5

Subjective Scope of Application

ACCORDING TO ARTICLE 1, Directive 93/13 (the Directive) applies to contracts concluded between a seller or supplier and a ‘consumer’, defined by article 2 as ‘any natural person who . . . is acting for purposes

which are outside his trade, business and profession’.

The notion of ‘purpose’ in the Directive must in principle be understood as referring to the objective destination of the good or service acquired;1 the scope of such notion is therefore clear in several cases, where the nature of the goods or services purchased (eg a kitchen or a health insurance policy) or the status of the customer (eg a student, a retired person or a housewife) may leave small room to doubt that a transaction has destinations other than ‘consumption’, that is, satisfaction of personal (or family) needs.2 The formula used by the Directive, however, leaves several ‘grey areas’: those are, for example, cases where the type of the goods or services purchased (eg cars, computers) or the status of the customer (eg a lawyer, a doctor) is not a definitive indicator of the nature of the transaction, or cases where goods or services are purchased by traders or professionals who intend to use them for both personal and business purposes.

This chapter first explores the ‘grey areas’ left by the definition in the Directive; it then moves on to considering the extent to which Member States remain free to determine the scope of application ratione personae of the protection.

THE CONSUMER IN EC LAW

The notion of consumer that one can find in EC law is not a uniform one, but varies in accordance with the different focuses and objectives of EC policies and legislation.

Under article 81(3) EC, for example, anti-competitive agreements may be granted an exemption if they contribute ‘to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit’. It is clear that, for the purposes of

1G Cian, ‘Il nuovo capo XIV-bis del codice civile, sulla disciplina dei contratti dei consumatori’ Studium Juris 1996, 414; U Ruffolo, ‘Le clausole “vessatorie”, “abusive”, “inique” e la ricodificazione negli artt.1469-bis–1469sexies cc’ in U Ruffolo (ed) Clausole vessatorie e abusive Gli artt.1469-bis e seguenti del codice civile e i contratti del consumatore (Milano, Giuffrè, 1997) 29.

2F Astone, ‘Commento all’article 1469-bis 2° comma’ in G Alpa and S Patti (eds) Le clausole vessatorie nei contratti con i consumatori (Milano, Giuffrè, 1997) vol I, 108.

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this article, a ‘consumer’ is not necessarily a member of the public who purchases goods or services for personal use: undertakings which acquire products in the course of their trade also qualify as consumers3 since the objective of this provision is to ensure, by means of competition law, the enhancement of the general welfare.4 ‘Consumer law’ is, on the other hand, commonly considered as a set of rules and principles specifically designed to protect the consumer in his relationship with the enterprise; this includes a range of measures which cover different aspects of market transactions, from advertising, labelling and negotiation to health and safety of products and contract terms. Intervention is from time to time justified by the subject matter of the contract (eg consumer credit), by the use of a particular selling technique (eg doorstep or distance sale) or by the wish to impose specific duties in relation to the sale of a certain product (eg product safety or sale guarantees): the presence of more of one of these variables seems to create the need to protect the weaker party. The target of achieving protection of a specific category of customers or buyers distinguishes directives related to consumer protection from other directives such as banking and insurance where consumer

protection is only an indirect aim.

Even within the limited area of ‘consumer law’, however, the need to give account of a pluralistic reality entails that one may identify different approaches to the question of who the ‘consumer’ is: ‘the definition of consumer depends on the object and extent of the protection that one wants to ensure’.5

Most of the directives which are commonly considered as the ‘consumer directives’, as well as the Brussels Regulation,6 rely on a ‘transaction’ definition, according to which the consumer is a natural person who, in transactions covered by the measure concerned, is acting for purposes which are not within his trade or profession.7 All the contract directives use this (or a similar) definition, with the exception of the Package Travel Directive.8

The directives on product liability9 and product safety10 contain a definition of producer, but not of the other party, which is referred to as ‘the injured person’ or

3See, eg, Kabel-und Metallwerke Neumeyer AG and Etablissements Luchaire SA Agreement [1975] OJ L222/34.

