Consumer Rights Bill

Written evidence submitted from Microsoft Ltd (CR 19)

Introduction

We welcome the opportunity to provide our comments to the House of Commons Public Bill Committee on the Consumer Rights Bill (the "CRB"). We support the introduction of a clearer consumer framework for the digital age which will give both consumers and traders clarity on quality standards, rights and remedies when buying digital content and services. However we have concerns that the CRB does not adequately engage with the complex, dynamic nature of digital content, and we believe that the quality standards and rights and remedies for digital content need further consideration to avoid creating serious uncertainty for the UK technology industry. The Bill will have a significant impact upon the UK’s creative and digital sector which contains many start-ups and SMEs as well as large companies like Microsoft. We are concerned that the Committee is moving very quickly through the clauses in the Bill and we would like to request that  it takes the time to adequately scrutinise these clauses and amend the legislation accordingly.

Microsoft’s consumer business spans from gaming, music and video across multiple screens (such as Xbox One), PC and mobile interactive entertainment, productivity and collaboration products and services (such as Office), personal communication services (such Bing and MSN portals), Skype, Internet Explorer and software and services for Windows phones. We also work with 30,000 Microsoft partner companies across the UK, many of which are SMEs. We are therefore well positioned to understand the impact the CRB will have on the UK’s creative and digital sectors.

Summary of our submissions

Our submissions focus on the following areas: (1) the introduction of liability for "free" digital content stifling technological innovation; (2) & (3) the inappropriateness of applying concepts of "satisfactory quality" or being "as described" to digital content; (4) the difficulties with requiring consumer consent for changes to pre-contractual information; (5) the need for clarification on how the concepts of "reasonable time" and "significant inconvenience" will apply in the context of complex repairs or patches for minor bugs; and (6) the negative impact the introduction of liability for digital content that causes device failures or loss of digital content would be likely to have on digital innovation and cyber security.

Our submissions on the CRB

1. Clause 33 – Liability for "free" digital content

The introduction of (a) quality standards to digital content that was not paid for but provided free with paid for products (including other digital content) or services, and (b) liability for all free digital content that causes device failures or loss of digital content will undermine any incentives for innovation in the UK technology industry. Many of the internet's most successful innovations are based on "free" and "freemium" product models. Technology start-ups which don't have the infrastructure to offer quick repairs or the reserves to pay unquantifiable compensation in the event of a fault will be forced to stop releasing new products on a large scale which will inevitably limit innovation.

We would welcome guidance on the reasoning behind extending the Bill to cover digital content that is not generally available to consumers unless they have paid a price for it or for goods or services or other content (clause 33 (2)(b)). This extension is potentially extremely wide and seems to capture trial or beta versions of content, which increases the ways in which the CRB is likely to stifle innovation.

The Government has reserved power to extend the scope of the digital content provisions of the CRB in the event of considerable consumer detriment, whether by amendment, transitional or transitory provision or savings (clause 33 (6)). We would welcome clarification on how this considerable consumer detriment might be identified, reported or measured.

2. Clause 34 – Digital content to be of satisfactory quality

Whilst the concept of satisfactory quality can be easily applied to tangible products, it fails to acknowledge the variety of forms of digital content and how it is sold or otherwise provided. Digital content such as software, computer games or apps are often reliant on a network of third party platforms and software owned by other vendors. This software is often provided "as is" and free of warranties to the consumer-facing brand. It may therefore have to provide a third party's software to consumers to a standard which the producer of that software will not warrant, leaving the consumer-facing brand with a "liability gap" between the protection it receives from the producer of the software and the protection it must give the consumer.

The quality of such digital content will also be impacted by the actions of third parties. The definition of "satisfactory quality" needs to acknowledge that traders may not have control over every aspect of the quality of the digital content, and the Bill needs to enable traders to limit their liability to the extent that quality standards are genuinely out of its control (e.g. in relation to interoperability with third party devices). Failure to acknowledge the fact that digital content is supplied within the context of a network of software and hardware products created by multiple vendors, in conjunction with the prohibition on a trader limiting its liability clause 47 (a) creates an unfair competitive advantage for traders who own or control both digital content and the related platforms, operating systems or software which will inevitably limit consumer choice. This is also likely to disproportionately affect SMEs.

3. Clauses 36 and 40 – Digital content to be as described and the right to modify digital content

The requirement for digital content to match its description for the entire duration of the contract remains problematic given the dynamic nature of digital content.

