Consumer rights in digital content

Consumer Rights in Digital Content

Andrew Tibber


Overview

What is “digital content”?

Existing consumer rights

What’s the problem?

Proposals for reform

Impact for business


What is “digital content”

Content that is digital – duh!

“supplied in digital format as a stream of zeros and ones so as to be readable by a computer and give instructions to the computer”

Software, videos, films, music, games, e-books, ring tones and apps

Delivered on physical media (discs) and downloads/ streaming


BTW

The internet economy contributed £100bn to UK economy in 2007 (7.2% GDP)

Growing at 10% a year

Will account for 10% of GDP by 2016

Bigger than construction, transport and utilities

$200 billion spent globally on digital content in 2010

Online gaming revenue predicted to grow to $28.3 billion in 2015


Existing consumer rights

Cancellation of Contracts made in a Consumer's Home or Place of Work etc Regulations 2008

Competition Act 2008

Consumer Protection (Distance Selling) Regulations 2000

Consumer Protection from Unfair Trading Regulations 2008

Consumer Rights (Payment Surcharges) Regulations 2012

Electronic Commerce (EC Directive) Regulations 2002

Enterprise Act 2002

Provision of Services Regulations 2009

Sale and Supply of Goods to Consumers Regulations 2002

Sale of Goods Act 1979

Supply of Goods (Implied Terms) Act 1973

Supply of Goods and Services Act 1982

Unfair Terms in Consumer Contracts (Amendment) Regulations 2001

Unfair Contract Terms Act 1977


Goods

Sale of Goods Act 1979, implied terms

- Section 12(1) – seller has right to sell goods (condition)

- Section 12(2) – free from undisclosed charges/encumbrances; quiet possession (warranties)

- Section 13 – goods will match description (condition)

- Section 14 – goods supplied in course of biz will be of satisfactory quality & reasonably fit for purpose (conditions)

Remedies – (1) common law: right to reject, damages; (2) EU: repair, replacement, reduction of price, rescission

Cannot exclude as against consumer (UCTA)

Similar protection for other forms of contract for supply of goods (eg hire purchase, part exchange) in Supply of Goods (Implied Terms) Act 1973 and Supply of Goods and Services Act 1982


Services

Supply of Goods and Services Act 1982

Implied term that work/service will be performed with reasonable skill and care

Innominate – so remedy depends on seriousness of breach and consequences

Excluding liability (other than for death/PI) subject to reasonableness test (UCTA)

Consumer has much less protection for services than for goods



Goods Services

Skyfall (DVD) ? ?

Skyfall (Netflix) ? ?

MP3 download ? ?

In-game purchase ? ?



2010/2011 – value of financial losses + lost time in EU = €64 bn

Problems with quality = €7.5 bn

- Poor visual/sound quality

- Corrupt content

Problems with access = €10 bn

- Unexpected service interruptions

- Interoperability

- Technical protection measures

Problems with information = €33.5bn

- Awareness of technical requirements/compatibility

- Content being of poorer quality than expected

- Lack of information on complaints and redress



32% of consumers do not take action (Consumer Focus)

- Uncertain how to obtain redress

- Low value of download

Ts and Cs put consumers off (Which?)

- 7 out of 9 investigated do not offer refunds

- Most Ts and Cs exclude liability for damage to s/w

Many consumers assume they have rights and remedies which they may not have – gap between expectations of consumer and trader

Risk to business of time and money spent on unnecessary disputes

Risk of reputational damage

Consumer confidence undermined


The proposals

New category of digital content in consumer law

New statutory rights for digital content

New statutory remedies for faulty digital content


New category of digital content

“Data which are produced and supplied in digital form” (taken from CRD)

Distinct from “Goods”: “any tangible moveable items”

Clause 15: goods do not conform to contract if include digital content which does not conform

“Consumer”: “an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession”



Paid-for content

Also free content where associated with paid-for digital content, goods or services, eg

- given away with magazine;

- in-app purchases

May be extended where evidence in future of detriment, eg where provided in exchange for personal data



Satisfactory Quality (Clause 36)

- Similar approach to that taken for goods

- Aspects of quality include fitness for purpose, freedom from minor defects, safety and durability

- Must meet standard that a reasonable person would consider to be satisfactory taking account of description, price and all relevant circumstances

- Eg standard for 69p app not as high as for £5.99 one


New statutory rights for digital content Fit for purpose (Clause 37)

Description (Clause 38)

- Content must match trial version

- Includes CRD requirements to provide information about characteristics, interoperability and functionality

Time (Clause 39) –

- Trader liable for quality issues up to the earlier of: (1) delivery to consumer’s device; or (2) an intermediary (eg ISP) within control of consumer

- MMOs/Cloud – access to content should be available for a reasonable period of time during which quality rights will apply



Right to modify (Clause 42)

- Permits updates in accordance with Ts and Cs but subject to quality rights

Right to provide content (Clause 43)

- Different to goods because right is limited to use (ie licence)

- Entitled to a refund in default


Remedies

For failure to conform to the contract

- Repair or replacement (Clause 45)

- Reduction in price (Clause 46)

- Refund where no right to provide content (Clause 47)

No right to reject unless provided on tangible medium

Does not affect other available remedies, eg damages

Compensation for damage to device or other digital content

Liability cannot be excluded (Clause 49)


Impact for business

Consumer Rights Bill does not alter law on B2B contracts

No firm timetable for progress of Bill but CRD must be implemented by 13 December 2013, and in force by 13 June 2014

Consumer Ts and Cs and EULAs will need to be reviewed to check they are not unlawfully limiting liability

Awareness raising for eg complaints departments re new consumer rights

Consumer Rights in Digital ContentThis presentation gives general information only and is not intended to be an exhaustive statement of the law. Although we have taken care over the information, you should not rely on it as legal advice. We do not accept any liability to anyone who does rely on its content.

Consumer rights in digital content

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