Financial services concluded at a distance in digital age - the new Directive 2023/2673

In 2023, European lawmakers were busy improving the protection of consumers in financial services. In addition to the new Directive 2023/2225 on consumer credit (on which we reported here), the regime distance marketing of financial service was also revamped. The new Directive 2023/2673 on financial services contracts concluded at a distance repeals the current Directive 2002/65/EC. The Directive entered into force on 18 December 2023, Member States are obliged to implement it by 19 December 2025 and apply the rules from 19 June 2026.

The 2023 Directive was driven by the need to ensure consumer confidence and trust in digital transactions. This need was underscored by the rapid development of digitalisation and the evolving means of distance communication, which have revolutionised how we use technology since the creation of the 2002 Directive. Digitalisation has also changed how products are marketed to consumers, with new products emerging in the online environment.

The other rationale was the progressive introduction of other sector-specific legislation that significantly overlapped the current, 2002 Directive, creating legal uncertainty.

The 2023 Directive clarifies its nature as a horizontal, general instrument that remains a safety net for matters not covered by other EU instruments or subject to exemptions. The Directive is a maximum harmonisation instrument and applies only to contracts concluded at a distance. Importantly, it amends Directive 2011/83/EU, which currently does not apply to financial services.

The Directive follows the current information approach to consumer production, detailing pre-contractual information duties and making the associated right of withdrawal more effective by mandating an easy-to-find 'withdrawal function' on the service provider online interface that should be continuously available during the withdrawal period. In laying down the rules on adequate explanations, the 2023 Directive adds the right to request human intervention when the trader uses online tools such as chatbots. 

Finally, the 2023 Directive recognises the realities of the online world and the difficulties in making informed decisions, thus protecting consumers against dark patterns or deceptive design patterns.

The new directive is a welcomed development of EU consumer law. It is based on the realities of the digital world and aims to tackle the most pressing problems for consumer decision-making.

Enforcement of consumer law in digital age: the EnfTech Project

In order to provide much-needed help to the enforcement of consumer law, our readers may be interested in the recently launched EnfTech Project.

EnfTech is a broad term for the use of technological innovations by enforcement agencies to help deliver enforcement activities. This could include market surveillance, such as scanning for misleading pricing or fake advertising; an investigative activity that uses machine learning to interrogate company documentation; preventative measures such as reviewing consumer contracts for unfair clauses before they reach the market. In the future, it may have the potential to directly execute or enable an enforcement action such as a warning, takedown, or sanction.

EnfTech was launched on the 20th of April via an online event. The recordings of the event, the associated blog, and contact details are available here.

Second Annual Digital Consumer Law Event

On the 21st of November 2022, the European Commission organised its second Annual Digital Consumer Event to reflect with the general public, academics, consumer and business associations, as well as authorities, on the problems consumers currently face in the digital transition.

The expert panels focused on the following topics: 

• Online consumer vulnerabilities: shedding light on dark patterns, personalisation, and structural asymmetries
• Online consumer purchases: challenges raised by digital subscriptions, virtual items, and the addictive use of digital products
• Online consumer contracts: mapping unfair contract terms and the lack of transparency, our Professor Luzak was one of the participants of this panel.

Our readers may be interested to know that the recording of the event is available to watch (see the link here).

OECD report on Dark Patterns

 Yesterday, aka 26 October 2022, the OECD has released a report on Dark Patterns which had been in the making for almost two years. LLM students who would like to write about the topic or just about anyone looking for a clear intro to the subject - this report is your friend! It contains not only a helpful classification of different types of dark patterns but also a quite comprehensive review of relevant regulatory frameworks/interventions, known case-law and much (if not all, and if arguably too US-centred and English-based) of the literature you may also want to look at, including... Joasia's 2019 JCP paper The Transparent Trap! Kudos there.

A working definition is provided at the outset which may or may not gain traction in the field: dark patterns, accordingly, are 

"business practices employing elements of digital choice architecture, in particular in online user interfaces, that subvert or impair consumer autonomy, decision-making or choice. They often deceive, coerce or manipulate consumers and are likely to cause direct or indirect consumer detriment in various ways, though it may be difficult or impossible to measure such detriment in many instances."

[The first part of the report, where dark patterns are typified and their impact assessed, I skip for now - but you can find it all online!]

