Consumers and Services of General Interest
Prof. Dr. Peter Rott[*]
A. Introduction
Services of general interest are relative newcomers in the field of consumer law.[1] The notion of services of general interest circumscribes – at least – those network services that were originally provided by the State, in particular telecommunications services, postal services and the supply with electricity, gas and water.[2] The user of such services used to be protected by public law principles such as the principles of equality, proportionality and of course the principle of compulsory provision of service, although it must be said that these rules did not always offer a high level of protection at all. Since the 1980s, however, the EC has pressed for the liberalisation of these markets, and many formerly state-owned companies were privatised. Their relationship with their customers was thereby transferred from the public law sphere into private law.
Consequently, services of general interest have also become an issue of consumer law. They form part of the Consumer Policy Strategies 2002-2006 and 2007-2013 where they have been identified as one field to focus activities on.[3] Indeed, there can be little doubt that the legal position of consumers vis-à-vis the provider of services of general economic interest has traditionally been particularly week in many EC Member States,[4] and that consumer protection in this field is therefore an issue of some urgency. Misleading advertising for mobile phone tariffs, unfair contract terms in the mobile phone sector, delayed trains, high electricity and gas prices, incorrect bills, and the threat of interrupted supply in the case of the consumer's refusal to pay such incorrect bills are some of the most common consumer complaints. Some of these issues, however, are well covered by existing EC consumer law, and it would merely be necessary to disallow national privileges for providers of certain services of general interest.[5]
Therefore, the question that I will discuss in this paper is not on the future of consumer law in the field of services of general interest but rather: Should consumer law be the future of the law on services of general interest? Is consumer law the appropriate approach, or are the established protective instruments that EC consumer law has developed over time and is pursuing now unsuited for the field of services of general interest?
B. The regulatory approach of EC consumer law
Regulation of consumer law at EC level has often – and perhaps somewhat oversimplifying - be said to be directed at the middle-class consumer who is reasonably well educated,[6] and there appear to be some truth to this when it comes to the law of unfair commercial practices and also consumer contract law.
The law of unfair commercial practices focuses on the so-called average consumer,[7] a frequently criticised concept that was first applied by the ECJ[8] and that ensures that not any misunderstanding on the consumer side will render a marketing practice unlawful.
In consumer contract law, the so-called information paradigm prevails.[9] It is suggested that the consumer is in a weaker position than the trader because the consumer has less information available. Thus, he can be "lifted" on a par with the trader through the provision of information. At the same time, information obligations are an instrument to make the different offers of different sellers or service providers more transparent and easier to compare. The EC therefore uses information obligations, and in fact the consumers as such, as tools to foster competition on the internal market. Information obligations have thus become the most prominent instrument in EC consumer contract law. They are supported by the right of withdrawal that offers the consumer the opportunity to reconsider a contract within a certain period of time. EC Directives that primarily use information obligations, frequently but not necessarily in combination with the right to withdrawal, are the Doorstep Selling Directive 85/577/EEC,[10] the Consumer Credit Directive 87/102/EEC,[11] the Timesharing Directive 94/47/EC[12] and the Distance Selling Directives 97/7/EC[13] and 2002/65/EC.[14] Even the Consumer Sales Directive 1999/44/EC[15] that grants the consumer rights once goods are not in the conformity with the contract, separates the informed average consumer from the uninformed consumer in a certain way. Its Art. 2 (2) lit. d) on the relevance of public statements uses a "reasonable consumer expectations" test that very much resembles the average consumer test of the law of unfair commercial practices.[16] Obviously, regulation that purely relies on information obligations and the right to withdrawal would leave those consumers alone who are less educated and insensitive to information, and who therefore have no reason to reconsider a contract after a second look at it either.
