Baroness Jolly
Main Page: Baroness Jolly (Liberal Democrat - Life peer)Consumer Rights Bill
Baroness Jolly Excerpts
Baroness Jolly (LD)
My Lords, for the first time, this Bill clarifies what rights consumers have when they buy digital content. Those rights include that the digital content be of satisfactory quality. If, before making a decision to buy, a consumer relies on a claim as to the outcome of digital content, it is, in many cases, absolutely right that this claim should be taken into account when assessing whether the digital content is of satisfactory quality. It may not, however, be appropriate when the claim relates to factors such as the subjective enjoyment of the content, such as an action game trader saying that the game will give the consumer “the greatest thrill of your life”. Thank you to the Bill team for that one.
That is why, as with goods, one of the factors taken into account in an assessment of satisfactory quality is “other relevant circumstances”. Again, I would like to stress that Clause 34(5) provides that this includes,
“any public statement about the specific characteristics of the digital content”.
This could include key outcomes. Where a consumer has relied on a claim made by a trader as to the outcome of the digital content, in many cases they will therefore already be able to take this into account when judging whether or not the digital content is of satisfactory quality.
When we discussed the question of outcomes relating to goods, the noble Baroness, Lady Hayter, distinguished claims about the physical characteristics of goods from claims about the outcome that the goods were supposed to achieve. Noble Lords may remember that there was much talk about the efficacy of washing machines and washing powders. However, statements about digital content may form part of the description—if the statement says that a calendar will include details of all public holidays, for example. Consumers have clear remedies if digital content, like goods, is not as described.
Where consumers are deliberately misled—again, as we have discussed in relation to goods—consumers are also protected under the Consumer Protection from Unfair Trading Regulations. The Government have given consumers a private right to redress if these regulations are breached, and we have clarified that they will apply to sales of digital content. These changes came into effect on 1 October. Under the Bill and the regulations, therefore, it is clear that there is strong consumer protection in place in relation to claims made by traders as to the outcome that digital content will achieve.
Earlier in Committee, the noble Baroness, Lady Hayter, expressed the view that if statements about outcome are already covered by the legislation, this should be included in the Bill to provide clarity to consumers. There may be a number of unintended consequences if that happened here. First, although it will in many cases be appropriate that public statements about the outcome of digital content should be taken into account when judging satisfactory quality, as with goods, a requirement that all statements be taken into account is not a practical option. Such a specific requirement would lose the necessary flexibility that we have under the current provisions. It would draw in statements made in advertising that are not intended to be taken literally. For example, an advertisement might state that a brain training app will turn you into the next Einstein, but a particular concern of the digital content industry, much of which is based on creative content, is that it would draw in statements as to the subjective enjoyment that the consumer would get from the digital content or the artistic merit of that content, which fall outside the meaning of “quality” that is understood in the Bill.
Secondly, there is a risk around narrowing the interpretation of “relevant circumstances”. The more circumstances that are specified as included, the greater the risk that the concept will be narrowly construed. As such, the Government consider that the Bill already provides the appropriate balance and flexibility in determining whether digital content is satisfactory. However, we can address the noble Lord’s point about providing clarity to consumers that statements about the outcome of digital content and goods are relevant factors in an assessment of “satisfactory quality”. This point will be set out in the guidance we will provide when implementing the Bill.
On Amendment 35, I do not dispute that it is important that consumers are protected if digital content is not fit for an advertised purpose. As we have discussed, the Bill provides this protection in Clause 34. The standard of satisfactory quality can include digital content being fit for its usual purpose and takes into account public statements made not only by the trader, but also by the producer or any representative of the trader or the producer. Clause 35 addresses a slightly different situation. Whereas Clause 34 refers to the purposes for which digital content of that kind is usually supplied, the purpose of Clause 35 is to ensure that consumers are protected when they rely on the trader’s judgment. If consumers make known to a trader that they intend to use the digital content for a particular purpose, and if it is sold to them on that basis, the clause clarifies that the digital content should indeed be fit for that particular purpose.
Let us take an example. A consumer may want to purchase an app that tells them whether or not their device is level, for the purpose of building a home extension. The consumer emails a trader to ask if the app can be used as a spirit level for building the extension and receives a reply stating that it would be suitable. So the trader has been made aware of the customer’s intentions for the app and has sold it on that basis. The consumer should be able to rely on the fact that the spirit level app will be accurate enough for their needs in constructing the house extension. Clause 35 protects the consumer even if the intended use is not the usual purpose for the digital content. Public claims about the digital content may not be relevant here. This clause is all about situations where the consumer is seeking the advice of the trader for less usual purposes, which may not be public. Indeed, this amendment may cut across the consumer protection that Clause 35 provides. Clause 34 already covers claims as to the quality or usual purpose of the digital content. I hope, therefore, that the noble Lord will be prepared to withdraw the amendment.
