Basically it is an exercise that consists in adding more

equity to the current EU approach that can boast only about its legal certainty (Chapter 5)

The last chapter will present a more political analysis of the situation that will namely serve to

foresee whether there are hopes within EUrsquos future perspectives that our suggestions may be

somehow met (Chapter 6)

- 11 -

Chapter 1 ndash On the track of the ratio legis of the consumer

protection

Section 1 ndash The ratio legis in general

Determining the underlying reasoning (ratio legis) of a law is in our view essential to

assessing its coherence and justification in a democratic society For the purposes of this

paper we wish to determine the reasoning not of a specific piece of legislation but rather an

entire body of laws namely consumer protection legislation in the EU

Our methodology is simple We have used the definition of consumer as our starting point as

this is the fundamental concept that underpins all consumer protection legislation Indeed the

question of who shall be considered a consumer can only be legitimately answered by

analysing the ratio legis of consumer protection law

The protection discussed below derives mainly from an express or implied contract between

the consumer on the one hand and a professional merchant or trader on the other hand1 As

such it can be stated that the consumer protection in general2 of a derogatory regime to the

common contract law Hence in order to understand the problem adequately it is first

necessary to take a look at the rationale underlying such derogatory regimes (Section 2)

before turning to the reasons that have prompted legislatures to provide specific protection for

consumers (Section 3)

Section 2 ndash The paradigm of the lsquoweaker partyrsquo

As far back as Roman Law traditions lsquofreedom of contractrsquo was an important concept Since

then its influence has only grown to such a point that it may be said that our modern Civil

Codes are to a large extent inspired from that principle that is comparable to a paradigm

through which the general contract law philosophy is to be understood

There are two underlying sub-principles to freedom of contract (i) the equality of the

contracting parties and (ii) the autonomy of the parties3 These principles go hand in hand

with the suppletive nature of the greatest part of any Civil Code allowing the parties to

contract on basically anything and in any way4

1 Indeed as Gilles Paisant wisely notices areas like health or security are excluded from the debate because

everyone must be treated in an equal manner with this respect Remain therefore the discussion on the protection

of the economic interests in the context of a contractual relationship (Gilles Paisant lsquoA la recherche du

consommateur ndash Pour en finir avec lrsquoactuelle confusion neacutee de lrsquoapplication du critegravere du ldquorapport directrdquorsquo

(March 26 2003) 13 La Semaine Juridique Edition Geacuteneacuterale I 121 paras 2-4) 2 It is true that consumer protection may concern the non-contractual obligations and procedural issues as well

but these issues also arise from a contractual or at least pre-contractual configuration between the parties As

such it is relevant to take as a starting point the comparison between the consumer law and the common contract

law 3 Immaculada Barral lsquoConsumers and New Technologies Information Requirements in E-Commerce and New

Contracting Practices in the Internetrsquo (2008-2009) 27 Penn St Intrsquol L Rev 609 610 4 Some classic limits do exist naturally Suffice to mention here the necessity to be capable to reach a valid

consent on a licit object that are understood more or less in the same way in all the Member States

- 12 -

However this laissez-faire approach could not stand up for long to the reality of contractual

relationships That is the reason why over the last century a parallel paradigm has gained

importance in European legal orders the need to protect the weaker party Some common

examples of this paradigm are the rules designed to protect consumers employees tenants

etc5 The question arises as to whether these systems of derogations will continue to spread

over time since new categories of so-called weak parties appear in the legal landscape6 While

the answer to this question is not clear it is clear that derogations as the name implies are an

exception rather than the rule and secondly must conform to the reason for which they were

enacted in the first place

In general many reasons can justify the establishment of special rules designed to protect a

weaker party The superiority of the lsquostrongerrsquo party over the lsquoweakerrsquo party can be analysed

based on technical legal intellectual psychological or yet economic characteristics

However in our opinion not all these grounds should be granted the same degree of

importance when considering the scope of a system of derogations We are thinking in

particular of the fields of psychology and economics As will be demonstrated further on

when defining the notion of consumer in consumer protection law reference should not be

made to economic or psychological characteristics Indeed although economic or

psychological grounds may be relevant when it comes to explaining a partys weakness such

characteristics cannot necessarily be used to determine the weaker party in law Hence for the

purpose of defining the term consumer we turn our attention to technical and legal grounds

Section 3 ndash The consumer as a weaker party

As the title of this paper indicates our focus will be riveted on the study of the consumer as a

weaker party Even though the consumer movement in itself had started in different

circumstances and already before the Second World War7 the legislative approach towards

the consumers as the weaker contracting party was only enacted in most European countries

in the early seventies as a response to the spread of adhesion contracts Indeed contrary to

the principle of freedom of contract which assumes a balance between the contracting parties

the weak consumer paradigm is based on the knowledge that contracts are drafted by

merchants to their advantage meaning the contracting parties do not have equal bargaining

power8 As such since the Civil Codes proved inadequate to protect consumers consumer

protection legislation was introduced for the purpose of (re-)establishing equilibrium in the

contracting relationship at all its levels between professionals and the consumers9

Based on the foregoing it appears that the legal rationale for consumer protection is very

linked to the loss of consumers bargaining power as a result of which they are unable to act

freely with regard to the substance conclusion and execution of a contract Logically the

notion of consumer should thus include all those persons who are precluded from

autonomously exercising their free will with regard to a contract they have entered into This

5 Ewoud Hondius lsquoThe protection of the Weak Party in a Harmonised European Contract Law A Synthesisrsquo

(2004) 27 Journal of Consumer Policy 245 6 Ibid Prof Hondius is of the opinion that while some new categories will certainly come to existence others

may loose of their importance 7 Matthew Hilton lsquoGlobalising consumers the history of consumerism as a socio-political movementrsquo

httpwwwpolitik-konsumdeenpdffnsb_hiltonpdf accessed the 10st May 2012

8 Barral (n 3) 610

9 Paisant lsquoA la recherche du consommateurrsquo (n 1) para 5

- 11 -

Chapter 1 ndash On the track of the ratio legis of the consumer

protection

Section 1 ndash The ratio legis in general

Determining the underlying reasoning (ratio legis) of a law is in our view essential to

assessing its coherence and justification in a democratic society For the purposes of this

paper we wish to determine the reasoning not of a specific piece of legislation but rather an

entire body of laws namely consumer protection legislation in the EU

Our methodology is simple We have used the definition of consumer as our starting point as

this is the fundamental concept that underpins all consumer protection legislation Indeed the

question of who shall be considered a consumer can only be legitimately answered by

analysing the ratio legis of consumer protection law

The protection discussed below derives mainly from an express or implied contract between

the consumer on the one hand and a professional merchant or trader on the other hand1 As

such it can be stated that the consumer protection in general2 of a derogatory regime to the

common contract law Hence in order to understand the problem adequately it is first

necessary to take a look at the rationale underlying such derogatory regimes (Section 2)

before turning to the reasons that have prompted legislatures to provide specific protection for

consumers (Section 3)

Section 2 ndash The paradigm of the lsquoweaker partyrsquo

As far back as Roman Law traditions lsquofreedom of contractrsquo was an important concept Since

then its influence has only grown to such a point that it may be said that our modern Civil

Codes are to a large extent inspired from that principle that is comparable to a paradigm

through which the general contract law philosophy is to be understood

There are two underlying sub-principles to freedom of contract (i) the equality of the

contracting parties and (ii) the autonomy of the parties3 These principles go hand in hand

with the suppletive nature of the greatest part of any Civil Code allowing the parties to

contract on basically anything and in any way4

1 Indeed as Gilles Paisant wisely notices areas like health or security are excluded from the debate because

everyone must be treated in an equal manner with this respect Remain therefore the discussion on the protection

of the economic interests in the context of a contractual relationship (Gilles Paisant lsquoA la recherche du

consommateur ndash Pour en finir avec lrsquoactuelle confusion neacutee de lrsquoapplication du critegravere du ldquorapport directrdquorsquo

(March 26 2003) 13 La Semaine Juridique Edition Geacuteneacuterale I 121 paras 2-4) 2 It is true that consumer protection may concern the non-contractual obligations and procedural issues as well

but these issues also arise from a contractual or at least pre-contractual configuration between the parties As

such it is relevant to take as a starting point the comparison between the consumer law and the common contract

law 3 Immaculada Barral lsquoConsumers and New Technologies Information Requirements in E-Commerce and New

Contracting Practices in the Internetrsquo (2008-2009) 27 Penn St Intrsquol L Rev 609 610 4 Some classic limits do exist naturally Suffice to mention here the necessity to be capable to reach a valid

consent on a licit object that are understood more or less in the same way in all the Member States

- 12 -

However this laissez-faire approach could not stand up for long to the reality of contractual

relationships That is the reason why over the last century a parallel paradigm has gained

importance in European legal orders the need to protect the weaker party Some common

examples of this paradigm are the rules designed to protect consumers employees tenants

etc5 The question arises as to whether these systems of derogations will continue to spread

over time since new categories of so-called weak parties appear in the legal landscape6 While

the answer to this question is not clear it is clear that derogations as the name implies are an

exception rather than the rule and secondly must conform to the reason for which they were

enacted in the first place

In general many reasons can justify the establishment of special rules designed to protect a

weaker party The superiority of the lsquostrongerrsquo party over the lsquoweakerrsquo party can be analysed

based on technical legal intellectual psychological or yet economic characteristics

However in our opinion not all these grounds should be granted the same degree of

importance when considering the scope of a system of derogations We are thinking in

particular of the fields of psychology and economics As will be demonstrated further on

when defining the notion of consumer in consumer protection law reference should not be

made to economic or psychological characteristics Indeed although economic or

psychological grounds may be relevant when it comes to explaining a partys weakness such

characteristics cannot necessarily be used to determine the weaker party in law Hence for the

purpose of defining the term consumer we turn our attention to technical and legal grounds

Section 3 ndash The consumer as a weaker party

As the title of this paper indicates our focus will be riveted on the study of the consumer as a

weaker party Even though the consumer movement in itself had started in different

circumstances and already before the Second World War7 the legislative approach towards

the consumers as the weaker contracting party was only enacted in most European countries

in the early seventies as a response to the spread of adhesion contracts Indeed contrary to

the principle of freedom of contract which assumes a balance between the contracting parties

the weak consumer paradigm is based on the knowledge that contracts are drafted by

merchants to their advantage meaning the contracting parties do not have equal bargaining

power8 As such since the Civil Codes proved inadequate to protect consumers consumer

protection legislation was introduced for the purpose of (re-)establishing equilibrium in the

contracting relationship at all its levels between professionals and the consumers9

Based on the foregoing it appears that the legal rationale for consumer protection is very

linked to the loss of consumers bargaining power as a result of which they are unable to act

freely with regard to the substance conclusion and execution of a contract Logically the

notion of consumer should thus include all those persons who are precluded from

autonomously exercising their free will with regard to a contract they have entered into This

5 Ewoud Hondius lsquoThe protection of the Weak Party in a Harmonised European Contract Law A Synthesisrsquo

(2004) 27 Journal of Consumer Policy 245 6 Ibid Prof Hondius is of the opinion that while some new categories will certainly come to existence others

may loose of their importance 7 Matthew Hilton lsquoGlobalising consumers the history of consumerism as a socio-political movementrsquo

httpwwwpolitik-konsumdeenpdffnsb_hiltonpdf accessed the 10st May 2012

8 Barral (n 3) 610

9 Paisant lsquoA la recherche du consommateurrsquo (n 1) para 5

- 12 -

However this laissez-faire approach could not stand up for long to the reality of contractual

relationships That is the reason why over the last century a parallel paradigm has gained

importance in European legal orders the need to protect the weaker party Some common

examples of this paradigm are the rules designed to protect consumers employees tenants

etc5 The question arises as to whether these systems of derogations will continue to spread

over time since new categories of so-called weak parties appear in the legal landscape6 While

the answer to this question is not clear it is clear that derogations as the name implies are an

exception rather than the rule and secondly must conform to the reason for which they were

enacted in the first place

In general many reasons can justify the establishment of special rules designed to protect a

weaker party The superiority of the lsquostrongerrsquo party over the lsquoweakerrsquo party can be analysed

based on technical legal intellectual psychological or yet economic characteristics

However in our opinion not all these grounds should be granted the same degree of

importance when considering the scope of a system of derogations We are thinking in

particular of the fields of psychology and economics As will be demonstrated further on

when defining the notion of consumer in consumer protection law reference should not be

made to economic or psychological characteristics Indeed although economic or

psychological grounds may be relevant when it comes to explaining a partys weakness such

characteristics cannot necessarily be used to determine the weaker party in law Hence for the

purpose of defining the term consumer we turn our attention to technical and legal grounds

Section 3 ndash The consumer as a weaker party

As the title of this paper indicates our focus will be riveted on the study of the consumer as a

weaker party Even though the consumer movement in itself had started in different

circumstances and already before the Second World War7 the legislative approach towards

the consumers as the weaker contracting party was only enacted in most European countries

in the early seventies as a response to the spread of adhesion contracts Indeed contrary to

the principle of freedom of contract which assumes a balance between the contracting parties

the weak consumer paradigm is based on the knowledge that contracts are drafted by

merchants to their advantage meaning the contracting parties do not have equal bargaining

power8 As such since the Civil Codes proved inadequate to protect consumers consumer

protection legislation was introduced for the purpose of (re-)establishing equilibrium in the

contracting relationship at all its levels between professionals and the consumers9

Based on the foregoing it appears that the legal rationale for consumer protection is very

linked to the loss of consumers bargaining power as a result of which they are unable to act

freely with regard to the substance conclusion and execution of a contract Logically the

notion of consumer should thus include all those persons who are precluded from

autonomously exercising their free will with regard to a contract they have entered into This

5 Ewoud Hondius lsquoThe protection of the Weak Party in a Harmonised European Contract Law A Synthesisrsquo

(2004) 27 Journal of Consumer Policy 245 6 Ibid Prof Hondius is of the opinion that while some new categories will certainly come to existence others

may loose of their importance 7 Matthew Hilton lsquoGlobalising consumers the history of consumerism as a socio-political movementrsquo

httpwwwpolitik-konsumdeenpdffnsb_hiltonpdf accessed the 10st May 2012

8 Barral (n 3) 610

9 Paisant lsquoA la recherche du consommateurrsquo (n 1) para 5

- 13 -

loss of bargaining power can certainly be attributed to the dependence on what professionals

have to offer10

Consumersrsquo weak position is yet worsened owing to a strong asymmetry of

information between the parties11

Immaculada Barral associates this asymmetry with the

concept of lsquonon-expertrsquo and defends the view that the consumer should be any party that is

not an expert in the subject matter to which the contract relates12

Notwithstanding all these elements the European legislator seems curiously to have departed

from this reasoning and opted for another approach which will be analysed in the next

chapter

10

As explained in the previous paragraph although this is typically an economic justification economy and its

definition of the consumer is not though necessarily relevant to define the consumer This idea is developed in

the paragraph 3 a) of the chapter 2 of this chapter 11

Shmuel Becher argues that this situation is detrimental for both partiesrsquo(lsquoA ldquoFair Contractsrdquo Approval

Mechanism Reconciling Consumer Contracts an Conventional Contract Lawrsquo (2009) Vol 42 University of

Michigan Journal of Law Reform 747 748-749 also available on httpssrncomabstract=1015736 accessed the

10st May 2012)

12 Barral (n 3) 611

- 14 -

Chapter 2 ndash The definition of the consumer under EU Law

Section 1 ndash General rule and minor exception

The EU consumer law acquis defines a consumer as a natural person acting for purposes that

are outside the scope of his or her trade business or profession The definitions vary slightly

from one instrument to another but on the whole these differences are insignificant Hence

with regard to the definition all the consumer law EU Directives13

as well as the procedural

and the conflict of laws Regulationsrsquo14

provisions relating to consumer law are composed of

two elements The consumer is

- a natural person

- acting for non professionalcommercialbusiness purposes

Only one exception can be found in EU law specifically in Directive 90314 on package

travel package holidays and package tours15

which defines a consumer in the following

terms

Consumerrsquo means the person who takes or agrees to take the package (the principal

contractor) or any person on whose behalf the principal contractor agrees to purchase

the package (the other beneficiaries) or any person to whom the principal contractor

or any of the other beneficiaries transfers the package (the transferee)

There is no reference to a lsquoprofessional purposersquo which is the key criterion in all the other

instruments Thus a consumer is any person who buys a (holiday) package regardless of

whether it is for business or private purposes The legislator has simply considered that in this

13

Council Directive 85577EEC to protect the consumer in respect of contracts negotiated away from business

premises [1985] OJ L 3720031-0033 art 2 Council Directive 87102EEC for the approximation of the laws

regulations and administrative provisions of the Member States concerning consumer credit [1987] OJ L

0420048-0053 art 1(2)(a) Council Directive 9313EEC on unfair terms in consumer contract [1993] OJ L

0950029-0034 art 2(b) Directive of the European Parliament and the Council 9447EC on the protection of

purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable

properties on a timeshare basis [1994] OJ L 2800083-0087 art 2 Directive of the European Parliament and of

the Council 977EC on the protection of consumers in respect of distance contracts [1997] OJ L 1440019-0027

art 2(2) Directive of the European Parliament and of the Council 986EC on consumer protection in the

indication of the prices of products offered to consumers [1998] OJ L 0800027-0031 art 2(e) Directive of the

European Parliament and of the Council 199944EC on certain aspects of the sale of consumer goods and

associated guarantees [1999] OJ L 1710012-0016 art 1(2)(a) Directive of the European Parliament and of the

Council 200031 on certain legal aspects of information society services in particular electronic commerce in

the Internal Market (Directive on electronic commerce) [2000] OJ L 1781-16 art 2(e) Directive of the

European Parliament and of the Council 200265 concerning the distance marketing of consumer financial

services and amending Council Directive

90619EEC and Directives 977EC and 9827EC [2002] OJ L 27116-24 art 2(d) Directive of the European

Parliament and of the Council 200529 concerning unfair business-to-consumer commercial practices in the

internal market and amending Council Directive 84450EEC Directives 977EC 9827EC and 200265EC of

the European Parliament and of the Council and Regulation (EC) No 20062004 of the European Parliament and

of the Council(lsquoUnfair Commercial Practices Directiversquo) [2005] OJ L 14922-39 art 2(a) 14

Council Regulation 442001 on jurisdiction and the recognition and enforcement of judgments in civil and

commercial matters (Brussels I) [2001] OJ L 121 art 15-17 Regulation of the European Parliament and of the

Council on the law applicable to contractual obligations (Rome I) [2008] OJ L 1776-16 art 6 15

Council Directive 90314EEC on package travel package holidays and package tours [1990] OJ L 158 art 2

- 15 -

type of transaction any buyer should be able to benefit from the provisions of the Directive

This raises some questions as to the rationale behind the definition The latter could be viewed

as the result of a reasoning following which the notion of lsquoconsumerrsquo is equal to the notion of

lsquopurchaserrsquo The consumer is then the one who consumeshellip But what if it does not Suppose

it resells the package and makes a living from doing so Obviously a consumer cannot be

identified simply as a purchaser This is probably the reason why most of the Member States

did not use the term lsquoconsumerrsquo when transposing the Directive preferring to characterise the

protected party as lsquothe travellerrsquo or lsquothe purchaser16

The conclusion that comes up

spontaneously is therefore that the European legislator has misused the notion of consumer in

this Directive

Section 2 ndash Is EU consumer law in accordance with the ratio legis

of consumer protection

With the exception of the Directive 90314 the entire acquis is coherent and aims to protect

only natural persons acting for non-professional purposes The case law of the Court of

Justice has reiterated the terms of those directives many times17

However is this position in

conformity with the ratio legis set out in the precedent section Obviously not Indeed in

most cases when someone purchases a good or service that is unrelated to his or her business

except the fact that it will be used in its lsquobusiness spherersquo that person will be in exactly the

same situation ndash in terms of weakness ndash as one who purchased the good or service for its

lsquodomestic spherersquo18

Examples are manifold a computer purchased for a lawyerrsquos home or

office an alarm system for a dentistrsquos office or home a telephone line for a restaurateurs

restaurant or home etc Exception made of tax related issues there will not be any difference

ndash and certainly not in terms of bargaining power or expertise ndash depending on whether these

contracts are concluded for domestic or business purposes

It should be noted here that the Court of Justice has recalled on more than one occasion the

rationale which is supposed to have influenced the European legislator when elaborating

consumer protection law19

In Asturcom one of the most recent consumer law cases the Court

clearly states that

The system of protection introduced by Directive 9313 is based on the idea that the

consumer is in a weak position vis-agrave-vis the seller or supplier as regards both his

bargaining power and his level of knowledge This leads to the consumer agreeing to

16

Hans Schulte-Noumllke (ed) in cooperation with Christian Twigg-Flesner and Martin Ebers Annotated

Compendium including a comparative analysis of the Community consumer acquis (Universitaumlt Bielefeld April

2007) 1 215-216

Available at httpeceuropaeuconsumerscons_intsafe_shopacquiscomp_analysis_enpdf accessed the 10th

May 2012 17

See namely C-15077 Bertrand v Paul Ott KG [1978] ECR-01431 and C-8991 Shearson Lehmann Hutton Inc

v TVB Treuhandgesellschaft fuumlr Vermoumlgensverwaltung und Beteiligungen mbH [1993] ECR I-00139 18

In support of this view see Didier Ferrier La protection des consommateurs (Dalloz 1996) 14 Marie-

Steacutephane Payet Droit de le concurrence et droit de la consommation (Dalloz 2001) 65 Denis Mazeaud lsquoDroit

commun du contrat et droit de la consommationrsquo in Meacutelanges Calais-Auloy (Dalloz 2004) 707 Sylvette

Guillemard lsquoLe laquo cyber consommateur raquo est mort vive lrsquoadheacuterent raquorsquo (2004) 1 JDI ndash Clunet 7 19 19

Joined Cases C-24098 to C-24498 Oceacuteano Grupo Editorial and Salvat Editores [2000] ECR I-4941 para 25

and Case C-16805 Mostaza Claro [2006] ECR I-10421 para 25 See also our comment on Rudolf Gabriel case

(n 24)

- 15 -

type of transaction any buyer should be able to benefit from the provisions of the Directive

This raises some questions as to the rationale behind the definition The latter could be viewed

as the result of a reasoning following which the notion of lsquoconsumerrsquo is equal to the notion of

lsquopurchaserrsquo The consumer is then the one who consumeshellip But what if it does not Suppose

it resells the package and makes a living from doing so Obviously a consumer cannot be

identified simply as a purchaser This is probably the reason why most of the Member States

did not use the term lsquoconsumerrsquo when transposing the Directive preferring to characterise the

protected party as lsquothe travellerrsquo or lsquothe purchaser16

The conclusion that comes up

spontaneously is therefore that the European legislator has misused the notion of consumer in

this Directive

Section 2 ndash Is EU consumer law in accordance with the ratio legis

of consumer protection

With the exception of the Directive 90314 the entire acquis is coherent and aims to protect

only natural persons acting for non-professional purposes The case law of the Court of

Justice has reiterated the terms of those directives many times17

However is this position in

conformity with the ratio legis set out in the precedent section Obviously not Indeed in

most cases when someone purchases a good or service that is unrelated to his or her business

except the fact that it will be used in its lsquobusiness spherersquo that person will be in exactly the

same situation ndash in terms of weakness ndash as one who purchased the good or service for its

lsquodomestic spherersquo18

Examples are manifold a computer purchased for a lawyerrsquos home or

office an alarm system for a dentistrsquos office or home a telephone line for a restaurateurs

restaurant or home etc Exception made of tax related issues there will not be any difference

ndash and certainly not in terms of bargaining power or expertise ndash depending on whether these

contracts are concluded for domestic or business purposes

It should be noted here that the Court of Justice has recalled on more than one occasion the

rationale which is supposed to have influenced the European legislator when elaborating

consumer protection law19

In Asturcom one of the most recent consumer law cases the Court

clearly states that

The system of protection introduced by Directive 9313 is based on the idea that the

consumer is in a weak position vis-agrave-vis the seller or supplier as regards both his

bargaining power and his level of knowledge This leads to the consumer agreeing to

16

Hans Schulte-Noumllke (ed) in cooperation with Christian Twigg-Flesner and Martin Ebers Annotated

Compendium including a comparative analysis of the Community consumer acquis (Universitaumlt Bielefeld April

2007) 1 215-216

Available at httpeceuropaeuconsumerscons_intsafe_shopacquiscomp_analysis_enpdf accessed the 10th

