3.1 Introduction
Whether consumer law should address inequality has been approached from various perspectives in Latin America and Europe.Footnote 1 A central factor to consider in the effort to elucidate the place for inequality concerns in consumer transactions is the underlying concept of the consumer embraced in each jurisdiction. In Europe, EU consumer law has historically emphasized consumer empowerment, and the European Court of Justice has predominantly elaborated its jurisprudence around the interpretive benchmark of the average consumer, that is, one who is presumed “reasonably well informed, observant and circumspect.” Conversely, consumer protection laws in Latin America start by emphasizing consumer protection and, by consequence, the courts have generally embraced the interpretive benchmark of the vulnerable consumer, that is, the party in the transaction who occupies, however relatively, a markedly vulnerable position in the regulatory structure of the marketplace.Footnote 2
The European emphasis on empowerment and the average consumer benchmark is informed by an underlying assumption that consumers are sovereign: they are rational actors who adequately process information and make informed decisions on their own. Following this particular assumption of rationality, EU consumer law has mainly taken the form of disclosure obligations and the recognition of consumers’ correlative rights in order to make the information necessary for autonomous choices available to them. Put in the simplest form, the professional supplier is taken as the informant and the consumer as the informed sovereign. This means that, on one side, the focus is on whether the supplier discloses the information owed and, on the other, on whether the consumer has sufficient access to that information – an approach often characterized as “empowerment through information.” Under this framework, information and empowerment are usually preferred to substantive regulation which, in principle, reflects reduced concern for vulnerable consumers. Indeed, cognitive vulnerabilities of consumers (the particular circumstances that impair decision-making) are primarily treated as exceptions (or deviations) from the default assumption of rational autonomy.
Contrarily, the Latin American emphasis on protection and the vulnerable consumer benchmark is informed by an underlying conception of the consumer as an imperfectly rational actor (one of “bounded rationality”) whose structural relation to the provider and marketplace situates her in a position of relative vulnerability. The point of departure is precisely such structural vulnerability: all consumers are potentially vulnerable. Under this framework, consumers’ vulnerabilities are the norm rather than the exception. This approach acknowledges the inherent complexity of market dynamics and consumer behavior, and the way in which professional suppliers and consumers relate to each other within that complex context. Part of the complexity derives from the dual objectives of the professional suppliers. Professional suppliers balance their obligation to inform potential customers against their primary objective of marketing their products or services to attract as many actual customers as possible. In other words, the professional supplier seeks to persuade the consumer that her product offers more advantages and benefits than her competitors, and to that end she invests resources and effort in gaining an understanding of her consumers’ behavior that surpasses that of the consumers themselves. The persuasive angle of suppliers’ exploitative behavior signals, on one hand, the insufficiency of the empowerment-through-information approach; and, on the other hand, the need to display more sensitivity to particular circumstances that impair consumers’ decision-making. The underlying principle is that consumer protection statutes should not limit themselves to remedying market imbalances because they can also provide a means for fostering substantive equality in consumer transactions, which becomes manifest where there is more substantive regulation coupled with more room for courts to intervene.
In this chapter, I demonstrate significant consequences of this distinctive emphasis: the more consumer law moves toward empowerment and embraces the average consumer default, the less sensitive it becomes to the vulnerabilities that impair consumer decision-making, which hinders this model’s capacity to address substantive inequality in consumer transactions. The different starting points, consumer vulnerability as an exception in Europe versus consumer vulnerability as a norm in Latin America, are crucial in the determination of when a court may justifiably intervene in a contractual relationship in order to protect vulnerable consumers from detrimental agreements. Following an examination of the European experience, the article takes a closer look at consumer protection law in Argentina, where the courts embrace the task of using consumer law to reduce inequality. In particular, it focuses on the significant, recently introduced category of the hyper-vulnerable consumers – that is, consumers who find themselves in a situation of aggravated vulnerability due to age, gender, physical or mental state or social, economic, ethnic and/or cultural circumstances, any of which may cause special difficulty for the full exercise of their rights as consumers (Res. 139/2020). The choice of the Argentine case is motivated by the country’s paradigmatic shift from a formal and abstract principle of equality to a substantive and situated conception that was introduced by Civil Code reform of 2015. The referred shift is also operative in the recently proposed Project of Reform of the Consumer Protection Law, which opens a path for novel regulation sensitive to inequality in consumer relations,Footnote 3 and was given momentum by the urgent need for responses from government, civil society, and social associations to the structural inequality that has become glaringly evident in the aftermath of the COVID-19 crisis.
Against this background, the traditional view that Latin American legal systems often represent outdated or failed transplants from Global North models becomes unsatisfactory. As this introduction suggests, the legal structures for consumer protection in Latin America differ from the approaches to consumer law which are currently considered “orthodoxy” in EU consumer law.Footnote 4 This deviation itself suggests that a more helpful or meaningful framework to address the development of “heterodox” legal approaches to consumer law in Latin America is greatly needed.Footnote 5 In this context, the legal heterodoxy framework introduced by Mariana Pargendler and Kevin Davis offers a promising alternative.Footnote 6 The close attention the legal heterodoxy framework devotes to the local circumstances (social, economic, and political) in developing countries makes it better equipped to unpack the variety of public policy objectives pursued within a range of different worldviews, each with its own order of values embraced. The conjugation of policy objective and local values yields the distinctive responses of consumer law in different jurisdictions to the problems common to all of them.
Moreover, by inviting scholars to tease out the underlying reasoning behind the divergent approaches to consumer law in developing jurisdictions, this methodology offers a unique opportunity not only to overcome the traditional unidirectional perspective of inquiry and learning (i.e., focusing on the degree to which Latin American institutions converge with their European counterparts), but also, and perhaps most importantly, it opens up an avenue for identifying “reverse convergence” (i.e., areas where Europe converges with Latin America). This broader perspective is particularly apt in the current rise of the global digital economy. The rapid development of Artificial Intelligence (and other new technologies), whose algorithms have a direct impact on consumers’ rights to safety, privacy, and non-discrimination, is exacerbating the salience of the structural character of consumer vulnerability in the marketplace.
