EU Digital Law: Article-by-Article Commentary 9781509923588, 9783848749782

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Foreword Digitalisation is one of the major challenges of the 21st century and has resulted in rapid and extensive changes to the legislative framework in response. Lawyers in Europe should be prepared for this transition and for working with the legislation once it enters into force. Recent EU legislation has swiftly adopted European law affording traditional core areas of private law with salient new features. For instance, over just a few years new legislation ranging from the Portability Regulation to the Platform Regulation has given rise to numerous individual provisions relevant to contract law. Moreover, full harmonisation has been extended to key aspects of consumer contract law. In particular, the 2019 Directive concerning contracts for the supply of digital content and digital services regulates aspects such as contractual obligations, liability, remedies, restitution and contract modification. The Directive adapts traditional private law by introducing new approaches, for example on data as counter-performance, update obligations, performance over a period of time, and integration into the digital environment. The parallel 2019 Directive on the sale of goods provides equally significant changes to sales law. The ‘Modernisation Directive’ has aligned further areas of consumer contract law to new developments, in particular through changes to the Consumer Rights Directive. European Digital Law will set the trend for the adaptation of national private laws to meet the challenges of digitalisation and provide a private law framework for the transition towards the digital economy. This commentary on European Digital Law provides a guide to understanding and applying these new provisions. It gives an insight into the function and legal context underlying the provisions and provides an extensive explanation thereof. The comments examine the potential questions that will arise when applying these provisions and therefore should ease their application in practice, for instance when advising clients, drafting contracts and in litigation. Furthermore, publication at this particular time strives to inform and offer suggestions during the important stage of transposition of the new Directives into national law. At the same time, the commentary also will assist legal education in these new fields. Finally, it contributes to the development of legal doctrine responding to the changes at European and national level and providing a systematic foundation, thereby paving the way towards a consistent and comprehensive private law framework for digitalisation. The international team of contributors comprises authors from several EU Member States, reflecting the European nature of the legislation covered by this commentary. However, as the new legislative developments, a commentary on European digital law presents a particular challenge for editors and contributors alike. We rely on feedback and support from the readers and therefore appreciate all suggestions on how to improve and develop the commentary. The editors especially thank Dr. Jonathon Watson for his tireless efforts, enthusiasm, valuable knowledge and advice. Particular thanks are also due to Dr. Matthias Knopik at Nomos Publishers, whose contribution and support, especially during the ‘Corona crisis’, ensured timely publication.

Münster and Brussels May 2020

Reiner Schulze Dirk Staudenmayer

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Contributors Esther Arroyo Amayuelas Full Professor of Civil Law and EU Private Law Jean Monnet Chair Holder at the University of Barcelona, Spain. Since 2011 Member of the Contract Law Section of the Catalan Government’s General Commission of Codification. Matthias Fervers Senior researcher and Habilitand at the Faculty of Law, University of Munich, Germany. Beate Gsell Head of the Chair of Civil Law, Civil Procedure, European Private Law and Procedure, University of Munich, Germany. Judge at Munich Higher Regional Court (OLG München). Lea Kaase Trainee lawyer at the Higher Regional Court of Frankfurt a.M., Germany. Former research assistant on Digital Single Market (DSM) matters. Dominik Lubasz Attorney at law, managing partner in Lubasz i Wspólnicy Kancelaria Radców Prawnych. Expert of the Polish Consumers Association for e-commerce, as well as legislative expert of the Chamber of E-commerce, Poland. Damjan Možina Professor of Civil and Commercial Law at the University of Ljubljana, Slovenia. Monika Namysłowska Head of the Chair of European Economic Law at the Faculty of Law and Administration, University of Lodz, Poland. Nils Rauer Attorney-at-law and partner at Pinsent Masons Germany LLP in Frankfurt a.M., Germany; head of Pinsent Masons’ Digital Single Market (DSM) team. Frank Rosenkranz Junior Professor of Civil Law in the Digital Age at the Faculty of Law, Ruhr-University Bochum, Germany. Managing Director of the Institute for Intellectual Property, Data Protection and Information Technology (IGEDI). Reiner Schulze Professor of German and European Civil law and Director of the Centre for European Private Law, University of Münster, Germany. Juliette Sénéchal Associate Professor of Private Law at the University of Lille, France. Dirk Staudenmayer Head of Unit ‘Contract Law’, Directorate-General ‘Justice and Consumers’ of the European Commission and Honorary Professor at the University of Münster, Germany. Evelyne Terryn Full Professor of Consumer Law and Commercial Law at KU Leuven, Belgium; co-director of the ‘Consumer Competition Market’ research centre. IX

Contributors Christian Twigg-Flesner Chair in International Commercial Law at the University of Warwick, United Kingdom. Joyce Vandenbulcke Associate in the International Commercial & Trade Group, Baker & Mackenzie, Brussels, Belgium. Former research assistant at the KU Leuven ‘Consumer Competition Market’ research centre. Matthias Wendland Senior lecturer at the Institute of International Law at the University of Munich, Germany. Fryderyk Zoll Professor at the Civil Law Department of the Faculty of Law and Administration, Jagiellonian University in Kraków, Poland, and at the European Legal Studies Institute, University of Osnabrück, Germany.

