Online safety and "vulnerable" consumers: the new OFCOM's draft codes of practice

The English Office of Communications (OFCOM) has recently released its new draft "Children's safety online" codes of practice in line with the Online Safety Act (OSA) the main act providing for online safety in the UK, which became law in October 2023. 

OFCOM is responsible for enforcing the OSA. Its draft codes of conduct are meant to complement it and to suggest platforms (especially, social media) how to shape a safer environment, with a focus on underage consumers. Accordingly, the guidelines encourage platforms to be stricter in setting up adequate procedures for age-checking, to provide users with the due instruments to report harmful content, to remove it when necessary, and to clarify the systems used to monitor and moderate online content, particularly with respect to young people.

Platforms ought to take measures based on their size, the purpose of their services, and the risk of harm to children. Thus, the Online Safety Act adopts a risk-based approach, similar to the European Digital Services Act (Regulation EU, 2022/2065). The purpose is indeed the same: ensuring that online service providers implement procedures that are able to tackle the threats to online safety while safeguarding users’ privacy rights and freedom of expression. The two acts therefore cover issues such as content moderation, and other generative AI outputs, such as deep fakes. They both show the increasing attention placed by lawmakers on new forms of digital vulnerability, and how to address them.

OFCOM’s choice to enact codes of conduct is in line with the European approach, too; in fact, the EU lawmaker has also emphasized the relevance of codes of conduct and soft laws in shaping a safer digital environment. The draft codes of conduct provide for transparency, placing on platforms the duty to make available to the public their risk-assessment findings, and providing systems to easily report illegal content. 

And the Agency has gone even further. Indeed, it has declared that it could even impose a ban on people under the age of 18 to access platforms that fail to comply with its guidelines. 

However, some questions arise from reading the new OFCOM document. Will the procedures for ascertaining the age of users lead to the collection of an excessive amount of personal data, violating the data minimization principle under the GDPR? Are OFCOM’s codes too restrictive if compared to the DSA, forcing platforms to adopt a “double standard” between users based in the UK, and those that are based in the rest of Europe? Is the Online Safety Act “technologically neutral” enough when differentiating platforms’ obligations on the basis of the content type or the most comprehensive approach adopted by the DSA, based on equal risk mitigation for all the illegal content, is to be preferred?

Despite these concerns, which undoubtedly will be further examined by many scholars and privacy advocates in the coming months, the guidelines seem promising for improving the online safety of English users, especially children. The true test will be their implementation and enforcement.

Online dating sites and the right of withdrawal - CJEU in PE Digital (C-641/19)

Yesterday, the CJEU issued a judgment - PE Digital (C-641/19) - regarding the interpretation of Articles 14(3) and 16(m) of the Consumer Rights Directive. Both these provisions regulate some aspects of the consumer's right of withdrawal. Article 14(3) CRD addresses the situation where a consumer explicitly requested the service provider to start performing a service during the cooling-off period. When the consumer then still decides to withdraw from a contract, this provision entitles the service provider to demand a part payment, 'in proportion to what has been provided'. Article 16(m) CRD specifically excludes the right of withdrawal from distance or off-premises contracts for the supply of digital content, not supplied on a tangible medium, where the performance of the contract begun during the cooling-off period upon consumer's explicit consent (following the consumer being informed about losing the right of withdrawal in such a case).

In PE Digital the issue arose from a contract concluded between a consumer and a German dating website - Parship - operated by PE Digital. This dating website allowed consumers to either enter into a free contract, with very limited opportunities to contact other persons on the site, or into a paid 'premium' contract for a period of 6, 12 or 24 months. The premium membership made it possible to contact any other premium member - ca 186000 users in Germany. The consumer in the case at hand concluded a 12 month membership contract for a high price of over 500 Euro, which was more than twice as high price as that which PE Digital charged other consumers for this contract duration (para 16). The consumer was informed about their right of withdrawal, but requested PE Digital to begin to supply the services during the cooling-off period. After 4 days, the consumer withdrawn from the contract and was charged almost 400 Euro for the provided services. The dispute arose from the consumer questioning this reimbursement.

The national court adjudicating the case asked the following questions:

1. Whether the proportional reimbursement awarded to consumers withdrawing from a partially performed contract should be calculated on the basis of how much time consumers have been bound to the contract or considering the value of the already performed services? (these were two questions answered jointly, see para 26)

2. On what basis should the national court examine whether the total contract price was excessive?

3. What consequences, if any, should be attached to the fact that under the concluded contract the consumer has received also, but not exclusively, digital content to which Article 16(m) CRD applies?

Proportional reimbursement 

The CJEU advises the national court that in general the proportional reimbursement should be calculated on a pro rata temporis base. This means that a consumer who was only bound by an agreement for 4 days out of a 1 year contract, could legitimately expect to recover the majority of the contract price he had paid. However, if the contract expressly stipulated that one or more services would not only be provided to consumers in full from the beginning of the performance of the contract, but also separately, which means that consumers were given a price to be paid for these services, separate from the total contract price, then the full price for such services could be seen as owed to the trader (para 32). Only when the consumers had the information that a particular service will be provided in full at the beginning of the contract's performance and knew its price, could they make an informed decision about asking the trader to start providing the services during the cooling-off period (knowing then of the reimbursement risk) (para 29). This was not the case with the dating site contract, as it did not specify a separate price e.g. for the personality test/report that would be delivered to a client upon the conclusion of the membership agreement.