3.2 Consumer Law and Inequality in Europe and Latin America
3.2.1 Between Empowerment and Protection Paradigms: A Matter of Emphasis
Whether consumer law should be concerned with inequality is a multi-faceted question that depends to a certain extent on the particular vision and understanding of the aims of consumer law in play, as well as the base conception of the consumer in a given legal system. Europe and Latin America have approached the relationship between consumer law and inequality from various, distinct perspectives, which reflect different views on both the goals of consumer law and the role of the consumer in the marketplace.
In the European context, where the underlying objective was putting in place a set of rules for the creation and maintenance of a single, durable regional market, consumer protection law was predominantly understood from the outset in terms of its usefulness for market optimization, a one-sided, exclusive goal aiming for internal market integration.Footnote 7 This unidimensional stance implied that economic interests and social interests are somehow fully separable.Footnote 8 The thinking behind the approach considered that EU consumer protection law should only concern the economic interests of the parties to any transaction, which are compatible with a market economy. Non-transactional interests, such as equality, social cohesion, or distributive concerns, which could conflict with market integration, were secondary.Footnote 9
According to this stance, protecting consumers against their vulnerabilities that result from particular circumstances puts a limit on (liberal notions of) freedom of contract and party autonomy,Footnote 10 which could hinder rather than enhance market integration.Footnote 11 The underlying liberal position is that the right to free choice constitutes the core element of the individual rights of citizens to participate in cross-border transactions in accordance with European Community law – the notion that the internal market should maximize the capacities of both businesses and consumers to do business with each other across borders.
Following this logic, the main rationale behind consumer protection law became the empowerment of consumers to take sufficiently informed autonomous decisions on their own by focusing on the right to information and relying on information duties to facilitate consumer choices and autonomy.Footnote 12 This paradigm of empowerment-through-information embraced by the EU is based on the conceptualization of the consumer “as a rational actor who – like other private actors – makes autonomous decisions and for whom the law normally only offers a facilitative back-up, rather than protection.”Footnote 13 The emphasis in the EU Directives on the mandatory disclosure of information and rights of withdrawal (a short cooling-off period following the transaction to allow consumers to re-evaluate and change their decision without penalty), which are designed for reasonably well-informed and circumspect consumers, clearly reflects this agenda of empowerment.Footnote 14
Alongside the empowerment narrative is the rhetoric that maximum harmonization is needed in order to promote the internal market, with its corollary that minimum harmonization should be dismissed because it might harm the unity of the internal market by inhibiting the establishment of a level playing field for trade.Footnote 15 Whether accurate or not, this assertion implies that the success of the empowerment-through-information paradigm ultimately requires a ceiling on consumer rights for the sake of maximum harmonization. Achieving maximum harmonization, for its part, ultimately means that consumer protection must be determined by the EU, and that level of protection cannot be raised by national law (i.e. stricter national rules of consumer protection are disallowed).Footnote 16 This limits national choice and flexibility in that the centralization does not allow sufficient space for national initiatives to protect groups of vulnerable consumers whose particular needs cannot be satisfactorily addressed by rules adopted at the EU level.Footnote 17 Moreover, maximum harmonization also means that if the maximum EU level of protection is lower than existing national standards, then the central EU determination causes a reduction in protection in those member states.Footnote 18
Whether EU consumer law should leave room for member states to choose how they enhance protection of particular groups of vulnerable consumers is a contested issue subject to (ongoing) debate,Footnote 19 one that I do not engage in this piece.Footnote 20 My aim is distinct: I wish to show that, the more EU consumer law emphasizes empowerment and embraces maximum harmonization, the less sensitive it is to vulnerabilities that impair consumer decision-making, which hinders the empowerment-through-information model’s capacity to address inequality in consumer transactions. To clarify, I am not implying that EU consumer policy solely involves empowerment.Footnote 21 It also recognizes the need for protection, and some concern for vulnerabilities is evident in the recognition that certain groups of consumers warrant enhanced protection.Footnote 22 For example, the Unfair Commercial Practice Directive (Directive 2005/29/EC) conveys (limited) concern for the vulnerable consumer by incorporating measures of consumer protection targeting specific disadvantaged groups (“mental or physical infirmity, age or credulity”).Footnote 23 Other references to vulnerable consumers are made in the Consumer Rights Directive (Directive 2011/83/EU) and the General Product Safety Directive (Directive 2001/95/EC). The reference in the Consumer Rights Directive stipulates that traders should take into account the specific needs of “consumers who are particularly vulnerable because of their mental, physical or psychological infirmity, age or credulity” when providing consumers with pre-contractual information.Footnote 24 The General Product Safety Directive (Directive 2001/95/EC), for its part, mandates that categories of consumers “particularly vulnerable to the risks posed by the products under consideration, in particular children and the elderly” be taken into account when assessing product safety.Footnote 25 Together however, the original choice to (over)emphasize empowerment and the pervasiveness of the narrative on the advantages of maximum harmonization for the internal market have powerfully influenced the overly restrictive consideration of consumer vulnerabilities in EU law, which, as I will demonstrate in Section 3.2.2, are considered secondary (or subsidiary) protective interests.Footnote 26
The situation is quite different in Latin America. There, the protective aim of consumer law has been emphasized over the empowerment one since the very beginning.Footnote 27 The prevailing underlying rationale at the time when most consumer protection laws were enacted in the region (the 1980s and 90s) prioritized the need for specific regulation from the state to properly address the contractual asymmetry of power between suppliers and consumers in the marketplace. This stance reveals the shortfall, at least in the realm of consumer law, of the classic assumption of formal equality between the contracting parties on the basis of which most nineteenth century Civil Codes were constructed. Consequently, consumer law has mainly been understood as a tool to counteract structural power imbalances between suppliers and consumers in the marketplace, with the aim of strengthening consumers’ substantive rights. This stance is perhaps partially explained and, to some extent, reinforced by the constitutional status of consumer rights in most jurisdictions in the region.Footnote 28 Constitutional status complicates the simplicity of the widely professed solid line walling economic and social rights from the underlying logic of private law institutions, such as contracts, torts, and property law. Ultimately, constitutionalizing consumer rights means that the constitution can be invoked to reshape the legal relationship between consumers and suppliers in the marketplace.Footnote 29
Following this line of thinking, the underlying idea was that consumer protection encompasses much more than empowerment because its concern is achieving adequate levels of substantive protection for all consumers, whether empowered or not. The underlying conception of the consumer thus departs markedly from the “reasonably well-informed and circumspect” rational actor that is assumed by the empowerment-through-information model. Instead, under the protection paradigm, the dominant depiction of the consumer is that of a structurally vulnerable consumer, that is, one who occupies a relatively although decidedly vulnerable position in the market structure, which calls for a higher degree of protection than other transactional contexts involving private parties who negotiate on more equal footing.Footnote 30
Under this distinctive structural narrative, the empowerment-through-information strategy (i.e., seeking to enable consumers to exercise their freedom of choice) appears, at least a priori, ill-suited for effective protection of consumers deemed, in principle, vulnerable to market power dynamics that (more often than not) impair their ability to inform themselves adequately or make free, autonomous choices. Consequently consumer protection statutes in many Latin American jurisdictions originally contained, in addition to the classic information duties and disclosure rules (which align well with the empowerment approach), more robust substantive protections, such as a consumer’s right to compensation and stringent remedies (e.g., the broader availability of pain and suffering awards and increasing recourse to punitive damages awards),Footnote 31 a right to dignity and equitable treatment, a regime of strict liability, and the availability of class action mechanisms, free access to justice and protective principles (e.g., “in dubio pro-consumer”), all of which better serve the aim of shielding consumers from structural vulnerability. Again, the claim is not that consumer law in Latin America exclusively involves substantive protection and heightened concern for vulnerable consumers, for empowerment is certainly an objective too.Footnote 32 The point is that the original emphasis on protection has facilitated the model’s capacity to address inequality in consumer transactions, by displaying much more sensitivity toward consumer vulnerabilities not only from legislators but also, and importantly, from courts – which I explore through reference to the particular case of Argentina in Section 3.3.
