Documents considered by the Committee on 15 June 2016 Contents

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3Digital Single Market: Consumer contract rights

Summary and Committee’s conclusions

Committee’s assessment	Legally and politically important
Committee’s decision	Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Innovation and Skills Committee, Justice Committee and Culture, Media and Sports Committee
Document details	Proposed Directives on contracts (a) for the supply of digital content and (b) for online and other distance sale of goods to consumers
Legal base	Article 114; ordinary legislative procedure; QMV
Department	Business, Innovation and Skills
Document Numbers	(a) (37389), 15251/15 + ADDs 1–2, COM(15) 634; (b) (37390), 15252/15 + ADDs 1–2, COM(15) 635

3.1These proposed Directives aim to help deliver the Digital Single Market and boost e-commerce. They fully harmonise consumer contractual rights and remedies in relation to online trade in (a) digital content and (b) tangible goods respectively.

3.2The Commission considers that the proposals will reduce legal uncertainty and compliance costs for businesses selling digital and other goods both online and cross border, so boosting consumer confidence in such trade. Both proposals are also legally significant because full harmonisation means that no Member State could give greater or lesser protection than set out in the Directive (such that certain aspects of consumer contract law would be fully harmonised across the EU). This means the proposals could have a significant impact in the UK both on consumers and businesses, particularly if they were to diverge significantly from existing consumer rights legislation, updated by the new Consumer Rights Act 2015 (CRA). The CRA specifically legislated for the supply of digital content and as such has established the UK as a leader in that field. Apart from the Netherlands, no other Member State has such “bespoke” legislation.

3.3Proposal (a) addresses sales to consumers of digital content (for example, downloads of digital music, films, apps, e-books) and services (for example, cloud computing and social media platforms) and includes transactions where personal data changes hands rather than money. Proposal (b) applies to online sales of tangible consumer goods (for example, the purchase of a waffle-maker from an online Belgian kitchen equipment supplier).

3.4In our last Report,74 we explored the background to the proposals and highlighted their key provisions (see “Background”). The Government appeared broadly to support each proposal with the reservations outlined in that Report. Taking those into account, we identified some key issues and asked the Government to respond to some questions. We asked how each proposal deviated from CRA (on an article by article basis) and what impacts this would have on consumers and businesses; what stakeholders’ reactions were and their key areas of concern or support; what further work the Government considered necessary to assess the implications for consumers and businesses; and what the Government hoped to secure during the negotiations.

3.5The Government now responds, indicating that after stakeholder consultation there is more concern from the tech industry about burdensome aspects of proposal (a) and more consumer representative concern about weakened protection in proposal (b). We note in the “Background” to this chapter how some of those and other concerns are addressed in more detail in the one-off evidence session held in the Lords on these proposals.

3.6Although the proposals are distinct, they are clearly linked and we report them together now in order to address common themes in the Government response we have received. However, it is possible that we will be considering these documents separately in the future since it appears that the Council is postponing negotiations on document (b) until 2017. By this time, the Commission will have completed a relevant re-evaluation of six related pieces of EU consumer rights legislation.75

3.7We thank the Minister for her comprehensive response to the questions we asked in our Report of 10 February on both documents and for the helpful provision of tables comparing the proposals with the Consumer Rights Act 2015.

3.8We note from the Minister’s response that she is taking on board the concerns of both consumer and trade/sector bodies in forming a negotiating position on both proposals. We therefore assume that she will also take account of the concerns highlighted in the evidence session on these proposals in the EU Justice Sub-Committee of the House of Lords’ Select Committee (which we refer to the “Background” section of this chapter).

3.9We will continue to conduct our scrutiny of these proposals with a focus on the following broad concerns:

a)On proposal (a), the need for alignment with the CRA and the adoption of a proportionate instrument which will not stifle innovative UK tech businesses;

b)On proposal (b), that there is no reduction of long-established UK consumer protections on the sale of goods, which may suit the “maximum harmonisation” ambitions of the proposal;

c)That any internal inconsistencies and overlaps between both these proposals and the existing EU legislation on consumer protection will be managed properly, if needs be in a single overarching proposal—to avoid consumer and trader confusion arising from overly fragmented EU regulation; and

d)As an illustration of our concerns in (c), that the consistency and effectiveness is achieved on the issue of both private and public enforcement on both proposals, particularly in the light of the publication on 25 May of the Consumer Protection Co-ordination proposal.76

3.10When the Minister next writes to update us on either of these two proposals, we therefore ask her to bear in mind our concerns (including those previously highlighted to the Minister in our last Report), together with those we refer to in paragraph 3.8 above.

