ANALYSIS OF DIRECTIVES ON CONSUMER PROTECTION – EU FUNDED
1. PURPOSE OF THE DIRECTIVE
Directive (EU) 2019/770 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the supply of digital content and digital services (“Directive“) aims to protect consumers who purchase digital content or services from a trader. The Directive sets rules on:
- the conformity of digital content or a digital service with the contract,
- remedies in the event of a lack of such conformity or a failure to supply, and the modalities for the exercise of those remedies, and
- the modification of digital content or a digital service.
The Directive entered into force on the 1st of January 2022 and applies to the supply of digital content or digital services taking place from that date onwards.
The level of harmonisation imposed to MSs by the Directive is one of maximum harmonisation and according to Article 3 of the Directive, it applies:
“to any contract whereby the trader supplies or undertakes to supply digital content or digital service to the consumer and the consumer pays or undertakes to pay a price”
The fact that the digital content or service is designed according to the consumer’s specifications does not preclude the application of the Directive.
DEFINITION OF PRICE: The definition of price is “money or a digital representation of value” which is paid or agreed to be paid in exchange for the supply of digital content or a digital service. Digital representation of value includes electronic vouchers or coupons as well as virtual coins. It should be noted that the concept of value includes the provision of personal data by the consumer except where the data provided by the consumer are:
“processed by the trader for the purpose of supplying the digital content or digital service in accordance with this Directive or for allowing the trader to comply with legal requirements to which the trader is subject, and the trader does not process those data for any other purpose.”
Personal data bears the definition included in Regulation (EU) 2016/679 – that is:
“…any information relating to an identified or identifiable natural person (“data subject”); an identifiable natural person is one whose identity can be established, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or one or more factors specific to the physical, physiological, genetic, psychological, economic, cultural or social identity of that natural person”
DIGITAL CONTENT: According to the Directive, digital content is “data which are produced and supplied in digital form”.
DIGITAL SERVICE: A digital service, on the other hand, is
a service that allows the consumer to create, process, store or access data in digital form. It also includes a service that allows the sharing of or any other interaction with data in digital form uploaded or created by the consumer or other users of that service.
CONSUMER AND TRADER: For the purposes of the Directive, the consumer is “any natural person who, in relation to contracts covered by this Directive, is acting for purposes which are outside that person’s trade, business, craft, or profession” and the trader is:
“any natural or legal person, irrespective of whether privately or publicly owned, that is acting, including through any other person acting in that natural or legal person’s name or on that person’s behalf, for purposes relating to that person’s trade, business, craft, or profession, in relation to contracts covered by this Directive”
NON-APPLICABILITY OF THE DIRECTIVE: The Directive does not apply in the following 8 cases:
“a) the provision of services other than digital services, regardless of whether digital forms or means are used by the trader to produce the output of the service or to deliver or transmit it to the consumer» However, it should be noted that the Directive still applies to the elements of the contract relating to the digital content or service.
b) electronic communications services as defined in Article 2(4) of Directive (EU) 2018/1972, with the exception of number-independent interpersonal communications services as defined in Article 2(7) of that Directive;
c) healthcare as defined in point (a) of Article 3 of Directive 2011/24/EU;
d) gambling services, namely, services that involve wagering a stake with pecuniary value in games of chance, including those with an element of skill, such as lotteries, casino games, poker games and betting transactions, by electronic means or any other technology for facilitating communication and at the individual request of a recipient of such services;
e) financial services as defined in point (b) of Article 2 of Directive 2002/65/EC;
f) software offered by the trader under a free and open-source licence, where the consumer does not pay a price and the personal data provided by the consumer are exclusively processed by the trader for the purpose of improving the security, compatibility or interoperability of that specific software;
g) the supply of digital content where the digital content is made available to the general public other than by signal transmission as a part of a performance or event, such as digital cinematographic projections;
h) digital content provided in accordance with Directive 2003/98/EC of the European Parliament and of the Council by public sector bodies of the Member States..”