Examining the distinctive European and Latin American visions of consumer law reveals how the pervasive foundational narratives pit the aims of consumer law as dichotomous (empowerment or protection), leading to starkly contrasting default conceptions of the consumer in Europe and Latin America (“reasonably well-informed, observant and circumspect” versus “structurally vulnerable”). These different default assumptions then affect ensuing decisions on when, where, and how consumer vulnerability in the marketplace should be addressed. The problem with this dichotomous narrative is that consumer protection and consumer empowerment are not necessarily at odds. On the contrary, they may very well complement each other. Another problematic aspect of the empowerment or protection framework is that it diverts attention from the more relevant question (and challenge), which is the appropriate relative weight of each in the design of any given legal system’s consumer law, not to mention the particular circumstances and contexts that might justify modifying that balance. In other words, the empowerment v. protection characterization overlooks the importance of recognizing and mapping out the interconnectedness and interaction between the two objectives, a relationship that is socially and culturally dependent – which will become clearer when I explore their interplay in the Argentinian context in Section 3.3.
However, the institutional choice on whether to emphasize empowerment or protection over the other has been assumed necessary from the outset in both Europe and in Latin America, perhaps without awareness of the extent of the practical ramifications that would actually transpire. In what follows, I explore one such ramification. In particular, I show how the initial emphasis on empowerment in Europe led the EU to embrace the “average consumer” as its interpretive benchmark, depicting consumer vulnerabilities as exceptions that occasionally require a higher degree of protection if properly justified; whereas the original Latin American emphasis on protection has led those jurisdictions to embrace the “vulnerable consumer” as their interpretive benchmark, positing structural vulnerability as the norm allowing greater room for the provision of enhanced protection in cases of “aggravated vulnerability,” which intensifies structural vulnerability.
3.2.2 The Significance of the Benchmark Adopted
The European narrative emphasizing consumer empowerment-through-information assumes a particular understanding of the consumer that responds to the initial, overarching concern with providing the information needed by consumers to make well-informed decisions.Footnote 33 This implies that stringent consumer protection, meaning protection that goes beyond duties of information (e.g., mandatory substantive law, such as the control of standard contract terms) is only justified “when the information content cannot be shaped in such a way that a reasonably observant, circumspect consumer could digest it at a reasonable price or with reasonable effort.”Footnote 34 This profile for the typical consumer in Europe was in fact established by the European Court of Justice (ECJ) itself, which described her as: “reasonably well-informed and reasonably observant and circumspect.”Footnote 35 The ECJ then developed, through reference to this profile in its case law, the interpretive benchmark of the “average consumer” as the default standard in legal doctrine for judging “unfairness,” for example, when assessing whether a contractual clause, in legal terms, is sufficiently clear.Footnote 36 Following this logic, the aim of consumer law is empowering the average, “reasonably well informed and reasonably observant and circumspect” consumer to exercise her choices, and to establish under which justifiable circumstances a heightened degree of protection may be exceptionally required.
Likewise, the Unfair Commercial Practice Directive (UCPD) has also adopted the “average consumer” benchmark as the standard to assess whether a specific practice (outside the forbidden) is unfair (e.g., whether it has misled or caused consumers to engage in a transaction that they would not have taken otherwise) and, as a consequence, whether consumers should be protected against it.Footnote 37 For example, in Sony,Footnote 38 the ECJ examined whether the economic behavior of the “average consumer” with regard to the product would be materially distorted by the commercial sale of a computer equipped with pre-installed software that affords no option for the consumer to purchase the same model of computer without the pre-installed software. Namely, would it significantly undermine the average consumer’s ability to make an informed decision and lead to a transactional decision that the consumer would not have taken otherwise? In dealing with this question, the ECJ emphasized that the consumer had been duly informed prior to the purchase that the computer model in question did not come without pre-installed software. On the basis of that information in particular, the understanding was that the consumer was able to decide whether to accept the terms previously drawn up by the seller and was therefore, in principle, free to choose another model of computer, or another brand, of similar technical specifications that was sold without pre-installed software or came with different pre-installed software. In light of these considerations, the ECJ concluded that the commercial practice at issue did not in itself constitute an unfair commercial practice within the meaning of Article 5(2) of the UCPD. As is evident in the ECJ’s approach, the consumer is treated in the abstract and the preponderant focus is on the quality (correctness) of the information provided.