4Even in competition law, however, the notion of consumer may be narrower than the one above presented: in Pavlov, for example, the ECJ decided that, for the purposes of the application of art 82 EC, self employed medical specialists were acting as undertakings rather than consumers when setting up a professional pension scheme (C–180/98 Pavlov and Others v Stichting Pensioenfonds Medische Specialisten [2000] ECR I–6451). The aim pursued by this interpretation is primarily to ensure the broadest application of EC competition law.

5F Picod and V Christianos, ‘Consommateurs’ Répertoire Communautaire Dalloz, April 1996.

6Council Regulation 44/2001 on Jurisdiction and the recognition and enforcements of judgments in civil and commercial matters [1972] OJ L12/1.

7The formula was actually first used in the Brussels Convention (see also case 150/77 Bertrand v Paul Ott [1978] ECR 1431) and later adopted in Community secondary legislation.

8Council Dir 90/314/EC on Package Travel, Package Holidays and Package Tours (Package Holidays Directive) [1990] OJ L158/59.

9Dir 85/374/EEC on the Approximation of the Laws, Regulations and Administrative Provisions of the Member States Concerning Liability for Defective Products [1985] OJ L210/29.

10Dir 2001/95/EC on General Product Safety [2002] OJ L11/4.

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‘the consumer’ (with no further definition). This approach can be explained by the awareness that some measures need to cover wide economic categories so as to include those who act in a professional capacity: the primary focus of those directives is the general responsibility of producers for the product so that there is no need to restrict the obligations of the producer to any particular category of consumers:11 it would be both impractical and morally unacceptable to prescribe different degrees of product safety or liability according to the use the purchaser makes of the product. Similarly, the misleading advertising directive extends its protection to all persons carrying out a trade or business or a profession as well as consumers (understood in a broad sense): again, this is because the directive itself is justified by the need to ensure a fair market for all economic agents.

As a result, when further investigating the notion of consumer elaborated at EC level, one needs to be mindful of the fact that each piece of EC consumer legislation must be read in the light of the context and the specific policy reasons that led to its adoption.

The notion of consumer in the ECJ case-law and in Directive 93/13

There are two possible approaches to the interpreting the definition of consumer contained in Directive 93/13.

One approach is to restrict the scope of protection to purchases which are exclusively aimed at satisfying personal needs: a consumer is a person who actually consumes the good or service bought, that is, he does not use any further the goods or services for the purpose of producing or distributing other goods or services.12 Under this perspective, which may be called ‘function-based approach’, the purpose of the law is not necessarily to protect the weak party as such, but to protect the party who satisfies family and personal needs.

A different solution, which may be called ‘competence-based’, suggests that a consumer is anyone who is in a position of technical inferiority compared to the counterpart, who, because of his business, is an expert in that field. On these grounds, one acts for purposes which are within his trade or profession only when making a contract which is an immediate and direct expression of his trade, where he has technical knowledge and competence; the fact that goods may be instrumental to the profession does not exclude that the status of consumer and protection should be extended to businesses whenever they are acting outside their field of competence.13

11It must be noted, however, that damage caused by death or personal injury is always compensated, while damage to property will be compensated only if the product is of the type ordinarily intended for private use or consumption (art 9(b) Dir 85/374).

12G Stella Richter, ‘Il tramonto di un mito: la legge uguale per tutti (dal diritto comune dei contratti al contratto dei consumatori)’ (1997) II Giustizia Civile, 202.

13See, eg, V Roppo, ‘La nuova disciplina delle clausole abusive nei contratti tra imprese e consumatori’ (1993) I Rivista di Diritto Civile 283; L Gatt, ‘Ambito soggettivo di applicazione della disciplina. Il consumatore ed il professionista’ in Bianca-Busnelli (ed) Commentario al capo XIV bis del

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In the seminal decision in Di Pinto,14 the ECJ had to adjudicate, for the purposes of the Doorstep Sales Directive, upon the status of traders in respect of contracts where they agreed to advertise the sale of their business in a periodical published by Di Pinto. The court rejected the argument that such traders could be considered as consumers. It established a close connection between the act performed and the subjective state of the person involved: acts which are preparatory to the sale of a business are managerial acts performed for the purpose of satisfying needs other than the family or personal ones; in relation to such acts, a normal wellinformed trader cannot claim to be surprised as he would be would aware of the value of his business.

