Baroness Neville-Rolfe
Main Page: Baroness Neville-Rolfe (Conservative - Life peer)Consumer Rights Bill
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The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Neville-Rolfe) (Con)
My Lords, the digital provisions are a vital aspect of the Bill, bringing consumer law into the 21st century. As the noble Lord, Lord Stevenson, has said, we need to get the rulebook right for the future, given the sheer scale, growth and innovation of the sector which he illustrated with some telling figures. I am also grateful to the noble Lord, Lord Knight, for his intervention and for reminding us of the importance of digital skills. He mentioned the hour-by-hour changes that are made to digital content and touched on the potential for co-production, which was interesting and important. Like him, I am delighted that my noble friend Lady Harding, who I also worked with when she was in retail, has joined the House and I agree that she will be able to bring some great insights to these important debates.
I can assure noble Lords that we have given extensive thought to and researched what these rights should be. What is clear is that a goods-like approach to the treatment of digital content is the right one to take. It builds on consumer expectations and familiar concepts for both businesses and consumers. The Bill will give consumers confidence, when they buy digital content, that it will be of satisfactory quality, fit for purpose and as described. If it is not, they will be entitled to have the digital content repaired or replaced, and failing that to get some or all of their money back. This approach creates a consistent regime for consumer protection other than where differences between goods and digital content justify different treatment, for example, because of the intangible nature of digital content.
Aligning the rights for goods and digital content completely would be a step too far. The main effect of providing that digital content should have the same rights as goods, as this amendment would do, would be to give consumers the short-term right to reject digital content that is supplied in intangible form, such as the music and films we download or games that are played online. We think that this would create real difficulties for our important digital content industry and would slow or prevent launches of new products in the UK. We believe that consumers will already be well protected by the new regime we have proposed without a short-term right to reject. As the noble Lord, Lord Stevenson, said, and as the noble Lord, Lord Knight, anticipated in his remarks, we have made clear in Clause 16 that goods which include digital content, such as digital content on a DVD or within a washing machine, will attract the full goods remedies, including the short-term right to reject. This also applies to software pre-installed on a computer or apps pre-installed on a phone. If the digital content is faulty, the consumer will be able to reject the goods in which it is included and return them to the trader. However, there are some significant differences between intangible digital content and goods which have led us to take a slightly different approach to digital content that is supplied in intangible form.
First, when consumers exercise their short-term right to reject faulty goods, they have no right to retain them. Under Clause 20, they have to make those goods available to the trader. However, unless digital content is embedded within a physical item, such as a DVD, it is difficult to return it to the trader in any meaningful sense. For example, it would be difficult for a consumer to return a faulty film they had downloaded to iTunes and, even if they did, the device would automatically retain a copy of the film. It has been suggested that the consumer could be required to delete the digital content as they cannot return it. However, this is easier said than done, as the noble Lord, Lord Stevenson, partly acknowledged. A requirement on consumers to delete the digital content would be difficult for even the best-intentioned consumer. For example, if a consumer was to e-mail back some digital content to the trader, a copy would be automatically retained in their sent box. In some cases, it would be impractical to delete the digital content. For example, a consumer might buy a so-called “mod” for a virtual world game such as Minecraft to be integrated into their world and built on further. Once this mod had been built on, if the mod proved to be faulty it would be impractical to delete it. A repair, or “patch”, to return the digital content to functionality would be a much more appropriate remedy.
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.
Baroness Neville-Rolfe
My Lords, I enjoyed the graphic picture described by the noble Lord, Lord Stevenson, of how things have changed and the smaller scale of everything as a result of the digital world. Despite his comments on the previous amendment, I think that we share a common goal: to legislate for the consumer of digital content in a 21st-century way.
One of the main aims of the Bill is to provide clarity on what rights consumers have when goods, digital content or services are substandard. I am sure that we are all agreed that one of the things that a consumer needs to know is to whom they should go when things go wrong. Intermediary businesses also need to be clear on when the rights do and do not apply to them, particularly when they are developing new and innovative business models. The digital content quality rights are contractual rights consumers have when they pay a trader to supply digital content to them under contract.
The noble Lord, Lord Stevenson, asked whether freemium products were covered by the clause for those who are not as digitally aware as some among the younger generation. A good example would be “Smurfs”, which is a free game but users can buy additional content within the game such as a house for Smurfers. The basic model is free but consumers then pay, sometimes at premium rates—hence the term freemium—for enhancements and additional features. Where a consumer pays for digital content and the trader provides it under a contract, the quality rights apply. This means that the initial free product will not attract the quality rights. However, the later paid-for features will, indeed, attract the quality rights. This includes being fit for the purpose for which they were bought—that is, to use in connection with the free product. Those of us who have studied the proceedings in another place will know that “Candy Crush” occupied a great deal of time among Members, to their great delight.
