Consumer Class Actions: Are They a Solution for Enforcing Consumer Rights? The Israeli Model

Class actions were introduced into the Israeli legal system in order to overcome the difficulties in the enforcement of consumer laws. Despite extensive consumer legislation during the 1980s, consumer laws were not enforced until the mid 1990s. Only since the incorporation of class action procedures in the Consumer Protection Law in 1994 have consumer actions become more common. The introduction of class actions under the Consumer Protection Law (CPL) led to a revival of consumer protection law. As a result, legal discourse in the field of consumer law has completely changed. Nonetheless, even after 1994 more than 90% of class action applications were dismissed at the early stages. This paper analyses the reasons for the poor results of this procedure, and suggests reform by amending the CPL. The conclusion presented in this paper is that consumer class actions have great potential, but that their correct implementation depends on a better understanding of the purpose of consumer legislation.     

Economics of Consumer Class Actions*

The consumer class action has been hailed as the ultimate consumer remedy. It permits economies of scale in some legal proceedings which may benefit the consumer. Moreover, government agencies will not ordinarily bring suit on behalf of one of these consumers but they will, in some cases, sue on behalf of the class. In the case of a harmful commodity, if a class action is successfully adjudicated disutility is lowered for those harmed and social benefits (i.e., collective benefits) may accrue in some measure to those for whom damage was averted. Whether in the short run or the extent to which in the long run prices will be increased as a result of the adjudication of a class action depends upon the degree of competition in the market in which the producing firm operates and on the level and elasticity of the relevant supply and demand curves for the product subsequent to the suit. Even without suit being brought the effect of the threat posed by the availability of the consumer class action will be a shift to a higher quality of product and more non-price competition on the basis of quality or at least a reduction of fraud and of harmful product attributes. The overall effect of the class action being available as a legal tool should be a better performing market and better performing agencies serving the consumer. Though consumer economic welfare will not always be increased through the use of the class action, its increased use is important if we are to have a more equitable economy.     

Ansatzpunkte für eine selbsthilfeorientierte Verbraucherberatung Ergebnisse einer empirischen Untersuchung

The article reports from a study of 835 Berlin citizens, in which their needs for legal counselling in five walks of life were ascertained. Subjectively experienced problems were related by the respondents, both spontaneously and as answers to a standardized questionnaire; in the same manner, the investigators tried to find out in which way, if any, the respondents had tried to solve the problems. In this paper, only some results from the questions dealing withconsumer problems are reported. Among the results of the study can be mentioned:

-Many more problems are reported for consumer durables than for insurance, holiday travel, and consumer credit (although when a problem arises in the latter spheres, they give rise to much concern). Doctors and consumer services (in particular, car repairs) show rather high problem rates, too;

-Most problems have to do with perceived deficits of the delivered goods and services (rather than with the activities of the seller);

-About 26% of the respondents explicitly stated that they had undertaken nothing by way of remedying the problem. The tendency to do nothing about it is clearly related to income (low income = proneness to do nothing). The relationship with education is less clear-cut.

-In particular, those persons who had resorted to legal counselling as a means of solving their problem, were very satisfied with this, and planned to use the method again if need arose. Contacts with the seller were less favourably evaluated as a problem-solving means. Also those who had not undertaken any action in order to solve their problem, state to a surprisingly high degree that they plan to use legal advice (lawyers, consumer advice centres, courts) the next time a problem arises. Plans to use legal counselling are mentioned by many more than have used them in an actual conflict, and these intentions do not differ dramatically among different social classes.

-Very few respondents (3%) report the use ofcollective action in attempts to solve their problem, but considerably more (15%) indicate a desire to solve future problems together with other consumers who find themselves in an similar situation.

