Little Man, what now? How COVID-19, the Commission and EU consumer protection interact

Covid-19 is extraordinary. In every sense. We are facing unprecedented challenges and governments are taking unprecedented measures to meet them. There is something unique about this downturn, however: it is not the crisis of those too big to fail, but of those too small to survive.

Coping with COVID-19

Criticized initially, the EU Commission enacted measures to cope with the economic impact of COVID-19. Regarding consumer protection, it established on March 18 Interpretative Guidelines on EU passenger rights […] in the context of […] Covid-19. However, these guidelines put consumer protection, a cornerstone of social Europe, at risk by siding with carriers to the detriment of consumers’ claims to compensation for cancellation. They create two levels of consumer protection depending on the person’s location: those travelling between places with strict restrictions could not claim compensation, while travellers in other areas could.

The rule

Consumer protection aims to protect the consumer, as the weaker party to a contract, from the position of the selling company. EU passenger rights, such as Regulation (EU) 261/2004 on flights, ensure the rights of passengers in transportation. The Court of Justice of the European Union (CJEU) recognized in its landmark decision C-549/07 Wallentin-Herrmann that Regulation 261/2004 should ensure ’a high level of protection for passengers and take account of […] consumer protection in general’. Its Article 5.1 entitles passengers whose flights were annulled to the right to a refund or alternative transportation and a claim to compensation. Any exception to this rule is to be constructed narrowly due to the principle of consumer protection in the regulation.

The exception to the rule

As any good rule, Article 5.1 is not without its exceptions. Article 5.3 explains that the carrier is not obliged to compensate ‘if it can prove the cancellation’ was caused by ‘extraordinary circumstances‘. Furthermore, extraordinary circumstances are now well-defined by three cumulative criteria:

1. They cannot be ‘inherent in the normal activity of the air carrier’,
2.  they must be ‘beyond the actual control of that carrier on account of its nature or origin’, and
3.  the carrier needs to take ‘all reasonable measures’ to prevent cancellation.

Many technical issues don’t fall in the category, while closures of the air space by authorities due to natural catastrophes or power outages were considered extraordinary. Nonetheless, the exception must be narrow.

The case

Let us consider a (maybe not so) hypothetical story from quarantined Europe to explore the guidelines.

On March 11, Austria was the first to close its border. More followed. On March 9, Italy imposed limited movement across its territory, for valid reasons. This amounted to a limitation of movement as movement was formally prohibited for those in quarantine or those testing positive for the virus. While some carriers had by then blocked their connections, public law did not impede flights at that time and some flights still operated without restrictions. This is where we fall into the guideline’s abyss.

Challenging the guidelines

Commission guidelines are common practice in EU law. Nonetheless, they are usually not formally included in the framework of EU law. Article 288 TFEU establishes the legal acts of the Union institutions (not including Communications), while the CJEU is the (final) interpreter of Union law. The guidelines on vertical restraints, for instance, explain the use of the Commission’s limited resources of analysis for infringements of competition law. They, thus, impact the relationship between the Commission and the undertaking.

The  COVID-19 guidelines, however, are different, and challenge consumer protection (and EU law) in two ways.

First of all, the Commission tries to interpret Union law. The risk here is not only that the Commission is overstepping its treaty role (as ‘guardian’ but not interpreter of the Treaties), but also that the carriers will use the guidelines to reject claims, despite the fact that they are not a binding element of formal EU law. Unlike the guidelines on vertical restraints, they affect the relationship between the consumer, a third party (to the guidelines), and the undertaking, not the latter’s link with the Commission.

Further, the aim of consumer law is to protect the consumer as vulnerable party to the contract. For example, from a legal point of view, the recent Recommendation on Vouchers […] as an alternative of reimbursement shows how the Commission can use its powers in line with consumer protection. It rejected claims by twelve Member States to abolish the right to refund under Regulation 261/2004 by a temporary amendment, and recommended how to encourage the use of vouchers.

However, these guidelines challenge EU consumer protection by indiscriminately considering any cancellation after March 2020 (up to an unknown future) as caused by extraordinary circumstances. Indeed, the circumstances of these cancellations are (and will be) highly different. A cancellation rightly could be justified as a decision to protect the crew’s health. The protection of workers should be considered carefully in case-by-case analyses of extraordinary circumstances. However, in light of earlier case law, airlines could be expected to take less drastic measures than cancellation. More recently, the Commission pointed out that wearing personal protective equipment in collective transport should be considered a ‘reasonable measure to limit contact between transport workers and passengers’, while not stepping back from its position on waiving compensation.

However, in a blanket consideration the guidelines state that public measures to contain COVID-19 ‘are by their nature and origin not inherent in the normal […] activity of carriers and […] outside their actual control […].’ The condition that all reasonable measures should be taken by the carrier ‘should be considered fulfilled, where public authorities […] prohibit certain flights or ban the movement of persons in a manner that excludes, de facto [including lockdowns with reasons to move] the flight in question […].’

Any public measure to contain the pandemic and limiting movement could waive the right to compensation. Such a bold interpretation is in opposition to what is found in Article 5.3, and the burden of proof is shifted to the consumer. Airlines profit from general exemption instead of a case-by-case analysis.

The Commission’s assessment further links extraordinary circumstances to economic reasons as a cancellation is ‘caused’ by public law, where the flight would remain ‘empty’. The construction of this link of causality challenges the nature of Regulation 261/2004, which protects passengers. Companies must be protected in the downturn, but why to the detriment of consumers? In the long-term, these guidelines set a precedent that could limit the reach of EU consumer protection.

Wrap-up – Little man, what now?

The COVID-19 guidelines challenge EU consumer protection as the Commission insufficiently considers the latter’s aims. They might be used by carriers to rebut well-founded claims. While this runs counter to the idea of Regulation 261/2004, who will fight for these rights? Rebuttal will discourage many. Finally, the guidelines enlarge the interpretation of Article 5.3 to the detriment of consumers and beg the question of what will happen when we return to ‘normal’?

A (thin) silver lining on the horizon might be that the Commission has thus far refused calls to waive the right for refund. Nonetheless, Austrian Chancellor Kurz already proposed an ‘Anti-Corona-Klub’ with flights between countries that ‘have defeated the virus’. Will EU consumer protection only be applicable to EU citizens from those places? In the end, the consumer loses, and we might ask again: Little man, What now?

 

Marc Steiert is a Ph.D. researcher in the EUI’s Law Department. His research deals with the status of young workers and how European Union law shapes their transitions in and into the labour market. More generally, his research interests center around the social dimension of the EU and the actors of Union law.