Lord Knight of Weymouth
Main Page: Lord Knight of Weymouth (Labour - Life peer)Consumer Rights Bill
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Lord Stevenson of Balmacara (Lab)
My Lords, Amendment 31A is also in the names of my noble friends Lady Hayter and Lord Knight of Weymouth, whom we welcome back this afternoon. He is too often away from our business and of course has great expertise in this area.
In his report, Consumer Rights In Digital Products, prepared for BIS in September 2010, Professor Robert Bradgate starts by saying:
“One might be forgiven for thinking that the questions addressed in this report would have been answered before now. Digital technology is now well established and widely used; consumers are familiar with and regularly purchase digital products and, indeed, some of the core questions considered in this report were first considered by a common law court as long ago as 1983 and first came before the English Commercial Court in a reported case in 1988. Nevertheless, there is as yet no wholly authoritative and satisfactory statement of the legal rights consumers enjoy on purchase of digital products. The area is not covered by subject specific legislation, and it is not clear whether digital products fall within the existing consumer protection regime of legislation such as the Sale of Goods Act 1979 … or the Consumer Protection Act 1987. This must be regarded as unsatisfactory”.
That is a bit of an understatement, I think, and it is good that the Government are now bringing forward proposals to try to codify and update the law in this area.
Last week in Grand Committee we talked about tangible goods and services but, in reading further the report I have just referred to, I noticed that there were some comments about the general propositions of introducing consumer legislation that have not yet been taken into account. Professor Bradgate says:
“It is generally accepted that the commercial community favours certainty in the law; the original Sale of Goods Act 1893 was passed on the request of the commercial community, which wanted a clear and accessible statement of the law governing contracts for the sale of goods. Equally, lack of certainty in the law is contrary to the interests of consumer buyers and may be exploited by suppliers to deny consumers their rights. It will rarely be economical for a consumer to take professional advice on a claim relating to even a relatively expensive consumer purchase, let alone to initiate legal proceedings”—
that is the point we have been making. He goes on to say:
“A clear, authoritative statement of the law would therefore be in the interests both of businesses and consumers”.
Chapter 3 concerns contracts where a trader agrees to supply digital content to a consumer. Digital sales are different from goods or services and there has been substantial debate over whether or not they are similar to goods. In particular, as most digital content is bought online, the trader and consumer do not meet and that makes it even more important to have clear rules about what each can expect and what to do if things go wrong. This is increasingly the way in which we will obtain goods and services in the future so we ought to try to use this Bill to at least get the principles right.
Why does digital content matter? In the UK entertainment sector, digital music, video and games now account for 43% of total spend; digital video games were worth £1.17 billion in 2013; 99.6% of the 189 million singles sold in the UK in 2012 were digital downloads; and 27.7% of British consumers downloaded or streamed music legally, meaning that it affects some 17.5 million citizens, especially young consumers, as 95% of 16 to 24 year-olds buy digital content. There are various other figures, including a 40% increase in spending on digital videos through downloads and recent research that puts the UK as the leading European country for total digital content spend per capita.
It cannot be sensible for the Government to be sanctioning two different regimes for tangible and intangible goods and services, and even if that situation prevails at the end of this Bill, I very much doubt that the courts will actually stand for it. Simplification and clarification of the law in this area should make it easier for businesses to understand and comply with their responsibilities; to explain and communicate to consumers what their rights under the law are; and for consumers to understand and assert their rights when things go wrong and they receive poor service.
The recent and continuing proliferation of portable internet-connected devices, including tablets and smartphones, has provided consumers with many more opportunities and new ways in which to access, purchase and consume digital content. The pace of development in the digital content sector—with new device launches, a broadening array of new products and services, and a sharp growth in digital content sales of all types—make efforts to clarify digital content rights and remedies in order to protect consumers timely and welcome. Our amendment seeks to align the rights for digital content with those for goods as far as is possible.
The department has produced and recently circulated a useful note on the differences between digital and tangible goods, for which I am grateful. The main issue between us is the question of whether, if digital content is provided in an intangible form and does not meet quality standards, the consumer should be restricted to a right of repair or replacement only. We strongly believe that the consumer should in such cases have both a short and a long-term right to reject digital content.
I draw the Grand Committee’s attention to the BIS Select Committee’s scrutiny of the Bill, which makes the case rather well. In paragraph 120, it says:
“The remedies for faulty digital content differ from those for goods. Unlike faulty goods, which a consumer will be able to reject within 30 days and receive a full refund, consumers will not automatically have a short-term right to reject faulty intangible digital content. The Government’s argument is that this is because digital content is not provided on a tangible medium”—
which seems somewhat circular—
“where it is downloaded or streamed and therefore ‘cannot be returned in any meaningful sense’. However, consumers will have a short term right to reject digital content sold on a tangible medium (such as on a DVD or CD)”.