The report acknowledges that more enforcement is necessary in the EU, while ultimately praising the UCPD's relative ability to address the problem in comparison with other instruments: if on the one hand resonance with the black listed items in the annex makes it possible to address certain black patterns with a degree of legal certainty, the report observes, the "principle-based" prohibition of unfair commercial practices works quite well to cover technological and commercial developments like the ones at hand. 

One critical point that is (thankfully) mirrored in the report is known criticism of the average consumer standard: this standard is hard to square with consumers' apparent vulnerability to dark patterns & other online perils &, the report observes, seems particularly problematic in the context of increasing online personalisation. The report also highlights criticism of disclosure rules, in particular as a way of preventing consumers from falling for dark traps: it turns out, the report concludes, that all experiments trying to measure the effects of disclosures in this area failed to detect any serious improvement. Hence the relevance of information may be limited to broader education campaigns and possibly to a limited set of dark patterns. 

The report also interestingly reviews examples of technical supports that are being developed - essentially, dark pattern-blockers for one's browser. These are, apparently, useful in some cases but less so when the dark patterns is not to be "written away" in code (p 47). I would like an app like that though!

As a scholar who reads Law & Econ work with a mix of interest and skepticism, I was less impressed by the report's discussion of nudges on page 37, under "Digital choice architecture". The title reflects a trend that has been going on for a long time of course; the report, however, brings together under one technique concerns that may need to be kept separated. "Privacy by design", that is mentioned as example, is not the same as a "bright pattern" based on extrapolating "welfare enhancing" choices from supposed "preferences or expectations". While the report necessarily gives a limited overview on each issue, conflating privacy protection with "consumertarian" views and hard-core nudge advocates is to my mind quite problematic.

Anyway, this is really a good starting point but also, as far as I can tell, a fairly comprehensive restatement that those already in the debate will also benefit from. Recommended read!

From Open Banking to Open Finance? UK developments

Following the possibility provided by PSD2 of opening up banking data for third-party access, the UK's Competition and Markets Authority instructed the 9 largest banks to do so at the request of the consumer. This initiative called ‘Open Banking' enables consumers to share their data with third-party providers that can use the data to develop innovative financial products and to provide ‘traditional’ services in a more convenient way (see our post here).

Three years post this experiment and building on the experience gained from Open Banking, the UK’s Financial Conduct Authority may be ready to take the next step to ‘Open Finance’. The FCA published a Call for Input in December 2019 on the shift to Open Finance and following the receipt of a large number of responses from industry representatives it published its Feedback Statement in March 2021.

Open Finance refers to the extension of Open Banking-like data sharing to a wider range of financial products, such as savings, investments, pensions, and insurance. Open finance enables consumers and SMEs to access and share their data with third-party providers outside banking, which can then use that data to develop innovative products and services which meet consumers’ current and future needs. The idea is greater ownership and control of consumers and SME's over their data.

Open Finance could potentially offer significant benefits to consumers, including increased competition, improved financial advice, and improved access to a wider and more innovative range of financial products and services. The FCA also sees this as an opportunity to enable access to creditworthy but previously excluded consumers to financial services such as credit.

In addition to consumers, SME’s would also benefit from open finance, by improved integration of payment, accounting, and lending platforms for internal management, leading to greater cash flow control. SME's could better compare the products and services available to them from a range of providers, and through this avenue, they would benefit from greater access to commercial lending. 

Overall, both consumers and SME's could gain access to a wider range of products and services, have greater control over their data, and could potentially better engage with their finances.

However, Open Finance would create or increase risks and raise new questions especially around data protection and digital identity. However, the FCA is also concerned that Open Finance would create or increase risks and raise new questions especially around data protection and digital identity. Further digitalization might deepen the exclusion of some consumer groups such as those that are less digitally savvy and greater responsibility might result in a choice of inappropriate or even dangerous financial products. The initiative will therefore have to be followed by an appropriate legislative and regulatory framework, common standards, and a designation of an implementation entity, as for Open Banking.

There is no doubt Open Finance could be highly beneficial for consumers, however, with greater control comes greater responsibility, and the big question from a consumer protection perspective is, are consumers ready to take this on?

German study finds no evidence of personalised pricing: does it mean it's really not an issue?