Excessive price

Article 14(3) CRD specifies that if the contract price was excessive then the proportionate amount should be calculated on the basis of the market value of what has been provided to a consumer. Recital 50 further states that the market value should be identified by comparing the price of an equivalent service performed by other traders at the time of contract's conclusion (para 35). Therefore, the CJEU advises the national court to take into account both the price charged for the same services to other consumers by a given trader, but also the price charged by equivalent service providers (para 37).

Digital content

As part of the membership contract in the dating site, the consumer was issued with a personality report, which could classify according to the national court as digital content. Article 2(11) CRD defines digital content as 'data which are produced and supplied in digital form'. Recital 19 gives further examples of digital content to which the CRD applies. Article 16(m) CRD excludes the application of the right of withdrawal to contracts for the supply of digital content when the consumer has consented to the performance starting in the cooling-off period. As an exception, this provision requires strict interpretation (para 43). This leads the CJEU to decide that neither the provision of an online dating service to consumers, which allows them to 'create, process, store or access data in digital form and allows the sharing of or any other interaction with data in digital form uploaded or created by the consumer or other users of that service', nor the generation of a personality report, could be perceived as supply of digital content that qualifies for the application of Article 16(m) CRD... Why though? The CJEU does not further expand its reasoning on this point. Is it because the provided digital content is a part of a bigger digital service? This might be, but it would be good to have this clarification as that would exclude the application of Article 16(m) CRD to most contracts for the supply of digital content that would be part of a relational contract.

‘Paying’ with personal data – what rights do consumers have?

The recently approved Directive on the modernization of consumer protection rules (available here) explicitly extended the scope of the Consumer Rights Directive to contracts where the consumer ‘pays’ with data, or contracts where the consumer provides personal data in exchange for a digital content product or a digital service. This extension means that consumers who ‘pay’ with their personal data have specific information rights stemming from Article 6 and the new Article 6a of the Consumer Rights Directive, such as the right to get information on the possibility of recourse to a complaint mechanism. Furthermore, these consumers are now entitled to the right to withdraw from the contract, even if they do not pay a monetary price. The advantage of this right when it comes to contracts where consumers ‘pay’ with data is evidently more limited than when consumers pays with money. Nevertheless, this is the latest move by the EU to better protect consumers’ personal data.

In fact, the Digital Content Directive (also recently approved and available here) was the first to 'innovate' in this area, by acknowledging the need for consumer protection in contracts where the consumer ‘pays’ with data. The Digital Content Directive extended the remedies already provided by the Consumer Sales Directive (applicable to the sale of goods and now replaced by the Sale of Goods Directive) to digital content contracts, both where the consumer pays a monetary price and where the consumer ‘pays’ with personal data. According to Article 14, in case of lack of conformity, consumers who provide their personal data in exchange for a digital content product or a digital service are entitled to have the product or service brought into conformity (for example, through an update). Furthermore, consumers are entitled to terminate the contract in case of any lack of conformity (regardless of how minor). In case of termination, the rights in the GDPR must be respected, particularly when it comes to the right to be forgotten (Article 17 GDPR) and the right to data portability (Article 20 GDPR).  

The increasing efforts by the EU to protect the consumer who ‘pays’ with data are an acknowledgement of the importance that similar data-based business models will play in the contracts of the future. However, the treatment of personal data as a contractual counter-performance is not uncontroversial. For example, although the (previous) European Data Protection Supervisor welcomed the protection of data subjects through consumer law, the EDPS also vocally opposed the treatment of data as a counter-performance. Nevertheless, given the increase in the number of contracts concluded in exchange of (personal) data (think of Spotify, Facebook and other similar platforms that provide digital services), it seems important to develop (and adjust) a general contract law framework applicable to these contracts. This must be done alongside – and not in opposition to – the data protection framework.

DSM directives published

Many of us have been waiting for this moment: on May 22 two Digital Single Market directives have been published in the Official Journal: Digital Content Directive (Directive 2019/770) and the new Consumer Sales Directive (Directive 2019/711). 

 

Time to update our frame of reference.

DSM proposals approved by the Parliament

We have announced in December that the work on the DSM proposals (on digital content and on the sale of goods) was moving more smoothly and that we expected the first EP reading to take place in March 2019 (2019 forecast...). This reading took place yesterday, with the EP approving proposals for both directives and passing the ball along to the Council for their formal approval. Since the changes introduced by the Parliament have previously been discussed with the Council, this final approval should really be just a formality and we may expect these new Directives to start binding in the Member States within the next 3 years. 