May 2012 17

See namely C-15077 Bertrand v Paul Ott KG [1978] ECR-01431 and C-8991 Shearson Lehmann Hutton Inc

v TVB Treuhandgesellschaft fuumlr Vermoumlgensverwaltung und Beteiligungen mbH [1993] ECR I-00139 18

In support of this view see Didier Ferrier La protection des consommateurs (Dalloz 1996) 14 Marie-

Steacutephane Payet Droit de le concurrence et droit de la consommation (Dalloz 2001) 65 Denis Mazeaud lsquoDroit

commun du contrat et droit de la consommationrsquo in Meacutelanges Calais-Auloy (Dalloz 2004) 707 Sylvette

Guillemard lsquoLe laquo cyber consommateur raquo est mort vive lrsquoadheacuterent raquorsquo (2004) 1 JDI ndash Clunet 7 19 19

Joined Cases C-24098 to C-24498 Oceacuteano Grupo Editorial and Salvat Editores [2000] ECR I-4941 para 25

and Case C-16805 Mostaza Claro [2006] ECR I-10421 para 25 See also our comment on Rudolf Gabriel case

(n 24)

- 16 -

terms drawn up in advance by the seller or supplier without being able to influence the

content of those terms20

Despite this clear statement and awareness of the actual rationale of consumer protection the

Court strongly supports the narrow definition advanced by the European legislator21

The

question arises however as to whether there is really any room left for the Court to depart

from the text of the law considering the very narrow approach that the legislator has adopted

We will revert to this question in the fifth chapter

Taking all of the above information into account can the EU position still be justified

Section 3 ndash A possible source of inspiration and a justification for

an unstated ratio legis

sect1 ndash The influence of the economic theory

Jean-Baptiste Say the renowned French economist once said that lsquoconsumption is not the

destruction of the matter but the destruction of the utilityrsquo22

Notwithstanding the age of this

quotation it is still useful when it comes to describing the economics underpinning the notion

of consumption Indeed as regards consumers it distinguishes between the intermediate

consumers and final consumers Whereas the former ndash as its name indicates ndash is someone

standing in the middle of the production line the latter is the last link of the chain The key of

the differentiation is therefore the lsquoproduction of utilityrsquo

When considering the Brussels Conventions23

special rules on consumer contracts the Court

of Justice stated in Rudolf Gabriel that

[hellip] protection for the consumer as the contracting party deemed to be economically

weaker and less experienced in legal matters than his professional co-contractor that

those provisions cover only a private final consumer not engaged in trade or

professional activities (hellip)24

20

C-4008 Asturcom Telecomunicaciones SL v Cristina Rodriacuteguez Nogueira [2009] ECR I-09579 para 29 21

See namely C-36189 Criminal proceedings v Patrice Di Pinto [1991] ECR I-01189 para 15 Joined cases C-

54199 and C-54299 Cape Snc v Idealservice Srl and Idealservice MN RE Sas v OMAI Srl [2001] ECR I-9049

para 16 C-46401 Johann Gruber v Bay Wa AG [2005] ECR I-00439 All these cases will be analysed in more

detail in the next chapter 22

Own translation from the French lsquola consommation nrsquoest pas une destruction de matiegravere mais une destruction

drsquoutiliteacutersquo (Jean-Baptiste Say Traiteacute drsquoeacuteconomie politique Livre III De la consommation des richesses [1803]

7 Available on httpsbisrvntwebuqaccaarchivage13868104t3pdf accessed 10th

May 2012 23

Brussels Convention on jurisdiction and the enforcement of judgments in civil and commercial matters [1968]

OJ L 2990032-0042 24

Emphasis added C-9600 Rudolf Gabriel [2002] ECR I-06367 para 39 The entire reasoning of this case is

based on older cases See in particular Bertrand (n 17) para 21 Shearson Lehman Hutton (n 17) para 22

C-26995 Benincasa [1997] ECR I-3767 paras 15-17 This statement illustrates even better what was explained

in the preceding paragraph as regards the case law of the Court of Justice Indeed the paradox in the Courtrsquos

reasoning is obvious On the one hand the Court states the rationale of consumer protection (albeit imperfectly

compared to Asturcom case that we quoted in the precedent paragraph (n 20)) but then takes an enormous short-

cut skipping the entire reasoning to conclude without any explanation that only the final consumer is to be

protected

- 17 -

In our view this example illustrates the influence of economic theory on European

lawmakers who decided to grant its favours only to final consumers Indeed the criterion

used excludes any contract that is in one way or another related to the purchasers professional

activity the reason being that any purchase related directly or indirectly to the business world

contributes more or less to the lsquoproduction of utilityrsquo The belief that there might be a link

between economics and law in the mind of the EU legislator is reinforced when reading the

paragraph 17 of Benincasa case in which the Court ended up by justifying the entire

reasoning of the European law criterion on the basis of the economic weakness of consumers

It is true that economic reality creates a certain boundary line between our professional

activities and private life (eg different telephone numbers clothing modes of transportation

etc) The law reflects this division the most obvious example being tax law Indeed most

self-employed persons try to maximize professional expenses in order to reduce their taxable

income In addition it could be argued that consumer protection legislation is designed with

only the economic interests of consumers in mind as opposed to issues such as health and

security25

You may be asking yourself what this has to do with the legal rationale for consumer

protection and if it makes sense to transpose the economic approach to the weak consumer

paradigm

Based on the Court of Justices case law on the definition that the European legislator has

chosen it appears that it has lost of sight the fact that simply because the consumer is often

the economically weaker contracting party does not mean that economic theory should be

used to determine who is the weaker party in law The criteria used in economic theory to

define a consumer are completely different from those used to define a consumer in law

Whereas economy theory concludes that the final consumer is the last link in the chain of

utility or commercial cycle the reason cited in law to protect consumers is their weakness

compared to the other contracting party

We believe that one of the real issues at stake is the loss of bargaining power as to consumers

owing to the widespread use of standard form contracts Hence while it is true that bargaining

power is closely related to the economic clout of the contracting parties it still does not make

sense to rely on an economic definition of consumer to determine the relative weakness of

their position The fact that the consumerrsquos weakness can also be explained with reference to

economic or psychological grounds does not change the situation

The other aspect of weakness that has to be taken into account in a legal approach is in our

opinion the fact that consumers are in most cases not experts in the area of the product or

the service purchased Hence there is an asymmetry of information between consumers and

sellers which the law has to regulate by means of rules designed to protect the lsquonon expertrsquo

party in the contractual relationship

25

Jean Calais-Auloy lsquoLa notion de consommateur en droit franccedilais et en droit communautairersquo in Luc Theacutevenoz

and Norbert Reich (dir) Liber amicorum Bernd Stauder Droit de la consommation (Collection Geneacutevoise

Nomas Schulthess Geneva 2006) 65 66 Paisant lsquoA la recherche du consommateurrsquo (n 1) paras 3-4 These

authors argue that as regards these other issues such as health or security there is no need to define the concept

of consumer as these issues concern everyone no matter the purpose of his action

- 18 -

Even Jean Calais-Auloy the renowned French scholar who advocates the current EU

approach states that the economic view according to which the consumer is the last link in

the chain of production cannot be transposed to the legal context without taking into account

the fact that lsquothe consumer from a legal perspective is a person in a situation of weaknessrsquo26

Furthermore a definition based on economic theory does not stand up to closer legal scrutiny

In effect if even purchases that indirectly contribute to the production of utility were excluded

from what may be considered as consumption then actually nothing would remain protected

27

For all those reasons we believe that if the EU legislator looked to economic theory when

drafting the definition of consumer it was certainly a mistake28

sect2 ndash The imperative of legal certainty

The major argument cited to justify the current definition of a consumer in EU law is without

a doubt legal certainty Its defenders claim that even though the current definition does not

protect persons who act outside their area of expertise even though these individuals are in

the same situation of weakness as consumers in the strict sense is a very good definition as it

is extremely precise and does not leave much room for divergent decisions therefore assuring

greater legal certainty29

That being said it is valid to ask whether it is not this rigid definition that is the reason of the

paradoxical reasoning of the Court of Justice in most of its cases but particularly well

illustrated by the paragraph 39 of the Rudolf Gabriel case cited above30

However there is another more important point While we certainly agree that legal certainty

is important it is not at all clear that it justifies protecting certain weak parties but not others

Nor is it clear that legal certainty should prevail at any price

Amid the legal debate shacking the French doctrine for decades now Professor Calais-Auloy

defends the European definition of consumer against the French definition which is certainly

the most respective of the ratio legis of consumer protection amongst all the Member States31

citing three arguments32

First he argues that someone acting for a business-related purpose

defends himself better than if he were acting for a purely private purpose In our opinion

there is no basis for this claim and no further comment is required Second he stipulates that

26

Own translation from the French lsquole consommateur en droit est une personne en situation de faiblessersquo (ibid

66) 27

The food we eat to sustain ourselves the bed on which we sleep to recover energy etc 28

An interesting way to approach this issue is to view it in the framework of the proportionality test regularly

applied by the Court of Justice As regards the justification of concern here it certainly would not have passed

the aptitude test applied by the Court as it is simply unable to achieve the goal it purports to seek namely the

protection of a weaker party in law Cf namely the defense arguments invoked by the German Government in

Cassis de Dijon (C-12078 Rewe-Zentral AG v Bundesmonopolverwaltung fuumlr Branntwein [1979] ECR 649) or

those referred to by the United Kingdom in Conegate case (C-12185 Conegate Limited v HM Customs amp Excise

[1986] ECR 1007) 29

Calais-Auloy (n 25) 74 and fn 9 30

See para 39 of the Rudolf Gabriel case cited above and its commentary in the same footnote (n 24) 31

Cf n 53 32

Calais-Auloy (n 25) 74

- 19 -

if necessary the legislator can extend the scope of protection This is an interesting argument

which relates to the idea of lsquodifferentiationrsquo depending on the sector of concern However we

will develop this concept further in the fifth chapter along with our proposed solutions to the

European legislator The third and final argument of Professor Calais-Auloy is the most

relevant at this stage of our discussion He affirms that lsquothe rule of law arises from a

compromise between the need for equity and the need for clarityrsquo33

In other words this

statement can be understood as meaning that a rule of law must strike a delicate balance

between ensuring equity and justice which implies a certain degree of flexibility while being

clear and effective in order to guarantee a high level of legal certainty

That being said the question arises as to whether the criteria chosen by the European

legislator is the best option since the balance clearly tilts in favour of legal certainty to the

detriment of equity One of the goals of this paper is to answer this question Next to this

scientific goal we will try to discern whether the choice of the European legislator for such a

narrow definition is not actually loaded with the intention to achieve another objective than

the protection of the consumer per se We are referring here to the unstated ratio legis

mentioned in the title of this section to which we will preferably turn in the last chapter

which is more politically oriented

First however we will start by looking at the situation at the national level to determine

whether the Member States conform to EU law This will allow us to answer the question of

whether the Member States are obliged to respect EU law with regard to the definition of

consumer or whether there is a possibility for them to derogate from this definition and if so

to what extent This analysis will also help us to probe some interesting ideas in the hopes of

arriving at a better definition of consumer

33

Own translation from the French lsquola regravegle de droit reacutesulte souvent drsquoun compromise entre les exigences

drsquoeacutequiteacute et le besoin de clarteacutersquo (ibid 74)

- 20 -

Chapter 3 ndash The situation at the national level

Section 1 ndash The question of derogation from EU law

Until the last important steps accomplished by the EU in the area of consumer protection

namely with the adoption of the so-called Consumer Rights Directive (hereinafter CRD)34

there was no possible discussion on the type of harmonisation of EU consumer directives

harmonisation should be minimal35

With the CRD however some doubts persist Indeed the

CRD was initially intended to consolidated in a single instrument no fewer than eight

directives36

After years of tough negotiations however the CRD ended up being a hybrid

harmonisation instrument repealing two directives and amending two others37

The maximal

harmonisation planned to be the central feature in order to achieve a successful internal

market enhancing the confidence of consumers and professionals alike38

failed39

We refer to the type of harmonisation because it may appear as an important factor in

determining the freedom of the Member States to extend the definition of consumer to certain

categories of person that are not included in EUrsquos definition such as for instance legal

persons or professionals acting outside their area of expertise However as Martijn W

Hesselink correctly notes things are not so simple40

Firstly the type of harmonisation must

not be confused with the degree of harmonisation The first concept concerns the right of the

Member States to go further as regards the entire scope of a Directive (horizontal aspect)

whereas the second relates to the extent to which an EU Directive regulates a specific issue

(vertical aspect) Furthermore the scope of a Directive should not confused with the

34

Directive of the European Parliament and of the Council 201183 on consumer rights amending Council

Directive 9313EEC and Directive 199944EC of the European Parliament and of the Council and repealing

Council Directive 85577EEC and Directive 977EC of the European Parliament and of the Council [2011] OJ

L 30464-88 35

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo COM (2006) 744 final 10 36

Ibid 37

Sandrine Rouja lsquoDirective droit des consommateurs projet et proposition de loi le point sur les mesures en

matiegravere dacutee-commercersquo (April 6 2011) httpwwwjuriscomnetactuvisuphpID=1308 accessed the 10th

May

2012 Caroline Cauffman lsquoThe Consumer Rights Directive Adoptedrsquo (February 6 2012) 1

httpssrncomabstract=2000132 accessed the May 2012 38

Jacques Laffineur lsquoLa proposition de directive du Parlement europeacuteen et du Conseil relative aux droits des

consommateurs du 8 octobre 2008rsquo (2008) 81 DCCR 107 We will also see that currently new projects are

currently being developed within the EU to tackle all the loopholes that the CRD has still left behind itself

(paragraph 3 of this chapter) 39

Indeed the Member States representative organisations as well as the doctrine were very much not in favour

of this technique as it would bring out many problems in terms of compatibility with national contract law on

the one hand and would have reduced the level of protection in some Member States on the other hand See

Laurent Leveneur lsquoProposition de directive relative aux droits des consommateurs recul de la protection des

acheteurs en Francersquo (2009) Contrats Concurrence Consommation Repegravere 8 Guy Raymond lsquoLibeacuteralisme et

consommateursrsquo (November 2009) 11 Contrats Concurrence Consommation repegravere 10 Juumlrgen Basedow

Gregor Christiandl Walter Doralt Matteo Fornasier Martin Illmer Jens Kleinschmidt Sebastian AE Martens

Hannes Roumlsler Jan Peter Schmidt and Reinhard Zimmermann lsquoPolicy Options for Progress towards a European

Contract Law ndash Comments on the issues raised in the Green Paper from the Commission of 1 July 2010 COM

(2010) 348 finalrsquo (2011) Max Planck Private Law Research Paper ndeg 112 1 31 para 71 accessed the 10th

May

2012 Also published in the Rabels Zeitschrift fuumlr auslaumlndisches und internationales Privatrecht (2011) Vol 75

371-438) 40

Martijn W Hesselink lsquoTowards a Sharp Distinction between B2B and B2C On Consumer Commercial and

General Contract Law after the Consumer Rights Directive (8th

of June 2009) Centre for the Study of European

Contract Law Working Paper Series 200906 1 21-23 httpssrncomabstract=1416126 accessed the 10th

May

2012

- 18 -

Even Jean Calais-Auloy the renowned French scholar who advocates the current EU

approach states that the economic view according to which the consumer is the last link in

the chain of production cannot be transposed to the legal context without taking into account

the fact that lsquothe consumer from a legal perspective is a person in a situation of weaknessrsquo26

Furthermore a definition based on economic theory does not stand up to closer legal scrutiny

In effect if even purchases that indirectly contribute to the production of utility were excluded

from what may be considered as consumption then actually nothing would remain protected

27

For all those reasons we believe that if the EU legislator looked to economic theory when

drafting the definition of consumer it was certainly a mistake28

sect2 ndash The imperative of legal certainty

The major argument cited to justify the current definition of a consumer in EU law is without

a doubt legal certainty Its defenders claim that even though the current definition does not

protect persons who act outside their area of expertise even though these individuals are in

the same situation of weakness as consumers in the strict sense is a very good definition as it

is extremely precise and does not leave much room for divergent decisions therefore assuring

greater legal certainty29

That being said it is valid to ask whether it is not this rigid definition that is the reason of the

paradoxical reasoning of the Court of Justice in most of its cases but particularly well

illustrated by the paragraph 39 of the Rudolf Gabriel case cited above30

However there is another more important point While we certainly agree that legal certainty

is important it is not at all clear that it justifies protecting certain weak parties but not others

Nor is it clear that legal certainty should prevail at any price

Amid the legal debate shacking the French doctrine for decades now Professor Calais-Auloy

defends the European definition of consumer against the French definition which is certainly

the most respective of the ratio legis of consumer protection amongst all the Member States31

citing three arguments32

First he argues that someone acting for a business-related purpose

defends himself better than if he were acting for a purely private purpose In our opinion

there is no basis for this claim and no further comment is required Second he stipulates that

26

Own translation from the French lsquole consommateur en droit est une personne en situation de faiblessersquo (ibid

66) 27

The food we eat to sustain ourselves the bed on which we sleep to recover energy etc 28

An interesting way to approach this issue is to view it in the framework of the proportionality test regularly

applied by the Court of Justice As regards the justification of concern here it certainly would not have passed

the aptitude test applied by the Court as it is simply unable to achieve the goal it purports to seek namely the

protection of a weaker party in law Cf namely the defense arguments invoked by the German Government in

Cassis de Dijon (C-12078 Rewe-Zentral AG v Bundesmonopolverwaltung fuumlr Branntwein [1979] ECR 649) or

those referred to by the United Kingdom in Conegate case (C-12185 Conegate Limited v HM Customs amp Excise

[1986] ECR 1007) 29

Calais-Auloy (n 25) 74 and fn 9 30

See para 39 of the Rudolf Gabriel case cited above and its commentary in the same footnote (n 24) 31

Cf n 53 32

Calais-Auloy (n 25) 74

- 19 -

if necessary the legislator can extend the scope of protection This is an interesting argument

which relates to the idea of lsquodifferentiationrsquo depending on the sector of concern However we

will develop this concept further in the fifth chapter along with our proposed solutions to the

European legislator The third and final argument of Professor Calais-Auloy is the most

relevant at this stage of our discussion He affirms that lsquothe rule of law arises from a

compromise between the need for equity and the need for clarityrsquo33

In other words this

statement can be understood as meaning that a rule of law must strike a delicate balance

between ensuring equity and justice which implies a certain degree of flexibility while being

clear and effective in order to guarantee a high level of legal certainty

That being said the question arises as to whether the criteria chosen by the European

legislator is the best option since the balance clearly tilts in favour of legal certainty to the

detriment of equity One of the goals of this paper is to answer this question Next to this

scientific goal we will try to discern whether the choice of the European legislator for such a

narrow definition is not actually loaded with the intention to achieve another objective than

the protection of the consumer per se We are referring here to the unstated ratio legis

mentioned in the title of this section to which we will preferably turn in the last chapter

which is more politically oriented

First however we will start by looking at the situation at the national level to determine

whether the Member States conform to EU law This will allow us to answer the question of

whether the Member States are obliged to respect EU law with regard to the definition of

consumer or whether there is a possibility for them to derogate from this definition and if so

to what extent This analysis will also help us to probe some interesting ideas in the hopes of

arriving at a better definition of consumer

33

Own translation from the French lsquola regravegle de droit reacutesulte souvent drsquoun compromise entre les exigences

drsquoeacutequiteacute et le besoin de clarteacutersquo (ibid 74)

- 20 -

Chapter 3 ndash The situation at the national level

Section 1 ndash The question of derogation from EU law

Until the last important steps accomplished by the EU in the area of consumer protection

namely with the adoption of the so-called Consumer Rights Directive (hereinafter CRD)34

there was no possible discussion on the type of harmonisation of EU consumer directives

harmonisation should be minimal35

With the CRD however some doubts persist Indeed the

CRD was initially intended to consolidated in a single instrument no fewer than eight

directives36

After years of tough negotiations however the CRD ended up being a hybrid

harmonisation instrument repealing two directives and amending two others37

The maximal

harmonisation planned to be the central feature in order to achieve a successful internal

market enhancing the confidence of consumers and professionals alike38

failed39

We refer to the type of harmonisation because it may appear as an important factor in

determining the freedom of the Member States to extend the definition of consumer to certain

categories of person that are not included in EUrsquos definition such as for instance legal

persons or professionals acting outside their area of expertise However as Martijn W

Hesselink correctly notes things are not so simple40

Firstly the type of harmonisation must

not be confused with the degree of harmonisation The first concept concerns the right of the

Member States to go further as regards the entire scope of a Directive (horizontal aspect)

whereas the second relates to the extent to which an EU Directive regulates a specific issue

(vertical aspect) Furthermore the scope of a Directive should not confused with the

34

Directive of the European Parliament and of the Council 201183 on consumer rights amending Council

Directive 9313EEC and Directive 199944EC of the European Parliament and of the Council and repealing

Council Directive 85577EEC and Directive 977EC of the European Parliament and of the Council [2011] OJ

L 30464-88 35

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo COM (2006) 744 final 10 36

Ibid 37

Sandrine Rouja lsquoDirective droit des consommateurs projet et proposition de loi le point sur les mesures en

matiegravere dacutee-commercersquo (April 6 2011) httpwwwjuriscomnetactuvisuphpID=1308 accessed the 10th

May

2012 Caroline Cauffman lsquoThe Consumer Rights Directive Adoptedrsquo (February 6 2012) 1

httpssrncomabstract=2000132 accessed the May 2012 38

Jacques Laffineur lsquoLa proposition de directive du Parlement europeacuteen et du Conseil relative aux droits des

consommateurs du 8 octobre 2008rsquo (2008) 81 DCCR 107 We will also see that currently new projects are

currently being developed within the EU to tackle all the loopholes that the CRD has still left behind itself

(paragraph 3 of this chapter) 39

Indeed the Member States representative organisations as well as the doctrine were very much not in favour

of this technique as it would bring out many problems in terms of compatibility with national contract law on

the one hand and would have reduced the level of protection in some Member States on the other hand See

Laurent Leveneur lsquoProposition de directive relative aux droits des consommateurs recul de la protection des

acheteurs en Francersquo (2009) Contrats Concurrence Consommation Repegravere 8 Guy Raymond lsquoLibeacuteralisme et

consommateursrsquo (November 2009) 11 Contrats Concurrence Consommation repegravere 10 Juumlrgen Basedow

Gregor Christiandl Walter Doralt Matteo Fornasier Martin Illmer Jens Kleinschmidt Sebastian AE Martens

Hannes Roumlsler Jan Peter Schmidt and Reinhard Zimmermann lsquoPolicy Options for Progress towards a European

Contract Law ndash Comments on the issues raised in the Green Paper from the Commission of 1 July 2010 COM

(2010) 348 finalrsquo (2011) Max Planck Private Law Research Paper ndeg 112 1 31 para 71 accessed the 10th

May

2012 Also published in the Rabels Zeitschrift fuumlr auslaumlndisches und internationales Privatrecht (2011) Vol 75

371-438) 40

Martijn W Hesselink lsquoTowards a Sharp Distinction between B2B and B2C On Consumer Commercial and

General Contract Law after the Consumer Rights Directive (8th

of June 2009) Centre for the Study of European

Contract Law Working Paper Series 200906 1 21-23 httpssrncomabstract=1416126 accessed the 10th

May

2012

- 19 -

if necessary the legislator can extend the scope of protection This is an interesting argument

which relates to the idea of lsquodifferentiationrsquo depending on the sector of concern However we

will develop this concept further in the fifth chapter along with our proposed solutions to the

European legislator The third and final argument of Professor Calais-Auloy is the most

relevant at this stage of our discussion He affirms that lsquothe rule of law arises from a

compromise between the need for equity and the need for clarityrsquo33

In other words this

statement can be understood as meaning that a rule of law must strike a delicate balance

between ensuring equity and justice which implies a certain degree of flexibility while being

clear and effective in order to guarantee a high level of legal certainty

That being said the question arises as to whether the criteria chosen by the European

legislator is the best option since the balance clearly tilts in favour of legal certainty to the

detriment of equity One of the goals of this paper is to answer this question Next to this

scientific goal we will try to discern whether the choice of the European legislator for such a

narrow definition is not actually loaded with the intention to achieve another objective than

the protection of the consumer per se We are referring here to the unstated ratio legis

mentioned in the title of this section to which we will preferably turn in the last chapter

which is more politically oriented

First however we will start by looking at the situation at the national level to determine

whether the Member States conform to EU law This will allow us to answer the question of

whether the Member States are obliged to respect EU law with regard to the definition of

consumer or whether there is a possibility for them to derogate from this definition and if so

to what extent This analysis will also help us to probe some interesting ideas in the hopes of

arriving at a better definition of consumer

33

Own translation from the French lsquola regravegle de droit reacutesulte souvent drsquoun compromise entre les exigences

drsquoeacutequiteacute et le besoin de clarteacutersquo (ibid 74)