In addition, the Directive does not apply to digital content or digital services embedded in goods with digital elements, i.e. tangible movable items that incorporate, or are inter-connected with, digital content or a digital service in such a way that the absence of that digital content or digital service would prevent the goods from performing their functions.
2. SUBSTANTIVE PROVISIONS
2.1. In Connection with the Supply of the Digital Content or Digital Service
TIME OBLIGATION TO SUPPLY: Article 5 of the Directive requires the trader to supply the agreed digital content or service in accordance with the terms of the agreement, and where there is no such term as to supply (i.e. delivery), then the supply must be “without undue delay after the conclusion of the contract”.
TIME WHICH THE PURCHASE OF DIGITAL CONTENT OR DIGITAL SERVICE TAKE PLACE: It should be mentioned here that in relation to the point in time when the digital content or service was purchased:
- Digital content is considered to be acquired when “the digital content or any means suitable for accessing or downloading the digital content is made available or accessible to the consumer, or to a physical or virtual facility chosen by the consumer for that purpose;”.
- The digital service “is made accessible to the consumer or to a physical or virtual facility chosen by the consumer for that purpose.”
2.2. Conformity of the Digital Content or Digital Service
The trader must supply to the consumer digital content or a digital service that meets subjective and objective compliance requirements as well as compliance requirements resulting from poor integration of the digital content or service into the consumer’s digital environment. These situations are discussed below:
2.2.1. Subjective Requirements for Conformity
Article 7 of the Directives states that in order to comply with the terms of the contract, the digital content or service must:
“a) be of the description, quantity and quality, and possess the functionality, compatibility, interoperability and other features, as required by the contract;,
b) be fit for any particular purpose for which the consumer requires it and which the consumer made known to the trader at the latest at the time of the conclusion of the contract, and in respect of which the trader has given acceptance;
c) be supplied with all accessories, instructions, including on installation, and customer assistance as required by the contract; and
d) be updated as stipulated by the contract.”
2.2.2. Objective Requirements for Conformity
Article 8 of the Directive contains the objective conformity requirements for goods – i.e. requirements that are laid down irrespective of the intention of the parties.
PROVISION OF THE MOST RECENT VERSION: Firstly, it should be stated that the digital content or service is provided with the latest version available at the time of the conclusion of the contract unless the parties have agreed otherwise.
OBJECTIVE REQUIREMENTS: Article 8(1) of the Directive states that digital content or digital service:
“a) be fit for the purposes for which digital content or digital services of the same type would normally be used, considering, where applicable, any existing Union and national law, technical standards or, in the absence of such technical standards, applicable sector-specific industry codes of conduct.
b) be of the quantity and possess the qualities and performance features, including in relation to functionality, compatibility, accessibility, continuity and security, normal for digital content or digital services of the same type and which the consumer may reasonably expect, given the nature of the digital content or digital service and taking into account any public statement made by or on behalf of the trader, or other persons in previous links of the chain of transactions, particularly in advertising or on labelling unless the trader shows that:
i) the trader was not, and could not reasonably have been, aware of the public statement in question.
ii) by the time of conclusion of the contract, the public statement had been corrected in the same way as, or in a way comparable to how, it had been made; or
iii) the decision to acquire the digital content or digital service could not have been influenced by the public statement.
c) where applicable, be supplied along with any accessories and instructions which the consumer may reasonably expect to receive; and
d) comply with any trial version or preview of the digital content or digital service, made available by the trader before the conclusion of the contract.”
Where the contract provides for the continuous supply of the digital content or service over a period of time, the digital content or service shall be in conformity throughout that period.
