Who Is a Consumer?
Consumer can be defined as a term that signifies a person who uses various goods and services for his or her own personal use. There are a lot of areas of the law that contain this term and the benign definition of the word has been disputed in many courts of law. There are different rules for different jurisdictions and these definitions change based on social and economic conditions. Until recently, the definition of the term consumer was to mean a natural person purchasing a good for his or her own personal use and not resell. This basic definition is uniform in the UK, Canada and Australia. On the European level, this term appears in many directives as well. Although the term consumer is uniform , interpretation differs based on jurisdiction. In Canada, the courts allow for the term to be broadened to allow for certain associated persons to be covered by the term and also judgments regarding whether an item purchased is for personal or commercial purposes. The UK allows for a broad definition of the term as well. The UK has even dealt with the argument of whether a corporation can ever be a consumer. Most of the European countries allow for a uniform interpretation that does not treat business consumers more harshly than personal consumers. The principle of the European Union does not allow for a differentiation between business and personal consumers.
Lessons from a Consumer and Business Perspective
Discerning Between a Consumer and a Business Entity: The Legal Implications of Being a Consumer
A significant difference between consumers and business entities is that consumers have the protection of consumer laws that do not apply to businesses. Violations of these consumer laws can lead to civil liability and/or criminal liability. For example, violation of various consumer laws in California allows enforcement by both the District Attorney’s office and private individuals. The private cause of action includes the ability to recover statutory penalties as well as attorneys fees. In the case of the Unfair Competition Law, private individuals are allowed to recover restitution (which can sometimes be seen as duplicative) as well as punitive damages. A private individual may also recover up to $5,000 for each consumer bar violation, such as improperly providing someone’s credit report on the Internet.
Criminal liability can include jail time and/or other punishments as well. In California, vendors who violate credit reporting laws face up to a year in jail. In addition, consumers generally have rights that business entities do not have as a matter of law. A consumer’s rights cannot be waived as much as a business entity’s rights. For example, if a consumer has standing to bring a claim under California’s Song Beverly Credit Card Act, a violation of that law will give rise to civil liability. However, a waiver of rights under that law is unenforceable. Thus even if a consumer expressly waives his or her rights under the law, the consumer can still recover. On the other hand, a business entity can waive rights under a contract or another legal instrument but once waived, will be enforced.
What Rights and Protections Do Consumers Have?
Consumer rights and protections will vary on a jurisdictional basis, but there are generally legal protections for consumers wherever a consumer transaction occurs. The General Terms and Conditions must be understood and established on the outset to protect both parties in a transaction, as the law generally implies contracts into existence by consumers’ acceptance of general terms and conditions through his or her performance of an act signifying his or her consent. Still, general terms and conditions in a consumer’s agreement may not infringe upon consumers’ rights and protections that are prohibited by law. Therefore, general terms and conditions are still subject to statutory interpretation of the applicable laws and limitations on a general contractual basis.
Under some statutory provisions, certain consumer transaction disclaimers contained in general terms and conditions will be deemed "unconscionable" or unconscionability is determined when the disclaimer appears to affect or allow a "clearly allocated" risk between the parties. If it is determined at any phase of an actual or contemplated dispute that the consumer’s general terms and conditions in effect establishes an incorrect allocation of risk between the parties, the risk allocated may be allowed to materialize; however, it is unlikely to be enforceable as to the costs or consequences of said risk. Unconscionability by its nature is a statutory interpretation of "good faith" and fair dealing in the formation and consummation of any contract that relates to unacceptable risks or inequitable advantages to the parties. In addition, it is unlawful to pursue unreasonable fees or costs against a consumer where the consumer transaction contains disclaimers that are unconscionable. Such practice is deemed a fraud and unfair trade practice by law. Misrepresentation of products, goods and services is another aspect of consumer rights and protections. Misrepresentation of a product, good or services impacts consumer rights and protections afforded to the consumer under law by his or her application of specific state laws. Deceptive practices laws are one type of consumer protection statute that are often referenced. For example, the Texas Deceptive Trade Practices – Consumer Protection Act (the "Act"), as amended, defines deceptive trade acts and practices that are prohibited by law and declares them to be unlawful acts. Aggressive advertising by companies concerning their products or services does not create in any way an affirmative legal defense to a consumer if advertising was misleading, and there was also an express or implied warranty or guarantee that products or services offered were actually and effectively useful to the consumer under these circumstances. Thus, statutory laws are in place to prohibit these actions and practices on a nationwide basis. Aggressive non-consumer sales and marketing efforts, such as aggressive or deceptive advertising by companies concerning their products or services that are non-meritorious, and misrepresenting products or services offered will create liability under law for companies that pursue such sales and marketing strategies. Such acts are considered fraud and an unfair trade practice under many statutory provisions.
