Legally and politically important
Cleared from scrutiny; drawn to the attention of the Business, Energy and Industrial Strategy Committee
Amended proposal for a Directive on certain aspects concerning contracts for the sale of goods, amending Regulation (EC) 2006/2004 and Directive 2009/22/EC and repealing Directive 1999/44/EC
Article 114 TFEU; ordinary legislative procedure; QMV
Business, Energy and Industrial Strategy
(39194), 13927/17 + ADD 1, COM(17) 637
11.1This proposal extends to offline sales of goods as well as online and distances sales. The scope of the proposed Directive reflected the concerns of the UK and other Member States about the possibility of different contractual rules for online and offline sales. We have already cleared from scrutiny a connected proposal for a Directive on contracts for the supply of digital content since the negotiations on that proposal were always more advanced. The period for implementing both proposals in national law is two years.
11.2In the past, the Government has highlighted points of divergence between this “maximum harmonisation” proposal (where more or less stringent national requirements cannot be maintained) and current UK law, mainly the . The potential loss of the UK consumer’s short term right to reject goods and the possible need to introduce liability periods have been key concerns of the Government. However when the Minister last on 17 January, improvements to that text had been achieved which for the most part preserved the UK short-term right to reject goods and limitation periods (as opposed to liability periods). A detailed account of the proposal and the Government’s view are provided in our previous Reports listed at the end of this Report chapter.
11.3When we last reported on 6 February 2019, we granted the Government a scrutiny waiver for final adoption of the proposal. However, we told the Government that we did not expect the UK to support a proposal which could materially undermine any key UK consumer protections. We also asked some questions about any implications for consumer protection of leaving the EU without an agreement with them.
11.4The Government now responds to our last Report following the adoption of the proposal. In her of 8 May, the Minister for Small Business, Consumers and Corporate Responsibility (Kelly Tolhurst MP) confirms that the Council adopted a on 15 April 2019. We note that the adoption of the took place at the same time. As requested in our last Report, she then sets out any changes to the final text of the Directive, compared with the position reported in her of 17 January.
11.5The Minister says that her last letter represented the position of the final text on the issue of time limits for remedies. The Government had already successfully negotiated for the UK to maintain only a limitation period, without the need to introduce also a liability period. The UK can also retain existing fixed limitation periods “where digital elements in smart goods are supplied by a single act or by a series of individual acts”.
11.6However, in the specific case of smart goods where digital content or digital services are supplied on a continuous basis over a period of time, the Directive requires that consumers should be able to seek remedies for any lack of conformity that occurs or becomes apparent throughout the period of continuous supply. The Minister comments:
It is unclear exactly how this provision would work in practice, but there is a possibility that the UK’s existing fixed time limit periods for breach of contract claims (i.e. 6 years in England and Wales and 5 years in Scotland) would not be sufficient where continuous supply extended over a very long period, especially where there was a delay between a fault occurring and that fault becoming apparent to the consumer. The existing UK limitation provisions would, therefore, need to be amended to reflect the time limit requirements for cases of continuous supply.
11.7The Minister explained in her last letter how the text developed to bring smart goods within the scope of this proposal rather than in the Digital Content proposal. This included a duty for the trader to ensure that the consumer is informed of and provided with updates to any digital elements and services within a good, so that the good remains in conformity with the contract.
11.8As updates are sometimes provided by the manufacturer or another third party, trilogues added the right for a trader to pursue remedies against those in the supply chain who may have omitted to provide the consumer with digital updates necessary for maintaining contractual conformity.
11.9Such a statutory requirement for a trader to provide updates would be new for UK consumer law. If the UK were to implement the Directive, the Minister says the Government:
would consult closely with business and consumer representatives to do it in a proportionate and pragmatic way, including by seeking consistency with wider government regulation of smart goods.
11.10Where a commercial guarantee is provided to a consumer, the Directive requires a statement to be supplied including information as to the identity of the guarantor, the goods covered and its terms. In the case of a commercial guarantee of durability, the Directive makes producers liable directly to the consumer for the period of the guarantee to provide repair or replacement if there is a fault. This is in addition to the trader’s liability to repair or replace goods as part of the general remedy regime. “Durability” is defined as the ability of the goods to maintain their required functions and performance through normal use.
11.11This would be a new requirement if implemented in UK consumer legislation, although producers are already free to offer repair/replacement directly to consumers on a contractual basis. The Minister comments:
It is currently unclear how a new statutory requirement on producers would interact, in practice, with the existing statutory remedy regime, which imposes obligations on traders. This requirement was not in the Council’s General Approach but was a high priority for the European Parliament. It was agreed late in the trilogue negotiation between the institutions.
11.12As a result of trilogues, there is a new option for Member States to require that consumers must notify traders within two months of discovering a defect if they are to benefit from their rights. The Minister informs us that no provision like this currently exists in UK law. The Directive also allows Member States to legislate for the contribution of the consumer to a lack of conformity to affect the right to remedies.
11.13The Minister reports that trilogues “resulted in a new EU right for consumers to withhold payment of any outstanding part of the price until the trader has fulfilled their obligations under the Directive”. Member States may determine the conditions and process for the exercise of this right when they implement the Directive. As a right to withhold pay already exists in UK law, the Minister considers this a “positive outcome”.
