DiPP - Digital contracts: will new rules deliver trust online?

On 9th December 2015, the European Commission issued two proposals for the online sale of digital content and tangible goods to offer enhanced protection to consumers and accelerate the uptake of e-Commerce in the EU, aimed at harmonising consumer rights across all Member States.

Everyone agrees that the intent of the Commission is good: harmonisation is a laudable goal and so are boosting cross-border e-commerce and enhancing trust. But the blurring border between goods and services makes it challenging to decide where content belongs. Tensions between high goals and increasing complexity on the ground also generate a worrying lack of consistency and legal certainty that all point to more investigation needed.

ICT has increased consumer choice by an order of magnitude. Content can be acquired as a good or a service, through outright sale or via licensing, for fixed term or renewable, etc. In this moving context, definitions, for instance, get shaky. The definition of supply proposed in the Directive should be congruent with the one applicable to VAT, itself downright ‘binary: if it’s a good it’s not a service and vice-versa.

Furthermore, the list of inconsistencies looks endless. Take the ePrivacy Directive as regards the active acceptance of cookies, for example. Or take the GDPR on pseudonymised data and try to figure out how it will fit the retrieval of personal data in case of termination.

The risk is high of stifling innovation:

– The above reference to the GDPR terrifies developers: free content which is instrumental to some operations like games (think Minecraft) or advertising can be frozen in its tracks. Beta versions that are common practice in the ICT industry will disappear.

– Whole businesses would be jeopardized as the return of data on termination would be awfully complex: think of users’ comments to TripAdvisor, for instance.

– In a nutshell this would spell death for the freemium model.

Another disincentive to innovation is the reset of termination rights whenever you improve digital content.

The consensus was that there are more questions than answers at this stage. By and large the new construct seems disproportionately complex, hence risky, to fix whatever needs to be improved in current legislation.

Isn’t a convenient way around these challenges to concede that digital content is ‘sui generis’? No straight answer, but more thought is definitely needed. A reasonable approach would probably compare the cost of not fixing what’s allegedly wrong with the current regime to that of sailing this uncharted sea on a ship fraught with inconsistencies and with no clear definitions in sight. While everybody can understand that some companies’ best practices towards customers worth inspiring others are not enough to build confidence with consumers, overregulating or regulating before taking a full measure of the issues is bound to backfire.