UPDATES AND SECURITY UPDATES: With regard to updates, Article 8(2) provides that the trader must ensure that the consumer is informed of and supplied with updates, including security updates, that are necessary to keep the digital content or digital service in conformity, for the period of time:
“a) during which the digital content or digital service is to be supplied under the contract, where the contract provides for a continuous supply over a period of time; or
b) that the consumer may reasonably expect, given the type and purpose of the digital content or digital service and taking into account the circumstances and nature of the contract, where the contract provides for a single act of supply or a series of individual acts of supply.”
OBLIGATION ON CONSUMERS TO INSTALL UPDATED: Alongside the trader’s obligation to provide updates, the consumer is obliged to install them within a reasonable time. The Directive explicitly states that the trader is not liable for any lack of conformity resulting solely from the lack of updates, provided that:
“a) the trader informed the consumer about the availability of the update and the consequences of the failure of the consumer to install it; and
b) the failure of the consumer to install or the incorrect installation by the consumer of the update was not due to shortcomings in the installation instructions provided by the trader.”
EXCLUSION OF LIABILITY: Article 8(5) of the Directive provides that if the trader informs the consumer specifically about a particular characteristic of the digital content or digital service which is deviating from the objective requirements of conformity mentioned above, and the costumer expressly and separately accepted the deviation when concluding the contract, then there is no lack of conformity. It should be noted that the exclusion of liability of the trader is only possible at the time of the conclusion of the contract.
2.2.3. Requirements Regarding the Integration of the Digital Content or Digital Service
Article 9 of the Directive refers to the incorrect integration of digital content or digital service due to a poor integration of the digital content or service into the consumer’s digital environment. In such a case, the content or service is considered to be non-compliant if:
“a) the digital content or digital service was integrated by the trader or under the trader’s responsibility; or
b) the digital content or digital service was intended to be integrated by the consumer and the incorrect integration was due to shortcomings in the integration instructions provided by the trader.”
2.2.4. Modification of the Digital Content or Digital Service
Article 19 of the Directive refers to cases where the contract provides that the digital content or digital service is to be supplied or made accessible to the consumer over a period of time – such as, for example, a one-year contract for the supply of anti-virus software, a cloud storage contract for two years or an unlimited subscription to a social media platform. In such a case Article 19(1) states that:
“the trader may modify the digital content or digital service beyond what is necessary to maintain the digital content or digital service in conformity in accordance with Articles 7 and 8, if the following conditions are met:
a) the contract allows, and provides a valid reason for, such a modification;
b) such a modification is made without additional cost to the consumer;
c) the consumer is informed in a clear and comprehensible manner of the modification”
Based on Article 19(2), the consumer is entitled to terminate the contract if the modification negatively impacts the consumer’s access to, or use of the digital content or digital service, (unless such negative impact is only minor). In such case, the consumer is entitled to terminate the contract free of charge within 30 days of the receipt of the information or of the time when the digital content or digital service has been modified by the trader, whichever is later.
NOTIFICATION BY THE TRADER OF THE AMENDMENT: As to the time which the consumer must be informed that the service or content is being modified, Article 19(1)(d) states that the information shall be given
“in advance on a durable medium of the features and time of the modification and of the right to terminate the contract in accordance with paragraph 2, or of the possibility to maintain the digital content or digital service without such a modification”
TERMINATION OF THE CONTRACT: In the case of a consumer who terminates the contract in accordance with Article 19(2), Articles 15 to 18 of the Directive apply mutatis mutandis. However, there is neither the right of termination nor the information obligation provided for in Article 19(1)(d) if the trader has given the consumer the opportunity to retain the digital content or service without additional charge and without the modification, and the digital content or service is kept in conformity.
2.2.5. Third-Party Rights
According to Article 10 of the Directive,
“Where a restriction resulting from a violation of any right of a third party, in particular intellectual property rights, prevents or limits the use of the digital content or digital service in accordance with Articles 7 and 8, Member States shall ensure that the consumer is entitled to the remedies for lack of conformity provided for in Article 14, unless national law provides for the nullity or rescission of the contract for the supply of the digital content or digital service in such cases.”
