Starting to move apart?

Three new consumer law directives have been introduced by the European Union. These will not have to be implemented into UK law, given the UK’s exit from the EU. However, once these directives become applicable under the national law of EU member states, UK traders supplying goods or digital content/services to these member states will be subject to the legislation implementing these directives and should therefore ensure that they are aware of the coming changes.

Directive (EU) 2019/771 on certain aspects concerning contracts for the sale of goods (SGD):

The SGD establishes a single set of rules for the supply of goods to consumers, including products with a digital element. There are rules on:

• The conformity of goods with the contract.
• Remedies for a lack of conformity or a failure to supply, and the procedures for exercising remedies.
• Additional durability guarantees for consumers.

The SGD applies to sales contracts for goods, including goods with a digital component such as a smart TV or a smart watch. Under the SGD, goods must conform with the contract. There are two sets of conformity requirements: subjective requirements and objective requirements.

The subjective requirements for conformity relate to the particular contract made between a trader and a consumer. The goods must be:

• Of the description, type, quantity and quality, and possess the functionality, compatibility, interoperability and other features, as required by the contract.
• Fit for any particular purpose for which the consumer requires them and which the consumer made known to the trader at the latest at the time the contract was entered into, and in respect of which the trader has given acceptance.
• Delivered with all accessories and instructions, including on installation, as stipulated by the contract.
• Supplied with updates as stipulated by the contract.

The objective requirements for conformity relate to objective standards of reasonable expectation which apply regardless of the terms of the contract. The goods must be:

• Fit for the purposes for which goods of the same type would normally be used, taking into account any existing law, technical standards or applicable sector-specific industry codes of conduct.
• Of the quality and correspond to the description of any sample or model that the trader made available to the consumer before the contract was entered into.
• Delivered along with such accessories, including packaging, installation instructions or other instructions, as the consumer may reasonably expect to receive.
• Of the quantity, and possess the qualities and other features (including in relation to durability, functionality, compatibility and security), normal for goods of the same type and which the consumer may reasonably expect given the nature of the goods and taking into account any public statement made by or on behalf of the trader, or other persons in the supply chain.

Where the content of a public statement made by the trader would otherwise mean that the conformity requirements have not been met, the trader can rebut this by showing that the consumer was not and could not reasonably have been aware of the statement, or the statement was corrected before the contract was entered into, or the decision to buy the goods could not have been influenced by the statement.

There will be no lack of conformity if, at the time the contract was entered into, the consumer is specifically informed of a deviation from the objective requirements for conformity, and the consumer expressly and separately consents to the deviation. We understand this to mean that a trader cannot obtain consent by simply having the consumer agree via general terms and conditions.

Whether goods comply with the requirements for conformity is a matter to be assessed at the time of delivery. Delivery is not defined in the SGD, so this is a matter for the member states to individually determine.

Under the SGD, traders remain liable to consumers for any lack of conformity for a two-year warranty period. This simply means that the defect or deviation must become apparent within two years of delivery. There is no express limitation period for bringing a claim under the SGD, so the cut-off point for bringing a claim will need to be decided by individual member states. Member states can, if they wish, have a warranty period of more than two years. There is also a reverse burden of proof for any defects discovered within the first year after delivery, i.e. the lack of conformity is presumed to have existed at delivery, with the trader obliged to prove otherwise.

The SGD provides consumers for three remedies in the event of defective goods. These are:

• To have the goods brought into conformity (the right to repair or replacement).
• To receive a reduction in price, proportionate to the defect.
• To terminate the contract.

The SGD differs from the UK’s Consumer Rights Act 2015 (CRA) in a few ways; for example:

• While both impose conformity requirements on goods, the SGD specifically requires that goods be delivered with all accessories, instructions and updates, as stipulated by the contract.
• Under the CRA, the trader will not be liable for any defects specifically drawn to the consumer’s attention, any defects which the consumer ought to have noticed during their pre-contract examination, or any defects which would have been apparent on a reasonable examination of a pre-contract sample. By contrast, under the SGD the trader can only escape liability by obtaining the consumer’s express and separate acceptance of the non-conformity.
• Under the CRA, a consumer has a short-term right to reject for a 30-day period after delivery. No such right exists under the SGD.
• There are also differences in the duration of the reverse burden of proof period, and the minimum claim period.

Directive (EU) 2019/770 on certain aspects concerning contracts for the supply of digital content and digital services (DCSD):

The DCSD establishes a single set of rules for the supply of digital content and digital services. There are rules on:

• The conformity of digital content or digital services with the contract.
• Remedies for a lack of conformity or a failure to supply, and the procedures for exercising those remedies.
• The modification of digital content or a digital service.

