European 'consumer' notion: Continued broad application in 2024

Happy New Year to all our Readers! A couple of posts ago we have commented on the changes that the Compass Banca judgment may bring to the average consumer benchmark (see "Who is the average consumer?..."), although we will need to carefully follow the practical application of this judgment by national courts. Still, it was reassuring for the CJEU to emphasise in para 44 of this judgment that a commercial practice contrary to professional diligence would escape prohibition if it were "only to mislead a very credulous or naïve consumer". 

What we failed to find time to comment on last year was a judgment in Zabitoń case (C-347/23) and an opinion of AG Rantos in Arce case (C-365/23); both pertain to the scope of the notion of a consumer.

Photo by Madhur Shrimal on Unsplash   

Zabitoń judgment follows the paradigm shifting cases of YYY. (Concept of 'consumer') (see our comment here) and Lyoness Europe (see our comment here). When a married couple, a police offer and a school principal, purchased a residential property with the purpose of leasing it for consideration, the question arose whether they could be considered consumers when entering into a mortgage loan contract to purchase this property. It was clear that they were not planning to use this property for their own accommodation. The Court indicates that they could indeed be considered consumers, provided they purchased a single residential property for such a purpose, as they would then not be acting in the professional capacity in the field of property management (para 32). This judgment clearly discounts consumers' financial gain from a conclusion of a transaction as a factor in the determination of the consumer's (non-)professional capacity (paras 34-35). The Court further confirms then a broad interpretation of the consumer notion in applying substantive consumer protection framework. 

   Photo by Markus Spiske on Unsplash

This broad interpretation is further confirmed by AG Rantos in his opinion in the case Arce. Here, a teenager, an aspiring basketball player, was represented by their parents, in concluding a contract with a company providing sports development, career support and coaching services. The question was whether this was a B2C contract, considering that the young sportsperson at the moment of its conclusion had not yet begun their professional career and was not employed by any club. There was, however, a clear intention (desire?) of such a professional employment happening soon after the contract's conclusion, which indeed then occurred. AG Rantos draws a distinction between the consumer notion's scope in procedural and substantive matters. While in cases concerning procedural consumer rights, such as Wurth Automotive (C-177/22) the notion of a consumer is interpreted narrowly and, specifically, "current and future purposes of the conclusion of the contract" are considered, this is different when substantive consumer rights are to be applied. AG Rantos recognises this difference and consequently advises the CJEU to consider the teenager a consumer as "at the time when the contract at issue was concluded, the young sportsperson was not a professional" (para 57). After all, Article 4(1) Unfair Contract Terms Directive requires assessment of unfairness at the date the contract was concluded. "Any other more 'dynamic' interpretation of the status of 'consumer', consisting in maintaining that that status may be lost over time, would run counter to the very wording of that provision" (para 58). 

Alternative terms on performance, average consumers... tune in to CJEU in mBank (C-139/22)

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Today the CJEU decided another case on unfairness in mortgage loan agreements with an index-link to Swiss francs - in the Polish mBank case (C-139/22). The first part of the judgment is Poland-specific, as it refers to the validity and effect of a national register of unlawful terms, which Poland happens to have. This issue has already been considered in the previous Biuro case (see our comment on case C-119/15 here). The Court now reiterated that as long as the register is transparent, kept up to date, and the traders have an opportunity to question the applicability of the register in their particular case, national courts could benefit from such registers (paras 41-43). Hence, contested terms could be declared by national courts as unfair if their content has previously  been registered as unfair, provided that the court warns parties to the proceeding about this and gives the trader the opportunity to challenge this finding (para 45). 

The second question was more interesting: What happens if the mortgage loan contract contains a term that is likely to be unfair, however, it also contains another term, which allows consumers to disregard the unfair term and follow a different path for contractual performance? In this case, the contract included a term that obliged consumers to reimburse a loan index-linked to Swiss francs 'exclusively in the national currency as converted according to a rate of exchange freely determined by the bank' (para 52). This term was previously determined as unfair by Polish courts. However, the contract also included a term that allowed consumers instead to reimburse the bank directly in Swiss francs. This would allow consumers to choose where to obtain Swiss francs from, avoiding the conversion rates set by mBank. According to the bank, consumers could have then avoided the detrimental effect of the first term, which, again pursuant to the bank. would not lead to unfairness. The Court rightly rejects this argumentation. Contrarily, it emphasises that a contract containing such a mechanism - two alternative terms referring to the same obligation, one of which is unfair and one of which is lawful - per definition should be considered unfair (para 55). The trader could be seen as counting on consumers' 'lack of information, failure to pay due attention or a lack of understanding', which would lead them to re-pay the loan in the way set out by the detrimental, unfair term, with the other term then only providing a mechanism to avoid liability by the trader (para 55).

