Consumer protection in the collaborative economy – by Vassilis Hatzopoulos

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The problem

By blurring the traditional production/consumption paradigm, the involvement of ‘prosumers’ in the collaborative economy questions the traditional consumer protection model based on the dichotomy between traders (sellers or suppliers, depending on the text) v consumers. In other words EU consumer protection law only applies to B2C relations and not to B2B, nor, more importantly for the collaborative economy, in P2P relations.

This, in turn, creates a potentially very important void in the field of consumer protection as, in those cases where the providers of the underlying services are not themselves traders, the consumers will be devoid of any claim (other than based on contract or, worse, tort) against the prosumer who has made them suffer damage. Not only will such claims be unable to benefit from the more favourable rules of jurisdiction and applicable law foreseen in favour of consumers,[1] but they shall also be subject to ‘traditional’ burden of proof standards, and will require a violation of a contractual term, or fault. Most importantly, such claims shall be addressed against individuals who may lack any financial surface and may be unable to offer any redress to the aggrieved consumer.

In order to understand the way consumer protection law applies to collaborative platforms, it is crucial to assess which of the three parties typically involved in collaborative economy activities qualifies as a trader, ie ‘acting for purposes relating to his trade, business, craft or profession’ and which is a consumer ie acting outside his trade, business, craft or profession.[2]

Platforms

Platforms will typically qualify as traders, unless they are active in communautarian, non-commercial activities. Even then, however, the E-commerce Directive offers them the possibility to be fully exempted from any liability, civil or criminal, for content over which they have no control. According to Article 14, such exemption is only available where the platform offers only hosting and has a complete ‘lack of knowledge or control of the data which it stores’.[3] Hence, it becomes crucial to know whether a platform actively intermediates between the parties (by drafting terms or clauses of their contract, by deciding on the price etc) or whether, on the contrary, it only serves as a passive ‘bulletin board’ for information over which it has no control whatsoever.[4]

In this respect a gradation may be established: when the platform participates to the provision of the underlying service, the E-commerce Directive is inapplicable; when the platform plays an active role in determining the content of the underlying service (which may be offered by a third party) then the E-commerce Directive may apply but the exclusion of liability foreseen in Article 14 may not. The exclusion of liability shall apply where the platform does neither of the above and has a passive or else neutral role both in the definition and in the provision of the underlying service. A diligent platform provider must not only respond to notifications from users but should also implement an effective notice-and-take-down policy.

Where the platform is actively involved in the definition and the provision of the underlying service, it may be liable not only as an intermediary, but also as if it were itself the provider of the underlying service. This may be safely assumed – although not expressly spelled out – from the Court’s judgment in Uber Spain.

Recipients of the underlying service

Most users of the platforms’ services will qualify as ‘consumers’ and will, thus, be able to claim protection; this will not be true for services addressed to professionals (gig-working, such as coding, translating, performing small tasks etc) thus creating a B2B relationship.

Suppliers of the underlying service

The supplier’s qualification as a trader or as a prosumer is crucial for the application of the consumer protection rules. Indeed, if the supplier of the underlying service is a trader, then the collaborative platform will be in a B2B relation with them and it will not have to comply with any of the obligations (in terms of information, warranties etc) stemming from consumer protection legislation. Such professional service providers will have to fulfill all consumer protection obligations, and consumers will expect to receive information, warranties, damages etc both from the platform and from the professional service provider.

In most cases, the providers of the underlying service offer collaborative services occasionally, in their spare time, on top of their main employment (or unemployment benefit);[5] hence, the collaborative activity does not become the main ‘trade, business, craft of profession’ of the individuals concerned. This could be otherwise if the collaborative activity comes within the broader professional activity of the person concerned, in which case it could be said that it constitutes a diversified expression of the trade etc already exercised (this would be the case of hoteliers promoting their rooms through Airbnb). The same could be true for inactive, unemployed or underemployed people who, after a while, come to depend economically on their collaborative activity.

Inspired by the practice followed in several Member States, the Commission suggests the use of thresholds as proxies for the qualification of a ‘trader’: a) the frequency of the services, ie whether the services are offered regularly or on a purely marginal and accessory basis, b) the profit seeking motive, as opposed to the aim of exchanging assets or skills, c) the level of turnover from the activity concerned, and whether such turnover is higher/lower from that obtained from other activities pursued by the same person.[6] It need be noted that these criteria only resolve clear cut extreme cases, while being unhelpful in most mainstream situations and would need further clarifications.