In our previous post we reported about a recent study published by BEUC containing important recommendations about the future of consumer protection in the digital age. The study engaged among others with problems of personalisation in online consumer markets, including in respect of price-setting. Data-driven price discrimination has indeed been a subject of a growing interest in the literature and law- and policy making. To recall, a new information duty concerning the existence of personalised pricing was added to the Consumer Rights Directive as part of its recent reform. Member States are now in the process of implementing the new EU provisions to their national legal systems and it is open to debate whether the adopted disclosure duty will in fact be useful for consumers (see e.g. a recent OECD study). In the meantime, an increasing number of studies explore to what extent personalisation of prices actually takes place in the (European) consumer markets.

Back in 2018, the results of the "Consumer market study on online market segmentation through personalised pricing/offers in the European Union" were published by the European Commission. The study found evidence for personalised rankings of offers, but was not able to confirm the existence of "consistent and systematic personalised pricing".

Earlier this month, a report from a similar study commissioned by the German Ministry of Justice and Consumer Protection (BMJV) was published. As part of the project, the prices charged for the same products to different consumers on leading webshops and platforms were analysed over a period of three months. To assess the relevance of user characteristics for price variations a number of factors were considered, e.g. different devices, operating systems, browsers, data protection settings, user location, browsing history and social media engagement. While certain differences were identified in relation to prices charged when booking a hotel room either through a desktop or a mobile device, overall the statistical analysis did not confirm the existence of personalised pricing in the investigated markets. Interestingly as well, if price variations were observed at all they were generally marginal and typically took form of targeted discounts.

Considered together, both studies raise the question whether personalised pricing is indeed an issue for consumer law and policy. While it is clear that granular price discrimination is possible from a technological perspective, recent findings show that such a possibility may not really be used in the market practice. This could be linked to the typically negative perception of personalised pricing among consumers, as reactions to some of the previous instances of price discrimination, or even to speculations thereof, have shown (see e.g. in relation to Amazon, Allstate, Orbitz and Uber). At the same time, for these negative perceptions to actually have a regulatory effect, recurring market studies, like the ones indicated above, seem to be needed.

New study on consumer protection in the digital age: should the burden of proof in the UCPD be reversed?

Earlier this month a very interesting report by Natali Helberger, Orla Lynskey, Hans-W. Micklitz, Peter Rott, Marijn Sax and Joanna Strycharz was published by BEUC. The study entitled "EU consumer protection 2.0: Structural asymmetries in digital consumer markets" addresses a number of topical issues concerning consumer protection in the digital age and consists of the following parts:

1. Surveillance, consent and the vulnerable consumer. Regaining citizen agency in the information economy
2. Personalised pricing and personalised commercial practices
3. A universal service framework for powerful online platforms

The first and most extensive part has a foundational nature and considers the key premises of consumer protection in view of structural asymmetries observed in digital consumer markets. Attention is paid, among others, to the concepts of digital vulnerability and consent. Following existing research, the authors remark that consumer vulnerability should not be reduced to internal characteristics, but can also be caused by external conditions, and that data-driven practices that promote exploitation of vulnerabilities can be linked to the lack of privacy. At the same time, privacy controls placed at consumers' disposal are often not effective and can lead to a false sense of security. The most ground-breaking conclusions and recommendations, however, follow from the subsequent analysis of what is described as "digital asymmetry". According to the authors, instead of focusing on the information aspect of the UCPD and the different consumer images, more weight should be attached to the structural power relations, including the power embedded in digital choice architectures controlled by online platforms. On this basis, a case is made for reversing the burden of proof in the UCPD so that effectivelly "unfairness of data exploitation strategies is presumed" (p. 77).

The second part of the study part looks more specifically at personalised pricing and advertising and the third part explores how obligations traditionally associated with services of general interest (SGI) could be applied to the platforms considered to hold a gatekeeper position.

We encourage our readers to consult this thought-provoking study, the full text of which can be found here.

The New EU Digital Finance Package: the Digital Finance Strategy

In addition to the new Action Plan on Capital Markets Union (see our report here),  on the very same day, the 24 September 2020, the EU Commission also presented its Digital Finance Package. This very board package consists of: 1) the Digital Finance Strategy; 2) the Retail Payments Strategy; 3) the legislative proposal for an EU regulatory framework for digital operational resilience and 4) the legislative proposals for crypto-assets.