3.11We would also be grateful for sight of any submission which the Government makes to the REFIT and public consultation on the seven pieces of EU consumer legislation in question77 which we think may also be of interest to the Business, Innovation and Skills Committee and which we would like to share with them.

3.12We draw this chapter and these documents to the attention of the Business, Innovation and Skills Committee as it holds your department to account, to Culture, Media and Sports Committee who is also interested in the development of the Digital Single Market and the Justice Committee in view of the potential impact of these proposals on consumer rights.

3.13We continue to keep these documents under scrutiny.

Full details of the documents

(a) Proposal for a Directive on certain aspects concerning contracts for the supply of digital contracts: (37389), 15251/15 + ADDs 1–2, COM(15) 634; (b) Proposal for a Directive on certain aspects concerning contracts for the online and other distance sale of goods: (37390), 15252/15 + ADDs 1–2, COM(15) 635.

Background and previous scrutiny

3.14As background to our scrutiny of these proposals, we provide a recap of the key provisions of each proposal which we referred to in our last chapter. We also provide a short list of the issues which were raised in the recent evidence session in the Justice Sub-Committee of the Lords’ Select Committee on these proposals.

Key provisions of each proposal

Proposal (a)

3.15Key provisions and areas of divergence from the recently implemented CRA in the UK include:

a)Rights and remedies in relation to digital content provided for non-monetary consideration: non-monetary ‘payment’ (for example, personal data) would attract quality standards and practices; and on termination of the contract, providers would have to stop using the personal data and give the consumer a means to retrieve content provided or generated by the consumer;

b)Suppliers’ liability for defects: defects would always be presumed to be present on delivery, as digital content is not subject to wear and tear. Therefore:

i)if digital content is ‘defective’, it would not be up to the consumer to prove that the defect existed at the time of supply, but for the supplier to prove there was no such defect at the time of supply; and

ii)consumers’ rights to seek remedies for ‘defective’ digital content would not subject to a time limit.

c)Consumers’ rights to terminate contracts: Consumers would have the right to terminate long-term contracts and contracts to which suppliers make major changes.

Proposal (b)

3.16Key provisions and areas of divergence from the recently implemented CRA in the UK include:

a)Conformity criteria of the goods: quality standards may need to be reformulated to reflect the wording in the proposed Directive;

b)Remedies available to consumers: UK consumers would lose their short-term right to reject faulty goods (as afforded under the CRA). Instead consumers would first have to request a repair or replacement and could only reject goods if these remedies failed. The proposed Directive does not specify how many times the supplier can offer a repair or replacement before a consumer can access a partial or full refund (as opposed to a maximum of once under CRA). However, consumers would have a statutory right to withhold payment of any outstanding amounts until the defects were fixed. Furthermore, if the consumer rejected the goods after repair or replacement had not resolved the defect, the trader could only deduct from its refund a sum to reflect use in excess of ‘regular use’;

c)Time limit for reverse burden of proof: the period within which a defect emerging is presumed to have been present on delivery would be extended from six months to two years; and

d)Liability: (the period in which a fault has to appear before a consumer can make a claim) and limitation periods (the period is the period of time within which a party to a contract must bring a claim) for remedies: currently aligned at six years in England, Wales and Northern Ireland and five years in Scotland. The proposed Directive would lead to a reduction in the UK’s liability period to two years.

The evidence session in the Lords

3.17The Justice Sub-Committee of the European Union Committee in the House of Lords held an evidence session on 10 May on these proposals,78 with Professor Hugh Beale (a professor of law at the University of Warwick) and Lucy Rigby (a solicitor at the consumer organisation “Which”?).

3.18It is our understanding that some of the key issues raised by the witnesses on the proposals were as follows.