A few remarks on digital content

Just a reminder, one of the novelties of the DSM proposals is the stipulation that consumers who pay with their data for access to digital content or online services will need to be provided with consumer rights just like paying consumers (Recital 24). However, unless the Member States stipulate differently, if the trader only collects metadata or where consumer gets access to digital content by exposing themselves to advertisements - these situations will not fall within the scope of protection of the directive. The Directive on digital content also provides for different remedies in case of non-conformity of the digital content (price reduction or reimbursement) than of goods (whether purchased online or offline), but the same longer reversal of the burden of proof (non-conformity manifests itself with in 1 year from the date of supply, with the possibility for the Member States to extend this to two years for goods) and a two year guarantee period (with a possibility for the Member States to extend this for goods). The Directive on digital content fully harmonises requirements for conformity, remedies for non-conformity or a failure to supply and the modalities for their exercise, as well as the modification of digital content or service, thus it adopts the model of targeted full harmonisation. The Member States retain however the right to regulate some matters related to lack of conformity of digital content, e.g. liability of third parties, such as developers of digital content who are not traders. Curiosity: recital 23 recognises e-vouchers as a digital representation of value, digital currency, which is a method of payment and therefore on its own is not a form of digital content. See the final text here.

A few remarks on sale of goods contracts

The Directive on the sale of goods fully harmonises requirements for conformity, remedies for non-conformity and the main modalities for their exercise, thus it adopts the model of targeted full harmonisation. It allows the Member States for example to elect to provide consumers with the right to repudiate the goods shortly after delivery or to regulate sellers' duties to warn. It will apply to 'smart' goods, that is goods embedded with digital elements (whether digital content or digital services), where the goods would not perform their functions without the digital content and where the digital content was provided as part of the same contract. Recital 49 changes the nature of assessment whether the seller is able to bring the goods back into conformity, as the new Directive will allow sellers to refuse to replace the goods or repair them when one of these two remedies is impossible and the other one could only be provided at a disproportionate case (contrary to the Weber and Putz approach to impossibility/disproportionality assessment). See the final text here.

Digital content proposal extended to IoT

Last month we have reported on the updated proposals for the Directive on online and other distance sale of goods (Towards a more coherent...). This proposal is part of one package together with a proposal for a Directive on the supply of digital content. Last week, in the first reading at the European Parliament certain amendments have been introduced to this latter proposal (see here for the full text of amendments). 

One of the amendments changes the scope of the proposal by making it apply not only to the supply of the digital content but also explicitly to digital services. Amendment 11 clarifies that the Directive would also apply to dual purpose contracts. Amendment 14 leaves it to the Member States to regulate remedies for 'hidden defects' as well as to continue to provide for the short-term right to reject. 

One of the most controversial amendments is Amendment 18 which extends the scope of application of the Directive to smart goods (IoT) (further confirmed by Amendments 25 and 31). Whenever the digital content or digital services come pre-installed in goods, 'the trader should be liable under this Directive to the consumer for meeting his obligations only in respect of the embedded digital content or digital service. Liability for the other elements of those goods should be governed by the applicable law.' The same rules would apply to IoT goods purchased online and offline. Whilst the liability of producers and traders of software for IoT goods should then not extend to covering other elements of IoT goods, traders of IoT goods would be subject to the conditions of the proposed Directive which require digital content and digital services providers to guarantee a high standard of security and interoperability. The European Parliament considers these adjustments necessary to guarantee that the proposed Directive remains relevant when faced with the reality of the use of modern technology. Apparently, however, the Council is likely to object to these amendments (European Parliament pushes on IoT device security and interoperability). We will continue to observe the fate of these proposals.

Modernising copyright: watching Netflix while abroad

Yesterday, the Council and the Parliament have informally agreed on new rules that will allow subscribers to paid online content (online music, games, films and TV shows) in any Member State to access this content in another Member State - while they are temporarily visiting it (also when they travel for business, so this protection would be applicable not only to consumers). Readers of this blog who travel abroad have probably been frustrated by geo-blocking rules (set up to protect exclusive licensing) that often prevented accessing online content when abroad. Free of charge services would still be excluded from the scope of these new rules, which means that such service providers will have a choice whether to enable their customers to access their services cross-border (Accessing online films and TV while abroad: deal with Council). The intention is for these rules to start applying as of the beginning of 2018 (DSM: EU negotiators agree on new rules allowing Euorpeans to travel and enjoy online content services across borders).

First data on geo-blocking practices in the e-commerce sector published

On 18.3.2016 the European Commission (DG COMP) published an issues paper presenting its initial findings on geo-blocking practices in the e-commerce sector. The sector inquiry conducted by Directorate-General for Competition is a part of a wider initiative on geo-blocking, which was already announced in the last year's communication on Digital Single Market. 

The recently published document is based on responses of more than 1400 companies involved in online sales of consumer goods and in the supply of digital content. Nearly three quarters of replies come from online retailers. Questionnaires were also sent to operators of online marketplaces, price comparison tools and payment systems. Data obtained from digital content providers (broadcasters, electronic communications companies) were analysed separately. 

For purposes of the study, geo-blocking is interpreted broadly and refers to "commercial practices whereby online providers prevent users from accessing and purchasing consumer goods/digital content services offered on their website based on the location of the user in a Member State different from that of the provider". It can take a variety of forms such as "(i) preventing the user from accessing the website, (ii) automatically re-routing the user to another website, (iii) refusing payment or (iv) refusing delivery". However, it does not include geo-filtering, which consists in "offering different terms and/or conditions depending on the location of the user".

