While the new Consumer Rights Act has brought with it changes to the law governing both goods and services, perhaps the most significant changes relate to digital content. Until now, digital content was something of a black sheep in consumer law. Was it goods? Was it a service? Was it both? Answers to these questions were never really very satisfactory. Now, however, the Consumer Rights Act has grabbed the bull sheep by the horns and made digital content into a proper category in its own right.
Good news for consumers: new rights and remedies for digital content contracts
The rules relating to digital content are, by design, very similar to those relating to goods. Digital content must be of satisfactory quality, fit for purpose, and as described (this includes compliance with information provided under the Consumer Contracts Regulations).
Despite the fact that the Consumer Rights Act clears up the confusion over what digital content actually is, there will still be occasions where the rules on goods and services will come into play, for example where the digital content is the product of a service provided to the customer, or where it is sold on physical media (i.e. goods).
What Digital Content is Covered?
The statutory definition of digital content is “data produced and supplied in digital form”. It therefore includes a wide range of content types including apps, games, music and video. The product of services may also be counted as digital content. Popular examples here might include websites and digital photos.
As for how the content reaches the customer, as far as the Consumer Rights Act is concerned, this is in many ways immaterial. Physical media, download, stored in the cloud, streamed… any way, any how.
For the most part, only paid digital content is covered. There is an exception where the digital content damages a consumer’s data or device, but we’ll look at that below. Digital content is “paid for” when it is supplied for a price, or when it is supplied with something else for which a price is paid and isn’t generally available to customers unless they have paid for it or for goods, services or some other digital content. An example of free content like this would be free software given away with a paid-for magazine. Paid digital content also extends to things paid for with “a facility for which money has been paid” – commonly things like purchased virtual currencies (every parent’s favourite, the in-app purchase).
Digital Content Requirements
First of all, digital content must be of satisfactory quality. This requirement is, for the most part, the same as its goods-related counterpart. As for what “satisfactory quality” is in this context, this isn’t a fixed requirement and will take account of the customer’s reasonable expectations, the price, the description given by the trader and other factors such as public statements made by the trader (in advertising, for example). The key point here is that the standard is flexible. A 99p photo filter app won’t be held to the same standard as Photoshop!
Further important points to note are that digital content will be judged according to its state and condition, the purposes for which the relevant type of content is normally supplied, its safety and durability, and whether or not it is free from minor defects. On this last point, this doesn’t mean that a bug in an app now constitutes a breach of contract! Again, the standard will vary according to the type of content. An audiobook with a chapter missing or corrupted audio would not be of satisfactory quality in the eyes of the law. A piece of software with some bugs in it, on the other hand, is all but inevitable even with the best attention to detail and quality control, and the law understands that. Another important thing to be aware of is that – as with goods – if you make the customer aware of a particular defect, its presence cannot later count against the digital content being of satisfactory quality.
The next requirement, again familiar to those who deal with goods, relates to fitness for purpose. This will include any purposes the customer has made known to the trader as well as particular purposes “as a matter of custom”. Traders providing bespoke digital content to consumers in particular should keep this one in mind.
Next up is another goods-like requirement: the digital content must be as described. Another way to put it is that the digital content must do at least what is described. There is nothing preventing you from making it do more than you’ve said it will. This is also important to keep in mind when issuing updates and enhancements for digital content in the future. Just because a piece of software, for example, now does more things than it did when the customer bought it, it doesn’t mean that it is no longer “as described”.
On a related note, unlike goods, there isn’t any requirement that digital content matches any samples, models or trial versions. On the plus side, this means that you aren’t tied into offering features, say, in a final version that were in a trial but that didn’t work out. Nevertheless, while the unscrupulous trader might be inclined to take advantage of this and offer samples and trials that promise more than the final version delivers, good business sense would dictate otherwise. Moreover, trial version or no, the digital content must still match its description.
A final compliance point relates to information provided to customers under the Consumer Contracts Regulations. As with goods and services, any such information (including points such as the main characteristics of the digital content, its functionality and compatibility) will be incorporated into the contract, thus meaning that the digital content must also comply with that information.
Since digital content, particularly software, is often updated post-release, how do these requirements sit with updates? The simple answer is that they continue to apply to the digital content where the contract gives the trader or a third party the right to modify that content. The Consumer Rights Act explains that this will not, therefore, prevent the addition or enhancement of features. A question that seems to be unaddressed at this stage, however, relates to the removal of features. As frustrating as it may be for a user, it isn’t unheard of (especially in this age of mobile apps and games making the silent transition from premium to freemium) for updates to remove or limit features that were present when the customer originally made the purchase. At this point, then, we would advise caution, and will look into this aspect of the Act again once traders, lawyers and – if the issue reaches such a level – the courts have had the opportunity to weigh in.
Getting the Digital Content to the Customer
Timing is everything. It’s a common phrase, and in this case, one that’s particularly relevant to the requirements outlined above. If the digital content is being transmitted “under arrangements initiated by the trader”, it must comply with the requirements either by the time the content reaches the customer’s device, or by the time it reaches the customer’s ISP (Described in the Act as “an intermediary with whom the customer contracts for delivery of digital content” – meaning that while the ISP is the most likely entity to fit the description, it may be a different party in some cases).
