CONSUMER PROTECTION REVISION NOTES
1. Introduction to Consumer Protection
Consumer Protection law is concerned with the specific regulations aimed at
protecting the more vulnerable party in a commercial relationship. Regulatory
system to provide protection to the customer who is the weaker party. That kind of
regulatory intervention is demonstrated by the imposition of different duties of the
trader.
Difference with contract law = consumer law is more specific and targeted, whereas
contract law is more general. Consumer law applies to consumer contracts and aims
protect the vulnerable consumer.
European consumer law represents the most advanced framework of consumer
protection policy in the world
Consumer problems:
o Vulnerability – old, busy, poor, age etc
o Information asymmetry
o Information overload
o Bargaining power
o Deception and duress
o Psychological tricks
Areas of Consumer Law
o Unfair commercial practices
o Unfair contract terms
o Consumer sales
o Information requirements
o Right of withdrawal
o Financial services
o Travel services
o Consumer redress and enforcement
2. Concept of Consumer
Characteristics:
o Natural person
o Takes financial decisions / makes transactions
o For purposes relating outside of her trade / business
o Elements found in Consumer Protection instruments including EU Directives
and UK Regulations on CP
Adults vs Children
o Quantitative research on adults have found that the level of financial literacy
increases with age. Age is an important factor of financial capability.
, o Adults: assumptions
Autonomy
Emotional control
Rational decision makers
Able to educate themselves / search enough information before
buying anything
Able to distinguish puffery
Calculate what would be best for them
o Where do these assumptions come from?
Neil Browne and Lauren Biksacky, ‘The significance of the distinction
between children and adults for consumer protection’ (2012-2013) 25
Loy. Consumer Law Review 185:
These characteristics are associated with cultures that place a
strong emphasis on individualism and personal responsibility
(e.g. American).
The more individualistic society the strongest the notion of
autonomy is.
Under Kantian philosophy (privileges autonomy and
independence) adults are labelled autonomous, while children
are characterized by their need for paternalistic control.
o Is there a tenable distinction between adults and children?
o Critiques divisions between adulthood and childhood are flimsy at best.
Child and adult are not dichotomous terms burr are instead at the opposite
ends of a continuum
There is no specific point in the process of development that turns
children into adults (so governments’ strict lines on this = arbitrary)
and individual responsibility or maturity is not dependent on age.
Traits we generally ascribe to either adults or children are not
exclusive to one or the other group but tend to vary from individual to
individual.
Emotional control? Adults that are ‘consumers’ can be over-
enthusiastic, they may be persuaded quite easily, their need to ‘play’
can offer grounds for exploitation, decent number of adults lack the
ability to control their emotions in certain situations
Autonomy? difficult to make autonomous decisions without some
level of experience with the subject matter, each new product is an
unexplored challenge
Rational nature? They often listen to what they want to listen & Locke
stated that reason is ‘available to children as early as they understand
language, children can be educated to think rationally’
Different tools for manipulation: processing power consumers’
behaviour can be easily predicted and directed
How does consumer protection law differ from contract law about autonomy?
, o CPL recognises power imbalance, informational asymmetry, impulsivity,
manipulation scenario: more targeted to specific issues
Autonomy vs Paternalism
o In an individualistic society: respecting people means respecting their
individual choices as autonomous beings consumers do as they think it
would be best for them
o Paternalism Protective interference against someone else’s will
consumer protection law: because the person will be better off with the
protection offered by the law. (*recognition of vulnerability a necessary step
here – in an individualistic society vulnerability is particularly frightening
because it signifies a loss of power and control, we often don’t want to be
labeled as vulnerable).
o Does this paternalistic interference benefit the consumer or the market? Can
it be good both for the public and the market?
Development of the meaning of ‘consumer’
o The Molony Report on Consumer Protection (England) First step towards
establishing consumer protection frameworks in the UK. Functioned as a
basis for policy making.
o USA 1962 Milestone: John F. Kennedy’s speech (15/03 because World’s
Consumer Rights day) ‘Consumers, by definition, include us all’.
o He stressed that national governments should safeguard their consumers’
interests and highlighted 4 main consumer protection principles:
The right to safety: To be protected against the marketing of goods
which are hazardous to health or life.
The right to be informed: To be protected against fraudulent,
deceitful, or grossly misleading information, advertising, labeling, or
other practices, and to be given the facts he needs to make an
informed choice.
