REGULATORYTECHNIQUESINCONSUMERPROTECTION:

ACRITIQUEOFTHECOMMONEUROPEANSALESLAW

OrenBar‐GillandOmriBen‐Shahar

AbstractThis Article classifies the consumer protection techniques that theCESL employs into four categories: Mandatory arrangements;disclosure; regulation of entry to and exit from contracts; and pro‐buyerdefaultrules.Itarguesthatthesetechniquesarefarlesslikelyto succeed than the drafters believe, and that theymay bring aboutunintended consequences and hurt consumers. Moreover, theproblemswe identifywith thedesignof theCESLwill likelypreventthe CESL from attaining its purpose of harmonizing European saleslawandenhancingaccesstomarkets.

NYUSchoolofLawandTheUniversityofChicagoLawSchool,respectively.WethankArielPoratandGerhardWagnerforhelpfulcomments.JosephEnoProvidedexcellentresearchassistance.Bar‐GillgratefullyacknowledgesthefinancialsupportoftheFilomenD'AgostinoandMaxE.GreenbergResearchFundatNYUSchoolofLaw.

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Introduction

TheDraftCommonEuropeanSalesLaw(CESL)1usesfourmajortechniques

toprotectconsumers.Unfortunately,thesetechniques’superficialappealdoesnot

withstandeconomiclogic.ThisarticlearguesthattheCESLprovisionsdesignedto

protectconsumersarefarlesslikelytosucceedthanlawmakersandcommentators

believe,andthattheymaybringaboutunintendedconsequencesandhurt

consumers.Moreover,theproblemsweidentifywiththedesignoftheCESLwill

likelypreventtheCESLfromattainingitspurposeofharmonizingEuropeansales

law.

ThefourconsumerprotectiontechniquesemployedbytheCESLare(1)

mandatorypro‐consumerarrangements,whichmustbepartofeveryconsumer

contract;(2)mandateddisclosure;(3)regulationofentrytoandwithdrawalfrom

contracts;and(4)pro‐consumerdefaultrulesandcontractinterpretation.Eachof

thesetechniquesisutilizedextensivelyandrepeatedlyintheCESL.Noneofthese

approachesisnew,butthefervorwithwhichtheyareimplementedisalmost

unprecedented.

Thefirsttechnique—mandatorypro‐consumerarrangements—isperhaps

themostphenomenaldevice.Eighty‐one(!)provisionsintheCESLaremandatory:

sellerscannotwritecontractsthatderogatefromthesearrangementstothe

detrimentofconsumers.Themandatoryprovisionsinvolveremedies,withdrawal

rights,riskofloss,warranties,noticesandcommunications,disclosurerules,and

1REGULATIONOFTHEEUROPEANPARLIAMENTANDOFTHECOUNCILonaCommonEuropeanSalesLaw,AnnexI:CommonEuropeanSalesLaw(hereinafterwerefertoAnnexIas“CESL”andtotheentireRegulationas“Regulation”).

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more.Itishardlyanexaggerationtoconcludethat“freedomofcontract”applies

onlytothequalityoftheproductanditsprice.Thereisnofreedomofcontractwith

respecttothe“quality”ofthestandardformterms.

Wearguethatmanyofthesesuperficiallyprotectiverulesareunlikelyto

helpconsumersasagroup.Theexpostpro‐consumerarrangementswillbepriced

ex‐ante.Consumerswillthuspayforprotectionsthatmanyofthemwouldrather

waiveforadiscount.Thispriceeffectisparticularlydisturbingwhenitis

regressive—namely,whenallconsumerspayforwhatonlythemoresophisticated

onesenjoy.Ironically,thewholesaleinclusionofmandatorytermsundermines,

ratherthanpromotes,“socialjustice”concerns,whichintendtoprotectweaker

consumersandsecuretheiraccesstothemarkets.2Morefundamentally,weargue

thatmanyofthemandatoryarrangementlackana‐prioriwelfare‐enhancing

justification,becausetheyarenotrespondingtosomesystematicmarketfailureor

toasystematicredistributiveproblem.

Thesecondtechniqueis,unsurprisingly,mandateddisclosure.Thisisa

standardstapleofconsumerprotection:givepeopleinformationtohelpthemmake

betterautonomouschoices.“Sunlightisthebestofdisinfectants,”asthetruismgoes.

Unfortunately,thetypesofdisclosuresthattheCESLmandatesarelikelyfutile.

Extensivepastexperienceinconsumerprotectionsuggeststhatstandardconsumer

“informedconsent”techniquesfail.Theyarenotreadnorused,andtheyarebeyond

mostpeople’scareorunderstanding.Mandateddisclosuresareusedsoextensively,

insomanyareasofthelaw,thatpeopleviewthemwithapathyandresentment,if2H.‐W.Micklitz,Introduction,in:THEMANYCONCEPTSOFSOCIALJUSTICEINEUROPEANPRIVATELAW37(2011).

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theyconsiderthematall.Whilenovelapproachestosmartdisclosurearebeing

experimentedwithelsewhere,theCESL’sdisclosureparadigmadoptsarchaic

templatesthathaveconsistentlyfailed.

Thethirdtechniqueistheregulationofentryto,andwithdrawalfrom,

consumercontracts.Theserulesareintendedtopromotefreedomfromcontract:

helpconsumersavoidtransactionsthatareotherwisetheresultof“passive”

contracting.Entryregulationshelpconsumersmakedeliberate,consciouschoices,

suitedfortheirneeds.Withdrawalregulationshelpthemcorrectpoorchoices

withoutbearinganypecuniaryfine.Here,too,theCESLtakesasensibletechnique

butleveragesittoanextentthatisunjustifiedandislikelytobeeitherineffectiveor

harmful.Theregulationofconsciousentryismerelyanotherformofdisclosure,

likelytobeasineffectiveasothermandateddisclosures.Andtheregulationof

withdrawalappliesapracticethatisalreadyprevailinginmarketsandimposesitin

contextswhereitmighthurt,ratherthanhelp,consumers.

Thefourthandfinalregulatorytechniqueisthesupplementationof

incompletecontractswithpro‐consumerdefaultarrangements.Wefindrelatively

lessuseofthisdeviceforthesimplereasonthatmanyarrangementsthatoperateas

gap‐fillersinothersalesstatutesareaccordedmandatorystatusintheCESL.But,

interestingly,thefewpro‐consumerdefaultrulesarebolsteredby“stickiness.”

Partiescanoptout,buttheprocedurefortheseopt‐outsismorerigorousandcostly.

Whilestickydefaultoptionsareagrowingtrendinconsumerprotectionlaw—a

strategydesignedtoslowdownwholesaleboilerplateopt‐outs—wearguethatthe

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opt‐outregulationadoptedintheCESLisunlikelytogenerateanybenefit,andis

morelikelytoimposeunnecessarycost.