Initial findings reveal significant differences with regard to consumer goods and online digital content. In online sales of tangible goods geo-blocking appears to be less widespread and usually stems from a unilateral business decision. According to respondents, geo-blocking in this field is mostly manifested by a refusal to deliver abroad. Conversely, complete denial of access to digital content based on IP verification is by no means unheard of, and is often required contractually. However, it is important to note that most restrictions in this field are imposed in licensing agreements with right holders and therefore cannot be regarded as illegitimate per se.

The discussed issues paper only gives a partial picture of the ongoing sector inquiry and we still have to wait at least a couple of months for a more detailed analysis in the preliminary (mid-2016) and final report (early 2017). It goes without saying that the current wording warrants further elaboration. The part on digital content only deals with audio-visual and music content, while computer games, software and books (including e-books) are analysed in the chapter on consumer goods. Reasons for such a differentiation are not explained, though. The interface between competition law and intellectual property also deserves a more in-depth evaluation. Judging by the cautious wording of the present document, spectacular antitrust interventions in the field of digital content do not seem very likely. At the same time, it is to be expected that the e-commerce inquiry will constitute a source of information for other Directorates-General, which are currently working on a legislative proposal on geo-blocking (scheduled for mid-2016). There seem to be a common understanding that the principle of non-discrimination laid down in Article 20 of the Services Directive does not offer consumers an effective tool of protection and is barely enforced in practice (see e.g. BEUC response to public consultations). Be it as it may, developing an adequate policy solution is a challenging task, which requires a careful examination of numerous subtle interconnections with existing and upcoming legislation. It remains to be seen if the broad approach, apparently favoured by the Commission, will allow to strike a fair balance between the competing interests involved. How the subject of copyrighted digital content will be addressed in the geo-blocking proposal is one of many interesting questions to follow.

A look into the future: What does 2016 hold for consumer law?

There is no doubt that 2015 was quite a busy year for the European institutions. In the light of considerable social, economical and political challenges faced by the EU these days, the European Commission under the presidency of Jean-Claude Juncker proclaimed that it would carefully choose its priorities and focus on feasible initiatives. While it is still too early to predict whether this approach will go beyond mere declarations, an overall policy stance can already be inferred from first two work programmes published under rather high-sounding titles: A New Start and No time for business as usual. Key objectives within ten priority areas have been defined and measures to be taken in order to reach them were announced. But what does this actually mean for consumers?

From the consumer law perspective three areas deserve particular attention:

• Measures designed to create a connected Digital Single Market
• Initiatives aimed to further deepen the internal market
• EU international trade policy, especially the Transatlantic Trade and Investment Partnership (TTIP), which is currently being negotiated by the EU and the USA

As we have already reported, first three legislative proposals implementing the Digital Single Market were presented on 9 December 2015. The first one deals with a fully novel issue of digital content (e.g. streaming music, purchasing e-books), while the second one builds upon the existing regulatory framework for online sales of goods. Both measures are seeking to fully harmonise several core aspects of online business-to-consumer sales of tangible goods and supply of digital content, including rules on pre-contractual information duties, consumer’s right to withdraw from the contract, conformity of goods and digital content as well as relevant remedies. Furthermore, a proposal for a regulation on ensuring the cross-border portability of online content services in the internal market was adopted.

In 2016 the Commission will surely try to further proceed with these measures. Its new approach to the European law-making shall ensure that the Digital Single Market strategy does not share the fate of the Common European Sales Law. Efforts are made to secure a common understanding with the European Parliament and the Council on key initiatives already at an early stage. Despite public concerns about the impact of such arrangements on the democratic process, an inter-institutional Agreement on Better Law-making has recently been finalised. Time will tell whether this approach will produce the desired results. In any case, it seems unlikely that the flagship measures implementing the Digital Single Market, which are by no means uncontroversial, will come into force in the nearest months. Also the Dutch Presidency in the Council seems to be taking a ‘wait and see’ attitude to this issue.

2016 will therefore rather be a time of intense discussions, public consultations and further legislative proposals. We may, among other things, expect a proposal aimed to bring an end to unjustified geo-blocking as well as other forms of discrimination on the basis of residence or nationality. Detailed information on the envisaged copyright reform should be presented shortly. Of particular interest are also measures, which have already been adopted in the previous years – such as Regulation 524/2013 on online dispute resolution for consumer disputes – or those at an advanced stage of adoption. It is worth noting that the European ODR platform has lately become operational and will be made available to consumers and traders on 15 February. While a faster and easier, Internet-based mechanism of resolving disputes between consumers and traders sounds like a good idea, much still needs to be done to ensure its reliability and promote its use among both parties to the contract. Furthermore, in the following months we will almost certainly witness a long-awaited reform of EU data protection law. Following the agreement reached in trilogue last month, it appears very likely that the final texts of General Data Protection Regulation and Data Protection Directive will be formally adopted in the first quarter of 2016.