3.19On proposal (a):

a)Clarification is required concerning a consumer’s right to damages. Article 14 provides that a consumer has a right to compensation as a result of loss or damage to their digital environment. Given that it is possible for consumers to suffer consequential losses arising out of faulty digital content, it seems clear that the right should either be given in the Directive or that is should be clear that the question of other damages is being left to national law;79

b)Weaker conformity requirements, compared with the CRA and historic consumer protection legislation, are another concern. In the CRA (chapter 3) digital content must be fits for the purpose for which digital content of that description is commonly supplied (the same is true for the way document (b) is currently drafted). In document (a), Article 6 (2) says that “To the extent that the contract does not stipulate … in a clear and comprehensive manner, the requirements for the digital content”, the digital content shall be fit for those common purposes. The point is made that this leaves consumers at the mercy of individual suppliers’ “small print”;80

c)Where digital content or services are supplied in return for free data, an area not covered by the CRA, there is a question as to whether providing the same remedies regardless will inhibit innovation;81 and

d)If contracts in return for “free data” were not covered however, there is also the question of how consumers could be compensated for damage caused to their devices or software caused by faulty content.82

3.20On proposal (b), the following concerns were raised by Lucy Rigby:83

a)The loss of the short term right to reject goods which has been long established in UK consumer law and which currently means that UK consumers can return a faulty good and get a full refund within 30 days of buying a product;

b)Article 9 does not provide a time limit on the consumer’s obligation to give the trader the opportunity to repair a faulty good and so consumers could be stuck in an endless cycle of “fault, repair”. As UK law currently stands, after the initial 30 day refund period, the trader has one opportunity to repair the produce but if that is not successful, a consumer can get a refund;

c)Consistency between the online and offline sale of goods regimes is likely to be a challenge;

d)The proposal for a two year guarantee period would undermine the current position in UK law where there is no such concept—instead UK consumers can claim a remedy for a faulty good if it becomes apparent within the limitation period of six years in England, five years in Scotland;

e)Traders can contract out of their rights to consumers by express acceptance but if that is given a broad scope it will weaken UK consumers’ rights particularly if hidden in small print or through pre-ticked boxes; and

f)National remedies, for example in relation to consequential losses as already discussed (for example, a washing machine ruining clothes) seem to be excluded and same clarity is required as discussed in relation to document (a).

The Minister’s letters of 7 April 2016

3.21In her two letters of 7 April, the Minister for Intellectual Property at the Department of Business, Innovation and Skills (Baroness Neville-Rolfe) responds to the questions we asked on documents (a) and (b) respectively. We summarise those responses below. Where common questions have been addressed on both proposals, we group them together.

3.22The Minister also encloses with each of her letters a table comparing the relevant proposal with the Consumer Rights Act 2015 (CRA). These are set out at Annex 1 and 2 respectively to this chapter.

Stakeholder views

Document (a)

3.23The Minister comments that stakeholders:

• have been as generally supportive of the aims of this EU proposal as they were for the digital content provisions in the CRA;
• see the need for a common set of EU rules and understand the potential single market benefits;
• are concerned about any significant divergence of the proposal from the UK approach, or the risk that it might impinge on other regimes; and
• from trade/sector are concerned about “clarity, proportionality and practicality and potential impacts on innovation and established practice in the sector” but understand the potential benefits of increased consumer confidence in cross-border trade in digital content if an acceptable text, reflecting UK objectives, is achieved.

3.24The Minister then identifies key issues for trade/sector stakeholders, including:

• The need to limit what data can constitute non-monetary payment for “free” content, given Member State support for this aspect of the proposal which is broadly worded;
• The onerous nature of the proposed remedies and what is required in relation to no longer using data and returning data to the consumer, though the Minister notes that as these concerns are shared by other Member States and she is confident that a more balanced approach is achievable; and
• Potential mismatch with the electronic communications framework (which is due for review), though this is likely to resolved satisfactorily as the Commission is aware of the need to avoid adverse overlapping with parallel regimes.

3.25Turning to consumer stakeholders. Minister comments that they:

• have been less engaged in this digital content proposal (a) than in proposal (b) on the online sale of tangible goods since they know that the scope of the proposal (a) goes wider, rather than narrower, than current UK coverage in the CRA; and
• have some concerns about the proposed change of approach to assessing whether content conforms to the contract by judging them against the contract itself rather than the consumer’s reasonable expectations, as is the case for goods (and digital content) in the UK. The Minister notes that these concerns are shared by other Member States and the UK will urge an approach which is “familiar and widely understood by consumers and by traders”.

Document (b)

3.26The Minister first explains that the Government published a “Call for Views” on the proposal84 and hosted a stakeholder conference.85 These gave her important, early insights into consumer and business views and that she will continue to call on the experience and practical insight of such representatives as negotiations progress. She adds that:

• A majority of consumer and business organisations supported a maximum harmonisation measure recognising potential benefits for business and consumers;
• Industry stakeholders wanted greater recognition of other, practical legal and commercial barriers facing business looking to sell cross-border; and
• Consumer stakeholders were concerned about the potential reduction in UK consumer protections.