Insum,wearguethatthemajorregulatorytechniques,asimplementedby

theCESL,areunlikelytoachievetheirconsumerprotectiongoal.Thenextfour

sectionsexamineeachofthefourmethodsinmoredetail.Wedonottakeissuewith

thesubstantivecontentofanyoftherules.Lookingateachparticularruleand

rethinkingitsjustificationisbeyondthescopeofthisarticle.Rather,wefocusonthe

methodsbywhichprotectiveinterestsarepromoted—mandatoryrules,disclosure,

exitandentry,defaultplans—andevaluatethelikelyeffectsofthesemethodsvis‐à‐

vistheirobjectives.

Thefifthandfinalsectionexplorestheimplicationsofourcritiquetothe

likelysuccessoftheCESL’sharmonizationgoal.Here,forthefirsttime,weconsider

theoptionalnatureoftheCESL.TheinefficienciesweidentifymaketheCESLaless

attractiveoptionasgoverninglaw.Thequestion–aquestionthatneedstobeasked

andansweredseparatelyforeachmemberstate–iswhethertheCESLisbetteror

worsethanthenationallawand,specifically,whethertheCESLisbetterorworse

forthesellerswho,byandlarge,determinewhethertheCESLwillbechosen.We

predictthattheCESLwillbechosenonlyinmemberstatesthathavemore

restrictivenationallaws.There,theCESLwillhaveabeneficialeffect.Butitwillnot

achieveharmonization.Afullanalysisoftheseissueswouldrequiredetailed

pairwisecomparisonsbetweentheCESLandthenationallawsofeachmember

state.Suchcomparisonsarebeyondthescopeofthisarticle.

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I.MandatoryArrangements

A.TheLaw

TheCESLwasdesignedtoprovideconsumersahighlevelofprotection,and

itfeaturesmanypro‐consumerarrangementsconcerningsubstantivecontractual

rights,remedies,formalities,formationprocedures,disclosures,warranties,and

interpretation.Itcouldhavedonewhatmanyothersalesstatutesdo,andestablish

thesearrangementsasdefaultrules,allowingwillingpartiestooptoutofthemby

expressagreement.3Butanticipatingthatsuchdefault‐ruleswouldlikelyresultin

standardformopt‐outsanddisclaimers,theCESLsafeguardsitsconsumer

protectionsbyaccordingthemmandatory,non‐disclaimable,status.

Thestatuteincludesadizzyingarrayofmandatoryarrangements—

provisionsthatcannotbeexcludedandcanonlybemodifiedtofavorconsumers.

WhileArticle1declaresthebasicnormof“freedomofcontract”andtherightof

partiestoexcludeoralteranyoftheprovisionsofthelawunlessotherwisestated,

theremainingArticlesstateotherwise,unequivocally.In31differentplaces,the

followingsentenceappears:

“Thepartiesmaynot,tothedetrimentoftheconsumer,excludetheapplicationofthisArticle[orSection,orChapter]orderogatefromorvaryitseffects.”4

Inall,wecounted81ofthestatute’sarticleswhicharebestowedamandatory

status.Allofthebuyer’sremediesaremandatory,asarethewithdrawalrights,the

3See,e.g.,UCC§1‐302;U.K.,TheSalesofGoodsActof1979§55(1).4CESLArts.2,10,22,27,28,29,47,64,69,70,71,72,74,75,77,81,92,99,101,102,105,108,135,142,148,150,158,167,171,177,186.InsomeoftheArticles,thesentencequotedinthetextappearswithslightvariations.InahandfulofArticles,thephrase“tothedetrimentoftheconsumer”doesnotappear.

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disclosurerules,theinterpretationrules(moreondisclosureandinterpretationin

partsIIandIIIbelow),therestitutionrules,theriskoflossprovisions,someofthe

impliedandexpresswarranties,rulesrelatingtonoticesandcommunications,

interestforlatepayments,graceperiods,alltheprescriptionrules,andmuchmore.5

Forexample,consumersdonothavetonotifysellersofnon‐conformityin

ordertoinvokeremedies,andcannotagreeotherwise.Consumershaveanon‐

disclaimablerighttochoosebetweenrepairandreplacement.Asellermustgivethe

consumera30‐daymandatorygraceperiodiftheconsumerisdelayedin

performance.Asellerdoesnothavetherighttocureincorrectinstallationofgoods.

Andtake‐or‐payclausesareforbiddenaltogetherinconsumercontracts.6

Inaddition,theCESLbansalonglistoftermsbyestablishingthattheyare

alwaysunfair.Theseincludesomeofthemostcommonchoiceofforumterms,such

asmandatoryarbitrationorseller’shomecourt.7Theyalsoinclude“asymmetric”

arrangements,forexamplewhentheconsumerisboundbutthesellerisnot,or

noticeperiodsthataremorelenienttothesellr,orremediesthataremoreforgiving

totheseller.

Sometermsarebannedmore“softly”bypresumingthemtobeunfair

(although,wetakeit,thepresumptionisnotconclusive).Thesebannedtermsare

someofthemostcommonprovisionsonefindsinsellers’standardforms:limitsto

buyers’remedies,one‐sidedterminationrights,sweepingmodificationclauses,

5CESLArts.2,10[¶¶3‐4];Ch.2,Sec.1(10articles);Ch.2,Sec.3(4articles);Arts.28,29;Ch.4(8articles);Arts.64,69,70,71,72,74,75[¶2],77;Ch.8(8articles);Arts.92[¶2],99[¶3],101,102,105;Ch.11(17articles);Arts.135,142,148[¶2],150[¶2],158,167;Ch.16,Sec.3(4articles);Ch.17(6articles);Art.186.6SeeCESLArt.106,¶3(b);Art.111,¶1;Art.135,¶¶1‐2;Art.155,¶3;Art.84(j).7SeeCESL,Article84(d).

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termsallowingthesellertoassignthecontracttoothers,termsrequiring

“excessive”advancepayments,restrictionsonseekingsuppliesorrepairsfromthird

parties,bundlingseparategoodsandservices,orsettingcontractduration

exceedingoneyear.

Inthiscornucopiaofmandatoryprotections,itisimportanttoremember

whichelementsofthecontractarenotmandatory.The“mainsubjectmatterofthe

contract”andthepriceareexcludedfromtheunfairnesstests,andarebindingeven

ifsetunilaterallybytheseller.8Surely,subjectingqualityandpricetomandatory

restrictionswoulddealafatalblowtoanynotionoffreedomofcontract,andthe

CESLhonorstheparties’freedomtoagreeonanyqualityandprice,evenifsuch

agreementsreflectharshbargainingrealities.Itispreciselythisdualstructure—

restrictionsonthelegalprovisions,coupledwithfreedomtosetpriceandquality—

thatundercutstheprotectiveambitionsofthestatute.Wenowturntoexplainwhy.