The noble Lord also asked what happens when the two matters come together and whether the quality rights that apply to the paid later additions then change the status of the free product. I will come back to him on that point.
The digital content chapter covers a consumer contract with the trader who supplies the digital content and not the intermediary who introduces the consumer to the trader, as they are not supplying that digital content. The intermediary will be covered only if they also supply digital content as part of their business. For example, if a consumer buys a computer game from an online trader such as Green Man Gaming, Green Man Gaming is the trader, in the same way as if they buy a board game from WH Smith, WH Smith is the trader.
If the consumer uses a search engine to find a trader from whom they can buy the game, the contract is not between the search engine and the consumer. The same is clearly true in the physical world. If the consumer uses Yellow Pages to find a shop, Yellow Pages is not the trader.
What consumers need to know is who the trader is. This information needs to be clear and transparent. I know that this is not always the case in the digital world. However, the consumer contract regulations, to which we referred in our discussions last week, came into force in June, particularly in respect of distance sales. They require that the identity of the trader and their contact details are provided to the consumer before the contract is made. This applies to digital content as well as to goods and services. Therefore, the proposed amendment is not necessary because this is how our reforms work. The rights apply against the trader the consumer has paid for the supply of digital content and not against the intermediary. The name and contact details of the trader have to be provided to the consumer under those regulations. I therefore ask the noble Lord to withdraw the amendment.
Lord Stevenson of Balmacara
I thank the Minister for her response. I take it from that that there is now agreement and clarity about the role of the intermediary, which I fully accept. I am glad to have on the record that the trader is the person with whom the consumer is contracting to provide a particular good or service delivered digitally and that the role of the intermediary is not involved unless they are also supplying either directly or indirectly material which could be called digital and it would be a paid-for service. I am also grateful for the confirmation that the consumer contract regulations will apply to that.
What I am not quite so happy about is the point raised by my noble friend Lord Knight about free downloads and what constitutes a free download—that is, not for monetary consideration—in the digital world. I wonder if the Minister would take that point away. It obviously comes up in relation to the freemium type of arrangement, but there are wider considerations here. I do not understand why the Government are taking a rather pure view of the fact that the trigger point appears to be the transfer of cash for a product that is already embedded into something that has been downloaded. The vanilla version—if I can use that term—of the game is clearly being used and operated in a traded way even though money is not being exchanged. There must be a reasonable expectation on both sides that a later development in that process would be for money to be exchanged so that the game could be enjoyed at a higher level. If the rights to it kick in only at the point at which consideration passes, then we are not covering the point at which the free version somehow interferes with and reduces the enjoyment of the player. It is perhaps too complicated to deal with here, but I would be grateful if we could exchange letters on this point. With that, I beg leave to withdraw the amendment.
Lord Clement-Jones
My Lords, in moving Amendment 34B I will speak also to Amendment 34C.
Under the current wording of Clause 35(1), a consumer can include in a contract for digital content a term that the content is fit for the purpose for which the consumer wants to use it without providing the trader with a realistic opportunity to evaluate, reply to, agree to or reject the consumer’s request. This means that the consumer can unilaterally include terms in a contract which go against the terms and conditions or the normal use of the content or even against the use of the content stipulated by the trader. Consumers should surely not be able to include a term in the contract on their own. A term should only be included if agreed by both parties. Clarity in a shared agreement as to contract terms is essential so that both parties understand and truly agree the contract. As currently drafted, the consumer may include a term in the agreement by implication. Contract terms should be expressly agreed, not by implication.
Surely if a consumer e-mails an online content store, saying that they intend to watch “Match of the Day” for a romantic night in, then that content would be deemed fit for that purpose under the current drafting. If it did not perform the stated purpose, the consumer would have a course of action against the store. As a second example, a consumer may e-mail an online content store saying they are buying a film to watch on a plane when they will not, in fact, be able to watch it because they need to stream the film over an internet connection and cannot download it. As currently drafted, unless the trader replies before the transaction takes place, the contract will, by implication, include a term that the consumer can use the content on a plane and the trader will be in breach of contract. I am sure there are many other possible scenarios that one might dream up, but it seems very strange that the consumer can, essentially, determine the nature of the contract in these circumstances as a result of Clause 35(1). I beg to move.
