Legal Uncertainties in Interpretation of the Term ‘Consumer’ in the Legislation of European Union and the Practice of European Court

Bezborodov Alexander Lawyer 107113, Russia, Moscow, Moscow, Hospital Val str., 3, sq. 95 bezborodova.julja@gmail.com

Consumer protection legislation is designed to protect the weak side in contractual legal relations – the consumer. It is believed that consumers have less knowledge in contractual matters, initially have a weaker contractual position, and, consequently, this category of buyers should be protected in a special way. In this regard, consumer buyers have broader rights and guarantees in comparison with commercial buyers, designed to smooth out the inequality of participants in civil turnover. In view of the attractiveness of using the status of a consumer when buying goods, disputes often arise in law enforcement practice related to the interpretation of the concept of "consumer" and its qualifying features.

The subject of the study seems relevant to the author, since the accumulated experience of foreign specialists, formed in court decisions, implemented and proposed for implementation in European legislative initiatives on the subject, is not the subject of wide discussion in Russia. At the same time, research conducted by a European legislator and foreign specialists involved in the development and implementation of both new approaches and rules, as well as in the harmonization and codification of existing legislation in the field of consumer protection and interpretations of fundamental concepts in this area, such as "consumer" and "commercial/professional activity", is of scientific interest. The purpose of the study is to trace the path taken by the European legislator in this matter, as an example of the formation of a unified concept and unified approach in one of the most successful existing forms of international integration.

In this regard, the author plans to consider the approach of the European legislator to the content of the concept of "consumer", to identify its qualifying functions, formed both legislatively and in judicial practice. And also to establish what difficulties the participants of legal relations face in this regard. 

Definition of the concept of consumer in EU legislation

To establish the content of the concept of "consumer", it is necessary to consider how this concept is used by the European legislator in various regulatory legal acts. Thus, in Directive 2005/29/EC of May 11, 2005 on unfair commercial practices towards consumers in the domestic market, article 2a defines a consumer as: "any natural person who, by entering into commercial relations regulated by this Directive, pursues his personal, and not commercial, business or professional interests." In Directive 2011/83/EC of October 25, 2011 on consumer rights, a consumer is understood as: "any natural person who acts for purposes beyond his trade, business, craft or professional activities when concluding contracts."

The relatively recently adopted EU directives, designed to regulate the legal relations of participants on the Internet (online trade), also adhere to a unified approach to the content of the concept of consumer. Thus, Directive 2019/771 of May 20, 2019 on certain aspects concerning contracts for the sale and purchase of goods and Directive 2019/770 of May 20, 2019, establishing rules for certain requirements concerning contracts for the supply of digital content or digital services, define a consumer as "any natural person who, with respect to contracts subject to within the scope of this Directive, acts for purposes unrelated to the economic activity, business, craft or profession of this person."

It is also necessary to consider the understanding of the term "consumer" in such a source of soft law of the European Union as "Principles, Definitions, Model Rules of European Private Law (Draft Common Frame of Reference: Principles, Definitions and Model Rules of European Private Law) – hereinafter "DCFR". As N.Y.Rasskazova notes ^[1], in the preface to the DCFR edition in Russian, this document was created by the efforts of representatives of the academic circles of the EU member states and represents an act of harmonization and codification of the private law of the participating countries. Its goal is to "harmonize the standards and rules of different countries to facilitate interaction"^[2]. At the same time, changing the existing legislation is not mandatory. The document thus has an important informational and codifying function, but is not legally binding. With regard to the qualification of the concept of consumer, article I.-1:105 gives a similar definition to the above-mentioned: "consumer" means an individual who acts primarily for a purpose unrelated to his trade, other business or professional activities. 

Interesting from the point of view of this study is the addition to this definition, according to which a person who satisfies the conditions of both previous paragraphs (consumer and entrepreneur) is considered as falling exclusively under paragraph (1 - consumer) in terms of the application of the rule aimed at protecting such a person, if he acts as a consumer, and as falling exclusively under the scope of paragraph (2 - entrepreneur) in other respects. It can be concluded that in this way the European legislator hopes to avoid a collision in case of confusion between the concepts of consumer and entrepreneur.

As can be seen from the legislative norms listed above, the term is harmonized at the legislative level and is applied uniformly in all EU legislative acts. Thus, it can be concluded that there is a unity of understanding of the concept of consumer in the law of the European Union and the formation of a basic concept for consumer protection legislation. The EU member States, when implementing EU legislative acts, may deviate from the definitions established in the directives in terms of the formulations proposed by the European legislator, but their meaning and content should remain unchanged, which follows from the content of such a legal instrument of the European legislator as the directive ^[3].

