UK Consumer Rights in Digital Content

On the 13th July 2012 the UK Government’s Department of Business Innovation and Skills (BIS) launched a consultation titled “Consultation on enhancing consumer confidence by clarifying consumer law” *. The consultation proposes a range of options that seek to harmonise UK consumer law. What marks this out for digital industries such as social media, cloud computing, computer games and others is that as part of the consultation the UK Government is proposing options for a set of consumer rights designed specifically for ‘Digital Content’. What’s more the consultation document includes a number of examples from computer games. The deadline for the consultation is 5 October 2012.

This is not of mere intellectual interest. Some of the options proposed in the consultation will have an impact on any and all providers of digital content and / or related services available to consumers in the UK. Indeed, the consultation is quite specific that the proposed consumer rights will also apply to non-UK based services and that the consumer rights cannot be contracted out of.

The full consultation document is over 250 pages long and there are two related documents. The questions asked in the consultation are wide-ranging and detailed. They span from whether digital content should even be considered as a separate category to specific questions about remedies. The summary below points out the key elements of the digital section of the consultation. However because of its length and depth, if you are a business considering responding you are advised to read the full work and see professional advice and your relevant trade association(s), the full set of links for the consultation and response options are as follows:

tVPN will be putting together a response to the consultation from a civil society / academic point of view (as we believe that industry responses are being created by trade associations).

The tVPN response can be found in this Google Document which is open to public comment. If you want edit access to the document email us: info AT virtualpolicy DOT net.

Executive Summary

The digital section of the consultation offers three options for Digital Content rights. These options build upon each other and are by stages wider in scope and increase the severity of the remedies they offer to consumers. In summary the consultation:-

  • Creates defined categories for :
    • Digital Content (MP3, the text of an eBook);
    • Related Services (a services that is necessary linked with some Digital Content e.g. a content streaming platform); and,
    • Enabling Services (a service that is essential to access Digital Content but is not specifically tied to that content e.g. a ISP).
  • Applies the notion of ‘quality’ to Digital Content (and in one option Related Services) including consumer rights where Digital Content / Related Services:
    • are provided by a seller who does not have the rights to provide the service;
    • do not meet the description;
    • have service interrupted;
    • are not of ‘satisfactory quality’ that meets ‘a reasonable persons’ expectations’; or
    • do not match the trail version / demo.
  • Suggests remedies for consumers that range across:
    • Repair or replacement;
    • Return with refund or price reduction;
    • Compensation; or
    • Right to reject.

What follows is a detailed analysis of each of these options.

Detailed Summary

The following detailed summary quotes extensively from the consultation document: 12-937-enhancing-consumer-consultation-supply-of-goods-services-digital.pdf

Overall Scope and Purpose

Our proposals focus on consumer rights when digital content is “faulty” or “sub-standard”. We cover solely transactions where there is a contract between a business and a consumer, where the consumer is an individual not acting in the course of his or her business
(7.1.2 p131)

Definition: Digital Content

“The CRD includes a definition of digital content. Article 2 (11) provides the following definition of digital content:

digital content means data which are produced and supplied in digital form
(7.75 p156)

This definition is supplemented by the following text in Recital 19: ‘Digital content means data which are produced and supplied in digital form, such as computer programs, applications, games, music videos or texts, irrespective of whether they are accessed through downloading or streaming, from a tangible medium or through any other means. [...] If digital content is supplied on a tangible medium such as a CD or a DVD, it should be considered as goods… contracts for digital content which is not supplied on a tangible medium should be classified … neither as sales contracts nor as service contracts.
(7.76 p156)

Definition: Related Service

Many forms of digital content cannot be accessed in isolation but require the supply of one or more services for their use. We believe these services break into two categories:

“related services” which are integral to the proper functioning of the digital content and over which the consumer has little or no choice as to who supplies the service once they have bought the digital content. This would include the download or streaming of digital content to a consumer’s computer or the provision of access to digital content in the cloud. These “related services” are almost always offered by the supplier of the digital content itself and can be seen in many ways as intrinsic to the digital content product;“enabling services” which are essential for the delivery of digital content to the consumer, but operate independently of the supply of any individual digital content product or related service. This would include broadband and internet service provision services. The service providers are often not the same companies that supply the digital content itself.
(7.3 pp 128 – 129)

Examples of Digital Content

The consultation provides a number of scenarios to illustrate what it means by Digital Content (see also below for ‘Free’ Content and Open Source).

