Incoming changes across the EU
The UK reformed its consumer protection rules, dealing with the supply of digital content and services (whether digital or not) under the Consumer Rights Act 2015 (CRA).
Coming slightly later to the party, as part of its Digital Single Market project, the EU passed a number of consumer protection Directives in 2019, including one on contracts for the supply of digital content and digital services (Digital Content Directive).
The Digital Content Directive must be transposed by 1 July 2021 and applied by 1 January 2022. The provisions will apply to all digital content and services supplied after 1 January 2022 save that the provisions on modification and right of redress will only apply to contracts concluded after that date.
What is its aim?
To harmonise rules on:
- conformity of digital content or digital services with the contract
- remedies for non-conformity or failure to supply
- modification of digital content or digital services.
What does it cover?
Business to consumer supplies (whether or not bespoke) of digital content and digital services, where they are paid for or supplied in exchange for personal data (other than data exclusively processed by the trader in order to complete the supply or comply with legal requirements).
In this context, "digital content" and "digital services" are defined as:
- Digital content – data which are produced and supplied in digital form.
- Digital services – a service which allows the consumer to create, process, store or access data in digital form; or which allows the sharing of or any interaction with data in digital form uploaded or created by the consumer or other users of that service.
With the exception of the rules around supply (Articles 5 and 14) the Directive also applies to any tangible medium which serves exclusively to carry digital content.
What is excluded?
The Directive does not cover digital content or services incorporated in or inter-connected (as defined) with goods and sold under a sale of goods contract.
There are a number of other exclusions including contracts regarding:
- non-digital services
- healthcare
- gambling services
- financial services
- supply of open-source or free software, and
- electronic communications services.
Supply of digital content or digital services
These must be supplied by the trader without undue delay after conclusion of the contract unless otherwise agreed.
Supply will be deemed to have occurred when:
- The digital content or any means suitable for accessing it or downloading it is made available or accessible to the consumer, or to a physical or virtual facility chosen by the consumer for that purpose.
- The digital service is made accessible to the consumer or to a virtual or physical facility chosen by them.
Subjective requirements for conformity
Digital content or digital services must:
- Match the description, quantity, quality, functionality, compatibility, interoperability and any other features as set out in the contract.
- Be fit for any particular purpose the consumer requires and which they have made known to the trader by conclusion of the contract and which the trader has accepted.
- Be supplied with all accessories, instructions and customer assistance as required by the contract.
- Be updated in accordance with the contract.
Objective requirements for conformity
In addition, to conform, the digital content or services must:
- Be fit for purposes for which that type of content or service would normally be used.
- Be of the quantity and possess the qualities and performance features normal for their type and which the consumer would reasonably expect. This includes taking into account public statements including on labelling and in advertising unless the trader was not and could not reasonably have been aware; or the statement had been corrected by conclusion of the contract; or the consumer's decision could not have been influenced by the statement.
- Be supplied with any accessories or instructions the consumer might reasonably expect.
- Comply with any trial version or preview.
Updates
To ensure continuing conformity, the trader must inform the consumer of and supply them with updates, including security updates, for as long as:
- The content or service is to be supplied where the supply is continuous or over a period of time.
- The consumer may reasonably expect relative to the type and purpose of what is being supplied and the contract terms, in relation to a single supply or series of single supplies.
The trader will not be liable where the consumer fails to install or properly install an update within a reasonable time as long as the consumer was warned about the consequences of not updating, and the failure was not due to inadequate installation instructions.
No lack of conformity
Conformity must be achieved throughout the duration of the supply period but there will be no lack of conformity if the consumer was specifically informed about a particular deviation and then expressly and separately accepted it.
Incorrect integration
Any lack of conformity arising as a result of incorrect integration of the digital content or service into the consumer's digital environment will be regarded as a lack of conformity of the content or service if the trader integrated it or was responsible for the integration, or the integration instructions for the consumer were insufficient.
Third party rights
If the consumer cannot use the digital content or services at all or in conformity, as a result of any third party rights (including intellectual property rights), the consumer will be entitled to remedies of lack of conformity under the Directive, unless national law provides for the nullity or rescission of the contract in such cases.
Liability of the trader
The trader will be liable for failure to supply in accordance with the Directive and for any lack of conformity at the time of supply (or at any time during a continual period of supply) or, if there are national rules which limit the period of liability, at any time the lack of conformity becomes apparent within at least a two year period from the time of supply.
Burden of proof
The burden of proof that the digital content or service was supplied is on the trader.
The burden of proof for conformity at the time of supply where there is a single supply or series of single supplies, is on the trader for any non-conformity which becomes apparent within one year from the time of supply.
Where the supply is continuous over a period, the burden of proof for conformity is on the trader in relation to any non-conformity which becomes apparent during the supply period.
The exception to the burden of proof rules on conformity is where the trader can demonstrate the digital environment of the consumer was not compatible with technical requirements which the trader had informed the consumer of in a clear and comprehensible manner before conclusion of the contract.
The consumer has requirements to cooperate with the trader to enable an assessment of the compatibility of their digital environment.
