Today's judgment involved a case brought by the Office of Fair Trading (OFT) against easyCar.
Until this judgment it had been anticipated by the OFT that the rental industry would have to comply with the Distance Selling Regulations and provide customers with full details of their agreement, including information on cancellation, in a 'durable' form prior to the rental taking place.
The British Vehicle Rental and Leasing Association had won the right for rental companies to present this notice immediately prior to the rental. But even this would have proved restrictive for consumers.
Following the judgment rental companies are now exempt from DSR and therefore the status quo applies.
John Lewis, BVRLA director general, said: 'The judgement means that we revert to the system whereby rental companies manage their own relationships with their customers which is right in any freely competitive market.
'It does not however, give rental companies the right to impose harsh cancellation policies but in reality, I don't see this taking place anyway as the industry has always tailored its wide range of services in favour of customers. After all, it wants them to come back and rent again.'
EasyCar, part of the easyGroup run by easyJet founder Stelios Haji-Ioannou, hires out cars across Europe via the internet. Consumers are only entitled to a refund if they cancel a booking due to serious illness of the driver, natural disasters, war, riot or acts of terrorism.
However, the OFT took a case against easyCar following consumer complaints over the refund policy.
The European Court of Justice found yesterday in favour of easyCar.
It said car hire forms part of transport services and was exempt from EU consumer protection rules for long-distance contracts obliging full refunds.
'Transport services includes contracts for the provision of car hire services so that such contracts cannot be cancelled by consumers without penalty,' the Luxembourg-based court said in a statement.