Harmonisation of contract rules for digital content and tangible goods

Transcription

1 POSITION PAPER 3 September 2015 Harmonisation of contract rules for digital content and tangible goods GENERAL MESSAGES Addressing the remaining barriers in the single market is one of the main priorities for BUSINESSEUROPE. Divergence amongst national rules in business-to-consumer (B2C) contracts for the sale of tangible goods is one of the main identified barriers. Small companies are particularly affected due to their lack of legal resources to cope with 28 different legal systems. These differences take a toll in the form of missed opportunities for both businesses and consumers. BUSINESSEUROPE has long advocated for a more harmonised legal framework in the B2C area when it comes to tangible goods. This would benefit the completion of the single market, also in its digital dimension. The consumer rights directive was a step forward. Still, a number of fundamental elements were left out of its scope. This is the case of rules on remedies, guarantees and conformity of contracts which still vary a great deal between Member States. If the Commission would decide to introduce new legislation regarding tangible goods, the costs and opportunities of such a route need to be carefully assessed, and the following principles need to be upheld: Full targeted harmonisation is the preferred approach to follow in consumer legislation. Any harmonisation initiative should provide for rules which are: Clear and evidence-based Future proof and technologically neutral Provide for a realistic level of protection Rules regarding transactions between businesses (B2B) should be left out. In areas where targeted full harmonisation is not possible or feasible, mutual recognition could be a way forward. KEY FACTS AND FIGURES Consumer expenditure accounts for 56% of EU GDP A Digital Single Market can create an additional 340 billion in additional growth Consumers have 16 times more choice and on average 10% lower prices when buying online Only 9% of Europeans shop online in another Member State whilst 40% do it in their own Member State Depending on the member state, traders might face 2-year, 5-year of even lifespan legal guarantee.

2 Legislation is however not the only route available. We also believe that other nonlegislative measures could also be useful to allow for businesses, in particular small companies, to become better aware of what they can expect if they decide to direct their activity to other markets. Awareness campaigns, clarification of existing legislation (e.g. Rome I regulation on international private law) and simplified databases of national legal specificities could be a way to go. With regard to the sale of digital content, a need for an European approach has been raised for discussion due to the emergence of a legislative trend in some Member States. From a business perspective, the benefit of a European route would be to prevent potential further legal fragmentation in the digital single market. Nevertheless, the decision to adopt a proposal for entirely new contractual EU rules on digital content should not be taken lightly and without careful assessment of the costs and benefits of an initiative at this stage. The fast developing nature of digital content markets should be preserved. We should ensure companies active online and even offline can rely on a proportionate and simple legislative framework that is future proof. Consumers can already rely on general contract rules and on a considerable part of the European Consumer Acquis (e.g. unfair commercial practices directive, unfair contract terms directive, payment services directive and consumer rights directive) to protect their interests. BUSINESSEUROPE is therefore pleased to give its contribution to the present public consultation and to the works of the Commission expert group on digital and online purchases. A detailed reply to part one (digital content) and part two (tangible goods) is provided below as well as a reply to the Annex of the consultation regarding product-related rules/labelling. BUSINESSEUROPE a.i.s.b.l AVENUE DE CORTENBERGH 168 BE 1000 BRUSSELS BELGIUM TEL +32 (0) FAX +32 (0) MAIN@BUSINESSEUROPE.EU EU Transparency register

3 POSITION PAPER 3 September 2015 BUSINESSEUROPE REPLY TO THE COMMISSION CONSULTATION ON CONTRACT RULES FOR ONLINE PURCHASES OF DIGITAL CONTENT AND TANGIBLE GOODS PART 1 - Harmonisation of contract rules for the supply of digital content/products Question 2: Do you think that users should be more protected when buying digital content products? The absence of specific rules on digital content contracts does not mean that consumers will be less protected as a contract party. General contract rules of the members states, mostly stemming from European legislation, do apply. The trader is still obliged to respect pre-contractual information obligations, abstain from using unfair contract terms and when a problem arises, consumers can still benefit from the remedies provided by general contract law. Questions 3 and 4: Do you perceive difficulties/costs due to the absence of EU contract law rules on the quality of digital content products? Do you think that upcoming diverging specific national legislations on digital content products may affect business activities? Companies apply consumer law and general contract law when providing digital content to consumers, therefore, no specific costs have been identified due to the absence of specific European rules. However, given that some Member States have introduced specific legislation and others are debating its feasibility, a purely national approach to digital content sales might arise in an area which is by nature fast evolving and cross-border. This would run the risk of legal fragmentation which would create barriers to businesses when selling and even when developing their digital products. Having said that, we believe that an in-depth analysis of effectiveness, proportionality and cost is needed before deciding to introduce any new rules in this area at European level to make sure that innovation is not jeopardised. Questions 5 and 6: The European Commission has explained in the Digital Single Market Strategy that it sees a need to act at EU level. Do you agree? What is your view on the approach suggested in the Digital Single Market Strategy? For BUSINESSEUROPE, any European harmonisation initiative should be targeted, evidence-based and with a level of protection which does not hamper the BUSINESSEUROPE a.i.s.b.l AVENUE DE CORTENBERGH 168 BE 1000 BRUSSELS BELGIUM TEL +32 (0) FAX +32 (0) MAIN@BUSINESSEUROPE.EU EU Transparency register

