Against False Settlement: Designing Efficient Consumer Rights Enforcement Systems in Europe

Abstract

With its recent legislation on consumer ADR and ODR, the European Union (EU) pioneers the creation of a comprehensive out-of-court dispute resolution system for B2C conflicts. The proposed system raises questions as to how consumer rights can and should be efficiently enforced. We propose design principles for efficient consumer rights enforcement systems in Europe and sketch an appropriate judicial model procedure. Against this background, we critique the new EU system: mandatory consumer rights will not be fully enforced; traders will have inefficient behavioral incentives; fundamental due process values will be compromised; an unnecessary, heavily regulated, and costly private enforcement industry needs to be created; access to the courts for consumers will be seriously impaired. Mandatory consumer rights attempt to correct market failure. Such rights should be enforced in streamlined small stakes proceedings by state courts, not by private service providers.

Keywords: Consumer Rights, Enforcement Systems, Dispute Systems Design, Small Claims Proceedings, Alternative Dispute Resolution, Online Dispute Resolution, European Union

JEL Classification: K12, K41