In short, the above article aims to protect the consumer where a third party obliges the trader to stop infringing his intellectual property rights when such intellectual property have been licensed to the consumer. In such a case the consumer is entitled to remedies for the lack of conformity, unless national law provides for the nullity of the contract, or for its rescission, for example for breach of legal warranty against eviction.
2.3. Liability of the Trader and Burden of Proof
According to Article 11(1), the trader is liable for any failure to supply the digital content or digital service in accordance with Article 5 (i.e. without delay and within the agreed time). The burden of proof as to whether or not the digital content or service has been supplied are borne by the trader.
Article 11(2) refers to single acts of supply or a series of individual acts of supply, and in such cases the trader is liable for any lack of conformity under Articles 7, 8 and 9 which exists at the time of supply, without prejudice to Article 8(2)(b). In cases covered by Article 11(2), the burden of proof with regard to whether the supplied digital content or digital service was in conformity at the time of supply shall be on the trader for a lack of conformity which becomes apparent within a period of one year “from the time when the digital content or digital service was supplied.”
If, under national law, the trader is only liable for lack of conformity that becomes apparent within a period of time after the supply, that period must not be less than two years from the time of supply, without prejudice to Article 8(2)(b). Indeed, based on the same article, MSs must ensure that such limitation period allows the consumer to exercise the remedies laid down in Article 14 for any lack of conformity that exists at the time indicated in the first subparagraph and becomes apparent within the period of time indicated in the second subparagraph.
Article 11(3) states that in the event that the contract provides for the continuous supply over a period of time, the trader shall be liable for a lack of conformity under Articles 7, 8 and 9, that occurs or becomes apparent within the period of time during which the digital content or digital service is to be supplied under the contract.
MSs shall ensure that such limitation period allows the consumer to exercise the remedies laid down in Article 14 for any lack of conformity that occurs or becomes apparent during the period of time referred to in the first subparagraph.
In relation to the burden of proof for cases subject to Article 11(3), as to whether the digital content or digital service was in conformity within the period of time during which the digital content or digital service is to be supplied under the contract, it is the trader who has to prove that there was no lack of conformity if such lack of conformity becomes apparent within that period.
According to Article 12(4), the burden of proof relating to the conformity of the content of the contract is not on the trader, provided that the trader demonstrates that the digital environment of the consumer is not compatible with the technical requirements of the digital content or digital service and where the trader informed the consumer of such requirements in a clear and comprehensible manner before the conclusion of the contract. To determine this, the consumer must cooperate with the trader, to the extent reasonably possible and necessary, to ascertain whether the cause of the lack of conformity of the digital content or digital service at the time specified in Article 11(2) or (3), as applicable, lay in the consumer’s digital environment. Based on Article 12(5):
“the obligation to cooperate shall be limited to the technically available means which are least intrusive for the consumer. Where the consumer fails to cooperate, and where the trader informed the consumer of such requirement in a clear and comprehensible manner before the conclusion of the contract, the burden of proof with regard to whether the lack of conformity existed at the time specified in Article 11(2) or (3), as applicable, shall be on the consumer.”
2.4. Consumer Rights
2.4.1. Right to Bring into Conformity
According to Article 14(1) the consumer is entitled to have the digital content or digital service brought into conformity, to receive a proportionate reduction in the price, or to terminate the contract. Article 14(2) states that the consumer is entitled to have the digital content or digital service brought into conformity, unless this would be impossible or would impose costs on the trader taking into account all of the circumstances of the case, including:
“a) the value the digital content or digital service would have if there were no lack of conformity; and
b) the significance of the lack of conformity.”
HOW CONFORMITY IS EFFECTED: According to article 14(3), the trader must bring the digital content or digital service into conformity within a reasonable time from the time the trader has been informed by the consumer about the lack of conformity, free of charge and without any significant inconvenience to the consumer, taking into account the nature of the digital content or digital service and the purpose for which the consumer required the digital content or digital service.