B.Discussion

Itistemptingtothinkthatapro‐consumermandatoryregimewouldbenefit

consumers.Allelseequal,consumersarebetteroffwithmorefavorableprovisions.

Butallelseisnotequal.Consumerprotectioncomesataprice.Thepro‐consumer

termsintheCESLraisesellers’costsandsellerswillpass‐on(atleastsomeof)these

increasedcoststoconsumersintheformofhigherprices.9Recall,theCESL

preservesfreedomofcontractwithrespecttoprice.

8SeeCESL,Article80(2).9See,e.g.,RICHARDA.POSNER,ECONOMICANALYSISOFLAW(1998);STEVENSHAVELL,FOUNDATIONSOFECONOMICANALYSISOFLAW(2004);RichardCraswell,PassingontheCostsofLegalRules:EfficiencyandDistributioninBuyer‐SellerRelationships,43STAN.L.REV.361(1991).

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Ofcourse,higherpricesarenotinherentlybad.Consumersmaypreferhigh‐

qualityproductswithahighlevelofconsumerprotection,evenifthesehigh‐quality,

protection‐intensiveproductscostmore.Butconsumersmightalsoprefertopaya

lowerpriceandgetlowerqualityproductswithalowerlevelofconsumer

protection.Peopleoftenwaivewarrantyprograms,orbuynon‐refundableitems,or

choosetheslowestdeliveryoption,ordeclinetoinsure,becausetheyarecheaper.A

30‐daygraceperiod,oragenerousremedy,oreasyno‐questions‐askedtermination

option,aresurelybeneficialtoconsumers,buttheyarealsocostlytosellers,

resultinginhigherprices.Ifmostconsumersprefertheseperks,sellerswouldoffer

themandlureconsumerswiththem.Thefactthattheydonot—andthatthelaw

needstomandatethem—suggeststhatmostconsumerspreferthediscount.

Theprecedingdiscussionlumpsallconsumerstogether,askingwhether

consumersasagroupwouldbenefitfromstrongprotectionsoncetheseprotections

arepriced.Buttheconsumersareaheterogeneousgroup,withdifferent

preferencesanddifferentbudgets.Indeed,oneofthefundamentalobjectivesofthe

CESL,andtheentireharmonizationproject,is“tograntaccessjusticetothosewho

areexcludedfromthemarketortowhofacedifficultiesinmakinguseofthemarket

freedoms.Europeanprivatelawruleshavetomakesurethattheweakerparties

haveandmaintainaccesstothemarket.”10TheprotectionssecuredbytheCESLare

intendedtobenefitconsumerswhoareotherwisemistreated,deniedservice,orleft

withoutaccess.Unfortunately,theperspectiveweoffersuggeststhattheproposed

protectionswouldundermine,ratherthansecure,accessjustice.Whilesome

10Micklitz,supranote2,at5.SeealsoChantalMak,InDefenseofCESL(thisvolume).

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consumersmayprefertopayhighpricesforstrongprotections,othersmayprefer

thelow‐price,low‐protectionscombo.Amongthislattergrouparesomeconsumers

whowouldbepricedoutofthehigh‐protectionmarket.Whenconsumersare

heterogeneous,aone‐size‐fits‐allmandatoryapproachnecessarilyhurtscertain

subgroupsofconsumers.Metaphorically,someairtravelersprefertoflyfirstclass,

evenatthehigherairfare.Butmostconsumerswouldprotestifairlineswere

required,bynotionofequalaccess,toflyallpassengersinfirstclass.Thisis

preciselywhymanypeoplerejectextendedwarrantyprogramsofferedbyretailers.

Theydon’twanttobuybetterterms.11

Thefocus,thusfar,hasbeenonheterogeneitywithrespecttotheprotection‐

pricetradeoff.Consumersarealsoheterogeneouswithrespecttotheirpropensity

tobenefitfromprotectionitself.Someconsumersenjoyagivenprotectionmore

thanothers.Forexample,therighttosuethesellerincourtratherthanarbitration,

ortherighttoobtainstrongremediesforbreach,ismorevaluabletoconsumers

whoaresystematicallymorelikelytoenforcetheserights.Toothers—oftenthe

“silentmajority”—theenhancedaccesstocourtandremediesislessbeneficial.

Manyconsumersarenotawareoftheirlegalrightsandprotections.Others“waive”

theirlegalrightsdefacto.Theydonotcomplain,donotsue,orreachan“off‐

contract”understandingwiththeseller.Indeed,theEurobarometersurvey,cited

andreliedonbytheCommissioninproposingtheCESL,showsthatconsumers

11SeeTaoChen,AjayKalra,&BaohongSun,WhyDoConsumersBuyExtendedServiceContracts?,36JOURNALOFCONSUMERRESEARCH611,615(2009)(only1/3ofconsumerspurchaseextendedwarranties);GlennB.Ross&IrfanAhmed,ExtendedWarranties:ABehavioralPerspective,19ADVANCESINCONSUMERRESEARCH879,879(1992)(30‐50%estimates).

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reportapreferenceforarbitrationoverlitigation.12Sincesellersaregenerally

unabletoseparate,inadvance,themorevs.lesslitigiousconsumers,allconsumers

willpaythepriceoftheprotectionsthatonlythefewenjoys.13Theresultingcross‐

subsidizationclearlyhurtsthemajorityofconsumers,anditmayalsoreducetotal

welfare.

Thiscross‐subsidyisoftenregressiveandunfair.Thewealthierandhealthier

consumersaresystematicallymorelikelytoinvoketheprotections.Peopleneedto

beinformedabouttheserights,tohavethesophisticationtoinsistoncompliance,

andtoaffordlegaladvice.Thepoor,theelderly,thelesseducated—thoseforwhom

theprotectionsareenactedinthefirstplace—lacktheinformation,sophistication,

andresources.Andyet,theybearanequalshareofthecost.14Thus,mandatingsuch

alonglistofprotectionsislikelytodiminishtheaccesstomarketsforthosewho

alreadyfacethegreatestbarriers.

Whileweareskepticalwhetherthemanymandatoryarrangementsinthe

CESLbenefitconsumers,wedonotarguethatmandatorycontractrulesarealways

bad.Economicanalysishassoughttodelineatetheproperdomainofthisregulatory

tool.Mandatoryruleslimitfreedomofcontract.Theyshouldbeusedwhen

voluntarycontractscannotbereliedupontomaximizesocialwelfare.Ingeneral,

contractsfailtoimprovewelfarewhentheyimposeexternalities,orwhenoneofthe

12ConsumerAttitudesTowardsCross‐BorderTradeandConsumerProtection,FlashEurobarometerSeries#299(March2011),atp.23(48%ofrespondentsagreethatitiseasiertoresolvedisputeswithsellersthrougharbitration;only33%saidthesameaboutcourts).13ClaytonP.Gillette,RollingContractsasanAgencyProblem,2004WIS.L.REV.679;GwenD.Quillen,ContractDamagesandCross‐Subsidization,61S.CAL.L.REV.1125(1988).14RussellKorobkin,BoundedRationality,FormContracts,andUnconscionability,70U.CHI.L.REV.1203,1266‐68(2003).

