UPDATE: International Law and Consumer Protection

By Antonella Corradi

Antonella Corradi earned a degree in Law from the University of Rome “La Sapienza” (June, 1991). She works at the Ministry of Cultural Activities and Heritage of Italy. She wrote many articles and has contributed as co-author to a book on the intellectual property of biobanks for JLIS, an online paper, in 2010. She is a statutory auditor on behalf of the Ministry of Cultural Activities and Heritage of Italy.

Published March/April 2021

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1. History of Consumer Protection

The idea of a consumer as a citizen, and thus as a juridical subject, is relatively new concept. Until the nineteenth century, consumers directed their resources towards products of first necessity, but the attention to quality came second in importance. The first country in which consumerism had established itself early was the United States where, based on the protests of the poorest strata of the American proletariat, federal regulations had been enacted. These regulations had imposed a required level of authenticity in foods and medicines. Unfortunately, it was soon realized that the success was only partial, and it was only at the time of the Great Depression that information about products that could be used to make correct choices was realized, and, above all, the lack of political representation able to channel protests into policies were still widespread.

Then, in 1928, the Consumers Union, a very important association, was established. In Europe, the culture of consumer protection has spread only since the fifties when the British government and Denmark recognized the social importance of the problem and considered it necessary to offer consumers the opportunity to express themselves on issues that were reserved for both producers and traders by creating special protection bodies. The same measures were then adopted by other countries such as France and Germany, as if to testify that consumer protection was spreading and thus laying the foundations for the birth of new regulations. The United States in 1962 gave birth to an official definition of consumer rights in safety. In Italy, the situation was a bit different and only with the Directives of the European Community were important concepts affirmed. In 1975, the European Community reorganized in an organic way the initiatives related to the consumer protection, highlighting all the objectives related to the same.

The consumer constitutes the starting point of economic activities and their role has always been valued by the development of the market. In effect, adequate consumer protection allows the economic systems to work through the consolidation of the rights of the citizens. The Old Testament mentions a form of consumer protection, and so does the Code of Hammurabi, but only in a mercantile perspective. An early form of movement in defense of consumers was born in the United States where the bases for the birth and development of monopoly and oligopolistic capitalism have been started.[1]

Until the 18th century, consumers had to verify for themselves the quality of the goods they purchased and only in the presence of gross negligence could the seller have been held liable. The struggle against capitalism and food fraud started the first phase of consumerism but it wasn’t until the third phase, in the 1950’s, that we saw the involvement of the European countries. The first consumer organizations were born in Denmark in 1947 and in Great Britain in 1955 where the Government created the Consumer Council in order to enable consumers to express themselves on issues reserved to producers and traders.[2] But the real normative breakthrough came with the Single European Act; it modified the Treaty of Rome[3] by strengthening the role of the Economic and Social Committee, to which powers to protect the consumers were attributed. Over the years, some important changes were made to the legislation that paved the way for a wider consumer policy. But despite these additions, it still lacked a solid foundation that allowed getting a real consumer protection.

2. Organizations for the Consumer’s Protection

The Federal Trade Commission was created on September 26, 1914, when President Woodrow Wilson signed the Federal Trade Commission Act into law. The FTC opened its doors on March 16, 1915. The FTC's mission is to protect consumers and promote competition. The FTC works with foreign competition and consumer protection authorities and cooperates with foreign authorities on enforcement and policy matters through formal and informal agreements. In Europe there are many consumer organizations. The Regulation on Consumer Protection Cooperation (CPC) is applicable in the European Economic Area. The consumer authorities of Norway, Iceland and Liechtenstein are therefore authorities of the CPC Network. The International Consumer Protection and Enforcement Network is a worldwide organization involving more than 40 countries, most of which are members of the Organization for Economic Cooperation and Development (OECD).The aim of the Network is to share information about cross-border commercial activities that may affect consumer interests, and to encourage international cooperation among law enforcement agencies. The Organization for Economic Cooperation and Development addresses a wide range of issues relevant to consumers. The three main areas of work of the CCP are:

