Only 12 percent of EU retailers sell online to consumers in other EU countries, while more than three times as many sell online in their own country.
To address this, the European Commission published two draft directives in December 2015, dealing with contracts for the supply of digital content and sales of online goods. The aim is to help harmonise consumer law across Europe.
It isn’t the first time the Commission has tried to align EU consumer laws: the last attempt at a Common European Sales Law faltered last year.
A challenge with previous initiatives is that “harmonised” has really meant “the same as long as a country doesn’t want to do anything different”. This time, the directives have been drafted as so-called “maximum harmonisation measures”, which would stop member states from providing any greater or lesser protection.
The proposed directives will need to be adopted by the EU Parliament and Council before becoming law, with member states then having two years to transpose the directives into national law.
The UK government’s Business Innovation and Skills department (BIS), the Competition and Markets Authority (CMA) and the Chartered Trading Standards Institute (CTSI) have all recently commented on the implications of the draft legislation for the UK.
Draft Digital Content Directive
The draft digital content directive applies only to consumer sales, and won’t extend to certain sectors including financial services.
Currently, most member states don’t have specific national law concerning sales of digital content (the issue is often covered by sales of goods or services rules). However, since 1 October 2015, UK consumers have enjoyed new rights with respect to digital content under the Consumer Rights Act (CRA).
The draft directive would reduce UK consumer protection in some areas and enhance it in others. Accordingly, concerns with the directive have been raised by BIS, CMA and CTSI, in particular:
- Scope: The draft directive applies to a broader range of digital content than the CRA. In particular, the CRA applies only to paid digital content, whereas the directive extends remedies to content that is provided for non-monetary consideration (e.g., in exchange for the consumer actively providing personal data). Whereas BIS states that extending rights to cover free services may not be proportionate, the CMA broadly welcomes the proposed approach, but suggests how this works in practice will need careful consideration. BIS suggests that the concept of “actively providing” data is not clear. Is simply agreeing to make data available sufficient? The CMA believes that consumers would need to do more than, say, ‘click’ a button. The draft directive also extends to certain types of digital services not currently covered in the CRA (e.g., cloud storage services; social networking). BIS believes the directive could be clearer as to which services are covered and which are not, to avoid conflict with other EU legislation.
- Modification of digital content: More restrictions are imposed on modifications by suppliers, and consumers have a new right to terminate the contract if the trader makes a modification that adversely affects access to, or use of, content. Although the CMA agrees with the general thrust, it has concerns that a trader’s right to update content shouldn’t be used to dilute consumer control.
- Standards and remedies: BIS has suggested that the fact that the standards for digital content in the draft directive (e., fit for purpose, as described and of satisfactory quality) are not aligned with the regime in the Online Goods Directive is not helpful. The CMA agrees that alignment would help avoid market distortions and uncertainty.
Draft Online Goods Directive
The draft directive only applies to consumer sales of goods sold online, or at a distance. The directive retains many of the same key rights and remedies contained in the CRA. However, there are some differences and it’s likely that a number of key rights under the CRA would need to be repealed, which has led to concerns being raised by BIS, CMA and CTSI, in particular:
- Short term right to reject: Under the CRA, consumers have a right to reject and obtain a full refund within 30 days. This would need to be repealed. However, consumers would still be entitled to a 14 day right of withdrawal for goods bought online or at a distance under the Consumer Rights Directive (CRD). CTSI see this proposed change as a retrograde step and don’t consider the CRD provisions sufficient to ameliorate the problems caused by the removal of the right to reject. The CMA is also unhappy with the change, believing it would reduce certainty, to the disadvantage of both consumer and trader.
- Loss of one repair or replacement limit: Under the CRA, consumers can pursue a price reduction or refund after the goods have undergone one repair or replacement. This would need to be repealed. The UK would be required to reinstate the law that existed before the CRA which, according to CTSI lacked clarity and led to significant consumer frustration, e., consumers can ask for a price reduction or refund if a repair/replacement cannot be provided within a reasonable time and without significant inconvenience. The CMA also disagrees with the removal of this key protection and recommends the draft Directive is amended in line with the CRA.
- Liability period: Currently, the liability/limitation period for remedies are six years (five years in Scotland). The draft directive would reduce the period in which a fault has to appear before a consumer can make a claim to two years. Again, CTSI and CMA don’t support this change, believing it a significant reduction in consumer rights.
On the other hand, the draft directive will enhance consumer protection under the CRA by extending the reversal of the burden of proof from six months to two years. During this extended period, it will be the supplier’s responsibility to prove that the goods were satisfactory at the time of sale. On this point, CTSI is not supportive as it says it is not sure it strikes the right balance and may be unfair on businesses. The CMA supports the proposal in principle, but it doesn’t offset their concerns regarding the reductions in consumer protection introduced by the draft Directive.
Other concerns have been raised. In particular, suppliers would be subject to different rules depending on the method they use to supply goods: offline selling would fall within the scope of the CRA, whereas online or distance selling would engage the provisions of the new directives. Suppliers using both methods would be required to comply with both sets of rules, and there are concerns from both CTSI and CMA that this could lead to confusion for consumers, and challenges for suppliers juggling two different sets of rights. CMA also points out that it could lead to market distortion with consumers more inclined to buy offline thus reducing online growth.
Although the proposed directives still have a long way to go before they become law, they demonstrate a keen desire for harmonisation at the EU-level. Being able to have one set of terms and conditions for all European customers would certainly appeal to many businesses currently having to navigate a patchwork of consumer laws.