Online Dispute Resolution for Consumers in the European Union

Pablo Cortés

• Editorial: Routledge
• Año: 2010
• ISBN:
  9781136943492
• Edición: 1
• Categoría: Law
• Categoría: Law Theory & Practice

A PDF version of this book is available for free in open access via www.tandfebooks.com as well as the OAPEN Library platform, www.oapen.org. It has been made available under a Creative Commons Attribution-Non Commercial-No Derivatives 3.0 license and is part of the OAPEN-UK research project.

E-commerce offers immense challenges to traditional dispute resolution methods, as it entails parties often located in different parts of the world making contracts with each other at the click of a mouse. The use of traditional litigation for disputes arising in this forum is often inconvenient, impractical, time-consuming and expensive due to the low value of the transactions and the physical distance between the parties. Thus modern legal systems face a crucial choice: either to adopt traditional dispute resolution methods that have served the legal systems well for hundreds of years or to find new methods which are better suited to a world not anchored in territorial borders.

Online Dispute Resolution (ODR), originally an off-shoot of Alternative Dispute Resolution (ADR), takes advantage of the speed and convenience of the Internet, becoming the best, and often the only option for enhancing consumer redress and strengthening their trust in e-commerce. This book provides an in-depth account of the potential of ODR for European consumers, offering a comprehensive and up to date analysis of the development of ODR. It considers the current expansion of ODR and evaluates the challenges posed in its growth. The book proposes the creation of legal standards to close the gap between the potential of ODR services and their actual use, arguing that ODR, if it is to realise its full potential in the resolution of e-commerce disputes and in the enforcement of consumer rights, must be grounded firmly on a European regulatory model.

1
Consumer protection and access to justice in the era of electronic commerce

A European perspective

Access to the courts may be open in principle. In practice, however, most people find their legal rights severely compromised by the cost of legal services, the baffling complications of existing rules and procedures, and the long, frustrating delays involved in bringing proceedings to a conclusion. There is far too much law for those who can afford it and far too little for those who cannot.¹

1.1 Introduction

The aim of this chapter is to evaluate whether European consumers are provided with adequate protection when they participate in e-commerce. To that end, this chapter considers not only the substantive law provided to encourage consumer participation in e-commerce but also the adequacy of existing judicial tools to enforce these rights effectively.

This chapter is divided into four sections. The first section (1.2) sets out the current European consumer protection regulation affecting e-commerce. The European Union (EU) is developing and harmonising consumer protection law with the aim of achieving a truly integrated internal market. This has been manifested in the area of e-commerce through many legal initiatives discussed in this chapter, such as the E-Commerce Directive and the Distance Selling Directive, soon to be part of the Directive on Consumers Rights. The European regulation is examined in the global context by contrasting its tendency towards codification against the more hands off regulatory approach of the US. This section considers whether there is a need to pursue greater legal harmonisation at regional and international levels in order to encourage the development of e-commerce.

The second section (1.3) considers consumer access to judicial redress in a European context within the EU by examining the small claims procedures of Ireland, Spain and the UK. It assesses these national judicial procedures and tests their accessibility for consumers by considering such critical questions as whether the existing small claim procedures are effective to deal with (i) low cost disputes or (ii) those with cross-border elements, such as those disputes arising out of e-commerce transactions.

The third section (1.4) addresses the conflict of laws. The development of e-commerce has led to an increase in the number of cross-border disputes. The Brussels Regulation and the Rome Regulation are contrasted with US case law on choice of law and forum selection in order to compare the legal treatment in both jurisdictions for business to consumer (B2C) disputes. At the international level it is apparent that the question of conflict of laws is still quite unsettled, but at a regional level there is greater legal uniformity. In addition to the above, this section also examines the efforts at an international level to reach legal harmonisation of the principles of conflict of laws through the Hague Conference.

Finally, section 1.5 discusses the enforcement of consumers’ rights under the EU legislation. First, it considers judicial enforcement and the procedural requirements for applications to enforce judgments and other judicial decisions. It examines how consumers may seek redress independently or as a group of affected individuals, either by collective actions, or from the representations of consumer organisations and government consumer agencies. It also discusses enforcement when this is carried out by governmental organisations that monitor and enforce consumer rights.

1.2 Consumer protection policy in the online market

1.2.1 The legal definition of consumer

A consumer is considered to be anyone acting for personal purposes and in a non-commercial capacity. From a legal perspective a consumer is an individual that needs legal protection when dealing with a business owing to his perceived lack of knowledge and weak position in the course of entering into a transaction. According to the Proposal for a Directive on Consumer Rights a ‘consumer means any natural person who […] is acting for purposes which are outside his trade, business, craft or profession’.² As opposed to this, the trader is considered to be a natural or legal person who, for the transaction in question, is acting in a commercial or professional capacity.