In paragraph 121, it says:
“The different remedies available for tangible and intangible digital content in the draft Bill would … embed inconsistency into consumer law. Consumer groups argued that consumers experience intangible digital content in the same way as tangible digital content, as a good, and therefore would expect to be able to reject it and receive a refund if the statutory rights are not met”.
It is also worth also quoting the consumer organisation Which?, which said:
“We believe that it is inappropriate for the law to deny consumers an appropriate remedy due to the perceived risk of certain behaviour from a minority of others. Further, where digital content is purchased that is not as described, a replacement or repair will often not be a suitable remedy”.
Now, I accept that the concept of “returning” intangible goods does not easily sit with digital content and that digital content is very easily copied and can be very difficult to delete from a device, certainly by those of us without technological skills. However, the situation we are in is that a consumer who has bought intangible digital content which turns out to be faulty has the right to a full refund only in one particular area: if the trader did not have the right to provide the digital content in the first place. If any of the other statutory rights that are available to everybody else for goods and services are not met, the consumer does not have access to a refund. The Bill does not provide a short-term right to reject or even a second-tier remedy of rescission of contract for intangible digital content, which means that a consumer would not be able to obtain a refund if any other statutory right were breached, on the basis that intangible content cannot be returned. That simply cannot be right.
Is there not a way through this? I note in the BIS Select Committee report that the Government were arguing at one stage that it may not be necessary to require a consumer to return or delete unsatisfactory digital content, on the basis that,
“existing legislation adequately protects IP rights”,
of the supplier. In other words, where a consumer has rejected the download, she or he ceases to hold rights in that material, and any subsequent copying or use would be a breach of IP rights. Can the Minister advise me if my reading of the situation is correct? If that is the case, it seems to create the ability to bring consumer rights on intangible goods to the same level as rights on tangible goods, so that we have parity.
I agree with the BIS Select Committee that we ought to remedy the existing inconsistency in the Bill, and that there should be a short-term right to reject and a final right to reject in relation to intangible digital content. At the very least, the Bill should require that in these circumstances there is an obligation on the consumer to delete the relevant intangible digital content. In addition, the Government should set out in detail their legal advice on the question of IP rights if the right to reject is adopted.
Professor Bradgate, whose report I quoted at the start of my remarks, says:
“It is therefore recommended that the 1979 Act be amended by way of an extension of the definition of goods to apply provisions of the Act both to goods, and to digital products … and to include power in the amending legislation for Her Majesty’s Secretary of State to apply the Act by Statutory Instrument to new developments as they arise”.
Why did the Government not follow his advice? I beg to move.
Lord Knight of Weymouth (Lab)
My Lords, I too applaud the Government for wanting to legislate on this area, because it is moving very fast and we will have to keep coming back to it. My noble friend has reminded us of the importance to the nation of the digital economy and we see, as an example, the huge numbers of people now being employed in it and the exponential rate at which vacancies are occurring. Indeed, we have a committee of the House looking at digital skills at the moment. It was a joy to see the noble Baroness, Lady Harding, being introduced into the House today to add some expertise for us in this area. Perhaps when she has had a chance to settle in she can visit this subject on Report. I also remind the House of my interests as managing director of online learning for TES Global and the somewhat overegged expertise, to which my noble friend referred, coming from my professional work in the last six months.
I would, obviously, agree that, given the importance of the digital economy and the extent to which it is now in the mainstream of how many of us live our lives, it is important to have, as far as possible, a single regime for consumers and producers on how this works, because that makes it more intelligible to us all. I am pleased that, in this clause, the Government are giving powers to the Secretary to State to look at exchanges other than by money. For instance, in subsection (3), some of these powers can be brought to bear if personal data are being exchanged rather than just money. When does the Minister think that these powers might be used? We know that many of the services most of us consumers use are notionally free, in respect of monetary exchange, but those of us who bother to read the terms and conditions know that we are getting these services for free in exchange for the platforms being able to use our data. So there is a very real exchange of something of huge value to us and this is of increasing public concern. I am of the view that the Secretary of State should be thinking actively about when these powers might be used. I would be interested in any guidance which the Minister could give.
It is also a delicate area because of the nature of iterative change of digital products. These days, it is likely that most producers of digital products will take advantage of the fact that they can alter them on an hour-by-hour basis, not just day by day or week by week. It is perfectly normal, and in the good interests of innovation, for products which are not functioning perfectly to be iteratively improved without them having to be returned, which might be the case if they were real products. We obviously need to legislate with iteration as well as agility in mind. Although I endorse the notion that, for the mainstreaming reason, we should, as far as possible, have the same regime, it is important to think about whether there are aspects where digital products might need slightly different consumer rights. If I were to purchase software on a CD and it did not work, I would expect to be able to return it and get something that did, or my money back.