Interestingly, the Court makes the above-finding fully aware of the average consumer standard that applies to the interpretation of the UCTD provisions. On its basis, we could expect that reasonably well-informed and circumspect consumers, who are to read and attempt to understand the contract and its consequences, should recognise the better of the two options for re-payment. And yet... the Court does not think so.

The average consumer is mentioned by the Court when giving the answer to the third question: Does the fact that one of the borrowers worked for the bank exclude them from the scope of protection of the UCTD? The answer is: No. As the concluded contract does not pertain to the employment relationship, the sole fact that it is concluded with the employer does not mean that it could change its non-commercial purpose (para 69). Further, even if the consumer in this case had insights into exchange rates of mBank, which were not available to consumers not working for this bank, this did not mean that their 'more specialised' knowledge should exclude them from the scope of protection of the UCTD. The CJEU reminds that we refer to the objective benchmark of an average consumer and their knowledge. Thus neither less nor more consumer knowledge in a given case will matter (para 66).

Financial benefits from a loyalty programme cannot deprive one of consumer status - case C-455/21, Lyoness Europe

Yesterday we reported on a case discussing the consumer notion under the Unfair Contract Terms Directive in the context of dual purpose contracts. Interestingly enough, this was not the only ruling on Article 2(b) UCTD issued by the Court on that day. Another one is C-455/21, Lyoness Europe, in which the Court similarly engaged with the consumer notion, although in somewhat different circumstances.

Facts of the case

  Image by storyset on Freepik

The dispute related to a membership programme offered by Lyoness Europe (currently myWorld), making it possible for the customers to purchase goods and services from collaborating traders on favourable conditions. One of the customers - a natural person working as a mechanical engineer - believed that the contract contained unfair terms and decided to sue the provider. Among others, the claimant questioned the lawfulness of a term designating Swiss law as the applicable law.

Easy case: membership programme

The Court focused on the easier problem arising in the dispute, namely whether a natural person who becomes a member of a scheme allowing certain financial benefits in connection with the purchase of goods and services is a 'consumer' within the meaning of Article 2(b) UCTD. Not surprisingly, the Court concluded that such a person does qualify as a consumer where he or she is acting for purposes which are outside his or her trade, business or profession. Like in case  C‑570/21, YYY, on which we reported yesterday, the Court emphasised the nature of the service covered by the contract, which may show the purpose for which that service is being acquired (para. 49). In this context, the Court concluded that a natural person who seeks to benefit from advantageous conditions in the context of the purchase of goods and services for non-commercial purposes cannot lose the status of 'consumer' by the mere fact that he or she derives financial benefits (refunds on purchases, commissions or other promotional advantages) from the participation in the scheme. Joining a club to get deals for your purchases does not make you a trader.

Unanswered questions: dual purpose contracts

The referring court also explicitly asked about the application of Article 2(b) UCTD to dual purpose contracts. The Court considered those questions inadmissible, stating that there was nothing in the preliminary reference to suggest that the case indeed involved such a contract. The conclusion seems justified. But the question also sheds light on the additional dimension of the differentiated interpretation of the consumer notion in contract law and private international law. As we know from case C-191/15, VKI vs. Amazon, a choice of law clause included in standard terms can be considered unfair if it leads the consumer into error by giving him the impression that only the law of that Member State applies to the contract, without informing the consumer that under Article 6(2) of the Rome I Regulation he or she also enjoys the protection of the mandatory provisions of the law that would be applicable in the absence of that term (para. 71). In case of dual purpose contracts, however, the very same person may qualify as a consumer under the UCTD and not qualify as such under Rome I Regulation. How then should a perfectly transparent term be formulated?

