Private Law, Nudging and Behavioural Economic Analysis

The Mandated-Choice Model

Antonios Karampatzos

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000028171
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

Offering a fresh perspective on "nudging", this book uses legal paternalism to explore how legal systems may promote good policies without ignoring personal autonomy.

It suggests that the dilemma between inefficient opt-in rules and autonomy restricting opt-out schemes fails to realistically capture the span of options available to the policy maker. There is a third path, namely the 'mandated-choice model'. The book is mainly dedicated to presenting this model and exploring its great potential. Contract law, consumer protection, products safety and regulatory problems such as organ donation or excessive borrowing are the setting for the discussion. Familiarising the reader with a hot debate on paternalism, behavioural economics and private law, this book takes a further step and links this behavioural law and economics discussion with philosophical considerations to shed a light on modern challenges, such as organ donation or consumers protection, by adopting an openly interdisciplinary approach.

The book will be of interest to students and scholars of contract law, legal systems, behavioural law and economics, and consumer law.

The Open Access version of this book, available at http://www.taylorfrancis.com, has been made available under a Creative Commons Attribution-NonCommercial-NoDerivatives (CC BY-NC-ND) 4.0 license.

Part B

EU private law and possible scope of application of the mandated-choice model under a Behavioral Economic Analysis of Law (BEAL) approach

In the following Part B, I explore whether the mandated-choice model may have a broader scope of application in the area of private law, especially in the field of consumer protection provisions, which currently take the form of mandatory law. The particular case-studies, which will concern me, are (a) the withdrawal right in distance contracts, (b) the sale ‘as is where is,’ and (c) the strict product liability. All these cases are examined mainly through the lens of BEAL. I begin by first exploring the possibility of applying the mandated-choice model to the withdrawal right in distance contracts provided for in Directive 2011/83/EU on Consumer Rights. The conclusion drawn here from the behavioral approach is that the mandated-choice model would be a more preferable, more efficient regulatory option than the existing mandatory law protection. It would be, namely, better if in distance contracts the law obligatorily provided the consumer with the possibility to choose between a contract without a withdrawal right and a contract with a withdrawal right and a higher price. This mandated-choice path currently finds considerable resonance in German theory and is advanced by eminent legal scholars. It has also been endorsed by me in my Greek monograph under the title “Private Autonomy and Consumer Protection – A Contribution to Behavioral Economic Analysis of Law” (2016).

4 The withdrawal right pursuant to Directive 2011/83/EU and the application of the mandated-choice model

I. Directive 2011/83/EU on Consumer Rights¹

Directive 2011/83/EU on Consumers’ Rights (hereinafter: DCR) replaced Directives 85/577/EEC on off-premises contracts and 97/7/EC on distance selling, seeking to simplify and modernize the pertinent legal framework. It establishes, inter alia, a withdrawal right (in German: Widerrufsrecht; in French: droit de rétractation) in off-premises and distance contracts, which provides for a cooling-off period (or period for sober reflection; spatium deliberandi) in favor of the consumer. The DCR is one of the most significant recent EU legislative reforms in the field of contract law.² The European Commission itself has attached great importance to the DCR and its effects on improving consumer protection and harmonizing the internal market. This is clearly manifested in the DG Justice Guidance Document of the European Commission, issued in June 2014, which reflects an authentic interpretation of the provisions of the DCR.³

It is noted that there has recently been published a Proposal for a Directive aiming to amend four existing Directives, inter alia the DCR.⁴ This new Directive seeks, in general, to further modernize EU consumer protection rules, mainly by providing for (a) additional information requirements for contracts concluded on ‘online marketplaces’ and (b) an extension of the withdrawal right to digital services for which consumers do not pay a price but provide personal data (such as cloud storage, social media, and e-mail accounts). The following analysis, though, rests on the, currently still in force, legal framework of the DCR.

1 Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council (O.J. L. 304). See, indicatively, Grundmann, JZ (2013), 53 ff.; Wendehorst, NJW (2014), 577 ff.; the same, in: FS Griss, pp. 717 ff.; Jud/Wendehorst, 6 GPR (2009), 68 ff.; Zöchnling-Jud, 212 AcP (2012), 550 ff.; Wipperfürth, Die Verbraucherrechte-Richtlinie…, passim, esp. pp. 26 ff.; Förster, JA (2014), 721 ff., and 801 ff.; Meier, JuS (2014), 777 ff.; Micklitz/Reich, EuZW (2009), 279 ff.; Tonner/Tamm, JZ (2009), 277 ff.; Zypries, 2 ZEuP (2009), 225 ff.; Weatherill, EU Consumer Law…, pp. 108, 110 ff., 132 ff.; Loos, Rights of Withdrawal, pp. 1 ff.