Lord Stevenson of Balmacara
I thank the noble Baroness for her comments, although I am slightly alarmed by the example of the spirit level app. However, that may have more to do with my technological ineffectiveness in terms of dealing with the tools of the trade; we can talk about that later. The key to some of these issues is better guidance because it is clear that we are in new territory here. What works for tangible goods may not be as effective in terms of intangible goods, and I think that that is common ground between us. Obviously we cannot see the guidance now, but I would ask the noble Baroness to advise me, not necessarily from the Dispatch Box, whether it will be available for consultation before it is issued and whether there will be the usual round of discussions with trade bodies, producers, consumer bodies and others. That would be helpful in terms of getting us to the right place. With that, I beg leave to withdraw the amendment.
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.
Baroness King of Bow
My Lords, this amendment would provide further exemptions to the providers of digital content, freeing them from the need to guarantee the third-party software they use. I understand the argument put forward by the noble Lord, Lord Clement-Jones; namely, that the trader may not have a warranty from the third party, and I am sorry that my contribution will be a disappointment to him. It appears to me none the less that it would reduce consumer protection, but after all, this legislation is called the Consumer Rights Bill. Again, this is a question of balance. The key point is that if the trader benefits financially from the use of the third-party software, surely it is inappropriate to load the risk on to the consumer. It is the trader’s decision to buy and use third-party software, so if that trader is unsure of its quality, it must be a risk that it undertakes and consequently should be liable for, not the consumer. The consumer cannot control the trader’s relationship with its suppliers; third-party software is very much the responsibility of the trader, and therefore we cannot support the amendment.
As I have already mentioned, if a business is selling digital content for profit, it is up to that business to ensure that all elements of the final product are of a reasonable quality. I hope to hear that the Minister shares this view.
Baroness Jolly
My Lords, the Bill aims to create confident consumers who are more likely to try new products and new providers, and as such, help to drive growth and innovation. With this aim in mind, our position is that there should be no gaps in consumer protection for digital content. It is only right that when a consumer buys digital content they can expect it to be of satisfactory quality, fit for purpose and as described. If not, they can expect the fault to be put right. The concerns of traders who may find their ability to claim back costs from third-party providers limited by their business-to-business arrangements need to be balanced against the needs of consumers who should be able to shop with confidence. I understand that B2B relationships may be particularly complex in the area of digital content, but complex arrangements are not a defence against faulty digital content, and consumers should not be left without adequate protection.
I shall pick up on a point made by my noble friend Lord Clement-Jones, that it was not fair on SMEs since intermediaries may limit their liability in a B2B contract. I understand the problem that some smaller traders may lack bargaining power with larger companies, and that is why we have other protections in law such as the Unfair Contract Terms Act 1997. However, beyond that basic protection and other protections, such as the Sale of Goods Act, where appropriate, we believe it is important to allow businesses the freedom to make contracts with each other without state interference. My concern is the potential for this amendment to significantly undermine consumer protection, because it would seem to have such very broad implications.
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.
Baroness Jolly
My Lords, this amendment relates to communication of the costs that the consumer will face. This can be particularly important for digital content provided under the “freemium” model, discussed earlier in Committee, where the original digital content may be provided for free, but consumers have the opportunity to purchase extensions and improvements to this content through “in-app purchasing”. That is why the Government are committed to providing clarity and transparency to consumers when it comes to costs.
I am sure that noble Lords will be happy to know that the Consumer Contracts Regulations, which came into force in June of this year, ensure that the trader provides information to the consumer about the total price, including taxes, before the sale is made. Under the regulations, this will have to be clear and comprehensible to the consumer before they buy. The Bill makes it clear that this information becomes part of the contract and cannot be changed without the consumer’s express consent. Furthermore, the regulations make it clear that the consumer’s express consent must be given before any payments are made in addition to the main price.
We have also made it clear that pre-ticked boxes, where the trader has already ticked the “agree” box for the consumer, are not enough to signify express consent for those additional payments. This should go a considerable way towards ensuring that a consumer knows exactly what they are buying before they commit to it. Under the “Unfair Terms” part of the Bill, which is still to come, additional charges will not be able to be hidden in the small print.
Legislation to provide clarity on pricing and a clear obligation to pay is already in place. However, we are all aware of cases where young children in particular have racked up high bills relating to in-app purchases in games. This is an issue for enforcement. That is why the then Office of Fair Trading conducted an investigation into children’s online games at the end of last year, which resulted in the publication of a set of principles for games manufacturers in January, based on the Consumer Contracts Regulations and the Consumer Protection from Unfair Trading Regulations.