However, if I am downloading an app from an app store, be it the Apple Store or Google Play, and I paid only 59 pence for it, these days I would probably just tolerate it not working well. If it did not work, I would go and buy another one for 59 pence. I am not that fussed about getting my 59 pence back. But it might suit me, as a consumer, to be able to say to the producer of the app via the platform, “It doesn’t work and you have 28 days to put it right”. I have then not wasted my 59 pence. That is a different approach to returning it and getting my money back, but there is merit in thinking about different sorts of rights, given the ability of producers to iteratively improve.
Finally, a point which would be worth ensuring is not far from the forefront of your Lordships’ minds is the fact that many of these digital products are co-produced, in some cases by minors. We all know the stories of 14 year-olds who suddenly become millionaires after having created a brilliant digital product. The notion of the producer being a powerful individual is not necessarily true, so we need to ensure that whatever digital consumer rights we create are viable in relation to the producers of the goods we are talking about. On that rather rambling basis, I am happy to support my noble friend and I look forward to the Minister’s reply.
Lord Knight of Weymouth
Before the Minister gets back into her stride, I hope that she will forgive me if I ask her a question. Before the Bell so rudely interrupted her, she was talking about what happens if a consumer is dissatisfied with an app and whether the consumer should have to delete it from a device. Have she and the Government given any consideration as to whether, in that circumstance, the consumer could require the producer of the app to delete any data it had collected about the consumer, as an aspect of the redress for their dissatisfaction?
Baroness Neville-Rolfe
Perhaps I can come back to that when I finish developing the argument. We had the first point and I am now going to move on to the second about the ease of copying digital content. Digital content is much easier to copy than physical goods because of its intangible nature, creating issues for digital rights managers. Under many existing contractual relations, the trader will make a payment to the original rights holder for each individual who downloads that content. However, if a trader has to refund the consumer for faulty digital content that they have rejected, that may lead to problems between traders and rights holders, given that the trader will be unable to prove to the rights holder whether the digital content was deleted.
A further point is that an error in the code of a digital content product will be replicated in each and every copy of that product, unlike most goods where faults may be restricted to only a few products. Therefore, where faulty digital content is released the trader would potentially have to provide a short-term right to reject to all consumers of that digital content. That would currently be addressed by the trader issuing an update at little inconvenience to consumers. Having to provide a refund to all consumers, in contrast, could have huge consequences for the digital content industry, which we want to support, particularly our growing number of start-ups and micro-businesses. The result would be much more conservative and costly offerings from businesses, which would spend more time in product development. The availability of basic games that the developer improves over time, or the cheap apps that are enjoyed by many consumers, could be significantly affected.
A short-term right to reject is only one aspect of the new law for digital content. As I have already explained, the consumer must have adequate protection in the digital field. Therefore, the Bill introduces consumer quality rights for digital content for the first time. Most faulty digital content will be repaired with an update, but where faulty digital content cannot be repaired or replaced—or where the repair or replacement cannot be done within a reasonable time or without significant inconvenience to the consumer—the consumer will be entitled to some money back. We have made clear in Clause 44(2) that this price reduction could be as much as 100%—so a full refund. Our evidence shows that where traders are not able to repair faulty content, some traders provide a full refund.
Lord Knight of Weymouth
I am sorry to interrupt; I fear that I may become an irritating presence at this stage. Many designers of digital products have to make a decision about browser compliance, for example, if it is a web-based product, whether or not they will go back to old versions of Internet Explorer. Would the rights to which the Minister has just referred apply to digital producers in circumstances where they have had to make a judgment, when they launch their product, that it is not going to work on those old legacy browsers, as so few consumers are still using them?
Baroness Neville-Rolfe
That brings me on to the points raised by the noble Lords, Lord Stevenson and Lord Knight. Perhaps I can touch first on the issue of IP rights to address consumers’ difficulty in deleting faulty digital content. There is a role for IP law and there may be remedies available, but we again need to strike a balance. We do not want to disadvantage consumers who are unable to be sure whether they have fully deleted all copies of their digital content. That is why we have not taken this route and do not feel that it would be great for the consumer.
If I understood the point that the noble Lord, Lord Knight, was making, he asked, “Why isn’t free digital content included? When will we use the powers that are provided in the Bill to cover it?”. There is a power if future evidence of significant consumer detriment arises. That seems to me a sensible provision to make. However, we do not have enough evidence of consumer detriment at present, and requiring remedies could impact on the sometimes narrow profit margins for businesses, leading to fewer offerings to consumers altogether.