CJEU confirms: consumer notions in contract law and private international law are not equivalent

Earlier today the Court of Justice issued the judgment in case C‑570/21, YYY. (Notion de consommateur). The case concerned, once again, the notion of the consumer under Directive 93/13/EEC on unfair terms in consumer contracts (UCTD). The Court has already dealt with similar problems in its earlier case law, recently e.g. in case C-485/21, S.V. (Immeuble en copropriété). The judgment confirmed that the notion of the consumer in mixed-purpose contracts under UCTD should be understood broadly. The ruling does not come as a surprise; what is nevertheless noteworthy is an explicit confirmation that the notion of the consumer in contract law is different from that in private international law. The Court, moreover, provided additional guidance on the interpretation of consumer notion in joint credit agreements.

Facts of the case

The case involved a credit contract concluded between a bank and two married debtors, one of whom self-employed. The loan amount was devoted partly to the professional purposes and partly to the private purposes. Specifically, 35% of the loan was used to make outstanding payments for the company of one of the debtors, while the remaining 65% was used to used to finance renovation works in the debtors' house. Against this background, a question was raised whether the contract qualified as a business-to-consumer contract and fell within the scope of the UCTD.

"Not predominant" vs. "negligible" purpose

The referring court requested the interpretation of Article 2(b) UCTD, which defines the notion of the consumer, explicitly enquiring about the relevance of the Gruber case law in that context. To recall, the Court established in Gruber that a person who concludes a contract for goods intended for purposes which are in part within and in part outside his or her trade or profession may not rely on the special rules of jurisdiction, unless the trade or professional purpose is "so limited as to be negligible" in the overall context of the supply. This seemed to be at odds with the wording on mixed-purpose contacts found, among others, in Directive 2011/83/EU on consumer rights (CRD). Specifically, pursuant to recital 17 of the CRD where the contract is concluded for purposes partly within and partly outside the person’s trade and the trade purpose is "so limited as not to be predominant" in the overall context of the contract, that person should also be considered as a consumer.

As mentioned, already the previous judgments of the Court suggested that the Gruber test cannot be applied more broadly to consumer law, but is limited to the specific context of applicable law and jurisdiction. The Court has now made this distinction explicit. It drew attention to a close connection between the UCTD and the CRD, recently strengthened via the Omnibus Directive (para. 43). The Court emphasised that both directives follow the same main objective, namely to provide for a high level of consumer protection (para. 42). It also observed that a wording similar to that in recital 17 CRD can also be found in the ADR Directive and the ODR Regulation, suggesting that the legislator intended such a broader reading to have a horizontal nature (para. 45). Accordingly, the notion of the consumer under UCTD must be understood as also covering a person who concludes a dual purpose contract if the trade purpose is so limited as not to be predominant in the overall context of the contract.

The more restrictive reading of the consumer notion in mixed-purpose contracts continues to be relevant in the domain of private international law. Here, as the Court noted, additional objectives must be considered, namely the legal certainty and predictability of the jurisdiction. The more recent Schrems judgment does not undermine this reading (para. 47). 

Joint credit agreements

Having clarified the outer boundaries of the consumer concept, the Court went on to provide more specific guidelines on its interpretation in the case at hand. Firstly, it stressed that the referring court should take all circumstances of the case into account, including the nature of the product or the service. In case of mixed-purpose credit contracts, the Court indicated that the scope of professional and personal components of the contract and the dominant purpose of the contract should be considered. The Court then went on to formulate more specific criteria, noting that they are neither exhaustive nor exclusive (para. 58). In particular, the quantitative breakdown of the borrowed sum between the two respective purposes may be an important criterion. However, also qualitative criteria may turn out to be relevant, e.g. the fact that only one of a larger number of debtors pursues a professional activity or that the granting of a loan, initially intended solely for private purposes, was made conditional upon the partial allocation of the borrowed amount to the repayment of trade-related debts.

Overall, the judgment in case C‑570/21, YYY, is a welcome ruling, dispelling some persisting doubts about the reading of consumer notion in different legal acts. Nonetheless, the differentiated interpretation may, in itself, pose practical challenges, as the second judgment issued on the same day illustrates.