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partiesisunabletomakegooddecisions.15Consumersmayfailtomakegood

decisionseitherbecauseofasymmetricinformationorbecauseofimperfect

rationality(andoftenthecombinationofthetwo).Arational,informedconsumer

wouldselectivelybargainfortheprotectionsthatareworththeaddedprice.Less

sophisticatedconsumersmightnotfairsowellinalaissez‐faireenvironment.They

mightfailtoappreciatecertainrisksorpowers,andsotheymightunderestimate

theimportanceofcertainprotections.Whensophisticatedsellersfacesuchnaive

consumers,themarketequilibriummayincludeaninefficientlylowlevelof

consumerprotection.16Thisconcernmayjustifyanoccasionalprotection,butit

hardlyjustifiestheCESL’swholesaleinventoryofmandates.

II.InformationandDisclosure

A.TheLaw

Theregulationofinformationisarguablythemostcommonanduniversal

techniqueinconsumerprotectionlaw.Basedontheirrefutablelogicthatinformed

decisionmakersreachbetter,safer,andmoreefficientdecisions—consumer

protectionstatutesrelyplentifullyontwodevicesthatdeliverinformationto

consumers.First,theymandatevariousdisclosures,requiringinformedpartiesto

conveyspecificallyprescribedinformation,inspecificallymandatedformats,to

specificallydesignatedrecipients.Second,theysupervisevoluntarydisclosuresto

assuretheirintegrity,withcausesofactionagainstdeceptionandfraud.

15See,generally,LucianA.Bebchuk,TheDebateoverContractualFreedominCorporateLaw,89COLUM.L.REV1395(1989).16SeeOrenBar‐Gill,SEDUCTIONBYCONTRACT:LAW,ECONOMICSANDPSYCHOLOGYINCONSUMERMARKETS(OxfordUniversityPress,2012).

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TheCESLappliesbothtechniques.Astotheanti‐deceptionrules,itplacesa

dutytoensurethatprecontractualrepresentationsarecorrect,incorporatingthem

intothecontracteveniftheyaredisclaimedinthestandardform.17Sincemerchants

lureconsumersbystatementsthatareattimesrosierthanthesubsequent

performance,andareoftenmorealluringthantheformalboilerplateterms,

consumersareentitledtorelyontheinformationgiven.Thisisthe“basisofthe

bargain”principleofwarrantylaw.18

MoreambitiousistheCESL’sapproachtomandateddisclosure.First,

consumercontractshavetoexplicitlydiscloseavarietyofterms,rangingfromthe

mostbasic(e.g,price,fees,paymentanddelivery,duration)tothemorespecialized

(e.g.,conditionsfortermination,post‐saleservices,digitalrightslimitations,rightto

withdraw).19Second,theCESLmandatesa“dutyoftransparency,”whichisachieved

inseveralways.Boilerplatetermshavetobecommunicated“inplainintelligible

language.”20Manyofthemhavetobeinwriting.21Anddraftershave“thedutyto

raiseawareness”totermsthatareparticularlyimportant—“amerereferenceto

theminthecontractdocument”isnotsufficient.22Aseparateandspecific

acknowledgementofassentisrequired,toensurethatinformationpassedthrough.

Thus,theconsumermustreceivenotonlythestandardformcontractinadurable

17CESL,Articles28,69.18UCC§2‐313.SeeDouglasBaird,PrecontractualDisclosureDutiesundertheCommonEuropeanSalesLaw(thisvolume).19CESL,Articles13‐18,20,22,27.20CESL,Article82,Articles13(3)(b),13(4)(b).21See,e.g.,CESL,Article18(foroff‐premisecontracts).22CESL,Article70.

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medium,butalsoaseparatedisclosureregardingtherighttowithdrawandits

limitations.23

Third,andmostinnovative,theveryfactthatCESLischosenasthegoverning

lawhastobedisclosed.Recognizingthatmanyconsumersareoblivioustolawyerly

matterslikechoiceoflaw,theRegulationstrivestoraiseawareness.Itrequires

merchantstouseauniformStandardInformationNotice—atwo‐pagepre‐drafted

form—thatconsumersmustreceiveinwriting,separatefromthemerchant’s

standardformcontract.Thisdisclosureexplainsandhighlightsthe“corerights”

guaranteedbyCESL,andprovidesaquick,two‐paragraphtutorialofSalesLaw.24Its

purposeisformidable:

“Consumersmustbefullyawareofthefactthattheyareagreeingtotheuseofruleswhicharedifferentfromthoseoftheirpre‐existingnationallaw.[...]TheuseoftheCommonEuropeanSalesLawshouldbeaninformedchoice.Thetradershould[...]provideinformationonitsnatureanditssalientfeatures.”25B.Discussion

TheCESL’santi‐deceptionrulesarequitestandard,adoptingfamiliar

safeguardsfortheintegrityofvoluntarydisclosures.Marketsthatrelyonvoluntary

communications,advertisements,andpromisesmustpenalizefraud—forthe

benefitofbothconsumersandhonestmerchants.WearemorecriticaloftheCESL’s

otherinformationdevice:itsapproachtomandatorydisclosure.

ThedisclosureparadigmadoptedbyCESLrepresentsanarchaicandfutile

regulationofinformation.Theseformatsofdisclosurehavenothelpedpeopleinthe

23CESL,Articles17(4),19(5),41(3).TheformthatthedisclosuremusttakeismandatedinAppendixes1and2.24Regulation,Articles8‐9andANNEXII.25Regulation,Preamble,Sections22‐23.

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past,arehighlyunlikelytodeliveranybenefit,imposeunnecessarycosts,andmight

evenhaveunintendedharms.

CESL’scontractdisclosuresarelikelytofailbecauseconsumerswillnotpay

attentiontothem.Peopledonotpayattentiontostandardforms,neitherlongnor

short,inplainlanguageorinlegalese,writtenororal,separatelysignedorunified

intoonedocument,handedoutinadvanceorexpost.Thefailureofconsumersto

attendtomandateddisclosurespackagedinpre‐draftedlanguage,likeonesCESL

utilizes,hasbeendocumentedthoroughly,inareaafterareaofconsumer

transactions,medical“informedconsent,”privacy,financialliteracy,andmuch

more.26

Manyfactorsaccountforthis“non‐readership”phenomenon.First,CESL

alonerequiresaheftyamountofdisclosures,fartootimeconsumingforshoppersto

investigateinthecourseofroutinesaletransactions.ThetypicalCESLconsumer

wouldtakehomea“packet”:thestandardtermsofthecontract(embellishedby

specifictermsthatmustbeincluded);theright‐to‐withdrawdisclosure;theactual

withdrawalform;andtheStandardInformationNotice.Thepacketmayactually

muchheftier,becauselawmakersregulatesector‐specificdisclosurestoalert

consumerstoparticularfeatures,risks,costs,andoptions,uniquetosomeproducts.