Baroness Neville-Rolfe
The department always keeps the operation of new regulations under review, and I can certainly follow up with the precise detail on this provision, if that is helpful.
The noble Lord, Lord Knight, also asked whether the consumer could require a trader to delete any data that they may have collected. In a sense, the answer is similar: it would be a significant departure from the current regime, which traders are familiar with, and of course data protection rules need to be complied with at all times.
The noble Lord, Lord Stevenson, I think asserted that consumers have the right to a refund only if the trader did not have the right to supply it. However, as I have just said under my second general point, the consumer can get 100% of their money back under Clause 44(2) if a repair or replacement cannot be made within a reasonable time or without significant inconvenience.
In conclusion, I have heard the argument in favour of giving intangible digital content the same rights as goods, including applying the short-term right to reject. I realise that there are strong views on both sides of this debate and a keenness to get this area right. We are already improving the situation for digital content by providing new rights when consumers buy digital content. There may be some attractions to the idea of providing exactly the same rights for digital content as goods, but the issues are not clear cut and a balance has to be struck with the impact on industry. To exactly align the rights for digital content and goods could have severe consequences—to the detriment of industry, which would have to bear the costs, and consequently, I fear, to consumers, who might suffer from reduced product offerings, reduced innovation and, ultimately, higher prices. I therefore ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I thank the Minister for her response, although I am very disappointed in it. I also thank my noble friend Lord Knight for his contributions. It is obviously going to be a lively afternoon if this is the rate at which he intends to intervene. I encourage him to do so, a bit like “Angry Birds”—or is that the wrong analogy? Just while I have him in my sights, his support for me was, I think, generous but perhaps a little lukewarm on the central point, which we might have a talk about afterwards. However, I also felt two things about what he was saying—which I think is relevant to the debate; I am not trying to pick on him. I agree that very often the download level, at which you are paying a matter of pence for things, can look very trivial, and that perhaps makes the effort of trying to remove the charge uncertain; but there are people in this world who look after the pence and hope that the pounds will look after themselves. For all people we have to be sure that there is not a massive rip-off taking place on a big scale. Prices are important, but they are not the only determinant.
Secondly, the failure to find a way in which one can return intangible downloads is also a way of cluttering up one’s computer. I think that I would be quite pleased if I got rid of some of the stuff that I have wittingly or unwittingly received in my computer which is slowing it down. These are points that we perhaps might come back to.
My main argument is that there is a lack of consistency in approach here. It is therefore not really about the detail, it is about the principles of this. In light of the fact that the consumer can experience some types of digital content in both tangible and intangible form, it seems unarguably the case that we need to have a single remedy and a single process under which that is operating. I think that we are building in problems for ourselves as a society if we do not get this right at this stage, and I fear that the Government are getting it wrong.
There is also a danger that the market will become skewed if one regime is seen to be effective and efficient for tangible goods but there is another for intangible goods. The better consumer protection for tangible goods and materials will be of benefit, and higher prices may even be applied to that area. Again, that would distort the market, which I thought was what we were trying to avoid. The cost elements of the two platforms are an issue to which we would have to return.
The Minister said she was worried about consumers’ willingness to try new and innovative products, but we are not hearing—as we have in previous debates in this Committee—that it is an important tenet of consumers’ interest in new products and innovative solutions that they have security in their rights. If they do not have easy, effective and properly organised rights as regards intangible goods, they will be less likely to take innovative material. That would be bad for innovation and our economy.
The Minister said that what we were asking for was a step too far but, as we heard from my noble friend Lord Knight, there is a huge asymmetry in the relationship between the traders now operating on the internet and consumers. He gave an example about the benefits that come back to producers in the form of personal data and the unwillingness of the Government to take that on board as a serious issue. If a consumer takes a free download in return for providing personal data but has no redress in terms of what the data are used for if he chooses to reject the material he has downloaded, there is a new asymmetry that we need to think carefully about.
Lord Knight of Weymouth
I am most grateful to my noble friend and I apologise if I am getting tedious. Through him, I say in response to the Minister’s response to my intervention that this is something that the Government need to think carefully about. We recently had the case of Snapchat and the pictures saved through Snapsaved.com that were released, involving a gross invasion of people’s privacy. If people decide that they do not want to risk that and therefore want to delete apps and cookies from their systems, it is reasonable for consumers to demand that those data, such as their pictures, should then be deleted by that producer.
Lord Stevenson of Balmacara
I thank my noble friend for his intervention.
