European Union: Harmonizing B2C Online Sales Of Goods And Digital Content In Europe

Last Updated: January 18 2016
Article by Alistair Maughan

The European Commission has announced new draft laws that would give consumers new remedies where digital content supplied online is defective or not as described by the seller.

On Dec. 9, 2015, the European Commission proposed two new directives on the supply of digital content and the online sale of goods. In doing so, the Commission is making progress towards one of the main goals in the Digital Single Market Strategy (the "DSM Strategy") announced in May 2015: to strengthen the European digital economy and increase consumer confidence in trading across EU Member States.

This is not the first time that the Commission has tried to align consumer laws across the EU; its last attempt at a Common European Sales Law faltered earlier this year. But the Commission has now proposed two new directives, dealing both with contracts for the supply of digital content and other online sales (the "Proposed Directives").

National parliaments can raise objections to the Proposed Directives within eight weeks, on the grounds of non-compliance with the subsidiarity principle—that is, by arguing that that regulation of digital content and online sales is more effectively dealt with at a national level.

Objectives

Part of the issue with previous EU legislative initiatives in this area is that "harmonized" has really meant "the same as long as a country doesn't want to do anything different." This time, the Proposed Directives have been drafted as so-called "maximum harmonization measures," which would preclude Member States from providing any greater or lesser protection on the matters falling within their scope. The Commission hopes that this consistent approach across Member States will encourage consumers to enter into transactions across EU borders, while also allowing traders to simplify their legal documentation by using a single set of terms and conditions for all customers within the EU.

An outline of the scope and key provisions of each of the Proposed Directives, as well as the effect on English law, are summarized after the jump.

Draft Digital Content Directive

Scope

The draft digital content directive would apply only in business-to-consumer sales, and would not extend to small and medium-sized enterprises—nor to digital content providers in certain sectors such as financial services, gambling or healthcare. The rules would apply regardless of the method of sale, unlike the draft online goods directive. The directive would cover consumers who provide non-monetary consideration in exchange for digital content, such as personal data.

Key Provisions

  • Digital content would now expressly include cloud computing and use of social media, and would attract quality standards and statutory remedies for consumers.
  • Digital content will be required to conform to key information provided to consumers, such as quality, interoperability, accessibility and security. If content does not conform, the consumer will have rights to require the provider to make it conform, or to receive a refund or terminate the contract.
  • Under present English law, the Consumer Rights Act 2015 ("CRA") applies only where digital content has been paid for. The draft digital content directive would extend the scope of consumer rights to cases where the buyer provides non-monetary consideration such as personal data, thus providing greater protection to consumers than is currently being offered under the CRA. On any termination, businesses would be prohibited from making further use of non-monetary consideration provided by consumers.
  • Digital content would need to be provided instantly and in its most recent version, unless otherwise agreed. Where the content is not provided instantly or at its agreed time, the consumer would have a right to terminate immediately.
  • The draft digital content directive would remove the current 6-month time limit under the CRA for the presumption that defects are present on delivery (unless the consumer had been forewarned that the digital content was incompatible with the consumer's digital environment).
  • Consumers will have the right to terminate a contract under which digital content is provided on an ongoing basis, if the business modifies the contract to the detriment of the consumer. Furthermore, the business would be required to give notice of the actual changes, and would only be entitled to implement those changes if the contract permitted it.

Draft Online Goods Directive

Scope

As with the draft digital content directive, the draft online goods directive would only apply in business-to-consumer sales. Only goods sold online or otherwise at a distance fall within scope. As such, any face-to-face sales are not covered. Contracts for the supply of services would not be subject to this directive. Where a contract is for the supply of both goods and services, the rules would apply only to those elements of the contract that relate to the goods.

Key Provisions

  • Consumers would no longer have a right to reject goods unless a repair or replacement had first been requested and been deemed unsuccessful.
  • Emerging defects that are presumed to be present on delivery currently have a time limit of six months under the CRA. The draft online goods directive would extend this to two years.
  • In the context of known defects, traders would be required to obtain express consent from consumers in order to escape liability. It will no longer be sufficient to rely on such defects being obvious, or being brought to the customer's attention.

While some Member States have expressed concerns regarding the practicalities of having separate rules for online and offline sales, there does appear to be support for action at the EU-level regarding digital content. If the Proposed Directives are successfully adopted in accordance with the ordinary legislative procedure, the Commission will finally be putting its push for harmonization into practice.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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