The package aims to improve Europe's global competitiveness in financial services and products provision not only by boosting consumer choice but also by ensuring consumer protection and financial stability. With the coronavirus pandemic and the rise in the use of digital services more than before, these sorts of initiatives from the Commission are more than welcome. Embracing digital innovation should not only create consumer choice, but also widen access to financial services for consumers, increase business opportunities for firms, especially SMEs, and thus facilitate Europe’s economic recovery.

The package is complex and far reaching. The strategies are necessarily general providing high level overall strategic aims, but some of the legislative proposals are concrete and ground-breaking. Most importantly, the package of proposals has been drafted based on careful consultation and intensive cooperation with business stakeholders and consumer advocates through public consultations and the innovative Digital Finance Outreach programme of DG FISMA over the summer (on which we reported here) that enabled anyone interested to get involved in shaping the solutions. DG FISMA continues its public approach, it is now holding biweekly seminars on the Digital Finance Package and these are open for attendance for anyone interested (see here). The first seminar focused on the Digital Finance Strategy and so does this post.

The first and broadest element of the Digital Finance Package is the Digital Finance Strategy. It provides for the overall strategic objective to embrace digital innovation and the ways in which the more concrete proposals and the existing legislative framework fits within the picture. As the Commission rightly states: 'The future of finance is digital: consumers and businesses are more and more accessing financial services digitally, innovative market participants are deploying new technologies, and existing business models are changing.' To reflect this the strategy is focused around four key priority areas:

1) Tackle fragmentation in the Digital Single Market: this is the most general aim that intended to enable consumers to access financial services and products fully remotely. 

To this effect, on the one hand, the strategy recognizes that the key to achieving this is the fitness of onboarding process (the recruitment of new customers) for digital age for which a crucial element is the interoperability of digital identities. Digital identification of customers remotely will be enabled with a review of the current regulatory framework provided by Regulation (EU) No 910/2014 on electronic identification and trust services for electronic transaction. In addition to securing a framework for the development and use of digital identities, this regulation should also enable data sharing between providers to facilitate the advantages of open finance. Taking identification fully online also requires the strengthening of the anti-money laundering and terrorism financing legislation. 

The other aspect of having access to digital financial services and product is passporting of firms. Passporting enables consumers and businesses to have access to cross-border services provided by firms established and supervised in another Member State in line with commonly agreed rules.  Although passporting currently may work for mainstream providers, it does not seem to work well for fintech companies that comprise the bulk of the digital finance ecosystem. To overcome this, the Commission is planning a one-stop-shop licensing system for these firms that combined with passporting rules should help their operation throughout the EU. In addition, special passporting rules for areas of particular interest such as crowdfunding are also being considered. Finally, the Commission proposed the establishment of a new EU Digital Finance Platform to facilitate cooperation and communication between firms and supervisory authorities. 

2) Adapt the EU regulatory framework to facilitates digital innovation: this aim relates to the creation and the review of the existing regulatory framework to fit the requirements of digital age. Within this aim, the EU Commission presented a legislative proposal on crypto-assets and placed as a strategic aim  for a technology-neutral regulatory framework. It also pledges for clarifying the supervisory standards on the application of this legislative framework to artificial intelligence applications.  

3) Create a European financial data space to facilitate data driven innovation: this dimension is connected to the European strategy for data and aims to facilitate access to data and data sharing within the EU, creating broader access to public and private data and real time data sharing. As part of these efforts, the Commission aims to set up a common financial data space through a number of more specific measures: promote innovative IT tools to promote supervision and promote business to business data sharing in EU financial sector and beyond. It is important to note that this open finance initiative is not going follow the UK's approach in mandating data sharing for firms (see our report here). Participation will be voluntary.  The Commission will therefore propose legislation on a broader open finance framework that will build on the upcoming initiative focusing on data access, including the upcoming Data Act, and the Digital Services Act. Finally, the Commission is also reviewing its competition approach and the upcoming review of PSD2 is also going to be part of this framework.  

4) Address new challenges and risks that come with digital innovation: with this aim, the EU Commission aims to work on future-proofing EU prudential and conduct supervision and regulation that should be fit to address both traditional firms as well as new entrants, especially technology companies that are increasingly present on financial markets. The objective will be proportionate regulation and supervision, based on the principle of “same activity, same risk, same rules” and pay particular attention to the risks of significant operators.