- 20 -

Chapter 3 ndash The situation at the national level

Section 1 ndash The question of derogation from EU law

Until the last important steps accomplished by the EU in the area of consumer protection

namely with the adoption of the so-called Consumer Rights Directive (hereinafter CRD)34

there was no possible discussion on the type of harmonisation of EU consumer directives

harmonisation should be minimal35

With the CRD however some doubts persist Indeed the

CRD was initially intended to consolidated in a single instrument no fewer than eight

directives36

After years of tough negotiations however the CRD ended up being a hybrid

harmonisation instrument repealing two directives and amending two others37

The maximal

harmonisation planned to be the central feature in order to achieve a successful internal

market enhancing the confidence of consumers and professionals alike38

failed39

We refer to the type of harmonisation because it may appear as an important factor in

determining the freedom of the Member States to extend the definition of consumer to certain

categories of person that are not included in EUrsquos definition such as for instance legal

persons or professionals acting outside their area of expertise However as Martijn W

Hesselink correctly notes things are not so simple40

Firstly the type of harmonisation must

not be confused with the degree of harmonisation The first concept concerns the right of the

Member States to go further as regards the entire scope of a Directive (horizontal aspect)

whereas the second relates to the extent to which an EU Directive regulates a specific issue

(vertical aspect) Furthermore the scope of a Directive should not confused with the

34

Directive of the European Parliament and of the Council 201183 on consumer rights amending Council

Directive 9313EEC and Directive 199944EC of the European Parliament and of the Council and repealing

Council Directive 85577EEC and Directive 977EC of the European Parliament and of the Council [2011] OJ

L 30464-88 35

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo COM (2006) 744 final 10 36

Ibid 37

Sandrine Rouja lsquoDirective droit des consommateurs projet et proposition de loi le point sur les mesures en

matiegravere dacutee-commercersquo (April 6 2011) httpwwwjuriscomnetactuvisuphpID=1308 accessed the 10th

May

2012 Caroline Cauffman lsquoThe Consumer Rights Directive Adoptedrsquo (February 6 2012) 1

httpssrncomabstract=2000132 accessed the May 2012 38

Jacques Laffineur lsquoLa proposition de directive du Parlement europeacuteen et du Conseil relative aux droits des

consommateurs du 8 octobre 2008rsquo (2008) 81 DCCR 107 We will also see that currently new projects are

currently being developed within the EU to tackle all the loopholes that the CRD has still left behind itself

(paragraph 3 of this chapter) 39

Indeed the Member States representative organisations as well as the doctrine were very much not in favour

of this technique as it would bring out many problems in terms of compatibility with national contract law on

the one hand and would have reduced the level of protection in some Member States on the other hand See

Laurent Leveneur lsquoProposition de directive relative aux droits des consommateurs recul de la protection des

acheteurs en Francersquo (2009) Contrats Concurrence Consommation Repegravere 8 Guy Raymond lsquoLibeacuteralisme et

consommateursrsquo (November 2009) 11 Contrats Concurrence Consommation repegravere 10 Juumlrgen Basedow

Gregor Christiandl Walter Doralt Matteo Fornasier Martin Illmer Jens Kleinschmidt Sebastian AE Martens

Hannes Roumlsler Jan Peter Schmidt and Reinhard Zimmermann lsquoPolicy Options for Progress towards a European

Contract Law ndash Comments on the issues raised in the Green Paper from the Commission of 1 July 2010 COM

(2010) 348 finalrsquo (2011) Max Planck Private Law Research Paper ndeg 112 1 31 para 71 accessed the 10th

May

2012 Also published in the Rabels Zeitschrift fuumlr auslaumlndisches und internationales Privatrecht (2011) Vol 75

371-438) 40

Martijn W Hesselink lsquoTowards a Sharp Distinction between B2B and B2C On Consumer Commercial and

General Contract Law after the Consumer Rights Directive (8th

of June 2009) Centre for the Study of European

Contract Law Working Paper Series 200906 1 21-23 httpssrncomabstract=1416126 accessed the 10th

May

2012

- 20 -

Chapter 3 ndash The situation at the national level

Section 1 ndash The question of derogation from EU law

Until the last important steps accomplished by the EU in the area of consumer protection

namely with the adoption of the so-called Consumer Rights Directive (hereinafter CRD)34

there was no possible discussion on the type of harmonisation of EU consumer directives

harmonisation should be minimal35

With the CRD however some doubts persist Indeed the

CRD was initially intended to consolidated in a single instrument no fewer than eight

directives36

After years of tough negotiations however the CRD ended up being a hybrid

harmonisation instrument repealing two directives and amending two others37

The maximal

harmonisation planned to be the central feature in order to achieve a successful internal

market enhancing the confidence of consumers and professionals alike38

failed39

We refer to the type of harmonisation because it may appear as an important factor in

determining the freedom of the Member States to extend the definition of consumer to certain

categories of person that are not included in EUrsquos definition such as for instance legal

persons or professionals acting outside their area of expertise However as Martijn W

Hesselink correctly notes things are not so simple40

Firstly the type of harmonisation must

not be confused with the degree of harmonisation The first concept concerns the right of the

Member States to go further as regards the entire scope of a Directive (horizontal aspect)

whereas the second relates to the extent to which an EU Directive regulates a specific issue

(vertical aspect) Furthermore the scope of a Directive should not confused with the

34

Directive of the European Parliament and of the Council 201183 on consumer rights amending Council

Directive 9313EEC and Directive 199944EC of the European Parliament and of the Council and repealing

Council Directive 85577EEC and Directive 977EC of the European Parliament and of the Council [2011] OJ

L 30464-88 35

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo COM (2006) 744 final 10 36

Ibid 37

Sandrine Rouja lsquoDirective droit des consommateurs projet et proposition de loi le point sur les mesures en

matiegravere dacutee-commercersquo (April 6 2011) httpwwwjuriscomnetactuvisuphpID=1308 accessed the 10th

May

2012 Caroline Cauffman lsquoThe Consumer Rights Directive Adoptedrsquo (February 6 2012) 1

httpssrncomabstract=2000132 accessed the May 2012 38

Jacques Laffineur lsquoLa proposition de directive du Parlement europeacuteen et du Conseil relative aux droits des

consommateurs du 8 octobre 2008rsquo (2008) 81 DCCR 107 We will also see that currently new projects are

currently being developed within the EU to tackle all the loopholes that the CRD has still left behind itself

(paragraph 3 of this chapter) 39

Indeed the Member States representative organisations as well as the doctrine were very much not in favour

of this technique as it would bring out many problems in terms of compatibility with national contract law on

the one hand and would have reduced the level of protection in some Member States on the other hand See

Laurent Leveneur lsquoProposition de directive relative aux droits des consommateurs recul de la protection des

acheteurs en Francersquo (2009) Contrats Concurrence Consommation Repegravere 8 Guy Raymond lsquoLibeacuteralisme et

consommateursrsquo (November 2009) 11 Contrats Concurrence Consommation repegravere 10 Juumlrgen Basedow

Gregor Christiandl Walter Doralt Matteo Fornasier Martin Illmer Jens Kleinschmidt Sebastian AE Martens

Hannes Roumlsler Jan Peter Schmidt and Reinhard Zimmermann lsquoPolicy Options for Progress towards a European

Contract Law ndash Comments on the issues raised in the Green Paper from the Commission of 1 July 2010 COM

(2010) 348 finalrsquo (2011) Max Planck Private Law Research Paper ndeg 112 1 31 para 71 accessed the 10th

May

2012 Also published in the Rabels Zeitschrift fuumlr auslaumlndisches und internationales Privatrecht (2011) Vol 75

371-438) 40

Martijn W Hesselink lsquoTowards a Sharp Distinction between B2B and B2C On Consumer Commercial and

General Contract Law after the Consumer Rights Directive (8th

of June 2009) Centre for the Study of European

Contract Law Working Paper Series 200906 1 21-23 httpssrncomabstract=1416126 accessed the 10th

May

2012

- 21 -

abovementioned concept of harmonisation Indeed some issues may simply fall outside the

scope of a directive regardless of the type or extent of harmonisation The Court of Justice in

its case law has unfortunately not made lawyersrsquo work easier by regularly confusing these

subtle but very important nuances41

As regards in particular the definition of consumer Di Pinto42

Idealservice43

and Gruber44

are highly relevant to answering the question set forth in the title of this section namely

whether the Member States are free to derogate from EU lawrsquos definition of consumer

Without prolonging the suspense any further the answer to this question is lsquono but yesrsquo

which sounds confusing In actuality the precise answer is no Indeed as the Court stated in

its Idealservice judgment of 2001 lsquoIt is thus clear from the wording of Article 2 of the

Directive that a person other than a natural person who concludes a contract with a seller or

supplier cannot be regarded as a consumer within the meaning of that provisionrsquo45

The issue

at stake was to determine whether legal persons can be considered as consumers in certain

circumstances The Courts unequivocal answer is no A few years later in a similar case

(Gruber) relating to the question of whether a person acting for both personal and

professional purposes can be considered a consumer the Court strictly relying on the

definition of consumer in the Brussels Convention46

confirmed that

[hellip] it is already clearly apparent from the purpose of Articles 13 to 15 of the Brussels

Convention namely to properly protect the person who is presumed to be in a weaker

position than the other party to the contract that the benefit of those provisions cannot

as a matter of principle be relied on by a person who concludes a contract for a

purpose which is partly concerned with his trade or profession and is therefore only

partly outside it It would be otherwise only if the link between the contract and the

trade or profession of the person concerned was so slight as to be marginal and

therefore had only a negligible role in the context of the supply in respect of which

the contract was concluded considered in its entirety47

Based on this case law it is clear that the Member States must implement or interpret as the

case may be the concept of consumer in accordance with the Court of Justices reasoning

However in the 1991 Di Pinto case the Court stated at paragraphs 21 to 23 that

21 It should be recalled in this regard that Article 8 of the directive provides that it

lsquoshall not prevent Member States from adopting or maintaining more favourable

provisions to protect consumers in the field which it coversrsquo

22 The object of that provision is to determine the freedom left to Member States in

the area covered by the directive namely that of consumer protection It cannot

therefore be interpreted as precluding States from adopting measures in an area with

which it is not concerned such as that of the protection of traders

41

Ibid 22 42

Di Pinto (n 21) 43

Idealservice (n 21) 44

Gruber (n 21) 45

Idealservice (n 18) para 16 46

Not strictly speaking an EU instrument at that time 47

Gruber (n 18) para 39

- 22 -

23 The answer to the second question must therefore be that the directive does not

preclude national legislation on canvassing from extending the protection which it

affords to cover traders acting with a view to the sale of their business

It is not clear what this means How can Di Pinto be reconciled with Idealservice and Gruber

In this regard the aforementioned distinction between the type or degree of harmonisation

and the scope of application of a Directive is relevant Idealservice and Gruber illustrate very

well the technique of minimal harmonisation (the type of harmonisation) whereas the degree

of harmonisation is exhaustive48

In concrete terms this means that the concept of consumer

is exhaustively defined even though the instrument is based on minimal harmonisation On

the other hand in Di Pinto the Court simply affirms that since the protection of traders falls

outside the scope of Directive 85577EEC which has since been repealed by the CRD it is

naturally within the powers of the Member States to decide whether they wish to protect these

players as well In other words the conclusion is that the Member States cannot use the notion

of consumer to protect someone other than the persons covered by the EU instruments

namely natural person acting for private purposes but can do so under the cover of another

term49

Di Pinto further clarifies that even though the Directive is based on maximal

harmonisation the Member States are still allowed to extend its scope of protection to persons

other than consumers in the strict sense

The CRD has formally clarified the situation by incorporating the lessons of this case law in

Recital 13 which reads as follows

Member States should remain competent in accordance with Union law to apply the

provisions of this Directive to areas not falling within its scope Member States may

therefore maintain or introduce national legislation corresponding to the provisions of

this Directive or certain of its provisions in relation to contracts that fall outside the

scope of this Directive

This is the explanation of the paradoxical lsquono but yesrsquo answer formulated earlier to the

question set forth in the title of this paragraph50

We will now discuss in relation to selected

issues how the Member States have arranged their own systems with respect to the case law

of the Court of Justice and whether they have used parallel concepts to extend consumer

protection beyond the narrow definition of EU law

Section 2 ndash National specificities with regard to certain

problematic issues

sect1 ndash Legal persons

48

In this regard it is not clear whether the Court considers the entire notion of consumer to be exhaustively

defined by EU law This is at least certainly the case as regards the fact that only natural persons are concerned

The lessons of Gruber are a little bit less obvious as this case concerned procedural rather than substantive law

(See Jules Stuyck and Evelyne Terryn lsquoLe droit europeacuteen de la consummation ndash deacuteveloppements reacutecentsrsquo

(November 2007) 143 JTDE 257 260) This will be dealt with in the paragraph 2 section 2 of this chapter 49

Calais-Auloy (n 25) 73 50

Margus Kingisepp and Age Vaumlrv lsquoThe Notion of Consumer in EU Consumer Acquis and the Consumer

Rights Directive ndash a Significant Change of Paradigmrsquo (2011)

httpwwwjuridicainternationaleuindexphpid=14841 accessed the 10th

May 2012

- 22 -

23 The answer to the second question must therefore be that the directive does not

preclude national legislation on canvassing from extending the protection which it

affords to cover traders acting with a view to the sale of their business

It is not clear what this means How can Di Pinto be reconciled with Idealservice and Gruber

In this regard the aforementioned distinction between the type or degree of harmonisation

and the scope of application of a Directive is relevant Idealservice and Gruber illustrate very

well the technique of minimal harmonisation (the type of harmonisation) whereas the degree

of harmonisation is exhaustive48

In concrete terms this means that the concept of consumer

is exhaustively defined even though the instrument is based on minimal harmonisation On

the other hand in Di Pinto the Court simply affirms that since the protection of traders falls

outside the scope of Directive 85577EEC which has since been repealed by the CRD it is

naturally within the powers of the Member States to decide whether they wish to protect these

players as well In other words the conclusion is that the Member States cannot use the notion

of consumer to protect someone other than the persons covered by the EU instruments

namely natural person acting for private purposes but can do so under the cover of another

term49

Di Pinto further clarifies that even though the Directive is based on maximal

harmonisation the Member States are still allowed to extend its scope of protection to persons

other than consumers in the strict sense

The CRD has formally clarified the situation by incorporating the lessons of this case law in

Recital 13 which reads as follows

Member States should remain competent in accordance with Union law to apply the

provisions of this Directive to areas not falling within its scope Member States may

therefore maintain or introduce national legislation corresponding to the provisions of

this Directive or certain of its provisions in relation to contracts that fall outside the

scope of this Directive

This is the explanation of the paradoxical lsquono but yesrsquo answer formulated earlier to the

question set forth in the title of this paragraph50

We will now discuss in relation to selected

issues how the Member States have arranged their own systems with respect to the case law

of the Court of Justice and whether they have used parallel concepts to extend consumer

protection beyond the narrow definition of EU law

Section 2 ndash National specificities with regard to certain

problematic issues

sect1 ndash Legal persons

48

In this regard it is not clear whether the Court considers the entire notion of consumer to be exhaustively

defined by EU law This is at least certainly the case as regards the fact that only natural persons are concerned

The lessons of Gruber are a little bit less obvious as this case concerned procedural rather than substantive law

(See Jules Stuyck and Evelyne Terryn lsquoLe droit europeacuteen de la consummation ndash deacuteveloppements reacutecentsrsquo

(November 2007) 143 JTDE 257 260) This will be dealt with in the paragraph 2 section 2 of this chapter 49

Calais-Auloy (n 25) 73 50

Margus Kingisepp and Age Vaumlrv lsquoThe Notion of Consumer in EU Consumer Acquis and the Consumer

Rights Directive ndash a Significant Change of Paradigmrsquo (2011)

httpwwwjuridicainternationaleuindexphpid=14841 accessed the 10th

May 2012

- 23 -

As we have already seen Idealservice firmly stated that the notion of consumer as used in the

Unfair Commercial Practices Directive covers only natural persons Considering the

similarity between the definition of consumer in that Directive and the definition found in

other pieces of EU consumer protection legislation it can be deduced that Courtrsquos holding

applies by analogy to these other instruments

Even though some Member States other than France have extended consumer protection rules

to legal persons under certain conditions51

the French situation is the most interesting with

respect to this issue52

French law does not define the concept of consumer Even though some

specific texts clearly exclude legal persons most of French consumer law makes no mention

of this point Therefore since French legal literature has for quite some time been

characterised by the belief that a natural person acting for private purposes is not the only one

that is to be protected as a weak party many commentators had accepted that certain legal

persons may also be granted the protection of consumer law53

The Idealservice judgment

changed this thinking however54

Whereas some trial courts refused to extend consumer

protection to legal persons the French Supreme Court in its case of 15 March 200555

rightly

stated that although the notion of lsquoconsumerrsquo cannot be extended to legal persons based on

Idealservice this does not preclude French law from extending consumer protection to legal

persons under the guise of another concept namely non-professionals56

This position was

confirmed in a more recent decision of 201157

and in our view demonstrates a very good

understanding of the leeway which the Di Pinto affords national lawmakers

sect2 ndash Mixed-purpose transactions

Above we set out the Gruber holding which basically states that in cases where a purchase

serves both professional and private purposes the purchaser can be considered a consumer

and hence benefit from consumer protection but only if the link between the transaction and

the purchasers business activity is so insignificant as to be marginal

Its important to note here that Gruber concerned procedural rather than substantive aspects of

consumer law However it is doubtful that the Court of Justice would interpret the notion of

consumer differently as regards substantive law

Amongst the Member States Belgium and Austria have even stricter laws and consider that in

order for someone to be considered a consumer the purpose of the purchase must be purely

51

See Schulte-Noumllke (n 16) 682-683 One can wonder whether all those laws are in conformity with EU law

Belgium for instance used to define a consumer as any natural or legal person (Art 1(7) of the Trade Practices

and Consumer Protection Act of 14 July 1991) This is no longer the case in the new legislation which covers

only natural persons (Art 2 no 3 of the Act of 6 April 2010 on Market Practices and Consumer Protection

repealing of the 1991 Act) 52

Calais-Auloy (n 25) 69-70 53

Some of the literature still supports this view and as stated above when analyzing legal certainty as a

justification for the European definition this is probably the most logical position with respect to the ratio legis

of consumer protection as presented in the first chapter of this paper 54

Gilles Paisant lsquoLe consommateur proteacutegeacute par la directive du 5 avril 1993 sur les clauses abusives est une

personne physiquersquo (March 20 2002) 12 La Semaine Juridique Edition Geacuteneacuterale II 10047 55

Cass 1re

civ 15 March 2005 Bull Civ 2005 I no 135 56

Christophe Sizaire lsquoChamp drsquoapplication du droit de la consommation et personne moralersquo (October 2011) 10

Construction ndash Urbanisme comm 145 57

Cass 1re

civ 23 June 2011 Syndicat des coproprieacutetaires du 68 rue Albert c Somaillet Jurisdata no 2011-

012279

- 24 -

private In Germany Sweden Finland and Denmark the rule is exactly same as that

elaborated by the Court of Justice in Gruber whereas in the other Member States the

situation is unclear as there are no specific rules covering this situation58

Certain authors59

consider there to have been a paradigm shift since the CRD resulting in an

extension of the scope of consumer protection as Recital 17 to the CRD states that

[] in the case of dual purpose contracts where the contract is concluded for purposes

partly within and partly outside the personrsquos trade and the trade purpose is so limited

as not to be predominant in the overall context of the contract that person should also

be considered as a consumer

This recital simply appears to transpose the Gruber decision into EU law We therefore fail to

understand the enthusiasm of these authors as the scope of the notion of lsquoconsumerrsquo is merely

clarified rather than altered

Hence the CRD seems to confirm with even more certainty that the Gruber holding applies to

the concept of consumer even with respect to substantive provisions of law60

Another interesting question in relation to mixed-purpose transactions is what happens if a

purchaser claims to be acting for professional purposes but in reality is acting for private

purposes in order to benefit from consumer protection This is in reality the factual

background to the Gruber case that we just discussed However before arriving at the

abovementioned conclusion the Court introduces the interesting concept of good faith

Indeed it states that an lsquoindividual must be regarded in view of the impression he has given

to the other party acting in good faith as having renounced the protection afforded by those

provisionsrsquo61

At first glance it appears that the notion of consumer should therefore be

interpreted subjectively rather than purely objectively62

In other words if in reality a

purchaser is acting for private purposes but gives the other contracting party the perfect

impression that he is acting for professional purposes such behaviour can be considered a

waiver of consumer status

It is striking however that Article 25 of the CRD expressly states that consumers may not

waive the rights conferred on them by the Directive The questions thus arises as to how this

statement can be reconciled with the Courts approach

One interpretation would be to say again that Gruber concerns only procedural aspects of

consumer law This is not a very convincing argument though Hence a second explanation

could be that the Court considering the Brussels Convention did not find any provision

precluding a waiver of consumer protection and therefore found that the general principle of

good faith is more important in this situation This possibility is actually reinforced when one

58

Hans Schulte-Noumllke (n 16) 685-686 59

Margus Kingisepp and Age Vaumlrv (n 50) 60

Caroline Cauffman (n 37) 2 61

Gruber (n 18) para 53 62

Margus Kingisepp and Age Vaumlrv (n 50)

- 25 -

looks at the Draft Common Frame of Reference63

for European contract law where we can

unmistakably notice the importance of this principle (in fact it is even a duty) Finally

Gruber may be simply considered as an isolated case that does not take into account recent

directives64

such as the CRD (Art 25) or Directive 200848EC on credit agreements for

consumers (Art 22)65

which do not allow consumer protection to be waived Gruber may also

be regarded as an isolated case considering its facts Indeed the Courts harsh stance towards

Mr Gruber could be related to the other conclusion it drew namely that a purchaser can be

considered a consumer only if the link between the transaction and its business is marginal

which was not the case here as we already mentioned As such Gruberrsquos severe approach to

consumers may be restricted to cases where the purchaser would in any case not be

considered a consumer because he is not acting predominantly for private purposes

All in all it is probably best to await further clarification on the perspective from which the

notion of consumer should be interpreted ie subjectively (the good faith principle) or

objectively (as soon as a purchase is made for private purposes the buyer should be granted

consumer protection regardless of what the other contracting party thought of the buyers

capacity)

sect3 ndash Indirect link with professional activity

The title of this paragraph refers to the situation where a person buys something that is not

directly related to his or her professional activity but which will still be used lsquoin the business

spherersquo Many examples have been given when assessing the European definition of the

consumer with respect to the ratio legis of the consumer protection one of the most common

being a lawyer who purchases a computer for use in his or her workplace

EU law clearly appears not to protect the lawyer as a consumer under these circumstances66

Indeed a first indication is the case of the Directive 994467

the proposal of which was

initially including the protection for purposes lsquoindirectly linked with businessrsquo The final

version however was modified to reflect the narrow conception of the consumer under EU

law and does not allow such an indirect link with business activity In addition in Di Pinto

the Court of Justice stated that EU consumer protection law does not lsquodraw a distinction

between normal acts and those which are exceptional in naturersquo68

Not all the Member States conform to EU law in this regard Again the most significant

opposition comes from France However Bulgaria Poland Latvia and Luxembourg also

extend consumer protection to businesses that conclude contracts outside their usual field of

63

Christian Von Bar Eric Clive and Hans Schulte Noumllke (eds) Principles Definitions and Model Rules of

European Private Law Draft Common Frame of Reference (DCFR) (Munich Sellier 2009) available at

httpeceuropaeujusticecontractfileseuropean-private-law_enpdf accessed the 10th

May 2012 64

Even though Directive 199944EC on certain aspects of the sale of consumer goods and associated guarantees