The United Nations Guidelines for Consumer Protection, which were adopted in 1985 and revised in 1999, propose a list of objectives described as “legitimate needs”: right to be heard, right to information, right to safety, right to choose, right to consumer education, and the promotion of economic interests of consumers. Many of these objectives appear to have their origins in human rights such as the right to safety for instance, which echoes the Universal Declaration of Human Rights. The Southern African Development Community (SADC) is a Regional Economic Community comprising 15 Member States: Angola, Botswana, Democratic Republic of Congo, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe. Established in 1992, SADC is committed to Regional Integration and poverty eradication within Southern Africa through economic development and ensuring peace and security. The SADC set particular challenges for the consumers and, similarly to other regions in Africa, the increased liberalization of exchanges and the opening of trade borders put the SADC markets under particular stress. The SADC region has another challenger; that of limited access to justice, which makes it long, difficult, costly and sometimes just plain impossible for consumers to exercise their rights in case of abuse.

3. Legislation on Consumer Protection

A turning point in this direction was the Maastricht Treaty, signed on February 7, 1992 and ratified by Law no. 454 of November 3, 1992, which transformed the European Community into the European Union. This legislation dedicated a specific title to the consumer protection, giving the new structure a specific expertise. It was ensured a remarkably high degree of protection, also through actions of support and integration implemented by the Member States both for the protection of health and for the consumer’s economic interests, in order to ensure adequate information. From the 1990s, the European Commission began to develop three-year plans in order to harmonize the different laws.[4]

One of the focal points consisted of one share of information and education to counterbalance the legislative measures. The plan proved to be interesting from the point of view of legislation, although it did not produce positive results because of the difficulty of "transposition and subsequent application of the same laws in the Member States."

The second three-year plan, developed in 1993-1995, was set out to improve the information given to consumers in order to put them in the position to make rational choices. But it also sought to consolidate the activities of consultation in order to enhance the role of the consumer’s organizations. This action was aimed primarily at ensuring effectiveness of consumer rights by facilitating access to justice and alternative dispute resolution. The following plan, developed in 1996-1997, was intended to "train" the consumers, so that they could better address the technological changes of the modern times.

This plan gave the countries of Central and Eastern Europe the technical and legal assistance to protect the interests of consumers and implement an effective policy towards them while also creating an appropriate strategy for a new consumer policy. The first forms in which this protection was fulfilled were developed in Italy and in other European countries at the same time. For this purpose, the National Union of Consumers was created who immediately proved itself to be an important cultural development.

In the early ‘90s the Movement of Consumers grew in importance to the point that the Adiconsum, created by a union body, quickly gained a prominent position in the field of consumer protection.

4. European Legislation

However, the individual associations remained weak until, in 1989, the National Consumers and Users Association was created, which was attended by nine associations. Consumer protection was still an important objective for the European Community, and this is also confirmed by Communication no. 531 of October 2, 2001, a green paper of the European Commission which had the purpose of launching a public consultation to decide the best way to regulate the field of unfair commercial practices. This act draws attention to the need of reforming European consumer law on the basis of a framework directive able to harmonize the rules of fair commercial practices between businesses and consumers.

In Italy, consumer protection, broadly speaking, was born at the end of the 1980’s to guarantee the health of the final consumer. The Presidential Decree of May 24, 1998 n. 244, implementing the established liability on the part of the producer for any damage caused by defects in their products.

The Legislative Decree 174/95, in compliance with the European legislation, established that the right of withdrawal can also be exercised within thirty days from the signing of a life insurance policy. In Italy, the rules on consumer protection were placed in special laws or in the Civil Code for what concerns unfair terms or after-sale guarantees.

The purpose of this green paper is to launch an extensive public consultation on the future direction of EU consumer protection. To stimulate a well-informed debate, it sets out an analysis of the current situation and possible options for the future.[5]

The EU legislation, which does not have consumer protection as its primary purpose, provides for some consumer protection or regulates the power of national authorities to introduce consumer protection regulations. For example, the e-commerce Directive 2000/31/EEC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects on information society services, in particular electronic commerce in the internal market covers advertising and marketing by information society service providers. The Council Directive 89/552/EEC of October 3, 1989, on the coordination of provisions laid down by Law, Regulation or Administrative Action in Member States concerning the pursuit of television broadcasting activities; Directives 97/36/EC (no longer in force) and 2007/65/EC (no longer in force) both amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulations or administrative action in Member States concerning the pursuit of television broadcasting activities. It provides for a uniform high-level protection, common definitions and clear enforcement requirements.[6]