The Explanatory Notes to the CRB now acknowledge that digital content may be enhanced or updated as long as the content continues to match the original content description. But the Bill still fails to address the complexities of digital content. For example, a computer game might feature a significant online component that is later discontinued by the games publisher as the game falls in popularity. Would this change mean that the game is no longer "as described" or would the existence of this online functionality, now dormant, mean the code provided to the consumer is still "as described"? Conversely, if the operator of a user interface (which is advertised on TV and on the packaging of the product) uses a software update to improve the user interface and add in new functionality this may no longer match the original content description. Would the consumer be entitled to a remedy even though the changes benefit the consumer?

In addition, clause 40 of the Bill legislates for modifications but at the same time the "grey list" (Paragraph 12, Part 1, Schedule 2) suggests that a term allowing a trader to make changes to the subject matter of a contract may be unfair. It is not clear if this "grey term" precludes modifications even if they are of benefit to a consumer. Both consumers and traders would benefit from the Bill clarifying that changes to digital content are only prevented to the extent they are detrimental to the consumer.

4. Clauses 36 (4) and 37 (3) – Requirement for express consumer consent for changes to pre-contractual information

New sub-clause 36(4) provides that pre-contractual information relating to the main characteristics of the content, its functionality or its compatibility with other hardware or software can only be changed with the express consent of the consumer. Digital content is by its nature constantly evolving: functions might have to be suspended or removed if they become vulnerable to cyber-attacks, or an update to enhance consumer experience could necessitate replacing or removing a function of software, all of which would mean a change to the pre-contractual information supplied to the consumer before it purchased the relevant content. The reference to "expressly agreed" indicates that a general clause in the relevant terms and conditions enabling any necessary or beneficial changes to be made from time to time will not be adequate. Requiring express consumer consent for these changes will lead to an impossible logistical situation for traders and mean consumers no longer benefit from changes which could improve user experience or security. It would be of consumer benefit for the Bill to instead allow that digital content can change from information provided to consumers pre-sale if the change benefits the consumer or improves the functionality or compatibility of the content or is required by law.

New sub-clause 37(3) provides that other information which traders must provide to consumers pre-sale (such as the identity of the trader, its registered address and phone number, its complaint handling policy, and its after sales services) is not effective unless expressly agreed with the consumer. The Bill needs to reflect that traders cannot be precluded from changing its location or its trading name simply because a consumer may not give its consent.

5. Clauses 43 – Right to repair or replacement

Where a consumer agrees to a repair or replacement of digital content, the trader has a "reasonable time" to carry out the repair or replacement unless giving the trader that time would cause significant inconvenience to the consumer. This does not acknowledge that complex repairs may necessarily take a trader time, which means that the consumer could be entitled to a refund before the trader has had the amount of time it requires to rectify the fault. It seems more sensible to set the trader the task of repairing the content within a timeframe which is reasonable given the nature of the repair required.

In addition, traders often develop patches that fix digital content if and when minor bugs are developed which are then made available to all consumers. As download is at the consumer's own discretion, under the Bill a consumer may require (and the trader will have to bear the cost of) a repair or replacement in relation to a minor bug for which a patch has already been released but the customer has not opted to download. We would welcome guidance on how the current practice of developing patches will fit within this new remedy regime.

6. Clause 46 - Remedy for damage to device or to other digital content

The introduction of liability for digital content that causes device failures or loss of digital content will have a negative impact on digital innovation and cyber security. Digital content and devices can malfunction for any number of reasons, for example digital content could conflict with software or hardware installed on the same device, or the device on which the digital content is stored might not be functioning. If consumers are unable to evidence a clear chain of causation, who will be liable: the trader who supplied the original content, the ancillary software or hardware or the device?

We request that the Government consider the negative impact this liability will have on the UK technology industry. In the fast-paced digital world, content providers need to be able to release updates as quickly as possible to protect consumers and their own liability in the event that an update causes unforeseen damage if a consumer incorrectly installs the update. The liability introduced by clause 46 will force traders to release upgrades with less frequency, and with fewer features. This could slow innovation and delay critical security protection from reaching consumers.

Finally, we would welcome further guidance on the following aspects of clause 46:

(a) What constitutes an appropriate amount of compensation in certain circumstances, for example if a device holds irreplaceable photos of sentimental value will this be taken into account in assessing appropriate compensation?

(b) Will a replacement constitute a repair for the purposes of clause 46 (3)?

(c) Will consumers be entitled to compensation if they initially opted for a repair and the repair doesn't work?

February 2014