2 Also Grundmann, JZ (2013), 53 and 65.

3 See https://ec.europa.eu/info/sites/info/files/crd_guidance_en_0.pdf.

4 Proposal for a Directive of the European Parliament and of the Council amending Council Directive 93/13/EE of 5 April 1993, Directive 98/6/EC of the European Parliament and of the Council, Directive 2005/29/EC of the European Parliament and of the Council and Directive 2011/83/EU of the European Parliament and of the Council as regards better enforcement and modernisation of EU consumer protection rules [COM(2018) 185 final, 11.04.2018]—see https://­eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2018%3A185%3AFIN. On the more recent European Parliament legislative resolution and position of 17 April 2019 on the Proposal, suggesting extensive amendments to it, see www.europarl.europa.eu/doceo/document/TA-8-2019-0399_EN.html. More recently, on 18.10.2019, the text of the new Directive has been finalized (PE-CONS 83/19).

II. The withdrawal right⁵

1. The withdrawal right justified by virtue of BEAL

In recent decades, the withdrawal right has been recognized by the European legislator as a fundamental pillar of consumer protection policy—the other two, equally fundamental pillars are the EU mandatory disclosure rules and the control of General Contract Terms (especially with respect to their possible abusive character).⁶ The European legislator espouses the general concept that the consumer must be able to rescind, or withdraw from, a contract within a cooling-off period (spatium deliberandi), especially in off-premises and distance contracts. The cooling-off period is 14 days.⁷ This approach is also in line with similar considerations offered in the Draft Common Frame of Reference (see Articles II.-5:101–106, II.-5:201–202).

The consumer exercises the withdrawal right without having to justify her withdrawal. This right resembles the so-called repentance right (in German: Reurecht), which is an old idea going back to the end of the 19th century when the noted German legal scholar Philipp Heck conceived it. He suggested that it was particularly useful in the context of ‘credit sales’ (in German: Abzahlungskäufe).⁸ Heck pointed out that customers often purchase products they do not really need and that exceed their financial means. This phenomenon, Heck argued, is easily explained in psychological terms: people are inclined to downplay the future repercussions of a commitment if it provides instant pleasure in the present.⁹ This is a key factor shaping consumers’ contractual decisions: in this respect Heck, already at the end of the 19th century, was alluding to the phenomenon of hyperbolic discounting.

5 In general, on the withdrawal right as provided for in the DCR, see, indicatively, Schärtl, JuS (2014), 577 ff.; Ernst, NJW (2014), 817 ff.; Förster, JA (2014), 728 ff., 801 ff.; Weatherill, EU Consumer Law…, pp. 113 ff.; Loos, Rights of Withdrawal, pp. 2 ff.; Eidenmüller, ­Widerrufsrechte, pp. 109 ff.; the same, 7 ERCL (2011), 1 ff.; Kroll-Ludwigs, 18 ZEuP (2010), 509 ff.; Wipperfürth, Die Verbraucherrechte-Richtlinie…, pp. 59 ff.; Grundmann, JZ (2013), 59; Karampatzos, Rechtspaternalismus im Europäischen Verbraucherschutzrecht…, pp. 213 ff.; cf. also Paparseniou, Griechisches Verbrauchervertragsrecht…, pp. 118 ff., 185 ff.; Schäfer, Widerrufsrechte…, pp. 189 ff.; Schwab, Widerrufsrechte…, pp. 149 ff.; Bechtold, Die Grenzen zwingenden Vertragsrechts…, pp. 93 ff.; Reiner, 203 AcP (2003), 1 ff.; Lettl, JA (2011), 9 ff.; Zimmermann, Rückabwicklung nach Widerruf, pp. 167 ff.; Fischer, DB (2002), 253 ff.; ­Heyers, NJW (2014), 2619 ff.; Fuchs, 196 AcP (1996), 313 ff.; Gernhuber, WM (1998), 1797 ff.; Rekaiti/van den Bergh, 23 J.Consum.Policy (2000), 371 ff.; Cserne, Freedom of Contract…, pp. 111 ff.

6 See Eidenmüller, Widerrufsrechte, pp. 109 ff., 160 ff., 162, 165; Zimmermann, Rückabwicklung nach Widerruf, pp. 167 ff.; Schmolke, Grenzen der Selbstbindung…, passim, esp. pp. 861–862; Riesenhuber, Wandlungen oder Erosion der Privatautonomie?, pp. 5 ff.; Tscherner, 1 ALJ (2014), 146 ff., esp. 148 ff.; ...