Besides the “average consumer” benchmark, the UCPD includes two other categories of consumers: the “targeted (average) consumer” and the “vulnerable (average) consumer.”Footnote 39 The “targeted consumer” refers to situations where a commercial practice is specifically aimed at a particular group of consumers, such as children.Footnote 40 The “vulnerable consumer” is meant to capture situations where “certain characteristics such as age, physical or mental infirmity or credulity make consumers particularly susceptible to a commercial practice or to the underlying product.”Footnote 41 However, the Directive further establishes that those commercial practices “shall be assessed from the perspective of the average member of that group.”Footnote 42 The fact that the reference point is the “average member” of the protected group means that, whether or not actual members of the “targeted” or the “vulnerable” group are misled by a certain practice, if the “assumed average member” would not be misled, there are no grounds for enhanced protection.
This theoretical construct, which contradicts the centrality of relational, situational, and highly contextual factors in the very definition of vulnerability, makes effective protection of vulnerable consumers difficult to ensure.Footnote 43 What it actually does is reconfirm the original, underlying intent of EU consumer law to facilitate market integration where consumers’ vulnerabilities are seen as a destabilizing departure from informed autonomy rather than relevant interests that warrant heightened protection (i.e., vulnerabilities as interests of secondary consideration). Most importantly, these two categories end up consolidating and reinforcing the default standard of the “average consumer.” First, consumer vulnerability is conceived as an exceptional deviation from the norm of the “average consumer” whose protection must be justified by additional substantive reasons beyond personal status as consumers.Footnote 44 Second, the “average” benchmark is embedded as a subsidiary consideration in the exceptional categories themselves, in that vulnerabilities are assessed in reference to the “average member” of the group. Moreover, it is not entirely clear what these category-based classifications are meant to address.Footnote 45 For instance, the exclusive focus on personal attributes (age, physical or mental infirmity or credulity) is questionable. They are narrow and flat attributes that fail to recognize that vulnerabilities are dynamic, not static: a person or group of persons may experience different kinds of vulnerabilities at different times. The manifestation of vulnerability depends on the particular circumstances (or contextual setting) in which consumers find themselves (situational vulnerability). For example, age does not in itself imply vulnerability. In many situations, an educated, resourceful elderly woman in Argentina can overcome hurdles of digital financial transactions that an illiterate poor elderly woman in the same country might not. Additionally, the categorical approach invites further criticism from those who argue that person-based categorizations not only stigmatize (or stereotype) groups of consumers, but also that they, perhaps most importantly, prevent us from identifying those from among the vulnerable category who are worse off than others (e.g., the illiterate and poor elderly woman when attempting to make a digital financial transaction).Footnote 46 Moreover, if these categories are meant to mitigate structural inequality in consumer transactions, they seem to present problematic shortfalls. For example, they do not capture other social, economic, ethnic, and/or cultural circumstances, which may very well impair consumers’ decision-making and call for some sort of enhanced protection.Footnote 47 Admittedly, vulnerability is extremely complex and multi-layered.Footnote 48 However, reflecting it solely in terms of person-focused attributes, as EU consumer law does in a categorical, selective, and fragmented way, makes it even more difficult (if not impossible) to grasp.
The point is that using the benchmark of the average consumer reduces the space for consumer vulnerability to an exceptional departure from the norm.Footnote 49 The influence of this framework has been widely discussed in the European scholarly work on the vulnerable consumer: most scholars depart from acknowledging and recognizing the average consumer as the unquestionable default and argue for flexibilization or expansion of that very notion in order to more accurately capture consumer vulnerabilities.Footnote 50 The few European scholars who have of late begun fundamentally questioning the average consumer default itself have thus far focused on the specific context of digital markets – persuasively arguing that “structural vulnerability” be taken as the norm in the digital economy and calling for higher levels of consumer protection and a reassessment of the information paradigm dominant in the EU.Footnote 51
Conversely, in Latin America, the dominant narrative of consumer protection has paved the way for the original notion of the consumer as one who occupies a relatively yet markedly vulnerable position in the market structure. Consumer law’s aim has thus concentrated on establishing when and under which circumstances consumers require protection, and when and under which circumstances an enhanced degree of protection is warranted or even required. The underlying rationale is that all consumers are potentially vulnerable (whether empowered or not) due to structural features that are characteristic of the market contextual dynamics: asymmetry of knowledge and systemic power imbalances between suppliers and consumers. The idea is that recognizing consumer vulnerability means acknowledging that consumers, for the mere fact of being consumers, might be exploited by suppliers under certain circumstances. Hence, the most relevant factor is the possibility of exploitation in the marketplace.
Following this logic, the idea of an “average consumer” presumed “reasonably well informed, observant and circumspect” who is therefore considered sufficiently protected by the disclosure of crucial information did not take root in Latin America. Instead, in addition to the asymmetrical advantages in terms of bargaining power and information that suppliers enjoy, another dimension of the unequal supplier–consumer relationship has been recognized: the imbalance caused by consumers’ cognitive vulnerabilities.Footnote 52 The empirical evidence convincingly shows that people usually, when making decisions, do not behave as a homo economicus or a perfectly rational agent would.Footnote 53 On the contrary, as imperfectly rational agents, their behavior deviates from what rational choice theory predicts. Individual rationality is bounded because cognitive abilities are finite. This acknowledgment admits instances when, in certain contexts, and maybe even in a great many if not most of them, individuals who resemble the “average consumer” behave according to the postulates historically assumed by the prevailing economic models.Footnote 54 It also means, however, that sometimes individuals deviate from those models’ predictions and act using mental shortcuts and alternative cognitive processes whose connection to logical deduction or standards of rational decision-making is tenuous. The responsibility for this behavior lies with the heuristics of intuitive thinking and cognitive biases.Footnote 55 Psychologists and economists have identified a large catalog of cognitive biases based on experiments and hypotheses, including availability, confirmation, status quo biases, and the bandwagon effect, among others.Footnote 56
For their part, suppliers invest considerable resources and effort (into, for example, highly sophisticated neuromarketing techniques)Footnote 57 in order to gauge the cognitive biases of consumers better than the consumers understand them themselves, which increases the marketplace asymmetry already noted.Footnote 58 In the process of informing and persuading consumers, cognitive biases are used as a tool like any other to promote products. Even if it can be accurately said that suppliers do have a genuine interest in providing reliable information about their products, it is equally fair to say they do so with the clear aim of attracting as many consumers as possible – the ultimate goal being increased sales, not necessarily fully informed consumers.Footnote 59 Furthermore, suppliers in competitive markets who are not willing to exploit the cognitive limitations of consumers are often quickly supplanted by those who are. Thus, according to Jon Hanson and Douglas Kysar, manipulation becomes an inescapable requirement for staying power in competitive markets.Footnote 60
Consumer transactions are shaped by the interaction between market dynamics and consumer psychology.Footnote 61 Understanding the behavioral dynamics of the relevant actors in the marketplace further illuminates the structural dimension of consumer vulnerability. At the same time, it makes evident both the insufficiency of duties of information and rights of withdrawals as exclusive legal protective measures and the need for mechanisms to provide enhanced, substantive protection in especially impairing circumstances. Importantly, this approach acknowledges both the dynamism of consumers’ vulnerabilities and the relational advantage of suppliers who are able to identify personal biases and characteristics of which consumers themselves are often unaware and the suppliers can exploit.