A consumer buys some software online and downloads it, along with the necessary installation software. The consumer then installs the digital content onto their hardware for use.
Yes, the software is an example of digital content that is accessed using a download, a type of related service. Our proposals apply rights and remedies to the digital content and consider applying specific rights and remedies to the related service.

A consumer buys a game on a disk from a high street trader and then buys access to an online system where they can play that game against other users.
Yes, although the related service is bought from a different party, it is integral to the functioning of the game and we consider what rights and remedies should apply to both the digital content (the game) and the related service (the accessing of the game online).

A consumer participates in an online virtual world for free for a time and later purchases in- world credits to buy virtual items within the virtual world (e.g. to send a fellow virtual world player a bunch of virtual flowers).
Probably. The first issue is to decide whether there is a contract between the business and consumer. We think there is, even though the virtual world is free, if the consumer has had to agree to terms of use before being allowed to enjoy the virtual world. If there is a contract our proposals would apply. The digital content supplied is the virtual world, and the access to it is a “related service”. Even though the consumer does not keep a copy of the digital content on their device (e.g. their computer or smartphone) they would still, under our proposals, expect it to meet digital content rights as to quality. We consider whether all proposed remedies would be appropriate for sub-standard free digital content and propose that these are limited. When the consumer pays for in- world credits they have paid for digital content and this would be fully covered under our proposals.

A consumer uploads and stores their own digital content on the cloud and can then share this digital content with others e.g. Photobox, Facebook
No, while there is a business to consumer contract this is not for the supply of digital content but rather for the storage of the consumer’s own digital content. This kind of “pure service” would be covered under the normal services framework described in Chapter 6.
(7.19 pp 132 – 134)

Content from non-UK provides i.e. cross-border

Non-UK based companies should pay particular attention to what the consultation says about cross-boarder sales i.e. content from non-UK based providers (tVPN emphasis added):

Arguably, digital content is particularly easy to buy and sell across borders (subject to intellectual property copyright provisions). We intend that our proposals as to quality will not be able to be contracted out of, ie a business will not be able to say that a consumer cannot claim the rights. Even if another country’s laws apply, if the trader pursued or directed their activities to the UK a consumer living in the UK will still be covered by our proposals.
(7.30 p 137)
Pursuing or directing activities might, for example, include having a website translated into English or with a UK web address from which a consumer in the UK can purchase digital content in sterling.
(7.31 p137)

Quality and Remedy Options

The Digital Content section of the consultation contains three broad options for rights and remedies.

  • Option 0: This is the minimal ‘do nothing’ option – which actually brings into force new EU consumer legislation.
  • Option 1: Builds on Option 0 (which as to be done anyway) by adding detailed concepts of ‘quality’ and consumer remedies if the quality is not met.
  • Option 2: Builds on Option 1 but brings Related Services under the same quality and remedies regime

Option 0

Option 0 proposes only the introduction of a piece of European Legislation know as the Consumer Rights Directive or CRD for short. The background to this is that the CRD was agreed by all EU states in October 2011 who have 2 years to implement it in local legislation.

What the CRD covers

  • Pre-contractual information – say what something is before someone buys it
  • Right to withdraw – which gives a consumer 14 days to withdraw from a purchase (this is not dependent on the quality of the digital content), but the right is in essence  waived if the consumer downloads / installs the content
Despite its name, the Consumer Rights Directive does not set out what rights consumers have regarding the quality of digital content, goods or services, except to the extent that incorrect pre-contractual information may be a breach of contract (see below paragraph 7.105). Therefore if we were only to implement the CRD, the quality standards that digital content transactions should meet would remain unclear. Arguably introduction of the CRD may reinforce the legal position that digital content on disk is to be treated as goods but it will not help to clarify what rights there are regarding the quality of intangible digital content. This is because the CRD states that digital content supplied on a tangible medium should be considered as goods but does not set out or indicate what rights exist to quality for intangible digital content nor what remedies the consumer is entitled to if the digital content is of a sub- standard quality.
(7.79 p157)

Option 1

The next option in the UK Government’s proposals retains the rights provided by the CRD and adds a set of ‘quality’ rights and related remedies that apply to Digital Content. While specific quality criteria and remedies do not apply directly to Related Services, there is still a provision that such services must be provided with ‘reasonable care and skill’.