Remedy for failure to supply
Where the trader fails to supply the relevant content or services without undue delay and the consumer requests supply, the consumer may terminate the contract if the supply does not take place without undue delay or within an additional period of time agreed to by the parties.
The trader can, however, terminate the contract immediately where the trader has said or it is equally clear that the trader will not make the supply, or where the consumer has made clear or it is equally clear from the circumstances, that a specific time of supply is essential to the consumer and it is not completed within that time.
Remedies for lack of conformity
Remedies for lack of conformity are:
- to have the digital content or service brought into conformity
- a proportionate price reduction
- termination.
The consumer has the right to request that the digital content or service be brought into conformity unless that would be impossible or would impose disproportionate costs on the trader, taking into account all factors including the value of the content or service if there had been no lack of conformity and the significance of the lack.
The conformity must be brought about within a reasonable time from when the trader is informed of the issue, for free and without significant inconvenience to the consumer.
The consumer is entitled to either a proportionate reduction of the price (where one was paid) or to terminate the contract where:
- it would be disproportionate or impossible to bring the content or service into conformity
- the trader has not brought the content or service into conformity
- the trader has tried and failed to bring the content or service into conformity
- the lack of conformity is sufficiently serious to justify immediate reduction or termination, or
- the trader has declared or it is clear from the circumstances that the trader will not bring the content or service into conformity within a reasonable time or without significant inconvenience to the consumer.
If the consumer exercises the right to terminate, they must make a statement to that effect to the trader.
Obligations on the trader in the event of termination
After termination, the consumer must not use the digital content or service and must not make it available to third parties.
If the digital content was supplied on a tangible medium, the consumer must return it without undue delay if requested to do so by the trader. The trader must make such a request within 14 days of being told that the consumer is terminating the contract and must bear the cost of the return.
The consumer is not liable to pay for any use made of the digital content or service in the period prior to termination during which it was not in conformity.
Obligations on the consumer in the event of termination
After termination, the consumer must not use the digital content or service and must not make it available to third parties.
If the digital content was supplied on a tangible medium, the consumer must return it without undue delay if requested to do so by the trader. The trader must make such a request within 14 days of being told that the consumer is terminating the contract and must bear the cost of the return.
The consumer is not liable to pay for any use made of the digital content or service in the period prior to termination during which it was not in conformity.
Modification of digital content or service
Where the content or service is supplied or made accessible to the consumer over a period of time, the trader may modify it beyond what is necessary to keep it in conformity provided:
- the contract allows and provides a valid reason for the modification
- there is no additional cost to the consumer
- the consumer is informed of the modification in a clear and comprehensible manner, and
- the consumer is informed reasonably in advance on a durable medium of the features and time of the modification and of the right to terminate the contract (under certain circumstances) as a result of the modification, or to maintain the digital content or service without the modification.
The consumer may terminate the contract free of charge if the modification negatively impacts the consumer's access to or use of the digital content or service (unless the impact is only minor). If the consumer wishes to terminate on these grounds, they must do so within 30 days of receipt of the information about the modification or the time when the modification is made by the trader, whichever is later. The termination provisions in the Directive will apply.
The consumer may not terminate as a result of a negative modification where the trader enables them to maintain the digital content or service unmodified at no additional cost, and provided the trader maintains conformity.
Right of redress
The trader may seek redress for liability to the consumer down the supply chain according to national law.
Enforcement
Member States must ensure adequate and effective means to ensure compliance with the Directive in accordance with national law. This may include allowing public bodies, consumer organisations, professional organisations and not for profit bodies to take action before the courts or competent administrative bodies.
What will the changes mean for UK businesses?
The Digital Content Directive did not have to be transposed before the end of the Brexit transition period and will not apply in the UK. UK businesses supplying to consumers in the EU will, however, need to understand the new rules and how they differ from the regime in the UK.
In some ways, the new rules should make it easier for UK businesses. A historical lack of harmonisation in parts of the consumer protection framework means that businesses are used to having to take local laws into account. As the new Directive is a maximum harmonisation measure, Member States will not be able to enact lesser or higher protections unless the Directive explicitly allows them to, although they are still free to regulate general aspects of contract law (like formation). Contractual attempts to vary or derogate will not be binding on the consumer.
This should lead to a more uniform approach across the EU which will be helpful to UK businesses as well as to EU ones.
How will the EU regime differ from the UK one?
There are a number of key differences between the incoming EU regime and the UK's existing one.
Digital services – a new category of contract
While the CRA separates consumer contracts into contracts for the supply of goods, services, and digital content, the Digital Content Directive introduces the concept of 'digital' services as distinct from other services and applies mostly the same rules to the supply of digital content and digital services.
Digital services include SaaS so sharing of content, cloud services including hosting and supply of content, and social media.
Personal data as consideration
The provisions relating to digital content under the CRA only apply to paid-for rather than free content (with the exception of where defective content which is free causes damage to a device or other digital content).
The EU rules treat personal data (other than data required by the trader to supply the digital content or services) as consideration, so as a form of payment equivalent to money. This means that the rights and remedies available under the Directive apply to digital content and services 'paid for' with personal data.