4 fast-paced development of digital products. It must also not place European companies at a competitive disadvantage. BUSINESSEUROPE would be against a minimum harmonisation approach which would be contradictory to the objective of fighting legal fragmentation. Non-legislative measures should also be promoted such as the optional information template for digital content recently developed by the European Commission which is available online 1. We are open to discuss the idea of developing model contracts provided that these remain voluntary, simple and with a realistic level of protection. Questions 7 and 8: Do you think that the initiative should cover business-toconsumers (B2C) transactions only or also business-to-business (B2B) transactions? BUSINESSEUROPE strongly believes that if the Commission decides to adopt a proposal the business-to-business sector should not be within the scope of a new instrument. The particular vulnerability that often exists for consumers in the B2C sector does not apply when traders do business with one another, even if one of the contracting parties is a small or medium-size company (SME). There are some cases, in highly specialised sectors (including the digital market), where the smaller partner in a B2B transaction can be a powerful negotiator due to its special expertise and unique products. Binding provisions are not appropriate for B2B transactions where the principle of contractual freedom must prevail. Thus, traders must be allowed to retain private autonomy over the contracts they conclude with other business partners. Question 9: Which digital content products/services should be covered by the initiative? Working on a definition of digital content would inevitably present challenges. Digital content is not a uniform category of products. It might include computer programs, media for download, media for streaming or cloud services but it also might include a category in itself. In addition, if there is customisation, a specific digital content might relate to a sales contract or to a contract for related services. Therefore, if the Commission decides to adopt a proposal, the definition of digital content would need to be to be sufficiently inclusive but not too prescriptive to avoid hindering the development of new digital content formats/types which evolve at a rapid pace

5 There should not be a distinction based on the type of provider of the digital content (e.g. telecommunication operator or over-the-top OTT - services). Any initiative should be technologically neutral and innovation-conducive. Question 10: which counter-performances types should be covered by the initiative? BUSINESSEUROPE believes that digital content provided without a financial counter-performance should be out of the scope of a potential initiative. Regulating free content would trigger additional challenges with regard to the definition of the digital product, the valuation of the counter-performance and the establishment of specific remedies. For instance, personal data can be a mean of counter-performance used in digital services. It is often also an element necessary to use products or services 2. The issue of personal data is currently under discussion in the framework of the General Data Protection Regulation proposal. Therefore, addressing this issue in the context of contract law would create an overlap with a possible inconsistent outcome. Question 11: which areas of contract do you think should be covered by an initiative? In BUSINESSEUROPE s opinion, we should avoid falling in the trap of regulating every single detail. This could be particularly counter-productive in the digital area which is in constant evolution. New digital content/products are created everyday which could fit several categories at the same time or that are a new category in itself. Rules on conformity, remedies and time limits could be looked at, taking into account a proper balance between rights of consumers and obligations for traders. Still, we expect a similar debate to the one on the consumer rights directive to arise. During those discussions, Member States showed unwillingness to give up certain features of their national consumer laws. Such difficulties might have a detrimental effect in the quality of an initiative because of possible derogations and exemptions. With regard to damages, we are sceptical about harmonising rules on damages since this is an area deeply linked to the different traditions of national civil/procedural law systems. It should, therefore, be left to Member States. Questions 13 and 14. Who provides the evidence about defective digital content products? What are the key remedies that users should benefit from in case of defective products? It is necessary to examine whether the rules that govern the sale of material goods can be transferred to immaterial goods. Some of these rules are not appropriate in 2 The European Commission s report on On-Demand Audiovisual Markets,

