On 9 December 2015, the European Commission released two proposals for Directives concerning contracts for distance sales of goods and supply of digital content in order to better protect consumers who buy from websites based in other EU Member States and to limit unnecessary costs for online sellers.
Earlier this year, the European Commission adopted the Digital Single Market Strategy, aimed at utilising the full potential of the digital economy by establishing a truly single digital market. As part of this strategy, two legislative proposals were announced on 9 December 2015, setting out harmonised rules to improve access for consumers and businesses to digital goods and services across the EU.
According to the Commission, EU consumers are often reluctant to buy online across borders because it is unclear what their rights are and how they are protected if a product is defective. Different national contract laws also make it more complicated and costly for businesses to sell in other EU Member States. In other words, the patchwork of national contract laws negatively impacts both consumers and businesses, because it is considered to form an obstacle to cross-border sales. The recent proposals by the Commission are a renewed attempt to offer a solution by partially harmonising contract law within the EU for distance purchases of goods and the supply of digital content in B2C relations.
The proposed mandatory rules are set out in two full harmonisation Directives – for distance sales of goods and supply of digital content respectively. Neither of the proposals addresses all the contractual aspects. They only provide harmonised key rights for the protection of consumers. They include rules on conformity with the contract (including the burden of proof), liability of the seller or supplier, remedies in case of non-conformity, the arrangements for exercising these remedies, and the right of redress in a chain of contracts. Both proposals are intended to supplement the Consumer Sales Directive and other existing directives on consumer protection.
Online and other distance sales of goods
The first proposal covers online and other distance contracts for the sale of tangible goods (e.g. clothes and electronics) concluded between a seller and a consumer. It would not apply to contracts for the provision of services.
According to the proposal, conformity should be assessed taking into account the requirements which have been set in the contract as well as objective requirements such as fitness for purpose. The conformity must be established at the time the consumer (or a third party designated by him) obtained control over the goods, but any lack of conformity which becomes apparent within two years is presumed to have existed at the time the consumer obtained the goods. The consumer will then be entitled to invoke certain remedies, such as repair, replacement, price reduction or even the termination of the contract, subject to a clear hierarchy and other conditions set out in the proposal.
The proposal also stipulates that any commercial guarantee is binding, including the conditions laid down in the pre-contractual information and advertising, and further sets out its requirements such as the minimum content and how it should be made available to the consumer.
In the event that a seller is held liable to the consumer for a lack of conformity caused by a person in earlier links of the chain of transactions, the seller will have the right to exercise redress against that liable person.
This proposal supplements the existing Consumer Sales Directive and clarifies certain aspects such as the right to price reduction. However, certain rules in the current proposal deviate from the Consumer Sales Directive, such as the consumer's right to terminate in case of minor defects under certain conditions, the abolition of a duty to notify the defect within a certain period of time from its discovery, and the extension of the period for the reversal of the burden of proof to two years instead of six months.
Supply of digital content
The second proposal covers contracts for the supply of digital content to consumers, in exchange for a price or for data provided by the consumer. Digital content is defined broadly and includes a wide range of items, such as music, movies, apps, e-books, social media, games, cloud storage services or broadcasts. The Directive would not, however, cover specific sectoral services such as healthcare or financial services.
The rules on conformity are similar to those set out above. The digital content should conform to the contractual requirements and certain objective criteria, including functionality and interoperability. Incorrect integration of the digital content into the consumer's digital environment will, in principle, also be regarded as a lack of conformity. The burden of proof with respect to conformity is imposed on the supplier. Unlike with the proposal concerning the sale of goods, this reversal of proof is not limited in time, because digital content is not subject to wear and tear. In the event of a lack of conformity, the consumer will be entitled to have the digital content brought into conformity within a reasonable time. The consumer also has the right, in certain circumstances, to obtain a price reduction or to terminate the contract. In addition, the supplier has the same right of redress against the liable person in the chain of contracts as set out above.
Finally, the proposal also deals with specific issues concerning digital content, such as modification of the digital content during the contract period, the supplier's liability for damage to the consumer's digital environment and the use of data provided by the consumer (in particular the obligation of the supplier to refrain from using collected data where the consumer has terminated the contract in accordance with the rules).
Conclusion
The Commission's ultimate aim with these proposals is to boost e-commerce, open up new markets, increase competition and contribute to the EU's economic growth. This is not its first harmonisation attempt in contract law. The proposal of the former Commission, known as the Common European Sales Law or CESL, was only withdrawn last December. It remains to be seen whether these new proposals, which are narrower in scope than the CESL, will receive the necessary support. A lot of analyses will certainly follow.