IntheU.S.forexample,therearesector‐specificdisclosuremandatesforsalesof

cars,appliances,food,drugs,timeshares,prepaidchargecards,burialproducts,art,

pets—andmany,many,more.Ifthesesaletransactionsinvolvecredit,orservice

elements,orinsurance,orimplicateprivacyissues,orenvironmentalissues,or26See,generally,OmriBen‐ShaharandCarlE.Schneider,MORETHANYOURWANTEDTOKNOW:THEFAILUREOFMANDATEDDISCLOSURE(PrincetonUniversityPress,2012).

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conflictsofinterests,additionallayersofseparatedisclosuresaremandated.Inthis

clutter,howlikelyareconsumers,eventhemosteducatedones,toreadthe

Appendix,theANNEX,oranyoftheCESL’spre‐printedboilerplate?Andthefactthat

peoplemightgettheCESL’spacketinrepeatedopportunitiesmightonlyrenderit

invisible,regardedasanotherroboticroutine—notasavitalinformationsource.

Theproblemswithdisclosureasaconsumerprotectiondevicerundeeper,

andthisisnottheplacetoanalyzetheirroots.Disclosuremandatesarewrittenso

oftenwithoutregardforpeople’scognitiveabilitiesandliteracylevels.They

disregardpeople’sreluctancetoreadtextsthatareunfamiliarandimposing.They

misconstruepeople’sobjectives,thinkingofconsumersasguzzlersoftechnical

information,notasusersofproducts.Theytellpeoplestuffaboutmattersthatmost

peoplehavenoexperiencewith,whichrequireatheoreticalframeworktoanalyze.

Peopledonotreadthedisclosuresbecausegoodthingswillrarelyemergefromthis

exercise.Itistime‐consuming,dull,largelyirrelevant,andwiththeloadof

disclaimersandwarningsitrarelyconveysanygoodnews,thusdrainingtheir

enthusiasmfromthetransaction.Besides,iftheyreadsomethingtheydislike,would

theyswitchtoanothermerchantwithitsownsetofdisclosures?

ThemandateddisclosureparadigmemployedbyCESLisnotonlyfutile,itis

costlyandharmful.Itiscostlybecauseitcompoundsthetransactionscosts,with

extraforms,signatures,clicks,andceremony,thusextendingthetimeandthewaste

involvedinstandardformexchange.Itisharmfulbecausethepresumptionof

“informedconsent”weakenstheeffectofotherprotections.Whenatermis

disclosed,itisnolonger“hidden.”Courtsthatarewillingtostrikehiddenterms

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whentheyarealsofoundtobeone‐sided,wouldholdbackifconsumersare

presumedtobe“fullyaware.”27

ThedisclosureparadigmadoptedbytheCESLislikelytofail.Thisdoesnot

implythatdisclosure,asaregulatorytool,canneverwork.Ifmandateddisclosureis

tohelpconsumers,anewapproachmustbeadopted–oneverydifferentfromthe

traditionalparadigmthattheCESLimplements,andwithfarlessambitiousgoals.

Effectiveinformationtoolscomeintwogeneralforms:

(1) Verysimple,aggregatemetricsthatconsumerscaneasilyunderstand

andcompare,liketotalcostofownershiporsatisfactionratings.

(2) Informationthatisdesignedandaimedtofacilitatetheworkof

sophisticatedintermediaries.

Ofcourse,theproperplaceforsuch“newparadigm”disclosuresisnotina

generalsaleslawliketheCESL,butratherinmarketspecificlawsandregulations.

III.RegulatingEntryandWithdrawal:FreedomfromContractA.TheLaw

Theregulationofentryintocontractandwithdrawalfromitarekey

consumerprotectiontechniques.Theyhelpconsumerschoosethedealstheywant

withoutartificialtimepressureandbias,andtheyallowconsumerstocorrectpoor

choiceshastilymade.Withgreaterfreedomfromcontract,merchantsarelessable

toafflictconsumerswithunwantedproductsandhiddenburdens.

27RobertA.Hilllman,OnlineBoilerplate:WouldMandatoryWebSiteDisclosureofe‐StandardTermsBackfire?,inBOILERPLATE(OmriBen‐Shahared.,2007);Ben‐ShaharandSchneider,TheFailureofMandatedDisclosure,U.OFPAL.REV.

17

TheCESLrulesrequireanactive,consciouschoicebyconsumersinorderto

enterintothecontract.Inaneraofstandardformcontractingcharacterizedby

consumerpassivity,inwhichsellersstufftheirpre‐draftedboilerplateintothe

packagesandconsumersarerarely,ifever,awareofthetermsoftheagreement,the

CESLenvisionsadifferentreality.Entryintoacontractwouldbecomeamoreactive,

deliberatedecisionbyconsumers.

First,wesaw,sellersmustobtaintheconsumer’sconsenttousetheCESL,

“byanexplicitstatementwhichisseparatefromthestatementindicatingthe

agreementtoconcludeacontract.”28Second,thesellermustprovidetheconsumer

witha“confirmationofthatagreementonadurablemedium.”29Inpractice,

consumerswilllikelyhavetosigntwoforms–thecontractandtheconsenttouse

theCESL.Inaddition,theCESLimposesrequirementsfordistancecontractsor

electroniccontracts.Theserequirementsinvolvespecificconfirmatorymemoranda

andspecificacknowledgmentofdisclosures.30Forexample,theconsumermust

explicitlyacknowledgethatheisrequiredtomakepayment(e.g.,byclickinga

buttonthatsays“Orderwithobligationtopay”).

TheCESLdoesnotfeatureaspecificruleregardingtheformationpractice

knownintheU.S.as“shrinkwrap”—sellersbindingconsumerstotermsthatare

packagedintheboxandwhichcanonlybeviewedafterthepurchase.Whilemost

U.S.courtsenforcesuch“termsinthebox,”Europeanjurisdictionsaremorehostile

28Regulation,Article8.29Id.30CESL,Article19,24‐25

18

tothem.31OurguessisthattheCESLdrafterswerelessworriedaboutthispractice,

despiteitbeingthemostperilousformofconsumerpassivity,becausethesafetynet

ofmandatoryarrangementsthateffectivelybansmostoftheoneroustermsthat

sellerscansneakin.

