Articles

Expanding Consumer Rights in the Digital Space

When offering cross-border digital content or digital services, businesses often face additional costs stemming from differences in national consumer contract laws and legal uncertainty. Also, consumers are not always confident when buying cross border and especially when buying online. One of the major factors for consumers’ lack of confidence is uncertainty about their key contractual rights and the lack of a clear contractual framework for the sale of digital content or digital services. Many consumers experience problems related to the quality of, or access to, digital content or digital services.

Two European legal documents, the Digital Content Directive[1] and Sale of Goods Directive[2], which form part of the European Commission’s Digital Single Market Strategy, aim to reduce transaction costs for business by aligning the EU legislation and increase the level of protection and legal certainty for consumers when buying from across the EU. Ensuring better access for consumers to digital content and digital services and making it easier for businesses to supply digital content and digital services can contribute to boosting the digital economy and to stimulating overall growth.

The documents bring about several main improvements to consumer rights: (i) they clarify the rules on the conformity of digital content or a digital service with the contract, (ii) they offer remedies in the event of a lack of such conformity or a failure to supply and (iii) they deal with the modification of digital content or a digital service.

Digital to consumer

While the Sale of Goods Directive applies to sale contracts between a consumer and a seller for goods, including goods with a digital element (e.g. Smartwatches, smart TVs etc.), the Digital Content Directive applies to contracts concluded between a consumer and a trader which supplies digital content or digital services. Our analysis shall further focus on the provisions of the Digital Content Directive.

The central concepts defining the substantive scope of application of the Directive are “digital content” and “digital services”, which cover, inter alia, social media services, software as a service and various computer applications. However, certain services, such as healthcare, financial services and open-source software, are expressly excluded from the scope of the Directive.

Noteworthy, the Digital Content Directive also applies when the consumer provides its personal data as a payment in return for the digital content or service, except the case when the personal data is necessary for the digital content/service to be provided. For example, the Digital Content Directive will apply where the consumer opens a social media account and provides a name and email address that are used for purposes other than solely for supplying the digital content or digital service, or other than for complying with legal requirements. However, in case of digital content or digital services are not supplied in exchange for a price, but the trader collects personal data exclusively to supply digital content or a digital service, or for the sole purpose of meeting legal requirements, the Directive will not apply to these situations.

Assessing the conformity

The requirements regarding the digital content or digital service are fully harmonised through a combination of subjective and objective criteria set out in this Directive.

Firstly, the digital content or digital service shall meet certain special requirements set forth by the Directive, namely the functionality and interoperability, and other features, such as accessibility, continuity and security. In other words, the digital content must primarily comply with the requirements agreed between the trader and the consumer in the contract. For example, the digital content or digital service shall “be of the description, quantity and quality, and possess the functionality, compatibility, interoperability and other features, as required by the contract”.

The conformity of the digital content shall also be assessed according to the objective criteria set out in this Directive. In this manner, the digital content or services shall be fit “for the purposes for which digital content or services of the same type would normally be used” taking into account any existing law, technical standards or applicable sector-specific industry codes of conduct.

In addition, the digital content or digital service must meet two additional requirements: firstly, the digital content must be properly integrated into the consumer’s hardware or software. Incorrect integration will be considered lack of conformity if the reasons for the incorrect integration come under the scope of the trader’s responsibility. Secondly, the Directive provides that the conformity covers not only material defects but also legal defects, which is an important matter for digital content due to being the subject of intellectual property rights.

Consumers’ rights & remedies

A trader’s failure to supply the digital content or service is a serious breach of its main contractual obligations that might well justify the termination of the contract in most cases. This remedy is explicitly provided for by the Digital Content Directive for cases when the trader has failed to supply the digital content or service after the consumer called upon the trader to supply it.

Regarding the lack of conformity of the digital content or service, the Directive lays down a hierarchy of consumer remedies for lack of conformity. Therefore, the consumer shall be entitled to:

have the digital content or digital service brought into conformity within a reasonable time without any significant inconvenience to the consumer and free of charge, unless this is impossible, disproportionate or unlawful;

a proportionate price reduction where the digital content or digital service is supplied in exchange for a payment of a price;

terminate the contract where the digital content is not or cannot be bought into conformity with the contract. The Directive does not recognise the consumer’s right to terminate the contract for minor defects and the burden of proof shall be on the trader.

The Digital Content Directive, however, does not recognise the consumers’ rights to withhold the payment of the price until the trader has brought the digital content or service into conformity with the contract.

Regarding the consumer’s rights to damages, the Digital Content Directive establishes the consumer’s right to seek compensation for any economic damage caused by a lack of conformity or the failure to supply. The detailed conditions for the exercise of the rights to damages are up to the Member States.

Modifying the digital content or digital service

The Digital Content Directive recognise the trader’s right to modify the digital content or digital service. If the digital content or digital service is supplied or made accessible to the consumer over a period of time, the trader may exercise his right even if such modification is not necessary for the conformity of the digital content or service. As a protective measure, the consumer shall be entitled to terminate the contract if the modification negatively impacts the consumer’s access to or use of the digital content or digital service, unless such negative impact is only minor.

Conclusion

These Directives will have a significant impact on contract and consumer protection’ laws and they shall be implemented across EU by 1 July 2021. The Directives and national implementing measures will apply from 1 January 2022.

In Romania, a new draft law has made the first step toward the implementation of the Digital Content Directive. In line with the European regulation, the most notable novelties introduced by this draft law concern: (i) the rules on the conformity of digital content or a digital service with the contract, (ii) the remedies in the event of a lack of such conformity or a failure to supply, and (iii) the modification of digital content or a digital service.

A provision that caught our attention and that is intended to be implemented by this draft law is the regulation of a commercial warranty for the digital content or digital service. The draft law sets out the traders’ obligation to offer to consumers a commercial warranty certificate, no later than the time of delivery (of the digital content or service). A compelling situation arises when the conditions set out in the commercial warranty certificate are less advantageous for the consumer than those provided in the associated advertisements. In this case, the draft law provides that the commercial warranty shall be offered under the conditions set out in the advertising, unless, prior to the conclusion of the contract, the associated advertisements have been corrected in the same way or in a manner comparable to that in which they were made. Also, the warranty certificate shall contain certain information and shall be provided in the Romanian language, without excluding the presentation in other languages as well. It remains to be seen whether the commercial warranty will be part of the new legislation, as well as its application and impact, given the realities and rapid evolution of technology.

 

[1] Directive (EU) 2019/770 on certain aspects concerning contracts for the supply of digital content and digital services

[2] Directive (EU) 2019/771 on certain aspects concerning contracts for the sale of goods

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