Updated: Aug 14, 2020
The evolution of technology has affected consumers' lifestyle, reflecting the all expansive, rapidly changing and adapting nature of the commercial world. We have, now, entered the digital market space, and purchasing digital goods online has become the new norm. The downloading or streaming of digital products is more common than ever, shaping a continuously evolving market.
However, when digital goods turn up to be defective and not up to the standard expected by the average consumer, the law has been characterised to be unclear. Indeed, until recently, the law was ambiguous, obscure, and compound. The UK courts rejected the majority of claims over defective digital goods on the fact that digital content products are not actual goods, based on their intangible nature. The solution to this confusion came with the Consumer Rights Act 2015 (CRA 2015), a statute-guide to digital content consumers, affording enhanced consumer protection. Admittedly, the CRA 2015 filled a significant gap, as people become more and more reliant towards digital products and services.
Defining 'digital content' under the CRA 2015
The term digital content can be simply described as elements produced and exposed in digital form, and such elements may include software, e-books, applications, online journals, even music, films and television. Undoubtedly, digital content may be procured in a tangible form e.g. via a device or a disk, or in an intangible form, either by downloading, streaming, or via other online sources. There are no limitations regarding the way digital contents are packaged, paid or transmitted to customers. The rights arising in shadow of the digital products are in fact contractual rights that apply when such products are delivered to the consumer under the requirements of the contract.
Digital products are provided to the public with a license incorporating consumer rights in accordance with the use of digital content and any implied limitations. Digital Content rights apply under contracts for those that have acquired such license (for e-goods), or alternatively for digital content incorporated within goods in the ‘traditional sense’. Subsequently, digital content cannot be limited as just an element of online shopping; rather it is simply a way in which a digital product is made available - it is nevertheless a product in its own right, regardless of the absence (or presence) of the element of tangibility. This means that digital content does not correspond to the content of online services such as websites for online banking, online shopping etc. unless the consumer has separately paid to have access or downloaded on a device such applications.
What about Free digital content?
The nature of free digital content has not acquired exclusive statutory rights, except for those occasions where damages occur to other content, software or device of the consumer, and/or for disputes concerning the imposition of unfair contract terms. The essential requirement for the application of digital content rights is the existence of a contract between the supplier and the consumer. In the territories of England, Wales, and Northern Ireland, a consumer is required to 'give something in return' (based on the common law doctrine for consideration). In contrast, Scots law does not require consideration but an intention to be legally bound.
Generally, the statutory rights for digital content mainly apply where there is extensive disposal to pay. Free digital content, however, does not require payment but exchange for personal data. In 2015 the Competition and Markets Authority (CMA) reported that the transfer of data for digital services and products had benefited businesses, consumers, and generally the economy. CMA further expressed that where consumers are exchanging data for digital products, then consumers should be followed by relevant rights, to protect them in a case where non-conformity occurs and/or even defects affect consumers' devices.
The requirements under CRA 2015 - explained
Digital content to be of 'satisfactory quality'
Where digital content is supplied to the consumer under a contract is required to be of satisfactory quality. The applicable legal test is where a reasonable person would think that a digital content good conforms the relevant restrictions set by the legal concept of satisfactory quality, taking into consideration the relevant circumstances including any description given from the trader, the level of the price, quality, state and condition of the content and the level of security that such content must have. A reasonable person’s expectations regarding the quality may vary, depending on the nature of the content.
Defects brought to the Consumer’s Attention
Where there is an existing fault with the digital content and that fault was brought to the consumer's attention prior conclusion of the contract, the consumer is unable to claim remedy for the defect. This is also the case if the consumer examined the content before purchase, and the defect was detectable. A supplier's general statement that the digital content 'will not be fault free' is not considered as prior notice to the consumer, as they are obliged to specify the condition of the product. Where there is an additional defect to the one that was originally brought to the consumer's attention, this specifically means that such content is in breach of the satisfactory quality right. Minor defects may not necessarily deem a good faulty; it depends on the circumstances, the type and price paid for it.