Criteria defining the concept of "consumer"

Based on the above legislative definitions of the concept of "consumer", it can be concluded that in EU law this term is understood as "any natural person acting for purposes other than his trade, commercial, professional or entrepreneurial activity." Thus, in order to qualify a participant in legal relations as a consumer, two defining criteria must be cumulatively met: 1) an individual, 2) the non-commercial nature of the activity, that is, activities not related to profit-making. In Russian law, a consumer is understood as 1) a citizen, 2) having the intention to order or purchase or ordering, purchasing or using goods (works, services) exclusively for personal, family, household and other needs not related to the implementation of entrepreneurial activity.

Turning to judicial practice in this regard, it is necessary to note the court's decision in the case of "Schrems" (ECJ, Schrems vs. Facebook; C 498/16 of January 25, 2018, access mode: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62016CJ0498, accessed: 01.02.2023). Mr. Shrims, an Austrian citizen, has been a user of the Facebook social network since 2008. At first, he used social media exclusively for personal purposes. Since 2011, Mr. Shrims has been covering his activities on his social network page as an activist for the protection of users' personal data and their privacy. In particular, he reported on the status of his trial with the Facebook social network, published articles and lectures on this topic, collected donations for the publication of a book, etc. The following question was put before the European Court: does the consumer lose his status if, after prolonged use of his account on a social network, the consumer publishes books in relation to his court proceedings, conducts paid lectures, collects donations to support his activities, etc. In this judgment, the court ruled that "the concept of consumer, which is used equally in all EU regulations and directives on consumer protection, should also be critically evaluated from the point of view of other legislative acts affecting this concept," and also that "a user of a social network does not lose the status of a "consumer" in the case of using his account to publish books, conduct lectures, collect donations, etc. activities to protect his rights in court."

For the purposes of this study, the court's statement about the concept of "consumer" is important. Exactly: 1) the concept is harmonized in the legislative acts of the European Union, 2) regardless of the level of harmonization of the concept, the context of the use of a thing or the consumption of a service or work is also important for the legal qualification of legal relations.

Next, we will consider the specific criteria that qualify a person as a consumer, as well as their interpretation in the practice of the European Court of Justice:

A. A consumer is an individual

The meaning of this definition is that only an individual, and not commercial and non-commercial legal entities, can be qualified as a consumer. With respect to commercial legal entities, this approach is fully justified, since the sole purpose of a commercial legal entity is to make a profit. In relation to non-profit legal entities, such a ban may be questioned, since the main purpose of the work of non-profit organizations is not to make a profit and in this part the purchase of any goods, work or services is necessary precisely to achieve non-profit, often socially useful goals. From this point of view, the extension of consumer protection rules to non-profit organizations may be justified.

In this context, it should be noted that a number of European countries have extended rights and obligations similar to consumer rights and obligations to certain categories of business.  In particular, as X points out. Bellesteros ^[4], in France, when providing legal protection in relation to contracts concluded online, small non-state enterprises, startups and small businesses are considered equivalent to "consumers". The application and content of this criterion is clear both in theory and in practice, in addition, a number of studies have already been devoted to this issue, for example, the work of E.A. Arabey and the article by K.M. Belikova, N.V. Badaeva, M.A. Akhmadova ^[5,6].

There is a controversy in the Russian legal literature regarding the qualification of a "consumer" as a citizen and/or an individual. There are studies justifying the application of consumer protection standards to legal entities. In particular, Rudenko E.Y. Sitdikova L.B. propose to give the status of "consumer" to those legal entities that buy goods for material support of their activities ^[7,8], since in this case they are in equal status with consumers and their rights also need protection. A number of researchers, for example, G.R. Gafarova^[9], propose to legislatively change the concept of "citizen" to "individual" in order to emphasize the conceptual inequality of an individual and a legal entity as the main purpose of the formation and allocation of the concept of consumer. 

Let's turn to the second criterion and the practice of its application. 

B. Non-commercial nature of the activity

This criterion means that the rules on consumer protection should not be applied in cases where the purchase of goods, the provision of services or other contractual legal relations constitute the professional activity of the participant, for example, the resale of goods for profit. Let's consider a number of court decisions that led to the concretization of the understanding of this criterion.

So, for example, in the case A. B., B. B. v. Personal Exchange International Limited (CJEU, 10 December 2020, Case C-774/19, access mode: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:62019CJ077, accessed: 01.02,2023) two poker players from Slovakia who spent more than 9 hours a day on the game and earned more than 200,000 euros in 14 months were recognized as "consumers" in the sense of European legislation, since, as it was established in court, "neither the remuneration received neither the professional skills of an individual, nor the regularity of activity, are the determining factors for the qualification of a person as a consumer." The commercial nature of the activity, according to the court, is "the sale of goods or the provision of services by an individual to a third party in return for monetary remuneration."

