The proposed provisions on digital content in the Bill

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

What types of contract would the Bill apply to?

Under the Bill, digital content, which is defined as "data which are produced and supplied in digital form", would be treated separately from goods and services. The provisions on digital content would apply where a trader supplies digital content to a consumer under a contract where:

• the consumer either pays for the supply; or
• the digital content is supplied free of charge with paid-for goods, services or other digital content and is not generally available without the purchase of such goods, services or other digital content.

Payment includes the use of any facility for which money has been paid (such as gift vouchers and virtual currencies), but does not include other types of "payment" (such as the provision of personal information). However, the Bill includes a provision which would permit the digital content provisions to be extended to cover other types of digital content contracts where appropriate to do so because of significant consumer detriment. This would be done by statutory instruments approved by both houses of Parliament.

What statutory rights would the Bill give consumers in relation to digital content?

Contracts for the supply of digital content would be treated as including the following terms:

• the digital content is of satisfactory quality;
• the digital content is reasonably fit for any particular purpose made known to the trader before purchase;
• the digital content matches any description given to it by the trader;
• certain pre-contract information which must be provided to consumers under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 ("CCICACRs") (such as the trader's identity and information on cancellation rights); and
• the trader has the right to supply the digital content.

The Bill also clarifies that the statutory standards on quality, fitness for purpose and content matching its description apply to digital content:

• when it reaches the consumer's device, or (if earlier) when it reaches another trader chosen by the consumer (for example, an internet service provider or a mobile network operator) to supply a service by which digital content reaches the device. This clarification would assist a digital content trader if it was determined (for example) that a consumer's internet connection was to blame for quality or other issues;
• whenever it is modified by the trader (for example, through updates and upgrades), if the contract is subject to the right of a trader or a third party to modify the digital content; and
• each time it is transmitted between a consumer and a trader using a processing facility that the trader has made available to the consumer (for example, in the case of multiplayer online games). The contract would also be treated as including a term that the processing facility must be available to the consumer for a reasonable amount of time, unless a time is specified in the contract.

In addition, there are cross-over provisions in the sections on goods and services. For example, goods would not conform to the statutory standards applicable to goods if any digital content which is included within those goods do not conform to the statutory standards applicable to digital content.

What remedies would a consumer have if digital content failed to meet statutory standards?

If digital content did not meet any of the statutory standards in relation to satisfactory quality, fitness for a particular purpose and matching its description, then the consumer would be entitled to repair or a replacement. If digital content does not conform to these statutory standards at any time within six months of when it was first supplied, then it would be assumed not to have conformed from the outset (except where it can be established that it did in fact conform when first supplied or if the application of this provision is incompatible with the nature of the digital content or the nature of the fault).

The repair or replacement would need to be carried out within a reasonable time, without causing significant consumer inconvenience and at the trader's expense. If a repair or replacement was impossible, or if the trader fails to carry out a repair or replacement as required, then the consumer would be entitled to a price reduction (which could be a full refund where appropriate).

If the trader acted in breach of any of the pre-contract information which must be provided under the CCICACRs, the consumer would be entitled to recover from the trader the amount of any resulting costs up to the amount of the price paid for the digital content.

If the trader did not have the right to supply digital content, the consumer would have the right to a refund of the full purchase price.

What other claims could a consumer make against a trader in relation to digital content?

If digital content (regardless of whether it was paid for or not) caused damage to a consumer's device or other digital content which would not have occurred if the trader had exercised reasonable care and skill, the consumer would be entitled to ask the trader to repair the damage (within a reasonable time, without significant consumer inconvenience and at the trader's cost), or provide compensation for the damage with an appropriate payment.

It should also be noted that the legislation would not prevent consumers from seeking other remedies for breach of the statutory standards (such as a damages claim).

Can liability in relation to the statutory standards for digital content be excluded or restricted?

No. A contract for digital content would not bind a consumer to the extent that it excluded or restricted a consumer's rights or remedies or the trader's liability in relation to the statutory standards or the compensation payable for damage to a consumer's device or other digital content.

Would the Bill apply where digital content is supplied by a non-UK entity and/or under a contract which is not subject to English law?

Yes, in theory the legislation would still apply. Where a contract has a close connection to the UK (for example, the digital content is supplied from a .uk website or it is possible to make purchases from a website in sterling), it would not be possible to circumvent consumer protection laws simply by using a foreign entity and/or by making terms and conditions subject to foreign law. However, many traders who do not specifically target UK consumers may decide to take the enforcement risk.

What other legislative changes are on the horizon which may affect digital content providers?

The revised distance selling rules, the CCICACRs, replace the Consumer Protection (Distance Selling) Regulations 2000 on 13 June 2014 and contain some specific provisions in relation to digital content. Digital content providers who transact with consumers therefore need to consider their impact. In particular, there are new information and cancellation rules for digital content which businesses will need to factor into their sale process and terms and conditions. For further information, please refer to our update here.