March 14, 2016

On the European Commission’s proposal for a Directive on contracts for the supply of digital content, the CMA says that as a matter of principle, where consumers exchange personal or other data for digital content, they should obtain similar protections to those available when purchasing digital content with money.  However, how this works in practice “will need careful consideration”.

On the supply of digital services, the CMA welcomes in principle the extension of consumer protection.  However, the practical implications, both in terms of workability and market impact, “require careful consideration”, it says.  In the case of social media, for example, it is not always clear whether what the consumer is paying for (if the consumer pays at all) is digital content that should be assessed under a standard akin to that for goods, and/or services to which a different standard should be applied.

On the right of the trader to modify and update digital content, the CMA agrees with the thrust of the proposals, but says that the right should “not be used as a mechanism to dilute consumer control over their online environment”.

As for standards and remedies, the CMA considers that the proposals in respect of online and other distance sales of goods should be aligned with those for digital content to avoid market distortions and uncertainty.

On termination of contract, the CMA says that it can see benefits to consumers if they are able to terminate longer-term contracts after a maximum of 12 months and switch to a new provider/contract.  However, it says, it is possible that this would impact on markets where linked products are included in the contract price, as it might encourage suppliers to frontload the price of such products in the initial 12-month period in order to ensure their costs are recovered. The potential effects therefore need further consideration.

As for the Commission’s proposal for a Directive on contracts for the online and other distance sale of tangible goods, the CMA says that there is a need for simple rights that consumers can understand.  There is a greater risk of confusion or lack of consumer understanding if rights differ according to the sales channel.  This could, it says, undermine the objectives of the Consumer Rights Act 2015 to align and simplify rights and remedies.  There is also the potential for market distortion if consumers buying offline (from shops) have better rights.

The CMA is concerned that the test for the quality of goods consumers can expect to receive under the proposed Directive is too far away from the test in the current Consumer Rights Act, which the CMA believes “reflects the right balance” between the contract terms and objective quality standards.

As for the right to reject, the CMA believes that the 30-day time limit under the Consumer Rights Act achieves a reasonable balance between the interests of consumer and seller.  It does not think that the Consumer Rights Directive cancellation rights (within 14 days) would be an adequate alternative remedy.

As for liability periods, the CMA notes that in the UK there are no explicit liability periods.  Instead, there are limitation periods by which time a claim must be brought.  It believes that these time limits should continue as they are.  A shorter period is likely to cause consumer detriment, the CMA says, and it considers that the introduction in the UK of a liability period of two years would be “a significant loss of consumers’ rights”.

As for introducing a right for a trader to make a deduction for use if the consumer exercises its right to terminate the contract the CMA says that this “creates numerous practical difficulties, unnecessary disputes and significant scope for consumers to be significantly disadvantaged”.  If any harmonised regime of remedies is to be applied across the EU, as a minimum, the CMA recommends that it should exempt any deduction for use within the first six months from delivery of the goods and that no deduction for use should be made where the contract is ultimately terminated within six months from the date of delivery.

In the CMA’s view, the presumption that any fault identified within a certain period is considered present at the date of purchase is “an important protection for consumers” and it strongly supports its retention.  The period set should ideally reflect consumers’ reasonable expectations of how long products should last free of defects, the CMA says, and agrees that there is a good case for extending the existing six-month period given that for a great proportion of household purchases, consumers can reasonably expect trouble-free use for a period much longer than six months.  To read the CMA’s full response, click here.