In conclusion, the argument that it is not possible for us to legislate in this area, because it is just too uncertain and difficult to require consumers to behave appropriately in relation to the products that they have downloaded or bought in an intangible form, does not stack up. It would be perfectly possible, as was recommended originally by the first report received by the Government on this matter, to place a legal duty on those who wish to return digital downloads to delete them, and if they do not do so, to rely on what was implied by the Minister—that there may be rights available to the producer to ensure that anyone who tried to reuse material that they wished to return would be subject to penalties under the law. We are placing a lot of responsibility on consumers to take up matters through the courts. Why should there not also be some responsibility in the hands of the producers?
We will return to this point but, in the mean time, I beg leave to withdraw the amendment.
Baroness King of Bow (Lab)
My Lords, this is an interesting group of amendments. “Oh no, it’s not”, I hear you say. Oh yes, it is. It is interesting because it relates to the fact that digital content is different from most other retail goods in so far as consumers cannot hold it in their hands. However, these amendments add more exemptions to areas where digital goods must be of satisfactory quality.
I will not speak at length on this amendment or the other amendments in the name of the noble Lord, Lord Clement-Jones, but it seems worth reiterating the peculiar nature of digital content, which is why these amendments arise. It is hard to imagine any other area of retail where a manufacturer would sell you a good when they know it is almost certainly going to have problems—it is almost certainly going to be defective in some way. Digital software is a strange anomaly because, as we heard, computer coding means that there are virtually always bugs to fix. We do not think it is abnormal any more, for instance, when Apple releases a new operating system such as iOS8 and, for whatever reason, our computing equipment is—to use the technical term—stuffed. My iPad is no longer working ever since I downloaded iOS8. There was actually an even more appropriate technical term to use but I did not think it was parliamentary.
The point here is that the Bill must tread a careful balance. On the one hand, we must not create a legal framework which is permissive towards digital content providers selling products that are simply not fit for purpose. On the other, we do not want to stop innovation and modification in the fast and frenetic world of technological advance and software downloads. In light of this, will the Minister ensure that any amendments of this nature do not tip the balance away from the consumer and towards the digital content provider? Most consumers struggling with technology feel that it is already unevenly balanced. My noble friend Lord Stevenson used the term “asymmetry”, which is very apt. Notwithstanding this, however, we recognise that with complex software it is impossible to give 100% guarantees. Therefore, it seems reasonable to say that where minor defects in software do not affect the overall functionality of the product, that digital content should not be deemed unsatisfactory. We look forward to the Minister providing further clarity on this issue because, as she pointed out, this is about getting the rulebook right for the 21st century. At present, we are not entirely clear what the rules are.
Lord Knight of Weymouth
My Lords, last Tuesday I facilitated part of an event at BAFTA organised by Innotech. One of the speakers was a young man, Jamie Woodruff, who has autism but probably earns a good income from being what I think is described as a white-hat hacker. He is a benign hacker who hacks into computer systems but has an ethical agreement whereby he gives people 28 days’ notice to resolve the security problems. If they do not resolve them, he can publish the problems. He did a live hack during the event to show how easy it is to hack into websites and expose the weaknesses that many sites have. That raises a question in my mind about quality.
I raise this issue to give the Minister an opportunity to say a little more about Clause 34(3) in respect of how quality is defined in this context. The word “safety” is used in Clause 34(3)(c). A company may have a business-to-consumer relationship in the course of which it collects a whole bunch of data. The service may be of very high quality in terms of what is described and what the consumer pays for. Indeed, the whole experience may be fine but subsequently it transpires that that business has not bothered to make the consumer’s personal data secure, it is hacked into and they lose their personal data. Does the word “safety” cover that scenario so that the consumer is protected and can have proper redress against that company?
Baroness Jolly
My Lords, this has been an interesting debate. Amendment 34 raises an important issue for digital content—when does a defect in digital content render it faulty and at what point is digital content not of satisfactory quality? I can confirm that BIS has listened to Professor Bradgate. As such, I recognise that some forms of digital content, such as software or games, commonly contain minor defects, or bugs, because it is currently difficult to produce code that is entirely error-free, whereas other types of digital content, such as music files, do not. I know that industry players such as techUK and the Federation Against Software Theft have expressed the concern that complex forms of digital content, such as software, should not be treated in the same way as simpler forms of digital content, such as music files. I believe that the Bill is flexible enough to cope with these differences.
Reasonable consumers understand that some types of digital content sometimes contain minor bugs, and that bugs will usually be fixed along the way through an update, although I went into a reverie at one stage listening to the noble Lord, Lord Knight, and remembered that my very early updates of MS-DOS were actually posted to me on a five and a quarter inch floppy disk, so things have moved on. While I know that the software industry is concerned about the phrase “freedom from minor defects”, the key point is that freedom from minor defects is an aspect of satisfactory quality only “in appropriate cases”.
