Future EU developments

25 November, 2016

At the moment, the UK has one of the most advanced consumer protection regimes in Europe which brings with it consumer confidence. The CRA brought in new rules around digital content which the EU is only now catching up with. As part of the Digital Single Market strategy, aimed at reducing barriers to cross-border sales, the EU has proposed two draft Directives (remember, these would require implementing legislation in Member States). The first is on certain aspects concerning consumer contracts for the supply of digital content (Digital Content Directive) and the second deals with certain aspects concerning consumer contracts for the online and other distance sales of goods (Online Goods Directive).

 

While the introduction of harmonised rules in these situations across the EU makes sense, these Directives are unlikely to be welcomed by the UK whatever form Brexit takes, because while some of the rules proposed by the Commission are broadly in line with the CRA, others are not.

 

Digital Content Directive

In terms of the Digital Content Directive, even the definition of “digital content”, which was taken from the Consumer Rights Directive, is different to the one used in the CRA. The supply of non-essential personal data is treated in more or less the same way as financial consideration for digital content in the new draft Directive but not in the CRA which is particularly relevant as much of the CRA applies only to paid-for digital content. This, therefore, looks likely to extend the scope of the regime significantly in the EU and will affect a broad range of businesses (although there is a certain lack of clarity to the provisions).

There is a presumption that digital content is to be supplied immediately after conclusion of the contract, whereas under UK law (derived from the Consumer Rights Directive), the consumer must explicitly request immediate supply and acknowledge that they will lose their cooling off period as a result. While the two provisions are not mutually incompatible, they do appear to be pulling in different directions.

Crucially, the rules on burden of proof are different. Under the CRA, the digital content is only presumed not to have conformed to the contract on point of delivery, for a period of six months after supply. Under the draft Directive, this presumption applies permanently. There is also a statutory termination right which does not exist under the CRA. In addition, under UK law, remedies may only be claimed up to six years from supply. Under the draft Directive, there is no time limit.

 

Online Goods Directive

The draft Online Goods Directive on the online and distance sale of goods is going to cause similar issues in the UK if adopted in its current form. While the remedies available are similar, there is no short term right to reject as under the CRA. Instead, the consumer moves straight to repair or replacement and can only terminate if repair or replacement is unsuccessful. And again, the burden of proof rules are different.

Both these Directives require Member States to implement equivalent provisions of a standard which must be no higher and no lower than those in the Directives.

Of course, it is a long way from initial publication to enactment and these drafts may well change significantly, but crucially, we are now unlikely to be involved in their negotiation. If we become a member of the EEA, we will be required to implement the Directives if they are adopted in the EU. If we do not, then we will have a choice: we will either have to amend the CRA to come in line with EU requirements, or we will be looking at two parallel regimes and increasing divergence between the UK and the EU.

 

Related areas

There are a number of areas which UK businesses trading with EU consumers will need to keep a close eye on beyond consumer protection. These include:

  • Data protection – the EU recently passed the new General Data Protection Directive which will apply from 25 May 2018 (at which point we are likely to still be an EU Member State). The UK’s Information Commissioner has made it clear that the UK will need to maintain a regime which provides equivalent protection to that in the EU if it wants to continue to receive personal data from the EEA. Similarly to consumer protection, it will be very difficult to trade with EU consumers if we do not comply with EU law in this area. See here for more about the impact of Brexit on data protection;
  • Product liability – prior to the EU Referendum, the government said that it had no plans to change product liability requirements and we can presume this view is likely to continue. The European product liability regime is embedded in UK law through the implementation of the Consumer Protection Act 1987 which imposes strict liability on manufacturers in respect of damage caused by defective goods. Regulations relating to product safety and product recalls have afforded consumers with a significant level of protection and manufacturers in the UK have long been used to complying with these rules – moving away from this regime would be a big task. However, the issue comes if the EU changes or adds to its product liability laws going forward and we are not an EEA member. At this point, the government will have a choice – either implement the EU laws anyway, or leave it up to businesses to decide whether or not to do so. This could cause a problem if rules conflict. However, there is no immediate likelihood of this happening and we would hope that future governments will take a pragmatic approach particularly given the importance of maintaining access to the EU market and EU consumer confidence in UK manufactured goods;
  • Governing law and jurisdiction – under current law, EU consumers have the right to take action against traders in their local courts. In addition, any mandatory local applicable laws will apply in the event of such disputes. This is likely to continue on Brexit, however, if over time EU consumer law starts to diverge from UK consumer law, defending claims in local courts may be more expensive as a result.
  • Marketing and advertising – there is less harmonisation in Member States in this area than in areas like data protection and businesses are probably used to having to take local considerations into account already.

 

For more information contact Kathryn Rogers on +44 (0)1892 506 147 or kathryn.rogers@crippspg.co.uk.