Consumer protection extended to mixed-purpose contracts - CJEU in S.V. (Immeuble en copropriété) (C-485/21)

Last Thursday in the case S.V. (Immeuble en copropriété) (C-485/21) the CJEU provided us with new guidance as to the scope of the notion of a consumer.

Image by Spencer Wing from Pixabay    

In the given Bulgarian case, an owner of an apartment in a building of a housing association (in co-ownership) concluded a contract with a company that was to provide management and maintenance of the communal areas of that building. The contract included terms on late payment fees, which ended up being contested as to their fairness (excessive amounts and lack of transparency) under the UCTD. The question was whether consumer protection framework was applicable at all to this situation.

The CJEU reminds that the notion of a 'consumer' is objective in nature and should be assessed by reference to a functional criterion (para 25). This means that is only relevant to consider whether the contract was concluded in the course of activities outside a trade, business or profession. Consequently, what is required of national courts it to establish whether the party in the given case, a natural person, 'does not use that apartment for purposes which fall exclusively within her trade, business or profession', as that would exclude that party from the scope of consumer protection (para 27). This is a welcomed confirmation that the 'consumer' notion applies broadly in mixed-purpose contracts, that is when consumers use goods for a mix of personal and professional purposes. The CJEU in this paragraph seems to imply that any mixed-purpose contract could be covered by consumer protection framework (by referring to 'exclusive' use for professional purposes). Further, in paragraph 32 of the judgment the CJEU specifically mentions situations where natural persons could use an apartment 'constituting his or her personal home for professional purposes also, such as in the context of salaried teleworking or in the exercise of a liberal profession'. Again, this is a great example of a modern, progressive approach to the interpretation of the notion of a 'consumer', considering the current realities of many goods being used simultaneously or alternatively for personal and professional purposes. 

Another interesting observation of the CJEU is that it is irrelevant whether some of the activities of a provider of services or a seller 'are the result of the need to comply with specific requirements relating to safety and town and country planning, laid down by the applicable national law' (para 30). Contractual terms reflecting such mandatory statutory provisions may not be tested for unfairness, pursuant to Article 1(2) UCTD, but that exclusion does not stretch as far as to encompass the contract as a whole. Consequently, other terms in that contract may be subject to the unfairness test (para 31). This is consistent with the past narrow interpretation of various UCTD's exceptions to its scope of application.

Financial expertise does not preclude qualification as consumer – CJEU in Petruchová (C-208/18)

Yesterday, the CJEU issued a judgment in the case C-208/18 Jana Petruchová v FIBO Group Holdings Limited (the case has not yet been published in English; the link refers to the French version). The case concerns an individual contract for difference (CfD) concluded between the claimant and the defendant and, particularly, the definition of a ‘consumer’ in the context of financial investments under Article 17(1) of the Brussels Regulation. The preliminary question referred to the CJEU was whether Article 17(1) of the Brussels Regulation should be interpreted as meaning that a person who engages in the trade of foreign currency exchange is a consumer or whether the individual’s financial knowledge and expertise, the complex nature of the contract, and the risks involved determine that that person is not a consumer. A summary of the facts of the case and an analysis of AG Tanchev’s opinion can be found here.

It is noteworthy that the defendant never argued that the claimant was acting in the sphere of her professional activities (para 46). In fact, the claimant was, at the time of the conclusion of the contract, a university student, which leads the CJEU to immediately ascertain that the contract was not concluded within the scope of the claimant’s professional activities. Instead, the argument is that the professional nature of the contract is not the only criterion that matters when determining whether a party qualifies as a consumer. However, just like AG Tanchev, the CJEU rejected this argument. The CJEU declared that factors such as the amounts involved in the financial transactions, the risks of financial losses associated with such contracts, the financial knowledge or expertise that the person might have or its active engagement in such financial operations are irrelevant in the qualification of a person as a consumer (para 59). In this sense, the CJEU reaffirmed that the crucial test is whether the contract relates to the person’s professional activities or whether the contract’s goal is to satisfy the individual’s personal needs (para 56).

This conclusion is not surprising, since the CJEU had already established (for example, in the Schrems case) that the concept of consumer has an objective character and that it is not connected with subjective aspects such as the particular knowledge that the individual has about the object of the contract (para 55).