On the basis of the results of the study and theoretical considerations, the authors draw the following conclusions:

1. A public consumer policy which entails the goals of consumer co-determination and self-reliance is more likely to succeed if it relates to deficiencies of goods and services perceived by the consumers. Consumer counselling should therefore change its focus from giving advice prior to decisions to giving advice about how to solve post-purchase problems.
2. Because of consumer expectations, consumer guidance must include legal counselling. It should not be limited to such counselling, however, since most consumer problem alleviation takes place outside the legal system.
3. Legal counselling should primarily aim at strengthening the position of the consumer innon-legal problem-solving attempts. Knowledge about the legal position is important because it gives self-confidence and increases the perceived rightfulness of one's concern. It creates the awareness that the problem is not an individual and rare one, and may give impetus to collective action. It makes it possible to see how one's problem is connected to other, related problem types. It strengthens the consumer's feeling of possessing negotiation power, since he can threaten with legal action, in case the seller does not yield, and it makes it possible for the consumer to specify minimum requirements in his dealings with the seller.
4. Legal counselling that has as its only purpose the securing of consumer rights throughlegal procedures, puts the consumer under tutelage and runs the risk of becoming an instrument which isolates consumers from each other and make them incapable of solidarity with fellow citizens.
5. Consumer counselling should as its starting-point take the problem-solving procedures usually employed by consumers (direct contacts with the seller, seeking advice from friends and colleagues) and attempt to make these procedures more efficient. The declared preparedness of consumers to consider collective actions should be put to use.
6. Consumer counselling should not address itself to specific, “weak” consumer groups (old people, low-income groups, non-employed women) but should in the first place concentrate its attention on those kinds ofproblem situations (certain types of goods and services, certain types of confrontations with sellers, etc.) in which such especially vulnerable consumers find themselves.

     

Financial Consumer Protection Regime in Malaysia: Assessment of the Legal and Regulatory Framework

This paper examines the status of the legal and regulatory framework for consumer protection in Malaysia, an emerging economy. Using leximetrics and notions of incomplete law, the paper explores the financial consumer protection regime in the country by examining two aspects of the legal framework: the legal infrastructure and typology of laws. The Malaysian legal framework for financial consumer protection is assessed in light of the good practices identified in international guidelines issued on the themes by OECD and the World Bank. The results highlight the complementary nature and different roles that laws, regulations, and supporting institutions play in achieving a comprehensive financial consumer protection framework in the country.     

The structural weaknesses of the consumer movement

The international consumer market in the western industrial nations is largely the product of the affluent post-war period. It has grown out of a concern that the legal principle of caveat emptor is inadequate to protect the consumer in the modern, complex marketplace by consumer education and protection, improved consumer information and a general concern for the consumer and physical environments. Consumer groups are typically seen to be self-help groups for the educated middle classes with little concern for the disadvantaged consumer, and there is no evidence that they have seriously challenged the dominance of producers and distributors. Two contrasting approaches to the structural analysis of consumer groups in the political systems of western industrial nations are considered, the pluralist approach and the conflict approach. It is argued that the analysis of power in the marketplace demonstrates that there is substantial producer dominance in the marketplace. The paper concludes by identifying five structural weaknesses of the consumer movement: negligible communication between consumers; the inability to mobilize; the rejection of effective (but politically radical) forms of action; the acceptance of existing market arrangements; and the provision of ideological support for these arrangements.     

Praktische Erfahrungen mit dem AGB-Gesetz

Zusammenfassung Der Verfasser berichtet über die Erfahrungen der Verbraucherzentrale Baden-Württemberg, Stuttgart, mit der Verbandsklage nach § 13 des Gesetzes zur Regelung des Rechts der Allgemeinen Geschäftsbedingungen bis einschließlich 1979. Er erörtert die Parallelen und Unterschiede zum UWG-Verfahren und gelangt zu dem Ergebnis, daß die Angleichung des Verfahrens nach dem AGB-Gesetz an den UWG-Prozeß vom Gesetzgeber nicht im wünschenswerten Umfang vorgenommen wurde. Dies kann im Einzelfall zu erheblicher Rechtsunsicherheit führen, z. T. auch zu sachlich nicht optimalen Ergebnissen. Trotz dieser Kritik zu einzelnen Punkten hält der Verfasser das Gesetz im ganzen für einen wichtigen Fortschritt zu Gunsten des Verbrauchers. Insbesondere stellt die Verbandsklage in ihrer Ausgestaltung ein besonders wirksames Mittel dar, um die Beachtung der Vorschriften des Gesetzes zu gewährleisten.