(n 13) did already contain a similar provision in its article 7 65

Directive of the European Parliament and of the Council 200848EC on credit agreements for consumers and

repealing Council Directive 87102EEC [2008] OJ L 13366 66

Hans Schulte-Noumllke (n 16) 681-682 67

N 64 68

Di Pinto (n 21) para 15

- 24 -

private In Germany Sweden Finland and Denmark the rule is exactly same as that

elaborated by the Court of Justice in Gruber whereas in the other Member States the

situation is unclear as there are no specific rules covering this situation58

Certain authors59

consider there to have been a paradigm shift since the CRD resulting in an

extension of the scope of consumer protection as Recital 17 to the CRD states that

[] in the case of dual purpose contracts where the contract is concluded for purposes

partly within and partly outside the personrsquos trade and the trade purpose is so limited

as not to be predominant in the overall context of the contract that person should also

be considered as a consumer

This recital simply appears to transpose the Gruber decision into EU law We therefore fail to

understand the enthusiasm of these authors as the scope of the notion of lsquoconsumerrsquo is merely

clarified rather than altered

Hence the CRD seems to confirm with even more certainty that the Gruber holding applies to

the concept of consumer even with respect to substantive provisions of law60

Another interesting question in relation to mixed-purpose transactions is what happens if a

purchaser claims to be acting for professional purposes but in reality is acting for private

purposes in order to benefit from consumer protection This is in reality the factual

background to the Gruber case that we just discussed However before arriving at the

abovementioned conclusion the Court introduces the interesting concept of good faith

Indeed it states that an lsquoindividual must be regarded in view of the impression he has given

to the other party acting in good faith as having renounced the protection afforded by those

provisionsrsquo61

At first glance it appears that the notion of consumer should therefore be

interpreted subjectively rather than purely objectively62

In other words if in reality a

purchaser is acting for private purposes but gives the other contracting party the perfect

impression that he is acting for professional purposes such behaviour can be considered a

waiver of consumer status

It is striking however that Article 25 of the CRD expressly states that consumers may not

waive the rights conferred on them by the Directive The questions thus arises as to how this

statement can be reconciled with the Courts approach

One interpretation would be to say again that Gruber concerns only procedural aspects of

consumer law This is not a very convincing argument though Hence a second explanation

could be that the Court considering the Brussels Convention did not find any provision

precluding a waiver of consumer protection and therefore found that the general principle of

good faith is more important in this situation This possibility is actually reinforced when one

58

Hans Schulte-Noumllke (n 16) 685-686 59

Margus Kingisepp and Age Vaumlrv (n 50) 60

Caroline Cauffman (n 37) 2 61

Gruber (n 18) para 53 62

Margus Kingisepp and Age Vaumlrv (n 50)

- 25 -

looks at the Draft Common Frame of Reference63

for European contract law where we can

unmistakably notice the importance of this principle (in fact it is even a duty) Finally

Gruber may be simply considered as an isolated case that does not take into account recent

directives64

such as the CRD (Art 25) or Directive 200848EC on credit agreements for

consumers (Art 22)65

which do not allow consumer protection to be waived Gruber may also

be regarded as an isolated case considering its facts Indeed the Courts harsh stance towards

Mr Gruber could be related to the other conclusion it drew namely that a purchaser can be

considered a consumer only if the link between the transaction and its business is marginal

which was not the case here as we already mentioned As such Gruberrsquos severe approach to

consumers may be restricted to cases where the purchaser would in any case not be

considered a consumer because he is not acting predominantly for private purposes

All in all it is probably best to await further clarification on the perspective from which the

notion of consumer should be interpreted ie subjectively (the good faith principle) or

objectively (as soon as a purchase is made for private purposes the buyer should be granted

consumer protection regardless of what the other contracting party thought of the buyers

capacity)

sect3 ndash Indirect link with professional activity

The title of this paragraph refers to the situation where a person buys something that is not

directly related to his or her professional activity but which will still be used lsquoin the business

spherersquo Many examples have been given when assessing the European definition of the

consumer with respect to the ratio legis of the consumer protection one of the most common

being a lawyer who purchases a computer for use in his or her workplace

EU law clearly appears not to protect the lawyer as a consumer under these circumstances66

Indeed a first indication is the case of the Directive 994467

the proposal of which was

initially including the protection for purposes lsquoindirectly linked with businessrsquo The final

version however was modified to reflect the narrow conception of the consumer under EU

law and does not allow such an indirect link with business activity In addition in Di Pinto

the Court of Justice stated that EU consumer protection law does not lsquodraw a distinction

between normal acts and those which are exceptional in naturersquo68

Not all the Member States conform to EU law in this regard Again the most significant

opposition comes from France However Bulgaria Poland Latvia and Luxembourg also

extend consumer protection to businesses that conclude contracts outside their usual field of

63

Christian Von Bar Eric Clive and Hans Schulte Noumllke (eds) Principles Definitions and Model Rules of

European Private Law Draft Common Frame of Reference (DCFR) (Munich Sellier 2009) available at

httpeceuropaeujusticecontractfileseuropean-private-law_enpdf accessed the 10th

May 2012 64

Even though Directive 199944EC on certain aspects of the sale of consumer goods and associated guarantees

(n 13) did already contain a similar provision in its article 7 65

Directive of the European Parliament and of the Council 200848EC on credit agreements for consumers and

repealing Council Directive 87102EEC [2008] OJ L 13366 66

Hans Schulte-Noumllke (n 16) 681-682 67

N 64 68

Di Pinto (n 21) para 15

- 25 -

looks at the Draft Common Frame of Reference63

for European contract law where we can

unmistakably notice the importance of this principle (in fact it is even a duty) Finally

Gruber may be simply considered as an isolated case that does not take into account recent

directives64

such as the CRD (Art 25) or Directive 200848EC on credit agreements for

consumers (Art 22)65

which do not allow consumer protection to be waived Gruber may also

be regarded as an isolated case considering its facts Indeed the Courts harsh stance towards

Mr Gruber could be related to the other conclusion it drew namely that a purchaser can be

considered a consumer only if the link between the transaction and its business is marginal

which was not the case here as we already mentioned As such Gruberrsquos severe approach to

consumers may be restricted to cases where the purchaser would in any case not be

considered a consumer because he is not acting predominantly for private purposes

All in all it is probably best to await further clarification on the perspective from which the

notion of consumer should be interpreted ie subjectively (the good faith principle) or

objectively (as soon as a purchase is made for private purposes the buyer should be granted

consumer protection regardless of what the other contracting party thought of the buyers

capacity)

sect3 ndash Indirect link with professional activity

The title of this paragraph refers to the situation where a person buys something that is not

directly related to his or her professional activity but which will still be used lsquoin the business

spherersquo Many examples have been given when assessing the European definition of the

consumer with respect to the ratio legis of the consumer protection one of the most common

being a lawyer who purchases a computer for use in his or her workplace

EU law clearly appears not to protect the lawyer as a consumer under these circumstances66

Indeed a first indication is the case of the Directive 994467

the proposal of which was

initially including the protection for purposes lsquoindirectly linked with businessrsquo The final

version however was modified to reflect the narrow conception of the consumer under EU

law and does not allow such an indirect link with business activity In addition in Di Pinto

the Court of Justice stated that EU consumer protection law does not lsquodraw a distinction

between normal acts and those which are exceptional in naturersquo68

Not all the Member States conform to EU law in this regard Again the most significant

opposition comes from France However Bulgaria Poland Latvia and Luxembourg also

extend consumer protection to businesses that conclude contracts outside their usual field of

63

Christian Von Bar Eric Clive and Hans Schulte Noumllke (eds) Principles Definitions and Model Rules of

European Private Law Draft Common Frame of Reference (DCFR) (Munich Sellier 2009) available at

httpeceuropaeujusticecontractfileseuropean-private-law_enpdf accessed the 10th

May 2012 64

Even though Directive 199944EC on certain aspects of the sale of consumer goods and associated guarantees

(n 13) did already contain a similar provision in its article 7 65

Directive of the European Parliament and of the Council 200848EC on credit agreements for consumers and

repealing Council Directive 87102EEC [2008] OJ L 13366 66

Hans Schulte-Noumllke (n 16) 681-682 67

N 64 68

Di Pinto (n 21) para 15

- 26 -

activity69

The rationale is simple in these cases the purchaser find himself exactly in the

same situation of weakness as if he or she had acted for private purposes

In the UK the situation is unclear In R amp B Customs Brokers Ltd v United Dominions Trust

Ltd70

the Court of Appeal found that with respect to the Unfair Contracts Terms Act 1977

chapter 12 (1) lsquobusinesses engaged in a transaction outside their normal business purposes

can claim to be ldquodealing as a consumerrdquorsquo71

However this holding seems to be limited to the

Unfair Contracts Terms Act and besides in another case Stevenson v Rogers72

the Court of

Appeal may have overruled that first approach

As stated above the most interesting situation is in France Indeed the French Supreme Court

has in first instance applied the criteria of compeacutetence professionelle (professional skill)73

Under this approach the Court was considering the lack of knowledge or technical

(in)competence of the purchaser in order to determine whether to grant the protection

provided for by the French Consumer Code Hence the Court held in many cases that even

though a purchaser is acting in a professional capacity if the purchaser is outside his or her

area of expertise he or she is in exactly the same position of weakness as a purchaser acting

for private purposes74

A turning point in the case law of the French Supreme Court75

came on 24 January 1995

when the criterion of compeacutetence professionelle was abandoned in favour of rapport direct

(or direct link)76

The key criterion in determining whether the rules apply is therefore no

longer the lsquotechnical skillrsquo of the professional but rather whether the contract is lsquodirectly

related to the business activityrsquo77

In our opinion the concrete difference is not very

significant Indeed we believe that while the previous criterion was subjective in nature it is

now objective while the category of persons that will be afforded protection has not changed

considerably In effect a person that is not technically skilled in a matter will usually be

acting outside his or her area of professional activity This is demonstrated by the fact that

French case law has not really gained legal certainty after this change of criterion In fact

certain trial courts have ruled that a person should be afforded protection whereas another

neighbouring court rules the opposite78

This split in the case law is due to the fact that the

Supreme Court has not taken its responsibility to define more adequately the direct link

criterion surrounding it with sufficient interpretation tools in order to guide the trial courts

69

Hans Schulte-Noumllke (n 16) 680 70

R amp B Customs Ltd v United Dominions Trust Ltd (1988) 1 WLR 321 71

Hans Schulte-Noumllke (n 16) 681 72

Stevenson v Rogers (1999) 1 All ER 613 73

Paisant lsquoA la recherche du consommateurrsquo (n 1) 74

See namely Cass 1re civ 28 April 1987 Bull Civ I no 134 See also Calais-Auloy (n 25) 67 and fn 4 The

author however mentions another line of cases where the Court did not accept this theory (fn 5) 75

Cass 1re

civ 24 January 1995 Bull Civ I no 54 76

Paisant lsquoA la recherche du consommateurrsquo (n 1) Calais-Auloy (25) 67-68 77

Hans Schulte-Noumllke (n 16) 680 78

Paisant lsquoA la recherche du consommateurrsquo (n 1) The author quotes a great amount of cases that illustrate very

well the nonsense amid French case law

- 27 -

and guarantee more legal certainty79

This in turn makes it more understandable why many

French authors argue for changing this criterion and meeting the European definition80

We will come back to the French approach in the fifth chapter and discuss whether it is

possible to improve on it somehow In the meantime even though the Court of Justice has not

been apprised of this specific issue (as is the case with respect to legal persons81

or mixed-

purpose transactions82

) it is doubtful that the French interpretation is totally in conformity

with EU law83

79

Paisant lsquo Le consommateur proteacutegeacutersquo (n 54) para 12 80

See namely Laurent Leveneur lsquoContrats entre professionnels et leacutegislations des clauses abusivesrsquo (April

1996) Contrats concurrence consommation 1 Paisant lsquoA la recherche du consommateurrsquo (n 1) Calais-Auloy

(n 25) 68 81

Idealservice (n 21) 82

Gruber (n 21) 83

Cf however Di Pinto (n 21) para 15

- 28 -

Chapter 4 ndash Towards full-fledged protection of the weaker

party at the EU level

Section 1 ndash A noteworthy case in the investment sector

The EU Markets in Financial Instruments Directive (hereinafter MiFID)84

which has been

described as Europersquos lsquonew constitutionrsquo in the area of investment services and secondary

capital markets85

adopts an extremely interesting approach towards those it is designed to

protect MiFID has introduced a lsquoconduct of business rulesrsquo aimed at ensuring a high level of

investor protection and the efficiency of the financial markets namely on the basis of home

country supervision Without embarking in a thorough discussion on the very interesting

content of this Directive86

suffice it to add to this short introduction that MiFID is based on

several principles such as loyalty informed consent and lsquoknow your clientrsquo set out in Articles

18 to 24

For our purposes whats more interesting is that MiFID has obliged the Member States to

impose on investment service providers to classify clients in three different categories based

on an extremely tailored assessment method The three different categories are professional

clients retail clients and eligible counterparties87

Let us set aside the latter category which

concerns very specialised players in financial circles88

who are afforded the least protection

Retail investors on the other hand are considered the weakest party in MiFIDrsquos regime As

such retail clients ndash defined negatively as a client that is not a professional investor89

ndash can be

treated as consumers90

However as Reinhard Steennot immediately notes lsquowhen having a

closer look at the list of professional clients it becomes clear that the concept of a retail client

is different from the traditional concept of a consumerrsquo91

The list to which Professor Steennot

refers can be found itself in Chapter I of Annex II to MiFID92

and covers basically all clients

84

Directive of the European Parliament and of the Council 200439EC on Markets in Financial Instruments

amending Council Directives 85611EEC and 936EEC and Directive 200012EC of the European Parliament

and the Council and Repealing Council Directive 9322EEC [2004] OJ L 1451 85

Olha O Cherednychenko lsquoThe Regulation of Retail Investment Services in the EU Towards the

Improvement of Investor Rights (February 2010) Vol 33 No 4 Journal of Consumer Policy 403 405

Available at httpssrncomabstract=1702249 accessed the 10th

May 2012 86

See developments namely in Michel Tison lsquoDe bescherming van de belegger in het kapitaalmarktrecht de

hobbelige weg naar een Europees Ius Communersquo in Synthegraveses de droit bancaire et financier Liber Amicorum

Andreacute Bruyneel (Bruylant 2006) 11 Reinhard Steennot lsquoProtecting Investors through Information

Requirementsrsquo in S M Kierkegaard (ed) Private Law ndash Rights Duties amp Conflicts (2010) 272 Olha O

Cherednychenko (n 85) Marc Kruithof and Walter Gerven lsquoA Differentiated Approach to Client Protection

The Example of MiFIDrsquo (June 8 2010) Ghent University Financial Law Institute Working Paper No 2010-07

Available at httpssrncomabstract=1622682 accessed the 10th

May 2012 87

For detailed information about what rules apply to each category see Commission Directive 200673EC

implementing Directive 200439EC of the European Parliament and of the Council as regards organisational

requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

[2006] OJ L 24126-58 88

See the full definition in the article 24 paras 2 to 4 MiFID 89

Art 4 12) MiFID 90

Olha O Cherednychenko does so in her contribution (n 85) 404 91

Reinhard Steennot (86) 575 92

The following should all be regarded as professionals in all investment

services and activities and financial instruments for the purposes of the

Directive

(1) Entities which are required to be authorised or regulated to operate in

- 27 -

and guarantee more legal certainty79

This in turn makes it more understandable why many

French authors argue for changing this criterion and meeting the European definition80

We will come back to the French approach in the fifth chapter and discuss whether it is

possible to improve on it somehow In the meantime even though the Court of Justice has not

been apprised of this specific issue (as is the case with respect to legal persons81

or mixed-

purpose transactions82

) it is doubtful that the French interpretation is totally in conformity

with EU law83

79

Paisant lsquo Le consommateur proteacutegeacutersquo (n 54) para 12 80

See namely Laurent Leveneur lsquoContrats entre professionnels et leacutegislations des clauses abusivesrsquo (April

1996) Contrats concurrence consommation 1 Paisant lsquoA la recherche du consommateurrsquo (n 1) Calais-Auloy

(n 25) 68 81

Idealservice (n 21) 82

Gruber (n 21) 83

Cf however Di Pinto (n 21) para 15

- 28 -

Chapter 4 ndash Towards full-fledged protection of the weaker

party at the EU level

Section 1 ndash A noteworthy case in the investment sector

The EU Markets in Financial Instruments Directive (hereinafter MiFID)84

which has been

described as Europersquos lsquonew constitutionrsquo in the area of investment services and secondary

capital markets85

adopts an extremely interesting approach towards those it is designed to

protect MiFID has introduced a lsquoconduct of business rulesrsquo aimed at ensuring a high level of

investor protection and the efficiency of the financial markets namely on the basis of home

country supervision Without embarking in a thorough discussion on the very interesting

content of this Directive86

suffice it to add to this short introduction that MiFID is based on

several principles such as loyalty informed consent and lsquoknow your clientrsquo set out in Articles

18 to 24

For our purposes whats more interesting is that MiFID has obliged the Member States to

impose on investment service providers to classify clients in three different categories based

on an extremely tailored assessment method The three different categories are professional

clients retail clients and eligible counterparties87

Let us set aside the latter category which

concerns very specialised players in financial circles88

who are afforded the least protection

Retail investors on the other hand are considered the weakest party in MiFIDrsquos regime As

such retail clients ndash defined negatively as a client that is not a professional investor89

ndash can be

treated as consumers90

However as Reinhard Steennot immediately notes lsquowhen having a

closer look at the list of professional clients it becomes clear that the concept of a retail client

is different from the traditional concept of a consumerrsquo91

The list to which Professor Steennot

refers can be found itself in Chapter I of Annex II to MiFID92

and covers basically all clients

84

Directive of the European Parliament and of the Council 200439EC on Markets in Financial Instruments

amending Council Directives 85611EEC and 936EEC and Directive 200012EC of the European Parliament

and the Council and Repealing Council Directive 9322EEC [2004] OJ L 1451 85

Olha O Cherednychenko lsquoThe Regulation of Retail Investment Services in the EU Towards the

Improvement of Investor Rights (February 2010) Vol 33 No 4 Journal of Consumer Policy 403 405

Available at httpssrncomabstract=1702249 accessed the 10th

May 2012 86

See developments namely in Michel Tison lsquoDe bescherming van de belegger in het kapitaalmarktrecht de

hobbelige weg naar een Europees Ius Communersquo in Synthegraveses de droit bancaire et financier Liber Amicorum

Andreacute Bruyneel (Bruylant 2006) 11 Reinhard Steennot lsquoProtecting Investors through Information

Requirementsrsquo in S M Kierkegaard (ed) Private Law ndash Rights Duties amp Conflicts (2010) 272 Olha O

Cherednychenko (n 85) Marc Kruithof and Walter Gerven lsquoA Differentiated Approach to Client Protection

The Example of MiFIDrsquo (June 8 2010) Ghent University Financial Law Institute Working Paper No 2010-07

Available at httpssrncomabstract=1622682 accessed the 10th

May 2012 87

For detailed information about what rules apply to each category see Commission Directive 200673EC

implementing Directive 200439EC of the European Parliament and of the Council as regards organisational

requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

[2006] OJ L 24126-58 88

See the full definition in the article 24 paras 2 to 4 MiFID 89

Art 4 12) MiFID 90

Olha O Cherednychenko does so in her contribution (n 85) 404 91

Reinhard Steennot (86) 575 92

The following should all be regarded as professionals in all investment

services and activities and financial instruments for the purposes of the

Directive

(1) Entities which are required to be authorised or regulated to operate in

- 28 -

Chapter 4 ndash Towards full-fledged protection of the weaker

party at the EU level

Section 1 ndash A noteworthy case in the investment sector

The EU Markets in Financial Instruments Directive (hereinafter MiFID)84

which has been

described as Europersquos lsquonew constitutionrsquo in the area of investment services and secondary

capital markets85

adopts an extremely interesting approach towards those it is designed to

protect MiFID has introduced a lsquoconduct of business rulesrsquo aimed at ensuring a high level of

investor protection and the efficiency of the financial markets namely on the basis of home

country supervision Without embarking in a thorough discussion on the very interesting

content of this Directive86

suffice it to add to this short introduction that MiFID is based on

several principles such as loyalty informed consent and lsquoknow your clientrsquo set out in Articles

18 to 24

For our purposes whats more interesting is that MiFID has obliged the Member States to

impose on investment service providers to classify clients in three different categories based

on an extremely tailored assessment method The three different categories are professional

clients retail clients and eligible counterparties87

Let us set aside the latter category which

concerns very specialised players in financial circles88

who are afforded the least protection

Retail investors on the other hand are considered the weakest party in MiFIDrsquos regime As

such retail clients ndash defined negatively as a client that is not a professional investor89

ndash can be

treated as consumers90

However as Reinhard Steennot immediately notes lsquowhen having a

closer look at the list of professional clients it becomes clear that the concept of a retail client

is different from the traditional concept of a consumerrsquo91

The list to which Professor Steennot

refers can be found itself in Chapter I of Annex II to MiFID92

and covers basically all clients

84

Directive of the European Parliament and of the Council 200439EC on Markets in Financial Instruments

amending Council Directives 85611EEC and 936EEC and Directive 200012EC of the European Parliament

and the Council and Repealing Council Directive 9322EEC [2004] OJ L 1451 85

Olha O Cherednychenko lsquoThe Regulation of Retail Investment Services in the EU Towards the

Improvement of Investor Rights (February 2010) Vol 33 No 4 Journal of Consumer Policy 403 405

Available at httpssrncomabstract=1702249 accessed the 10th

May 2012 86

See developments namely in Michel Tison lsquoDe bescherming van de belegger in het kapitaalmarktrecht de

hobbelige weg naar een Europees Ius Communersquo in Synthegraveses de droit bancaire et financier Liber Amicorum

Andreacute Bruyneel (Bruylant 2006) 11 Reinhard Steennot lsquoProtecting Investors through Information

Requirementsrsquo in S M Kierkegaard (ed) Private Law ndash Rights Duties amp Conflicts (2010) 272 Olha O

Cherednychenko (n 85) Marc Kruithof and Walter Gerven lsquoA Differentiated Approach to Client Protection

The Example of MiFIDrsquo (June 8 2010) Ghent University Financial Law Institute Working Paper No 2010-07

Available at httpssrncomabstract=1622682 accessed the 10th

May 2012 87

For detailed information about what rules apply to each category see Commission Directive 200673EC

implementing Directive 200439EC of the European Parliament and of the Council as regards organisational

requirements and operating conditions for investment firms and defined terms for the purposes of that Directive

[2006] OJ L 24126-58 88

See the full definition in the article 24 paras 2 to 4 MiFID 89

Art 4 12) MiFID 90

Olha O Cherednychenko does so in her contribution (n 85) 404 91

Reinhard Steennot (86) 575 92

The following should all be regarded as professionals in all investment

services and activities and financial instruments for the purposes of the

Directive

(1) Entities which are required to be authorised or regulated to operate in

- 29 -

with the experience knowledge and expertise to make their own investment decisions and

properly assess the risks they incur Even more remarkable is that MiFID differs even from

the investor protection directives such as the UCITS IV Directive93

and the Prospectus

Directive94

95

Marc Kruithof goes further in his explanation of MiFIDrsquos rules and notes that contrary to the

usual consumer legislation MiFID uses two levels of protection depending on the needs of

the client96

Hence it affords protection to every type of investor and moreover grants

additional protection to those who need it because they do not have the necessary knowledge

expertise or experience The weakness of retail clients and hence the protection extended to

such clients is thus assessed on the basis of concrete and rational elements Formalistic and a

priori irrelevant factors ndash such as the fact that the client is a legal person ndash are not taken into

account97

The rules are all the more rational and well construed since a per se professional

client can request a higher degree of protection provided certain conditions ndash related again to

knowledge expertise or experience ndash are met (opt down) whilst in the opposite way a retail

client can ask to be treated as a professional (opt up)98

The analysis of the weakness of a

the financial markets The list below should be understood as

including all authorised entities carrying out the characteristic activities

of the entities mentioned entities authorised by a Member State under

a Directive entities authorised or regulated by a Member State without

reference to a Directive and entities authorised or regulated by a non-

Member State

(a) Credit institutions

(b) Investment firms

(c) Other authorised or regulated financial institutions

(d) Insurance companies

(e) Collective investment schemes and management companies of

such schemes

(f) Pension funds and management companies of such funds

(g) Commodity and commodity derivatives dealers

(h) Locals

(i) Other institutional investors

(2) Large undertakings meeting two of the following size requirements on

a company basis

mdash balance sheet total EUR 20 000 000

mdash net turnover EUR 40 000 000

mdash own funds EUR 2 000 000

(3) National and regional governments public bodies that manage public

debt Central Banks international and supranational institutions such

as the World Bank the IMF the ECB the EIB and other similar

international organisations

(4) Other institutional investors whose main activity is to invest in

financial instruments including entities dedicated to the securitisation

of assets or other financing transactions 93

Directive of the European Parliament and of the Council 200965EC on the Coordination of Laws