6 the digital world. One cannot underestimate that in this area the type of device/software that consumer uses to enjoy his digital content/service can play a fundamental role. Therefore, users should be expected to provide some evidence that digital content products are defective. A proper balance is needed to avoid introducing bottlenecks to the further development of digital content markets and products. Question 15: Should users have the same remedies for digital content products provided for counter-performance other than money (for example, the provision of personal data)? No. See explanation given in response to question 10. Question 16: Should users be entitled to ask for remedies for an indefinite period of time or should there be a specific time limit after they have acquired the digital content products or discovered that the digital content products were defective? Any rules must ensure fair balance between business and consumer s interests. In any case, we believe there should always be a time limit. Moreover, the specific characteristic of immediate consumption associated with many digital goods should be taken into account when considering the issue of remedies. Question 19: If there is a right to damages, under which conditions should this remedy be granted? Following the explanation to question 11, rules on damages should be left to Member States legislations. Question 25: Upon termination, what actions should the trader be entitled to take in order to prevent the further use of the digital content? Disabling a user account or blocking the use are the type of measures that the trader could benefit from to prevent further use of digital content after the contract has been terminated. However, as long as they are justified and proportional, the trader should be able to use other technical/legal measures at his disposal. PART 2 - Harmonisation of contract rules for the sale of tangible goods Questions 29 to 34: considerations on the need and the type of initiative Divergence of national rules in business-to-consumer (B2C) contracts for the sale of tangible goods is a challenge for business, which also translates in missed opportunities by consumers. 6

7 As regards the approach suggested in the Digital Single Market Strategy further clarity is needed on the type of instrument, scope and level of harmonisation that the Commission has in mind. Full targeted harmonisation is the number one solution for business, although we are aware of its limits as witnessed during the Consumer Rights Directive debate. In areas where targeted full harmonisation is not possible or feasible, mutual recognition could be a way forward. Any new harmonisation exercise needs to provide businesses and consumers with a framework which is: o Targeted; o Clear and evidence-based; o Future proof; o Balanced, meaning with a realistic level of protection; o Does not discriminate offline businesses against online ones (e.g. there is no reason to have different rules to assess conformity of a washing machine if it is bought on a website or in a physical shop); o Limited to the B2C environment. In addition, we believe that other non-legislative measures could also be useful to allow for businesses, in particular small companies, to become better aware of what they can expect if they decide to direct their activity to other markets. These measures could be: o A clarification about the application of Article 6 of the Rome I Regulation; o A database, to be placed in the Commission website, with differences between Member States rules (not fully harmonised) regarding the sale of tangible goods. o Extending the Commission s consumer rights awareness campaign beyond BUSINESSEUROPE is open to discuss the idea of developing model contracts provided that these remain voluntary, simple and with a realistic level of protection. Questions 35 and 36: Do you see a need to act for business-to-consumers transactions only or should the EU also act for business-to-business transactions? Any initiative should only target business-to-consumer (B2C) contracts. The business-to-business sector, where the principle of contractual freedom is the fundamental rule, should not be within the scope of a new instrument

8 Question 37: Among the areas of contract law below, which ones do you think create problems related to national divergences which should be covered by an initiative BUSINESSEUROPE strongly advocates for a targeted approach. Not all the rules of a contractual B2C relation would need harmonisation. A possible initiative could pick up on the abandoned chapters of the original consumer rights directive proposal, namely conformity, remedies and guaranties/time limits. Question 38: Which should be the criteria for establishing the quality of the tangible goods? Should there be any additional/different criteria in addition to those already provided by Article 2 of the Consumer Sales and Guarantees Directive (1999/44/EC)? The main rule for establishing conformity should be that the goods shall correspond to what can be deemed to have been agreed (in type, quantity, quality and other characteristics). The criteria described in Article 2 of Sales Directive should apply. Questions 40, 41: Which contractual rights should the buyer have in case of a defective good? Should the buyer have a free choice of remedies? We support a hierarchy of remedies for lack of conformity as foreseen in the Sales Directive which is more adapted to the reality of the markets. As a rule, there should be no free choice of remedies available for consumers. Granting the trader the choice between repair (right to cure) and replacement in the first instance - when a product is defective - is reasonable and in line with current practice. Also, in case the defect is minor the right to termination should be precluded. This would avoid situations where in cases of an easily repairable defect, the consumer would be able to opt for direct replacement or reimbursement. This is particularly important for products of high-value, personalised products or those that would lose substantial value if returned or resold. Questions 42 to 45: Time limits (and guarantees) to exercise remedies The current rules, as established in the Sales Directive (1999/44/EC) should be kept but under a full harmonisation approach. Question 46: If there is a right to damages, under which conditions should this remedy be granted? Should liability be based on the trader s fault or be strict (namely, irrespective of the existence of a fault)? BUSINESSEUROPE would oppose an open-ended right to damages by granting that the consumer may claim damages for any loss he had not remedied by the traditional remedies (repair, replacement, reduction of price and cancellation). This should be left to national legal systems to determine. 8