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Practical experiences with the German Act on Standard Contract Terms

The German Act on Standard Contract Terms, in force since April 4, 1977, restricts the use of preformulated contract terms far beyond civil law. The Act enables consumer associations to bring collective action against unfair terms and thus to ensure the implementation of the act.The author describes the experiences of a consumer association, the Verbraucherzentrale Stuttgart, in actively using the new legal instrument. The author explains some details of such legal action which, though in many respects resembling action against unfair trade practices which is permitted to consumer organizations since 1975, also has some peculiarities of its own.The author comments on some legal and factual problems of the collective action. Among other things, he criticizes the intention of the legislator to have the exact wording of the whole unfair term put into the court decision. This will lead to problems in cases where the judgment is pronounced without any argumentation, which is possible in some circumstances of German civil law procedure, since in these cases, it is extremely difficult to find out what it was in the term that was judged unfair.Even though criticizing some details of the legislative regulation the author is of the opinion that collective action is a considerable progress in consumer protection. Such action, actively used by consumer associations, is an effective means of putting the new act into practice and of getting business to use only such general contract conditions which are not unfair in the sense of the law.

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Walter Stillner ist als Rechtsanwalt in D-7000 Stuttgart 1, Seestraße 104, von der Verbraucherzentrale Baden-Württemberg mit der Prozeßführung beauftragt.     

“If It’s Easy to Read,It’s Easy to Claim”—The Effect of the Readability of Insurance Contracts on Consumer Expectations and Conflict Behaviour

In the area of financial services, lawmakers and regulators increasingly promote the use of plain language in business-to-consumer contracts. Although such efforts are undoubtedly welcomed by consumers, as they promote better comprehension, not much is known about the actual effects of improved readability on consumer attitudes and cognitive processes. Does improved readability in general contract terms have an impact on the consumer’s perception of their contractual position? Do contracts that are easier to read influence the steps or actions taken by consumers in the wake of conflict? In response to these questions, we present data from an experiment that investigates the relationship between the reading ease of general contract terms on the one hand and consumer expectations and willingness to engage in conflict on the other. Our findings suggest that readability increases the trust and confidence of the consumer in the sense that it increases their expectations of the claim. Moreover, we have found partial evidence to suggest that reading ease also increases the consumer’s willingness to engage in legal action in the case of subsequent claim denial.     

Die geplante neuordnung des konsumentenkreditrechts in der schweiz

The planned reform of consumer credit law in Switzerland. The author discusses the bill of a new Swiss Act on Consumer Credit. It is the intention of the bill to protect consumers engaged in all forms of direct or indirect acquisition on credit of goods and services. The bill contains detailed regulations in order to realize the consumer's freedom of entry into contract. There are rules concerning advertising, the duty to inform the consumer about effective credit cost, the protection against unfair clauses, and restrictions with regard to the duration of the credit period. The bill enacts rules concerning the default of consumers, too: Excessive interest rates in case of default are banned; the consumer may apply for adelai de grâce. Finally, the bill will improve the possibilities of preventive protection and of legal action on the part of the consumer. There will be criminal sanctions if the creditor does not fulfil his obligations. He may also loose his contractual rights. Consumer organizations may proceed against abuses in the advertising by consumer credit lenders.     

Consumer Bankruptcy in the United States: A Study of Alleged Abuse and of Local Legal Culture

This paper describes certain central aspects of the operation of the consumer bankruptcy system in the United States. It combines government data with the investigators' empirical data from two large studies done over a decade to explore two types of questions. The first area of investigation relates specifically to bankruptcy policy. The object is to identify the categories of persons principally served by the consumer bankruptcy system and to determine if suggestions of widespread abuse of that system by debtors are well-founded. The paper reports that the system is used primarily by the middle-class. It also reports that there is no evidence of widespread abuse. The second area of investigation is explanation of differences in the operation of the system in different regions of the country, differences that have persisted over twenty years despite major changes in legal rules and economic conditions. The paper argues that these differences are not explicable in terms of formal legal rules or a simple economic model and that a better explanation of the data is that the differences are the product of a "local legal culture" in each region.     

