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.