9 Question 47: Should the buyer be obliged to notify the defect within a certain period of time after discovery? The buyer should have a duty to notify the trader within a certain period after he discovered that the good was defective. A notification obligation and a time limit are needed in order to guarantee a fair balance between the interests of consumers and trader. It will ensure that the trader becomes aware of the defect. Furthermore, without such a notification, continuous use by the consumer might aggravate the defect making it considerably more expensive and difficult or impossible to remedy. Questions 48 and 49: commercial guarantees As a matter of principle, we consider that legislation on the content of this type of guarantees should be limited to what is strictly necessary. Commercial guarantees should remain voluntary to companies. They are an additional service provided by the trader and constitute an important instrument of companies commercial policies, also to become more competitive in the market. This is why we believe that regulation would have a chilling effect and reduce incentives to offer commercial guarantees, to the detriment of companies and consumers alike. Questions 50 and 51: unfair terms Individually negotiated terms should not be subject to unfairness control. They are explicitly determined by the parties of the contract and already subject to judicial review according to basic legal principles (e.g. equity and good faith). In general, the unfairness tests should not apply to the main object of the contract or to the question of the appropriateness of the price to be paid in so far as the trader has complied with its transparency obligations. Price and main subject of a contract are solely determined by the parties of the contract (autonomy in contractual matters). Furthermore, the current requirements regulated in the Unfair Contract Terms Directive should suffice. They protect the consumer against unfair clauses which have not been individually negotiated in B2C contracts and are applicable to both tangible goods and digital content related contracts. * * * 9

10 ANNEX ON PRODUCT LABELLING As part of the DG JUST consultation on contract rules for online purchases of digital content and tangible goods, BUSINESSEUROPE welcomes the opportunity to provide feedback on product labelling, especially as an aspect that is potentially limiting proliferation of cross-border e-commerce. Labelling practices and their intended purposes can differ depending on the transaction, either: B2B or B2C (industrial products or consumer goods). Due to the scope of the consultation, the comments below cover B2C (consumer goods) only. Reply to the Commission questionnaire on product labelling SECTION 1 Problem Question 1: In general, do you agree with the description of the situation made in the "Context"? Please explain? The excessive use of national technical regulations is burdening the ability of businesses to sell cross-border in the single market. These specific requirements that are imposed at a national level take the form of product testing, certification or type approval. A prominent example experienced by many businesses, distributing through online and offline channels, are national labelling and packaging requirements. For example, in the Nordic region, these requirements vary greatly from country to country. This means that medicines, although harmonised products, have to comply with many differing legal requirements with regards to its labelling, insert and packaging. The increasing amount of text required for these compulsory national and even European labels is alarming. The high amount of content required in warning messages, information on the product or certification marks is making it more difficult to use the same labelling for different countries. Also, as a lot of text has to be translated, it makes using the same material for several countries impossible. Even elements not needing translation, such as certification marks, differ between Member States. Adhering to many differing additional national labelling or packaging schemes is highly burdensome for businesses: carrying out greater market research, making multiple labelling applications, reproducing a mass of translated material or adapting the product itself amount to extra handling. This adds to time and costs spent on selling the product making it unappealing for businesses willing to scale up and sell cross-border. 10