The Work of Consumer Protection Agencies
Many countries have established governmental organizations and agencies which oversee the implementation of consumer protection regulations and laws. Although these agencies vary from country to country, they all play an important role in carrying out the principles of consumer protection. Not only are these agencies responsible for convincing consumers of their rights and advising the consumers of those rights, but they also aid in the enforcement of these rights. In the United States, for example, Federal Trade Commission has the more powerful consumer protection agencies. State governments also have their own consumer protection agencies, in addition to many universities and other organizations that have been created by Congress to protect consumers. The U.S. Department of Consumer Affairs is charged with enforcing statutes related to consumer protection. Many states also have a local department of consumer affairs, whose job is to enforce statutes related to consumer protection. Legal mechanisms in other countries, such as the Australian Competition and Consumer Commission, also play an important role in implementing the principles of consumer protection. The ACCC promotes fair trade in the commercial sector in order to provide consumers with a fair, competitive and informed marketplace. The ACCC enforces the Trade Practices Act. It also focuses on helping consumers with specific issues and providing information to them. By helping consumers take action against people or businesses who violate consumer laws, the ACCC helps empower consumers to take responsibility for their rights. The goal of the ACCC is to look out for consumer interests. In Australia, the ACCC is improving the ability of consumers to be treated fairly and to secure what they have paid for. It sets rules in key areas so providers don’t gain an unfair advantage, and it is making sure businesses follow the rules. In Canada, the Canadian Competition Bureau, a part of Industry Canada, was established to help ensure that Canadian consumers are protected wherever they shop. The Bureau is an independent law enforcement agency and works in cooperation with other agencies at the federal, provincial, and municipal levels and with competition authorities in other countries. In the United Kingdom, the Office of Fair Trading, which is now the UK’s consumer and competition authority, was created to safeguard consumer interests by encouraging fair business practice. The OFT aims to make markets work well for consumers and competitive markets work well for consumers. Undoubtedly, most countries have established consumer protection agencies to aid in the implementation of consumer protection principles.
Common Legal Areas of Dispute Involving the Consumer
Consumers may be involved in a wide variety of legal disputes, with such disputes typically arising from some type of transaction involving a good or service.
A warranty or guarantee is a common type of term used in a consumer purchase, commonly giving rise to disputes regarding the expectation that certain property will perform in a certain manner. This type of transaction may commonly occur in the sale of real estate or the sale of goods, such as in the sale of an automobile in which a consumer purchased an extended service plan or extended warranty. Thus, if a consumer learns that property is not performing in accordance with a warranty or agreement, litigation may arise.
False advertising or other marketing schemes have been a common source of consumer related litigation, particularly for the products sold during the real estate boom. For example, a so called "no money down" plan for purchasing real estate is a common cause of litigation, with a consumer believing he or she has paid no out of pocket funds only to learn later of hidden costs or various fees for which they must pay. Other examples of false advertising may involve a product offering made by a consumer, such as a product offered at a discounted price for which the consumer paid more than was advertised . In more extreme cases, a consumer may invest in a Ponzi or other scheme under which a trader or broker pretends to invest the consumer’s money and post a high return creating false tax documents that lead the unsuspecting consumer to believe everything is above board.