The noble Lord, Lord Stevenson, asked me to clarify whether the Office of Fair Trading principles applied to the online games industry. The amendment would provide a statutory basis. So the OFT principles are based on statute. They are based on the Consumer Contracts Regulations and the Consumer Protection from Unfair Trading Regulations. I am therefore confident that the OFT—now, of course, rebadged as the CMA—already has the legal toolkit that it needs. To reiterate this, the CMA, as it is now known, is currently looking into industry’s compliance with these principles and will consider enforcement action in necessary cases.
Lord Stevenson of Balmacara
I thank the noble Baroness for giving way. I am interested in what she said about the principles being set out in an OFT report but I am not clear where we ended up. Perhaps she would reflect on that a little more so that I have a better understanding of it. The principles bite quite hard on this problem, so if they were to be given statutory backing, that would go a long way towards answering the other points that are made in my amendment. Can she confirm whether that is the case? Is she saying that the impact of the Bill as it currently stands is such that it would incorporate the set of principles identified by the OFT or is she not? It is a simple question.
Baroness Jolly
That is my understanding, but I sought to check the point with my team before it goes into Hansard. They already have statutory backing in the regulations. We are already there.
Lord Stevenson of Balmacara
Just to be troublesome, the Advertising Standards Authority is not a statutory body, although it does still exist where the OFT does not. As we have heard, it is now part of the CMA. Is it also the case that the ASA’s principles, which again bite hard on this problem, would be considered to be part of the statutory provision or not? I am happy to wait for a reply because I appreciate that it might take more time.
Baroness Jolly
Rather than mislead the noble Lord, I shall send him a letter and copy it to all noble Lords who are concerned with this debate.
I shall proceed with my response. We are pleased that the games trade associations have responded positively to these principles since the industry does have a duty to behave responsibility. Of course, parents too have a responsibility, for example, to turn off in-app purchases. I confess that I did not know they exist, but my kids are a bit big for them now. I hope that, as a result of this action, we will continue to see progress on compliance with the regulations in this area, and I would therefore ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
My Lords, I am grateful to the Minister for responding to these points and I look forward to receiving a letter. On reflection, if the letter could cover both the OFT, now CMA, principles and the ASA principles, that would be a lot better.
We share a concern on the generality of these issues. These games are incredibly popular and are played by loads of people, but the particularity of the problem which we have identified is that the danger arises because it is mostly children who are engaged with them. Yes, it is possible to switch off the in-app acquisitions elements that are part of the process of playing games these days, but I still think that there are many concerns which will surface in other areas alongside those, such as exposure to advertising and so on. They form part of the value chain of the very products we are talking about. Although we are dealing with a first level of concern here, I worry that we will need to come back to this, perhaps in some other forum, and question how it is that the almost addictive quality of the game-playing capacity that now engages among young people in this and many other countries is being accompanied by a new mode of trading which is not just purchase based but, as we have heard, is about acquiring personal details on purchasing habits that help to inform trading activities, particularly as they affect children. However, these issues are broader that what we have before us and no doubt we will come back to them at some point. In the mean time, I beg leave to withdraw the amendment.
Baroness Jolly
My Lords, when the issue of the trader’s responsibility when they are aware that they have a digital content product that is faulty was discussed in the other place, much reference was made to inaccurate mapping software that continued to be offered to consumers even after it was known to be faulty. Examples like this are embarrassing to the businesses in question. No reputable manufacturer wants to release an inadequate product, especially in these days of Twitter, Facebook and other social media, where news of such faults spreads really quickly. When problems such as this do occur, it is in their best interests to act quickly to resolve them. Consumers vote with their feet. In the case of the inaccurate mapping software, consumers simply switched back to a competitor’s product.
It is therefore in the interests of traders and manufacturers who find themselves with a faulty product to act quickly to produce an update to rectify the fault, and to ensure that consumers receive that update. Of course, in the case of updates to apps, downloaded products or products that are uploaded and then registered online, manufacturers already proactively inform consumers when updates are available.
However, the amendment has implications that would be burdensome on business and, at the least, an unwelcome irritation to consumers. The effect of the amendment would be to require traders to make consumers aware that there is a bug before they provide an update. This would seem to introduce an unnecessary step in the process, particularly for those consumers who have not already noticed the bug. It could also be burdensome for businesses, especially small businesses, if the result is an increase in complaints that have to be handled, diverting resources away from the important issue of producing the update.
Of course, I am not discouraging consumers from complaining to traders where their rights have been breached—quite the opposite. The Bill aims to empower consumers to assert their rights. However, encouraging consumers to claim a remedy where they might otherwise not have noticed that there was a fault, and a repair was already being produced by the trader, seems unnecessary. I therefore ask the noble Lord to withdraw the amendment.