A summary of the rights and remedies follows. This part of the consultation is complex but contains some fascinating examples, so more detailed analysis follows. The key quality rights are:

  • Rights as to title i.e. that the seller has the right to sell the digital content
  • Rights as to sale meeting description i.e. that the digital content should correspond with the description given.
  • Rights as to quality and fitness i.e. that the digital content is of satisfactory quality
  • Right that the sale will correspond to any sample given i.e. that the digital content will correspond with any trial version

The key remedies or faulty or sub-standard digital content are:

  • repair or replacement of the digital content
  • reduce the purchase price or return the digital content and get a refund

Rights

Rights to title

It seems obviously that a seller must have the rights to sell what they sell you – but the consultation actually references the famous case of Amazon selling George Orwell’s 1984 and Animal Farm on Kindle then finding they did not have the rights and simply deleting them from customer devices.

In the proposal Amazon would not have the right to do this without compensating buyers as it would have been Amazon that had breached the new consumer law by selling something it did not have title to.

Uninterrupted use

Although it’s buried in a subsection of the report (7.100 & 7.101 p164) the consultation suggests that under s.12(2)b Of SOGA (Sale of Goods Act) a company may be restricted in the extent to which it can change a good once it has been sold – in particular to remove features.

In fact the consultation cites the example of a ‘console’ (i.e. the PS/3 ) that was sold with the ability to run other operating systems (i.e. Linux). Some time after sale the console maker released a patch which removed this ability. While this patch was optional, not installing it meant that the console would not run new games or Bue-Ray movies.The consultation suggests that the company could NOT remove these features from without ‘consent’. Given the context of this assertion one might assume that consent has to be a realistic choice not effectively forced.

There have been situations, however, where traders or manufacturers have removed certain aspects of digital content or made updates that have negatively affected the content’s functionality. In 2010, a company provided an update to one of its games consoles that removed the consumer’s ability to run “other” operating systems. The aim behind this update was to prevent hacking. The update was optional but if consumers chose to opt out they were prevented from using other features of the games console including the company’s network, newer games and Blu-ray movies. This update affected a number of consumers who felt that a feature which they had paid for and valued had been subsequently removed. This is a situation unique to digital content. It might be necessary to introduce a requirement that for digital content, quiet use includes a guarantee that the consumer must consent to any interference that could affect their use of the digital content.
(7.101 p 165)

Must Meet Description

Here the consultation points that Digital Content is sold that has DRM or other ‘Technical Protection Measures’ that mean that users’ find that they can’t use the content on some devise or other. The consultation does not prevent this but it does say that any such measures and their compatibility implications must be fully explained.

Rights to Quality

This is one of the more extensive sections of the consultation as it explores what is meant by quality. The consultation attempts to find a balance between the notion of quality in physical goods and services and the fact that many digital artefacts contain bugs. Essentially the consultation says – look at the context and see what would be reasonable to expect.

It explicitly questions notions such as trivial and serious bugs, durability in time when technology moves on and the expected user experience. On this last point, the consultation rules out subjective notions of quality content saying

[…]The quality standards are not intended to be used for any subjective judgements of the digital content for instance, the game is not exciting enough or the e-book isn’t interesting.
(7.110 p167)

Correspondence with sample / trial

The consultation simply proposes that the trial or demo of Digital Content should be a reasonable example of what the full Digital Content should be.

Remedies

The consultation makes clear the remedies proposed are not the limit of a consumer’s rights. A consumer also has access to standard statutory remedies such as breach of contract.

Following on from the discussion of bugs (above) the consultation proposes that a reasonable approach to the idea of quality and the practicality of replacement / repair should be taken i.e. if a consumer finds a bug they cannot simply demand a perfect version of some Digital Content. But there are cases where replacement / repair is reasonable.