Consumers in the age of digital health and AI

The European Consumer Organisation - BEUC - recently published a new position paper on digitalisation in healthcare. The paper comes at the right time as the impact of digital technologies on health products and services indeed continues to grow. The potential benefits are recognized: better access to medical care, more effective prevention, diagnosis and treatment of diseases, support of healthy lifestyles. However, as pointed out by BEUC, the risks are also present. The issues of consumer privacy, security and safety are listed among the most salient ones.

Main insights

The position paper makes reference to the eHealth communication of the European Commission, which focused on three areas: 

1. citizens' right to secure electronic access and share their health data (improving electronic health record systems), 
2. improved research, disease prevention and personalised medicine (pooling data resources and using common standards),
3. digital tools for citizen empowerment and person-centered care (shifting focus from disease treatment to health promotion and well-being, supported by digital solutions such as wearables and mHealth apps).

While endorsing these general objectives, BEUC - as was to be expected - emphasises the need for adequate consumer safeguards. This general observation is followed by a list of more specific principles and recommendations. We sketch some of them further below - for more details we invite our readers to consult the original paper.

Consumers' control over their personal health data (including the right to decide about data-sharing, to access one's own data and to report on possible errors) features prominently throughout the paper. This translates into a call for a diligent implementation of the General Data Protection Regulation with respect to this sensitive category of personal data. Importantly, BEUC argues, data protection safeguards are also relevant in the context of electronic health records and relationship between patients and physicians.

Another eminent topic addressed in the paper are the digital health tools, which, in view of BEUC, should respect the principles of privacy and security by design and by default and remain under supervision of competent authorities. The paper emphasises the connection between security and safety by providing an illustrative example of a hacked pacemaker. An argument is also made for a minimum set of security measures for all digital health connected products, including mobile health applications, as an ex ante market access requirement. Medical Devices Regulation, Radio Equipment Directive and General Product Safety Directive are listed among key instruments to be revisited in this context.

Consumers and artificial intelligence (in healthcare)

An interesting part of the BEUC paper concerns the growing deployment of artificial intelligence in the healthcare sector and in consumer markets more generally. Indeed, the advances in machine learning have made it possible to generate operable knowledge from the previously intransparent data sets. As a result, data contained in health records as well as vast amounts of data produced through our daily use of digital products and services have become an even more valuable resource. The prospect of AI transforming the way diseases are prevented, treated and diagnosed is anything but exciting. A look at the website of IBM Watson Health will give the reader a good impression. However, as pointed out by BEUC, the picture is not always so rosy.

The observations which BEUC makes in this regard largely follow its earlier position paper on automated decision-making and artificial intelligence. Similar issues were also pointed out in the European University Institute's working paper on consumer law and AI published a couple of months ago. They concern, in particular, the growing information asymmetry and power imbalance, the impact on consumers' decision-making capacities, implications for access to essential services and the risk of discrimination. These, of course, are only early contributions and both the extent of indicated problems and the possible remedies must still be investigated. Considering the growing interests in AI of both scholars and policymakers further research is certainly to be expected.

Commission fines electronics companies for fixing resale prices

On the 24th July, the EU Commission issued fines against four electronics companies for breaching antitrust rules by fixing resale prices on their online retailers.

All four companies, namely Asus, Denon & Marantz, Philips and Pioneer, did not allow their resellers to set their own prices and instead pressured them to maintain a minimum resale price. The fines issued ranged from more than 63 million for Asus to 7.7 million for Denon & Marantz. The fines were reduced as a result of the cooperation of the companies to the investigation. The prime target of this practice were online resellers, who tend to sell their products at lower prices.

As online resellers adjust their prices automatically to that of competitors, the practice had a wide effect on the market. Furthermore, the goods in question were widely used consumer goods from computers to kitchen appliances and personal care products, meaning a significant impact on consumers.

The practice of fixing resale prices is prevalent in online markets and Commissioner Margrethe Vestager highlighted the fact that the online market is ever growing and it is imperative to protect consumers.

What happens to the consumer affected by these high prices in electronics? They can seek damages in court, following Directive 2014/104/EU (The Antitrust Damages Directive) using the Commission decisions as proof of illegal behaviour of the companies.