Furthermore, the CJEU concluded that even though the definitions of a ‘consumer’ present in other EU legislative instruments are interpretively relevant (para 61), the fact that financial instruments are excluded from the scope of the Rome I Regulation is irrelevant in this case, since the two Regulations pursue different goals (para 64). The qualification of an individual as a ‘retail client’ is also irrelevant for the qualification as a consumer (para 77).

UCTD applicable to other than employment contracts concluded between employees and employers - CJEU in Pouvin (C-590/17)

The CJEU supported today the AG Bobek's opinion in the case Pouvin (C-590/17) that the notion of consumers and sellers from the Unfair Contract Terms Directive should be interpreted broadly. This means that also employees (and their spouses) who are acquiring a loan from their employers should be seen as consumers when these loans are meant to finance the purchase of a real estate for private purposes. Simultaneously, the employer in this situation would be seen as a seller within the meaning of the UCTD, as the loan contract would be provided within its professional activity, even if it not the employer's main professional activity.

We have previously commented on the AG Bobek's opinion in this case in detail (see AG Bobek in Pouvin C-590/17: The scope of the UCTD should be interpreted broadly), thus we send our readers to this post for the summary of the facts of the case and the main arguments raised. The CJEU repeats the argumentation that the exclusion of employment contracts from the scope of application of the UCTD is not applicable to other than employment contracts concluded between employees and their employers, as long as these contracts do not regulate the employment relationship or employment conditions (paras 31-32). What is then only important to ascertain, in order to determine whether an employee is a consumer, is the purpose for which he is purchasing goods/services (needs to be private) (paras. 23, 26). It remains irrelevant that not every consumer could have concluded this contract, as they were reserved only for employees of this particular undertaking, as long as the employees who were eligible to conclude this contract did this in their private capacity (para. 30). Further, the employer should be seen in this case as a 'seller', as even if their main professional activity lies in supplying energy rather than offering loan contracts, the latter activity is ancillary in their business dealings - allowing them to attract a skilled workforce (para. 42). Moreover, the employer has more resources and, therefore, more information than any natural person, his employee. This puts the employees at a contractual disadvantage that the application of the UCTD will remedy (para. 40).

In light of the earlier judgments in Karel de Grote case and Costea, this is by no means a surprising judgment.

Max Schrems is a consumer - with respect to his own claims, Court says

Source: https://twitter.com/maxschrems

Yesterday, on 25 January, the judgment in the second high profile case concerning the battle of Max Schrems against Facebook was delivered by the Court of Justice. The ruling does not come as a big surprise to those familiar with the earlier opinion of Advocate-General Bobek (for a broader overview of the dispute itself and the AG's opinion see our earlier post here). Indeed, the Court decided to follow the midway approach proposed to it by the AG. According to the Court, a claimant does not lose the status of a 'consumer' for purposes of establishing jurisdiction of the court seised, as a result of his engagement in activities such as book publishing, lecturing, operating websites, fundraising and collecting claims of numerous consumers. However, the jurisdictional privilege arising out of Article 16(1) Regulation No 44/2001 (Brussels I; currently Article 18(1) Regulation No 1215/2012) does not extend to collective redress.

Question 1: Is Schrems himself a consumer?

The Court began its analysis by recalling the general rule of actor sequitur forum rei, upon which the Brussels I regime is based, and the consequent requirement to interpret the rules which derogate from it strictly. This applies to Article 16(1) which allows consumers to bring proceedings against their contractual counter-party in the courts for the place where they are domiciled. 

It then reaffirmed its established line of reasoning, according to which:

• in the interpretation of the term 'consumer' for purposes of Brussels I regulation reference must be made to the position of the person concerned in a particular contract, having regard to the nature and objective of that contract and not to the subjective situation of the person concerned (para. 29);
• only contracts concluded outside and independently of any trade or professional activity or purpose, solely for the purpose of satisfying an individual's own needs in terms of private consumption, are, in principle, covered by the special rules aimed to protect the consumer as a weaker party (paras. 30-31).

