The days of popping down to your local music store to buy a CD with a shiny album cover are quickly becoming a thing of the past.
In a ‘need it now’ consumer society, shoppers are far more likely to click a few buttons and download music straight to their device. Yet in doing so, consumers are sacrificing the protection that they would have enjoyed had they bought a physical product.
Under the current Sales of Goods Act 1979, protection is only given to those consumers who purchase digital content in tangible form, such as on a CD or DVD. Products downloaded directly from the internet, such as music and computer games, are simply not recognised as goods under the 1979 Act.
As the number of consumers using portable devices and smartphones has increased, the law has become increasingly outdated. This gap has been addressed in the Consumer Rights Act 2015 (the Act) which will for the first time recognise ‘digital content’ including downloaded music, apps, computer games and software. Businesses which supply digital content will need to ensure that they are up to speed with the changes under the Act which come into force on 1 October 2015.
The Act will give consumers similar rights to those conferred when buying goods from a shop. Content must be of satisfactory quality, fit for purpose and match the advertised description. The rights arise automatically, provided that the consumer has paid for the digital content or it has been supplied free with goods or services or other digital content which has been paid for.
Remedies in the event of breach
Despite recognition of digital content under the Act, the remedies available to consumers in the event of breach are significantly different. Unlike with goods, there is no right to reject a digital product. The only available remedies are repair, replace or a reduction in price. A consumer cannot require a business to repair or replace content if this remedy would be disproportionate in comparison with other remedies.
If repair or replacement is not possible, or has not been carried out within a reasonable time, the consumer will have the right to a reduction in price. Businesses supplying digital content will need review their complaints procedure and ensure that they are resolved in accordance with the Act.
Rules do not apply where personal data, rather than money is exchanged for digital content
Under the Act, consumers are only conferred protection if they have directly or indirectly paid for the digital content. In some instances, digital content is supplied in return for the consumer consenting to the supplier having access to their personal data. However, because the consumer has not paid for the goods they are therefore not entitled to the rights and remedies conferred under the Act.
This has lead the Competition and Markets Authority to question what value ought to be placed on personal data. Information relating to consumer preferences and decision making is becoming an increasingly valuable commodity. This provision may result in digital content developers supplying digital content in return for gaining access to data, rather than for monetary value.
Damage caused by Digital Content
So what happens when a consumer downloads content and the dreaded words “your computer has been corrupted” pop onto their screen? Under the new legislation remedy is available if, as a result of purchasing digital content, damage is caused to the device or existing content. This includes the scenario of damage or corruption resulting from a download of an app onto a smartphone.
If the supplier has failed to take ‘reasonable care and skill’, the consumer will have the right to require the supplier to either repair the damage and bear all costs of doing so, or pay appropriate compensation. Interestingly this section also applies to free digital content. At present there are an abundance of free apps for smartphones and the numbers are likely to continue to increase.
This provision will present a significant risk to app developers and critics argue that it will stifle innovation. Liability in relation to damage can however be limited by the supplier, provided that this does not result in a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer. Suppliers should consider having their Terms and Conditions drafted to limit liability within the parameters of the Act.
Traders will also need to give careful consideration to the financial risk which this presents and implications on insurance premiums. It will be difficult to determine potential financial burden as there is no way of knowing in advance the value of the specific device or digital content. That said, it may be practically difficult for consumers to establish that their digital content has been damaged by that specific product and that the supplier has failed to exercise reasonable care and skill.
Practical Steps for Businesses
Suppliers of digital content should take the following steps prior to implementation on 1 October 2015:
- Terms and Conditions should be reviewed and provisions inserted to deal specifically with digital content. Particular consideration should be given to limiting liability in respect of damage;
- Complaints procedures should be reviewed to ensure that consumers are aware of how to make a complaint in respect of digital content and what remedies are available;
- Consideration should be given to the potential financial risk arising from the new right to repair or compensation as a result of damage to devices. Thorough product testing should be in place and insurance premiums should be reviewed.
Whilst the new Act brings consumer law into the 21st Century, it will be interesting to see how digital content developers and providers respond to the changes. In particular, whether there will be a decline in the number of free apps due to the potential financial exposure as a result of damage. Ultimately, the changes are pro-consumer and impose a higher duty of care on digital content developers than the current outdated law.