Regulations and Administrative Provisions relating to Undertakings for Collective Investment in Transferable

Securities (Recast) [2009] OJ L 30232 94

Directive of the European Parliament and of the Council 200371EC on the Prospectus to be Published when

Securities are Offered to the Public or Admitted to Trading [2003] OJ L 34564 95

For an analysis of these approaches see Marc Kruithof (n 85) 14-15 96

Ibid 14 97

Ibid 15 98

Reinhard Steennot (n 85) 575 The author explains that the reason why a retail investor would like to be

considered as a professional one and hence get less protection is simply because professional investors have

access to products and services that are not available to retail investors

- 30 -

party is therefore made on a case-by-case basis Indeed clients must be classified before any

service are provided to them In this respect Article 19 of MiFID provides that

When providing investment advice or portfolio management the investment firm shall

obtain the necessary information regarding the clients or potential clients knowledge

and experience in the investment field relevant to the specific type of product or

service his financial situation and his investment objectives so as to enable the firm to

recommend to the client or potential client the investment services and financial

instruments that are suitable for him

The same applies to other investment services99

The foregone conclusion is that a consumer ndash in the strict sense ndash will always be treated as a

retail client whereas not every retail investor will be considered a consumer100

In other

words the notion of retail client in MiFID is broader than the notion of consumer and hence

a person whose business is investing may benefit from more protection than if he or she were

to use the same money for another business Indeed in the investment sector such as it is as

covered by MiFID101

the weaker party namely the retail client is defined on the basis of

factual elements such as knowledge expertise or experience whereas such factors are totally

ignored when assessing the weaker party in the other areas of consumer law As mentioned

above legal persons are automatically excluded from the definition of consumer and same

goes with respect to natural persons acting for professional purposes Their actual weakness

does not matter EU law presumes that all legal persons and natural persons acting for

business purposes are without exception strong experienced and competent contracting

parties We therefore clearly support the much more rational view that the legislator has taken

in MiFID Having said that however another question arises namely why this directive takes

a different approach102

Section 2 ndash Motives guiding the particular approach in the MiFID

sect1 ndash Distinction between standard and tailor-made contracts

Looking to MiFID or its implementing Directive will not help answer our question It is thus

necessary to try to determine the legislative intent

99

Art 19 para 5 See also article 27 para 1 of the implementing Directive (n 87) that reads as follows Member

States shall ensure that investment firms notify new clients and existing clients that the investment firm has

newly categorised as required by Directive 200439EC of their categorisation as a retail client a professional

client or an eligible counterparty in accordance with that Directive 100

Reinhard Steennot (n 85) 575 101

But also the Prospectus Directive (n 94) to a certain extent as its article 3(2)(a) of which distinguishes

between qualified investors and unqualified investors The latter category may include small and medium sized

enterprises (lsquoSMErsquo) (as defined in Article 2(1)(e)(v) Article 3(2)(a) also provides that SMEs as well as natural

persons that can be considered as having significant experience in the relevant sector may be considered

qualified investors by the Member States 102

It is also worthwhile to note here the other aforementioned exception with respect to travel packages holidays

and tour packages covered by Directive 90314 which (n 15) and that does not distinguish at all between private

and business purposes Unlike MiFID however this directive does not define a weak party setting forth

multiple concrete and factual criteria

- 31 -

The first hypothesis that comes to mind is that the investment sector is distinct from other

areas of consumer law as contracts for investment services cannot be considered standard

agreements that is contracts that are lsquostandardised and offered to an unlimited range of

possible contractors regardless of their individual condition or characteristics103

Such

contracts are also known as standard form contracts The use of such contracts has become

increasingly common especially since the e-commerce revolution Nevertheless it seems that

investment services do not follow that trend or at least not to the same extent Amongst the

investment services listed in Annex 1 Chapter A of MiFID lsquoportfolio managementrsquo is

defined by MiFID in Article 4(9) as the management of lsquoportfolios in accordance with

mandates given by clients on a discretionary client-by-client basis []rsquo whereas lsquoinvestment

advicersquo is in turn defined in Article 4(4) as the lsquoprovision of personal recommendations to a

client [] in respect of one or more transactions relating to financial instrumentsrsquo As

Reinhard Steennot notes a recommendation is deemed personal lsquowhen it is presented as

suitable for that person or it is based on consideration of the circumstances of that personrsquo104

These elements show that at least for these two types of investment services the contractual

approach is not a standard one As such this could be a first element to explain why the

legislator considered that in this sector it is feasible ndash or even necessary ndash to assess the

expertise of each client separately Clients may therefore be accurately classified as weak

parties (retail clients) or standard parties (professional clients) and benefit from the level of

protection that corresponds to their category

sect2 ndash Complexity of investment services

Another ndash or perhaps complementary ndash explanation for this singling out of the investment

sector from other sectors of consumer law may be that the investment sector is extremely

complex involving high stakes and risks thus necessitating prudent and personalised advice

It is not necessary to go into more detail here investments are always associated with the idea

of risk and speculation and hence the economic security of society as a whole The legislator

obviously wanted to reduce the number of ill-advised people who gamble without experience

in this area possibly putting themselves in a worse economic situation and hence becoming a

burden on society

Section 3 ndash Relation to other instruments

The two reasons expressed above at first glance constitute the legislatures rationale when

deciding to adopt a more cautious approach with respect to investment services assessing on

a case-by-case basis the level of protection required to guarantee more or less safe investment

However as has already been pointed out MiFIDrsquos personal (ratione personae) scope of

application differs from that of other instruments regulating the investment sector (namely the

UCITS IV Directive and to a lesser extent the Prospectus Directive) and even more from the

Directive on the distance marketing of consumer financial services105

which applies the

103

Barral (n 3) 612 104

Steennot (n 85) 573-574 105

Directive on distance marketing of consumer financial services directive (n 13)

- 32 -

narrow definition of consumer limiting its scope of application to natural persons acting for

other than business purposes106

What is the reason for this difference in approach

In our opinion these different approaches are due to a lsquopolicy of differentiationrsquo The

legislator simply decided not to opt for a single concept on which the entire branch of law

would depend as is the case for the controversial definition of consumer in consumer law

Depending on the concrete aspect it seeks to protect the legislator has decided to apply

different personal scopes of application Hence the notions used in the various instruments

not the same Whereas MiFID distinguishes between lsquoretail clientsrsquo and lsquoprofessional clientsrsquo

the UCITS IV Directive refers only to the lsquoinvestorrsquo while the Prospectus Directive adds the

term lsquoqualified investorrsquo107

and the Directive on distance marketing of consumer financial

services uses the traditional notion of lsquoconsumerrsquo108

This approach is naturally very favourable to flexible protective rules As Marie-Steacutephane

Payet has noted referring to consumers in general lsquodire que le consommateur est

incompetent crsquoest ne rien dire Deacutefinir le consommateur par son incompeacutetence neacutecessite

avant tout de deacuteterminer le domaine particulier dans lequel on se placersquo109

The same

reflection can actually be made with respect to any lsquoweaker partyrsquo The legislator seems to

have followed this path in the investment sector Would such an approach not be the best

alternative in consumer law as well Instead of using a single notion of lsquoconsumerrsquo in all

instruments a policy of lsquodifferentiationrsquo could well be the ideal solution to reconcile legal

certainty and equity

106

The relation with this Directive is however not that simple since although it formally applies only to the

consumer in the strict sense its scope of application is actually indirectly extended ndash by art 29(5)(b) of the

Directive implementing MiFID ndash to the broader notion of lsquoretail clientrsquo as regards investment services covered

by MiFID 107

Even though this terminology is already closer to that used in MiFID as the weaker party who is granted the

protection foreseen by the Directive is one more time assessed on the basis of concrete experience and expertise 108

Other sector-specific directives such as the Payment Services Directive (Directive of the European Parliament

and of the Council 200764EC on payment services in the internal market amending Directives 977EC

200265EC 200560EC and 200648EC and repealing Directive 975EC [2007] OJ L 3191) or the Consumer

Credit Directive (n 65) also use the traditional notion of lsquoconsumerrsquo 109

lsquoSaying that the consumer is incompetent does not mean anything Defining the consumer on the basis of its

incompetence requires primarily a determination of the specific domain concernedrsquo (own translation) See Payet

(n 18) 69

- 33 -

Chapter 5 ndash Reflections on a possible new definition of

consumer that conforms to theratio legis of the consumer

protection rules

Section 1 ndash The adhering party

sect1 ndash Standard-form contracts and e-commerce

The adhering party or adheacuterent (with reference to a contrat drsquoadheacutesion or standard-form

contract) is the term used by Sylvette Guillemard a Canadian scholar who strongly supports

the position that insofar as e-commerce is concerned the concept of consumer should be

replaced with that of the adhering party110

In a nutshell this position is based on the fact that

in e-commerce standard-form contracts are extremely widespread which renders the

differentiation between business purchases and private purchases irrelevant Hence she

argues that the notion of consumer which determines the personal scope of application of the

protective rules does not make sense with respect to commercial practices on the Internet

This proposal which is based on the contractual weakness of the purchaser is the first

alternative to the current European definition of consumer which we would like to analyse

Although traditional forms of contracting are also very concerned by standard-form contracts

Sylvette Guillemard suggests replacing the notion of consumer with that of adhering party

only with respect to e-contracts This position is based on the fact that e-contracts are almost

always concluded via a website in which case there is no face-to-face bargaining partner

This situation is commonly referred to as the lsquotake-it-or-leave-itrsquo111

position and is

characterised by a serious reduction in bargaining power Since this situation of contractual

weakness applies to both consumers and professionals Sylvette Guillemard suggests avoiding

this traditional distinction with regard to e-commerce

sect2 ndash The concept of adhering party with respect to e-contracts

It could be argued that many e-traders still distinguish between purchasers that are acting for

private or domestic purposes and those acting for business purposes However this is not

exactly true Indeed most websites differentiate only between natural and legal persons with

legal persons presumed to be professionals Hence it appears that if we interpret these terms

narrowly natural persons acting for business purposes will be excluded On the other hand

the proponents of Sylvette Guillemardrsquos approach may claim that even this distinction is

justified only for tax and sometimes convenience reasons Indeed if for instance we visit the

website of Dell112

or the Belgian newspaper lsquoLe Soirrsquo113

and identify ourselves as a company

110

Guillemard (n 18) 44-61 111

Robert A Hillman and Jeffrey J Rachlinski lsquoStandard-Form Contracting in the Electronic Agersquo (2001) 1 7

Available at httpssrncomabstract=287819 accessed the 10th

May 2012 Zheng Tang lsquoExclusive Choice of

Forum Clauses and Consumer Contracts in E-Commercersquo (October 2005) 1 Journal of Private International Law

237 239 112

httpwwwdellcombefrentreprisesp~ck=mn accessed the 10th

May 2012 113

httpwwwlesoirbeservicesabonnementsupport=numeriqueampcode=numeriqueampapp= accessed the 10th

May 2012

- 30 -

party is therefore made on a case-by-case basis Indeed clients must be classified before any

service are provided to them In this respect Article 19 of MiFID provides that

When providing investment advice or portfolio management the investment firm shall

obtain the necessary information regarding the clients or potential clients knowledge

and experience in the investment field relevant to the specific type of product or

service his financial situation and his investment objectives so as to enable the firm to

recommend to the client or potential client the investment services and financial

instruments that are suitable for him

The same applies to other investment services99

The foregone conclusion is that a consumer ndash in the strict sense ndash will always be treated as a

retail client whereas not every retail investor will be considered a consumer100

In other

words the notion of retail client in MiFID is broader than the notion of consumer and hence

a person whose business is investing may benefit from more protection than if he or she were

to use the same money for another business Indeed in the investment sector such as it is as

covered by MiFID101

the weaker party namely the retail client is defined on the basis of

factual elements such as knowledge expertise or experience whereas such factors are totally

ignored when assessing the weaker party in the other areas of consumer law As mentioned

above legal persons are automatically excluded from the definition of consumer and same

goes with respect to natural persons acting for professional purposes Their actual weakness

does not matter EU law presumes that all legal persons and natural persons acting for

business purposes are without exception strong experienced and competent contracting

parties We therefore clearly support the much more rational view that the legislator has taken

in MiFID Having said that however another question arises namely why this directive takes

a different approach102

Section 2 ndash Motives guiding the particular approach in the MiFID

sect1 ndash Distinction between standard and tailor-made contracts

Looking to MiFID or its implementing Directive will not help answer our question It is thus

necessary to try to determine the legislative intent

99

Art 19 para 5 See also article 27 para 1 of the implementing Directive (n 87) that reads as follows Member

States shall ensure that investment firms notify new clients and existing clients that the investment firm has

newly categorised as required by Directive 200439EC of their categorisation as a retail client a professional

client or an eligible counterparty in accordance with that Directive 100

Reinhard Steennot (n 85) 575 101

But also the Prospectus Directive (n 94) to a certain extent as its article 3(2)(a) of which distinguishes

between qualified investors and unqualified investors The latter category may include small and medium sized

enterprises (lsquoSMErsquo) (as defined in Article 2(1)(e)(v) Article 3(2)(a) also provides that SMEs as well as natural

persons that can be considered as having significant experience in the relevant sector may be considered

qualified investors by the Member States 102

It is also worthwhile to note here the other aforementioned exception with respect to travel packages holidays

and tour packages covered by Directive 90314 which (n 15) and that does not distinguish at all between private

and business purposes Unlike MiFID however this directive does not define a weak party setting forth

multiple concrete and factual criteria

- 31 -

The first hypothesis that comes to mind is that the investment sector is distinct from other

areas of consumer law as contracts for investment services cannot be considered standard

agreements that is contracts that are lsquostandardised and offered to an unlimited range of

possible contractors regardless of their individual condition or characteristics103

Such

contracts are also known as standard form contracts The use of such contracts has become

increasingly common especially since the e-commerce revolution Nevertheless it seems that

investment services do not follow that trend or at least not to the same extent Amongst the

investment services listed in Annex 1 Chapter A of MiFID lsquoportfolio managementrsquo is

defined by MiFID in Article 4(9) as the management of lsquoportfolios in accordance with

mandates given by clients on a discretionary client-by-client basis []rsquo whereas lsquoinvestment

advicersquo is in turn defined in Article 4(4) as the lsquoprovision of personal recommendations to a

client [] in respect of one or more transactions relating to financial instrumentsrsquo As

Reinhard Steennot notes a recommendation is deemed personal lsquowhen it is presented as

suitable for that person or it is based on consideration of the circumstances of that personrsquo104

These elements show that at least for these two types of investment services the contractual

approach is not a standard one As such this could be a first element to explain why the

legislator considered that in this sector it is feasible ndash or even necessary ndash to assess the

expertise of each client separately Clients may therefore be accurately classified as weak

parties (retail clients) or standard parties (professional clients) and benefit from the level of

protection that corresponds to their category

sect2 ndash Complexity of investment services

Another ndash or perhaps complementary ndash explanation for this singling out of the investment

sector from other sectors of consumer law may be that the investment sector is extremely

complex involving high stakes and risks thus necessitating prudent and personalised advice

It is not necessary to go into more detail here investments are always associated with the idea

of risk and speculation and hence the economic security of society as a whole The legislator

obviously wanted to reduce the number of ill-advised people who gamble without experience

in this area possibly putting themselves in a worse economic situation and hence becoming a

burden on society

Section 3 ndash Relation to other instruments

The two reasons expressed above at first glance constitute the legislatures rationale when

deciding to adopt a more cautious approach with respect to investment services assessing on

a case-by-case basis the level of protection required to guarantee more or less safe investment

However as has already been pointed out MiFIDrsquos personal (ratione personae) scope of

application differs from that of other instruments regulating the investment sector (namely the

UCITS IV Directive and to a lesser extent the Prospectus Directive) and even more from the

Directive on the distance marketing of consumer financial services105

which applies the

103

Barral (n 3) 612 104

Steennot (n 85) 573-574 105

Directive on distance marketing of consumer financial services directive (n 13)

- 32 -

narrow definition of consumer limiting its scope of application to natural persons acting for

other than business purposes106

What is the reason for this difference in approach

In our opinion these different approaches are due to a lsquopolicy of differentiationrsquo The

legislator simply decided not to opt for a single concept on which the entire branch of law

would depend as is the case for the controversial definition of consumer in consumer law

Depending on the concrete aspect it seeks to protect the legislator has decided to apply

different personal scopes of application Hence the notions used in the various instruments

not the same Whereas MiFID distinguishes between lsquoretail clientsrsquo and lsquoprofessional clientsrsquo

the UCITS IV Directive refers only to the lsquoinvestorrsquo while the Prospectus Directive adds the

term lsquoqualified investorrsquo107

and the Directive on distance marketing of consumer financial

services uses the traditional notion of lsquoconsumerrsquo108

This approach is naturally very favourable to flexible protective rules As Marie-Steacutephane

Payet has noted referring to consumers in general lsquodire que le consommateur est

incompetent crsquoest ne rien dire Deacutefinir le consommateur par son incompeacutetence neacutecessite

avant tout de deacuteterminer le domaine particulier dans lequel on se placersquo109

The same

reflection can actually be made with respect to any lsquoweaker partyrsquo The legislator seems to

have followed this path in the investment sector Would such an approach not be the best

alternative in consumer law as well Instead of using a single notion of lsquoconsumerrsquo in all

instruments a policy of lsquodifferentiationrsquo could well be the ideal solution to reconcile legal

certainty and equity

106

The relation with this Directive is however not that simple since although it formally applies only to the

consumer in the strict sense its scope of application is actually indirectly extended ndash by art 29(5)(b) of the

Directive implementing MiFID ndash to the broader notion of lsquoretail clientrsquo as regards investment services covered

by MiFID 107

Even though this terminology is already closer to that used in MiFID as the weaker party who is granted the

protection foreseen by the Directive is one more time assessed on the basis of concrete experience and expertise 108

Other sector-specific directives such as the Payment Services Directive (Directive of the European Parliament

and of the Council 200764EC on payment services in the internal market amending Directives 977EC

200265EC 200560EC and 200648EC and repealing Directive 975EC [2007] OJ L 3191) or the Consumer

Credit Directive (n 65) also use the traditional notion of lsquoconsumerrsquo 109

lsquoSaying that the consumer is incompetent does not mean anything Defining the consumer on the basis of its

incompetence requires primarily a determination of the specific domain concernedrsquo (own translation) See Payet

(n 18) 69

- 33 -

Chapter 5 ndash Reflections on a possible new definition of

consumer that conforms to theratio legis of the consumer

protection rules

Section 1 ndash The adhering party

sect1 ndash Standard-form contracts and e-commerce

The adhering party or adheacuterent (with reference to a contrat drsquoadheacutesion or standard-form

contract) is the term used by Sylvette Guillemard a Canadian scholar who strongly supports

the position that insofar as e-commerce is concerned the concept of consumer should be

replaced with that of the adhering party110

In a nutshell this position is based on the fact that

in e-commerce standard-form contracts are extremely widespread which renders the

differentiation between business purchases and private purchases irrelevant Hence she

argues that the notion of consumer which determines the personal scope of application of the

protective rules does not make sense with respect to commercial practices on the Internet

This proposal which is based on the contractual weakness of the purchaser is the first

alternative to the current European definition of consumer which we would like to analyse

Although traditional forms of contracting are also very concerned by standard-form contracts

Sylvette Guillemard suggests replacing the notion of consumer with that of adhering party

only with respect to e-contracts This position is based on the fact that e-contracts are almost

always concluded via a website in which case there is no face-to-face bargaining partner

This situation is commonly referred to as the lsquotake-it-or-leave-itrsquo111

position and is

characterised by a serious reduction in bargaining power Since this situation of contractual

weakness applies to both consumers and professionals Sylvette Guillemard suggests avoiding

this traditional distinction with regard to e-commerce

sect2 ndash The concept of adhering party with respect to e-contracts

It could be argued that many e-traders still distinguish between purchasers that are acting for

private or domestic purposes and those acting for business purposes However this is not

exactly true Indeed most websites differentiate only between natural and legal persons with

legal persons presumed to be professionals Hence it appears that if we interpret these terms

narrowly natural persons acting for business purposes will be excluded On the other hand

the proponents of Sylvette Guillemardrsquos approach may claim that even this distinction is

justified only for tax and sometimes convenience reasons Indeed if for instance we visit the

website of Dell112

or the Belgian newspaper lsquoLe Soirrsquo113

and identify ourselves as a company

110

Guillemard (n 18) 44-61 111

Robert A Hillman and Jeffrey J Rachlinski lsquoStandard-Form Contracting in the Electronic Agersquo (2001) 1 7

Available at httpssrncomabstract=287819 accessed the 10th

May 2012 Zheng Tang lsquoExclusive Choice of

Forum Clauses and Consumer Contracts in E-Commercersquo (October 2005) 1 Journal of Private International Law

237 239 112

httpwwwdellcombefrentreprisesp~ck=mn accessed the 10th

May 2012 113

httpwwwlesoirbeservicesabonnementsupport=numeriqueampcode=numeriqueampapp= accessed the 10th

May 2012

- 31 -

The first hypothesis that comes to mind is that the investment sector is distinct from other

areas of consumer law as contracts for investment services cannot be considered standard

agreements that is contracts that are lsquostandardised and offered to an unlimited range of

possible contractors regardless of their individual condition or characteristics103

Such

contracts are also known as standard form contracts The use of such contracts has become

increasingly common especially since the e-commerce revolution Nevertheless it seems that

investment services do not follow that trend or at least not to the same extent Amongst the

investment services listed in Annex 1 Chapter A of MiFID lsquoportfolio managementrsquo is

defined by MiFID in Article 4(9) as the management of lsquoportfolios in accordance with

mandates given by clients on a discretionary client-by-client basis []rsquo whereas lsquoinvestment

advicersquo is in turn defined in Article 4(4) as the lsquoprovision of personal recommendations to a

client [] in respect of one or more transactions relating to financial instrumentsrsquo As

Reinhard Steennot notes a recommendation is deemed personal lsquowhen it is presented as

suitable for that person or it is based on consideration of the circumstances of that personrsquo104

These elements show that at least for these two types of investment services the contractual

approach is not a standard one As such this could be a first element to explain why the

legislator considered that in this sector it is feasible ndash or even necessary ndash to assess the

expertise of each client separately Clients may therefore be accurately classified as weak

parties (retail clients) or standard parties (professional clients) and benefit from the level of

protection that corresponds to their category

sect2 ndash Complexity of investment services

Another ndash or perhaps complementary ndash explanation for this singling out of the investment

sector from other sectors of consumer law may be that the investment sector is extremely

complex involving high stakes and risks thus necessitating prudent and personalised advice

It is not necessary to go into more detail here investments are always associated with the idea

of risk and speculation and hence the economic security of society as a whole The legislator

obviously wanted to reduce the number of ill-advised people who gamble without experience

in this area possibly putting themselves in a worse economic situation and hence becoming a

burden on society

Section 3 ndash Relation to other instruments

The two reasons expressed above at first glance constitute the legislatures rationale when

deciding to adopt a more cautious approach with respect to investment services assessing on

a case-by-case basis the level of protection required to guarantee more or less safe investment

However as has already been pointed out MiFIDrsquos personal (ratione personae) scope of

application differs from that of other instruments regulating the investment sector (namely the

UCITS IV Directive and to a lesser extent the Prospectus Directive) and even more from the

Directive on the distance marketing of consumer financial services105

which applies the

103

Barral (n 3) 612 104

Steennot (n 85) 573-574 105

Directive on distance marketing of consumer financial services directive (n 13)

- 32 -

narrow definition of consumer limiting its scope of application to natural persons acting for

other than business purposes106

What is the reason for this difference in approach

In our opinion these different approaches are due to a lsquopolicy of differentiationrsquo The

legislator simply decided not to opt for a single concept on which the entire branch of law

would depend as is the case for the controversial definition of consumer in consumer law

Depending on the concrete aspect it seeks to protect the legislator has decided to apply

different personal scopes of application Hence the notions used in the various instruments

not the same Whereas MiFID distinguishes between lsquoretail clientsrsquo and lsquoprofessional clientsrsquo

the UCITS IV Directive refers only to the lsquoinvestorrsquo while the Prospectus Directive adds the

term lsquoqualified investorrsquo107

and the Directive on distance marketing of consumer financial

services uses the traditional notion of lsquoconsumerrsquo108

This approach is naturally very favourable to flexible protective rules As Marie-Steacutephane