A comparable, function-based solution was adopted by the court in cases involving other EC measures containing a similar definition, Benincasa15 and Dietzinger16. In the latter case focus on the objective element of the transaction is particularly evident since a guarantee given by Dietzinger for the repayment of his father’s business debt was considered as made ‘in the course of his business’. Dietzinger, nevertheless, had provided the guarantee outside his business or profession: he did not run a financing company, nor did the guarantee fall in any other way within his trade or profession: the guarantee was provided on a one-off basis in order to support his father. The court emphasised the objective elements related to the contract itself and concluded that a contract of guarantee made by a natural person who is not acting in the course of his trade or profession does not come within the scope of the Directive where it guarantees repayment of a debt contracted by another who, for his part, is acting within the course of his trade or profession.

This approach leaves some doubts as to the status of those who purchase a good or a service that should serve both professional and personal needs.17 The problem is that when a contract simultaneously serves both private and trade or professional needs, it may be possible to determine the proportion of the contract within each category; but it is not possible to deem the customer to be, in that proportion or indeed in any other proportion, a consumer and a non-consumer in relation to one and the same contract.

Codice Civile: dei contratti del consumatore (Padova, Cedam, 1999) 150–51 and L Gatt, ‘L’ambito soggettivo di applicazione della normativa sulle clausole vessatorie (nota all’ordinanza di rimessione)’ (1998) Giustizia Civile 2341–58. This view is also inspired by the case-law developed in other countries, like France and England.

14C–361/89 Criminal Proceedings against Di Pinto [1991] ECR I–1189.

15C–269/95 Francesco Benincasa v Dentalkit Srl [1997] ECR I–3767, concerning the definition of consumer in what was at the time the Brussels Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters [1972] OJ L299/32.

16C–45/96 Bayerische Hypotheken und Wechselbank AG v Edgar Dietzinger [1998] ECR I–1199 concerning the definition of consumer in the Doorstep Sales Directive.

17P Rossi, ‘Il concetto di consumatore e l’ ambito di tutela della disciplina dei contratti del consumatore’ (1998) Rassegna Giuridirica dell’ Energia Elettrica 459–60. In favour of the criterion of prevalence to be assessed on a case-by-case analysis is the Law Commission, see Law Commission and Scottish Law Commission, Unfair Terms in Contracts. A Joint Consultation Paper Law Commission Consultation Paper no 166/Scottish Law Commission Discussion Paper no 119 (2002) (hereinafter Law Commission Consultation Paper no 166) para 4.155.

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The question has recently been brought to the attention of the ECJ the case of Gruber v Bay Wa,18 where the court was asked whether a farmer who bought tiles for the roofing of his farm, which was also his private dwelling, was or not a consumer for the purposes of the special rules of jurisdiction for consumer contracts under article 13 of the Brussels Convention (now Regulation 44/2001). The court ruled that this depended on which purpose, the private or the professional one, was predominant, and established that the status of consumer can only be granted where the link between the purpose for which the goods or services are used and the trade or profession of the person concerned is negligible and ‘so slight as to be marginal’.19

In coming to this conclusion, the ECJ considered that the rules of jurisdiction for consumer contracts represent a derogation from the general principles established by the Convention and must therefore be narrowly interpreted: the Convention itself does not appear to favour the attribution of jurisdiction to the courts of the claimant’s domicile. In addition, the special protection under article 13 is justified only for contracts concluded outside and independently of any trade or professional activity or purpose, solely for the purpose of satisfying an individual’s own needs in terms of private consumption. Such protection is unwarranted in the case of contracts made for the purpose of a trade or professional activity.