Practical implications for businesses and consumers

Document (a) (and where stated, document (b))

3.27The Minister says:

• As negotiations have already started, the Government does not think the Commission want now to revisit conclusions in its costs/benefits analysis or expand its assessment, but that the Government will challenge that assessment where it does not justify particular elements of the proposal (she also makes the same point on document (b)).
• Although the Government has recent experience of assessing the practical implications of various options for regulating the sale of digital content in the run up to the CRA, it recognises that the proposal differs from the CRA in “several important ways”. The Minister makes the same point on document (b) in relation to the provisions in the CRA dealing with the online sale of goods.
• Maintaining active consultation, both with a wide range of “British tech businesses” and with consumer associations such as “Which?” and BEUC (the European consumer organisation) will be important as negotiations progress to enable the Government to gauge the likely impacts of the proposal and any changes to it. She makes a similar point on document (b) and recognises the value of consultation given that that proposal does risk weakening the current level of UK consumer protection in relation to online sales of goods.
• There is regular, ongoing across-Whitehall consultation with colleagues responsible for related policies, for example on data protection and communications regulation.

Negotiation position

Document (a)

3.28The Minister says that:

• Her department is in the process of obtaining formal clearance for a negotiating position, so she can only provide us with an indication of the UK’s likely approach;
• The Government will aim to secure changes in key areas of the proposal “to meet an overall objective of providing appropriate, clear protections for consumers and clear, consistent rules for business”;
• In pursuing those objectives, the Government will aim for “a balance so as not to stifle innovative business models; ensure that remedies are proportionate to the perceived damage in individual circumstances; and that remedies are practical and not overly burdensome”;
• On scope, the Government intends to “focus effort on ensuring that that the definition of ‘free’ content is tighter, so the coverage of the Directive is clearer and properly targeted”. The Minister considers this important for business and consumer understanding;
• On remedies, the UK will work for these to “reflect reasonable consumer expectations across the wide range of content and services, including in relation to ‘free’ content”. It intends to “tighten the obligations on what suppliers should do with data on termination, where these go wider than obligations in general data protection rules, to ensure that an acceptable balance has been achieved”;
• On the Commission’s proposed approach to conformity of digital content and services to the contract (already mentioned), the Government considers that this is not necessary and could potentially over complicate things for consumers, so will “advocate the more standard approach to assessing quality and fitness for purpose”; and
• The Government will work to ensure that there are no negative effects from regulatory overlaps, that these should be avoided where possible (for example, in relation to the Electronic Communications framework) and in the event of any overlap with data protection rules, the latter should clearly take precedence.

3.29The Minster adds:

“As a Member State which already has bespoke digital content rights in law our expertise and experience is clearly valued in Working Group, and the prospects for establishing workable alliances is good, particularly as Member States have already echoed many of our concerns with the current text. We will continue to show leadership on the file.

“As this is a co-decision file, the European Parliament will also influence the outcome of the proposal. It will be negotiated jointly by the EP’s Committees for Internal Market and Consumer Protection (IMCO) and Legal Affairs (JURI). This means that agreement must be reached between both Committees and this can be difficult. Working with our colleagues in UK Rep we will focus effort on building strong relationships with key Members from each Committee alongside developing our alliances with Member States”. She makes a similar comment on how the UK will engage with the EP and its relevant committees in relation to document (b).

Document (b)

3.30The Minister says that it is too early for her to outline the changes the UK aims to secure as there had been no substantial discussion at working group yet and so no indication of the position of other Member States. She is clear though that the “right balance needs to be found between maintaining the UK’s high level of consumer protection whilst ensuring that the potential of the Digital Single Market is realised”.

Complementary policies

Document (a)

3.31The Minister agrees with what we said in our last Report about complementary policies and considers that they should “help to enhance and ensure the success of the new rules”. She then addresses the relevance of some of those policies:

• The recently launched Online Dispute Resolution platform will provide a means of settling online and cross border disputes out of court in a simple, fast and low cost way. All online traders dealing with consumers are required to carry a link to the platform which will provide consumers with improved access to cross border redress in many instances; and
• As we will see in the Minister’s future EM on the revised Consumer Protection Cooperation Regulation, in the interests of consistency and engagement in cross border monitoring and enforcement, the UK has been pushing for “new enforcement powers, better definitions of the relevant infringements, and clearer obligations on and processes to be followed by nominated national enforcement bodies”. The Minister makes the same point as previously about any overlaps with this measure and the data protection regime and the need for the latter’s clear precedence. Copyright rights will be protected in the same way under the Copyright Directive which is also under review.