Goods with digital elements
Goods which rely on digital elements to work are not within scope of the Digital Content Directive. Despite their digital elements, they are treated as goods and consumer rights and remedies are dealt with under the Sale of Goods Directive.
The CRA treats mixed contracts slightly differently although the end result is similar. Technically, there are different remedies for non-conforming contracts for the sale of goods as against the sale of digital content. However, where digital content supplied with goods does not conform to the contract, the goods themselves will be treated as not conforming and goods remedies for non-compliance will be available.
When to supply
The CRA does not stipulate a time within which digital content must be supplied. Services (which under the CRA includes digital services), must be supplied within a reasonable time where the contract is silent as to time of supply.
The Digital Content Directive requires digital content and services to be supplied without undue delay after the contract is concluded unless otherwise agreed.
Fitness for purpose
The CRA implies a statutory term that digital content will be fit for a particular purpose. As digital services are treated separately, there is no equivalent statutory term for them. Instead, services must be performed with reasonable skill and care and in compliance with pre-contractual information.
Under the CRA, fitness for particular purpose means any particular purpose for which the consumer informs the trader (expressly or by implication) that they are entering into the contract. The contract will contain an implied term that the digital content is reasonably fit for that purpose, whether or not it is a purpose for which the content is normally supplied and whether or not the trader accepts the purpose. A contract may also be treated as making provision about fitness of the digital content for a particular purpose by custom.
Under the Digital Content Directive, the digital content and/or services must be fit for any particular purpose the consumer makes known to the trader and which the trader accepts prior to conclusion of the contract, and for any purpose for which that content or service is normally supplied. General fitness for purpose can be assessable against EU and national technical standards or industry specific codes.
Defects
Under the CRA, a trader is not liable for any defect in digital content which was expressly drawn to the attention of the consumer before conclusion of the contract. Under the Directive, traders must get express and separate acceptance to any defects or variations from the quality requirements.
Updates
Unlike the CRA, the Digital Content Directive requires traders to update digital content in accordance with any contractual requirements, and as needed to keep the digital content and/or services in conformity. This includes supplying security updates. Updates must be supplied throughout a continuous supply period and, in relation to a one-off supply, for as long as the consumer might reasonably expect.
The CRA allows updates to digital content to be supplied to add improvements or new features provided the digital content continues to match the description and any pre-contractual information of it given to the consumer (unless the consumer has specifically agreed otherwise).
Integration
While the CRA makes the trader liable for any defect in digital content which causes damage to devices or other digital content, it does not include integration requirements.
The Digital Content Directive, however, makes the trader responsible for correct integration of digital content and services where the trader carries out the integration or it is under the trader's control or in accordance with their instructions. Instructions must be sufficiently clear and complete to allow the average consumer to carry them out.
Burden of proof
Under the CRA, the burden of proof is on the consumer to demonstrate that digital content or services were defective or not in conformity. If they prove a fault within the first six months of supply, the defect will be presumed to have been present since the supply was made.
Under the Digital Content Directive, the burden of proof is on the trader to show that the digital content or digital service was supplied in conformity. Where digital content is supplied as an individual supply there will be a presumption that any defect was present on supply for a period of one year. Member States must allow claims for a period of at least two years.
The exception to the consumer's reliance on a presumption of non-conformity is where the trader proves that the consumer's digital environment was incompatible with clearly communicated technical requirements of the digital content or services.
For digital content or services provided on a continuous basis, there will be a presumption that the defect was present for the duration of the supply period and claims must be allowed for at least the duration of the supply period although Member States can allow longer.
Trader obligations on termination
The Digital Content Directive requires traders to make digital content (other than personal data) provided or created by the consumer using the digital content or services, available to the consumer on request following termination. The CRA does not contain equivalent requirements.
Consumer obligations on termination
The Digital Content Directive contains an express obligation on consumers to stop using digital content or services after termination and to return any tangible media on which the content or service was supplied to the trader on request. The CRA does not contain equivalent provisions.
Modifications
The Digital Content Directive contains provisions allowing the trader to modify digital content under certain conditions which include giving the consumer the right to terminate the contract within 30 days of notification of a pending modification. The termination right is lost if the consumer can continue to use the digital content in conformity without accepting the modification. Again, this is not dealt with under the CRA.
Remedies for failure to supply and to conform
The Digital Content Directive remedies are similar to those under the CRA but whereas the consumer has a right to terminate the contract under the Directive if repair or replacement is impossible or can't be carried out within a reasonable time and without significant inconvenience to the consumer, under the CRA, this is a right to a price reduction, albeit to the full contract price.
Under the CRA, the consumer is also entitled to a refund (rather than to terminate) where the trader does not have the right to supply digital content and the consumer has the right to repair of any digital content or device damaged by defective digital content supplied by the trader.
Other changes to the EU's consumer protection regime
The Digital Content Directive is one of three incoming EU Directives on consumer protection. You may also be interested in our articles on the Sale of Goods Directive, and the Omnibus Directive.
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