The decision may be subject to three main criticisms. First, the reason why the professional purpose of the contract (even when it is not prevailing, but simply not ‘marginal’) must necessarily attract the application of the ordinary rules of jurisdiction is not explained. Jacobs AG suggests that ‘inasmuch as a contract is entered into for the customer’s trade or professional purposes, he must be deemed to be on an equal footing with the supplier. And that position of equality—his deemed business and legal experience, and resources, vis-à-vis those of the supplier—can- not be undermined by the fact that the contract also serves private purposes’: this argument, however, seems to rely on criteria drawn from the competence-based approach, previously rejected by the court.

Second, it is not clear what a ‘negligible’ or ‘marginal’ link in practice means: would the purchase of car to be used 70 per cent for personal use and 30 per cent for professional use be considered or not as a ‘consumer contract’?

Third, the ruling assumes that it is possible to distinguish between the professional and the commercial use of a good or a service. While this can be done in the case of a car or a computer, it is impossible to draw such a distinction in the case, for example, of a doctor having his medical practice in his own house: would the contract for the supply of electricity or water be considered a consumer contract? To what extent is it possible to argue that the link with the profession is ‘negligible’?20

18C–464/01 [2005] ECR I–439.

19Ibid para 39.

20The issue is addressed by the Law Commission’s Consultation Paper no 166, above n 17, at paras 3.36–3.38. The Law Commission states that a definition of consumer as ‘an individual who makes the contract for purposes which are not related to any business of his’ would totally exclude that a mixed contract could be considered as a consumer contract in the case where the buyer buys primarily for

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It is submitted that there are other indicators that, in a case of this type, should be used to decide whether there is or not a consumer contract. Dealing as a business often entails several advantages: one usually has a stronger bargaining power, can gain access to stores that sell to traders/retailers only and, above all, is able to recover value added tax on the purchases made. In those cases, it is submitted that the one who chooses to enjoy such benefits (by, for example, using stationery with his business letterhead or asking for a VAT receipt) should not be able to enjoy, at the same time, the benefits connected with the status of a consumer; in deciding whether to apply or not the consumer rules a court should therefore investigate such matters.

Bearing in mind that, as earlier discussed, each piece of EC consumer legislation must be read in the light of the context and the specific policy reasons that led to its adoption, one may wonder whether judgments rendered by the ECJ in contexts other than that of Directive 93/13 can be relevant for the interpretation of the latter.

While the value of the rulings in Di Pinto and Dietzinger in this respect is beyond doubt,21 the issue is less clear with regard to the decision in Bay Wa.

The ECJ makes it clear that the provisions of the Convention must be interpreted by reference principally to the scheme and purpose of the Convention, and that article 13, being a derogation from a rule of jurisdiction laid down in the Convention itself, must be narrowly construed. The same reasoning would not apply in the context of Directive 93/13 (although one could argue that since its provisions are an exception to the principle of contractual freedom, their scope of application should be construed narrowly).

There is no reason, however, why the remaining part of the reasoning in Bay Wa could not be ‘transplanted’ to the consumer contract Directives and accordingly to Directive 93/13. A different solution would have dramatic consequences on legal certainty as it would result in an inconsistency of interpretation between Regulation 44/2001 on the one hand and the consumer contract directives on the other. If, for example, the same person was to be considered as a consumer under the Unfair Terms Directive but not under the Regulation a claimant would find himself in a situation where a jurisdiction clause may be held to be unfair under Directive 93/13 but would be not be subject to article 13 of the Regulation, hence it would be perfectly valid.

Finally, the Directive does not say anything on the burden of proof. This suggests that the usual rules apply, that is, it is for the person wishing to rely on the protection offered by the Directive to show that he is acting as a consumer.22

private use but with the intention of occasionally use for business. Accordingly, the Law Commission recommended that the consumer is defined as ‘an individual who enters into it (the contract) wholly or mainly for purposes unrelated to a business of his’. This means that a party who enters into a contract for purposes that are merely incidental to its business but nevertheless related to it (such as R&B), should not be treated as acting as a consumer. It is not clear why the report does not simply adopt the terminology of the directive but uses a totally new one.

21In C–541/99 Idealservice [2001] ECR I–9049, for example, Mischo AG referred several times to Di Pinto in the context of the definition of ‘consumer’ for the purposes of Dir 93/13.

22This is confirmed by para 46 of the Bay Wa decision.