Holistic approach or two separate proposals?

Document (b) (but we think relevant to both)

3.32In response to our question about whether it would have been better to have integrated into one proposal the rights and remedies for goods, digital content and services as in the CRA, the Minister says:

“The Act does cover goods, digital content and services but the rights and remedies for each type of product or service are different. The important point is that, to avoid confusion for consumers and business, the same rules apply for the same types of product irrespective of how they are bought or where they are bought within the Union. I am not therefore concerned that the Commission has produced separate proposals. Our assumption at this stage is that the Directives will be transposed by amending the CRA, so that from the consumer perspective all their rights and remedies will still be in one piece of legislation. It will also be important to ensure that where there are common areas we work to ensure consistency, and that the tangible goods proposals suitably address products with embedded digital content.”

Two separate consumer protection frameworks for offline and online contracts?

Document (b)

3.33The Minister comments:

“As noted in the EM we had serious concerns that this would be confusing for both consumers and business and that it would be better for the same protections to apply, whatever the sales route. It was also clear from the initial Council working group that a significant majority of Member States shared this concern and that, to many, it seemed illogical to consider this proposal before the results of the Regulatory Fitness and Performance Programme (REFIT) analysis of the consumer acquis, due early next year. I am therefore pleased that the Commission and Dutch Presidency have recognised these difficulties and in response have prioritised the negotiation of the proposal on digital content so that for the tangible goods proposal the results of REFIT can be taken into account. I welcome this sensible approach, as I am sure the Committee will, as it means that the unwelcome possibility of operating dual protection regimes in the UK now seems less likely.”

Lessons learned from Consumer Rights Directive

Document (b)

3.34 The Minister says:

“The REFIT analysis is also relevant in relation to your question on this. I understand that the Commission will be evaluating the Consumer Rights Directive in accordance with Article 30 and the outcome of this evaluation will feed into the conclusions of the REFIT exercise. We understand that a report on the REFIT exercise will be submitted to the European Parliament and the Council by the end of this year, accompanied, where necessary, by legislative proposals. In relation to whether there are any lessons that the Government and Commission could learn, I think that the current proposal should be dealt with on its own merits. In particular the Commission has listened to views of Member States, including the UK, and has produced a short proposal that rightly concentrates on key barriers to e-commerce and has kept the scope tight and focussed. I welcome this approach and think that in many ways this would be the most important lesson we could take from the negotiation of the Consumer Rights Directive that started out with a much wider scope.”

Other measures impacting the success of this Directive

Document (b)

3.35The Minister agrees with us that existence of different consumer protection regimes across the EU is not the only barrier to low levels of cross-border online sales and it will be important to ensure that other barriers are tackled. She comments:

“This is an important point and one that the Commission has rightly sought to tackle through a holistic approach to realising a Digital Single Market. The overall package that was published by the Commission in May 2015 contained several separate measures organised under three pillars that taken as a whole will ensure a more coherent set of rules, without unnecessary barriers to an online single market developing. One of these pillars, under which this proposal falls, includes a number of initiatives to boost e-commerce in the EU. This includes: strengthening the enforcement of consumer laws by strengthening the Consumer Protection Co-operation framework; looking at cross-border parcel delivery and bringing forward proposals to improve this, including around price transparency; tackling geo-blocking whereby consumers should be able to access websites outside of their home nation; and simplifying VAT arrangements for business. Taken together the package will tackle a range of existing barriers, and should ensure that businesses will find it easier to trade and consumers will benefit from greater choice, and improved competition.”

3.36The Minister then makes the same point about precedence of data protection rules in the event of any overlap and that Copyright being protected in the same way as under the Copyright Directive.

Previous Committee Reports

(a) Twenty-third Report HC 342–xxi (2015–16), chapter 4, 10 February 2016; (b) Twenty-third Report HC 342–xxi, chapter 5 (2015–16), 10 February 2016.