We have acknowledged in the Explanatory Notes that it is the norm to encounter some bugs in a complex game or piece of software on release. A reasonable person might not expect that type of digital content to be completely free from minor defects. We will also highlight this point in business and consumer guidance when implementing the Bill. That guidance is being written in consultation with industry and consumer stakeholders. The Bill team confirmed this when we went through it again just before this session.
Assessments of satisfactory quality also take into account “all relevant circumstances” and I would expect the type and nature of the digital content to be such a relevant circumstance. However, it is entirely reasonable to expect other forms of digital content, such as MP3 or music files, to be free from minor defects. Such types of digital content would probably not be judged to be of satisfactory quality if they contained bugs, even minor ones. So it is important to retain “free from minor defects” as an aspect of satisfactory quality in “appropriate cases”, as the Bill provides.
Although I understand the driver behind the amendment, I believe that the Bill is already flexible enough to take these concerns into account. To pick up a point made by my noble friend Lord Clement-Jones, about evidence that reasonable consumers expect bugs in software, the presence of bugs is widely understood in the marketplace. In its evidence to the BIS Select Committee during pre-legislative scrutiny, Which? stated:
“Consumers are very accepting of updates and patches within the software development world and when purchasing apps”.
That will, necessarily, form part of the assessment of satisfactory quality. However, consumers do expect software to work as they are told and as described when sold and that in any given situation, you would be able to tell the difference between a faulty piece of software and one that is just evolving.
The Bill is based on, and takes into account, the expectations of a reasonable person. Amendments that address specific types of software would reduce this flexibility, and may limit the relevance of the provisions in future as the industry evolves. I am also concerned that a blanket requirement to take account of the common presence of defects could have negative implications for consumers. It would make it harder for a consumer ever to show that software was not of satisfactory quality when it contained a defect, even one that was not minor.
Amendment 36 seeks to bring the issue of defects into the concept of “fit for a particular purpose”. As such, it conflates two different concepts: satisfactory quality and fit for a particular purpose. Digital content is fit for a particular purpose or it is not. That is separate from questions about whether it is of satisfactory quality. Clause 35 relates to instances when a consumer might let a trader know that they intend to use the digital content for a specific purpose that is not the normal use of that digital content. So if a consumer tells a sales assistant that she wants to use a computer game described as helping children learn to read in order to teach her child some basic letter sounds, and the trader sells her the game for that purpose, the game must be fit for that particular purpose—it must be able to teach basic letter sounds. The consumer is relying on the skill and judgment of the trader that the game has this feature.
If the digital content is not fit for that particular purpose, Clause 35 is breached, unless the trader can show that the consumer did not rely, or it was unreasonable for them to have relied, on the skill or judgment of the trader. A defect might render some digital content unfit for a particular purpose if a necessary feature did not work well enough or, indeed, it did not work at all. In such cases, I would be concerned that a requirement to take account of the common presence of defects could create a lack of clarity for consumers and lower consumer protection. The amendment could water down the concept of “reasonably fit” in subsection (3) for products that could be argued to be of a type that commonly includes defects. This could have the effect of reducing the impact of Clause 35 and therefore consumer protection.
Lord Stevenson of Balmacara
My Lords, Amendment 39 aims to ensure that a consumer is aware of their statutory rights and what that means in practice ahead of any purchase. The purpose is twofold: to ensure that consumers have those rights at the forefront of their thinking when they place the order, and the corollary of putting the rights as they are offered back in the mind of the trader. That is obviously important for digital content because traders and consumers do not interact in real time. We still have a situation where the nature of the transactions for any digital goods is new for many people and where the technical information around content lies outside many people’s normal experience.
In that context, consumer rights need to be spelled out as clearly as possible—possibly more so than for traditional goods—so that they are not an additional complicating factor. The consumer should be required to acknowledge that she or he has received that information. Another part is to ensure that all the details of costs—including potential or optional costs—are available to the consumer before they download. As previously indicated, that is especially important for online sales: consumers are not on the forecourt of a car salesroom and they cannot ask the questions that arise out of a discussion about the physical object that they are about to buy. As I am bound to say, if the Government insist on maintaining their view that digital rights are curtailed relative to equivalent tangible goods, then surely greater prophylactic measures need to be in place.
The amendment would be a good thing in its own right, but it would give statutory force to the OFT’s recommended principles for the online game industry. These include being upfront about all costs, including the download cost, unavoidable costs once downloaded and optional extra costs. All material information about the game should be provided upfront before download or play begins. That will include what the game does, how it works, compatibility with hardware, whether the game contains advertising or marketing material, and how personal data may be collected, stored and shared. Information about the business providing the game or app should make clear who the consumer is contracting with and how they can be contacted in case of queries or complaints, or if they wish to seek redress. The OFT’s principles also make it clear that in-game payments are not authorised and should not be taken unless the payment account holder—often a parent in the case of many of these purchases—has given his or her express, informed consent.