Lord Stevenson of Balmacara
I thank the Minister for her response. I will read carefully what she has said and consider it. I did not agree with her view that this might in some senses be unwelcome to consumers. I think we are underestimating the worries that many people have when they buy material that is then subject to problems, and they need to be updated about that. Nevertheless, for the moment, I beg leave to withdraw the amendment.
Lord Clement-Jones
My Lords, in moving Amendment 43, I shall speak also to Amendment 44. Very significantly, the effect of Clause 47 is that liability under most of the provisions of Chapter 3 cannot be excluded or restricted. Broadly, the clause in its present form prohibits any exclusion or restriction of liability whatever, however reasonable it may be to exclude or restrict such liability. The intention of these amendments is to allow such exclusion or restriction of liability if it is reasonable. This is particularly important because, as we discussed earlier, software often contains defects and is known to do so. Increasingly, software is installed and runs alongside or on other applications or platforms. These are often refined and altered as new versions are released and indeed may have incidental defects as well. The performance of one software program may therefore often depend on other applications, interfaces and programs, and it is the resulting interplay that can expose unexpected defects, but these may not be evident or even exist when running the same program in another manner or configuration.
The appearance of a defect might lead to the conclusion that a software program is defective as an absolute and verifiable characteristic of that software, but many such defects may exist only in certain circumstances or in specific configurations. This is very different from a single consumer good which, operating alone, either functions in accordance with the marketed description or is defective. It may well be reasonable to allow the supplier to exclude liability for defects. It is important to stress that the amendment would permit the supplier to exclude or restrict liability only if a court thought it reasonable to do so.
The fact of the matter is that virtually all software contains defects. There are limited exceptions but they are highly specialised and tend to be found in application areas where the consequences of failure are so grave as to demand ultra-resilient and dependable software—for example, aircraft and automotive control systems, software for nuclear installations, software in surgical scenarios, or software to guide or launch weapons. To the extent that defect-free software exists, it will tend to be infinitely expensive.
Cheap consumer software is wholly different. It cannot be polished for ever and, if so, would be very expensive to buy a licence for. Apps are being developed all the time for the consumer at the cost of, for example, around 69p or free. Without the ability to limit such liability, this law could chill software development by micro-business and SMEs. Costs will be pushed up for such small developers as they will need to seek to mitigate or insure against such legal risks. It could end up by stifling innovation. It could make the developer think, “Why supply software under such a law to consumers at all? It’s too risky”.
In any event, this law is unnecessary as in practical terms the software industry will always find a workaround or fix to a problem. Such solutions happen each day and often very quickly. The rule will be divorced from reality. The remedy is not proportionate and, in the view of many in the software industry, is somewhat draconian. It is out of step with the way in which the industry works and looks after its customers, who are its lifeblood. A solution could be that such a rule under Clause 47 applies only if a workaround or fix is not implemented. Thus, unlimited exposure kicks in only if a fix fails.
The clause is too much of a blunt weapon to cure, at best, only a technical legal problem. Have the consequences been properly considered on developers? The effect of such potential unlimited or excludable liability can be foreseen as the near certainty of choking back innovation and the further distribution and take-up by consumers of advanced technologies in application areas where it is not reasonable for them to expect a perfect product—especially where the product is at zero or very low cost. In any event, it is reasonable to take into account any fix offered, together with a number of factors, in order to determine reasonableness.
In conclusion, as the Federation Against Software Theft suggests, a more equitable approach would be to permit the exclusion or restriction of liability to the extent that it is reasonable to do so, taking into account factors analogous to those under the Unfair Terms in Consumer Contracts Regulations 1999—SI 1999, No. 2083. That would enable the courts to develop a fair and equitable system on a case-by-case basis. I beg to move.
Baroness Jolly
My Lords, we have heard that this amendment seeks to introduce into the digital content chapter a right for businesses to be able to exclude or limit their liability for meeting the quality rights if doing so is “reasonable”.
We have chosen not to allow “reasonable” limitations on liability for the quality rights in any of the goods, services or digital content chapters of the Bill. This reflects the current law in relation to business-to-consumer contracts for goods. Clause 47 prevents a trader contracting out of the consumer’s statutory rights and remedies specified in that clause. This is because, in practice, the liability will for the most part be limited to the contract price of the digital content, as for goods. So there is a natural cap.
Clauses in consumer contracts that exclude liability entirely, or limit liability to significantly less than the contract price, are unlikely to be judged as reasonable anyway. I have heard industry concerns about the complex environment in which digital content works, and I know that contractual relationships between traders may be complex, as may the technical issues. Against this backdrop, it is difficult for a trader to have full control over the quality of the digital content that they supply, so traders have concerns about being liable for problems that are not entirely in their control. However, as I said earlier, is it right, from the consumer’s perspective, that traders can limit their liability? Surely if a trader offers to sell digital content for a consumer, they should take responsibility for the consumer getting what they expect.