Product liability claims are another common type of claim involving consumers. Interestingly, an individual or consumer can be a product liability plaintiff despite the fact he or she never purchased the product. As long as the plaintiff has been harmed by the product, he or she can be a product liability plaintiff. Product liability actions depend on the theory upon which a consumer brings a claim. Notably, there are three types of claims that can be brought in a product liability case including: (1) strict liability (or simply negligence argued under a strict liability theory); (2) negligence; or (3) breach of warranty. In short, a warranty or guarantee may exist as to the materials on a product. Or, simply put, a product must be free from defects in materials, which relates to the quality of the components used to manufacture a consumer good. Or, a product must be free from defects in design, which relates to the way a product is intended for use. Once a product contains a defect in materials or design that causes injury to a consumer, or even to cause harm or injury to third parties based on the use of the product, a consumer who has suffered an injury can sue.
Emerging Trends in Consumer Definition
The advent of the digital marketplace has given rise to services such as online marketplaces that further complicate what it means to be a consumer. Classically, the law protected consumers against transactions where they had less bargaining power and greater information disadvantages vis-à-vis the other party. However, consumers today frequently have access to more information than the seller and a marketplace that generates many service providers who have equal or better information to the consumer. With these services, there is often a network of service providers and consumers, and it is difficult to determine when a transaction has occurred, who the merchant is, and what the contract terms are, if any.
Additionally, no transaction ever necessarily occurs as a result of marketplace services. This morphs even further with aggregators of multiple marketplaces. The protections that apply to a single transaction between two parties may need to evolve into something that considers networked transactions and also considers the fact that no transaction may occur at all. Finally, modern marketplaces shift risk from the party providing goods and services to the consumer, who is now forced to assume an extremely high level of due diligence prior to entering into a transaction. This shift in risk may effect the determination of a consumer and whether they could reasonably have been expected to otherwise seek other means of transacting commerce, thereby erasing any need for consumer protections at all. It will be interesting to see how the law will adapt.
Global Perspectives on Consumer Laws
Beyond the EU, jurisdictions around the world adopt different definitions of a consumer based on local customs and legal traditions. For example, some categorise consumers as domestic, or household consumers, whereas others go so far as to protect small and medium-sized enterprises (SMEs) against any form of abuse. Specifically, certain states want to strike a balance between consumer protection and business interests by protecting SMEs in their commercial relationships with larger entities.
The United Nations Convention on Contracts for the International Sale of Goods (Vienna 1980) (CISG) affords some consumer protection, as it contains provisions that would apply to a consumer entering a contract with an international supplier. Certain acts are excluded from the Convention in some jurisdictions, mainly to protect SMEs. For example, Article 2(a) excludes goods sold for "personal, family, or household use" from the provisions of CISG. Article 2(b) excludes those with "outstanding debts" or "liabilities" where the debtors are at least two years overdue. Article 2(e) also excludes sales of goods that are to be manufactured, processed or custom-made by the supplier as long as the supplier does not take the action at the request of the buyer and the buyer "did not intend to make them available to third parties." The applicability of these exceptions will be in accordance with each jurisdiction’s approach to the definition of a consumer .
In addition to the CISG, the UNCITRAL model provisions on electronic commerce are intended to assist in establishing a global framework for electronic commerce. They contain rules to facilitate the use of electronic commerce, covering electronic contracts, expert determination and arbitration, cryptography and the exchange of data. A controversial issue within the provisions is whether they should apply to consumer contracts. Again, different jurisdictions have taken different approaches to the interpretation of consumer contracts.
Within the EU, there are also rules in place. Directive 2011/83/EU concerning the provision of consumers rights applies to both domestic and international contracts. Article 1(b) of the Directive distinguishes between a "business" and a "consumer" contract and defines "consumer" as someone who is acting for a purpose that is outside of its trade, business or profession. Article 1(b) aims to include consumers who are acting for purposes related to trade, business, and profession. The Directive also establishes a general rules on the interpretation of the word "consumer" in terms of international trade.
Some jurisdictions do not define a consumer at all, yet tend to interpret persons protected under their jurisdictions as someone who can be described in substance as a consumer.