Computers sold exclusively with pre-installed software not unfair - CJEU in Deroo-Blanquart (C-310/15)

The CJEU is back from its holidays and today a first consumer law case has been resolved. Mr Deroo-Blanquart purchased a Sony laptop in France that, unsurprisingly, came with pre-installed Windows software and various applications. During the first use of the computer, more unusually, the consumer refused to sign the EULA (End-user licence agreement), displayed on the computer screen. Subsequently, and exceptionally, the consumer requested Sony to reimburse him for part of the purchase price of the laptop that would correspond to the cost of the pre-installed software, that he would never use. Sony claimed in return that the pre-installed software and the laptop 'form part of a single and non-separable offer', thus no discount was possible. Sony offered, however, to cancel the sale and to reimburse the consumer for the purchase price (549 Euro) upon return of the purchased laptop. While it might not have been a bad deal, it is likely that it would not satisfy the consumer since he would not easily be able to purchase a laptop without pre-installed software elsewhere. It doesn't come as a surprise then that Mr Deroo-Blanquart rejected this offer and started proceedings claiming payment of 450 Euro for the pre-installed software, as well as 2500 Euro damage suffered as a result of unfair commercial practices. His claims were dismissed by the district court and court of appeals, but the Cour de cassation decided to stay proceedings and turned to the CJEU with the following questions.

1. Is it a misleading commercial practice when a combined offer of sale of a computer with a pre-installed software does not specify the cost of each individual component, when listing each item of pre-installed software? (Art. 5 & 7 UCPD)

2. Is it an unfair commercial practice when a combined offer of sale of a computer with a pre-installed software leaves the consumer only two choices: to accept the software or to cancel (not engage in) the whole sale? (Art. 5 UCPD)

3. Is it an unfair commercial practice when a manufacturer offers only combined offers of sale of a computer with a pre-installed software, without allowing consumers to obtain a computer which is not equipped with pre-installed software?

The CJEU considered the last two questions together and came to the conclusion that on its own it is not an unfair commercial practice pursuant to Art. 5 UCPD if the manufacturer offers for sale a computer with a pre-installed software without any option for the consumer to purchase the same computer model without this software. However, it is for the national court to decide whether this practice was also pursuant to the requirements of professional diligence and did not materially distort or was likely to distort the economic behaviour of the average consumer with regard to the product.

As combined offers are not included in the list of prohibited commercial practices that is included in the Annex to the UCPD, unfairness of such practices could only be evaluated on the basis of general clauses. The requirements for unfairness are thus that the practice has to be contrary to professional diligence and materially distort average consumer's behaviour. While the CJEU leaves it to the national court to assert whether these requirements have been met, it states that:

"it is clear from the order for reference that, inter alia, the sale by Sony of computers with pre-installed software meets the expectations, as revealed by an analysis of the market concerned, of a significant proportion of consumers who prefer to purchase a computer already equipped and ready for immediate use, rather than to purchase a computer and software separately. Moreover, as is also apparent from the order for reference, prior to the purchase of the computer at issue in the main proceedings, Mr Deroo-Blanquart, as a consumer, was duly informed via Sony’s retailer of the existence of pre-installed software on that computer and the specific nature of each of those items of software. Finally, subsequent to the purchase, when using that computer for the first time, Sony offered Mr Deroo-Blanquart the possibility of either subscribing to the ‘end-user licence agreement’ in order to be able to use that software or cancelling the sale." (Par. 35)

Providing consumers with correct information on combined offers is perceived by the CJEU as satisfying the conditions of fairness (Par. 36). Moreover, since the consumer was offered a possibility to cancel the sale, it suggests that the commercial practice was an honest market practice, "the trader thereby demonstrating care towards the consumer". (Par. 37) The CJEU also hints at the commercial practice being unlikely to materially distort consumer's behaviour, as "the consumer has been duly informed, prior to the purchase, that the model of computer that is the subject matter of the sale was not marketed without pre-installed software and that he was therefore, in principle, free to choose another model of computer, or another brand, with similar technical specifications, sold without software or used with different software...". (Par. 41)

The CJEU also doesn't consider the lack of indication of individual prices of each software item as a misleading commercial practice. While the lack of overall price indication would constitute a misleading omission, as material information for the consumer would not be disclosed, the same reasoning does not apply to the components of this overall price. Especially, since the computer is not sold without the pre-installed software, the CJEU considered that it would not impact consumer's transactional decision-making, if he had price information on all individual software applications (Par. 48-51).