In contrast, EC law makes very little use of prohibitions. It is probably fair to say that only the Unfair Contract Terms Directive 93/13/EEC[17] fully protects the uninformed and uneducated consumer by declaring unfair terms not binding, no matter whether or not the consumer was informed on their content.[18] Recently, a prohibition of the doorstep selling of consumer credit was discussed[19] but dismissed. Such prohibitions were traditionally left in the competence of the Member States, and Member States have introduced many such prohibitions where they regarded certain practices as dangerous, for example in the field of doorstep selling law.[20]
The most recent trend in EC consumer law is the trend towards total harmonisation, or maximum harmonisation. The Commission now argues that minimum harmonisation, with its leeway left to the Member States to adopt or maintain more stringent consumer protection provisions, is responsible for the low proportion of cross-border consumer contracts.[21] Recent Directives such as Directive 2002/65/EC on the distance marketing of financial services and the Unfair Commercial Practices Directive 2005/29/EC therefore follow the maximum harmonisation approach to the extent to which agreement could be achieved amongst the Member States, and so do pending proposals, in particular the proposal for a new Consumer Credit Directive. Notably, and unsurprisingly, these Directives emphasise the information paradigm. However, since they contain total harmonisation rules, they disallow more stringent national rules,[22] and in particular prohibitions of certain practices in the regulated field of law.[23] This is particular problematic since it must be doubted that the "high level of consumer protection" that Art. 95 (3) EC requires is reflected in the most recent consumer law proposals of the Commission. The proposal for a new Consumer Credit Directive is particularly weak in this respect.[24]
National prohibitions in fields that merely have undergone minimum harmonisation until now have also come under pressure of internal market law, in particular since the landmark decision of the ECJ in the German tobacco case.[25] Since this judgment was made, some authors have claimed that the EC was only competent to regulate consumer law for the benefit of the internal market, and they have concluded that maximum harmonisation and the reduction of national prohibitions are necessary to improve the functioning of the internal market.[26] For example, in A-Punkt Schmuckhandel, the Austrian prohibition to sell silverware at the doorstep was challenged before the ECJ, and the Commission has supported the view that this prohibition was an impediment to the free movement of goods. Although the ECJ did not make a final decision on this issue but left it for the national court to decide,[27] it seems obvious that more protective approaches in the laws of some of the Member States are on the retreat.
C. EC consumer law and services of general interest
Services of general interest have some features that distinguish them from most issues of consumer law that have been regulated at EC level until now. Most importantly, they are certainly not only requested by the middle-class, which one could argue for timesharing contracts, for package holidays and for financial services and other goods sold over the distance. In contrast, everybody is dependent on the provision of services of general interest.
Currently, two rather different approaches can be found in the works of the EC in the field of services of general interest: the internal market approach that includes elements of consumer protection, and the universal service approach. Under the internal market approach, the EC tries to foster competition through the opening of the national markets. The universal service approach, in contrast, has a human rights dimension.[28] Universal service means guaranteed access for everyone, whatever the economic, social or geographical situation, to a service of a specified quality at an affordable price.[29] In the legislative practice of the EC both approaches have been mixed. The most obvious example is Art. 3 of the Electricity Market Directive 2003/54/EC[30] that is headed "Public service obligations and consumer protection". Despite of this mix, however, the respective regulatory techniques remain distinguishable.
I. The market-related consumer protection approach
In its communications, the Commission does not hide its strong belief in the force of the market, and it primarily points at the telecommunications market. Indeed, telecommunication services have become cheaper after the liberalisation of the market although new problems have arisen due to the confusing variety of available services, and the lack of transparency.[31] At the same time, the recent debate about roaming fees[32] shows that even in the relatively competitive sector of telecommunications competition in itself has not solved all the problems.
This strong belief is also reflected in EC legislation. Not only are all the relevant Directives based on the internal market competence of Art. 95 EC but also their contents show clear market orientation. First of all, national monopolies were broken up, making competition possible at all. Key concepts are interconnectivity and transmission: Network providers are obliged to grant all competitors access to their network, at a fair and reasonable price.[33] In practice, transmission fees, and also certain exemption clauses that justify denial of transmission, have proved to be major obstacles to competition between suppliers.[34] Therefore, one of the major novelties of the new Electricity Market Directive 2003/54/EC as compared to its predecessor, Directive 96/92/EC, is to require Member States to establish a regulator who is competent to determine transmission fees.