Regarding the former, the dynamism of consumer vulnerability means that consumer susceptibility to manipulation is not a static characteristic of a person (age, education, etc.) but rather often a product of the market dynamics designed to exploit cognitive biases and heuristics. While this implies that consumers are not inherently and irremediably vulnerable, the more important implication is that vulnerabilities are mainly relational, situational, and highly contextual. They are dependent on the particular circumstances’ consumers are in when engaging in consumer transactions, which can exacerbate those vulnerabilities to the consumers’ detriment (e.g., an elderly consumer may be vulnerable to certain commercial practices involving digital expertise that evoke familial duties, but not to ones that exploit a desire for fame, recognition, or romance).
As for the latter, the relational advantage of suppliers in the modern marketplace, the information on potential consumers’ biases and vulnerabilities has multiplied by many orders of magnitude. Before the advent of the digital economy, for example, empirical evidence already showed that female consumers were often more vulnerable to (predatory) price personalization in car purchasing,Footnote 62 but the landscape thirty years after that research was conducted is almost unrecognizable. It is important to recall that we are not only talking about the information that consumers freely and publicly share on social media.Footnote 63 From the information on spending habits tracked by credit card companies to the internet browsing information shared by internet providers, suppliers’ ability to identify and target personal circumstances and individual characteristics that make a consumer potentially more prone than others to enter into detrimental consumer transactions has grown exponentially.Footnote 64
This is the background against which the point of departure for consumer protection statutes in Latin America, that of “structural vulnerability,” becomes especially pertinent. Consumer protection statutes were envisioned as a key tool to counterbalance systemic power imbalances between suppliers and consumers with the aim to protect consumers’ ability to fully exercise their substantive rights. Under this logic, improving standards for the disclosure of information and market transparency, however important and desirable, appear insufficient to compensate fully for consumers’ structural disadvantages because informative measures hardly seem capable of empowering consumers to make wholly autonomous decisions.Footnote 65 Unlike EU consumer law, Latin American countries embraced from the start more substantive measures (e.g., rules of strict liability, broader availability of pain and suffering awards, recourse to punitive damages, among others) and protective principles (e.g., in dubio pro consumer)Footnote 66 that go beyond the mere duty to provide information and further developed these measures through the case law in individual cases involving consumer transaction disputes – which I explore further in the Argentinian context discussed in Section 3.3.
Moreover, the protective narrative of the “structurally vulnerable consumer” underlying the norm has made it possible for courts to play a dynamic and active role in interpreting whether and when to protect individual consumers from abusive or unfair commercial practices in the particular cases before them.Footnote 67 The courts do this by appealing to, among other legal resources, the underlying protective principles already mentioned that transversally inform consumer protection law.Footnote 68 For instance, the practice of personalized pricing, which would normally be allowed under the “average consumer” benchmark as long as the provider complies with the requisite disclosure requirements (i.e., that it disclose in advance that the price has been personalized), might be found questionable under the “vulnerable consumer” benchmark together with the contextual sensitivity to the particular circumstances of the case usually involved in the operation of the in dubio pro-consumer principle. This is because one particular circumstance of personalized prices is that they are often the product of sophisticated profiling and manipulation, which make evident the shortcomings of an exclusive focus on the information disclosed and demand a meaningful assessment of the structural and situated factors potentially impairing consumers’ decision-making in those specific contexts.
Furthermore, the protective narrative has facilitated the acknowledgment in some jurisdictions of what are called “aggravated vulnerabilities,” which are individual characteristics (e.g., age, gender, disability) or personal circumstances (e.g., residency in rural or impoverished areas, limited access to technology or education, unemployment, poverty) that on their own or in the aggregate heighten the “structural vulnerability” affecting all consumers as such, in that they exacerbate particular consumers’ odds to enter into detrimental economic transactions. Following this thinking, the debate in Latin America has recently progressed to assessing the desirability of adding the normative category of “hyper-vulnerable consumer” (which responds to “aggravated vulnerabilities”) to the standard for the “vulnerable consumer” (which responds to “structural vulnerabilities”) in order to reduce inequality in consumer transactions when certain exacerbating circumstances impairing individual consumers’ decision-making are manifest – a debate I explore further in the Argentinian context discussed in Section 3.3.Footnote 69
The impact of the default image of the consumer initially selected is doubtless significant in terms of consumer law’s capacity to address inequality. As just described, the European “average consumer” benchmark hinders the model’s capacity to meaningfully address inequality in consumer transactions. In contrast, the Latin American benchmark of the “vulnerable consumer” opens a path for substantive consumer protection laws that demonstrate more sensitivity to inequality concerns in consumer relations by recognizing room for courts to address inequality in the particular cases before them. Examining the divergence between the Latin American and European narratives on the role of consumer law and the default image of the consumer reveals a vital element in understanding the different attitudes toward the more fundamental question of whether consumer law should address inequality in those jurisdictions. The relevance of my claim is reinforced by the relative futility of simply looking at the wording of consumer protection provisions here and there without a broader understanding of the emphasis in each case. It is the underlying narratives embraced in those jurisdictions that ultimately give content to and inform the default interpretive benchmarks (“average” or “vulnerable”) used by judges (and other relevant actors) in enforcing consumer protection laws. These benchmarks play an important role in assessing the different levels of protection ultimately granted to consumers. This suggests that the practical relevance of the specific concept of the consumer embraced in the different jurisdictions plays an important normative role.