From the consumer law perspective, particular attention should also be paid to the Commission’s Regulatory Fitness and Performance programme (REFIT), i.e. a systematic analysis whether the existing regulatory framework is fit for its purpose. According to the recently published roadmap, a substantial part of EU consumer law will be subject to evaluation within next 18 months, namely:

• Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the internal market (Unfair Commercial Practices Directive);
• Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees (Sales and Guarantees Directive);
• Directive 93/13/EEC on unfair terms in consumer contracts (Unfair Contract Terms Directive).
• Directive 98/6/EC on consumer protection in the indication of the prices of products offered to consumers (Price Indication Directive);
• Directive 2006/114/EC concerning misleading and comparative advertising (Misleading and Comparative Advertising Directive);
• Directive 2009/22/EC on injunctions for the protection of consumers' interests (Injunctions Directive).

Additionally, Consumer Rights Directive 2011/83/EU and Regulation 2006/2004 on consumer protection cooperation are also expected to undergo separate evaluations in the coming months. During the first semester of 2016 public consultations on application of consumer legislation in Member States will be launched, which might well be a spark for another heated debate, reminiscent of the time when the Common European Sales Law was still on the agenda.

Without doubt 2016 will be a very exciting year in consumer law. Like every year, we will keep you posted about the most significant developments, so stay tuned!

BEUC on EU Copyright Rules

Recently, the European Consumer Organisation (BEUC) published the position paper it submitted to the Commission's Public Consultation on the Review of EU Copyright Rules. The consultation is part of the Commission's on-going efforts to review and modernise EU copyright rules.

BEUC invites the Comission to take the consumer perspective when revising the Copyright Directive (2001/29/EC). At the moment, there is an exhaustive list of optional exceptions and limitations to right holders' exclusive rights. In the future, users should be granted a clear set of (mandatory) rights instead, including the right to a private copy and rights reflecting fundamental rights and freedoms, such as the rights of quotation and criticism, e.g.. As regards the right to a private copy, BEUC calls for immediate EU action in order to reform the current system of copyright levies (they should be clearly indicated to consumers, see answer to question 67 of the consultation) and launch a reflection as to alternative systems of fair compensation.

Buying digital content is nowadays often effectuated through digital transmission. While re-selling a used CD is undisputedly legal, the same is not clear for the same album purchased via iTunes, e.g.. This is why BEUC calls upon the European Commission to carefully assess the consumer detriment from the existing discrimination between purchases of immaterial copies and of copies on physical media (see answer to question 13). BEUC doesn't propose a solution to the problem; this is as far as the position paper goes. 

Consumers are not only users of digital content but also create it themselves, which is referred to as user-generated content (UGC). They thereby often re-use pre-existing works (e.g. reuse of a song for a familiy video) and upload the result on the internet at little to no financial cost. This raises questions as to the right to property and the freedom of expression. BEUC calls for permitting the use of pre-existing works for UGC and refers to the Canadian rules on UGC as an example (see answers to questions 23 and 58 ff).

BEUC is realistic in only demanding more and not full harmonisation for the revised Copyright Directive (see answer to question 7). Let's wait and see how the Commission proceeds!

Of course, the position paper tackles many more questions, only the most relevant ones for consumers are pointed at here. If you are interested in the topic and read German you can also have a look at the position paper of the Verbraucherzentrale Bundesverband e.V. for the same consultation.

No more illegal downloading - CJEU judgment in Case C-435/12 ACI Adam v Stichting de Thuiskopie

The CJEU's power to affect national laws should not be underestimated. The impact of the Court's judgment in the case of ACI Adam BV v Stichting de Thuiskopie illustrates this well: the CJEU's ruling of yesterday morning was followed by a prohibition on illegal downloading in the Netherlands taking immediate effect.

The case was brought by ACI Adam and others, who were importers and manufacturers of blank CDs and CD-Rs on which digital data could be copied. They argued that the amount of private copying levies charged on these blank data carriers in the Netherlands was too high, as it incorrectly took into account the harm suffered by copyright holders as a result of copies made from unlawful sources.

In its judgment, the Court holds that the Dutch law indeed was non-compliant with EU law insofar as it did not distinguish the situation in which the source from which a reproduction for private use is made is lawful from that in which the source is unlawful.

While the Dutch film industry has welcomed the prohibition on illegal downloading that followed the CJEU's ruling, consumer organisations are more sceptical. They emphasise the problems that enforcement of the prohibition may entail, such as infringement of consumers' privacy online. A well-balanced levy system would be the better option, in their opinion (for those of you who read Dutch, background information on the discussion may be found in newspaper articles here and here and here).

Please refer to the Court's press release for a more elaborate summary of the judgment.

A fair balance? - CJEU judgment in Case C-314/12 UPC Telekabel Wien

While the authors of this blog were enjoying the consumer law conference in Oxford (more on this in a later post), the CJEU handed down its judgment in the intriguing case of UPC Telekabel Wien v Constantin and Wega last Thursday. For a summary of the facts of the case and Advocate-General Cruz's opinion, please refer to an earlier post on this blog ('Ius est ars aequi et boni').

The UPC case concerned the topical and difficult question of how to strike a balance between the rights of copyright holders (on films, in this case), consumers / internet users and internet service providers. Can providers be assigned the responsibility to take action to prevent the infringement of copyright by internet users to which they offer their services, considering that they do not have any direct contractual relationship to the copyright holders and it might be very burdensome (if not impossible) to take adequate measures to prevent users from illegally accessing copyright-protected material?

