Outside glass view of RPC building.

Digital content under the new Consumer Rights Act

14 May 2015. Published by Oliver Bray, Partner

The Consumer Rights Act 2015 (CRA) comes into force on 1 October 2015. It will reform consumer law in the UK, in particular by setting up new consumer rights and remedies in respect of digital content.

Digital content - a new category of product

Today's consumers are increasingly reliant on digital products for entertainment and productivity, from smartphone apps to streamed songs and movies.
The Sale of Goods Act (SGA) 1979 and the Supply of Goods and Services Act (SGSA) 1982 have traditionally been the foundations of consumers' rights when buying goods or services.  However, since the SGA and SGSA were conceived before the digital era, the existing law is not clear on consumer remedies for defective digital products.

The CRA addresses this issue by establishing "digital content" as a new category of product, covering any data which are produced and supplied in digital form. It seeks to apply familiar consumer rights to digital content as predictably as possible, bringing the consumer rights regime into the 21st century.

Remedies for defective digital content

The SGA implies terms for quality, purpose and description into contracts for the sale of goods. Where a product is defective, the consumer may reject the goods within a reasonable time and obtain a refund or, where it is too late to reject the goods, the consumer may require the trader to replace or repair the goods.  The trader must do this within a reasonable time and without causing significant inconvenience to the consumer.

However, whether the SGA applies to digital content is unclear. The SGA's definition of "goods" suggests that they must be tangible items – meaning that digital content delivered electronically (as opposed to on a CD or DVD) is arguably not goods. Compounding the confusion, the right under the SGA to reject goods and receive a refund poses particular problems for digital works, given the risk (and ease) of copying.

So far, case law has not resolved these points. With the courts' approach far from certain, a consumer seeking a remedy for defective digital content is likely at present to rely on the trader's goodwill rather than strict legal rights.

The CRA, however, introduces specific rights and remedies for the new category of digital content (as long as the consumer has paid a price for that content). It expressly extends the current implied terms to contracts for digital content and, in particular, it also sets out the following remedies where digital content is faulty: 

  • consumers can choose to have either a repair or replacement of the digital content, providing that the chosen remedy is not impossible or disproportionately difficult (eg. where a game stored on a consumer's smartphone is corrupt, a repair may be disproportionately difficult compared to a replacement download); and 
  • where repair and replacement are both impossible (or the trader fails to carry them out), the consumer can request an appropriate price reduction, reflecting the difference in value between the price paid for the content and what the consumer actually receives (eg. the full cost if the product doesn't work at all). 

The main difference between the SGA and CRA remedies is that consumers cannot reject digital content and receive a refund. 

Services provided along with digital content

In contracts for a "mixed supply" of services and digital content (eg. a music streaming service), the CRA's digital content provisions apply to the digital content, whilst its services provisions apply to the service.

The CRA retains the implied terms in the SGSA (ie. services must be carried out with reasonable care and skill, in a reasonable time and for a reasonable charge). However, it introduces two new remedies for consumers where a trader breaches these terms, namely that: 

  •  where a service is not performed with reasonable care and skill, the consumer may request that the service is performed again; and 
  • if this is not possible, or where the service is not performed within a reasonable time, the consumer may request an appropriate price reduction. 

Commentary

With the CRA due to take effect from 1 October 2015, traders will need to ensure that their terms of sale comply with the new regime. Whilst the rights which will apply to digital content are familiar ones, the remedies introduced by the CRA do not simply reflect those applicable to physical goods and will require careful consideration.

In particular, traders should be aware of a consumer's right to a price reduction where digital content cannot be repaired or replaced (or the trader fails to do so). Although there is no specific right to reject digital content, where the digital content does not work and the trader does not fix it, the trader may be liable to return the whole sum paid. The scale of the price reduction in the case of less fundamental flaws with digital content may well become a key battleground under the new legislation.