UndertheCESLconsumersenjoyarighttowithdrawfromdistanceandoff‐

premisescontracts,withina14‐dayperiod,atnocosttotheconsumer.32The

rationalefortherighttowithdrawisthatconsumersneedtoinspectandtryoutthe

productbeforedeciding.Assentisnotcompleteuntiltheconsumerhadthe

opportunitytoinspecttheproductanddecidenottowithdraw.

B.Discussion

Ensuringinformedconsenttotheofferedcontractisclearlyvaluable.It

makesconsumersbetteroffandthemarketmoreefficient.Butitisunlikelythatthe

techniqueusedbytheCESLtoaccomplishthisgoalwouldhavethedesirableeffect,

anditmightimposeundesirablecosts.Theentryruleswillmerelyincrease

transactioncosts,withoutactuallyimprovingthequalityoftheexpressedconsent.

Andthewithdrawalrulescouldimposeanunfaircrosssubsidy,hurtingtheweakest

echelonsofconsumers.

Theconsciouschoicerulesamounttoconsumerssigningmoreforms.For

example,consumerswillaffirmthattheyagreetousetheCESL.Butwilltheyread

theform?And,iftheyreadit,willtheyunderstandhowitdiffersfromnationallaw

tobeaffirmativelychoosingitasafeatureoftheirtransaction?Howmany

31FortheU.S.–seeHillv.Gateway2000,Inc.,105F.3d1147(7thCir.1997);ForEurope–see[CITE]32CESL,Articles40,42.

19

consumerswillactuallyreadthetedioustermsinthewrittenaffirmationorremote

contractsandreevaluatetheirchoice?Itistruethatoneadditionalform,one

additionalsignature,oneadditionalclick—allthesearenottoocostlyandwillnot

slowdownthewheelsofcommerce.Butsuchcostlessmechanicalgesturesarenot

verybeneficialeither.IftheCESLweretruetoits“consciouschoice”rationale,it

wouldrequiremorethoroughandmeaningfulproceduresthatwouldguarantee

morethananappearanceofchoice.Those,however,wouldimposeasignificant

transactioncost.

Whatabouttherighttowithdraw?Thisright,likeotherconsumer

protections,providesarealbenefit.Theabilitytoinspecttheproductandtryitout

foraperiodoftime,beforemakingafinalcommitmenttopurchase,isvaluable,

especiallyifproductsareeasilyreturnable.Arighttowithdrawmayalsobe

valuabletotheseller,ifitincreasesdemandfortheseller’sproducts.Consumers

wouldbemorelikelytomakeremotepurchasesiftheycanreturnaproductthat

turnsouttobelessattractivethanitinitiallyappeared.33

But,alongsidethesebenefits,arighttowithdrawentailspotentiallylarge

costs,especiallywhenitisabusedbyasubgroupofopportunisticconsumers.

Returneditemsdepreciateinvalue,sometimesubstantially.Thiscostwillbeborn,

atleastinpart,byconsumers,assellersanticipatethelikelihoodofreturnsand

increasepricesaccordingly.Theeffectissimilartothatofanyothermandatory

qualityfeature.

33SeeOmriBen‐ShaharandEricPosner,TheRighttoWithdrawinContractLaw,40J.LegalStud.115(2011);HorstEidenmuller,WhyWithdrawalRights?,7EuropeanRev.ContractLaw1(2011).

20

ThemainproblemwiththeCESL’srighttowithdrawruleisitsmandatory

nature.Intheabsenceofamandatoryduty,primeretailersroutinelyofferarightto

withdraw,whilelow‐endretailersdonot.EvenWalmartoffersa90‐dayfreereturns

policy.Avoluntarilydesignedrighttowithdrawthusenablessellerstosignal

superiorqualityandreliability.Amandatoryrighttowithdrawdestroysthis

selectioneffect.

Inaddition,amandatoryrighttowithdrawreducessellers’abilitytooffer

differentiatedprices.Someconsumerspurchaseextendedreturnperiods,while

otherconsumerswaivetherighttoreturntheproductaltogetherinexchangefora

lowerprice.(Thinkofthelattergroupsaspassengersbuyingcheapnonrefundable

airfaresinsteadofthecostlierbutrefundablefares.)Forthisgroup,therightto

purchasecheapproductsisvaluedmorethantherighttowithdraw.TheCESL’s

mandatoryrighttowithdrawwillforcetheseconsumerstopayforafeaturethat

theydonotwant.

Wecanthinkofatleasttwocategoriesofconsumersthatmightbehurtby

thismandate.First,thepoorestconsumers,whoprefertoshopforlow‐endproducts

atlow‐endprices,willbedeprivedofsomeoftheirdesiredsavings.Itisadubious

protection—inthenameof“accessjustice”—toforcethepoortospendmoneyon

qualityfeaturesthatapaternalisticlawmakerselectedforthem,onlytopricesome

ofthemoutofthemarket.Second,consumerswhoaresystematicallylesslikelyto

invoketherighttowithdraw(perhapsbecausetheyarefamiliarwiththeproduct,

orareaversetoreversals,orannoyedbythereturneffort),willhavetopayfora

21

featuretheyareunlikelytoenjoy,therebycross‐subsidizingtheheavierusersofthis

feature.

Aswithothermandatoryprovisions,arighttowithdrawmakessenseonlyif

itcorrectsacostlymarketfailure.Suchamarketfailurewouldoccur,forexample,if

consumersfailtoappreciatetheimportanceofarighttowithdraw.34These

imperfectlyrationalconsumerswouldnotdemandarighttowithdrawandsellers

wouldnotofferit.Underthesecircumstances,thepricedifferentiationandsignaling

benefitsofavoluntaryrighttowithdrawwouldalsogoaway.Butisthisreallythe

situation?Areconsumersunmindfultosellers’returnpolicies?Aretheystuckwith

productsthattheycannotreturn?Theprevalenceofvoluntaryreturnpolicies,

offeredbymanystores,chains,ande‐retailers,suggeststhatwithdrawalrightsarea

salientqualityfeature.Theredoesnotseemtobeamarketfailure.And,accordingly,

regulatoryinterventionseemsunnecessaryandpotentiallydisruptive.

IV.SupplementationandInterpretation

A.TheLaw

Contracts,includinglengthyfineprintconsumercontracts,arenecessarily

incomplete.Accordingly,supplementation(orgap‐filling)andinterpretationare

necessary.Tofurtheradvanceitsconsumerprotectionstrategy,theCESLadoptsa

pro‐consumersetofdefaultrulesandinterpretationapproach.

Becausemanyofthepro‐consumerarrangementsintheCESLare

mandatory,thereisalesserrolefordefaultrules.Still,theCESLincludesseveral

34SeeEidenmueller,supranote33,whoidentifiesthetheoreticaljustificationsforwithdrawalrightsandconcludesthattheyoughttobeoptionalinthedistancesellingcontextbutmandatoryincaseslikedoorstepsalesthatinvolvedecisionbiasesthatareeitherpreexistingorheightenedbysellers.