Annex 1: Comparison of document (a) with the Consumer Rights Act 2015

Consumer Rights Act	Draft Directive	Effect
The main provisions cover digital content supplied in exchange for money. “Free” digital content supplied in exchange for personal data is covered only to a very limited extent in respect of damages to a consumer’s device and unfair contract terms. There is a reserve power to extend scope to “free” digital content if there is evidence of significant consumer detriment.	Article 2, Article 3: Scope includes digital content paid for with money and “free” digital content (paid for with personal and other data). Monetary remedies do not apply to “free” content.	Consumers: Extends consumer protection by ensuring “free” digital content meets contractual standards and is at least fit for purpose. Provides remedies of bringing into conformity with the contract and, on termination, stopping use of and return of data apply. Business: Businesses should already ensure conformity with the contract as a matter of good business practice, even for “free” digital content. However, The cost of providing remedies as drafted could inhibit innovation and discourage participation in the market, but there is general stakeholder agreement that the return of consumer generated or stored content is fair.
Does not extend digital content rights to all digital services, but digital services are subject to the general services protection in the Act, and digital services that support the delivery of some types of digital content, such as online games or cloud software, are included.	Article 2: Includes an increased range of digital services (e.g. cloud storage, social networking)	Consumers: Some extension of consumer protection, particularly as regards remedies but likely to be negligible given already subject to the general services protections in the Act. Business: Extends some obligations on business in respect of remedies. Subject to clarification, may overlap with other regimes (e.g. Electronic Communications Framework), although the Commission intends that it does not.
No right to terminate contract where there is a failure to supply, but right to repair, replacement and if those steps fail, a refund.	Article 5, Article 11: Immediate right for the consumer to terminate the contract where there is failure to supply (linked to a requirement for “immediate” supply subject to the consumer agreeing otherwise).	Consumers: Assuming the consumer wants the product they have ordered, in practice this does not necessarily benefit the consumer who presumably would prefer a repair or replacement in any case. Business: Potentially leaves suppliers exposed to abuse but in practice, as above, if the consumer wants the content they will opt for a replacement or repair. Degree of potential confusion over how it applies in cases of temporary interruption to delivery or streaming services, but this is likely to be clarified.
No automatic right to terminate contracts which extend beyond one year. Termination left to terms of the contract and protected by rules on unfair contract terms.	Article 16: Right after one year for consumer to terminate or withdraw from contracts which last for more than one year or which are of indeterminate length or renewable. (Only applies to digital content element of mixed contracts where goods are also supplied or which include electronic communications services).	Consumer: Provides additional consumer option, but may inhibit attractive re-contracting offers from suppliers based on longer-term consumer commitment, including of bundled services (e.g. phone, broadband and Pay TV). Business: As above, may also inhibit popular combined contracts which spread the cost of new innovative hardware (phone, TV box) over a longer period. May not align with possible proposals in the review of the Electronic Communications Framework to better facilitate switching of bundled services because the provisions would only apply to the digital content element. Commission has said it wants to avoid any mismatches.
Burden of proof reversed (presumption that digital content was faulty at the time of delivery) for six months.	Article 9, Article 10: Supplier has the burden of proving that the digital content was in conformity with the contract at the time of supply for the duration of the contract (which may be longer than 6 months). The supplier must be provided with reasonable access to the consumer’s “digital environment” where necessary to establish nature of a fault.	Consumers: Still have to establish that there is a fault, but can look to the supplier for a potentially longer period to establish that the fault was not present at the time of supply. Business: Extends the period of the reversal of proof in relation to ongoing contracts to supply digital content, or where content is updated in accordance with the contract. Business is concerned that as time goes by faults are much more likely to be caused by changes to the consumer’s digital environment rather than faults with the digital content which were present at the time of supply. Not clear to what extent consumers are likely to assume that faults in old or aging content were present at the time of supply. Other Member States support a limit to this reversal of burden of proof.
Applies objective criteria to assessment of conformity with the contract, irrespective of what the contract says, irrespective of what the contract says. That is, consumers are entitled to expect that products will be as described, fit for purpose and of a quality it is reasonable to expect in the circumstances, and that services are as described and performed with reasonable care and skill.	Article 6: Consumer entitled to quality standard as set out in the contract. Where the contract is found not to be clear and comprehensive on relevant matters, entitled to expect product to be fit for purpose as compared to other products described in the same way, taking into account whether money or data was paid for the product.	Consumers: Places more reliance on what the trader includes in contracts and relies initially on the consumer’s assessment of whether the contract covers relevant matters clearly and comprehensively. Appears to be potentially confusing for consumers and departs from the well established approach of setting clear, easily understood and suitably flexible standards. Business: Allows for more reliance on contract terms. However, this is a change from an already well established approach to consumer sales and would likely entail some familiarisation and assessment costs.
The point of supply of digital content is set as when it reaches the consumer’s device or a nominated third party (e.g. a games platform).	Article 2: The point at which content is considered supplied is the point at which it is available to the consumer or a nominated third party, or at which the consumer or a nominated third party has access to the content, (e.g. by the supplier providing a link to a download).	Consumers: This has implications in respect of instances where there is a failure of consumer access to content or where the content fails to download and where the fault does not concern matters within the control of the consumer (e.g. Internet Service Provider failure or failure of the consumer’s device). The consumer would be required to establish that the fault rests with the supplier, leaving potential gaps where the supplier simply insists that the content has been and remains available. Business: Business relieved of the obligation to track down errors in delivery, including where the error may be with a third party employed by the supplier.
No explicit requirements as to the future use by business of consumer data or the return of consumer data in the event of termination of the contract.	Article 13, Article 16: Detailed requirements on business to stop using wide range of consumer data, including data provided as payment for “free” content; and for the return to the consumer of consumer data. Consumer data includes not just personal data but any other data collected in the course of the supply of the content.	Consumers: This is the main remedy in respect of “free” content where repair or replacement is not carried out (it also applies in respect of paid for content). It also provides reassurance that consumers are entitled to the return of content they may have generated in the course of using the content (e.g. stored files, documents, adjusted photos, music or artwork etc.). However, as drafted it also requires the return of much data of no apparent practical use to the consumer such as usage stats and possibly all interactions in the course of using social media. Business: Business generally recognises the fairness of the obligation to return files stored by the consumer and content produced by the consumer where that clearly has some value to the consumer, and also to comply with data protection rules in respect of personal data. However the scope of the data specified in the draft makes this requirement potentially burdensome, and may involve, for example the expectation of de-aggregating usage data and other feedback gathered in the course of the consumer’s use or accessing digital content and services. We believe these concerns will be allayed through clarification of what is intended.