3.3 Consumer Law and Inequality in Argentina
3.3.1 Structural Vulnerability as Default: An Explanation
The initial rationale of consumer protection law in Argentina was to provide legal tools to counterbalance the factual asymmetry of information and negotiating power between consumers and suppliers in the marketplace, which is characteristic of consumer transactions.Footnote 70 The underlying wisdom behind the enactment of the Argentinian Consumer Protection Law (1993) was the aspiration to devise a normative microsystem which had as its primary objective creating legal tools to comprehensively and effectively account for the challenges faced by consumers in the marketplace. After all, the unequal bargaining positions between the parties in consumer contracts were already well known, inequality which in many instances throws into question the affirmation of a pillar of classic contract law, true consent. In many ways, the emergence of consumer protection law represented a fracture in the classic general theory of contract law, which has traditionally assumed contractual parties to be on equal footing. Instead, consumer protection law in Argentina acknowledged the power imbalance between the contracting parties from the very beginning with its recognition that consumers as such occupy a relatively although markedly vulnerable position in the market structure that calls for differentiated treatment and stringent substantive protection.Footnote 71
This protective aim was substantively reinforced a year later by the reform of the Argentinian Constitution (1994), which expressly introduced consumers rights (such as protection of consumers’ health, safety, and economic interests; right to access to adequate and truthful information; freedom of choice; and conditions of equal and dignified treatment) as constitutional rights,Footnote 72 and incorporated into Argentine law several International Treaties with constitutional status, many of which include (directly or indirectly) consumer protection measures.Footnote 73 Furthermore, this trend, which understands consumers as the subject of protection in as much as they are consumers, was first reinforced by the Supreme Court of JusticeFootnote 74 and later confirmed by the paradigmatic shift from formal and abstract equality to a substantive and situated notion of the same that was transversally instituted by the recently reformed Argentinian Civil Code (2015). The 2015 reform introduced specific rules and principles directly aimed at protecting consumers’ structural position of vulnerability in the marketplace within the general norms of contracts.Footnote 75 Moreover, the current Project of Reform of the Argentinian Consumer Protection Law explicitly introduces the “structural vulnerability of the consumer” as a fundamental principle of consumer law.Footnote 76
Apart from the underlying protective rationale fundamentally inspired by the recognition of consumers’ structural vulnerability in the marketplace as the norm, consumer law in Argentina is further informed by, among other principles, the normative principle of “in dubio pro consumer” – which prescribes that courts, “when in doubt,” interpret the rules contained in the consumer statute “in favor of the consumer.”Footnote 77 Importantly, the “in dubio pro consumer” principle is explicitly recognized as such in both the Consumer Protection LawFootnote 78 and the recently reformed Civil Code.Footnote 79 This normative principle, in conjunction with the consumers’ structural vulnerability standard, is being used by relevant legal actors, particularly judges, as a flexible interpretive tool (e.g., to fill in gaps or solve conflicts of rights in case of doubt) to justify measures deemed necessary to protect individual consumers in the cases brought before them, a tool that allows more sensitivity to context-specific forms of vulnerability.Footnote 80 For instance, the “in dubio pro consumer” principle has been applied to interpret normative conflicts within consumer law;Footnote 81 compliance with the duty to inform;Footnote 82 and deceptive, abusive, or discriminatory advertising, among many others cases. Judges have also resorted to it to assess relevant aspects of the particular relationship between the parties in order to uncover abusive clauses or fraudulent business practices.Footnote 83 Importantly, most of these cases show some sensitivity to individual consumers who find themselves in a particularly vulnerable situation vis-à-vis suppliers.Footnote 84
Accordingly, besides looking at the wording of protective legislative measures (for instance, duty of information, rights of withdrawal, abusive clauses, free access to justice, and so on), observing the intervention and behavior of the courts in interpreting and enforcing consumer protection law is extremely important, since courts and judges play a relevant role in reducing inequality in consumer transactions by adjudicating case-by-case situations, and whether effective access to justice is granted to consumers ultimately lies in their hands. Certainly, this has not always been the scenario. In Argentina, the actual implementation and enforcement of the Consumer Protection Law only gradually began to gain traction around a decade after it was enacted. A cultural change had to be wrought because consumers were not sufficiently aware of their rights while, for their part, lawyers and civil law judges also unfamiliar with the new statutory regulation initially resisted its implementation. The major shift in the enforcement of consumer protection laws in Argentina occurred much later, in 2008, when, among other reforms, free access to justice, class action mechanisms, and punitive damagesFootnote 85 were introduced in Argentina’s Consumer Protection Law.Footnote 86 These substantive reforms, coupled with the implementation of more expeditious procedures, were key factors behind the expansion of consumer litigation in Argentina.Footnote 87
3.3.2 The Significance of Aggravated Vulnerabilities
It seems clear at this point that the assumption of the consumer as a rational actor who processes information adequately in order to meet her individual preferences is altogether unsatisfactory. At the same time, an understanding of the consumer as someone who suffers from cognitive biases that make her completely vulnerable and subject to constant manipulation by suppliers is not fully satisfying either. The structural fact that all consumers are potentially vulnerable does not mean that actual vulnerabilities will always materialize for everyone in every transaction. Furthermore, even when actual vulnerabilities do often materialize in certain circumstances, it does not follow that all consumers will be rendered equally vulnerable, since vulnerabilities have differentiated impact on different persons in different situations – not everyone will experience the same type or the same degree (or level) of vulnerability.Footnote 88 Structural vulnerability thus suggests a rather simplistic answer to a more complicated problem: consumers are not uniform; diversity and heterogeneity better characterize consumers as a group – for they do not share the same abilities, characteristics, social circumstances, economic position, etc. In such a context, a richer understanding of the act of consumption and what it involves is needed, one that takes into account the social and cultural context within which consumer preferences are channeled, for a more accurate appreciation of consumer vulnerability, whose forms are distinctive for different individuals in different settings, and, as such, relational, situational, and highly contextual (i.e., we need to envision the “socially situated consumer”).Footnote 89
This more holistic and contextual understanding of the consumer necessarily leads to a logic that forecloses understanding consumer protection law as an eminently informative tool disconnected from the particularities of the social and cultural context of consumption. Within the broader universe of the structurally vulnerable consumer there are individual consumers who, on account of internal factors (e.g., age, gender, disability) and/or external circumstances (e.g., poverty, residency in rural or disadvantaged areas, limited access to technology or education, unemployment) find themselves in particularly disadvantageous situations of subordination, defenselessness, or lack of protection which, temporarily or permanently, prevent them from fully exercising their rights as consumers in equal conditions.Footnote 90 These consumers are known as “hyper-vulnerable consumers” (or “especially vulnerable consumers”).Footnote 91 This means that, beyond the shared cognitive vulnerabilities potentially affecting all consumers, there are additional contingent factors – both internal (i.e., characteristics pertaining to oneself) and external (i.e., pertaining to the circumstances surrounding the transaction) – that might exacerbate consumers’ relatively structural vulnerable position vis-à-vis suppliers, further impairing their decision-making.
