Inequality of Bargaining Power Versus Market for Lemons: Legal Paradigm Change and the Court of Justice's Jurisprudence on Directive 93/13 on Unfair Contract Terms
European Law Review, Vol. 33, pp. 336-358, 2008
Posted: 12 Feb 2009
Directive 93/13 on unfair terms in consumer contracts has often been described as one of the most important European instruments in the area of consumer contract law. Currently the Directive is being assessed as part of the Commission's Review of the Consumer Acquis. Despite a comparatively large amount of case law, the Court has refused to develop a substantive minimum standard of fairness and consumer protection. Given the widely held view that the underlying rationale of the Directive is to correct the 'inequality of bargaining power' between business and consumers, this can only be a disappointment. Alternatively, the Directive can be analyzed as an instrument to tackle a form of market failure in respect of contract terms similar to what Akerlof has described as a 'market for lemons'. This approach is better able to accommodate the regulatory framework provided by the Directive as well as the Court's case law. Consequently, the current paradigm of 'inequality of bargaining power' should be replaced by the 'market for lemons' approach. This will have implications for the future development of standard contract terms legislation at the European level.
Keywords: Competition law, Consumer contracts, Consumer protection, EC law, fairness, Inequality of bargaining power, Transparency, Unfair contract terms
JEL Classification: K12
Suggested Citation: Suggested Citation