Generally, based on past case law, we could not expect the CJEU to consider combined offers to be unfair commercial practices under all circumstances. However, the CJEU seems to give very detailed guidance to national courts in this case, directing them to consider the combined offer under the given circumstances as a fair commercial practice. While an informed consumer has definitely more capability to assess the value of the transaction he is entering into, that does not necessarily give him as much market power as the trader has and may not prevent an unfair commercial practice from occurring. The Court mentions that this consumer could have decided to purchase a different computer, of a different brand, e.g., instead. This presumes the existence of certain market conditions, consumer's familiarity with them, as well as consumer's sharpness in exploitation of these. Is this the continuity of the average consumer's high benchmark or has it just been raised even higher?

Survey on cross-border access to online content

The European Commission has published a new Flash Eurobarometer 411 with results of a survey on "Cross-border access to online content". The survey examines with what frequency EU citizens access the Internet (it's least used in Romania, Bulgaria and Portugal) and through what media (portable devices are generally more popular than desktop computers and unsurprisingly, the younger the respondent the more likely he is to use a smartphone to access the Internet) and if they do, then whether they also access digital content online, what types thereof (music and audio-video content is the most popular, while e-books remain quite unpopular - but that may also depend on fact that e-books are mostly mentioned as paid digital content, while music and audio-video content is offered accessed for free). The reasons for not accessing digital content online are also explored (no interest, other access means than digital more attractive, lack of knowledge). With regard to the cross-border options, the study checks the willingness of EU citizens to purchase online digital content in a different than their own language (the majority only accesses it if it's in their country's language), as well as whether they are willing to purchase such content from providers from other Member States and what problems they might have experienced with regard to such purchases (in only half of reported cases EU citizens had no problems accessing digital content generally meant for users of another country).

On books and e-books - AG Jääskinen's opinion in Case C-117/13 Technische Universität Darmstadt

To what extent are public libraries free to offer digitised versions of their books to their users? In his Opinion in case C-117/13 Technische Universität Darmstadt v Eugen Ulmer KG, Advocate General Jääskinen provides the CJEU with some suggestions as to how to answer this question in light of EU law.

The case concerns a dilemma that is of interest to many public libraries, in particular those attached to universities, such as in casu the library of the Technical University of Darmstadt (Germany): how to make accessible to a large public its resources, both on paper and in digital format. As many publishers nowadays offer their products both as printed books and as 'e-books', a library's choice in individual cases can be between a) buying a physical copy of a book and possibly digitising is, b) acquiring access to the digital version (e-book) of the work, and c) a combination of both. If a library already has a physical copy of a book in its collection, it will usually prefer the first option over the other two, for rather obvious economic reasons. 

In the present case, the university library in Darmstadt had digitised a textbook on contemporary history ('Einführung in die neuere Geschichte') published by Eugen Ulmer KG. The publishing house seeks to prevent the library from this type of digitisation of the book and from making available the digital copy to library users via electronic reading points. Earlier, it offered the library the possibility to buy e-books of the textbook concerned, but the library did not make use of this offer.

AG Jääskinen considers that, as long as no licensing contract on the use of e-books has been concluded, the Copyright Directive does not prevent Member States from allowing a library to digitise books that are part of its collection. Neither does EU law stand in the way of having libraries make available digitised books through dedicated terminals. This particularly regards copyrighted works that are either old, fragile or rare, or that might suffer disproportionate wear because of a large number of students photocopying them.

However, according to the AG, the relevant provisions of EU law do not provide space to allow a library to digitise its entire collection, but regard individual works. Moreover, users of dedicated terminals should not be given the possibility to save digitised books on a USB device; they may print a paper copy. 

The AG's Opinion is not yet available in English. A summary can, however, be found in the CJEU's press release regarding the case.

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.

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.

What the internet is doing to our brains

Those of you interested in consumer behaviour, more specifically in regard to digital consumer contracts, might also be interested in watching this short film about the internet's effects on behaviour and learning processes:

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.