Consumer Law and Policy in Ghana

This paper presents a picture of the landscape of consumer law and policy in Ghana and reviews the scope of protection of consumer interests with specific regard to product safety and liability, consumer sales, and telecommunication services. It assesses the legislative and policy framework on consumer contracts, product safety, and unfair commercial practices; discusses the role of national agencies in enforcing safety standards; and highlights some critical consumer issues in telecommunications service delivery. The paper examines the regulatory framework on other consumer issues such as advertising, labelling, and marketing of consumer products; terms and conditions of consumer contracts; and after sales services including the enforcement of guarantees, warranties, refund, and return policies. The paper also discusses the extent of external influence on the development of consumer law and policy in Ghana and reviews the level of interaction with other legal systems and supranational bodies in the three focal areas. The contribution also explores areas of Ghana’s consumer protection framework which could benefit from guidance from the EU transnational model on consumer protection and makes recommendations for the enhancement of the emerging legislative and policy regime on consumer protection in Ghana.     

Attitudes and Motivations Toward Craft Beer Consumption: An Explanatory Study in Two Different Countries

This study adopts a revised model of the Theory of Planned Behaviour incorporating self-identity and desire for unique consumer products to understand and predict consumers’ motivation to drink craft beer in Germany (N=210) and Italy (N=211). Data were analysed using Partial Least Squares modelling (PLS) approach. The findings provide support that the extended TPB model is a useful tool for understanding the consumers’ choice to drink craft beer. The results confirm the major role played by consumers’ attitudes and self-identity. Mediation analysis indicates a potential indirect effect from self-identity, subjective norms and the desire for unique consumer products on individual behaviour both in the German and Italian sample. Implications for theory are discussed for further research developments within the context of consumption of crafted food products.     

Exploring the Legality of Consumer Anti-branding Activities in the Digital Age

The importance of “brand dilution” is changing with the rise in internet-mediated consumer power and increasing consumer involvement in the brand identity and message creation processes. In light of recent legal rulings, this study re-conceptualizes brand dilution as a matter of counter-posed brand meanings and associations in digital markets. Anti-branding dilution cases from both a blurring and a tarnishment dilution basis are examined through consumer interviews. The results show that consumer anti-branding has less potential for brand dilution, and more potential for brand identity collusion. By addressing both legal and marketing views of the meaning systems associated with the dilution versus collusion perspectives, this study provides an approach for understanding anti-branding dilution discussions and a way to develop better functioning branding exchange systems for digital markets. Consequently, possible changes in future branding ownership issues for digital markets are envisioned.     

消费者增权理论与我国消费者权益保护法的完善

消费者增权理论是近年来西方社会科学领域关注的热点问题之一,在消费者增权理论中,信息供给型增权和制度供给型增权是两种主要模式。我国现阶段的消费模式和消费者权益保护实践表明,制度供给型消费者增权可以更好地保护消费者利益。所以,从消费者增权理论出发,完善消费者权益保护法律体系,是增进消费者利益保护和实现消费和谐的重要举措。     

Towards a rationale for integrating consumer and citizenship education

Despite the importance of consumer education and citizenship education in contemporary societies, there has been little attempt to bring together the studies of these two fields to understand the developments in which they share an interest. After defining the parameters of consumer education and citizenship education, this paper will begin to develop a rationale for integrating consumer education and citizenship education, striving to identify synergies that could lead to revised consumer education curricula such that people are prepared to be citizens first and consumers second; that is, consumer-citizens.     

The Proposed Guarantees Directive: Is It Fit for the Purpose?