22

pro‐consumergap‐fillers.Recognizing,however,thatstandarddefaultrulesare

easilydisclaimedbysellers,theCESLbolstersitsdefaultprovisionsbymakingthem

“sticky,”—moredifficultfordrafterstounilaterallyalter.Forexample,thedefault

ruleof“noadditionalpayments”—thatis,nohiddenremunerationbeyondthemain

contractualprice—canbealtered,butanyagreementtoadditionalpayments

requiresaseparateexpressconsentbytheconsumer.Apassive,unnoticedchecklist

ofhiddenfeeswillnotsuffice.35

TheCESL’srulesonconformityprovidemoreexamplesofpro‐consumer,

stickydefaults.Theystipulateconformityrequirements,includingfitnessfor

ordinaryandparticularpurposes,butmaintainthatderogationfromthese

standards“tothedetrimentoftheconsumerisvalidonlyif,atthetimeofthe

conclusionofthecontract,theconsumerknewofthespecificconditionofthegoods

orthedigitalcontentandacceptedthegoodsorthedigitalcontentasbeingin

conformitywiththecontractwhenconcludingit.”Again,opt‐outisallowedonly

aftertheconsumerexpressesconscious,informedconsent.36

Contracttermsareoftenambiguousandrequireinterpretation.TheCESL

establishesthatambiguoustermsinconsumercontractswillbeinterpretedina

pro‐consumerway.“Wherethereisdoubtaboutthemeaningofacontracttermina

contractbetweenatraderandaconsumer,theinterpretationmostfavourableto

theconsumershallprevailunlessthetermwassuppliedbytheconsumer.”37Thisis

reinforcedbythefamiliarcontraproferentemprinciple—ambiguoustermsthat

35CESL,Article71.36CESL,Articles99,100.Contrasttheseopt‐outrulewiththemorelenientopt‐outrulesforbusiness‐to‐businesscontractsinCESL,Article104.37CESL,Article64.

23

werenotindividuallynegotiatedshouldbeinterpretedagainstthepartywho

suppliedtheseterms.38

B.Discussion

Inconsumercontracts,pro‐consumerdefaultshaveonlylimitedeffect

becausesellerscaneasilyreplacethemwithstandardformterms,withoutincurring

anyaddedtransactioncosts,andoftenwithoutevenalertingpeopleandraising

suspicion.Mindfulofthisproblem,theCESLimposesspecialconsentrequirements.

Weareconcerned,however,thattheseadditionalrequirementswillonlyincrease

transactioncosts,withoutsubstantiallyincreasinginformedconsentandwithout

reducingthelikelihoodofself‐servingopt‐out.

Considerthe“noadditionalpayments”default.Opt‐outrequiresexplicit

consenttotheadditionalpaymentterm.Buthowdifficultwoulditbefortheseller

toobtainsuchexplicitconsent?Theconsumerwouldsimplyneedtosignhername

onyetanotherdottedlineor,perhaps,evenonaseparateform.Similarly,opting‐

outoftheconformitydefaultsispermittedonlyiftheconsumerknewofthenon‐

conformityatthetimeofcontracting.Inessence,theCESLimposesanother

disclosurerequirementasaconditionforeffectiveopt‐out.Aswehaveargued,these

multi‐layerdisclosuresarenoteffective,andareallthemorefutileastheypileup.

Inchoosingtoenacttheseprovisionsasdefault,ratherthanmandatoryrules,

theCESLsurelyintendedtopreservesomeroomforfreedomofcontract,butto

safeguardagainstmindlessoptouts.Itthusrequiresthatconsumers“know”and

payspecialattentiontoareversalofthedefaults.Butthelaw’ssoledevicefor

38CESL,Article65.

24

alertingpeopleandinformingthemismandateddisclosure,andsotheregulationof

optoutsismerelyanotherdisclosurerequirement.Thisisnotapre‐drafted

mandateddisclosure;here,courtswoulddetermineexpostfactowhetherthe

disclosureswereeffectiveininformingtheopt‐outers,andifnottheycouldrescind

ormodifytheconsentsorreinstitutethedefaultterm.Tothosewhobelievethat

lengthyprecontractualdisclosuresareeffectiveinprotectingconsumers,this“sticky

default”techniquehasobviousappeal.

ButaswearguedinSectionIIabove,suchbeliefsbumpagainstthesobering

realityofineffectivedisclosures.Sellerswouldfigureoutthedisclosuretemplates

thatareregardedbycourtsasreasonableandusethemtodirecttheirclientsaway

fromthepro‐consumerdefaultrules.Aslongasitonlytakesanotherstackofpre‐

printedforms—howeverreasonableorcomprehensible—tovalidatetheopt‐out,

sellers’preferredtermswouldprevail.

Thisscenario,inwhichopt‐outsbecomejustanothermeaninglessdisclosure,

isunfortunatelyexceedinglycommon.Forexample,U.S.saleslaw–theUniform

CommercialCode(UCC)–providesapro‐buyerwarrantyofmerchantabilityalong

withgenerousremedies.And,liketheCESL,theUCCrequiresthatoptoutsbe

conspicuous.39Theresult:practicallyeveryconsumercontractcomeswith

boilerplatelanguagedisclaimingthedefaultwarranty.TheALLCAPSfontofthese

terms,whichAmericanlawdeemssufficienttorenderthedisclosureconspicuous,is

anartifactofthisregime.Justincase,though,merchantssometimesrequirea

separatesignatureor“click”tosignifythebuyer’s“meaningful”assenttoapro‐39SeeUCC§§2‐314&2‐702forthedefaultrulesonwarrantyandremedies;seeUCC§2‐316fortheconspicuousdisclaimerrule.

25

sellerterm.40Awell‐intended,pro‐consumer,defaultschemeistrumpedbythe

disclosureescapevalve.

TheCESLmandatetointerpretambiguoustermsinfavorofconsumers

wouldforcesellerstowriteclearer,moreexplicit,longerformcontracts.Thecostto

sellersofsuchlengthydraftingisprobablysmall.Butsinceconsumersdonotread

thesecontractsanyway,thebenefitswillalsobeinsignificant.Thisisnottoargue

thatcontraproferentemisalwaysundesirable.Ininsurancecontracts,forexample,

theambiguouslanguagecansometimesapplytotheveryessenceofthepolicy.In

suchcontracts,thereisno“product”otherthantheinsurancepolicy—thatis,the

legalterms—andthuspolicyholdershaveaffirmativeexpectationsovertheseterms.