The CJEU's judgment in general seems to be in the affirmative, or at least not in the negative, though the Court takes great care to outline the conditions under which internet service providers are to be held to this responsibility.

In a first step, the Court considers that internet services providers fall within the scope of Article 8(3) of the Copyright Directive, which states that ‘Member States shall ensure that rightholders are in a position to apply for an injunction against intermediaries whose services are used by a third party to infringe a copyright or related right’ (para. 30 of the judgment). The lack of a contractual relationship does not affect this conclusion:

'Neither the wording of Article 8(3) nor any other provision of Directive 2001/29 indicates that a specific relationship between the person infringing copyright or a related right and the intermediary is required. Furthermore, that requirement cannot be inferred from the objectives pursued by that directive, given that to admit such a requirement would reduce the legal protection afforded to the rightholders at issue, whereas the objective of that directive, as is apparent inter alia from Recital 9 in its preamble, is precisely to guarantee them a high level of protection.' (para. 35)

In a second step, then, the Court establishes that it remains mostly a matter for national laws to regulate court injunctions prohibiting internet service providers from allowing their customers to illegally access copyright-protected material. EU law does not (!) preclude an injunction that 'does not specify the measures which that access provider must take and when that access provider can avoid incurring coercive penalties for breach of that injunction by showing that it has taken all reasonable measures, provided that (i) the measures taken do not unnecessarily deprive internet users of the possibility of lawfully accessing the information available and (ii) that those measures have the effect of preventing unauthorised access to the protected subject-matter or, at least, of making it difficult to achieve and of seriously discouraging internet users who are using the services of the addressee of that injunction from accessing the subject-matter that has been made available to them in breach of the intellectual property right, that being a matter for the national authorities and courts to establish.' (para. 64)

The CJEU supports this conclusion by pointing out that an injunction restricts the service provider's freedom to conduct a business (protected under Article 16 of the EU Charter of Fundamental Rights), but does not touch upon its essence - the internet provider can choose the means to prevent users from illegally accessing copyright-protected works and may avoid liability by proving to have taken all reasonable measures. Regarding the measures to be taken, the Court observes:

'In that regard, in accordance with the principle of legal certainty, it must be possible for the addressee of an injunction such as that at issue in the main proceedings to maintain before the court, once the implementing measures which he has taken are known and before any decision imposing a penalty on him is adopted, that the measures taken were indeed those which could be expected of him in order to prevent the proscribed result.'

'None the less, when the addressee of an injunction such as that at issue in the main proceedings chooses the measures to be adopted in order to comply with that injunction, he must ensure compliance with the fundamental right of internet users to freedom of information.'

'In this respect, the measures adopted by the internet service provider must be strictly targeted, in the sense that they must serve to bring an end to a third party’s infringement of copyright or of a related right but without thereby affecting internet users who are using the provider’s services in order to lawfully access information. Failing that, the provider’s interference in the freedom of information of those users would be unjustified in the light of the objective pursued.' (paras. 54-56)

In this respect, the role of national judges is underlined:

'It must be possible for national courts to check that that is the case. In the case of an injunction such as that at issue in the main proceedings, the Court notes that, if the internet service provider adopts measures which enable it to achieve the required prohibition, the national courts will not be able to carry out such a review at the stage of the enforcement proceedings if there is no challenge in that regard. Accordingly, in order to prevent the fundamental rights recognised by EU law from precluding the adoption of an injunction such as that at issue in the main proceedings, the national procedural rules must provide a possibility for internet users to assert their rights before the court once the implementing measures taken by the internet service provider are known.' (para. 57)

Finally, copyright holders might face continuing (minor) infringements of their copyright, insofar as measures to prevent access may be circumvented and copyright is not an absolute right. Still, 'the measures which are taken by the addressee of an injunction, such as that at issue in the main proceedings, when implementing that injunction must be sufficiently effective to ensure genuine protection of the fundamental right at issue, that is to say that they must have the effect of preventing unauthorised access to the protected subject-matter or, at least, of making it difficult to achieve and of seriously discouraging internet users who are using the services of the addressee of that injunction from accessing the subject-matter made available to them in breach of that fundamental right' (para. 62)

While one cannot but admire the Houdini-like turns the Court takes in order to avoid chaining itself to a fixed balancing of the rights of all stakeholders involved, this judgment leaves many questions unanswered. The judgment re-emphasises EU law's strong right-based approach to access to films and other works through the internet, which is debatable in light of ongoing developments in the digital world. Furthermore, the Court's detailed considerations on the various aspects national judges have to take into account when considering the responsibilities of a service provider in a specific case hardly give any guidance as to the actual measures that may meet all the criteria - neither to national judges nor to internet providers. True, this is to a large extent a technical matter. Yet, it seems that the main burden of finding adequate and reasonable measures to prevent illegal access to information is now put on the internet service providers (and, indirectly, on judges assessing their cases). It may be questioned whether that outcome reflects a 'fair balance' in light of the EU Charter…

For a summary of the judgment, see also the CJEU's press release.

