Documents considered by the Committee on 25 April 2017 Contents

3Digital Single Market: Consumer contract rights and the supply of digital content

Committee’s assessment

Legally and politically important

Committee’s decision

Not cleared from scrutiny; conditional scrutiny waiver granted; further information requested

Document details

Proposal for a Directive on certain aspects concerning contracts for the supply of digital content

Legal base

Article 114 TFEU; ordinary legislative procedure; QMV

Department

Business, Energy and Industrial Strategy

Document Number

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

Summary and Committee’s conclusions

3.1This proposed Directive aims to help deliver the Digital Single Market and boost e-commerce. It seeks to fully harmonise consumer contractual rights and remedies in relation to online trade in digital content. It was proposed at the same time as another on contracts for online and other distance sale of goods (physical goods proposal).

3.2When the Government last wrote on 9 March, it provided an updated estimate that the proposal is likely to be adopted by the end of the year or early 2018. Since it is a Directive, with a two year grace period for implementation, it is unlikely that the UK will have to formally implement it before Brexit. But it may ease any future trading relationship if the EU and UK consumer protection regimes are aligned post-Brexit. The Government is focussed on reducing divergence between this proposal and the Consumer Rights Act 2015 (CRA) which already regulates in UK law consumer rights in relation to digital content and as such has established the UK as a leader in that field.

3.3The Commission considers that the proposed Directive will reduce legal uncertainty and compliance costs for businesses selling digital content online and cross border, so boosting consumer confidence in such trade. The proposal is also legally significant because full harmonisation means that no Member State could give greater or lesser protection than that set out in the Directive once adopted so that certain aspects of consumer contract law essentially would be the same across the EU. This means the proposal could have a significant impact in the UK both on consumers and businesses, particularly if it were substantially to diverge from the CRA.

3.4The proposal specifically 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.

3.5In our past scrutiny, broadly we have been supportive of the Governments’ approach to achieve a proportionate text, protecting consumer rights but not stifling the innovative UK tech industry, which is also as aligned as possible with the approach already taken to digital content contracts in the CRA.

3.6Last time we reported on this proposal (15 March), we granted the Government a conditional scrutiny waiver in order to support a Partial General Approach (PGA) at the JHA Council meeting of 28/29 March on relatively uncontroversial provisions. This was on the basis that the PGA would only cover matters set out in the Government’s letter of 9 March and additionally that:

3.7The Government now writes to update us on the outcome of that meeting. In the event the PGA was not sought, but the Presidency updated Member States on progress on the proposal, areas for agreement going forward and the receipt of an opinion from the European Data Protection Supervisor on how the proposal should take account of and relate to EU data protection rules. The Government also requests, in advance of dissolution, a scrutiny waiver for a General Approach, expected at the 8–9 June JHA Council meeting.

3.8We thank the Minister for her letter. In view of the importance of the Government’s freedom to negotiate and support the text of a General Approach which meets broad UK objectives for a proportionate text which adequately protects consumer rights but does not stifle the UK tech sector, we grant a scrutiny waiver for the 8–9 June JHA Council meeting provided the text meets those broad objectives. We recognise that in the exceptional circumstances of the imminent general election period, the Minister is having to seek this waiver much earlier than is usual in the EU scrutiny process. We retain the document under scrutiny pending the Minister’s report on the outcome of the 8–9 June JHA Council meeting and further updates, to be considered by the new Committee to be formed following the general election.

Full details of the document

Proposal for a Directive on certain aspects concerning contracts for the supply of digital content: (37389), 15251/15 + ADDs 1–2, COM(15) 634.

Background and previous scrutiny

3.9The full background to the proposal and the concerns we have raised in previous scrutiny can be found in the previous Committee Reports listed at the end of this chapter.

The Minister’s letter of 19 April 2017

3.10We reproduce in full the letter of the Minister for Small Business, Consumers and Corporate Responsibility (Margot James), given that she requests a scrutiny waiver in order to support a possible General Approach at a Council meeting of 8–9 June and the intervening general election period:

“I refer to the Committee’s consideration at its meeting of 15 March of my letter of 9 March providing an update on progress in negotiations.

“The Committee granted a scrutiny waiver in respect of elements of the proposal on which at the time it was possible the Presidency would seek a Partial General Agreement at a meeting of the Justice and Home Affairs Council on 27 and 28 March. The Committee asked to be kept informed of the outcome of the Council meeting and of any agreed text.

“Thank you for granting the scrutiny waiver. This is to confirm that, in the event, the Presidency did not seek a Partial General Approach on any element of the proposal, preferring instead to provide Ministers with an update on progress.

“The Presidency confirmed that this dossier is among its top legislative priorities. It outlined its approach to seeking to concentrate discussions on related elements of the directive and that it believes significant progress is being made. It mentioned in particular: aligning the criteria for conformity with the contract more closely with the approach to consumer rights when they buy goods; the remedies which should apply in cases of non-conformity; and, remedies for failing to supply. It acknowledged that Member State views still diverge on the issue of time limits for supplier liability and the related reversal of the burden of proof, and that more work is necessary to achieve agreement on the approach to modifications to digital content and services. Also, further work was necessary on scope, particularly in relation to exemptions covering, for example, electronic communications services as covered by the new proposed European Electronic Communications Code.

“The Presidency confirmed that it had received the Opinion of the European Data Protection Supervisor on the relationship between the Directive and data protection rules. It believes that the Opinion provides the necessary clarity and the basis for technical solutions to the Supervisor’s concerns, and that this will enable further fruitful discussion on this issue in coming meetings.

“As we reported in our previous letter in March, the Presidency remains focused on this priority dossier and is confident that it will be able to seek a full agreed General Approach at the JHA Council on 8th and 9th June. We are continuing to participate fully in Council Working Groups and remain influential. Whilst it is too early to predict exactly what approach will be taken at the Council meeting, it is our intention to vote in support of the approach if it aligns with our broad objectives on the dossier, i.e. to ensure that the rules are proportionate (as light touch as they can be whilst providing effective protections for consumers) and do not go so far as to stifle important innovative business models. Following the announcement this week of a General Election in June, this letter asks the Committee to consider granting another scrutiny waiver in good time ahead of the JHA meeting.”

Previous Committee Reports

Thirty-fifth Report HC 71-xxxiii (2016–17), chapter 1 (15 March 2017), Eighteenth Report HC 71-xvi, chapter 3 (16 November 2016), Sixth Report HC 71-iv (2016–17), chapter 3 (15 June 2016) and Twenty-third Report HC 342-xxii (2015–16), chapter 4 (10 February 2016).





27 April 2017