Ideas for the future

It is clear from the above that the situation of the consumer depends on many fine legal qualifications, nourishing legal uncertainty. This is only made worse by the application of divergent national laws in the field of contract and tort law as well as intermediary’s liability.

As a response some commentators have suggested that liability arising from the activity of collaborative platforms should be specifically regulated in the form of a ‘Platform Directive’,[7] along the lines of the recently revised Package Travel Directive,[8] but allowing for a fairer share of responsibility on the basis of the participation of each of the parties in the actual service provision.[9] Such a Platform Directive could also clarify the relations between the platform and the supplier of the underlying service, irrespective of whether the latter is a professional or a prosumer. Further, it could set rules for the choice of jurisdiction and applicable rules in case of disputes. Such a Directive could be in the interest of the consumers, but also of platforms which, in view of the Court’s judgment in Uber Spain¸ may be held fully liable for the underlying service.

A further issue is that of the content of consumer protection rules applicable to the collaborative economy. For, EU consumer protection law has been criticized as being over-formalistic and heavily dependent on an ‘information overload’, supposedly to the benefit of the ‘average consumer’. In the collaborative economy, however, the information which is most relevant for consumers is voluntarily provided by the platforms themselves in the form of reputational ratings, in order to build the trust on which collaborative transactions between unknown parties rest. Moreover, since platforms rely on a detailed ‘profiling’ of their users in order to perform their matching function, it is worth questioning whether the ‘average consumer’ is the appropriate benchmark, or whether smarter consumer protection rules, in the form of individualized default rules or else, also taking into account the hindsight offered by the behavioural analysis of the law, would be more appropriate.

ΧΑΤΖΟΠΟΥΛΟΣ ΒΑΣΙΛΗΣ

Vassilis HATZOPOULOS is full Professor of EU Law and Policies at the Panteion University, Athens (Greece), visiting Professor at the College of Europe, Bruges (Belgium), honourary Asst. Professor at the University of Nottingham (UK), Attorney at law – member of the Athens Bar. A leading expert in EU law, he notably wrote the first reference book on collaborative economy, The Collaborative Economy and EU Law, Oxford, Hart, 2018

 


[1] Under the Rome I Regulation (European Parliament and Council Regulation (EC) No 593/2008 of 17 June 2008 on the law applicable to contractual obligations (Rome I) [2008] OJ L 177/6) and the Brussels I Regulation (recast: European Parliament and Council Regulation (EU) No 1215/2012 of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels I Regulation (recast)) [2012] OJ L 351/1).

[2] Unfair Terms Directive 93/13, Art 2(a) and (b).

[3] Joined Cases C-236/08 to C-238/08, Google France v Louis Vuitton, EU:C:2010:159, para 114.

[4] The term ‘bulletin board’ is taken from R. Koolhoven et al, ‘Impulse Paper on specific Liability Issues raised by the collaborative economy in the accommodation sector, Paris-Amsterdam-Barcelona’, upon request by the Commission (2016) 12 available at http://ec.europa.eu/growth/single-market/strategy/collaborative-economy_el.

[5] See eg the data published in Commission Staff Working Document ‘European agenda for the collaborative economy – supporting analysis’ SWD(2016) 184 final, 37-38,

[6] COM(2016) 356 final, 9.

[7] C Busch et al, ‘The Rise of the Platform Economy: A New Challenge for EU Consumer Law?’ (2016) 5 EuCML 3.

[8] European Parliament and Council Directive (EU) 2015/2302 of 25 November 2015 on package travel and linked travel arrangements, amending Regulation (EC) No 2006/2004 and Directive 2011/83/EU of the European Parliament and of the Council and repealing Council Directive 90/314/EEC (Package Travel Directive) [2015] OJ L 326/1.

[9] OECD, ‘Protecting Consumers in Peer Platform Markets, Exploring the Issues’ (2016) OECD Digital Economy Papers No 253, available at http://www.oecd-ilibrary.org/science-and-technology/protecting-consumers-in-peer-platform-markets_5jlwvz39m1zw-en.

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