Music makes the EU come together

Last week, 4 February, the European Parliament also approved the new Directive on collective management of copyright and related rights and multi-territorial licensing - that are supposed to allow for easier streaming of music across the EU, exempting online music providers from having to apply for a license in every country they play music. Since only one of 500 licensed digital music services is available in all EU member states, these new rules may make this market more attractive for smaller competitors. (Licence to thrill...) This provided the online music provider will obtain a license from a collective management organisation representing authors' rights across borders. To facilitate this process national collective management organisations will be able to request other organisations to represent their repertoire (under the same conditions as applicable to their own repertoires) in countries for which they were not authorised to issue such licenses. The artists will need to be guaranteed their royalties not later than nine months from the end of the financial year in which the rights revenue was collected. Since the Directive was already informally agreed with the Council, the following Council's vote should just be a formality. (Copyright: cross-border licences for online music services)

Ius est ars boni et aequi - Opinion of AG Cruz Villalón in Case C-314/12 UPC Telekabel Wien

What responsibilities do digital service providers have towards copyright holders? Can an internet provider be required to block access to a website on which movies are made available without the consent of the film industry?

Case C-314/12 UPC Telekabel Wien v Constantin Film Verleih & Wega Filmproduktionsgesellschaft, which is currently pending before the Court of Justice of the EU, gives a clear illustration of the problem. The case concerns the access to a website on which more than 130,000 (!) movies were made available for streaming and downloading without permission of copyright holders. The owners of the website, which was taken offline after criminal investigation, were prosecuted in Germany. The present case regards the legal responsibility of an internet service provider whose services allowed Austrian users to access the illegal website. The question at issue is whether the internet provider, who had no (contractual) relation at all to the makers of the website, was under a legal duty to prohibit users from accessing the website.

In a nuanced Opinion in this case, Advocate General Cruz Villalón submits that it is not compatible with EU law to impose a general prohibition on an internet provider to allow its users to view a website that violates copyright law, without giving any specific guidance as to concrete measures that should be taken so as to prevent access to the site. According to the AG, moreover, this is not different in case a provider may avoid sanctions by demonstrating to have taken all reasonable measures to uphold the prohibition.

Still, in AG Cruz's opinion, a national measure specifically requiring a certain provider to block access to a designated website is not as a matter of principle disproportionate for the sole fact that it requires the service provider to incur not inconsiderable costs, while users may easily circumvent the technical measures taken by the service provider. It remains the task of national judges to strike the delicate balance of parties' rights in specific cases.

The AG bases his conclusions on the balancing of fundamental rights within the ambit of what is 'fair and equitable' and 'proportionate' in the sense of Article 3 of Directive 2004/48 on the enforcement of intellectual property rights. The balance involves the right to protection of intellectual property (Article 17(2) of the EU Charter of Fundamental Rights) and, on the service provider's side, freedom of information (Article 11 of the Charter) and freedom to conduct a business (Article 16 of the Charter). As AG Cruz points out, imposing a general obligation de résultat on the service provider to prevent access to websites that violate copyright law does not reflect a fair balance of these rights. Giving a service provider the possibility to avoid sanctions by showing to have taken all reasonable measures does not restore the balance, as it pushes back the consideration of relevant fundamental rights argumentation to the second stage of the assessment. Moreover, while a copyright holder has strong claims in hand, a digital service provider who is not infringing copyright himself would hardly have any defence against the imposition of a burdensome general measure aimed at preventing the abuse of intellectual property rights by third parties to which the provider has no contractual relationship.

In sum, the complex task of balancing the interests and rights involved in cases of massive copyright infringements through the internet would remain a task of national judges in specific cases.

See also the CJEU's press release (which, interestingly, leaves out most of these nuances of its heading).

Downloaded any goods recently? - consumer protection standards

The European Commission conducts regular sweeps - checking the enforcement's level of EU consumer protection measures by European websites. Last December a sweep was conducted to see whether websites selling digital consumer products (games, books, videos and music) are in compliance with EU legislation. The sweep that took place in the summer of 2012 showed that over half of the investigated websites (172 out of 330 checked websites) was not compliant with EU rules. (Q&A - Sweep on on-line games, books, videos and music) After that sweep, the authorities issued advice and warnings to websites that were potentially in breach of EU rules. As a result, the repeated sweep revealed that out of 172 previously non-compliant websites, 116 have been corrected. Altogether, 80% of the examined 330 websites is now compliant with EU consumer law. (Better protection for EU Consumers downloading games, e-books, videos and music) This means that consumers should be getting better information nowadays on products' attributes, should be informed fully and comprehensively on their rights (e.g., the fact that when the download starts consumers lose their right of withdrawal), on how to contact the sellers with their complaints, have been provided with fair contract terms. The conducted studies revealed also that consumers are still insufficiently informed about the following facts:

• that they are giving up their right of withdrawal with the start of a download (42% websites don't provide this information);
• that they have a right to take a legal action or claim compensation when the product doesn't work;
• how to contact the trader;
• that the product may have geographical restrictions that would make it impossible to use it abroad if consumers travel;
• that digital games that are advertised as 'free' could upon downloading and use still requirement certain payments being made.

The enforcement actions will continue to be conducted. It is especially relevant to increase children protection when purchasing digital goods, since they are often users of digital goods and are more vulnerable consumers, more prone to succumb to misleading commercial practices.