The DCSD was drafted in tandem with the SGD and should therefore be read alongside it. The DCSD covers the business-to-consumer supply of digital content and digital services. This includes any business in any sector that supplies digital content or digital services to customers in exchange for money or personal data, not just those whose business is the provision of such content or services.

Digital content is any data which is produced and supplied in digital form. This includes content supplied on a tangible medium, such as a CD or USB stick. However, the SGD, not the DCSD, will apply to the tangible medium itself. Digital services include any service that allows the consumer to create, process, store or access data in digital form, as well as any 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 the service. This covers streaming services, video and audio sharing platforms, and social media.

Unless agreed otherwise, the DCSD requires a trader to supply the digital content or service without undue delay after the contract is entered into. Where the trader fails to do this, the consumer may call upon the trader to supply the content or service. If the trader again fails to supply, the consumer will be entitled to terminate the contract.

The consumer also has the immediate right to terminate the contract where the trader has declared, or it is otherwise clear from the circumstances, that they will not be supplying the digital content or service, or where the parties have agreed, or it is clear from the circumstances, that a specific time for supply is essential for the consumer, and the trader fails to meet this deadline.

As with goods falling under the SGD, digital content and digital services must comply with objective and subjective conformity requirements. The DCSD’s conformity requirements are much the same as those for goods under the SGD, just in the context of digital content and services.

Digital content or services which are supplied continuously over a period of time must remain in conformity for the duration of this period.

As under the SGD:

• If the consumer expressly and separately consents to a defect, the trader cannot be liable for that defect.
• The DCSD imposes a minimum two-year warranty period and a reverse burden of proof for defects in the first year after supply.
• The remedies for non-conformity are bringing the content or service into conformity, a price reduction, and termination of the contract.

If the consumer does elect to terminate the contract, the DCSD imposes obligations on both the trader and consumer. The trader must of course reimburse the consumer for all sums paid under the contract. However, where the content or service was provided over a period of time, and was in conformity for some of that time, the trader is only obliged to reimburse the consumer for the period when the content or service was not in conformity. With some minor exceptions, the trader must also cease using any content created or provided by the consumer when using the content or service, for example, images, videos, or audio files. The General Data Protection Regulation will also apply to any personal data the trader has obtained from the consumer.

Following termination, the consumer is obliged to stop using the content or services, and to return any tangible media on request without delay.

For digital content or services which are provided for a given period of time, the trader may wish to modify the content or service beyond simply bringing it into conformity. The trader may do this provided the contract permits the modification and givens a valid reason for it, the modification is made without additional cost to the consumer, and the consumer is informed of the modification in a clear and comprehensible manner. Where the modification will negatively impact the consumer’s use of or access to the content or service, the consumer must be informed reasonably in advance of the modification, and be given the right to terminate the contract or to elect to maintain the content or service without the modification (if this is possible).

The Enforcement and Modernisation Directive (EU) 2019/2161 (EMD):

The EMD aims to strengthen consumer rights through a range of increased transparency measures and enhanced enforcement measures, amending four consumer protection directives:

• Unfair Contract Terms Directive (UCTD)
• Price Indication Directive (PID)
• Unfair Commercial Practices Directive (UCPD)
• Consumer Rights Directive (CRD)

There are several general themes to the changes made to these four directives:

• Penalties for infringements: Member states are required to fine businesses for widespread or cross-border infringements. In most cases, these fines must be up to at least 4% of the annual turnover of the business in the member states where the breach occurred.
• Online transparency: New information obligations have been imposed on traders, requiring that an expanded category of “material information” be disclosed to consumers prior to contract. This information includes the criteria used to rank search results, whether the trader verifies reviews, whether the consumer will benefit from consumer protection law, and any personalisation of the price on the basis of automated decision-making.
• New rights to derogate for member states: The EMD allows member states to opt to impose stricter obligations on businesses, in relation to unsolicited home visits, solicited home visits for repairs, and rules for online marketplaces.

There have also been some specific changes to the four directives, attempting to future proof consumer protection law in the EU.

For the PID, there is a new provision requiring that, for any price reduction announcement, the trader must also indicate a reference price, being the price of the good or service within a period of at least 30 days before the reduction.

For the UCPD, express provisions have now been introduced stating that the practice of selling dual quality products may be misleading. Member states must introduce new rights for consumers seeking redress from traders, and there is now a ban on using tickets bots to bulk buy tickets for resale.

For the CRD, new definitions have been introduced to align it with the DCSD. The CRD has also been updated to reflect new methods of communication.

The SGD and DCSD have already been transposed into the national law of member states, and will apply from 1 January 2022. The EMD requires transposition into national law by 28 November 2021, and application from 28 May 2022.