The right to choose: To be assured, wherever possible, access to a
variety of products and services at competitive prices; and in those
industries in which competition is not workable and Government
regulation is substituted, an assurance of satisfactory quality and
service at fair prices.
The right to be heard: To be assured that consumer interests will
receive full and sympathetic consideration in the formulation of
Government policy, and fair and expeditious treatment in its
administrative tribunals.
Conceptions of the average ‘consumer’ in CJEU EU case law and the Molony report
o CJEU the “average consumer” is “reasonably well informed” and
“reasonably observant and circumspect”. (Tusky, C-210/96). “A reasonably
circumspect consumer is someone who does not believe that the size of a
, promotional marking on a package corresponds to the promotional increase
in the size of the product.” (Mars, C-470/93).
o (ii) The Molony Committee (UK) on Consumer Protection, Report 1959: “the
ordinary consumer is devoid of technical knowledge, lacking ready access to
independent technical advice, uncertain of the strength of his case, a
stranger to the law and its ways, voiceless.”
3. Theoretical Underpinnings of Consumer Protection Regulatory Measures
Neo-classical economics
o Supply and demand determine goods, outputs and income distributions
3 core assumptions:
o People have rational preferences between outcomes that can be identified
and associated with values
o Individuals maximise utility and firms maximise profits
o People act independently on the basis of full and relevant information
Accepts regulatory intervention only in the case of market failure
o Central economic rationale for govt regulation of the marketplace
o Paternalistic interference
o Justify consumer protection only by reference to the idea of market failure
o Market failure = occurs when there is a failure of one of the conditions for
the optimal operation of a competitive market: optimal conditions:
Numerous buyers and sellers in the market, meeting the needs of
each other
Numerous buyers and sellers so that the activities of any one
economic actor have only minimal impact on the output or price in
the market
Free entry into and exit from the market
Markets produce and allocate scarce resources in the most efficient
way
All economic actors in the market have perfect information about the
nature and value of the commodities traded
No negative externalities
Market failure
o Competition problems – monopolies etc
o Barriers to entry
o Productive and allocative inefficiency
o Information gaps
o Third party effects which are not costed in the market price
o Negative externalities
The social costs of a market transaction may not be costed in the market
price, and the burden may be transferred to the shoulders of third parties.
1. Introduction to Consumer Protection
Consumer Protection law is concerned with the specific regulations aimed at
protecting the more vulnerable party in a commercial relationship. Regulatory
system to provide protection to the customer who is the weaker party. That kind of
regulatory intervention is demonstrated by the imposition of different duties of the
trader.
Difference with contract law = consumer law is more specific and targeted, whereas
contract law is more general. Consumer law applies to consumer contracts and aims
protect the vulnerable consumer.
European consumer law represents the most advanced framework of consumer
protection policy in the world
Consumer problems:
o Vulnerability – old, busy, poor, age etc
o Information asymmetry
o Information overload
o Bargaining power
o Deception and duress
o Psychological tricks
Areas of Consumer Law
o Unfair commercial practices
o Unfair contract terms
o Consumer sales
o Information requirements
o Right of withdrawal
o Financial services
o Travel services
o Consumer redress and enforcement
2. Concept of Consumer
Characteristics:
o Natural person
o Takes financial decisions / makes transactions
o For purposes relating outside of her trade / business
o Elements found in Consumer Protection instruments including EU Directives
and UK Regulations on CP
Adults vs Children
o Quantitative research on adults have found that the level of financial literacy
increases with age. Age is an important factor of financial capability.
, o Adults: assumptions
Autonomy
Emotional control
Rational decision makers
Able to educate themselves / search enough information before
buying anything
Able to distinguish puffery
Calculate what would be best for them
o Where do these assumptions come from?
Neil Browne and Lauren Biksacky, ‘The significance of the distinction
between children and adults for consumer protection’ (2012-2013) 25
Loy. Consumer Law Review 185:
These characteristics are associated with cultures that place a
strong emphasis on individualism and personal responsibility
(e.g. American).
The more individualistic society the strongest the notion of
autonomy is.
Under Kantian philosophy (privileges autonomy and
independence) adults are labelled autonomous, while children
are characterized by their need for paternalistic control.
o Is there a tenable distinction between adults and children?
o Critiques divisions between adulthood and childhood are flimsy at best.
Child and adult are not dichotomous terms burr are instead at the opposite
ends of a continuum
There is no specific point in the process of development that turns
children into adults (so governments’ strict lines on this = arbitrary)
and individual responsibility or maturity is not dependent on age.