The purpose of this article is to critically analyse the provisions of the proposed Directive on the sale of consumer goods and associated guarantees as it will apply, in particular, in the UK. The Directive addresses two perceived problems for the European consumer; the variation in the minimum legal guarantee currently provided by individual Member States, and the lack of clarity and difficulties in enforcement of additional guarantees provided by sellers and manufacturers. The article considers the detailed provisions of the Directive as to both the "legal guarantee" and the "commercial guarantee" and sets these provisions in a UK context in order to assess, specifically, their potential significance for consumers and consumer law in the UK.     

浅析电子商务活动中消费者合法权益的保护

电子商务不仅改变了传统的商务活动模式,而且对产业间的融合与经济结构的调整产生了重大的影响。电子商务在给我们带来诸多便利的同时,也产生了大量的法律问题,在这些问题中,消费者合法权益的保护问题更显突出。     

Verbraucherpolitik als gewerkschaftliche Aufgabe

Trade unions and consumer policy. In the first part of his essay, the author discusses the position of the DGB (Deutscher Gewerkschaftsbund), the largest and most important of the West German trade unions, in the field of consumer policy. Consumer policy has been part of the statute of the DGB since 1971. Trade unions in West Germany regard themselves as consumer organisations because their members are consumers as well as employees, and consumer policy is understood to be part of the general economic policy of the unions. In 1975, the congress of the DGB accepted a programme of consumer policy. The programme demands that consumers rank equal with producers in the market. This goal should be reached by price competition (as a dominant factor of competition), by transparency (Markttransparenz) of prices and quality, and by the appointment of an ombudsman as a legal caretaker of consumer interests. The DGB rejects new consumer organisations, because in its view the trade unions constitute a well organised consumer institution. There is some cooperation, however, with the Arbeitsgemeinschaft der Verbraucher, the chief German organisation for consumer affairs. The author disagrees with legal writers who deny trade unions a right of claim against unfair competition and against unfair standard contract clauses, according to para. 13 of the German Unfair Competition Act. In the second part of his essay, the author analyses the legitimation of trade union consumer policy. The discussion concerns the question of whether or not employees are the only consumers who are in need of protection, and if there is a conflict between their interests as employees and as consumers. The author suggests that legal consumer protection should shield only individual persons as buyers (not small firms, for example). Furthermore, consumer interests should be defined from the perspective of the consumer who is anemployee. A consumer who is at the same time an employer, does not need protection because he can compensate for the disadvantages sustained in his consumer role by exploiting his position as an employer. Conversely, the employee-consumer has the weaker position in both of his roles. Another important question is whether or not there is a conflict between a high standard of consumer protection and a high level of wages. The author cites some economists who suggest that this conflict may be resolved, and that the real conflict is not between consumers and employees, but between those two on the one side and business on the other. The author draws the conclusion that there exists a theoretical legitimation for trade unions to represent the consumer interest. There is a wide gap, however, between the programmes of the trade unions and their policy as evidenced by their everyday activities. The hope is expressed that this gap will become narrower.     

Usefulness of Economics in Explaining Consumer Complaints

Based on an economic model of consumer demand, a multinomial logit model is estimated to predict the probability of a consumer falling into one of four categories of complaint action: no action, private, public, or both private and public complaints. Automobile repair and medical services are used as examples of more and less competitive industries. There are differences across industries with regard to variables that explain variation in complaints. Once variables representing the cost/benefit, learning, restraints, and personality models are accounted for, most of the variation in complaint behavior for both industries is explained by the learning and restraints models. Characteristics of individuals are important in explaining complaint behavior for both auto repair and medical services, while supply side characteristics are important in explaining variation in complaint behavior for auto repair services.     

Electronic funds transfer at point of sale: a consumer viewpoint*

The first section examines the advantages and disadvantages of electronic funds transfer at point of sale (EFTPOS) as a payment method for consumers. The next section looks at the legal issues and especially at consumer problems arising from the use of wellestablished related technology, automated teller machines (ATMs). The third part sets out the European Commission's strategy for EFTPOS. Finally, the last section summarizes the consumer issues involved and suggests that an international legal framework is needed to deal with them.