27 November 2013

Q & A: Digital Content and the Draft Consumer Rights Bill

What is “digital content”?

In this context, we’re talking about books, movies, ringtones, games, apps, etc, basically any content for electronic devices supplied in digital form.

What rights do consumers currently have?

Existing consumer rights legislation is a complex web of UK and European legislation supplemented by judge-made “common law”.

The existing law makes a broad distinction between “goods” on the one hand and “services” on the other.

It provides that in any contract for the sale or supply of goods to a consumer, some terms will automatically apply that will guarantee a certain degree of protection.  For example, goods must meet the seller's description, must be of satisfactory quality and reasonably fit for purpose, otherwise the buyer will have the option to reject the goods for a certain period of time after purchase.

These rights cannot be excluded by the seller's small print.

There are similar protections currently in place for services provided by a business to a consumer, which must be provided with reasonable skill and care.  Unlike goods, however, the supplier of services may be able to exclude these rights depending on whether it is reasonable to do so.

Sounds good - so what’s the problem?

Digital content can be provided on a tangible medium, such as a DVD, or can be streamed over the internet.  In either case it is unclear whether the content would fall within the accepted definitions of goods or services, and if so what level of protection the consumer will have when purchasing this content.

Bizarrely this could even mean that consumers have different rights depending on how the content they are consuming is delivered - for example, viewers watching a movie could have different rights depending on whether they are watching a DVD or streaming the same movie over the internet. 

While the EU has recently published a report concluding there are significant problems with the quality of digital content, it seems many consumers don't take action, whether because of the low value of the claim, because they don't know how or because they are put off by the sellers'  terms and conditions.  Others think they may have more rights than they actually do.

All in all this represents a significant expectation gap which creates a risk of unnecessary disputes, reputation damage and undermining of consumer confidence.

What’s the proposed solution?

As part of wider reforms to consumer legislation (not the subject of this post), the Government published a draft Consumer Rights Bill in June 2013, which is expected to become law by June 2014.

The new legislation will create a new category of "digital content", that will sit alongside the existing categories of goods and services.

Consumers (note not businesses or sole traders) will have new statutory rights that apply both to paid-for content, and also free content where it is associated with paid-for digital content (eg in-app purchases).  Terms will be implied into every contract (which the supplier cannot exclude) to the effect that:

  • digital content will have to meet reasonable standards of satisfactory quality, including fitness for purpose, freedom from defects, safety and durability, what is reasonable depending on the description, price and all relevant circumstances - so different standards will apply to a 69p app than to a £5.99 one;
  • digital content must be fit for purpose;
  • digital content must match its description, including, for example, by matching the functionality of a trial version;
  • digital content must be available for reasonable periods of time (for example in the course of massively multiplayer online gaming);
  • the supplier must have the right to supply the content (usually under licence);
  • the supplier has the right to update the content in accordance with its terms and conditions and subject to maintaining quality standards.

If digital content fails to meet these requirements, the consumer will be entitled to:

  • repair or replacement within a reasonable time so long as it does not cause the supplier significant inconvenience; or
  • a price reduction by an appropriate amount where the content cannot be repaired or replaced, or cannot be repaired or replaced within a reasonable time.

Unlike goods, there is no right to reject digital content, given that it cannot be "returned" in any meaningful sense: the only exception to this is where the content is provided on a tangible medium, such as a DVD.

What will be the impact for my business?

As far as business to business contracts are concerned, none. 

However, if you are supplying digital content to consumers, you should review your terms and conditions and end user licence agreements to check that they are not inconsistent with the new legislation and not unlawfully attempting to limit or exclude liability.  Refund and returns policies should also be reviewed in the light of the new law, and appropriate training rolled out to customer service departments to raise awareness.  This should in turn protect the reputation of the business and avoid the risk of spending valuable time and money on unnecessary disputes.

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