In the case of Ms. Kamenova (CJEU, 4 October 2018, Case C-105/17, access mode: https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX:62017CJ0105, date of circulation: 01.02.2023), the buyer intended to refuse to purchase the watch purchased online, since the product did not match the proposed description. The seller (Ms. Kamenova) refused, referring to the fact that she is also a consumer in legal relations. At the same time, as it was established, the seller has already published 8 offers for the sale of both new and used goods on the Internet. According to the ruling of the European Court, "the commercial nature of the activity is determined by the specific actions of the seller." The Court suggested that national judicial institutions use a number of criteria to determine whether such activities take place:

• ·         Is there a creation and promotion of an online platform for the sale of goods
• · The purpose of the seller's activity is to make a profit
• ·         The level of knowledge and technical skills of the seller compared to the buyer
• · Legal status of the seller
• · VAT
• ·         Does the seller receive remuneration for his activities or a share in the profits
• · Regularity of commercial activity, etc.

In another decision in the Benincasa case (CJEU, 3 July 1997, Case C-269/95, ECR 1997 p. I-03767, “Benincasa v Dentalkit", access mode: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A61995CJ0269, date of appeal: 01.02.2023) the court made a number of important conclusions regarding the intentions to conclude a contract in the future. An Italian company has entered into a franchise agreement with an individual with the aim of opening a store in Munich (Germany). The contract contained a provision on jurisdiction in favor of the court in Florence (Italy). An individual opened a store and made several purchases for which no payment was made. In the end, he stopped all activities under the contract and filed a lawsuit in the Munich Land Court, in which he asked to invalidate the contract. Mr. Benincasa argued the need to invalidate the contract by the fact that he has not yet begun to carry out commercial activities, which means he should be treated as a "consumer" and enjoy the corresponding rights.

The court ruled that only contracts "concluded to satisfy personal needs are regulated by the norms of consumer protection legislation." Consumers, in this case, are considered as a weak party in the contract, subject to protection. If the contract is concluded "for the purposes of commercial or professional activity, even if such activity was planned in the future, such a contract cannot be considered consumer and fall under the law on consumer protection."

The doctrine of the dual nature of activity

In this connection, the question arises, if the same person in some legal relations can be qualified as a consumer, and in others as a commercial operator, then how to determine whether the legislation on consumer protection is applicable, it is necessary to determine the prevailing purpose of contractual legal relations. 

Thus, in the official opinion of lawyer Ruiz-Jarabo Colomer in the Benincasa case (see above), paragraph 38 states ^[10] that "the same person can be defined as a "consumer" in some legal relations and as an "economic operator" in others." Thus, the determining factor for the qualification of legal relations is "not the personal circumstances of a person, but his role in a particular contract, in particular, in its subject and purpose." In this regard, as Tobias Luci notes ^[11], it should be noted that for the purposes of qualifying a person as a "consumer", it is necessary to establish for each specific legal relationship what role this person plays in them. This conclusion should be made based on the purpose and nature of the contract, and not personal. However, the question arises whether the legislation on consumer protection is applicable in the case when the same person pursues both commercial and personal goals in legal relations? For example, a lawyer wants to buy a laptop on which he will work on his trials, and also use it to check personal mail and store photos.

This situation has received the name "dual purpose doctrine" in the European doctrine. In such situations, in order to determine the applicability of consumer protection legislation, it is necessary to establish: what is the purpose of the person prevailing in the contract ^[12]. In other words, in the example above, it is necessary to establish how often the lawyer will use the laptop for work issues, and how often for personal ones.

This task, of course, is very difficult. Assessing the balance of interests and procedural capabilities of the parties (seller and buyer) in such a case, it should be recognized that the seller's ability to prove the fact of using the goods for business purposes is extremely small. Firstly, the collection of information about the private life of an individual without his consent is usually prohibited under threat of administrative or criminal punishment. Also, the seller does not have access to the product, which excludes the possibility of its proper research (with the exception of a separate type of goods). The buyer, on the contrary, has more opportunities to prove that the use of the goods occurred to a predominant extent to meet personal needs. Indeed, as a rule, it is the consumer who has complete information about the history of using the product. Such an unequal position of the parties in the process allows us to conclude that it is advisable to impose an obligation to prove the fact of using a thing for personal purposes on the consumer, if the seller disputes this circumstance. And, if the seller provides convincing evidence that the prevailing purpose of the purchase of goods, work or services was to satisfy personal needs, then, according to the European law enforcement officer, it should be recognized for such an individual the right to protection as a consumer.

In conclusion, I would like to note the conclusions obtained as a result of this study.

1)    In the fundamental legislative acts of the European Union devoted to the protection of consumer rights, there is a unity of understanding of the concept of "consumer";

2)    The qualifying criteria for the concept of consumer are: 1) natural person 2) non-commercial nature of the activity;

3)    When assessing the nature of a person's activity as a commercial or non-commercial, the courts of the EU Member States may be guided by a number of criteria established in the practice of the European Court of Justice (for example, the level of knowledge and technical skills of the seller, legal status, VAT, etc.);

4)    In order to determine whether a person is a "consumer", it is necessary to refer to the legal nature and purpose of contractual relations in each specific situation.