Annex 2: Comparison of document (b) with the Consumer Rights Act 2015

Consumer Rights Act 2015	Draft Directive	Effect in UK
Overlap with digital content The Consumer Rights Act provides separate rights and remedies for contracts to supply goods and digital content. Where digital content contained in goods is defective, the consumer can choose to use the ‘digital content’ remedies or the ‘goods’ remedies, including the short-term right to reject (Part 1, Chapter 3 Consumer Rights Act 2015).	Overlap with digital content Article 1 (3): Directive does not apply to digital content contained in goods where the goods have been used exclusively as a carrier for the supply of digital content.	Consumers: Unlike in the Consumer Rights Act digital content contained in goods, such as CDs and DVDs, will only attract digital content rights and not goods rights. Could be initially confusing but unlikely to have a significant impact assuming the rights and remedies for digital content and goods do not significantly diverge. Business: Unlikely to have much impact in practice. However, BRC have called for more drafting clarity.
Burden of proof The current EU position, transposed by the UK in the CRA, is that if goods breach the rights in the Act in the first 6 months there is an assumption that the issue was present at the time of delivery (unless this is incompatible with the type of goods or how the rights are breached, or it is shown that the goods did comply with the rights at delivery). It is for the trader to prove otherwise (S.19 Consumer Rights Act 2015).	Burden of proof Article 8 (3): The reverse burden of proof currently in the CRA is extended to a two year period.	Consumers: Provides additional consumer protection by extending the reverse burden of proof from 6 months to 2 years. Business: This will be an extra burden on business (particularly coupled with 13(d) below). Commission have argued that the impact will be minimal as most traders honour an assumption that the fault was present on delivery up to a year anyway. However, this is a view we would need to test.
Short term right to reject If a fault appears in goods within 30 days of buying them, the consumer has an immediate right to reject them and obtain a full refund. The exception is where the goods are perishable and would not be expected to last 30 days, in which case the right to reject lasts only as long as a reasonable person would expect those goods to last. This remedy is additional to the EU remedies of repair/replacement then price reduction/partial refund (under the CSD) and is possible because existing EU rules are minimum harmonisation. (Ss. 20–22 Consumer Rights Act 2015).	Short term right to reject There is no ‘short term right to reject’ in the draft Directive.	Consumer: Consumer awareness of this right is high and it may act to support high levels of consumer confidence in UK. Business: Unlikely to have much impact on business. UK businesses may continue to offer this right or more generous terms as a commercial decision, as many do now.
		The proposal does not affect the rights in the Consumer Rights Directive (2011/83/EU), so consumers will still be entitled to a 14 day right of withdrawal for goods bought online or at a distance. However, unlike the short term right to reject, the consumer has to bear the cost of returning goods under the right to withdraw, and the trader may make a deduction for use from the refund, depending on the circumstances.
Right to a repair or replacement The consumer can access second tier remedies (price reduction or reject the goods and obtain a refund) after the consumer has either 1) sought a repair or replacement but this was not carried out without significant inconvenience to the consumer or within a reasonable time; or 2) already undergone one repair or replacement of the goods by the trader (S.24 Consumer Rights Act 2015).	Right to a repair or replacement Article 9(1): The consumer would still be able to obtain a price reduction or reject the goods and obtain a refund if a repair or replacement could not be completed within a reasonable time and without any significant inconvenience to the consumer but there is no specified limit as to the number or repairs or replacements which should be carried out before it constitutes a significant inconvenience or unreasonable time.	