In Germany, the rules were included in the new Civil Code, while in Catalonia rules were inserted into a special code that had to be coordinated with the Civil Code. In Italy, law 52 of 1996, in implementation of the Community Law of 1991, introduced in the Civil Code art. 1469 bis, regarding unfair clauses towards consumers. The Consumer Code in Italy came into force on 23 October 2005 and has been a fundamental body of law for the protection of consumer rights; it improved the rules on the fairness of competitive practices as well as those on the information.

The legislative decree n. 21 of 2014 carried out a renovation of the Consumer Code, replacing art. 45 with art. 67. With this law, the consumer was at the center of the market and so was guaranteed his individual and collective rights. More pre-contractual information was established for consumers and this was applied especially to contracts signed outside of the business premises.

The right to reconsider is among the major changes introduced by this law; it can be exercised within a broader term than the current 10 to 14 days. Not only that, but if the consumer has not been informed on his right to change his mind, the withdrawal period is extended from the current 60-90 days period to up to 12 months after the signing of the contract or the delivery of the goods. In case of withdrawal, the seller has fewer days to return the sum paid by the consumer, but the latter will have more time to return the goods.

Another important change concerns the prohibition of increasing the cost of the goods purchased with credit or debit cards. A similar ban is expected for telephone charges on dedicated lines that are made available to the consumer by the seller in case of direct or distance sales.

In 2015, the Consumer Code was further updated with the Legislative Decree 130 of 6 August 2015, implementing Directive 2013/11/EU of the European Parliament and of the Council of May 21, 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No. 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR), which in Part V introduced Title II-bis concerning the new discipline relating to extra-judicial resolution of consumer disputes (from Article 141 to Article 141-decies).

In England, the legislature broke away from the decisions of the Courts in order to create a legislation aimed at a more careful and precise regulation of consumer contracts. The legislation to protect the consumers is generally called Consumer Law and is one of the most complex existing regulatory frameworks.

The Coronavirus has put in place the need to reflect on a new definition of the current contractual remedies in order to find a balance between the right of consumers in case they are in a position to give up the purchase of goods and services to protect the primary right to health, and the rights of companies in case they are forced to issue refunds. In this case, the rules that apply require that the consumer who see the event cancelled due to the health emergency can exercise the right to have returned the amount paid or even part of the cost of the subscription or ticket purchased. In the light of the emergency we are experiencing, it is necessary to rethink the protection of consumers or contractors by paying special attention to business, users and consumers.

All this suggests a horizon of change in which good expenditure, postponement of payments, the possibility of choosing new conditions for time and place of service, and a new definition of fulfillment in the presence of particular unpredictable circumstances, are just some of the areas of contract law on which to intervene.

The continuous development of consumer law considering globalization leads to the need for internationalization of the consumer. If the move towards an international dimension of consumer law occurs, this should make us reflect on the minimum consumer protection standard that is accepted and recognized globally. Moreover, it is the development of cooperation rather than the harmonization of substantial consumer law that should be considered the prerequisite to effective consumer protection. Particularly because law is also crossing national borders.

The first is certainly what constitutes a reference point for consumer protection, which is also accepted in every jurisdiction. It is thanks to internalization that some operators, such as Amazon, have over time had a remarkable development.

The law has also had to come to terms with these realities. An important role in this area has been played by some directives, such as the Directive 93/13/EEC of April 5, 1993 concerning unfair terms in contracts concluded with consumer. It is not the first time that the European Parliament has been involved in this debate. It is also important to note that there is a need for a more comprehensive picture of the problem. The Directive 2011/83/EU of October 25, 2011 on consumer rights, amending Directive 1999/44/EC of the European Parliament and of the Council, which repeals Directive 85/577/EC of the Council and the Directive 97/7/EC of the European Parliament and the Council. Sanctions are, however, the focal point of the reform and consist of requiring member states to take all necessary measures to ensure that the Directive comes into force in the next 20 days, so states will not be able to review protection until 2023.