Baroness Neville-Rolfe
My Lords, I am grateful for the comments of my noble friend Lord Clement-Jones and for his constructive and telling contributions throughout this session. I note his comment about the consumer essentially creating the contract. I will answer, and try to cast light on the circumstances that we foresee for this provision, by looking at another scenario. Where a consumer e-mails a trader about their desired use for the digital content and then downloads it immediately—as is the case in the example proposed—it is highly unlikely that the consumer would be able to claim a remedy under Clause 35 from the trader if the digital content was unsuitable for that particular purpose.
This scenario would already apply to goods bought online. A consumer could e-mail a trader saying that they wanted to use the goods for a particular purpose that was not their usual purpose, and then order the goods without waiting for a response. However, there is no evidence that consumers are playing the system in this way, nor that it is causing problems for traders. The first key point is that the consumer must make known to the trader the purpose for which they intend to use the digital content. Secondly, the clause does not bite if the consumer does not rely on, or it was unreasonable for them to have relied upon, the skill and judgment of the trader.
In my scenario, we think it would be open to traders to raise a number of arguments. First, the consumer may not have made known their purpose to the trader, particularly if the time interval was such that the trader could not have been aware of the purpose at the time the contract was made. Secondly, the trader has not responded in any way and so has not exercised any skill or judgment. Finally, the consumer did not rely on the trader’s skill and judgment in these circumstances since their decision was made before the trader responded, and possibly even before the trader could have done so. So the clause is unlikely to apply in the scenario I outlined.
Amendment 34B says that we should remove the phrase “or by implication”. It is important to reflect that the requirement that a trader makes known the particular purposes for which digital content is intended implies that the trader must be aware of the consumer’s intentions. The phrase “or by implication” is to be seen in that context and may be more relevant in face-to-face sales than online ones. For example, a consumer may tell a salesperson that they are teaching their child to read when they are buying a particular piece of software but may not expressly say that they want to buy the software for the purpose of teaching their child to read. I do not want to deny consumers a remedy in such a case.
Amendment 34C requires that traders should expressly agree the purpose. Again, there are scenarios where the consumer may rely on the skill and judgment of the trader without their express agreement. For example, a consumer may e-mail a trader several times, providing the trader with an opportunity to respond to their request. The consumer may assume that the fact that the trader has not denied that the digital content is suitable for their purpose implies their agreement. Again, I do not want to deny consumers a remedy in such a scenario. Nor would I want to introduce additional steps into the purchasing process that were not necessary.
The clause replicates the related clause for goods, Clause 10, and also, crucially, that in the Sale of Goods Act. Keeping the wording consistent wherever we can retains the link with existing case law on fitness for a particular purpose, and ensures a close alignment between goods, digital content sold on a tangible medium and intangible digital content. While on the face of it, this amendment seems like a sensible clarification of the provisions for digital content, it could, as I have explained, have a perverse effect. I therefore ask the noble Lord to withdraw his amendment.
Lord Clement-Jones
My Lords, I thank my noble friend the Minister for her response. It is interesting and rather tricky. This is one of the trickiest areas that we have come across to date. I can understand my noble friend’s attachment to existing case law; that is what many lawyers would say in the circumstances. However, I want to innovate. The existing case law for goods in these circumstances could be extremely dangerous.
I accept some of the Minister’s points about the consumer having seriously tried to get the trader to respond and they have not, and about circumstances in which is entirely reasonable for consumers to rely on their skill and judgment. However, the digital world is different from the product world. The ability to communicate in one direction over e-mail without having a response adds a new dimension. It will not always be the case that it being unreasonable for the consumer to rely on the skill or judgment of the trader or credit broker will get the trader out of this particular situation, where there has been a unilateral statement that the product is required for such and such and, for some reason, the e-mail has not been received or the trader has not acknowledged receipt, or whatever.
Of all the clauses we have talked about to date, I do not think that this one is really the finished article yet. There is still some room for improvement precisely because the digital world is different from the product world. If you are buying a car on the dealer’s forecourt, you are in a very different position from that of winging e-mails and pressing buttons on purchasers’ websites. This clause does not yet reflect that adequately. I shall read what the Minister has said carefully and have further discussions. In the mean time, however, I beg leave to withdraw the amendment.
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.
Baroness Neville-Rolfe
My Lords, I am also grateful to the noble Lord, Lord Haskel, for his amendment and for standing in for the noble Lord, Lord Sugar. I look forward to his appearance on the Lord Sugar show.