11 Question 2: Do you consider that certain national product-related rules should oblige traders to alter their product/product information when they sell their legally marketed products to consumers in other Member States? The essence of the issue explained in the context is precisely because businesses witness a limited application of mutual recognition in practice. Specifically the multiplication of compulsory national labels, without sufficient mutual recognition, is a barrier to trade within the single market. It causes businesses to choose to endure such national conditions and become less competitive or lose out on market opportunity altogether. Consumers also experience a knock-on effect of higher prices being levied on their products or a lack of availability of certain products. Yet the principle of mutual recognition is enshrined in the Treaty on the functioning of the European Union and so should automatically apply. It is even made operational by Regulation 764/2008 which sets procedural requirements and the burden of proof for a national authority to deny mutual recognition through use of a national technical regulation. It is clearly understood through case law that national marking or labelling provisions can amount to barriers to trade and so should not be permitted 4. Furthermore, it is established that obligations to exclusively use language of the region of sale constitutes a measure equivalent to a quantitative import restriction. As a result, it should be enough to use language easily understood by consumers or ensure other methods of imparting information are used 5. The only opportunity available for a national authority to deny mutual recognition is where it can show that it is strictly necessary for the protection of public health, safety or the environment. It must then be demonstrated that the least traderestrictive measure be taken. In some cases it is hard to see how the impact of additional national labelling or packaging requirements protects these public interests. SECTION 2 Need for an initiative on product-related rules such as labelling Question 7: In the Digital Single Market Strategy, the European Commission pointed to product-related rules, such as labelling, as a possible obstacle to cross-border e-commerce. Do you agree? Please explain. Yes we would agree. As explained in the answer above, the mixture of excessive national technical regulations and a lack of correct application of mutual recognition both amount to obstacles to cross-border trade. Inconsistent implementation of the relevant EU rules by national authorities also acts as an obstacle to internal trade. It is important to note that all three issues affect online and offline selling. 4 C-27/80 Fietje. 5 C-369/89 Piageme. 11

12 With the promotion of the Digital Single Market in mind, the increasing amount of background text required for compulsory national and even European labels (as explained in answer 1) could be dematerialised to alleviate excessive marking obligations that are a great cost to business. Not only would it make producers and traders more competitive, but it would allow them to give more detailed and relevant information to consumers. If deemed beneficial for businesses investment, this could be achieved through the voluntary use of electronic labelling for devices with integrated display screens. The information could be accessible via a web page (physically printing the web-address) or a QR code (scanning to an app); reachable by consumers through their personal devices. Of course, e-labelling is not possible for all products. Many other labelling schemes also exist that are not compulsory, so are not supported by national technical regulations, but instead voluntary in nature. At no point should these labels have the effect of restricting the free movement of goods in the single market. SECTION 3 Content of a possible initiative Question 8: Should an action at EU level for product-related rules affecting cross-border on-line sale of tangible goods cover: a) Difficulties related to different product specifications at national level b) Difficulties related to different packaging rules at national level c) Difficulties related to different labelling rules at national level d) Other issues, if so, please explain The Commission should improve the functioning of legal mechanisms it already has in place to overcome these specific barriers to internal trade. Directive 98/34 should alleviate the amount of national technical regulations that act as barriers to internal trade, such as compulsory packaging or labelling rules. The mechanism requires the Member State passing the national law that could restrict internal trade to inform the Commission and other Member States of the draft. This is known as the notification procedure. It allows a standstill period in order for the Commission and other Member States to respond with detailed comments on the draft provision. At the end of the procedure the final text is sent to the Commission and other Member States to inform whether comments have been taken on board. Yet in practice, notifying Member States often do not fully justify reasons for enacting measures. This makes a detailed response difficult. In order to make full use of the mechanism the notification procedure should be made fully operational. Developing detailed Commission guidance to improve justifications of Member States would improve the functioning of the notification procedure. This could be reinforced by increased Commission monitoring to ensure compliance with all provisions of Directive 98/34. 12

13 Overall monitoring of wider rules, such as Treaty provisions on mutual recognition, could also bolster this area. The Commission should allocate resources needed to fully achieve this. Currently, mutual recognition is not being widely applied in the single market (as explained in answer 2). Also, if misapplication of mutual recognition takes place and continues to amount to a barrier to internal trade, the Commission should use resources to launch necessary infringement procedures. Outside of legislation, problem solving initiatives such as SOLVIT should be sufficiently geared to handle internal trade issues. A single portal for all European businesses willing to sell goods and even services cross-border would enable businesses the opportunity to get specific Commission assistance to find solutions to the issues listed above. Market surveillance is also an important Member State responsibility that should ensure predictable interpretation of common EU rules. If carried out effectively, not only would the free movement of goods be fully enabled but businesses would be able to operate on a level playing field. This requires a boost in political willingness to prioritise market surveillance activities. Not only are resources required, but good organisation, suitable facilities and skilled officers. Furthermore, cooperation between market surveillance authorities inside and outside of the single market (with 3 rd countries) will improve the overall consistency of administrative actions. * * * 13