Also, at the European level, on 17 January 2020, the new Regulation on Cooperation Between National Authorities Responsible for Consumer Legislation came into force. The new regulation repeals and replaces the EC Regulation 2006/2004, by which the European Community established a network of Consumer Protection Cooperation (CPC) authorities, in order to facilitate more effective coordination between the different authorities.

With the introduction of the legislation, the powers of the component national authorities, which, in the case of breaches of regulation, require information from private entities, had been created. In addition, the same authorities can make spot purchase to assess the most advantageous condition and order removal of content.

Published in the Official Gazette No. 409 L of December 4, 2020, EU Directive 2000/1828 of November 25, 2020 relating to representative actions for the protection of the collective interests of consumers and repealing Directive 2009/22/EEC concerns representative actions to protect the collective interests of consumers, was published. The purpose of this directive is to ensure that all member states are offered the possibility of applying a procedure for representative actions aimed at protecting the collective interests of consumers and their access to justice. The Directive enters into force on 24 December 2020 and the Member States will have until 25 December 2022 to adopt the legislative provisions necessary to comply with this Directive and then apply them on 25 June 2023. The main purpose of the directive is to ensure a high level of consumer protection by harmonizing certain aspects of the laws of the member states, but also to improve consumers' access to justice.

5. United States Legislation

In the American legislation, as the English one from which is inspired, consumer protection is implemented through a system of rules and case law as well as administrative controls operated from offices established ad hoc. In the United States, there is no durability requirement for product warranties, just as there is no warranty requirement for products sold. Commercially, therefore, no consumer will buy products for sale without a warranty or with a warranty that is too limited. A manufacturer offering a product warranty will in most cases offer written warranties in which important elements must be included.

However, the need to provide adequate protection to consumers has been launched in the United States. Over the years, the activity of American legislators, in collaboration with various agencies and other institutions has created a series of legislative acts aimed at establishing the primacy of the United States in the field of consumer protection.

An important role is given by the Economy Analysis of Law Act, which favored consumer protection by requiring the enterprise costs of defective products to be transferred on the insurer and ultimately distributed among the consumers themselves. Noteworthy is the Product Liability Law, a set of rules and principles on the direct responsibility of the company to the consumer, for the manufacture and sale of products that give rise to harmful events.

Important in the United States, but now here too in the EU, is the institution of class action, which consists in the action to which the members of a group or category are entitled, like the shareholder of a company; the actor can bring an action on behalf of all other members of the class he represents. While in the U.S. the effect of the judgment is applied to every member of the class, whether they decided to participate in the trial or not; in England, unless the court decides otherwise, the judgment is binding on every person represented in the dispute but may be enforced by or against those who are not part of the trial only with the permission of the Court.

[1] G. Alpa, “Il Diritto dei Consumatori”, Bari, 1995, p. 12

[2] F. Silva, A. Cavaliere, “I diritti dei consumatori e l’efficienza economica, in “La tutela del consumatore tra mercato e regolamentazione”, a cura di F. Silva, Roma, 1996, p.12.

[3] Il Trattato di Roma fu sottoscritto nella capitale italiana il 25 marzo 1957 e rappresenta il momento decisivo del processo costitutivo delle Comunità Europee. I sei Paesi firmatari (Francia, Germania, Belgio, Lussemburgo e Olanda) istituirono con detto Trattato una Comunità Economica Europea (CEE) –e con altro trattato sottoscritto lo stesso giorno- la Comunità Europea dell’Energia Atomica, meglio nota come Euratom. Nel 1951 era stato sottoscritto il Trattato costitutivo della Comunità Europea del Carbone e dell’Acciaio (CECA). Quest’ultima, istituita con trattato a tempo, è cessata il 23 luglio 2002. Euratom, al contrario, resta in essere come Comunità giuridicamente autonoma dell’Unione Europea, pur condividendone le istituzioni in https://www.bankpedia.org/index.php/it/129-italian/t/22858-trattato-di-roma-enciclopedia.

[4] Il piano d’azione della Commissione CE, in “Rivista critica di Diritto Privato”, II/94, p. 153.

[5] Explanatory Memorandum to COM(2001)531 - Green paper on EU Consumer Protection.