I recognise that some types of digital content, such as software and games, do, in the words of the noble Lord, Lord Haskel, evolve over time. That is precisely why we introduced Clause 40, allowing updates that were in the terms of the contract. So let me reassure noble Lords that there is nothing in the Bill that prevents digital content traders from providing updates or upgrades, under the terms of their contract, to improve the functionality of the digital content. We have heard several times from the noble Lord, Lord Knight, about the iterative nature of some digital content and I am grateful for his digitally aware intervention.
Clause 40 ensures that, as long as modifications are allowed under the terms of the contract, there is nothing to prevent the trader from updating or upgrading digital content as long as it remains of satisfactory quality, fit for any particular purpose and as described. Such contract terms would be assessable for fairness under Part 2, “Unfair Terms”. The “as described” aspect does not fix the digital content to a static description. The digital content has to match the description but this does not mean it has to be exactly the same as the original description. It simply means that if the digital content is described as containing a certain feature then it should have that feature. However, as long as it has the described features, any additional features would not prevent it from matching, rather as a blouse may match a jacket, although the jacket may have more colours.
To a large degree, the description is in the gift of the trader, as long as it includes the main characteristics of the digital content, its functionality and interoperability. I have heard the industry’s concerns that it needs to be able to provide updates that are made for the consumer’s benefit. Perhaps a feature is taking up too much processing power and slowing everything else down, or perhaps a feature has become vulnerable to a security threat and needs to be removed while it is fixed, to protect the consumer from the threat. Of course it is important that industry is able to act in these cases but I am not convinced by arguments that Clause 40 will prevent it from doing so or slow it down in cases of urgent updates.
Let us assume that a trader has needed to remove a feature of some digital content, either intending to improve functionality or protect from a security threat. What would the trader do next? They would have two options. They could repair the feature to make it work more efficiently or improve security, and then reinstate it. Or they could take a decision that it was a minor feature that not enough consumers used, so they would not reinstate it. If, in that scenario, the removal of the feature meant that the digital content no longer matched the description, as required by Clause 40, the first remedy available to the consumer would be the repair or replacement of the digital content.
In the first option I have just outlined, that is normal industry practice already and is appropriate. A consumer has bought some digital content expecting it to contain the features or perform the functions it was described as doing. If the digital content no longer does that they will be justifiably unhappy and will expect the problem to be fixed. In the second option, where the trader is not repairing or replacing the feature, the consumer would be entitled to some money back. Let us remember that the amount due is unlikely to be the full price paid. It would be an appropriate amount and we would expect this to take into account the use the consumer had already had of the digital content and the continued functionality of the rest of the digital content. So the amount might be small.
“(7A) It is not open to the consumer to treat the contract as at an end for breach of a term to which any of subsections (2), (4) or (5) applies.”
Lord Clement-Jones
My Lords, the rationale for this amendment is that Clause 46, which deals with consumer compensation for damage to a device or other digital content, fails to appreciate totally the complexities of security software products. Failures and malfunctions in software can occur for a variety of reasons, often without any connection to the design or development of the product itself. Improper use of the product is one common cause, while defects in the consumer's own equipment are another. The incompatibility of different pieces of digital content used simultaneously by the consumer is a third. In all these instances, the liability of the software provider can extend only to what is effectively in the sole control of that provider; that is, to cases where the cause of the damage sustained by the consumer is unambiguously and exclusively the product of that provider.
In the area of internet security products, urgent critical fixes for serious threats may sometimes get released before companies have tested the process extensively as there is generally a greater benefit for a greater number of consumers compared with a small number who may experience minor compatibility issues or false positives. These updates are developed with reasonable skill and care and they are tested against numerous possible known configurations. However, by their very nature the updates are a process that needs to be automated, and that is done under extreme time pressure. As a general rule, the faster an update is released to consumers, the greater the number of people who are protected from a new threat.
However, the current clause might encourage suppliers to slow down, delay or discourage the release of new security solutions or urgent critical fixes, to the ultimate detriment of consumers. Against that backdrop one must add the fact that the Bill does not allow the trader to restrict his liability under any circumstances. It then becomes apparent that the security industry will be confronted with a very real disincentive. Moreover, in the digital environment it is sometimes necessary to sustain minor damages that are unavoidable to protect the consumer from greater or further harm. A few examples may be helpful to illustrate this point because it is so specific to the digital environment.