11.14There is a two-year transposition period for the Directive. The Minister anticipates that the deadline for Member States to implement the Directive will be in May or June 2021. This would fall after the end of the transition/implementation period provided for by the draft Withdrawal Agreement between the UK and the EU (which has an end date of 31 December 2020).
11.15However, the Minister says that if circumstances change so that the UK is required or chooses to implement the Directive, the Government will work closely with business and consumer stakeholders to make sure it is done in the “most sensible and proportionate way”.
11.16The Minister now responds to specific questions we asked in our last Report:
11.17The Minister notes that the Directive is maximum harmonisation in some areas with the aim of increasing consistency across Member States. This should make it easier for consumers and businesses to understand their contractual rights and obligations when buying and selling goods in the EU. The Minister adds:
It is possible that EU traders will, as a matter of contract, provide consumers with full rights under EU law and will not distinguish between EU and non-EU consumers. We do not consider that EU traders are prevented from doing so, but the extent to which this will be the case in practice, or it will be practicable for consumers to enforce those rights in the case of dispute, is unclear in a no-deal scenario. Therefore, we encourage all consumers to check the terms of the contract, whether they are making purchases within the UK or from a non-UK trader.
11.18In the event of a “no deal” exit, the Minister draws our attention to the Government’s commitment to fund the UK European Consumer Centre for at least one year, until March 2020. This is so that consumers can continue to contact the Centre for free advice about their rights and protections in purchasing goods or services in EU Member States.
11.19The Minister notes it is unclear yet whether and to what extent the UK will align with the Directives. Although the on the future relationship states the Government’s commitment to maintaining high levels of consumer protection, the question of alignment will depend partly on the terms and nature of our future relationship with the EU.
11.20Interim alignment is a “theoretical possibility”. However, the Minister adds that it:
would depend on the terms of the Withdrawal Agreement and the extent of work needed to implement the new Directives into UK law. The Prime Minister has been clear, however, that businesses and consumers should only have to plan for one set of changes in the relationship between the UK and the EU.
11.21We thank the Minister for her letter and her answers to questions raised in our previous Reports. The Minister omits to say whether the UK supported the final adoption of the Directive. We will assume this to be the case unless she writes to inform us otherwise.
11.22We would also have expected the Minister to have alerted us to any changes in the final text which undermined the position of the General Approach Text as regards the short term right to reject goods under UK law. Her letter is silent on this issue, but it is our reading of the adopted text of the Directive that the position remains as explained in her letter of 17 January.
11.23Apart from some limited areas of uncertainty as to how some of the provisions might affect existing UK consumer protection law, the Directive as adopted appears to satisfy the condition of our scrutiny waiver. We also note with interest the examples the Minister gives of where consumer protections have been built on by the Directive in terms of new requirements imposed on traders and producers. Though in some instances there are corresponding obligations for consumers (for example, the optional requirements relating to notification of a defect).
11.24We are content now to clear the Directive from scrutiny. In drawing this chapter to the attention of the Business, Energy and Industrial Strategy Committee, we simply note that if the transition/implementation period under a ratified Withdrawal Agreement were extended to either 31 December 2021 or 2022, both the Sale of Goods Directive and the Digital Content Directive would have to be implemented in UK law.
Amended proposal for a Directive on certain aspects concerning contracts for the sale of goods, amending Regulation (EC) 2006/2004 and Directive 2009/22/EC and repealing Directive 1999/44/EC: (39194), + ADD 1, COM(17) 637.
Fifty-fourth Report HC 301–liii (2017–19), (6 February 2019); Forty-sixth Report HC 301–xlv (2017–19), (28 November 2018); Fifth Report HC 301–v (2017–19), (13 December 2017); Second Report HC 301–ii (2017–19), (22 November 2017); Eighteenth Report HC 71–xvi (2016–17), (18 November 2016); Sixth Report HC 71–iv (2016–17), (15 June 2016); Twenty-third Report HC 342–xxii (2015–16), (10 February 2016).
85 The “digital content directive” concerns the supply of digital content and covers: data produced and supplied in digital form (e.g. music, online video, etc.), services allowing for the creation, processing or storage of data in digital form (e.g. cloud storage), services allowing for the sharing of data (e.g. Facebook, YouTube, etc.) and any durable medium used exclusively as a carrier of digital content (e.g. DVDs). ‘Over the top’ interpersonal communication services (OTTs), bundle contracts and the processing of personal data are included within the scope of the DCD directive.
86 This proposal was adopted on 15 April 2019.
87 A liability period is a time limit for a defect to arise for the consumer to be entitled to a remedy, as opposed to limitation periods (which exist in UK law) providing a time limit for pursuing legal action.
88 As note in our Fifty-fourth Report of Session 2017–19, HC 301–liii, chapter 1 (6 February 2019).
89 Same as above.
90 A smart good is an everyday item that connects to the internet. This can include both ‘hi-tech’ items (speakers, fitness trackers and security cameras), and also household items (such as fridges, light bulbs and doorbells) (Source HMG website).
91 Negotiations between the European Parliament, Commission and Council.
Published: 11 June 2019