Mixed purpose and dynamic assessment

The judgment further recalled that in mixed purpose scenarios, i.e. where a person concludes a contract for a purpose which is partly within and partly outside his or her trade or profession, the Gruber test applies. Consequently, a person can only rely on the jurisdictional privilege available to consumers if the link between the contract and that person's trade or profession is so slight as to be marginal and, therefore, has only a negligible role in the context of the supply in respect of which the contract is concluded, considered in its entirety (para. 32).

Having in mind the conclusion reached in Gruber as well as the Court's repeated references to the strict interpretation requirement in the commented judgment, the reasoning presented so far did not appear to bode well for Schrems. Neither did the following passage of the judgment, which introduced an element of novelty to the Court's existing jurisprudence and could be of considerable relevance for the future cases. 

"[I]t is necessary, in particular, to take into account, as far as concerns services of a digital social network which are intended to be used over a long period of time, subsequent changes in the use which is made of those services" (para. 37). Consequently, "a user of such services may, in bringing an action, rely on his status as a consumer only if the predominately non-professional use of those services, for which the applicant initially concluded a contract, has not subsequently become predominately professional" (para. 38).

The Court has thus made clear that the subsequent change of the purpose, for which the services provided under the contract are used, should not be disregarded. This is already a very important take-away. The importance of these follow-on factors is, nevertheless, far from clear. While the Court does not refer to it explicitly, it seems that the time of contract conclusion could still be perceived as the main point of reference, as reasoned by the AG. Based on this premise, one could argue that it is at this stage that the strict Gruber test should be applied. Indeed, the negative formulation "has not subsequently become predominately professional" leaves room for a more consumer-claimant-friendly interpretation at a subsequent stage.

The contract, not the person

As seen from above, with respect to mixed-purpose long-term contracts the judgment leaves several important questions open and its consumer-claimant-friendly reading may be regarded as a stretch. The answer provided by the Court was, nevertheless, favourable to Schrems. The reason seems to lie in the character of his "professional" use of Facebook services. According to the Court, acquiring expertise in the field covered by the services at issue and giving assurances for the purposes of representing the rights and interests of other service recipients cannot lead to the loss of one's consumer status. This is because: 

• as mentioned before, an assessment of the 'consumer' status is undertaken irrespective of the subjective situation of the person concerned, in particular his or her knowledge and information possessed (para. 39);
• a contrary interpretation would prevent an effective defence of the rights that consumers enjoy in relation to their contractual partners who are traders or professionals (here especially: the protection of personal data) and would disregard the objective set out in Article 169(1) TFEU of promoting the right of consumers to organise themselves in order to safeguard their interests (para. 40).

Question 2: Can Schrems bring claims of other consumers in his domestic court?

Article 169(1) TFEU, however, did not prove helpful in respect of the second question. Emphasising once again the requirement of strict interpretation, the Court found that the special protection granted to a consumer as a party to the legal proceedings applies only in so far as the claimant or defendant is, in fact, a party to the consumer contract in question (paras. 44-45). A situation of a consumer to whom claims of other consumers were assigned was thus treated analogously to that of a consumer organisation. A different interpretation would, according to the Court, lead to the establishment of a specific forum for consumers to whom claims of other consumers have been assigned, which is nowhere to be found in the Brussels I regulation and which would undermine the predictability of attributing jurisdiction (paras. 46-48).  

Consequently, the jurisdictional privilege set out in Article 16(1) of Regulation No 44/2001 does not apply to the proceedings brought by a consumer for the purpose of asserting the claims assigned to him by other consumers, irrespective of whether the assignors are domiciled in the same Member State, in other Member States or in non-member countries.

Concluding thought

The judgment appears to be a win for consumers who decide bring their civil claims against traders to a court and take their disputes seriously - a result which is hard not to agree with. The ruling is, nevertheless, far from a sweeping consumer victory. Despite a reference to the consistency of EU law in para. 28, the Court maintained the established reading of Gruber for jurisdictional purposes and accepted that consumer status can be lost over time. Last but not least, even if the Court's choice to leave the collective redress dimension up to the European legislator cannot be denied legal grounds, it goes without saying that transnational private enforcement of consumer law remains an issue. One can hope, however, that the experience made in discussions on the GDPR regarding that latter point, along with the recent steps taken by the Commission as a follow-up to its 2013 recommendation on collective redress, will eventually bring something more concrete to reason about.