UK set to reform consumer protection legislation

What changes to civil product liability has the European Commission proposed for defective digital products and software?

The question

What changes to civil product liability has the European Commission proposed for defective digital products and software? 

The key takeaway

The proposed revised Product Liability Directive (PLD) is a significant development for product liability in the digital age and modernises the currently outdated regime by expanding the definition of “products” to capture digital technology. In some instances, the PLD lessens the hurdles a consumer faces in proving a manufacturer’s liability. As a result, it’s likely the PLD could lead to an uptick in product liability litigation. 

The background

The current Directive came into force in July 1985, meaning it is over 35 years old. The Commission recognises the significant technological advancements that have taken place in that time and has updated product liability laws to reflect the dramatic shift in the concept of a “product”, specifically those which incorporate artificial intelligence (AI) and digital services. 

On 28 September 2022, the Commission announced its proposal for the updated PLD, at the same time as announcing the AI Liability Directive (discussed in a separate Snapshot). The AI Liability Directive, which is intended to be read in harmony with the Product Liability Directive, specifically focuses on civil liability for AI systems, whereas the Product Liability Directive has general application across all products. 

The development

As currently drafted, the PLD has the following key features: 

• extending the scope of “products” to now include digital manufacturing files (for example, those used in 3D printing), software and electricity. It also includes software updates, including those rolled out for existing products already on the market
• extending the scope of who can be liable to digital service providers where that digital service is required for the product to perform properly. Authorised representatives, importers, fulfilment services providers and distributors are also captured with different levels of liability for each. In line with the Digital Services Act, where an online platform offers products such that a consumer believes it is dealing directly with the platform or an authorised representative of the platform, the online platform may be considered a distributor under the PLD and be liable accordingly
• extending the scope of “damage” to include the loss or corruption of data
• presumption of defectiveness where it would be “excessively difficult” because of the “technical or scientific nature” of the product for the consumer to prove that it was defective. This presumption can be rebutted by the manufacturer
• €500 de minimis threshold for claims removed. Likewise, Member States’ abilities to cap a manufacturer’s total liability have been scrapped. There is a 10-year limitation period for a consumer to bring a claim from the time the product enters the market, but this can be restarted if a product has been substantially modified (for example, by software updates which may affect the product’s safety).

The PLD still needs to be adopted by the European Parliament and Council before it enters into force, but the proposals demonstrate a significant development in non-contractual civil liability for defective products. 

Why is this important?

The PLD aims to protect consumers who suffer damage and to put them on a level footing with digital technology manufacturers. Whilst most of the impact of the PLD will be on manufacturers, it is notable that liability may also be attributed to other players in the supply chain including online platform service providers, importers, and authorised representatives. The silver lining is that the PLD provides some measure of certainty to these businesses regarding their potential exposure to liability. 

Any practical tips?

Steps businesses should consider include:

• understanding what role they play in the supply chain and, therefore, what their potential liability may be under the PLD
• assessing how the new liability regime may affect their supply chain contracting and standard terms
• considering if their internal processes should be reviewed as a result of this development, which may include more fulsome policies around releasing product updates (which resets the limitation period for claims) or record retention.

Winter 2022