Payet has noted referring to consumers in general lsquodire que le consommateur est

incompetent crsquoest ne rien dire Deacutefinir le consommateur par son incompeacutetence neacutecessite

avant tout de deacuteterminer le domaine particulier dans lequel on se placersquo109

The same

reflection can actually be made with respect to any lsquoweaker partyrsquo The legislator seems to

have followed this path in the investment sector Would such an approach not be the best

alternative in consumer law as well Instead of using a single notion of lsquoconsumerrsquo in all

instruments a policy of lsquodifferentiationrsquo could well be the ideal solution to reconcile legal

certainty and equity

106

The relation with this Directive is however not that simple since although it formally applies only to the

consumer in the strict sense its scope of application is actually indirectly extended ndash by art 29(5)(b) of the

Directive implementing MiFID ndash to the broader notion of lsquoretail clientrsquo as regards investment services covered

by MiFID 107

Even though this terminology is already closer to that used in MiFID as the weaker party who is granted the

protection foreseen by the Directive is one more time assessed on the basis of concrete experience and expertise 108

Other sector-specific directives such as the Payment Services Directive (Directive of the European Parliament

and of the Council 200764EC on payment services in the internal market amending Directives 977EC

200265EC 200560EC and 200648EC and repealing Directive 975EC [2007] OJ L 3191) or the Consumer

Credit Directive (n 65) also use the traditional notion of lsquoconsumerrsquo 109

lsquoSaying that the consumer is incompetent does not mean anything Defining the consumer on the basis of its

incompetence requires primarily a determination of the specific domain concernedrsquo (own translation) See Payet

(n 18) 69

- 33 -

Chapter 5 ndash Reflections on a possible new definition of

consumer that conforms to theratio legis of the consumer

protection rules

Section 1 ndash The adhering party

sect1 ndash Standard-form contracts and e-commerce

The adhering party or adheacuterent (with reference to a contrat drsquoadheacutesion or standard-form

contract) is the term used by Sylvette Guillemard a Canadian scholar who strongly supports

the position that insofar as e-commerce is concerned the concept of consumer should be

replaced with that of the adhering party110

In a nutshell this position is based on the fact that

in e-commerce standard-form contracts are extremely widespread which renders the

differentiation between business purchases and private purchases irrelevant Hence she

argues that the notion of consumer which determines the personal scope of application of the

protective rules does not make sense with respect to commercial practices on the Internet

This proposal which is based on the contractual weakness of the purchaser is the first

alternative to the current European definition of consumer which we would like to analyse

Although traditional forms of contracting are also very concerned by standard-form contracts

Sylvette Guillemard suggests replacing the notion of consumer with that of adhering party

only with respect to e-contracts This position is based on the fact that e-contracts are almost

always concluded via a website in which case there is no face-to-face bargaining partner

This situation is commonly referred to as the lsquotake-it-or-leave-itrsquo111

position and is

characterised by a serious reduction in bargaining power Since this situation of contractual

weakness applies to both consumers and professionals Sylvette Guillemard suggests avoiding

this traditional distinction with regard to e-commerce

sect2 ndash The concept of adhering party with respect to e-contracts

It could be argued that many e-traders still distinguish between purchasers that are acting for

private or domestic purposes and those acting for business purposes However this is not

exactly true Indeed most websites differentiate only between natural and legal persons with

legal persons presumed to be professionals Hence it appears that if we interpret these terms

narrowly natural persons acting for business purposes will be excluded On the other hand

the proponents of Sylvette Guillemardrsquos approach may claim that even this distinction is

justified only for tax and sometimes convenience reasons Indeed if for instance we visit the

website of Dell112

or the Belgian newspaper lsquoLe Soirrsquo113

and identify ourselves as a company

110

Guillemard (n 18) 44-61 111

Robert A Hillman and Jeffrey J Rachlinski lsquoStandard-Form Contracting in the Electronic Agersquo (2001) 1 7

Available at httpssrncomabstract=287819 accessed the 10th

May 2012 Zheng Tang lsquoExclusive Choice of

Forum Clauses and Consumer Contracts in E-Commercersquo (October 2005) 1 Journal of Private International Law

237 239 112

httpwwwdellcombefrentreprisesp~ck=mn accessed the 10th

May 2012 113

httpwwwlesoirbeservicesabonnementsupport=numeriqueampcode=numeriqueampapp= accessed the 10th

May 2012

- 32 -

narrow definition of consumer limiting its scope of application to natural persons acting for

other than business purposes106

What is the reason for this difference in approach

In our opinion these different approaches are due to a lsquopolicy of differentiationrsquo The

legislator simply decided not to opt for a single concept on which the entire branch of law

would depend as is the case for the controversial definition of consumer in consumer law

Depending on the concrete aspect it seeks to protect the legislator has decided to apply

different personal scopes of application Hence the notions used in the various instruments

not the same Whereas MiFID distinguishes between lsquoretail clientsrsquo and lsquoprofessional clientsrsquo

the UCITS IV Directive refers only to the lsquoinvestorrsquo while the Prospectus Directive adds the

term lsquoqualified investorrsquo107

and the Directive on distance marketing of consumer financial

services uses the traditional notion of lsquoconsumerrsquo108

This approach is naturally very favourable to flexible protective rules As Marie-Steacutephane

Payet has noted referring to consumers in general lsquodire que le consommateur est

incompetent crsquoest ne rien dire Deacutefinir le consommateur par son incompeacutetence neacutecessite

avant tout de deacuteterminer le domaine particulier dans lequel on se placersquo109

The same

reflection can actually be made with respect to any lsquoweaker partyrsquo The legislator seems to

have followed this path in the investment sector Would such an approach not be the best

alternative in consumer law as well Instead of using a single notion of lsquoconsumerrsquo in all

instruments a policy of lsquodifferentiationrsquo could well be the ideal solution to reconcile legal

certainty and equity

106

The relation with this Directive is however not that simple since although it formally applies only to the

consumer in the strict sense its scope of application is actually indirectly extended ndash by art 29(5)(b) of the

Directive implementing MiFID ndash to the broader notion of lsquoretail clientrsquo as regards investment services covered

by MiFID 107

Even though this terminology is already closer to that used in MiFID as the weaker party who is granted the

protection foreseen by the Directive is one more time assessed on the basis of concrete experience and expertise 108

Other sector-specific directives such as the Payment Services Directive (Directive of the European Parliament

and of the Council 200764EC on payment services in the internal market amending Directives 977EC

200265EC 200560EC and 200648EC and repealing Directive 975EC [2007] OJ L 3191) or the Consumer

Credit Directive (n 65) also use the traditional notion of lsquoconsumerrsquo 109

lsquoSaying that the consumer is incompetent does not mean anything Defining the consumer on the basis of its

incompetence requires primarily a determination of the specific domain concernedrsquo (own translation) See Payet

(n 18) 69

- 33 -

Chapter 5 ndash Reflections on a possible new definition of

consumer that conforms to theratio legis of the consumer

protection rules

Section 1 ndash The adhering party

sect1 ndash Standard-form contracts and e-commerce

The adhering party or adheacuterent (with reference to a contrat drsquoadheacutesion or standard-form

contract) is the term used by Sylvette Guillemard a Canadian scholar who strongly supports

the position that insofar as e-commerce is concerned the concept of consumer should be

replaced with that of the adhering party110

In a nutshell this position is based on the fact that

in e-commerce standard-form contracts are extremely widespread which renders the

differentiation between business purchases and private purchases irrelevant Hence she

argues that the notion of consumer which determines the personal scope of application of the

protective rules does not make sense with respect to commercial practices on the Internet

This proposal which is based on the contractual weakness of the purchaser is the first

alternative to the current European definition of consumer which we would like to analyse

Although traditional forms of contracting are also very concerned by standard-form contracts

Sylvette Guillemard suggests replacing the notion of consumer with that of adhering party

only with respect to e-contracts This position is based on the fact that e-contracts are almost

always concluded via a website in which case there is no face-to-face bargaining partner

This situation is commonly referred to as the lsquotake-it-or-leave-itrsquo111

position and is

characterised by a serious reduction in bargaining power Since this situation of contractual

weakness applies to both consumers and professionals Sylvette Guillemard suggests avoiding

this traditional distinction with regard to e-commerce

sect2 ndash The concept of adhering party with respect to e-contracts

It could be argued that many e-traders still distinguish between purchasers that are acting for

private or domestic purposes and those acting for business purposes However this is not

exactly true Indeed most websites differentiate only between natural and legal persons with

legal persons presumed to be professionals Hence it appears that if we interpret these terms

narrowly natural persons acting for business purposes will be excluded On the other hand

the proponents of Sylvette Guillemardrsquos approach may claim that even this distinction is

justified only for tax and sometimes convenience reasons Indeed if for instance we visit the

website of Dell112

or the Belgian newspaper lsquoLe Soirrsquo113

and identify ourselves as a company

110

Guillemard (n 18) 44-61 111

Robert A Hillman and Jeffrey J Rachlinski lsquoStandard-Form Contracting in the Electronic Agersquo (2001) 1 7

Available at httpssrncomabstract=287819 accessed the 10th

May 2012 Zheng Tang lsquoExclusive Choice of

Forum Clauses and Consumer Contracts in E-Commercersquo (October 2005) 1 Journal of Private International Law

237 239 112

httpwwwdellcombefrentreprisesp~ck=mn accessed the 10th

May 2012 113

httpwwwlesoirbeservicesabonnementsupport=numeriqueampcode=numeriqueampapp= accessed the 10th

May 2012

- 33 -

Chapter 5 ndash Reflections on a possible new definition of

consumer that conforms to theratio legis of the consumer

protection rules

Section 1 ndash The adhering party

sect1 ndash Standard-form contracts and e-commerce

The adhering party or adheacuterent (with reference to a contrat drsquoadheacutesion or standard-form

contract) is the term used by Sylvette Guillemard a Canadian scholar who strongly supports

the position that insofar as e-commerce is concerned the concept of consumer should be

replaced with that of the adhering party110

In a nutshell this position is based on the fact that

in e-commerce standard-form contracts are extremely widespread which renders the

differentiation between business purchases and private purchases irrelevant Hence she

argues that the notion of consumer which determines the personal scope of application of the

protective rules does not make sense with respect to commercial practices on the Internet

This proposal which is based on the contractual weakness of the purchaser is the first

alternative to the current European definition of consumer which we would like to analyse

Although traditional forms of contracting are also very concerned by standard-form contracts

Sylvette Guillemard suggests replacing the notion of consumer with that of adhering party

only with respect to e-contracts This position is based on the fact that e-contracts are almost

always concluded via a website in which case there is no face-to-face bargaining partner

This situation is commonly referred to as the lsquotake-it-or-leave-itrsquo111

position and is

characterised by a serious reduction in bargaining power Since this situation of contractual

weakness applies to both consumers and professionals Sylvette Guillemard suggests avoiding

this traditional distinction with regard to e-commerce

sect2 ndash The concept of adhering party with respect to e-contracts

It could be argued that many e-traders still distinguish between purchasers that are acting for

private or domestic purposes and those acting for business purposes However this is not

exactly true Indeed most websites differentiate only between natural and legal persons with

legal persons presumed to be professionals Hence it appears that if we interpret these terms

narrowly natural persons acting for business purposes will be excluded On the other hand

the proponents of Sylvette Guillemardrsquos approach may claim that even this distinction is

justified only for tax and sometimes convenience reasons Indeed if for instance we visit the

website of Dell112

or the Belgian newspaper lsquoLe Soirrsquo113

and identify ourselves as a company

110

Guillemard (n 18) 44-61 111

Robert A Hillman and Jeffrey J Rachlinski lsquoStandard-Form Contracting in the Electronic Agersquo (2001) 1 7

Available at httpssrncomabstract=287819 accessed the 10th

May 2012 Zheng Tang lsquoExclusive Choice of

Forum Clauses and Consumer Contracts in E-Commercersquo (October 2005) 1 Journal of Private International Law

237 239 112

httpwwwdellcombefrentreprisesp~ck=mn accessed the 10th

May 2012 113

httpwwwlesoirbeservicesabonnementsupport=numeriqueampcode=numeriqueampapp= accessed the 10th

May 2012

- 34 -

we will notice on the payment page that VAT information is requested whereas the contract

in itself does not become more negotiable

However in our view neither of these two extreme positions is entirely correct simply

because the reality of e-commerce is much more complex

First of all there are many differences between websites Some make a distinction between

lsquoundertakingsrsquo (which broadly interpreted can include all professionals) and lsquoprivatersquo

purchasers Others such as Dell for instance propose even more categories distinguishing

between SMEs and large undertakings Finally some do not make any significant distinction

at all114

In addition some websites allow for lsquopersonalised offersrsquo which are not strictly based on the

category of purchaser115

Hence the situation is not lsquotake-it-or-leave-itrsquo nor are the traditional

distinctions between consumers and professionals abolished

Finally this brief analysis leads us to the conclusion that standard-form contracts and the

notion of adhering party should not be considered only relevant in the area of e-commerce

The loss of bargaining power is a consequence of any standard-form contract be it in e-

commerce or in more traditional forms of contracting

Considering this amendment to the theory of Sylvette Guillemard the question then arises as

to whether it would be a good idea to extend consumer protection to all types of adhering

parties in other words whether the conclusion of a standard-form contract should be the

criterion that determines the application of consumer protection law

sect3 ndash A ratio legis friendly criterion

First of all as Aristides N Hatzis rightly maintains standard-form contracts are not

necessarily a bad thing116

Indeed in todays fast-paced world it is impossible to negotiate

separately the terms of each and every contract This is simply unrealistic117

Besides

purchasers would most likely not really like to negotiate the terms of every sales contract We

assume that in most case they would prefer to focus on the features of the product or its

price

This conclusion however does not mean that standard-form contracts are devoid of

problems Indeed as Shmuel Becher points out since consumers usually do not read

standard-form contracts there is asymmetry of information which economically speaking is

114

See for instance httpwwwcoplacleancomconsultation-gratuite or httpwwwseficleanbedevisphp

accessed the 10th

May 2012 115

See for instance httpwwwlesoirbeservicesabonnementformulepage=entreprises or

httpwwwsitabedirect_offerte_aanvargen_frhtml accessed the 10th

May 2012 116

Aristides N Hatzis lsquoAn Offer You Cannot Negotiate Some Thoughts on the Economics of Standard Form

Consumer Contractsrsquo in Hugh Collins (ed) Standard Contract Terms in Europe A Basis for and a Challenge to

European Contract Law (Wolters Kluwer Law amp Business Private Law in European Context Series Vol 15

2008) 45 117

In addition to being inconceivable from an economic point of view since the transaction costs would be so

high that supply and demand would not meet

- 35 -

considered a market failure118

Hence he suggests having an independent third party review

and approve standard-form contracts Besides this would be perceived as a signal of quality

by consumers119

This is not the place to expound on this idea but it is undeniably an

interesting one

Although it provides much less personalised and efficient control over standard-form

contracts another alternative would be to grant consumer protection to all adhering parties

However such a significant extension of the scope of protection of the weaker party would

necessarily need to be very accurately circumscribed The difficulty would therefore lie in

defining precisely what should be considered a standard-form contract Indeed although

everyone understands the general idea of the standard-form contract it remains quite vague

Indeed one may ask oneself what features a contract submitted for negotiation must have in

order to avoid being considered a standard-form contract Should all the terms of the contract

be negotiated or is the negotiability of a single term sufficient to escape from such a

qualification Perhaps only certain key elements of the contract need to be negotiated But in

that case what are the key elements of the contract Answering these questions is not an easy

task In addition despite the fact that the loss of bargaining power is obviously a key element

in the ratio legis of consumer protection legislation defenders of the traditional definition of a

consumer especially lobbyists for professionals may consider this extension to go too far

Therefore we would like to propose an intermediate solution to the European legislator Since

the loss of the bargaining power is mainly the battle ground of the legislation on unfair terms

we suggest simply extending the scope of application of that legislation to all standard-form

contracts As for the definition of the latter concept we think it may be broadly construed

considering the limited extension proposed

In other words the broader concept of adhering party compared to that of consumer would

apply only in the context of the legislation on unfair terms This approach would require a

lsquopolicy of differentiationrsquo by the European legislator We will revert to this idea in the last

section of this chapter120

Section 2 ndash An approach agrave la franccedilaise

sect1 ndash The criterion of rapport direct

As stated in the third chapter when we analysed the various national approaches French law

is one of the most interesting with respect to the definition of consumer Actually there is no

such definition121

Hence it is up to the courts to precise the frame of the notion the problem

being that the Supreme Court has shirked its responsibility in this regard Indeed after having

switched from the criterion of compeacutetence professionnelle to that of rapport direct ndash a change

that can be considered as an objectification ndash the French Supreme Court decided to let the trial

courts appraise on a case-by-case basis the existence of a direct link with professional

activity

118

Shmuel Becher (n 11) 749 119

Ibid 750 120

Practically speaking the CRD would have to be reviewed 121

Calais-Auloy (n 25) 67

- 36 -

As mentioned above we are of the opinion that the new criterion which requires the trial

court to determine whether a purchase has a direct link with the purchasers professional

activity does not represent a significant change with respect to the scope of application of

consumer protection law122

Indeed a contracting party who does not possess enough

expertise in a given field will usually be acting outside his or her area of professional activity

and in most cases that field will have no direct link with his or her professional activity

either However the perspective of the analysis and its rationale may now be different

Whereas the competence professionnelle criterion conformed to the ratio legis of consumer

protection seeks to protect a weaker party without enough expertise compared to the other

contracting party the new criterion on the other hand seems to be closer to the economic-

political rationale of EU consumer protection law

That being said the main purpose of this chapter is to find an alternative definition to the

current definition of consumer under EU law Both French criteria have seemingly

experienced problems with respect to legal certainty123

However perhaps a corrective

mechanism could solve these problems

sect2 ndash A new interpretation of the definition of consumer in EU law

In that regard Gilles Paisant proposes defining a consumer as a purchaser who does not

contract for professional needs He emphasises the purpose rather than the type of purchase

Hence he maintains that a professional who does not act in order to attract or increase

clientele nor to improve the management of his or her business may be protected With

reference to French case law he cites the example of a storekeeper or artisan who buys a fire

extinguisher or a real estate agent who buys a remote surveillance system124

These contracts

do not form part of their direct business even though they are acting in their professional

capacity (for tax reasons) to make these purchases

And yet the EU definition of consumer is already based on the finality of the purchase All

the directives mentioned basically state that a consumer is a natural person acting for

purposes that fall outside the scope of his or her professional activity125

However when we

read Geraint G Howells Hans-W Micklitz and Thomas Wilhelmssons interpretation of

these directives we have some doubts Indeed they claim that all of the directives convey the

same basic message as to who is a consumer namely lsquowhen a person acts in a professional

capacity for an economic purpose that person is not covered by the () rulesrsquo126

As Gilles Paisant correctly notes when determining the scope of application of the consumer

protection rules it is one thing to take into consideration the the professional capacity of the

contracting party and another thing to take into account the finality of the contract127

Indeed

Paisantrsquos suggestion shows that the latter is a much softer criteria

122

Paisant lsquoA la recherche du consommateurrsquo (n 1) paras 7-10 123

Ibid para 12 124

Ibid para 17 125

Schulte-Noumllke (n 16) 673 126

Geraint G Howells Hans-W Micklitz Thomas Wilhelmsson European Fair Trading Law The Unfair

Commercial Practices Directive (Ashgate 2006) 65 127

Paisant lsquoA la recherche du consommateurrsquo (n 1) para 11

- 37 -

What about the interpretation of the EU consumer definition then According to Howells

Micklitz and Wilhelmsson even though the terms of the definitions in the various directives

do all refer to the lsquopurposersquo (which can be understood as the finality) of the purchase the

actual interpretation of that word appears to be stricter than it sounds Too strict in our view

Hence we support Gilles Paisantrsquos position and argue in favour of an interpretation of the

term lsquopurposersquo that will let certain transactions made in a professional capacity but which are

not related to the purchasers business benefit from the consumer protection rules Such an

approach appears more in line with the ratio legis of consumer protection law which is

supposed to ensure the protection of the weaker party regardless of his or her capacity

It is clear that this interpretation does not ensure a level of legal certainty as high as the

current definition does However on the other hand the current definition is far too strict and

incompatible with the ratio legis of consumer protection law In addition some interpretation

guidelines could supplement this new approach in order to enhance legal certainty

First we could use the general principle of good faith to frame this more flexible definition

This principle holds a very important place in the DCFR and is also referred to in the Green

Paper on the Review on the Consumer Acquis128

The Commission notes that such a general

principle does not exist in the consumer acquis but its introduction will certainly

provide guidance for the interpretation of more specific provisions and would allow he

courts to fill gaps in the legislation by developing complementary rights and

obligations It could therefore provide a safety net for consumers and create certainty

for producers by filling gaps in legislation

Concretely this rule would allow the professional party to the contract to prevent the

consumer from abusing the wider definition we propose (for instance if a party claims to be a

professional in order to purchase but then raises the consumer protection rules)129

The same

would hold true if the consumer artificially narrows his or her business activity in order to

benefit from consumer protection

Otherwise to determine the capacity of the contracting party based on the interpretation of

consumer definition we suggest the trial courts should in particular consider whether the

purchase is meant to be resold after possible transformation or to be incorporated into

something else before being sold Similarly consumer protection may be denied if the

purchase is a working tool for the contracting party and when he or she is supposed to have

certain expertise in that domain For complex cases the duty of sincere cooperation may play

a useful role too by requiring from the party that claims the benefit of the rules to prove that

he or she can effectively be considered a weak contracting party This is somewhat similar to

the approach adopted by MiFID in which the client that is per se considered a professional but

may argue the contrary referring to factors such as expertise knowledge or experience in the

investment field

Aside from this solution that is based on a re-interpretation of the current definition of

consumer one alternative could be to simply rephrase it We suggest the following definition

128

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo (N 35) 17 129

Margus Kingisepp and Age Vaumlrv (50) The authors quote a German case

- 38 -

a consumer means any natural person acting primarily for non-business purposes or as a

professional but neither for the specific activities of its business nor for an activity that in all

likelihood falls within its professional expertise

This is a broad and flexible definition that covers the issue of mixed-purpose contracts ndash

widening the case law established by Gruber130

ndash and protects professionals acting outside

their area of expertise since in that case nothing distinguishes them from a person acting for

private purposes

Section 3 ndash A policy of differentiation

We have already touched on the notion of lsquodifferentiationrsquo a few times in our study but now

it is time to develop more extensively on this concept

A policy of differentiation is a key instrument in order to legislate according to the paradigm

of the weaker party as regards consumer protection law The general idea is that depending

on the field the weak party should be assessed differently131

In this regard we have first noted the lsquoexceptionrsquo contained in Directive 90314 on package

travel package holidays and package tours132

This Directive does not make any difference

with respect to a consumerrsquos professional or private capacity or the purpose of the purchase

A consumer is defined broadly in order to include basically any purchaser and we suppose

the reason for this is simply that the legislator found that in this particular area it is adequate

to protect any purchaser regardless of the his or her capacity of purpose of its purchase

We also analysed the very interesting approach adopted by MiFID133

In that directive the

weak party corresponds to the retail client which is negatively defined as one that is not

professional However in addition to a list134

that presumes a certain number of economic

actors to be professional clients per se a case-by-case assessment still plays a very important

role Indeed the presumption established via the aforementioned list is supposed to

encompass actors that have the necessary experience knowledge and expertise to make their

own investment decisions and properly assess the risks they incur135

As such if they consider

that the presumption does not apply to them as they do not meet the criteria relating to

investment expertise they can request the benefit of protection As noted earlier MiFID is

very respective of the rationale of the weaker party paradigm However it is not conceivable

to extend this type of personalised assessment of the weaker party to consumer protection law

as a whole which is based on standard contracts136

Standard-form contracts are the rule in B-

to-C relationships and unfortunately do not lend themselves to a personalised assessment of

the weakness of a contracting party

130

Gruber (n 21) Indeed the word primarily means that protection will be excluded only when the business

use resulting from the purchase will be obviously more significant than the private use 131

Cf n 109 132

N 15 133

N 84 134

N 92 135

The same type of logic underscores the Prospectus Directive which uses the term of lsquoqualified investorrsquo 136

