Will Asian Mercantilism Meet its Waterloo? Martin Wolf
Transcript of Will Asian Mercantilism Meet its Waterloo? Martin Wolf
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.