Traits we generally ascribe to either adults or children are not
exclusive to one or the other group but tend to vary from individual to
individual.
Emotional control? Adults that are ‘consumers’ can be over-
enthusiastic, they may be persuaded quite easily, their need to ‘play’
can offer grounds for exploitation, decent number of adults lack the
ability to control their emotions in certain situations
Autonomy? difficult to make autonomous decisions without some
level of experience with the subject matter, each new product is an
unexplored challenge
Rational nature? They often listen to what they want to listen & Locke
stated that reason is ‘available to children as early as they understand
language, children can be educated to think rationally’
Different tools for manipulation: processing power consumers’
behaviour can be easily predicted and directed
How does consumer protection law differ from contract law about autonomy?
, o CPL recognises power imbalance, informational asymmetry, impulsivity,
manipulation scenario: more targeted to specific issues
Autonomy vs Paternalism
o In an individualistic society: respecting people means respecting their
individual choices as autonomous beings consumers do as they think it
would be best for them
o Paternalism Protective interference against someone else’s will
consumer protection law: because the person will be better off with the
protection offered by the law. (*recognition of vulnerability a necessary step
here – in an individualistic society vulnerability is particularly frightening
because it signifies a loss of power and control, we often don’t want to be
labeled as vulnerable).
o Does this paternalistic interference benefit the consumer or the market? Can
it be good both for the public and the market?
Development of the meaning of ‘consumer’
o The Molony Report on Consumer Protection (England) First step towards
establishing consumer protection frameworks in the UK. Functioned as a
basis for policy making.
o USA 1962 Milestone: John F. Kennedy’s speech (15/03 because World’s
Consumer Rights day) ‘Consumers, by definition, include us all’.
o He stressed that national governments should safeguard their consumers’
interests and highlighted 4 main consumer protection principles:
The right to safety: To be protected against the marketing of goods
which are hazardous to health or life.
The right to be informed: To be protected against fraudulent,
deceitful, or grossly misleading information, advertising, labeling, or
other practices, and to be given the facts he needs to make an
informed choice.
The right to choose: To be assured, wherever possible, access to a
variety of products and services at competitive prices; and in those
industries in which competition is not workable and Government
regulation is substituted, an assurance of satisfactory quality and
service at fair prices.
The right to be heard: To be assured that consumer interests will
receive full and sympathetic consideration in the formulation of
Government policy, and fair and expeditious treatment in its
administrative tribunals.
Conceptions of the average ‘consumer’ in CJEU EU case law and the Molony report
o CJEU the “average consumer” is “reasonably well informed” and
“reasonably observant and circumspect”. (Tusky, C-210/96). “A reasonably
circumspect consumer is someone who does not believe that the size of a
, promotional marking on a package corresponds to the promotional increase
in the size of the product.” (Mars, C-470/93).
o (ii) The Molony Committee (UK) on Consumer Protection, Report 1959: “the
ordinary consumer is devoid of technical knowledge, lacking ready access to
independent technical advice, uncertain of the strength of his case, a
stranger to the law and its ways, voiceless.”
3. Theoretical Underpinnings of Consumer Protection Regulatory Measures
Neo-classical economics
o Supply and demand determine goods, outputs and income distributions
3 core assumptions:
o People have rational preferences between outcomes that can be identified
and associated with values
o Individuals maximise utility and firms maximise profits
o People act independently on the basis of full and relevant information
Accepts regulatory intervention only in the case of market failure
o Central economic rationale for govt regulation of the marketplace
o Paternalistic interference
o Justify consumer protection only by reference to the idea of market failure
o Market failure = occurs when there is a failure of one of the conditions for
the optimal operation of a competitive market: optimal conditions:
Numerous buyers and sellers in the market, meeting the needs of
each other
Numerous buyers and sellers so that the activities of any one
economic actor have only minimal impact on the output or price in
the market
Free entry into and exit from the market
Markets produce and allocate scarce resources in the most efficient
way
All economic actors in the market have perfect information about the
nature and value of the commodities traded
No negative externalities
Market failure
o Competition problems – monopolies etc
o Barriers to entry
o Productive and allocative inefficiency
o Information gaps
o Third party effects which are not costed in the market price
o Negative externalities
The social costs of a market transaction may not be costed in the market
price, and the burden may be transferred to the shoulders of third parties.