Barral (n 3) 611-612

- 39 -

With regard to standard-form contracts another example of a policy of differentiation can be

found in our proposal to extend the legislation on unfair terms to any situation involving

standard-form contracts Indeed as explained above a loss of bargaining power attributable to

the nature of the contract can affect any adhering party be it a professional private person or

even a legal entity

Finally a policy of differentiation can also be adopted towards legal persons As Recital 17 to

the CRD states the Member States are allowed to extend the protection of CRDrsquos rules to

persons other than consumers The directive cites notably the example of SMEs This

possibility has actually already been used by France via the notion of non-professional and

has been confirmed as conform to Idealservice137

by the French Supreme Court138

In other

words the French legislator has provided certain protection to consumers which when it

deems necessary are extended to non-professionals as well This is a good example of a

policy of differentiation and we will see in the next chapter that the EU legislator could have

recourse to this technique

137

Idealservice (n 21) 138

See n 55 56 and 57

- 40 -

Chapter 6 ndash Is the weaker party paradigm just a myth

Section 1 ndash Historical and political background

In the second chapter of this paper and in particular the third section we clarified the EUrsquos

approach towards consumer definition namely by looking at the possible source of this

definition (that is purportedly economic theory) and its main advantage (that is the legal

certainty) We then mentioned an unstated ratio legis representing the starting point of the

consumer protection legislation in the EU identified as the achievement of the Internal

Market It is now time to develop on that point in order to assess the feasibility of our

different suggestions and determine the direction consumer protection law will take in the EU

The notion of consumer appeared for the first time in 1975 in a Council Resolution139

but we

will recall here the importance that consumer protection achieved thanks to the famous Cassis

de Dijon140

case Indeed in that case consumer protection was formally recognised as an

overriding concern in the general interest capable of justifying barriers to the free movement

of goods Subsequently specific exceptions to the free movement of goods were repeatedly

raised by various Member States on the grounds of consumer protection which is obviously

not ideal in order to achieve a properly functioning Internal Market Hence the EU decided to

launch a massive harmonisation of consumer protection law by means of various directives

cited herein focusing on all areas which were declared admissible under the test that the

Court of Justice applies to assess the validity of certain barriers to the freedom of movement

principles141

However this was by far insufficient since harmonisation was only minimal

Faced with the recent economic crisis the EU has made substantial efforts to capitalise on the

potential of a deeply integrated Internal Market in order to boost economic growth Its main

focus has been devoted to consumer law as European consumers play a major role in the

economy representing 58 of EU GDP142

Viviane Reding the vice-president and

commissioner responsible for justice fundamental rights and citizenship made the following

declaration

I want a Polish German or Spanish consumer to feel as safe when doing business with

an Italian Finnish or French company online as when they are at home And I want

Europes small and medium-sized companies to offer their products and services to

consumers in other countries without having to become experts in the national contract

law systems of all other 26 EU countries143

139

Council Resolution of 14 April 1975 on a preliminary programme of the European Economic Community for

a consumer protection and information policy [1975] OJ C 921 140

N 28 141

Vanessa Mak lsquoTwo Levels One Standard The Multi-Level Regulation of Consumer Protection in Europersquo

(April 7 2010) TISCO Working Paper Series on Banking Finance and Services No 012010 5 Available at

httpssrncomabstract=1585786 or httpdxdoiorg102139ssrn1585786 accessed the 10th

May 2012 142

Commission lsquoCommunication from the Commission to the Council the European Parliament and the

European Economic and Social Committee - EU Consumer Policy strategy 2007-2013 - Empowering

consumers enhancing their welfare effectively protecting them SEC(2007) 321 SEC(2007) 322

SEC(2007) 323 COM (2007) 0099 final 143

Viviane Reding lsquoEuropean Commission seeks contract law solutions to smooth Single Market for consumers

and businessersquo (Brussels July 1st 2010) IP10872

- 36 -

As mentioned above we are of the opinion that the new criterion which requires the trial

court to determine whether a purchase has a direct link with the purchasers professional

activity does not represent a significant change with respect to the scope of application of

consumer protection law122

Indeed a contracting party who does not possess enough

expertise in a given field will usually be acting outside his or her area of professional activity

and in most cases that field will have no direct link with his or her professional activity

either However the perspective of the analysis and its rationale may now be different

Whereas the competence professionnelle criterion conformed to the ratio legis of consumer

protection seeks to protect a weaker party without enough expertise compared to the other

contracting party the new criterion on the other hand seems to be closer to the economic-

political rationale of EU consumer protection law

That being said the main purpose of this chapter is to find an alternative definition to the

current definition of consumer under EU law Both French criteria have seemingly

experienced problems with respect to legal certainty123

However perhaps a corrective

mechanism could solve these problems

sect2 ndash A new interpretation of the definition of consumer in EU law

In that regard Gilles Paisant proposes defining a consumer as a purchaser who does not

contract for professional needs He emphasises the purpose rather than the type of purchase

Hence he maintains that a professional who does not act in order to attract or increase

clientele nor to improve the management of his or her business may be protected With

reference to French case law he cites the example of a storekeeper or artisan who buys a fire

extinguisher or a real estate agent who buys a remote surveillance system124

These contracts

do not form part of their direct business even though they are acting in their professional

capacity (for tax reasons) to make these purchases

And yet the EU definition of consumer is already based on the finality of the purchase All

the directives mentioned basically state that a consumer is a natural person acting for

purposes that fall outside the scope of his or her professional activity125

However when we

read Geraint G Howells Hans-W Micklitz and Thomas Wilhelmssons interpretation of

these directives we have some doubts Indeed they claim that all of the directives convey the

same basic message as to who is a consumer namely lsquowhen a person acts in a professional

capacity for an economic purpose that person is not covered by the () rulesrsquo126

As Gilles Paisant correctly notes when determining the scope of application of the consumer

protection rules it is one thing to take into consideration the the professional capacity of the

contracting party and another thing to take into account the finality of the contract127

Indeed

Paisantrsquos suggestion shows that the latter is a much softer criteria

122

Paisant lsquoA la recherche du consommateurrsquo (n 1) paras 7-10 123

Ibid para 12 124

Ibid para 17 125

Schulte-Noumllke (n 16) 673 126

Geraint G Howells Hans-W Micklitz Thomas Wilhelmsson European Fair Trading Law The Unfair

Commercial Practices Directive (Ashgate 2006) 65 127

Paisant lsquoA la recherche du consommateurrsquo (n 1) para 11

- 37 -

What about the interpretation of the EU consumer definition then According to Howells

Micklitz and Wilhelmsson even though the terms of the definitions in the various directives

do all refer to the lsquopurposersquo (which can be understood as the finality) of the purchase the

actual interpretation of that word appears to be stricter than it sounds Too strict in our view

Hence we support Gilles Paisantrsquos position and argue in favour of an interpretation of the

term lsquopurposersquo that will let certain transactions made in a professional capacity but which are

not related to the purchasers business benefit from the consumer protection rules Such an

approach appears more in line with the ratio legis of consumer protection law which is

supposed to ensure the protection of the weaker party regardless of his or her capacity

It is clear that this interpretation does not ensure a level of legal certainty as high as the

current definition does However on the other hand the current definition is far too strict and

incompatible with the ratio legis of consumer protection law In addition some interpretation

guidelines could supplement this new approach in order to enhance legal certainty

First we could use the general principle of good faith to frame this more flexible definition

This principle holds a very important place in the DCFR and is also referred to in the Green

Paper on the Review on the Consumer Acquis128

The Commission notes that such a general

principle does not exist in the consumer acquis but its introduction will certainly

provide guidance for the interpretation of more specific provisions and would allow he

courts to fill gaps in the legislation by developing complementary rights and

obligations It could therefore provide a safety net for consumers and create certainty

for producers by filling gaps in legislation

Concretely this rule would allow the professional party to the contract to prevent the

consumer from abusing the wider definition we propose (for instance if a party claims to be a

professional in order to purchase but then raises the consumer protection rules)129

The same

would hold true if the consumer artificially narrows his or her business activity in order to

benefit from consumer protection

Otherwise to determine the capacity of the contracting party based on the interpretation of

consumer definition we suggest the trial courts should in particular consider whether the

purchase is meant to be resold after possible transformation or to be incorporated into

something else before being sold Similarly consumer protection may be denied if the

purchase is a working tool for the contracting party and when he or she is supposed to have

certain expertise in that domain For complex cases the duty of sincere cooperation may play

a useful role too by requiring from the party that claims the benefit of the rules to prove that

he or she can effectively be considered a weak contracting party This is somewhat similar to

the approach adopted by MiFID in which the client that is per se considered a professional but

may argue the contrary referring to factors such as expertise knowledge or experience in the

investment field

Aside from this solution that is based on a re-interpretation of the current definition of

consumer one alternative could be to simply rephrase it We suggest the following definition

128

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo (N 35) 17 129

Margus Kingisepp and Age Vaumlrv (50) The authors quote a German case

- 38 -

a consumer means any natural person acting primarily for non-business purposes or as a

professional but neither for the specific activities of its business nor for an activity that in all

likelihood falls within its professional expertise

This is a broad and flexible definition that covers the issue of mixed-purpose contracts ndash

widening the case law established by Gruber130

ndash and protects professionals acting outside

their area of expertise since in that case nothing distinguishes them from a person acting for

private purposes

Section 3 ndash A policy of differentiation

We have already touched on the notion of lsquodifferentiationrsquo a few times in our study but now

it is time to develop more extensively on this concept

A policy of differentiation is a key instrument in order to legislate according to the paradigm

of the weaker party as regards consumer protection law The general idea is that depending

on the field the weak party should be assessed differently131

In this regard we have first noted the lsquoexceptionrsquo contained in Directive 90314 on package

travel package holidays and package tours132

This Directive does not make any difference

with respect to a consumerrsquos professional or private capacity or the purpose of the purchase

A consumer is defined broadly in order to include basically any purchaser and we suppose

the reason for this is simply that the legislator found that in this particular area it is adequate

to protect any purchaser regardless of the his or her capacity of purpose of its purchase

We also analysed the very interesting approach adopted by MiFID133

In that directive the

weak party corresponds to the retail client which is negatively defined as one that is not

professional However in addition to a list134

that presumes a certain number of economic

actors to be professional clients per se a case-by-case assessment still plays a very important

role Indeed the presumption established via the aforementioned list is supposed to

encompass actors that have the necessary experience knowledge and expertise to make their

own investment decisions and properly assess the risks they incur135

As such if they consider

that the presumption does not apply to them as they do not meet the criteria relating to

investment expertise they can request the benefit of protection As noted earlier MiFID is

very respective of the rationale of the weaker party paradigm However it is not conceivable

to extend this type of personalised assessment of the weaker party to consumer protection law

as a whole which is based on standard contracts136

Standard-form contracts are the rule in B-

to-C relationships and unfortunately do not lend themselves to a personalised assessment of

the weakness of a contracting party

130

Gruber (n 21) Indeed the word primarily means that protection will be excluded only when the business

use resulting from the purchase will be obviously more significant than the private use 131

Cf n 109 132

N 15 133

N 84 134

N 92 135

The same type of logic underscores the Prospectus Directive which uses the term of lsquoqualified investorrsquo 136

Barral (n 3) 611-612

- 39 -

With regard to standard-form contracts another example of a policy of differentiation can be

found in our proposal to extend the legislation on unfair terms to any situation involving

standard-form contracts Indeed as explained above a loss of bargaining power attributable to

the nature of the contract can affect any adhering party be it a professional private person or

even a legal entity

Finally a policy of differentiation can also be adopted towards legal persons As Recital 17 to

the CRD states the Member States are allowed to extend the protection of CRDrsquos rules to

persons other than consumers The directive cites notably the example of SMEs This

possibility has actually already been used by France via the notion of non-professional and

has been confirmed as conform to Idealservice137

by the French Supreme Court138

In other

words the French legislator has provided certain protection to consumers which when it

deems necessary are extended to non-professionals as well This is a good example of a

policy of differentiation and we will see in the next chapter that the EU legislator could have

recourse to this technique

137

Idealservice (n 21) 138

See n 55 56 and 57

- 40 -

Chapter 6 ndash Is the weaker party paradigm just a myth

Section 1 ndash Historical and political background

In the second chapter of this paper and in particular the third section we clarified the EUrsquos

approach towards consumer definition namely by looking at the possible source of this

definition (that is purportedly economic theory) and its main advantage (that is the legal

certainty) We then mentioned an unstated ratio legis representing the starting point of the

consumer protection legislation in the EU identified as the achievement of the Internal

Market It is now time to develop on that point in order to assess the feasibility of our

different suggestions and determine the direction consumer protection law will take in the EU

The notion of consumer appeared for the first time in 1975 in a Council Resolution139

but we

will recall here the importance that consumer protection achieved thanks to the famous Cassis

de Dijon140

case Indeed in that case consumer protection was formally recognised as an

overriding concern in the general interest capable of justifying barriers to the free movement

of goods Subsequently specific exceptions to the free movement of goods were repeatedly

raised by various Member States on the grounds of consumer protection which is obviously

not ideal in order to achieve a properly functioning Internal Market Hence the EU decided to

launch a massive harmonisation of consumer protection law by means of various directives

cited herein focusing on all areas which were declared admissible under the test that the

Court of Justice applies to assess the validity of certain barriers to the freedom of movement

principles141

However this was by far insufficient since harmonisation was only minimal

Faced with the recent economic crisis the EU has made substantial efforts to capitalise on the

potential of a deeply integrated Internal Market in order to boost economic growth Its main

focus has been devoted to consumer law as European consumers play a major role in the

economy representing 58 of EU GDP142

Viviane Reding the vice-president and

commissioner responsible for justice fundamental rights and citizenship made the following

declaration

I want a Polish German or Spanish consumer to feel as safe when doing business with

an Italian Finnish or French company online as when they are at home And I want

Europes small and medium-sized companies to offer their products and services to

consumers in other countries without having to become experts in the national contract

law systems of all other 26 EU countries143

139

Council Resolution of 14 April 1975 on a preliminary programme of the European Economic Community for

a consumer protection and information policy [1975] OJ C 921 140

N 28 141

Vanessa Mak lsquoTwo Levels One Standard The Multi-Level Regulation of Consumer Protection in Europersquo

(April 7 2010) TISCO Working Paper Series on Banking Finance and Services No 012010 5 Available at

httpssrncomabstract=1585786 or httpdxdoiorg102139ssrn1585786 accessed the 10th

May 2012 142

Commission lsquoCommunication from the Commission to the Council the European Parliament and the

European Economic and Social Committee - EU Consumer Policy strategy 2007-2013 - Empowering

consumers enhancing their welfare effectively protecting them SEC(2007) 321 SEC(2007) 322

SEC(2007) 323 COM (2007) 0099 final 143

Viviane Reding lsquoEuropean Commission seeks contract law solutions to smooth Single Market for consumers

and businessersquo (Brussels July 1st 2010) IP10872

- 37 -

What about the interpretation of the EU consumer definition then According to Howells

Micklitz and Wilhelmsson even though the terms of the definitions in the various directives

do all refer to the lsquopurposersquo (which can be understood as the finality) of the purchase the

actual interpretation of that word appears to be stricter than it sounds Too strict in our view

Hence we support Gilles Paisantrsquos position and argue in favour of an interpretation of the

term lsquopurposersquo that will let certain transactions made in a professional capacity but which are

not related to the purchasers business benefit from the consumer protection rules Such an

approach appears more in line with the ratio legis of consumer protection law which is

supposed to ensure the protection of the weaker party regardless of his or her capacity

It is clear that this interpretation does not ensure a level of legal certainty as high as the

current definition does However on the other hand the current definition is far too strict and

incompatible with the ratio legis of consumer protection law In addition some interpretation

guidelines could supplement this new approach in order to enhance legal certainty

First we could use the general principle of good faith to frame this more flexible definition

This principle holds a very important place in the DCFR and is also referred to in the Green

Paper on the Review on the Consumer Acquis128

The Commission notes that such a general

principle does not exist in the consumer acquis but its introduction will certainly

provide guidance for the interpretation of more specific provisions and would allow he

courts to fill gaps in the legislation by developing complementary rights and

obligations It could therefore provide a safety net for consumers and create certainty

for producers by filling gaps in legislation

Concretely this rule would allow the professional party to the contract to prevent the

consumer from abusing the wider definition we propose (for instance if a party claims to be a

professional in order to purchase but then raises the consumer protection rules)129

The same

would hold true if the consumer artificially narrows his or her business activity in order to

benefit from consumer protection

Otherwise to determine the capacity of the contracting party based on the interpretation of

consumer definition we suggest the trial courts should in particular consider whether the

purchase is meant to be resold after possible transformation or to be incorporated into

something else before being sold Similarly consumer protection may be denied if the

purchase is a working tool for the contracting party and when he or she is supposed to have

certain expertise in that domain For complex cases the duty of sincere cooperation may play

a useful role too by requiring from the party that claims the benefit of the rules to prove that

he or she can effectively be considered a weak contracting party This is somewhat similar to

the approach adopted by MiFID in which the client that is per se considered a professional but

may argue the contrary referring to factors such as expertise knowledge or experience in the

investment field

Aside from this solution that is based on a re-interpretation of the current definition of

consumer one alternative could be to simply rephrase it We suggest the following definition

128

Commission lsquoGreen Paper on the Review of the Consumer Acquisrsquo (N 35) 17 129

Margus Kingisepp and Age Vaumlrv (50) The authors quote a German case

- 38 -

a consumer means any natural person acting primarily for non-business purposes or as a

professional but neither for the specific activities of its business nor for an activity that in all

likelihood falls within its professional expertise

This is a broad and flexible definition that covers the issue of mixed-purpose contracts ndash

widening the case law established by Gruber130

ndash and protects professionals acting outside

their area of expertise since in that case nothing distinguishes them from a person acting for

private purposes

Section 3 ndash A policy of differentiation

We have already touched on the notion of lsquodifferentiationrsquo a few times in our study but now

it is time to develop more extensively on this concept

A policy of differentiation is a key instrument in order to legislate according to the paradigm

of the weaker party as regards consumer protection law The general idea is that depending

on the field the weak party should be assessed differently131

In this regard we have first noted the lsquoexceptionrsquo contained in Directive 90314 on package

travel package holidays and package tours132

This Directive does not make any difference

with respect to a consumerrsquos professional or private capacity or the purpose of the purchase

A consumer is defined broadly in order to include basically any purchaser and we suppose

the reason for this is simply that the legislator found that in this particular area it is adequate

to protect any purchaser regardless of the his or her capacity of purpose of its purchase

We also analysed the very interesting approach adopted by MiFID133

In that directive the

weak party corresponds to the retail client which is negatively defined as one that is not

professional However in addition to a list134

that presumes a certain number of economic

actors to be professional clients per se a case-by-case assessment still plays a very important

role Indeed the presumption established via the aforementioned list is supposed to

encompass actors that have the necessary experience knowledge and expertise to make their

own investment decisions and properly assess the risks they incur135

As such if they consider

that the presumption does not apply to them as they do not meet the criteria relating to

investment expertise they can request the benefit of protection As noted earlier MiFID is

very respective of the rationale of the weaker party paradigm However it is not conceivable

to extend this type of personalised assessment of the weaker party to consumer protection law

as a whole which is based on standard contracts136

Standard-form contracts are the rule in B-

to-C relationships and unfortunately do not lend themselves to a personalised assessment of

the weakness of a contracting party

130

Gruber (n 21) Indeed the word primarily means that protection will be excluded only when the business

use resulting from the purchase will be obviously more significant than the private use 131

Cf n 109 132

N 15 133

N 84 134

N 92 135

The same type of logic underscores the Prospectus Directive which uses the term of lsquoqualified investorrsquo 136

Barral (n 3) 611-612

- 39 -

With regard to standard-form contracts another example of a policy of differentiation can be

found in our proposal to extend the legislation on unfair terms to any situation involving

standard-form contracts Indeed as explained above a loss of bargaining power attributable to

the nature of the contract can affect any adhering party be it a professional private person or

even a legal entity

Finally a policy of differentiation can also be adopted towards legal persons As Recital 17 to

the CRD states the Member States are allowed to extend the protection of CRDrsquos rules to

persons other than consumers The directive cites notably the example of SMEs This

possibility has actually already been used by France via the notion of non-professional and

has been confirmed as conform to Idealservice137

by the French Supreme Court138

In other

words the French legislator has provided certain protection to consumers which when it

deems necessary are extended to non-professionals as well This is a good example of a

policy of differentiation and we will see in the next chapter that the EU legislator could have

recourse to this technique

137

Idealservice (n 21) 138

See n 55 56 and 57

- 40 -

Chapter 6 ndash Is the weaker party paradigm just a myth

Section 1 ndash Historical and political background

In the second chapter of this paper and in particular the third section we clarified the EUrsquos

approach towards consumer definition namely by looking at the possible source of this

definition (that is purportedly economic theory) and its main advantage (that is the legal

certainty) We then mentioned an unstated ratio legis representing the starting point of the

consumer protection legislation in the EU identified as the achievement of the Internal

Market It is now time to develop on that point in order to assess the feasibility of our

different suggestions and determine the direction consumer protection law will take in the EU

The notion of consumer appeared for the first time in 1975 in a Council Resolution139

but we

will recall here the importance that consumer protection achieved thanks to the famous Cassis

de Dijon140

case Indeed in that case consumer protection was formally recognised as an

overriding concern in the general interest capable of justifying barriers to the free movement

of goods Subsequently specific exceptions to the free movement of goods were repeatedly

raised by various Member States on the grounds of consumer protection which is obviously

not ideal in order to achieve a properly functioning Internal Market Hence the EU decided to

launch a massive harmonisation of consumer protection law by means of various directives

cited herein focusing on all areas which were declared admissible under the test that the

Court of Justice applies to assess the validity of certain barriers to the freedom of movement

principles141

However this was by far insufficient since harmonisation was only minimal

Faced with the recent economic crisis the EU has made substantial efforts to capitalise on the

potential of a deeply integrated Internal Market in order to boost economic growth Its main

focus has been devoted to consumer law as European consumers play a major role in the

economy representing 58 of EU GDP142

Viviane Reding the vice-president and

commissioner responsible for justice fundamental rights and citizenship made the following

declaration

I want a Polish German or Spanish consumer to feel as safe when doing business with

an Italian Finnish or French company online as when they are at home And I want

Europes small and medium-sized companies to offer their products and services to

consumers in other countries without having to become experts in the national contract

law systems of all other 26 EU countries143

139

Council Resolution of 14 April 1975 on a preliminary programme of the European Economic Community for

a consumer protection and information policy [1975] OJ C 921 140

N 28 141

Vanessa Mak lsquoTwo Levels One Standard The Multi-Level Regulation of Consumer Protection in Europersquo

(April 7 2010) TISCO Working Paper Series on Banking Finance and Services No 012010 5 Available at

httpssrncomabstract=1585786 or httpdxdoiorg102139ssrn1585786 accessed the 10th

May 2012 142

Commission lsquoCommunication from the Commission to the Council the European Parliament and the

European Economic and Social Committee - EU Consumer Policy strategy 2007-2013 - Empowering

consumers enhancing their welfare effectively protecting them SEC(2007) 321 SEC(2007) 322

SEC(2007) 323 COM (2007) 0099 final 143

Viviane Reding lsquoEuropean Commission seeks contract law solutions to smooth Single Market for consumers

and businessersquo (Brussels July 1st 2010) IP10872

- 38 -

a consumer means any natural person acting primarily for non-business purposes or as a

professional but neither for the specific activities of its business nor for an activity that in all

likelihood falls within its professional expertise

This is a broad and flexible definition that covers the issue of mixed-purpose contracts ndash

widening the case law established by Gruber130

ndash and protects professionals acting outside

their area of expertise since in that case nothing distinguishes them from a person acting for

private purposes

Section 3 ndash A policy of differentiation

We have already touched on the notion of lsquodifferentiationrsquo a few times in our study but now

it is time to develop more extensively on this concept

A policy of differentiation is a key instrument in order to legislate according to the paradigm

of the weaker party as regards consumer protection law The general idea is that depending

on the field the weak party should be assessed differently131

In this regard we have first noted the lsquoexceptionrsquo contained in Directive 90314 on package

travel package holidays and package tours132

This Directive does not make any difference

with respect to a consumerrsquos professional or private capacity or the purpose of the purchase

A consumer is defined broadly in order to include basically any purchaser and we suppose

the reason for this is simply that the legislator found that in this particular area it is adequate

to protect any purchaser regardless of the his or her capacity of purpose of its purchase