It is better to delete a malware-infected e-mail from the consumer’s webmail account and to lose the content of that one e-mail than to have the consumer’s entire computer corrupted. It is also preferable as a precaution to temporarily block the consumer’s access to a website that is suspected of distributing malware rather than giving access and exposing the consumer to the risk of an infection. Similarly, it might be advisable in certain cases to take a service offline in order to address a security threat before making it available again to the consumer. In all these cases, the consumer or the consumer’s property may sustain damage, such as the loss of the content of an important e-mail that was deleted because of the malware that had infected it, the failure to receive a live video transmission while access to the service platform was blocked, or the inability to perform a particular online action at a precise moment because of a service outage. But in certain circumstances it has to be understood that this minor damage is a reasonable price to pay for the avoidance of much bigger harm, and Clause 46 should acknowledge that. I beg to move.
Baroness Neville-Rolfe
My Lords, I listened with great interest to my noble friend’s concerns. However, it is worth going back to the driver for this clause, which is to make it clear that all consumers of contractually provided digital content, free or paid for, may have a right to damages if the circumstances warrant it. Perhaps I can expand on that a little. The consumer already has the ability to bring a negligence claim in this area. If a consumer downloads some digital content that contains a virus, the consumer could seek to make a negligence claim against the trader if the virus caused loss or damage to the device or other digital content. However, excluding free digital content from the quality rights may leave consumers unsure that they have the ability to make a claim when free digital content causes damage, so Clause 46 clarifies the position. It is designed to reflect negligence principles and not to introduce any new burdens on industry.
On the question of consumer responsibility, I agree that traders should not be liable for damage that results from something the consumer has done with the digital content that it was not reasonable for them to do. Clearly, in this case, it is the consumer’s behaviour that has caused the damage and not the digital content. However, I do not agree that it is necessary to lay this out in the Bill. It is already implicit in the way the clause works. In order to prove a breach of the clause, the consumer has to show first that the digital content itself caused the damage to their other digital content or device. Secondly, they would have to show that the trader failed to use reasonable care and skill to prevent the damage. If the damage occurred because of something the consumer had done, then the consumer would not be able to prove a breach.
The concept of reasonableness in the application of this provision was referred to. I recognise that digital content operates in a very complex environment, as has been said often, and furthermore that no digital content trader can be expected to know every possible configuration of digital content on a consumer’s device. That is why we used the concept of reasonable care and skill in this clause. Reasonable care is part of the test of whether there was a breach in the first place. Even if the digital content can be shown to have caused the damage, there is no breach if the trader acted with reasonable care and skill to prevent the damage. This effectively protects the trader from expectations that they must have acted in every way possible to prevent the damage if it was not reasonable for them to have done so. It means that the trader would not be expected to test exhaustively for every possible scenario and that the trader’s activity would be judged against the normal standards in the industry.
The concept of reasonably foreseeable is slightly different. It addresses whether it was reasonably foreseeable that breaching this clause would cause the loss that the consumer suffered. However, expressly limiting the application of the provision to damage of a kind which the trader ought reasonably to have foreseen makes the provision more complex and creates an additional hurdle for consumers, making it harder for a consumer to secure a remedy.
My noble friend raised the issue of urgent updates and the need for them to be automated under the inevitable pressure of time. It is unreasonable—
The Deputy Speaker (Lord Geddes) (Con)
My Lords, it is now 6.23 pm. At least, it is according to the Annunciator, not the Clock; we should not rely on the Clock. I cut the noble Baroness, Lady Neville-Rolfe, off in her prime. Perhaps she would like to continue.
Baroness Neville-Rolfe
My Lords, I had finished explaining the background to what we were seeking to achieve, which is important for the Committee to understand and for the record because of the original nature of the discussions on online. However, my noble friend Lord Clement-Jones was particularly concerned about emergency security updates. He rightly emphasised that they need to be carried out with great speed and that some consumers could suffer minor damage.
The position as the Government see it is as follows. The consumer has to demonstrate that the trader failed to use reasonable care and skill to prevent the damage. We would expect that all reputable traders in this area would use reasonable care and skill as a matter of course, even for security updates that obviously have to be released rapidly. However, what constitutes reasonable care and skill for urgent security updates would be judged against the normal industry standards in that context, not against the standards for regular updates.
I sympathise with my noble friend’s concerns about traders facing claims concerning minor damage caused to a few consumers during the process of an emergency update. However, if the trader has used reasonable care and skill, given the context, I would not expect that Clause 46 would be engaged. I therefore ask my noble friend to withdraw the amendment.