Similar a customer may wish to simply return Digital Content. Here both refund and considerations of a ‘deduction for use’ are considered (see: 7.127)

Here is best to simply reproduce the example given in the consultation:

A game manufacturer recently released the third instalment of their immensely popular game. In a bid to combat piracy, the game requires consumers to log on to the manufacturer’s servers before they can enter the game and to remain connected to the internet throughout, even in single player mode. On the day of the launch of the game, the company’s online infrastructure failed to cope with demand from consumers and the manufacturer took the decision to bring down their servers for emergency maintenance, thereby preventing consumers from playing the game. In this example there was no problem with the digital content but there was an issue with the related service. Under option 1 the consumer would have to prove that the manufacturer had not delivered this related service with reasonable care and skill.
(7.1.3 p177)

Option 2

As noted above Option 2 includes all rights and remedies in Option 0 and Option 1. In addition it introduces

  • Short term right to reject (with full refund) until a consumer has accepted the Digital Content
  • Right to the Digital Content being of satisfactory quality once the related service has been performed
  • The remedies that apply to Digital Content/goods would also apply to the Related Service

Short term Right to Reject

In the previous option the consultation proposed a right to reject if Digital Content were faulty. In this next option it introduces the same right in the case that Digital Content is sub-standard. It debates at some length what the meaning and value of such a right is (see: 7.137 – 7.145 pp179 – 182)

Related Services

Similarly the consultation changes the bar for Related Services adding notions of quality (rather than the more standard legal test of reasonable care and skill covered in Option 1). More specifically the consultation weighs up the arguments for a ‘strict liability’ test being applied to Related Services (see: 7.153 – 7.157 pp184 – 185)

The consultation considers giving consumers the same remedies in relation to Related Services as provided to Digital Content in Option 1. Noting that in many cases Digital Content simply will not work without the Related Service (see 7.158 p185). But also suggests that there is an option to keep some remedies but not provide ‘second tier remedies such as refund or price reduction.

Final notes

There are a number of final matters the consultation covers

Consumer responsibility

The consultation notes that consumers have responsibilities too, specifically:

  • The burden of proof in relation to Digital Content is on the consumer
  • If a consumer return faulty digital content then they must delete it / not make copies etc

Free Content

The consultation takes into account that some Digital Content is free or at least is provided in exchange for something other than hard currency. It notes that the exchange of anything of value creates a ‘binding contract’. Thus in many cases ‘free’ content is covered by the proposals in the consultation.

Here it is worth looking at the text of the consultation as it is illuminating in respect of the business models it has taken into account (emphasis added):

This could be in exchange for something of value other than money such as personal data or virtual currency, as part of a marketing strategy or in connection with the purchase of something else e.g. hardware or other digital content
(7.1.69 p 190)

Open Source

In a related note the consultation considers whether Open Source software should be included under the options when it is provided by a by a business.

EULA

Lastly (in the section on Digital) the consultation turns to EULAs, again quoting is of most value:

These licences can go well beyond what is necessary for copyright protection and can include terms that could be considered unfair. EULAs are usually international documents and do not vary country by country. It can be confusing for the consumer that there seem to be one set of rights laid out in domestic legislation and another set of rights described in the EULA. The Law Commissions are examining some of these issues in their consultation on unfair contract terms.
(7.175 p194)

tVPN Summary Analysis

First we need to note that this is a consultation. All of the options beyond those that are required by European law are set out as options for comment, so the document should not be read as immanent statue.

Whether one thinks that the proposals are reasonable probably depends on what side of the virtual shop counter one sits. There is certainly an argument to say that even if one takes all of the consultation’s proposals then all it does is level the playing field for consumer rights. If one buys a car then one would not reasonably expect the manufacturer to come and remove the Air Conditioning 6 months later – which could be see as a direct analogy to the case of a console being modded so that it no loner runs a particular operating system.

What’s more the this set of consumer rights is yet another step in the shift away from the dominance of IP and Contract in the digital realm which, to many, has given industry unchecked power over consumers.

On the other hand industry may argue that digital is sufficiently different because of its nature and the consequences of it’s use / misuse. Hence the recognition that digital content does not always work, that features give rise to un-intended consequences of such scale means that industry must retain rights to change code and normal (in the EU) consumer rights should not prevail.

*  Full disclosure: the Virtual Policy Network was one of the bodies that engaged in a dialog with the UK Government in the run up to the publication of the consultation. We provided background on the computer games, social media and augmented reality industries. In particular we provided details and scenarios that covered the range of digital objects and services around the world and the current state of legislation and regulation. This was all done pro bono.

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