This approach to vulnerability as a complex phenomenon requiring an exercise of internal and external contextualization fits well with “layered” concepts of vulnerability.Footnote 92 For instance, Florencia Luna has argued that vulnerability should be understood “dynamically and relationally” since we do not face “a solid and unique vulnerability” but rather “different vulnerabilities, different layers operating.”Footnote 93 Moreover, she points out that “some of these layers may overlap: some of them may be related to problems with informed consent, others to social circumstances.” According to Luna, “the layered way of viewing vulnerability allows it to target differences or variations within the group and to consider different kinds of safeguards or empowerment tools targeting these different features.”Footnote 94
Admitting gradations of vulnerability that affect consumers differently allows us, in turn, to recognize the situational diversity of different social and cultural settings and to acknowledge the need for special and differentiated protections from the state. Treating everyone as equals when significant substantive cognitive and contextual differences exist can lead to unsatisfactory results and breakdowns in protection. Where different levels of inequality operate, the state should intervene in differentiated manners to protect consumers, according to the situated diversity at hand. Where the vulnerability is aggravated with respect to the standard, the law can account for this difference by providing more or less accentuated protection depending on the case – the intensity of the legal protection of vulnerable individuals should be proportional to the quantity and nature of the various layers of vulnerability in play. Ultimately, the underlying principle holds that all consumers are potentially vulnerable, but at distinct levels and in different contexts.
Regulating aggravated vulnerabilities has supporters and detractors. The critics argue that special rules stigmatize groups of individuals by identifying them as subsets of society who deserve exemptions based on a set of predetermined personal characteristics (e.g., age, gender, disabilities).Footnote 95 Others argue that such regulation goes against the very ideal of equality before the law, the ideal that requires courts to turn a blind eye to differences of, for instance, social status.Footnote 96
Conversely, those who support normative recognition for special subsets believe positive discrimination is required in order to restore equality in consumer transactions – especially in societal contexts where pervasive conditions of socioeconomic inequality are patent. The underlying idea is that highlighting disadvantages by explicitly regulating them and providing differentiated treatment represents an important step forward in addressing inequality in consumer transactions by directing the attention of relevant actors, such as judges, lawyers, and the state, to internal and external factors that impair consumers’ decision-making and would not otherwise be weighted, factored in, or even perhaps considered relevant under the broader (more elusive) framework of structural vulnerability.Footnote 97 Moreover, the focus on identifying and understanding disadvantages would not only help to expose and raise awareness of undesirable commercial practices that would otherwise go unnoticed but also, and most importantly, to devise mechanisms to counteract them, mitigate their impact on hyper-vulnerable consumers, and ultimately restore equality in consumer transactions.
While regulation for aggravated vulnerabilities acknowledges these aspects and builds upon them, the broader framework of the structurally vulnerable consumer does not on its own assure that certain inequalities will be directly tackled and addressed by the relevant actors. Ultimately, the salience and significance of consumers’ inequalities must be taken up by the legislator to obtain the consideration they deserved from judges, lawyers, and the state. Giving the framework statutory backing would help to level the playing field between socially vulnerable and more powerful parties in the specific context of certain consumer transactions.
More than discriminating or stigmatizing certain groups of consumers, identifying layers of vulnerability (e.g., poverty, illiteracy, gender, age, etc.) that impair individual consumer decision-making, directs our focus and attention to the existing institutional arrangements and the more fundamental question of how law and policy might more fairly balance vulnerabilities in the consumer–provider relationship. No meaningful answer to this question can be found without devoting attention to context and complexity and any meaningful answer will require responsive institutions and state architecture that acknowledge vulnerability – a responsive state with the capacity to take substantive action.Footnote 98
3.3.3 The Normative Category of the Hyper-Vulnerable Consumer
The COVID-19 crisis not only made the already deep inequalities in Argentine society more salient but exacerbated many of them – the exceptionally long periods of lock-downs and social distancing measures increased the proliferation of online and digital tools to engage in economic transactions which created a “digital gap” for those with restricted access to the Internet and technology or little knowledge of how to use them, restricted access to basic health care and education, and increased the levels of unemployment and poverty, among other examples of the societal impact of the pandemic response.Footnote 99 The urgent need to reduce structural inequality from the government, civil society, and social associations became more pressing than ever.Footnote 100 If anything, it became evident that ignoring the vulnerabilities impairing consumers’ decision-making would result in perpetuating and worsening inequality. In this context, the category of the hyper-vulnerable consumer, which had previously been discussed in scholarly circles,Footnote 101 acknowledged in the case-lawFootnote 102 and explicitly introduced in reform draft proposals of the Consumer Protection Law,Footnote 103 was at last officially introduced in the Argentine legal system (Resolution SCI 139/2020).Footnote 104 The new category was formally introduced as a response to the constitutional mandate (Art. 75 Inc. 23) to promote positive action measures to guarantee consumers full enjoyment of their rights in conditions of actual equality of opportunity and treatment according to the National Constitution (Art. 42 CN; Art. 1094 CC) and other International Human Rights Treaties with constitutional status in Argentina (Art. 75 Inc. 22 CN; Arts. 1 y 2 CC).