It is also interesting that the Advertising Standards Authority works to similar guidelines on price advertising in its code, which is set out by its Committee of Advertising Practice. Those guidelines include that price statements must not mislead by omission, undue emphasis or distortion; they must relate to the product featured in the marketing communication. Quoted prices must include non-optional taxes, duties, fees and charges that apply to all or most buyers. If a tax, duty, fee or charge cannot be calculated in advance, perhaps because it depends on the consumer’s circumstances, the marketing communication or advertisement must make it clear that it is excluded from the advertised price and state how it is calculated. Marketing communications that state prices must also state the applicable delivery, freight or postal charges. If the price of one product depends on another, marketing communications must make clear the extent of the commitment the consumer must make to obtain the advertised price. Lastly, price claims such as “up to” and “from” must not exaggerate the availability or amount of benefits or discounts likely to be obtained by the consumer.
I mention those because they are relevant to the amendment: there is a lot more than simply putting a blanket price on a product. I am sure that all of us have been caught to some extent by not seeing prices. This will sometimes apply to tangible goods as well as intangible goods, but it is much worse for intangible goods because, as we have said, there is a lack of direct contact. For all these reasons and the ones already indicated, it would be interesting to hear the Government’s response to this. We should strengthen this clause for the benefit of consumers and traders. I beg to move.
Lord Knight of Weymouth
My Lords, I was hoping to catch my noble friend before he sat down, but I am sure he will save up his response. I am extremely sympathetic to the amendment, given that I have signed it with him. I have a question on in-app purchases. In the course of the Committee we have discussed the iterative nature of improvement and change. It is difficult for some suppliers to anticipate all the potential in-app services that may evolve over the life of an app, for example. Is it my noble friend’s intention that the supplier of the services should set out, as far as it can foresee, what the potential cost would be of further digital content that is not completely upfront, but that it would not be completely bound by the clause if it then chooses to offer something additional?
Lord Stevenson of Balmacara
My Lords, that is an interesting point. I think that the intention behind the amendment was to restrict the applicability to purchases and the information available at the time that purchase was made. However, it is a fair point to suggest that where a purchaser clearly has intentions to upgrade or change the product in some way, there is a case for that being signalled at the time that the purchase is originally made—that other options or, indeed, if it were mandatory, extra charges could be coming down the line. Perhaps the Minister could respond to that point.
Lord Haskel (Lab)
My Lords, as my noble friend said, Clause 36 deals with digital content and the consumer’s right for it to be as described. This is important because people may not be able to properly check digital content before buying a complete program. Neither can you check whether it matches a trial version. It has to do what it says on the label.
As my noble friend said, digital content does not remain static. It evolves over time and during use. To give consumers the benefit of these improvements and the advantages of new developments as they come along, digital content providers supply updates, as the Minister explained. However, in addition to updates, upgrades are needed to make sure that the digital content works on the latest operating system and hardware.
The Explanatory Notes say that the Bill goes partly towards recognising this, in that it allows for updates that enhance features or add new features. However, the Bill is not clear. It insists that the digital content continues to match the original product. It has to remain as initially described for the duration of any contract. People in the industry, including my noble friend Lord Sugar, who has many years of experience in the software industry, consider that this could hold back progress in upgrades because the obligation of having to match the original product description could make some new features difficult or impossible to install.
This amendment therefore suggests a more practical approach while still maintaining the rights of the consumer. The amendment allows digital content to be modified if it is of general benefit to the consumer or if it improves the functionality of the software, regardless of whether the digital content continues to meet the original description. To make this absolutely clear, the original terms and conditions must disclose the fact that necessary changes may be made.
The Minister said that she was determined to provide clarity. This is what the amendment does, and achieves it by adding an exemption to Clause 40 so that subsection (1)(c) does not apply where modifications are made to digital content if such modifications are of benefit to the consumers, if they remedy issues, eliminate risk or generally improve the functionality of the digital content—provided that the fact that necessary changes may be made is disclosed clearly in the terms and conditions of the original contract. For example, the amendment will make it perfectly clear that if a consumer purchases Microsoft Office 365 they are not buying a static product and need not purchase a new version each time Microsoft issues an update or improvement. The programme will be refreshed and its features updated automatically as the consumer continues to use the software and had been informed of this at the time of the purchase.
The amendment will provide the clarity that the Government seek, less room for dispute, and continuing benefits for the consumer. I beg to move.