 

The European Commission advises consumers to think whether they have an answer to the following questions prior to making a purchase decision:

 

• Can you contact the trader in case there is a problem? Make sure that the trader provides his name, geographical and e-mail address.
• Do you have all the information you need about how to run the download? Check that you are given sufficient information and minimum operating system requirements of the product such as size, quality and whether a device or particular software is needed in order to operate the digital content product.
• How much is it really going to cost? Look out for the final price; including taxes and all charges that may be hidden in the last stages of the payment process.
• Do you have a right of return? Be aware that once you have started downloading the product, you have usually no right to return it.
• Are your rights being restricted? Beware of terms that exclude the trader from various liabilities and redress mechanisms including legal action; they are probably unfair.
• Where can you use the digital content? Look for information whether you can use the digital content in another country than the one you live in. You may get a nasty surprise if you are travelling or on holiday. Contact the sales office for advice, if you do not find the information.
• What is the real cost of the "free" kids game? There might be add-ons requiring payment without you being warned about it beforehand.

Collective copyrights management

The BEUC published also this week its response to a proposal for a Directive on collective management of copyright, related rights and the multi-territorial licensing for online musical works. In its response the BEUC explains consumers interests in this law (enjoying access to more diverse content, hopefully, under more competitive prices) as well as suggests ways to improve the proposal (esp. with regards to more effective enforcement mechanisms). For the document see here.

Digital Consumers and the Law

A nice thing about the week before the holidays is that usually a lot of packages arrive. The one I just opened contained a new book on 'Digital Consumers and the Law', resulting from a joint project of the Amsterdam Institute for Information Law (IViR) and the Centre for the Study of European Contract Law (CSECL).

The book deals with the following topics: 

Chapter 1 Digital Content Markets for Consumers: Characteristics, Challenges, and Legal Context.

Chapter 2 Classifying Digital Content: Good, Service or Else?. 

Chapter 3 Somewhere between ‘B’ and ‘C’: The Legal Status of the ‘Prosumer’ in European Consumer Laws. 

Chapter 4 Pre-contractual Information Requirements for Digital Content.  

Chapter 5 Conformity and Non-conformity of Digital Content. 

Chapter 6 Educating the Regulator: A More Mature Approach Towards the Underage Consumer.

Chapter 7 Fundamental Rights and Digital Content Contracts.  

Chapter 8 Money Does Not Grow on Trees, It Grows on People: Towards a Model of Privacy as Virtue.  

Chapter 9 Conclusions.

Please refer to the publisher's website for more information.

What are the options? - BEUC's position paper on digital products

European consumer organisation BEUC has made no secret of its critical stance toward the European Commission's proposal for an optional instrument that would offer a set of contract terms that parties may, inter alia, choose to apply to their contracts for the supply of digital content (such as films, e-books or music). In particular, BEUC is sceptical of the proposed Common European Sales Law's optional nature, since 'a business selling digital content online will be able to decide between modern European rules or national legislation, which is - as acknowledged by the European Commission - often unclear about the rights to which consumers are entitled in contracts for the supply of digital content. What consumers need is solid legislation applicable to all contracts and not dependent on an opt-in or opt-out basis.'

Yet, what are the alternatives? In a recently published position paper, BEUC outlines the following suggestions for updating the acquis communautaire governing digital content contracts for consumers:

'- A legislative proposal modernising the EU rules on legal guarantees in order to cover digital content products. This could be done via a new Directive on digital content products or in the frame of an eventual revision of the 1999 Sales of Goods Directive. The rules included in chapters 10 and 11 of the CESL could serve as a basis with the appropriate adaptations as indicated in point 5 of this paper.

- Standardisation of key information provided to consumers and the format in which it shall be presented to make this information comprehensible, transparent and easy to access and to read. This initiative should equally take into account the Commission’s own research on consumers’ behaviour towards information load and the way consumption decisions and made.

- Initiatives to address the issues related to lack of the transparency and unfairness of certain contract terms in digital content contracts. They could include guidance on transparency requirements and unfair contract terms, which would help clarify the application of the UCT legislation to digital content contracts and include examples of terms which may be considered unfair under the 1993 Unfair Contract Terms Directive.

- Support better enforcement of EU rules against unfair commercial practices in the field of digital content products through promoting co-ordinated enforcement actions by national consumer organisations and facilitating the co-operation for national enforcement authorities.

- Clarify under which conditions a contract for the supply of digital content can be concluded by a minor.'

Digital Content Sweep

The European Commission just published the results of a 'sweep investigation' conducted on digital content. This EU-wide screening of websites led the Commission to conclude that about 75% of websites offering digital content (such as music, videos, e-books and games) are not fully complying with European consumer law. In particular, problems are found regarding unfair contract terms, the consumer's right to withdrawal and information on the trader's identity and address.

Please check the press release and Digital Content Sweep website for more information. On the legal framework for digital content contracts for consumers, see also our earlier post 'Reporting on digital content contracts'.

Orphan works will find home

Just a short update: the Orphan Works Directive was adopted yesterday by the Council. Upon a publication in the Official Journal of the EU it will enter into force. See more on this in our previous post: EU-wide online access to orphan works soon possible.