What does this mean in real terms? After all, if you’ve done your job properly, the digital content complies with the requirements before it’s even left your hard disk. The point here is that if the digital content fails to comply, for example, because of a problem with your customer’s ISP, you won’t be at fault. If, on the other hand, there is no intermediary (or at least not one that you don’t have some sort of direct or indirect contractual control over) and the digital content doesn’t comply when it reaches the customer, then you will be responsible. Once again, however, it is important to remember that these rules exist to protect customers from unscrupulous traders. Ensuring that digital content is up to scratch and that it reaches your customers safely really goes without saying, or at least we hope it does!
A further point relates to so-called “facilities for continued transmission” and “processing facilities”. This may be particularly relevant if you are providing on-going cloud-based services to your customers which entail the transmission of data from the customer to your servers and vice-versa. The Consumer Rights Act requires that the period throughout which such a service should remain available should either be fixed in the contract or, where it isn’t fixed, should be “a reasonable time”. In addition, the digital content must continue to comply with the requirements we have covered above for that period.
What If There’s A Problem?
Because you’re here reading this, you’re quite obviously a trader that wants to be clued up and good to your customers! Nevertheless, however hard you may try, there may sometimes be occasions where things go wrong. In those cases, it’s important to know what remedies your consumer customers may be entitled to. As with the requirements concerning quality, fitness for purpose and compliance with description, the remedies are not dissimilar to those concerning goods.
First up, if the digital content does not comply with the requirements (including pre-contract information relating to its material characteristics), the customer has the right to a repair or replacement. The customer may request one or the other (unless one would be disproportionate compared to the other), and it is the trader’s obligation to comply within a reasonable time and without significant inconvenience to the customer. Any costs associated with carrying out a repair or replacement must be borne by the trader. As to what a “repair” is where digital content is concerned, it is a rather awkward term, but it essentially means making the non-complying digital content comply with the contract. To use software as an example, then, a patch would qualify as a “repair”.
The remedies differ slightly in cases where the trader fails to comply with pre-contract information provided under the Consumer Contracts Regulations other than that which relates to the material characteristics of the digital content. In such cases, the customer only has the right to recover any costs incurred as a result of that failure (up to the price paid for the relevant digital content).
If the trader has supplied digital content that they have no right to supply, the customer will have the right to a refund.
If a repair or replacement can’t be (or isn’t) carried out because it is impossible, or has not been performed within a reasonable time or without significant inconvenience to the customer, the customer may be entitled to a price reduction which can be anything up to the full price originally paid for the digital content in question. As to how this will be calculated, the rule of thumb is that the refund should reflect the difference between what the customer has paid for and what they have actually received. As in the case of goods and services, refunds should be made using the same payment method originally used by the customer unless they agree otherwise (so no refunds using IAP currencies – gold coins, miracle fertiliser or whatever else dismayed parents may find on their bank statements!). Once again, as with goods and services, you may not charge customers for issuing refunds, and they must be made without undue delay, and in any case within 14 days starting on the day that you agree that your customer is entitled to the refund.
A notable difference between the digital content remedies and the goods remedies is that with digital content, unlike goods, you are not limited to only one opportunity to repair or replace the digital content. That said, however, more than one attempt may constitute “significant inconvenience” for the customer in some scenarios. The number of attempts at rectification, therefore, will depend on the circumstances rather than a limit that is set in stone.
Another key difference between goods and digital content remedies is the absence of a right to reject. This, we would suggest, is largely borne out of practicality. Ensuring the deletion of digital content from a customer’s device would be very difficult in many cases, and since the price reduction remedy can be anything up to a full refund, an additional right to reject could have been considered superfluous.
As we pointed out above, for the most part these requirements and remedies apply to content that is, at least in some way, paid for. There is however one remedy that applies to any digital content, even that which is free. If you supply any digital content to a consumer under a contract and that digital content damages the consumer’s device or other digital content that belongs to them, and that damage wouldn’t have occurred had you exercised “reasonable care and skill”, the consumer may be entitled to a repair at your expense or to compensation.
For more than a decade, digital content sales have been a hugely significant part of doing business, and it has taken the law a surprisingly long time to catch up with reality and start treating digital content as it treats goods and services. Now, though, we’re finally there. At the risk of repetition, as with the changes in the law on goods and services, these new provisions should not present many (if any) surprises, and any trader worth their salt should already be complying as a matter of course.
Nevertheless, the various requirements with which digital content must comply and the various remedies open to consumers if it doesn’t are now presented in black and white, clear for all to see and it is important that traders providing digital content to consumers understand the law, their obligations and their customer’s rights.
As this is a new category of commodity in the eyes of the law, it will be interesting to see as time progresses how traders and trade practices adapt and adjust. As we noted above, it seems that traders who want to make alterations to digital content, especially software, need now to be particularly careful. If you are a trader dealing in digital content, how do you feel about the new rules? Do you think it’ll just be business as usual or do you now feel trapped in a creative box? As ever, we would love to hear from you, so don’t hesitate to leave us your responses in the comments section below.
By Iain Mackintosh