DSM Watch: on 24 February the UK Government’s Department for Business, Innovation and Skills (BIS) organised a conference in London on the European Commission’s proposals under its Digital Single Market (DSM) strategy for the directive for distance sales of goods and the directive for the sale of digital content. Our DSM Task Force team is a multi-jurisdiction, cross-practice group working together to keep you informed as the initiatives under the DSM strategy roll out.

The workshop was attended by Baroness Neville-Rolfe (a BIS minister), Director-General Tiina Astola (DG Justice and Consumers) as well as Dr Dirk Staudenmayer (the Head of Contract Law Unit, DG JUST). After introductions from Baroness Neville-Rolfe and Director-General Tiina Astola there was a panel discussion involving members of various consumer and business bodies. Dr Staudenmayer then fielded a large number of questions from the audience which, while broadly supportive of the initiative in principle, had various concerns about how the Directives would work.

Some notable points included:

  • The Commission considered introducing maximum harmonisation of unfair terms legislation – i.e. not allowing Member States to introduce more stringent regulation in this area, in contrast to the current position of minimum harmonisation which sets a floor for the level of regulation – but was told by Member States that they preferred to keep the existing flexibility. The risk with this, however, is that businesses can’t know whether aspects of their terms and conditions of sale (e.g. liability caps or termination rights) will be deemed to be unfair in other jurisdictions unless they get a local law check. One of the key justifications for the proposed Directives is that they will enable businesses to do without these local law checks – so it looks as though their success on this point will be largely dependent on how much of a risk businesses are prepared to take in the area of unfair terms.
  • The potential scope of the Directive on digital content sales was a concern to some businesses. In particular the fact that the Directive will apply whenever a consumer provides data (not just personal data) in return for digital content. Here the Commission reiterated that the Directive is only supposed to address situations where the trader uses data for commercial purposes.
  • There were worries about the practical difficulty of allowing, upon termination of the contract, a consumer to “retrieve” any content that the consumer has provided, or that has been created by the consumer’s use of the digital content supplied by the trader. In particular this could pose significant practical challenges where the consumer’s content has become embedded into wider platform data (e.g. the creation of avatars on gaming platforms).
  • How will businesses cope when selling bundles of goods, digital content and services (e.g. telecoms providers), given the different regulations applying to each element of the bundle? Dr Staudenmayer thinks that this is essentially the same position as exists currently (in the UK at least) and that it is difficult to see how a unified set of rules could be applied given the inherent differences between the three categories.
  • The growing disparity between regulation of online vs face-to-face sales is making it increasingly difficult for businesses to plan their sales strategies. The Commission is acutely aware of this – indeed it made express reference to the importance of “omni-channel” sales strategies in the explanatory memorandum accompanying the draft directives – and clearly agrees that there needs to be alignment. For the time-being, however, it is bound to carry out the usual consultations and data analysis (which previously it only carried out for distance sales) before it is able to propose any measures – but doesn’t want this to interfere with the timetable set out in the Digital Single Market Strategy.
  • From a consumer perspective there were concerns that the supply of goods proposals would erode existing protections under UK law – including in particular the omission of the consumer’s short term (i.e. 30 day) right to reject (as set out in the Consumer Rights Act) and the reduction of the time limit for claims from 6 years (pursuant to the UK’s statute of limitations) to 2 years. However, in respect of the short-term right to reject, Dr Staudenmayer pointed out that consumers already have a right to cancel their contracts (for any reason) within 14 days of receiving goods (albeit with a duty to pay delivery costs), and the data suggests that in practice consumers are less likely to reject within the 3 – 4 week period. He viewed the reversal of the burden of proof for claims (i.e. there will be a presumption that a product was defective at the point of delivery if that defect arises within 2 years) as being much more important for consumer rights than maintaining a theoretical ability to make a claim for up to 6 years, given how difficult it is for a consumer to prove a claim when more than 2 years have passed since delivery.
  • A number of people raised concerns about how enforcement will work. For example, will a UK consumer really be able to bring effective action against a Hungarian supplier of a defective sofa? The Commission emphasised the new ODR and ADR platforms (discussed in a separate blog available here) – but there is still some concern that even these will be too expensive for smaller claims. There are also concerns about how enforcement authorities will coordinate across borders. In this example, would the consumer have to complain directly to the Hungarian authorities, or would they be able to use a UK Trading Standards Officer to assist?