The European Court of Justice (ECJ) deliberated over the definition of consumer a number of times in order to clarify its scope. In France v Di Pinto the defendant (Di Pinto) offered professionals who wanted to sell their businesses an opportunity to advertise their offers in his magazine.³ The question referred to the ECJ was whether professionals in the process of selling their businesses could be treated as consumers owing to their lack of experience in these transactions. The ECJ did not accept this subjective notion of consumers and rejected the above argument. This definition of consumer was reinforced in the case of Francesco Benincasa v Dentalkit.⁴ In this case the parties had entered into a franchising agreement for the defendant to open a business, which was never completed. The question raised in this case was whether the defendant could be considered as a consumer under Article 13(1) of the Brussels Convention of 27 September 1968. This Article defined consumer as a party acting for a purpose which may be considered as outside his professional activities. The resulting question was formulated: is this qualification then applicable to parties who have not yet entered into a commercial activity? The ECJ stated that a consumer, in the light of the Convention, should be interpreted as a private end-consumer, and in no way engaged in commercial or professional activity. Hence, following this interpretation of the ECJ, consumers should be understood in a strict sense, that is, individuals whose activities are exclusively guided by private and household purposes without any connections to professional or commercial activities.⁵

Despite this unmistakable interpretation of the law there will always be border-line cases, eg a solicitor who buys a car for personal and business purposes. It seems that in this type of border-line cases consumer protection law will normally apply as long as the professional interest is not higher than the personal one.⁶

1.2.2 Consumer protection

The notion of consumer protection first appeared to challenge the doctrine of freedom of contract in the 1970s. This new concept questioned whether it was fair to allow a business to decide freely on the terms and conditions of a contract when dealing with consumers who are not technical experts and have neither the bargaining power nor the knowledge to negotiate fairly the terms of the contract. Under these circumstances the notion of freedom is truly applicable to one of the parties. At this point, the doctrine of freedom of contract stopped being absolute and began to be seen as a doctrine with some limitations. In order to balance the inequality of contractual power between businesses and consumers, the legislature decided to intervene by enacting laws to protect consumers when entering in contractual relations with businesses.

To achieve adequate consumer protection, the law of contract must balance two of its functions. The first one is the ‘facilitative function’ that states that parties must have the freedom to do what they want to do (if both really want the same once they are ad idem), which is the idea underlying the doctrine of freedom of contract. The second one is the ‘protective function’, which aims to prevent abuse from the stronger party over the weaker party when negotiating the terms and conditions of consumer contracts. To obtain this double objective Girot suggests that the consumer law should ‘be enlightened by “the notion of the parties’ reasonable expectations”’.⁷ This notion contributes to find a balance between, in words of Adams and Brownsword, market-individualism and consumer welfarism.⁸

The idea that ‘weak businesses’ must have legal protection when dealing with stronger parties is based on the same legal principle supporting consumer protection, ie the imbalance of power may allow abuses from the stronger party. In this context, the European Commission consulted in the Revision of the Consumer Acquis whether weak businesses or businesses that have a double capacity (eg buying something for personal as well as for professional use) should receive the same level of protection as consumers. The case law of the ECJ and the Revision of the Consumer Acquis implies that the inclusion of non-consumers under the protection of the consumer regulation is undesirable.⁹ The reason behind this restriction is that the best method for recognising consumers is distinguishing them from those acting in a professional capacity. Furthermore, accepting commercial parties within the meaning of consumer protection might increase the risk of legal disharmony when national courts construe this new category.

Nevertheless, removing professionals from consumer protection regulation should not exclude them from legal protection because small businesses are often in similar circumstances to those experienced by consumers. Businesses can still be protected by general rules of contract law, such as those related to the valid formation of contracts, which are applied to both businesses and consumers.¹⁰

1.2.3 Consumer protection in the field of e-commerce

1.2.3.1 EU regulation

At the time of writing, in the context of information and communications technology (ICT) there are two main directives which aim to protect consumers when buying online. These are the Distance Selling Directive and the E-Commerce Directive,¹¹ which aim not just to grant minimum rights for consumers but also to harmonise the Member States’ legislation in order to facilitate and boost the internal market.

Under the Electronic Commerce Directive, EU Member States must ensure that their legal systems allow the formation, completion and enforcement of electronic contracts.¹² The requirements to create a valid electronic contract are similar to...