The regulation establishes that hyper-vulnerable consumers are those who, in addition to their structural vulnerability as consumers, find themselves in other aggravated situations of vulnerability due to their age, gender, physical or mental state, or due to social, economic, ethnic, and/or cultural circumstances that cause special obstacles to the full exercise of their rights as consumers.Footnote 105 The category is dynamic, flexible, and relational in that it must be assessed in each particular situation. Furthermore, the regulation establishes a nonexhaustive list of situations that might be considered criteria of hypervulnerability: claims that involve the rights or interests of (i) children and adolescents; (ii) members of the LGBT+ collective; (iii) persons of over 70 years of age; (iv) persons possessing a certified disability; (v) individuals without permanent resident immigration status; (vi) those who belong to native communities; (vii) those who reside in rural areas; (viii) those who reside in impoverished neighborhoods (according to Law 27.453); and (ix) situations of socioeconomic vulnerability. Situations of socioeconomic vulnerability include being a retiree, pensioner, or a worker in a dependency relationship whose gross income is less than or equal to twice the official minimum wage known as the Minimum Vital and Mobile Salary in Argentina; belonging to certain categories of tax contributors; being a beneficiary of pregnancy or child social allowances; and being included in the special social security scheme for domestic service employees (Law 26.844), among others.Footnote 106
One of the concrete practical implications of being considered within the new normative category is facilitating access to justice, broadly understood, for hyper-vulnerable consumers. The regulation obliges the state to provide specialized legal assistance and more general support when needed, and to identify ex-officio the complaints filed by hyper-vulnerable consumers to give them expedited treatment and provide additional support for conflict resolution.Footnote 107 This is not only important in cases where the consumers’ losses are not significant, which reduces the incentive to pursue redress but, most importantly, in order to overcome the enforcement costs barriers and generalized apathy toward consumer rights on the part of consumers themselves. Furthermore, the regulation establishes two additional protective principles that must be observed in all procedures involving a hyper-vulnerable consumer: (i) accessible language: all communication must use clear, colloquial language, expressed in a plain, concise, understandable, and appropriate manner to the conditions of hyper-vulnerable consumers; and (ii) a reinforced duty of collaboration: suppliers’ conduct must be aimed at guaranteeing adequate treatment and an expedited solution of the conflict, and must demonstrate full collaboration to this end.Footnote 108 Apart from the reinforced duty of collaboration, the regulation does not contemplate any additional or stringent sanctions for suppliers who do not comply with the requirement of expedited and effective treatment of claims involving hyper-vulnerable consumers. However, the explicit recognition of a “reinforced duty of collaboration” might open a path in practice for stricter assessment of supplier behavior by judges in those cases.Footnote 109 For instance, judges might use their discretion to raise the monetary sanctions imposed in the particular case to account for the nature of those claims (i.e., higher amounts in cases of hypervulnerability).Footnote 110 Indeed, a new reform grants discretion to the authority to double economic sanctions in certain situations where hyper-vulnerable consumers are involved.Footnote 111 Another possibility might be recourse by courts to the imposition of other stringent remedies (e.g., punitive damages).Footnote 112 As a matter of fact, judicial decisions where judges awarded higher punitive damages in cases involving hypervulnerability have already been handed down.Footnote 113 The availability of punitive damages in the realm of consumer relationships in Argentina is probably one of the most distinctive tools at the judiciary’s disposal for consumer law enforcement.Footnote 114 Granted, the amounts of punitive awards are legally cappedFootnote 115 and are in general relatively modest.Footnote 116 Nonetheless, punitive awards have played an important expressiveFootnote 117 and indeed growing role in the increased enforcement of consumer law in Argentina, which is reinforced by the fact that they are fully awarded to individual consumers.Footnote 118
All these measures combined under the normative force of the new category of hyper-vulnerable consumers could play an important role in altering the behavior by disincentivizing market actors from exploiting aggravated vulnerabilities in the first place, which might, hopefully, mitigate the inequality in contemporary consumer transactions. Certainly, for this regulation to be effective, efforts and resources must be allocated to creating the proper enforcement mechanisms and strengthening the state’s capacity to adapt and respond to the challenges posed by the variety of situations involving hypervulnerability. The regulation is too recent for informed conclusions at this point; however, it holds promise as a complement to other government policies aimed at addressing inequality in Argentina.
3.4 Conclusion
The need to reduce societal inequality is not unique to the Global South, it is a pressing global problem that urgently demands attention. Europe and Latin America have much to learn from each other. The distinctive emphasis on either empowerment or protection adopted in those jurisdictions impacts the discussion on the relationship between consumer law and inequality: the more consumer law moves toward empowerment and embraces the average consumer standard, the less sensitive it is to the vulnerabilities that impair consumer decision-making, which hinders this model’s capacity to address inequality in consumer transactions. The socially devastating aftermath of the COVID-19 pandemic, coupled with the rapid acceleration of the digital economy, globally compel an approach to consumer law that recognizes the default conception of consumers as occupying a relatively although markedly vulnerable position in the market structure. In this sense, the Latin American emphasis on structural vulnerability seems better equipped to address inequality in consumer transactions than the European emphasis on the average consumer. A fresh start for EU consumer law might thus begin with recalibrating its focus on the proper balance between empowerment and protection such that the law not only considers in the equation the relevance of addressing consumer inequality, but also the deep interconnectedness of economic and social interests. Whether EU law will refocus the concept of consumer vulnerability is unclear. However, reliance on the current standards of the average consumer (the default) and the vulnerable consumer (the exception) is becoming increasingly difficult to sustain, especially in the context of the emerging global digital economy.Footnote 119 Aggravated vulnerabilities are exacerbated in the digital age because the use of algorithms and big data collection allows providers to obtain much more information than ever before about their consumers’ behavior.Footnote 120 Acknowledging the combination of the structural and situational factors that impair consumer decision-making could be an important step toward overcoming the (over)emphasis on empowerment and the (over)reliance on the benchmark of the average consumer as default.
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