As far as detailed rules on consumer protection have been adopted, most of them aim at allowing the consumer to choose between different providers of services of general interest. Firstly, market transparency shall be established. The most important tool is pre-contractual information obligations. Thus, Article 3 with Annex A of the Electricity Market Directive 2003/54/EC requires the service provider to provide pre-contractual information that specifies: the identity and address of the supplier; the services provided, the service quality levels offered, as well as the time for the initial connection; if offered, the types of maintenance service offered; the means by which up-to-date information on all applicable tariffs and maintenance charges may be obtained; the duration of the contract, the conditions for renewal and termination of services and of the contract, the existence of any right of withdrawal; any compensation and the refund arrangements which apply if contracted service quality levels are not met; and the method of initiating procedures for settlement of disputes in accordance with point (f).
Secondly, with a view to long-term contracts on continuous supply, the right to choose a service provider implies that contractual terms must not limit the right to terminate an existing contract unreasonably. Such terms may consist of excessive fix duration of the contract, penalties for termination, charges for changing the service provider etc. In Germany, such practices have deterred many consumers from changing their supplier.[35] Under Article 3 (5) of the Electricity Market Directive 2003/54/EC and Article 3 (3) of the Natural Gas Market Directive 2003/55/EC, Member States shall ensure that the customer is effectively able to switch to a new supplier. Both Directives provide, in Annex A, that customers shall not be charged for changing supplier. Under the Universal Service Directive 2002/22/EC, Member States shall ensure that all subscribers of publicly available telephone services, including mobile services, who so request can generally retain their number(s) independently of the undertaking providing the service. Apart from such specific rules, the Unfair Contract Terms Directive 93/13/EEC may be of relevance with regard to the duration of long-term contracts.
Thirdly, the above-mentioned transmission problem has a consumer law dimension as well. Obstacles to the transmission of electricity or other services of general interest do not only concern competitors but also consumers whose choice is restricted or eliminated. This consumer perspective was initially not reflected in the law, in particular because the EC had opted for an opening of the markets step by step. The new Energy Market Directives 2003/54/EC and 2003/55/EC now recognise the consumer’s right to access to transmitted energy from July 2007 on. Therefore, from that date on, consumers must have the right to enforce transmission of electricity by a provider other than the network operator.[36]
Without any doubt, these consumer rights are important, and it seems that until now, the mechanisms have not yet put in place to effectively enforce them so that there is certainly room for improvement. It must, however, be emphasised that they are of little use where a competitive market has not yet developed, which is the case in most sectors of the formerly public services. Moreover, consumer protection through information and choice neglects the needs of those who are of no interest to the service providers, be it because of their geographical location or because of their financial capacities, and this latter problem concerns an ever increasing part of the population in the EC.
II. Universal service requirements
Universal service requirements are explained in some detail in the Green Paper and the White Paper on services of general interest. In these documents, the EC Commission, under Article 16 EC, has proposed to develop a common framework of rules for services of general interest.[37] This plan was then meant to be suspended until the new constitution was adopted[38] whose Article II-96 would vest the EC with the competence to formulate general principles and conditions for the provision of services of general economic interest.[39] The ratification of the Constitution has in the meantime, become highly unlikely so that the EC will remain to lack the competence for creating such framework legislation.
As mentioned above, universal service means guaranteed access for everyone, whatever the economic, social or geographical situation, to a service of a specified quality at an affordable price. Despite of the lack of a general competence to deal with this issue, universal service requirements have already been introduced in sector-specific legislation. The concept of universal service was first established in EC telecommunications law.[40] It is now enshrined in the Telecommunications Market Directive 2002/22/EC[41] and in the Postal Market Directive 97/67/EC[42] as amended by Directive 2002/39/EC.[43] The Energy Market Directives 2003/54/EC and 2003/55/EC[44] do not use the term "universal service" but the term "public service" and have also established minimum standards. The relevant Directives aim at harmonising universal service requirements but this occurs with a view to the internal market.[45] In fact, the EC Treaty as interpreted by the ECJ, at least since the judgment in the Corbeau case,[46] has left considerable freedom to the Member States for defining their national services of general interest, and complaints by competitors from other Member States were numerous. Therefore, the EC used Directives in order to establish greater predictability and legal certainty by reducing the leeway left to the Member States in determining the way in which services of general interest are defined and regulated.[47] For example, recital (5) of the Postal Market Directive 97/67/EC explicitly mentions that universal service obligations varied significantly from one Member State to another. Nevertheless, details on universal service obligations and also the rules on consumer protection have not been totally harmonised yet. To this extent, these Directives follow the minimum harmonisation approach.[48]