According to article 14(4), the consumer is entitled to either a proportionate reduction of the price, where the digital content or digital service is supplied in exchange for a payment of a price, or the termination of the contract.
PRICE REDUCTION: The reduction in price is proportionate to the decrease in the value of the digital content or digital service which was supplied to the consumer compared to the value that the digital content or digital service would have if it were in conformity.
Where the contract stipulates that the digital content or digital service is to be supplied over a period of time in exchange for the payment of a price, the reduction in price applies to the period of time during which the digital content or digital service was not in conformity.
2.4.2. Termination of the Contract due to Lack of Conformity
TERMINATION OF THE CONTRACT: For the consumer to be able to terminate the contract, the lack of conformity must not be insignificant and one of the following conditions must be met.
“a) the remedy to bring the digital content or digital service into conformity is impossible or disproportionate in accordance with paragraph 2;
b) the trader has not brought the digital content or digital service into conformity in accordance with paragraph 3;
c) a lack of conformity appears despite the trader’s attempt to bring the digital content or digital service into conformity;
d) the lack of conformity is of such a serious nature as to justify an immediate price reduction or termination of the contract; or
e) the trader has declared, or it is clear from the circumstances, that the trader will not bring the digital content or digital service into conformity within a reasonable time, or without significant inconvenience for the consumer.”
2.4.3. Termination of the Contract due to Failure to Supply
RIGHT OF TERMINATION: Based on Article 13(1), where the trader has failed to supply the digital content or digital service in accordance with Article 5, the consumer can call upon the trader to supply the digital content or digital service. If the trader then fails to supply the digital content or digital service without undue delay, or within an additional period of time, as expressly agreed to by the parties, the consumer is entitled to terminate the contract.
In the following cases, the consumer may terminate the contract directly. That is where:
“a) the trader has declared, or it is equally clear from the circumstances, that the trader will not supply the digital content or digital service;
b) the consumer and the trader have agreed, or it is clear from the circumstances attending the conclusion of the contract, that a specific time for the supply is essential for the consumer and the trader fails to supply the digital content or digital service by or at that time.”
Where the consumer terminates the contract under paragraphs 1 or 2 of Article 13, Articles 15 to 18 shall apply mutatis mutandis.
2.4.4. Rights in case of Termination
EXERCISE OF THE RIGHT OF TERMINATION: According to Article 15, the consumer is allowed to exercise the right to terminate the contract by means of a statement to the trader expressing the decision to terminate the contract.
OBLIGATIONS OF THE TRADER IN THE EVENT OF TERMINATION: Article 16 of the Directive refers to the trader’s obligations in the event of termination of the contract by the consumer. In such a case, the trader must reimburse the consumer for all sums paid under the contract.
REPAYMENT OF THE PRICE PRO-RATA: When the contract provides for the supply of the digital content or digital service in exchange for a payment of a price and over a period of time, and the digital content or digital service had been in conformity for a period of time prior to the termination of the contract, the trader must reimburse the consumer only for the proportionate part of the price paid corresponding to the period of time during which the digital content or digital service was not in conformity, and any part of the price paid by the consumer in advance for any period of the contract that would have remained had the contract not been terminated.
PERSONAL DATA: In the case of termination of the contract, the trader must comply with the obligations applicable under Regulation (EU) 2016/679and must refrain from using any content other than personal data, which was provided or created by the consumer when using the digital content or digital service supplied by the trader, except where such content:
“a) has no utility outside the context of the digital content or digital service supplied by the trader;
b) only relates to the consumer’s activity when using the digital content or digital service supplied by the trader;
c) has been aggregated with other data by the trader and cannot be disaggregated or only with disproportionate efforts; or
d) has been generated jointly by the consumer and others, and other consumers are able to continue to make use of the content.”
In the case referred to in (d) above, the trader must, at the request of the consumer, make available to the consumer any content other than personal data, which was provided or created by the consumer when using the digital content or digital service supplied by the trader.