We also analysed the very interesting approach adopted by MiFID133

In that directive the

weak party corresponds to the retail client which is negatively defined as one that is not

professional However in addition to a list134

that presumes a certain number of economic

actors to be professional clients per se a case-by-case assessment still plays a very important

role Indeed the presumption established via the aforementioned list is supposed to

encompass actors that have the necessary experience knowledge and expertise to make their

own investment decisions and properly assess the risks they incur135

As such if they consider

that the presumption does not apply to them as they do not meet the criteria relating to

investment expertise they can request the benefit of protection As noted earlier MiFID is

very respective of the rationale of the weaker party paradigm However it is not conceivable

to extend this type of personalised assessment of the weaker party to consumer protection law

as a whole which is based on standard contracts136

Standard-form contracts are the rule in B-

to-C relationships and unfortunately do not lend themselves to a personalised assessment of

the weakness of a contracting party

130

Gruber (n 21) Indeed the word primarily means that protection will be excluded only when the business

use resulting from the purchase will be obviously more significant than the private use 131

Cf n 109 132

N 15 133

N 84 134

N 92 135

The same type of logic underscores the Prospectus Directive which uses the term of lsquoqualified investorrsquo 136

Barral (n 3) 611-612

- 39 -

With regard to standard-form contracts another example of a policy of differentiation can be

found in our proposal to extend the legislation on unfair terms to any situation involving

standard-form contracts Indeed as explained above a loss of bargaining power attributable to

the nature of the contract can affect any adhering party be it a professional private person or

even a legal entity

Finally a policy of differentiation can also be adopted towards legal persons As Recital 17 to

the CRD states the Member States are allowed to extend the protection of CRDrsquos rules to

persons other than consumers The directive cites notably the example of SMEs This

possibility has actually already been used by France via the notion of non-professional and

has been confirmed as conform to Idealservice137

by the French Supreme Court138

In other

words the French legislator has provided certain protection to consumers which when it

deems necessary are extended to non-professionals as well This is a good example of a

policy of differentiation and we will see in the next chapter that the EU legislator could have

recourse to this technique

137

Idealservice (n 21) 138

See n 55 56 and 57

- 40 -

Chapter 6 ndash Is the weaker party paradigm just a myth

Section 1 ndash Historical and political background

In the second chapter of this paper and in particular the third section we clarified the EUrsquos

approach towards consumer definition namely by looking at the possible source of this

definition (that is purportedly economic theory) and its main advantage (that is the legal

certainty) We then mentioned an unstated ratio legis representing the starting point of the

consumer protection legislation in the EU identified as the achievement of the Internal

Market It is now time to develop on that point in order to assess the feasibility of our

different suggestions and determine the direction consumer protection law will take in the EU

The notion of consumer appeared for the first time in 1975 in a Council Resolution139

but we

will recall here the importance that consumer protection achieved thanks to the famous Cassis

de Dijon140

case Indeed in that case consumer protection was formally recognised as an

overriding concern in the general interest capable of justifying barriers to the free movement

of goods Subsequently specific exceptions to the free movement of goods were repeatedly

raised by various Member States on the grounds of consumer protection which is obviously

not ideal in order to achieve a properly functioning Internal Market Hence the EU decided to

launch a massive harmonisation of consumer protection law by means of various directives

cited herein focusing on all areas which were declared admissible under the test that the

Court of Justice applies to assess the validity of certain barriers to the freedom of movement

principles141

However this was by far insufficient since harmonisation was only minimal

Faced with the recent economic crisis the EU has made substantial efforts to capitalise on the

potential of a deeply integrated Internal Market in order to boost economic growth Its main

focus has been devoted to consumer law as European consumers play a major role in the

economy representing 58 of EU GDP142

Viviane Reding the vice-president and

commissioner responsible for justice fundamental rights and citizenship made the following

declaration

I want a Polish German or Spanish consumer to feel as safe when doing business with

an Italian Finnish or French company online as when they are at home And I want

Europes small and medium-sized companies to offer their products and services to

consumers in other countries without having to become experts in the national contract

law systems of all other 26 EU countries143

139

Council Resolution of 14 April 1975 on a preliminary programme of the European Economic Community for

a consumer protection and information policy [1975] OJ C 921 140

N 28 141

Vanessa Mak lsquoTwo Levels One Standard The Multi-Level Regulation of Consumer Protection in Europersquo

(April 7 2010) TISCO Working Paper Series on Banking Finance and Services No 012010 5 Available at

httpssrncomabstract=1585786 or httpdxdoiorg102139ssrn1585786 accessed the 10th

May 2012 142

Commission lsquoCommunication from the Commission to the Council the European Parliament and the

European Economic and Social Committee - EU Consumer Policy strategy 2007-2013 - Empowering

consumers enhancing their welfare effectively protecting them SEC(2007) 321 SEC(2007) 322

SEC(2007) 323 COM (2007) 0099 final 143

Viviane Reding lsquoEuropean Commission seeks contract law solutions to smooth Single Market for consumers

and businessersquo (Brussels July 1st 2010) IP10872

- 39 -

With regard to standard-form contracts another example of a policy of differentiation can be

found in our proposal to extend the legislation on unfair terms to any situation involving

standard-form contracts Indeed as explained above a loss of bargaining power attributable to

the nature of the contract can affect any adhering party be it a professional private person or

even a legal entity

Finally a policy of differentiation can also be adopted towards legal persons As Recital 17 to

the CRD states the Member States are allowed to extend the protection of CRDrsquos rules to

persons other than consumers The directive cites notably the example of SMEs This

possibility has actually already been used by France via the notion of non-professional and

has been confirmed as conform to Idealservice137

by the French Supreme Court138

In other

words the French legislator has provided certain protection to consumers which when it

deems necessary are extended to non-professionals as well This is a good example of a

policy of differentiation and we will see in the next chapter that the EU legislator could have

recourse to this technique

137

Idealservice (n 21) 138

See n 55 56 and 57

- 40 -

Chapter 6 ndash Is the weaker party paradigm just a myth

Section 1 ndash Historical and political background

In the second chapter of this paper and in particular the third section we clarified the EUrsquos

approach towards consumer definition namely by looking at the possible source of this

definition (that is purportedly economic theory) and its main advantage (that is the legal

certainty) We then mentioned an unstated ratio legis representing the starting point of the

consumer protection legislation in the EU identified as the achievement of the Internal

Market It is now time to develop on that point in order to assess the feasibility of our

different suggestions and determine the direction consumer protection law will take in the EU

The notion of consumer appeared for the first time in 1975 in a Council Resolution139

but we

will recall here the importance that consumer protection achieved thanks to the famous Cassis

de Dijon140

case Indeed in that case consumer protection was formally recognised as an

overriding concern in the general interest capable of justifying barriers to the free movement

of goods Subsequently specific exceptions to the free movement of goods were repeatedly

raised by various Member States on the grounds of consumer protection which is obviously

not ideal in order to achieve a properly functioning Internal Market Hence the EU decided to

launch a massive harmonisation of consumer protection law by means of various directives

cited herein focusing on all areas which were declared admissible under the test that the

Court of Justice applies to assess the validity of certain barriers to the freedom of movement

principles141

However this was by far insufficient since harmonisation was only minimal

Faced with the recent economic crisis the EU has made substantial efforts to capitalise on the

potential of a deeply integrated Internal Market in order to boost economic growth Its main

focus has been devoted to consumer law as European consumers play a major role in the

economy representing 58 of EU GDP142

Viviane Reding the vice-president and

commissioner responsible for justice fundamental rights and citizenship made the following

declaration

I want a Polish German or Spanish consumer to feel as safe when doing business with

an Italian Finnish or French company online as when they are at home And I want

Europes small and medium-sized companies to offer their products and services to

consumers in other countries without having to become experts in the national contract

law systems of all other 26 EU countries143

139

Council Resolution of 14 April 1975 on a preliminary programme of the European Economic Community for

a consumer protection and information policy [1975] OJ C 921 140

N 28 141

Vanessa Mak lsquoTwo Levels One Standard The Multi-Level Regulation of Consumer Protection in Europersquo

(April 7 2010) TISCO Working Paper Series on Banking Finance and Services No 012010 5 Available at

httpssrncomabstract=1585786 or httpdxdoiorg102139ssrn1585786 accessed the 10th

May 2012 142

Commission lsquoCommunication from the Commission to the Council the European Parliament and the

European Economic and Social Committee - EU Consumer Policy strategy 2007-2013 - Empowering

consumers enhancing their welfare effectively protecting them SEC(2007) 321 SEC(2007) 322

SEC(2007) 323 COM (2007) 0099 final 143

Viviane Reding lsquoEuropean Commission seeks contract law solutions to smooth Single Market for consumers

and businessersquo (Brussels July 1st 2010) IP10872

- 40 -

Chapter 6 ndash Is the weaker party paradigm just a myth

Section 1 ndash Historical and political background

In the second chapter of this paper and in particular the third section we clarified the EUrsquos

approach towards consumer definition namely by looking at the possible source of this

definition (that is purportedly economic theory) and its main advantage (that is the legal

certainty) We then mentioned an unstated ratio legis representing the starting point of the

consumer protection legislation in the EU identified as the achievement of the Internal

Market It is now time to develop on that point in order to assess the feasibility of our

different suggestions and determine the direction consumer protection law will take in the EU

The notion of consumer appeared for the first time in 1975 in a Council Resolution139

but we

will recall here the importance that consumer protection achieved thanks to the famous Cassis

de Dijon140

case Indeed in that case consumer protection was formally recognised as an

overriding concern in the general interest capable of justifying barriers to the free movement

of goods Subsequently specific exceptions to the free movement of goods were repeatedly

raised by various Member States on the grounds of consumer protection which is obviously

not ideal in order to achieve a properly functioning Internal Market Hence the EU decided to

launch a massive harmonisation of consumer protection law by means of various directives

cited herein focusing on all areas which were declared admissible under the test that the

Court of Justice applies to assess the validity of certain barriers to the freedom of movement

principles141

However this was by far insufficient since harmonisation was only minimal

Faced with the recent economic crisis the EU has made substantial efforts to capitalise on the

potential of a deeply integrated Internal Market in order to boost economic growth Its main

focus has been devoted to consumer law as European consumers play a major role in the

economy representing 58 of EU GDP142

Viviane Reding the vice-president and

commissioner responsible for justice fundamental rights and citizenship made the following

declaration

I want a Polish German or Spanish consumer to feel as safe when doing business with

an Italian Finnish or French company online as when they are at home And I want

Europes small and medium-sized companies to offer their products and services to

consumers in other countries without having to become experts in the national contract

law systems of all other 26 EU countries143

139

Council Resolution of 14 April 1975 on a preliminary programme of the European Economic Community for

a consumer protection and information policy [1975] OJ C 921 140

N 28 141

Vanessa Mak lsquoTwo Levels One Standard The Multi-Level Regulation of Consumer Protection in Europersquo

(April 7 2010) TISCO Working Paper Series on Banking Finance and Services No 012010 5 Available at

httpssrncomabstract=1585786 or httpdxdoiorg102139ssrn1585786 accessed the 10th

May 2012 142

Commission lsquoCommunication from the Commission to the Council the European Parliament and the

European Economic and Social Committee - EU Consumer Policy strategy 2007-2013 - Empowering

consumers enhancing their welfare effectively protecting them SEC(2007) 321 SEC(2007) 322

SEC(2007) 323 COM (2007) 0099 final 143

Viviane Reding lsquoEuropean Commission seeks contract law solutions to smooth Single Market for consumers

and businessersquo (Brussels July 1st 2010) IP10872

- 41 -

We will revert later to the various steps that have been taken since this declaration and in

particular the latest developments which may produce a certain impact the division of powers

between the EU and the Member States with respect to the scope of consumer protection For

the time being however we would like to dive back into the first issue discussed in this

section namely the realisation of the Internal Market as an unstated ratio legis for the EU

definition of consumer

Section 2 ndash Consumer protection as a corollary of the Internal

Market

As just mentioned it is for the sake of the Internal Market that the EU has made inroads in the

area of consumer protection To date the main goal of consumer legislation has been to

smooth cross-border legal issues and increase the number of international contracts144

This is

due to the fact that the EU legislator has relied mostly on Article 114 TFEU to enact

consumer law which is the specific statutory provision to integrate the Internal Market145

As

such consumer protection has become an ancillary goal146

This issue is further illustrated by the debate surrounding the notion of the lsquoaverage

consumerrsquo We will not expound extensively on this issue here but in a nutshell it relates to

the fact that the EU and particularly through the medium of the Court of Justice does not

apply the same standard when interpreting the lsquoaverage consumerrsquo in relation to consumer

legislation that exists at the national level and the EU level147

Indeed if it goes beyond the

level of EU harmonisation national law must meet a high threshold in order to be considered

valid the average consumer being considered reasonably circumspect and able to look after

his or her own interests On the other hand in EU consumer law the consumer is considered

much weaker One of the problems that results from this discrepancy is that the EU interferes

too much in purely domestic situations since when it condemns national consumer protection

laws with respect to cross-border situations it indirectly also prevents that legislation from

applying to purely domestic cases Indeed the Member States rarely ndash if ever ndash differentiate

in their legislation between cross-border and domestic situations Hence there is an obvious

problem with respect to the subsidiarity principle In addition the ratio legis also suffers

since as noted above the underlying rationale for EU consumer legislation is to achieve the

Internal Market rather than the protection of consumers per se

Finally as the standard of protection of consumer law is closely linked to the definition of

consumer which determines the personal (ratione personae) scope of application of the

httpeuropaeurapidpressReleasesActiondoreference=IP10872ampformat=HTMLampaged=1amplanguage=ENampg

uiLanguage=fr accessed the 10th

May 2012 144

Anna Luczak lsquoEvolution of the Consumer Protection Law in the Light of the Proposal for a Horizontal

Directive on Consumer Rights and Rome I Regulationrsquo (2011) Vol 12 Wroclaw Review of Law Administration

amp Economics 121 125 145

The reason being that this basis gives exclusive competence to the EU whereas the article 169(3) gives it only

a shared competence 146

Mak lsquoTwo Levels One Standardrsquo (n 141) 10 147

See namely Angus Johnston and Hannes Unberath lsquoThe Double-Headed Approach of the ECJ Concerning

Consumer Protectionrsquo (2007) 44 Common Market Law Review 1237 Cees Van Dam lsquoDe gemiddelde

consument in Europa een pluriforme verschijningrsquo in D Busch en H Schelhaas (red) VergelijkenderWijs -

Promoti-bundel Prof mr EH Hondius (Deventer Kluwer 2007) 59-73 Mak lsquolsquoTwo Levels One Standardrsquo (n

141) 1-18 Vanessa Mak lsquoStandards of Protection In Search of the ldquoAverage Consumerrdquo of EU Law in the

Proposal for a Consumer Rightes Directiversquo (June 17 2010) 18 European Review of Private Law

- 42 -

protective rules we believe the definition of consumer has been influenced by that goal too

Indeed the definition is construed in a far too narrow way and favours legal certainty over

equity Hence it seems to further the realisation of the Internal Market too Indeed the

narrower the definition of consumer the easier it is for businesses to engage in cross-border

transactions

Section 3 ndash Future perspectives

After facing heavy criticism these past few decades (for example being characterised as a

union of elites serving only the interests of businesses)148

the EU decided to adapt its policy

in order to take more account of consumers interests Now however SMEs are in turn

complaining that they are insufficiently protected149

Hence during a conference on the future

of the Internal Market policy of the EU Emil Paulis the Director responsible for Financial

Services Policy amp Financial Markets in the Directorate-General for the Internal Market and

Services (DG MARKT) has recalled that the EU must ensure a high level of protection for all

consumers and should not be lsquothe Europe for the richrsquo instead of the lsquoEurope for the man of

the streetrsquo150

Afterwards he pointed out that SMEs will certainly be granted a special kind of

protection as well in addition to consumer protection

Taking a closer look at the situation we notice that effectively a third party has clearly

emerged in the traditional tug of war opposing consumersrsquo and businessesrsquo interests Indeed

SMEs traditionally do not have the same interests as consumers or businesses We remember

that the Recital 17 to the CRD allows the Member States to broaden the category of

beneficiaries of the directive and mentions SMEs as an example However it seems that it is

not precisely this type of protection that interests SMEs but rather the fact that they are not

able to face the laws of 27 Member States when concluding cross-border contracts and

possibly 27 different forums for litigation with consumers from all over the EU Hence they

would prefer better harmonisation of European contract law and perhaps an exception to the

consumer protection rules of the Brussels I Regulation151

Whereas the latter measure is

unlikely to materialise in the near future the former issue has been before the legislator for

some years now It is not the place here to analyse in detail the developments of European

contract law152

however the Proposal for a Regulation of the European Parliament and of the

148

Eric Dacheux lsquoRapprocher lrsquoEurope des citoyens une neacutecessiteacute Analyse critique de la politique de

communicationdes institutions europeacuteennesrsquo (2002) 18 Recherches en Communication 1 Olivier Costa and Paul

Magnette Une Europe des eacutelites Reacuteflexions sur la fracture deacutemocratique de lUnion europeacuteenne (Editions de

lrsquoUniversiteacute de Bruxelles 2007) 149

Andrew Williams lsquoSMEs balk at new Consumer Rights Directiversquo (27 June 2011)

httpwwweuractivcomconsumerssmes-balk-new-consumer-rights-directive-news-505974 accessed the 10th

May 2012 150

Conference of Emil Paulis Director responsible for Financial Services Policy amp Financial Markets in the

Commissions Directorate-General for the Internal Market and Services (DG MARKT) for the closing session of

the Delva Evening Lectures on lsquoThe Internal Market of the 21st Century Stakes and Challengesrsquo (Ghent 18

April 2012) 151

N 14 152

See namely Christian Twigg-Flesner lsquoComment The Future of EU Consumer Law ndash The End of

Harmonisationrsquo (December 15 2010) in Mike Kenny and James Devenney European Consumer Protection ndash

Theory and Practice (Cambridge University Press Forthcoming) Available at httpssrncomabstract=1786717

Norbert Reich lsquoHarmonisation of European Contract Law ndash with special emphasis on Consumer Lawrsquo (2011)

China-EU Law Journal 551 Jules Stuyck and Reiner Schulze Towards European Contract Law (Sellier

European Law Publishers 2011)

- 43 -

Council on a Common European Sales Law (hereinafter CESL)153

that is the last project in

date indicates some interest with respect to the main issue

As regards first SMEs the legislator has decided to integrate them into the scope of the

CESL but only through the B-to-B approach Hans-W Micklitz and Norbert Reich are of the

opinion that this is not a good idea and would rather see the definition of consumer construed

broadly in order to integrate SMEs154

As stated in the previous chapter we would prefer a

policy of differentiation Although Micklitz and Reich argue that this would create an

additional difficulty when defining SMEs155

we do not think difficulty would be avoided

simply by expanding the notion of consumer to include SMEs

More importantly even though the Court of Justice has already imported the notion of

consumer to the domaine reacuteserveacute of the EU the Member States still remain free to extend the

rules to other groups although not under the cover of the definition of consumer156

This is

the holding of Di Pinto However even this freedom is endangered Indeed some scholars

suggest that the proposal for CESL may well foreclose this possibility at least as regards the

extension of consumer protection to certain legal persons such as SMEs since the instrument

aims at de facto full harmonisation157

The wording of CESL shows that the realisation of the

Internal Market is again given precedence over the equitable protection of the weaker party

Hence the answer to the broad question set forth in the title of this section is rather negative

We do not see any positive evolution in the notion of consumer as proposed in the previous

chapter in the near future However as the recent interest in SMEs indicates the European

legislator may well have recourse to a policy of differentiation in order to protect lsquonewrsquo types

of weak parties Ewoud Hondius partially foresaw this evolution when he wrote that

The protection of the weak party has developed slowly over the last century to include

first employees then tenants and hire-purchasers and finally consumers and patients

Thos development has not come to an end It is bound to continue as new weak

parties ndash such as asylum seekers and small businesses ndash emerge into the limelight

whereas the need to protect existing categories of weak parties may lose some of its

importance158

We say partially foresaw as interest in consumers is still present However no one knows

what the future will bring One thing is sure though the protection of the weaker party in

European law is governed almost exclusively by political and economic reasons On the one

hand the EU wishes to maintain a proper image vis-agrave-vis its citizens on the other hand its

main purpose remains what it was back in 1957 economic construction Facing stiff

economic challenges the EU is seeking naturally to promote legislation that will help its

economy grow A successful Internal Market would naturally help to achieve this objective

but in the meantime the ratio legis of certain EU legislation appears to seriously lack logic

153

Commission lsquoProposal for a Regulation of the European Parliament and of the Council on a Common

European Sales Lawrsquo COM (2011) 635 final 154

Hans-W Micklitz and Norbert Reich lsquoThe Commission Proposal for a ldquoRegulation of a Common European

Sales Law (CESL)rdquo ndash Too broad or not broad enough rsquo (2012) EUI Working Papers ndash Law 201204 14-15

httppapersssrncomsol3paperscfmabstract_id=2013183 accessed the 10th

May 2012 155

See article 72 of the Regulation on a Common European Sales Law (n 153) 156

Di Pinto (n 21) 157

Ibid 158

Ewoud Hondius (n 5) 245

- 44 -

Conclusion

The notion of lsquothe consumerrsquo does not seem to attract much attention in legal doctrine That is

quite paradoxical since it is that notion which determines the personal scope of application to

consumer legislation The issue is crucial because depending on the definition of consumer a

person would be granted consumer protection or not Defining the consumer thus comes prior

to the analysis of the protection rules themselves However our impression is that many legal

commentators consider that the problem of definition of the consumer is a closed chapter

which does not require any further call into question We are not of the same opinion

Through this study we have tried to provide a broad overview of this issue Our in-depth

analysis of the rationale behind the EU consumer (protection) legislation and case law has

revealed certain incoherencies Indeed whereas the Court of Justice has formally

acknowledged that the consumer is the weaker party in the contractual relationship with a

professional due to lack of bargaining power or expertise it still adheres to the narrow

approach of the European legislator The latter has established a strong demarcation between

those who purchase for business purposes and those who purchase for private purposes

However as a more in-depth analysis reveals the EU definition of consumer is even more

restrictive than it appears at first glance and excludes not only those who act for business

purposes but also all those who act in a professional capacity

In our view the two major elements which should guide the definition are the demands of

equity and legal certainty To combine both in one definition is not always easy since the first

may require more flexibility whereas the second one needs more rigidity After in depth

consideration of the situation in some Member States and particularly France and having

regard to some other sectors of EU law as well as to some theories proposed in the legal

literature we concluded that the current EU definition of the consumer can be formulated or

at least interpreted in a better way as regards equity Hence we propose a combined approach

to allow certain specific sectors or legal situations to be isolated and provide them the

protection that they deserve ndash with a re-interpretation of the consumer definition The reading

we suggest extends the scope of consumer protection to professionals that contract for a

purpose other than their specific business In addition the legislation on unfair terms should

be extended to all standard-form contracts and where appropriate some of the general

consumer legislation could be extended to certain types of legal persons via other means

Aside from the essential question of the personal scope of consumer protection many other

issues remain unsolved Amongst these the most important one remains certainly the

effectiveness of consumer protection This issue can be first addressed by looking at the type

of protection that consumers are afforded In short it consists mainly of an increase of

information to their attention However is this huge flow of information ever read and hence

an adequate approach to protect consumers Effectiveness of consumer protection is certainly

even more problematic as regards the judicial enforcement of the protection rules It does

economically speaking not make any sense to go before courts for consumer transactions

which turned bad Though the harm is there and should ideally be addressed by the legislator

In respect to this issue ADRrsquos and class actions are possible directions in order to improve

the reality of consumer protection laws Let us however leave these interesting questionings

for further more specific studies

- 45 -

At the end of the day it is important to keep in mind that economic interests have always

taken precedence over purely social goals and the EU is no exception to this rule Indeed

rules of law are typically enacted for economic as opposed to social purposes In our case the

paradigm of the weaker party is replaced by the necessary pursuit of economic growth

through the Internal Market in order to remain competitive on the international scene

- 45 -

At the end of the day it is important to keep in mind that economic interests have always

taken precedence over purely social goals and the EU is no exception to this rule Indeed

rules of law are typically enacted for economic as opposed to social purposes In our case the

paradigm of the weaker party is replaced by the necessary pursuit of economic growth

through the Internal Market in order to remain competitive on the international scene