Documents considered by the Committee on 18th November 2016 Contents

3Digital Single Market: Consumer contract rights

Committee’s assessment

Legally and politically important

Committee’s decision

Not cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy and Industry Strategy Committee

Document details

(a) Proposal for a Directive on certain aspects concerning contracts for the supply of digital content; (b) Proposal for a Directive on certain aspects concerning contracts for the online and other distance sale of goods

Legal base

Article 114; ordinary legislative procedure; QMV


Business, Energy and Industrial Strategy

Document Numbers

(a) (37389), 15251/15 + ADDs 1–2, COM(15) 634;

(b) (37390), 15252/15 + ADDs 1–2, COM(15) 635

Summary and Committee’s conclusions

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) physical or “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.

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, we said that we would continue to conduct our scrutiny focussing on the following broad concerns and asked the Government to bear these in mind when providing future updates:

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.

3.5In our last Report, we also requested that we should have sight of the Government’s response to the REFIT23 review and the Government’s response to the review of the Consumer Rights Directive. The Government now responds to our questions and provides those documents which we summarise at paragraphs 3.15–3.18.

3.6We thank the Minister for her helpful letters on these proposals, including the enclosed submissions of the UK Government to the Commission’s EU Consumer REFIT and review of the Consumer Rights Directive.

3.7On proposal (a), we welcome:

a)the direction and focus of the negotiations so far on the question of consumer expectations in relation to “fitness for purpose” and “quality”, leaving damages remedies to regulation at national level and the need to reduce overlaps between this and the proposal on tangible goods (b); and

b)the Government’s focus on obtaining a text which aligns with the Consumer Rights Act and which does not, in the Minister’s words “stifle the innovative UK tech business”.

3.8We note that there appears to be general acceptance now that “free” digital content contracts will be covered by proposal (a) but that Government wants the type of data acting as payment to be closely defined and for practical remedies to reflect reasonable consumer expectations. We agree with the Government that legal clarity on obligations and rights in relation to such contracts will be key.

3.9We look forward to the Minister’s further updates as the negotiations on proposal (a) progress and when they commence on proposal (b).

3.10In relation to Brexit, we ask the Minister to indicate:

a)when she considers the legislative proposals are likely to be adopted; and

b)the extent to which the UK is likely to want to mirror in its post-Brexit domestic legislation the substance of the legislative proposals where there is a deviation from current UK law; and if so the extent to which this would require further agreement with the EU because it involves reciprocal cross-border rights and obligations.

3.11We retain the documents under scrutiny but draw this chapter and these documents to the attention of the Business, Energy and Industrial Strategy Committee.

Full details of the documents

(a) Proposal for a Directive on certain aspects concerning contracts for the supply of digital content: (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.

The Minister’s letters of 10 October 2016

3.12The Minister for Small Business, Consumers and Corporate Responsibility (Margot James) provides separate responses in relation to both proposals. She prefaces both with a reminder of the Government’s standard statement about its continued membership in the EU before Brexit.24

Document (a)—the digital content Directive

3.13On this document the Minister provides the following update and response to the concerns we listed as (b)–(d) in our last Report and referred to in paragraph 3.4 above:

Document (b)—the online and distance sale of goods Directive (tangible goods)

3.14In relation to this proposal, the Minister says:

Our summary of the Government’s submissions to the Consumer REFIT and the review of the Consumer Rights Directive

3.15Enclosed with the Minister’s letters were the two Government submissions which we requested on the Consumer EU law and legislation REFIT and the review of the Consumer Rights Directive (CRD).27 We now summarise their content.

3.16As the Minister says in her letter on proposal (a), the key provisions of CRD are: requirements to provide certain pre-contractual information to consumers; withdrawal rights in respect of distance and doorstep sales and the prohibition of overcharging for using any given means of payment. The Directive generally aims to achieve full harmonisation, but a few articles allow Member States to diverge from their scope. The Commission aims to evaluate how the Directive is viewed by consumers and businesses and how it is applied in Member States. The CRD was implemented in the UK by the Consumer Contracts Regulations 2013 (S.I 2013, No.3134).28

3.17On the CRD, the Government’s submission29 is detailed and wide ranging. However, we lost some general points of relevance to the current proposals:

3.18On the REFIT on EU consumer law,30 some key points from the Government’s submission are:

Previous Committee Reports

(a) and (b): Sixth Report HC 71-iv (2016–17), chapter 3 (15 June 2016); (a) Twenty-third Report HC 342-xxii (2015–16), chapter 4 (10 February 2016); (b) Twenty-third Report HC 342-xxii (2015–16), chapter 5 (10 February 2016).

23 Regulatory Fitness and Performance Programme on EU consumer law and legislation.

24 “Until European Union exit negotiations are concluded, the UK remains a full member and all the rights and obligations of EU membership remain in force. During this period the Government intends to continue to negotiate, implement and apply EU legislation.”

25 This First Reading paper is accessible on the Council website.

26 Our explanation: This means the body of EU law and legislation in that particular policy area.

27 The Commission’s website on the CRD is accessible here.

28 The Consumer Contract (Information, Cancellation and Additional Charges) Regulations are accessible here.

29 Letter to the Director for Consumers at the Commission from the Deputy Director for Consumer and Competition Policy at BEIS, 22 September 2016.

30 Letter to the Director for Consumers at the Commission from the Deputy Director for Consumer and Competition Policy at BEIS, 12 September 2016.

21 November 2016