New consumer rights have been introduced on an EU-wide basis which affect businesses dealing with consumers, particularly those who supply online digital content. These rights have been introduced through the EU Consumer Rights Directive and implemented by way of national legislation in the various EU Member States.
As we had anticipated, long-awaited guidance on the application of the Directive has recently been published by the Directorate General for Justice (the Guidance). We summarise below some of the most significant points raised by the Guidance that affect providers supplying online digital content.
1. Information required to be provided at the point of purchase: the Directive requires providers to make the consumer aware of certain significant information (such as the main characteristics of the goods, the total price, the contract duration and conditions for termination) in a clear and prominent manner, directly before the consumer places their order.
The Guidance advises that this "should be presented in a way that the consumer can actually see and read it before placing the order without being obliged to navigate away from the page used to place the order". Providers will therefore have to ensure that, as a minimum, their checkout pages contain this specific information.
2. Order buttons: the Guidance reiterates that providers must use purchase buttons which imply a payment obligation, such as: "buy now", "pay now" or "confirm purchase". Whereas "register", "confirm" or "order now" will not be sufficient to comply with the Directive.
3. Confirmation email: the Directive requires a confirmation of the contract to be provided within a "reasonable time". The Guidance suggests that digital content providers will be required to send the confirmation email "immediately before" the consumer begins to download or stream the content. This may be technically challenging for some providers, particularly those which enable consumers to start their stream almost concurrently with conclusion of the purchase.
4. Service contracts versus contracts for the supply of digital content: the Directive does not explain whether certain subscription-based digital content services (e.g. online VOD movie subscriptions or all-you-can-eat music subscriptions) should be treated as "services" or "contracts for the supply of digital content". Whilst the Guidance does not specifically address this point, it seems to imply that such subscription contracts should be treated as contracts for digital content. This is a helpful clarification for providers.
The Guidance goes on to say that: "If covered by a subscription contract, each supply of individual digital content under that contract would not, accordingly, constitute a new 'contract' for the purposes of the Directive". The Guidance adds that pay-per-view content, which is not covered by the consumer's subscription, would nevertheless be treated separately as a new contract.
5. Provision of digital content prior to expiry of the cancellation period: possibly the most controversial requirement of the Directive is that the provider must obtain the consumer's express consent before making purchased digital content available to the consumer during the 14-day cancellation period by way of download or stream, together with an acknowledgement from the consumer that they will lose their cancellation right once they start to access the content. Providers have been concerned that such language may be intimidating to consumers and may lead to a negative effect on sales and conversion.
To assist the consumer, the Guidance suggests using a tick-box on the provider's website, but clarifies that a pre-ticked box is likely not to be sufficient, nor would reference to the general terms and conditions. Nevertheless, the Guidance adds that the express consent and acknowledgment can be obtained at the same time (e.g. at the purchase page) and provides the following example wording: "I hereby consent to immediate performance of the contract and acknowledge that I will lose my right of withdrawal from the contract once the download or streaming of the digital content has begun".
Providers may be keen to use less intimidating language to achieve the same result, but in light of the seemingly inflexible interpretation of the Directive on this point, it is important to ensure that any replacement language still obtains both: (a) the express consent of the consumer; and (b) the consumer's acknowledgement that they will lose their cancellation right by continuing.
6. Additional information requirements: providers have been particularly concerned by the ambiguity over the level of detail which is required to be given to consumers relating to: (a) the functionality, including applicable technical protection measures, of digital content; and (b) any relevant interoperability of digital content with hardware and software.
The Guidance clarifies that "it does not appear feasible to set a single exhaustive list of functionality and interoperability parameters that would apply to all digital products". Therefore the Guidance provides a non-exhaustive list of information which may be required to assist providers with any changes they need to make.
The Guidance was certainly much needed and answers a number of questions which had previously been tormenting providers, but it is unfortunate that the Guidance has been published so late, particularly since many providers will have already made sizeable investments and used significant resources to comply with the Directive by 13 June of last year.
However, it is likely that, as a result of the Guidance, many providers will have to reassess their services to ensure that their own interpretation of the requirements of the Directive were in line with that of the Directorate General.
- Gregor Pryor is Co-Chair of the global Entertainment and Media Group, and Nick Breen is Associate, Entertainment and Media Group, at Reed Smith LLP