Major defects that are blocking digital products from operating, undoubtedly, imply unsatisfactory quality and correspond to the picture of a faulty good. A major defect may, indeed, impair the functioning of features contained within such content or the device in which it is incorporated. Where a reasonable person anticipates that the product will be sound but later discovers that it is not, then the content can be described as faulty. A reasonable person will expect minor defects in complex forms of digital content (software, etc.). Still, the supplier may not be obliged to set a repair because most types of digital content are frequently updated so that a good deal might be a repair of such defects through an update.
The right to return faulty digital goods
Simultaneously, consumers are entitled to a 14-day right of cancellation for digital content ‘bought at a distance or off-premises’ under no reasonable grounds. However, this right does not apply to audio, video, and software products once the performance has commenced. The supplier must notify the consumer that when performance begins, the right to withdraw no longer exists. Alternatively, where the digital content is defective, the buyer acquires the right to return it within a period of 6 months.
Suggestions by Law Society of Scotland
The Scottish Law Society, back in 2015, expressed the need for an initiative on contract law for digital content at EU level as something strongly 'desirable' to establish the promotion of common standards across the EU states markets. The desire for EU wide harmonisation arose, mainly, because the national law even though recently supplemented still seemed weak, whereupon the EU wide regulation of digital content could both strengthen the law domestically and could act to avoid the risks arising whilst accommodating the practical cooperation of the Union’s member states.
EU & Digital Content
In 2015 the UK Government requested within the EU the creation of a Digital Single Market because at the time there was no EU-wide law addressing disputes of defective digital content. The European Commission set out a strategy aiming to 'reduce the barriers to the growth of cross-border e-commerce in the European Union' with the settlement of laws that will be common to all its member states. Now in force, the relevant Directives (Digital Content Directive - DCD, and the Sale of Goods Directive -SGD), are following the legislative formation and provisions of EU law. Notably, some of the most critical provisions contained in the DCD and SGD are already available in the UK through the CRA 2015.
In a nutshell, there are, though, significant areas where the Directives differ from the rights given under CRA 2015. DCD's extended scope affords protection to contracts where the trader supplies digital content in exchange for a 'counter-performance', the consumer's data; name, e-mail address, photos, etc., to the supplier. EU law also pioneers in regulating separately digital content that is incorporated in physical goods, under Art. 3 of the SDG, but not the DCD. The element of tangibility is decisive under EU law in that digital content made available in a tangible form, (e.g. a smartwatch or a smart TV) is regulated as goods that contain or are inter-connected with digital content. Conversely, the DCD is regulating the supply/downloading of digital content, including digital content supplied through a tangible medium (e.g., DVDs, CDs, USB sticks and memory cards) as well as the tangible medium itself, provided that it serves exclusively as a carrier of the digital content and not as a good.
The aim of the EU is to achieve harmonisation on the regulation of digital content within its member states to avoid any contractual risks that could otherwise arise, and accommodate the establishment of the European Digital Single Market. Therefore, reforming the CRA 2015 will be necessary to comply with EU law, if the UK wishes to be in the Digital Single Market, post-Brexit.
Considering the relevant provisions of the existing law and further establishments required at UK level, it seems that the domestic law is still at a starting point. The law on defects in digital content requires further scrutiny and more detailed enactments covering every aspect of the matter. The EU directives establish a common regulatory framework among its member states on the enhancement of consumer rights to a greater extent. Even though the UK pioneered in legislating digital content first, the CRA 2015 still needs further expansion, to better resolve those issues that arise from defects (of either free or paid digital content) and the EU is now the place for that.
Consumer Rights Act 2015
Directive (EU) 2019/770 on certain aspects concerning contracts for the supply of digital content and digital services (Digital Content Directive)
Directive (EU) 2019/771 on certain aspects concerning contracts for the sale of goods, amending Regulation (EU) 2017/2394 and Directive 2009/22/EC, and repealing Directive 1999/44/EC (Sale of Goods Directive)
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