International Law and Consumer Protection: The history of 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 and is now studying for a second degree in Public Administration Studies.
Published January/February 2015
Table of Contents
The consumer constitutes the starting point of economic activities and its role has always been valued by the development of the market. In effect, an 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.[i]
Until the 18th century, the consumers had to verify themselves the quality of the goods they purchased and only in presence of gross negligence the seller could have been hold liable. The struggle against capitalism and food fraud started the first phase of consumerism but it wasn’t until the third phase, in the 1950s, that we saw the involvement of the European countries. The first consumer’s 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[ii]. But the real normative breakthrough came with the Single European Act; it modified the Treaty of Rome[iii] by strengthening the role of the Economic and Social Committee, to whom were attributed powers to protect the consumers. Over the years, some important changes were made to the above mentioned 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.
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. As the FTC celebrates its 100th anniversary, our thoughts turn to its unique mission, significant events in Commission history, and its staff, stakeholders and constituents – present and past. The FTC works with foreign competition and consumer protection authority, and cooperates with foreign authorities on enforcement and policy matters through formal and informal agreements. In Europe there are many consumers’ organizations. The Regulation on Consumer Protection Cooperation (CPC) is applicable in the European Economic Area. The consumers’ 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:
- Building consumers trust in the digital economy;
- Impact of the new technologies and emerging business practices on consumers;
- Examining consumer policy regimes, including the economic underpinning of consumer policy and its interaction with competition policy.
The United Nations Guidelines for Consumer Protection, that 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; 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.
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 that transformed the European Community in 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 1990, the European Commission began to develop three-year plans in order to harmonize the different laws.[iv]
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, but created also 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 it was created the National Union of Consumers who immediately proved itself to be an important cultural development.
In the early ‘90s the Movement of Consumers grew importance to the point that the Adiconsum, created by a union body, quickly gained a prominent position in the field of consumer protection.
However, the individual associations remained weak until, in 1989, was created the National Consumers and Users Association 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 to launch a public consultation to decide the best way to regulate the field of unfair commercial practices. This act poses attention on the need to reform the European consumer law, on the basis of a framework directive able to harmonize the rules on fair commercial practices between businesses and consumers.
In Italy, consumer protection, broadly speaking, was born at the end of the 80’s to guarantee the health of the final consumer. The Presidential Decree of May 24, 1998 n. 244, an implementation of the EC Directive 85/574 established, for the first time, the producer responsibility for any damage caused by defects on the products.
Subsequently, with the Legislative Decree n. 50 of 1991, were introduced guarantees for the consumers who stipulate the contract outside the business premises with the exception of those involving mobile property, the supply of food products as well as insurance and financial services. The consumer therefore could exercise the right to cancel within seven days without incurring in any penalties.
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.[v]
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 (Directive 2000/31, June 8, 2000) covers advertising and marketing by information society service providers. The television without frontiers directive (Directive 89/552, October 3, 1989) concerns the pursuit of television broadcasting activities; Directive 97/36 also coordinates certain aspects of commercial communications through broadcasting means. It provides for a uniform high level of protection, common definitions and clear enforcement requirements.[vi]
In Germany the rules were included in the new Civil Code, while in Catalonia 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 the 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 the art. 45 with the art. 67. With this law, the consumer was at the center of the market and so was guaranteed the effectiveness of 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 to 90 days 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 to increase 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 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.
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.
However the need to provide adequate protection to consumers has been launched precisely in the United States.
Over the years, the activity of the American legislator, 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 U.S. the effect of the judgment is applied to every member of the class, have 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.
[i] G. Alpa, “Il Diritto dei Consumatori”, Bari, 1995, p. 12
[ii] 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.
[iii] 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 http://www.bankepedia.org/index.php/it/129-italian/t/22858-trattato-di-roma-enciclopedia
[iv] Il piano d’azione della Commissione CE, in “Rivista critica di Diritto Privato”, II/94, p. 153
[v] Explanatory Memorandum to COM(2001)531 - Green paper on EU Consumer Protection in http://www.eumonitor.eu/9353000/1/j4nvhdfdk3hydzq_j9vvik7m1c3gyxp/vikqhjjfnexo