My Lords, Clause 33 sets out which contracts to supply digital content are covered by this chapter. It clarifies that the chapter will apply to contracts between a trader and a consumer where a trader agrees to supply digital content that has been paid for with money; associated with any paid-for goods, digital content or services; or paid for with a facility, such as a token, virtual currency or gift voucher. As well as dealing with the substantive issue raised in the amendment, it would be helpful if the Minister can indicate whether “freemium” games and other free downloads are covered by this clauses.
The substantive part of the amendment aims to make the distinction between intermediary trader services and a trader explicit. The reason why online platforms, from small bulletin boards to sites such as YouTube, eBay, Amazon, Facebook, Twitter and so on, are so beneficial is that they allow anyone anywhere to instantly connect with billions of people around the world. Before, if you wanted to speak to a large audience, you needed to own a broadcast tower. If you wanted to reach consumers around the world directly, you needed to set up store fronts. Now, all it takes is a website host, YouTube or eBay and you can connect with a global audience.
4.15 pm
Appropriate limitations on intermediary liability play a critical role in the internet’s development. It is essential that legal regimes do not put intermediaries in the untenable position of policing content or holding them strictly responsible for what users do. After all, telephone companies are not held legally responsible for callers who use their phone lines and are not forced to monitor calls to make sure that they are not doing something illegal. In the same way, requiring online services to monitor every piece of content or imposing harsh liability on them does not make sense. It would be bad for innovation, free speech and privacy.
When Android Market was originally launched in 2008, it included approximately 600 apps. Google Play, its successor, now includes more than 1 million apps, with thousands being added daily. It also includes a library of more than 18 million songs, 5 million e-books and thousands of movies. Google Play has had a total of more than 50 billion app downloads, and iTunes has 1 million apps in the App Store, with more than 60 billion app downloads. That has resulted in a total of $13 billion being paid to developers over the years—so it is a big part of the world’s economic activity.
The Bill refers to the consumer contract with “a trader”. It is therefore important for both consumers and UK developers that new legislation does not undermine the intermediary protections that allow platforms such as Google Play and Facebook to function. My amendment explicitly clarifies that there is a distinction between the trader—the developer of an app—and the intermediary, and that consumer rights over the trader are not extended to the intermediary.
Premium or free-to-play apps have been around since 2009, when the iPhone first allowed micro-transactions on the iTunes App Store. For those who are not up to speed on this matter—I am sure that my
noble friend Lord Knight will keep us right, in case we go wrong—games can be downloaded that allow consumers to be charged for elements in the game. Such games have become much more widespread in the past year, with the success of games such as “Candy Crush” and “Clash of Clans”. It is estimated that 63% of the total revenue of phone apps comes from games. Although these games are free to download, the tactic of deprivation is used whereby users have only a finite number of moves or actions when playing the game for free, and they have to wait for a period of time—sometimes hours—in order to play again. Therefore, users are tempted to keep the fun going or satisfy their frustration with a particular level by paying for credits to continue playing. This tactic has led to a major revenue stream, and to plenty of addicts who are often surprised when their credit card bill comes in. At the beginning of 2013, 77% of apps in the iTunes App Store had an in-app purchase. By November, it had shot up to an amazing 92%.
Can the Minister explain to what extent this clause covers “freemium” content? For example, if a consumer has downloaded a free game that runs perfectly but there is a premium element to the software that must be paid for, do the rights extend only to the parts that are paid for, or will this extend to the unpaid-for elements of the software if they are subsequently affected? At which point under this clause does the cover kick in for “freemium” games—when they are downloaded or when the consumer purchases something within the game? Once the premium content is paid for, does the whole download become a paid-for service? I look forward to hearing from the Minister. I beg to move.