Lord Clement-Jones
My Lords, I thank my noble friend once again for a very clear exposition. If there is ambiguity when it comes to a court looking at some of the provisions of the Bill when it is enacted, some of the explanations may be quite useful in a Pepper v Hart kind of way. That useful exposition would give some assurance to anybody looking at the clause. I will read Hansard with great interest. I thank my noble friend and I beg leave to withdraw the amendment.
Baroness Neville-Rolfe
My Lords, this clause aims to address a specific concern of consumer groups who have told us that, as a minimum, we should give some protection in legislation against free digital content that causes damage, as we discussed earlier. The clause aims to clarify that consumers have a right to a remedy for damage to their device or other digital content, even in relation to free digital content, if it has been supplied under a contract. It addresses a concern that there may not be a clear course of action because free digital content is not covered by the quality rights.
We are all aware that digital content sometimes contains malware, such as computer viruses, that can damage the consumer’s device. Often this is as a result of the actions of rogue traders, but malware can also be introduced accidentally from legitimate sources. For example, in January, an American personal computer manufacturer notified its dealers that it had accidentally shipped at least 500 computers that contained the Michelangelo virus, which erases the computer’s hard disk, on 6 March, Michelangelo’s birthday. The virus had infected the computers from a third-party supplier whose software was bundled in the computers. The intention of this clause is to engage negligence principles. It gives consumers rights to a remedy for all contractually provided digital content which causes damage. The remedy would be a repair or an appropriate payment.
The noble Lord, Lord Stevenson, asked about freemium apps. I have already promised to write to him, so I will ensure that this aspect is also covered in that letter. He also asked how one would calculate an appropriate payment for free digital content that causes damage. The payment is not a reduction in price of the original content. The financial remedy is to provide compensation of an appropriate amount. We would expect this amount to be proportionate to the damage caused. If the damage simply stopped the spellchecker within the word processor from working, the financial compensation would be very minor.
A noble Lord
Baroness Neville-Rolfe
I agree—I take the rebuke. Obviously, perfect spelling is very important to the future of civilisation.
As I was saying, the digital content might have introduced a code that has damaged all the digital content on the consumer’s device, including the underlying operating system—for example, as can happen on one’s iPad. In this case, the compensation could be considerably more.
We have already debated the issues surrounding business liabilities under this clause and we have talked a little about the consumer angle. I have listened very carefully to both of the perspectives discussed in relation to this clause and I will read Hansard. I am keen to ensure that we have the balance right here. I think that we have. For that reason, I hope that your Lordships will agree that this clause should stand part of the Bill.
Lord Stevenson of Balmacara
My Lords, I thank the Minister for her comments. By her use of examples she has explained some of the difficulties. She put herself into exactly the position I was trying to bring her to, which is that I do not really understand how this works yet. I now understand the mechanism and that it will apply to free delivery, and anticipating her line of argument, presumably where free apps turn into freemium apps there will be an assessment of both the free part and the premium part because there will be two different elements in the calculation that go towards it. I can see that the issue is about the damage caused rather than the original pricing because there was no price on the free element. However, I still do not quite understand who is doing that. Is this now a matter for the courts or will some new form of arbitration system be set up for problems around free downloads? I am not looking for a response at this point, but perhaps the Minister could write to me.
Baroness Neville-Rolfe
Perhaps I may clarify that obviously it is ultimately for the courts since we are talking about provision for damages and so on. I shall set that out clearly in writing.
Lord Stevenson of Balmacara
I am now slightly more confused because the text of the Bill states that the consumer has a right and can exercise that right against a trader. Is that going to be in the courts in all circumstances? If we are talking about some of the apps referred to earlier by my noble friend Lord Knight, we are considering trivial things which may create a lot of confusion. I cannot believe that the courts will wish to engage themselves with “Angry Birds” and “Candy Crush” users who are annoyed about an issue.
Baroness Neville-Rolfe
Perhaps I have confused the noble Lord by saying that ultimately this is a matter for the courts. However, he will be pleased to know that we are planning to issue guidance in this area which will be subject to the usual consultation. The minor points being articulated by the noble Lord will be the subject of guidance and therefore, it is hoped, will not reach the courts too often.
Lord Stevenson of Balmacara
“A hae ma doots” about that—but perhaps I should not use that term in Hansard. I have some doubts about where this is going, so again perhaps I may request a letter that sketches this out in more detail; I am sure that we will reach an accommodation. In the mean time, I am happy not to press my opposition to the clause.
Baroness Neville-Rolfe
My Lords, this may be a convenient moment for the Committee to adjourn.