Thepro‐consumerconstructionrestorestheintegrityofthebargain.41Inconsumer

contracts,bycontrast,thepro‐consumerconstructionappliestothefineprint,

whichisotherwisebeyondtheaffirmativeexpectationofmostconsumers.There,a

legalpolicythatinducessellerstodraftthesetermswithhypermeticulouscarewill

notgenerateanymeaningfulbenefit.

V.ConsumerProtectionversusHarmonization

OurreviewandanalysisofthefourregulatorytechniquesusedbytheCESL

suggeststhatmanyCESLprovisionsarebothinefficientandlikelytoharm

consumers,despitetheirconsumerprotectionpurpose.Wenowexplorethe

40Cf.DouglasG.Baird,TheBoilerplatePuzzle,104U.MICH.L.REV.933(2006)(discussingoptoutsofpropertyrights);TheodoreEisenberg&GeoffreyMiller,TheRoleofOptOutsandObjectorsinClassActionLitigation:TheoreticalandEmpiricalIssues,57VAND.L.REV.1529(discussingoptoutsofclassactionrights).[CITEevidenceofdescribedopt‐outresponsestoUCC.]41SeeC&JFertilizer,Inc.v.AlliedMutualIns.Co.,227N.W.2d169(Iowa1975).

26

implicationsofthisassessmentfortheabilityoftheCESLtoachieveanotheroneof

itsdeclaredgoals–theharmonizationofEuropeansaleslaw.

Lawthatissuboptimallydesignedcannonethelessbecomeuniform.IftheEU

imposedtheCESLonallsalestransactions,thenharmonizationwouldbeachieved,

regardlessofwhethertheCESLpromotesefficiencyorprotectsconsumers.Butthe

CESLisanoptionallaw.ToassesstheCESL'sharmonizationpotential,wemust

thereforeexaminetheincentivesofsellersandbuyerstochoosetheCESL.

AssumeinitiallythatsellersandbuyerswillchoosetheCESLonlyifit

increasesthecontractualsurplus,ascomparedtothealternative–therelevant

nationallaw.Intheprevioussections,wehaveidentifiedsubstantialinefficienciesin

theCESL.ButwehavesaidnothingabouttherelativeefficiencyoftheCESLas

comparedtothenationallawsofdifferentEuropeanstates.Inprinciple,theCESL

dividesEuropeinto(1)stateswithsaleslawsthataremoreefficientthantheCESL,

and(2)stateswithsaleslawsthatarelessefficientthantheCESL.Sellersand

buyerswillonlyoptintotheCESLif,absentsuchopt‐in,theyexpecttobesubjectto

thelawsofaGroup2state.42IfmoststatesareinGroup2,thentheCESLshouldbe

abletoachievesubstantialharmonizationand,atthesametime,increasethe

efficiencyofmanysalestransactions.Ontheotherhand,ifmoststatesareinGroup

1,thentheeffectoftheCESL–bothitsharmonizationeffectanditsefficiencyeffect

–willbelimited.

42ThedivisionintoGroup1andGroup2statesisoverlysimplistic.ItcouldwellbethatthesaleslawsofStateAaresuperiortotheCESLwithrespecttoonecategoryoftransactionsbutinferiortotheCESLwithrespecttoanothercategoryoftransactions.

27

Itisalsopossiblethatduetoconsumers’ignoranceandpassivity,thechoice

tooptintotheCESLwouldreflect,notanincreasedtotalsurplusfromthe

transaction,butratherincreaseprofitstosellers.Ifsellershaveunfetteredcontrol

ofchoiceoflaw,andifconsumersremainignorantaboutthisaspect,sellerswill

choosetheCESLonlyifitbenefitsthem,evenwhenthischoiceisoverallwelfare‐

reducing.

ManyoftheCESLprovisionsthatwesurveyedintheprevioussectionsare

expectedtoreducesellers'profits.Consider,forexample,someofthemandatory

termsdiscussedinSectionI:Consumersdonothavetonotifysellersofnon‐

conformityinordertoinvokeremedies;Consumersarefreetochoosebetween

repairandreplacement;Asellermustgivetheconsumera30‐daymandatorygrace

periodiftheconsumerisdelayedinperformance.Again,theCESLdividesEurope

intotwogroups:(1)stateswithsaleslawsthataremorepro‐sellerthantheCESL,

and(2)stateswithsaleslawsthatarelesspro‐sellerthantheCESL.Sellerswillonly

optintotheCESLif,absentsuchopt‐in,theyexpecttobesubjecttothelawsofa

Group2state.IfmoststatesareinGroup2,thentheCESLshouldbeabletoachieve

substantialharmonization.IfmoststatesareinGroup1,thentheCESLwillhavea

limitedharmonizationeffect.

ThisdiscussionsuggestthatCESLcanachieveharmonizationonlyifthelaws

ofmanymemberstatesareinferiorfromeithertheperspectiveofoverallefficiency

orfromtheperspectiveofsellers,andeventhenharmonizationwillbeonly

partiallyaccomplished.Inanimportantway,theCESL’stwogoalsareatwarwith

eachother.TheCESLseekstoharmonize—namely,tomakeavailable“aself

28

standinguniformsetofcontractlawrules”,butitisalsoambitiouswithrespectto

thecontentofsuchuniformrules—“toprotectconsumers.”43Theproblemisthat

thetwogoalsareinconsistent.ThemoretheCESLpullsthesecondleverof

consumerprotection,andsetsitbeyondthelevelsexistinginmostmemberstates,

thelessoftenitwouldbechosenandlessuniformitywouldensue.Andviceversa.

Thus,longastheconsumerprotectionprongiseitherinefficientorprofitreducing

tosellers,thetradeoffisinevitable.Harmonizationcanbeachieved—andmayeven

justifymandatorymetricsthatsimplifyproductcomparison—butitcannotatthe

sametimeinstituteredistributivepoliciesthroughanopt‐inscheme.

Conclusion

ManyoftheprotectionstheCESLpurportstoconferuponconsumersareof

littleornovalue.Thedisclosurerequirements,themeaningfulassent,andthepro‐

consumerdefaultsrules—allcreatetheappearanceofconsumerprotectionwithout

muchsubstance.Ifanything,theyincreasetransactionscosts.Otherprotectionsin

theCESLareinefficientorregressive.Someofthemandatoryarrangementsandthe

righttowithdrawareexamplesforprotectionsthathaveactualeffecton

transactions,butapotentiallyundesirableeffect.

TheCESLisanoptionalinstrument.Sellerswouldresistchoosinggoverning

lawthatreducesthevalueofthetransaction,orwhichpricesoutsomecustomers.

Accordingly,sellerswilloptintotheCESLonlytoavoidnationallawthatiseven

morerestrictiveandinefficient.Thislimitedopt‐intranslatesintolimited

43Regulation,p.4.

29

harmonization.TwomaingoalsoftheCESL–consumerprotectionand

harmonization–areunlikelytobeachieved.