The days of online retailers being able to use a single set of terms and conditions for customers across the EU drew a step closer last week with the publication by the European Commission of two draft Directives to harmonise the rules on the sale of online goods and digital content to consumers. If passed, the draft Directives would see changes to consumer protection legislation in the UK and across the EU, increasing consumer protection in some areas and reducing it in others.

The draft Directives are part of the EU’s Digital Single Market Strategy which aims to open up the potential of cross-border e-commerce in the EU. The Commission believes that differing rules across Member States is behind the reluctance of consumers and businesses to engage in cross-border e-commerce; with businesses unwilling to bear the costs of adapting to different rules in different Member States and consumers uncertain about their contractual rights when buying cross-border. Commission research indicates that currently only 12% of EU retailers sell online to consumers in other Member States and only 15% of EU consumers buy online from other Member States.

One size fits all

To combat obstacles to cross-border on-line sales, the Commission has proposed full harmonisation of aspects of the sale of digital content to consumers and of distance sales of goods to consumers. This means that, if the Directives are passed, no Member State could give consumers greater or lesser protection than the provisions of the Directives. A similar approach was taken under the Consumer Rights Directive with regard to pre-contract information and cancellation rights. The measures would apply to business to consumer contracts only.

What are the Proposed New Rules?

Digital Content

  • For the sale of digital content (which expressly includes cloud services), the majority of Member States do not currently have specific legislation. Some countries deal with this under the rules on sales of goods, while others deal with it under the rules on sales of services.
  • Key highlights from the current draft Directive:
    • Defects would be presumed to have been present on delivery (whereas under the Consumer Rights Act 2015 there is a six month time limit after which the customer has to prove the defect existed).
    • Digital content provided for non-monetary consideration (e.g. personal data) would attract quality standards and remedies. With the increasing use of free downloads in return for survey participation or marketing details, this will be a relevant development.
    • Accessibility, continuity and security will now be aspects of fitness for purpose.
    • Any contract for the supply of digital content which lasts more than 12 months can be terminated on 14 days’ notice after the first 12 months.

Goods

  • In relation to the sale of goods, for example consumer rights in the case of defective goods, there are currently only minimum EU requirements in place. This means that Member States laws differ significantly.
  • Key highlights from the current draft Directive:
    • Consumers can only reject goods after requesting repair or replacement first (versus the current short term right to reject).
    • A defect will be presumed to have been present for two years from delivery (versus six months).
    • A trader must get the consumer to expressly accept defects to avoid liability for them (versus currently having to draw them to the customer’s attention or relying on them being obvious).
    • A consumer can withhold payment of outstanding amounts until defects are fixed.

What next?

So far, the new Directives have only been proposed by the Commission. They will need to be adopted by both the EU Parliament and the Council of the EU before coming into force. The requirements will then need to be adopted by Member States – the draft Directives currently propose a two year period for Member States to do this. It is therefore likely to be a number of years before the Directives will take effect, and there are likely to be changes to their content. BLP will monitor the progress of the Directives and provide further updates in due course.

Alongside the draft Directives, the Commission issued a proposed regulation to ensure the portability of online content services by allowing subscribers to online content (such as music and television streaming) to access those services across the EU, rather than being “geo-blocked” when they leave their home country.