Lord Knight of Weymouth
My Lords, I have considerable sympathy with my noble friends’ amendment. However, I should like to return to the issue of the iPad of my noble friend Lady King, which she described as “stuffed”, following the iOS upgrade. I am sure that Apple would argue that the modifications embedded in the upgrade are of benefit to consumers, remedy issues or security risks, and improve the functionality of the iPad. Whatever the reason—it may be an old iPad that cannot handle the iOS, or it may be user or Apple error; I do not know the circumstance of her iPad being “stuffed”—the point that I am trying to make, certainly when others upgrade their iPads with the new iOS, is that if they have an old version of the device they would be struggling. We know that plenty of software upgrades depend, to some extent, on whether your hardware can cope with all the extra features that Apple in particular include. I wonder whether my noble friend’s amendment can deal with such a scenario in which benefit may apply to most but not necessarily all consumers. The amendment may be better than what is in the Bill, and it may be that I am just pointing out the complexities of this area, but I should be interested in his and any other responses to that point.
Lord Stevenson of Balmacara
My Lords, I am grateful to my noble friend Lord Sugar for putting down this amendment and my noble friend Lord Haskel for adding his name to it and standing in and presenting it for my noble friend Lord Sugar who is unavoidably detained today. As has been said, this is an alternative approach to things which is, perhaps, more reflective of a more dynamic and engaged relationship between consumer and trader in which you have to trust the trader to develop the tools you use and you go forward. It certainly beats the old advice—which I am sure my noble friend Lady King has already tried—that when in trouble switch it off, hope for the best and it will magically work itself out. It is an attractive idea that somebody up there is thinking about how it works and how best to improve it. With the dangers that my noble friend has mentioned, we need to hear from the Minister about how this has been received.
Lord Stevenson of Balmacara
My Lords, we question whether Clause 46 is as effective as it might be in this area. Although the debate on the last amendment was very helpful, it served to amplify some of our concerns about how this matter should be dealt with. As the Minister explained, the issue seems to be that there is the possibility of a price reduction if a trader fails to provide, or can neither repair nor replace, digital content if the consumer requires it but the trader is in breach of the requirement to do so within a reasonable time and without significant inconvenience. There is an implication that this is about paid-for content and that it arises from the contract. An obvious question is how it will deal with free downloads. I think I caught the Minister saying that it did apply to free material. I listened carefully to what she said but I am still not quite sure about the implications of this in terms of getting redress. There is also a wider question about how these things are going to be calculated.
My first question is: what is the mechanism under which price reductions and replacement costs are going to be calculated? Is this a matter for the courts or will some guidance be issued? If so, how will it be developed and will it be subject to the usual consultation? If it is not being dealt with by the courts or in documentation issued by the Government, who is going to decide this? Is it an ombudsman’s issue? Will there be a sliding scale of time for usage, given that some digital content such as streaming a film might be for one-off use while others might be for longer, such as an anti-virus software package—which usually covers a computer for a year or longer—or games which might be used for even longer than that? What is the basis on which this will be approached? Is it that you have had it for 12 months and therefore it is a longer or shorter period depending on the original cost? Are there difficulties about digital content that relate to such matters as a consumer having had 11 months’ use out of a piece of anti-virus software that is supposed to last for 12 months but a fault in the program causes significant loss through damaged work files or a personal data breach? Do they get only one-twelfth of the price paid because that is the period of time remaining under the original contract? Presumably there is a way of calculating a scale of loss in relation to the damage caused. If so, will the Minister explain it?
Ending with our favourite fermium apps, how do they work? I gather from the body language and the nods that they will be included, but when do they get picked up? Do you get the full force of the law, as outlined in this clause, as soon as you have downloaded, or only once you have gone on to the premium aspects? How is the balance between the two arrived at? There seem to be so many questions that the clause is not working effectively. I would like to hear further from the Minister before deciding on this matter.
Lord Knight of Weymouth
My Lords, my question returns to something that I have come back to every now and then today. In the context of this clause, has the Minister thought about remedy, not only for damage to a device or other digital content but for damage to reputation? Many digital products now involve co-production whereby users of the product are creating the product. Even something as simple as Twitter is of value purely by virtue of the nature of the contributions of the users. I have given the example of Snapchat, which is possibly the most recent example of this issue, but problems of people suffering damage to their reputation arise regularly. Obviously, they have a potential recourse to law but if we are starting to legislate to protect these consumers, as we should, will this extend to protecting prosumers—an ugly word—that is, consumers who are also producers? For example, a supplier of digital services may have a problem with the privacy setting and, although the consumer has legitimately set up privacy controls to protect his privacy, those have failed and there is then an impact on the consumer’s reputation. Can consumers seek recourse under this legislation or do they have to go through other legal means?