Consumers: Consumers will be less clear when they can access a second tier remedy—it could be difficult for a consumer to prove significant inconvenience or what a reasonable timeframe might be. The result could be that the consumer faces a cycle of failed repairs or replacements. Business: Unlikely to have much direct impact- after all they would offer a refund if this was the best solution from their perspective- but we know that business strongly welcomed the legal certainty of the CRA’s limit on the number of repairs/ replacements that can be offered before moving to second tier remedies.
Deduction for use A trader must provide a full refund if the consumer rejects the goods within 6 months of goods of delivery of the goods (unless the goods are a motor vehicle or specified by SI). After 6 months, or if the goods are a motor vehicle, a trader may apply a deduction to the refund to account for the use that the consumer has had. (S.24(10)–(13) Consumer Rights Act 2015).	Deduction for use Article 13 (d): Under the proposal this right will be lost and traders would be able to apply a deduction to the refund whenever a consumer exercised the final right to reject, including during the first 6 months. However, the consumer shall only be liable for any decrease in value to the extent that it exceeds depreciation through regular use. Any deduction would be capped at the price paid by the consumer for the goods.	Consumers: In some ways this represents a strengthening of consumer protection in that the circumstances in which a trader could make a deduction for use are more limited. Business: As above could represent an extra burden on business when coupled with reverse burden of proof and coverage of minor faults.
Time periods At present the liability and limitation periods for remedies are aligned at six years in England, Wales and Northern Ireland and five years in Scotland. This goes beyond the minimum EU requirement in the CSD, of a 2 year liability period for defects which are present at the time of delivery. Limitation Act 1980 Prescription and Limitation (Scotland) Act 1973	Time periods Article 14: There would be a two year liability period whereby faults that appeared after two years would not be covered by the rights and remedies in the Directive. The UK’s limitation periods could remain unchanged.	Consumers: Consumers would not be able to claim a remedy prescribed in the Directive for a fault that appeared after 2 years from purchase, but they would still have 6 years (or 5 in Scotland) to make a claim. Consumers will also be able still bring a claim for damages for faults that arose between years 2 and 6 (5 in Scotland). Business: Limited impact on business. Businesses may benefit from not having to provide a remedy for goods that have become faulty after 2 years.

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74 Twenty third Report HC 342–xxi (2015–16), chapter 4, (10 February 2016).

75 Information on this REFIT evaluation and public consultation launched on 12 May is accessible here. The six pieces of consumer legislation to be reviewed are: the Unfair Commercial Practices Directive, the Sales and Guarantees Directive, the Unfair Contract Terms Directive, the Price Indication Directive, the Misleading and Comparative Advertising Directive and the Injunctions Directive.

76 The proposed Regulation on cooperation between national authorities responsible for the enforcement of consumer protection laws: (37814), 9565/16 + ADDs 1–3.

77 See footnote 2.

78 Uncorrected transcript of oral evidence taken before the Justice Sub-Committee of the Select Committee on the European Union in the House of Lords on 10 May 2016, HL (2015–16).

79 Q 6 [Professor Hugh Beale].

80 Q 6 [Professor Hugh Beale].

81 Q 8 [Lucy Rigby].

82 Q 8 [Lucy Rigby].

83 Q 9 [Lucy Rigby}.

84 We understand that this consultation commenced in January 2016 and ended on 10 February 2016.

85 We understand that this was held on 24 February 2016.

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17 June 2016