The consumer is entitled to retrieve that digital content free of charge, without hindrance from the trader, within a reasonable time and in a commonly used and machine-readable format.
Without prejudice to this, the trader may prevent any further use of the digital content or digital service by the consumer, in particular by making the digital content or digital service inaccessible to the consumer or disabling the user account of the consumer.
OBLIGATIONS OF THE CONSUMER IN THE EVENT OF TERMINATION: According to the article 17(1), after the termination of the contract, the consumer must refrain from using the digital content or digital service and from making it available to third parties. In case that the digital content was supplied on a tangible medium, the consumer must, at the request and at the expense of the trader, return the tangible medium to the trader without undue delay. If the trader decides to request the return of the tangible medium, that request must be made within 14 days of the day on which the trader is informed of the consumer’s decision to terminate the contract.
It should be noted that the consumer is not liable to pay for any use made of the digital content or digital service in the period, prior to the termination of the contract, during which the digital content or the digital service was not in conformity.
2.4.5 Time Limits for Refunds by the Trader
TIME LIMITS FOR REIMBURSEMENT: Article 18(1) states that refunds by the trader to the consumer for a reduction of the price or termination of the contract must be carried out without undue delay and, in any event, within 14 days of the date on which the trader is informed of the consumer’s decision to invoke the consumer’s right for a price reduction or to terminate the contract.
Based on article 18(2), the trader must carry out the reimbursement using the same means of payment as the consumer used to pay for the digital content or digital service, unless the consumer expressly agrees otherwise, and provided that the consumer does not incur any fees as a result of such reimbursement.
It is noted that the trader must not impose any fee on the consumer in respect of the reimbursement.
2.4.6 Right of Redress by the Trader
According to Article 20 of the Directive:
“Where the trader is liable to the consumer because of any failure to supply the digital content or digital service, or because of a lack of conformity resulting from an act or omission by a person in previous links of the chain of transactions, the trader shall be entitled to pursue remedies against the person or persons liable in the chain of commercial transactions. The person against whom the trader may pursue remedies, and the relevant actions and conditions of exercise, shall be determined by national law.”
The above right, is the right of the trader to take action against a previous service supplier if the former is contractually bound to a consumer and breaches its contract with the consumer and the breach is attributable to the previous supplier.
3. Obligations of Member States
According to Article 21 of the Directive, MSs must ensure that adequate and effective means exist to ensure compliance with this Directive. Such means include provisions whereby one or more of the following bodies, as determined by national law, may take action under national law before the courts or before the competent administrative bodies to ensure that the national provisions transposing this Directive are applied:
“a) public bodies or their representatives.
b) consumer organisations having a legitimate interest in protecting consumers.
c) professional organisations having a legitimate interest in acting;
d) not-for-profit bodies, organisations, or associations, active in the field of the protection of data subjects’ rights and freedoms as defined in Article 80 of Regulation (EU) 2016/679.”
4. OTHER RELEVANT PROVISIONS
4.1. Enforcement
Article 22(1) states that any contractual term which, to the detriment of the consumer, excludes the application of the national measures transposing this Directive, derogates from them or varies their effects before the failure to supply or the lack of conformity is brought to the trader’s attention by the consumer, or before the modification of the digital content or digital service in accordance with Article 19 is brought to the consumer’s attention by the trader, shall not be binding on the consumer.
It should be noted however, that traders can offer consumers contractual arrangements that go beyond the protection provided by the Directive.
4.2. Amendments
Article 23 amends Regulation (EU) 2017/2394 and Directive 2009/22/EC.
4.3. Review
According to Article 25, the Commission will review the application of the Directive and submit a report to the European Parliament, to the Council and to the European Economic and Social Committee. The report shall examine, inter alia, the case for harmonisation of rules applicable to contracts for the supply of digital content or digital services other than that covered by this Directive, including supplied against advertisements.