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Abbreviations AcP ACQP AfP AG AI ALJ alt. app Art.(s) AVMS B2B B2C BB BeckOGK BeckOK BEREC BGB BGH BR-Drs. BT-Drs. C&R CDN cf. CESL CISG CJEU CJLA CL&SR CLPD CRD CSD DCD DCFR DG DNS DPI DPyC EC ECHR ECJ ECtHR ed.(s) edn EEC EECC e.g. ELF ELJ EP ERCL ERPL et seq. EU EuCML EULA EWHC GDPR GJ advances GPR HTML

Archiv für die civilistische Praxis Principles of the Existing EC Contract Law (Acquis Principles) Zeitschrift für das gesamte Medienrecht / Archiv für Presserecht Advocate General Artificial intelligence Austrian Law Journal Alternative Application Article(s) Audio Visual Media Services Business-to-Business Business-to-Consumer Betriebsberater Beck-online. Grosskommentar zum Zivilrecht Beck'sche Online-Kommentare Body of European Regulators for Electronic Communications Bürgerliches Gesetzbuch (German Civil Code) Bundesgerichtshof (German Federal Court of Justice) Bundesratsdrucksache Bundestagsdrucksache Computer & Recht Content Delivery Network Confer Proposal for a Common European Sales Law United Nations Convention on Contracts for the International Sale of Goods Court of Justice of the European Union Columbia Journal of Law and the Arts Computer Law & Security Review Competition Law and Policy Debate Consumer Rights Directive Consumer Sales Directive Digital Content Directive Draft Common Frame of Reference Directorate-General Domain Name System(s) Deep Packet Inspection Derecho Privado y Constitución European Community European Convention on Human Rights European Court of Justice European Court of Human Rights editor(s) edition European Economic Community European Electronic Communications Code exempli gratia, for example European Legal Forum European Law Journal European Parliament European Review of Contract Law European Review of Private Law et sequentia, following page(s) European Union Journal of European Consumer and Market Law End-User-License-Agreement England & Wales High Court General Data Protection Regulation Global Jurist advances Zeitschrift für das Privatrecht der Europäischen Union Hyper Text Mark-up Language

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Abbreviations i.a. ICT IDP i.e. IIC IJCLP IJLIT IoT IP IRLCT ISP IT JIPITEC JCP JT JZ LG K&R KC KG LSSI MEP MMR MMS mn. MPI IPCL RP MR-Int n NGO NJCL NJW no/s NTER OJ OLG OUP p. P2P Para.(s) PIN PTD QB Reg. s Santa Clara HTLJ SAP SGD SME SMS Subpara.(s) suppl. STS SWD TEU TFEU TMG TPR TvC UCPD

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inter alia, among other things Information and Communication Technology Revista d’Internet, Dret i Política id est, that is International Review of Intellectual Property and Competition Law International Journal of Communications Law & Policy International Journal of Law & Information Technology Internet of Things Internet Protocol International Review of Law, Computers & Technology Internet Service Provider Information Technology Journal of Intellectual Property, Information Technology and Electronic Commerce Law Journal of Consumer Policy Journal des Tribunaux JuristenZeitung Landgericht (Regional Court, Germany) Kommunikation & Recht Kodeks cywilny (Polish Civil Code) Kammergericht (Higher Regional Court of Berlin, Germany) Ley de Servicios de la Sociedad de la Información (Spanish Act 34/2002, on Electronic Commerce) Member of the European Parliament Multimedia und Recht Mulitmedia Messaging Service Marginal number(s) Max Planck Institute for Intellectual Property and Competition Law Research Paper Medien und Recht International Footnote Non-Governmental Organisation Nordic Journal of Commercial Law Neue juristische Wochenschrift Number(s) Nederlands Tijdschrift voor Europees Recht Official Journal of the European Union Oberlandesgericht (Higher Regional Court, Germany) Oxford University Press Page(s) Peer-to-Peer Paragraph(s) Personal Identification Number Package Travel Directive Law Reports Queen’s Bench Division Regulation Section Santa Clara High Technology Law Journal Sentencia de la Audiencia Provincial (Provincial Court Judgment, Spain) Sale of Goods Directive Small and Medium-sized Enterprise Short Message Service Subparagraph(s) Supplement Sentencia del Tribunal Supremo (Spanish Supreme Court Judgment) Staff Working Document Treaty on European Union Treaty on the Functioning of the European Union Telemediengesetz (German Telemedia Act) Tijdschrijft voor Privaatrecht Tijdschrift voor Consumentenrecht & handelspraktijken Unfair Commercial Practices Directive

Abbreviations URL/s US v VAT Vol. VuR VPN wbl ZVglRWiss ZEuP ZRP ZfRV ZHR ZIP ZUM

Uniform Resource Locator/s United States of America versus Value Added Tax Volume Verbraucher und Recht Virtual Private Network Wirtschaftsrechtliche Blätter Zeitschrift für Vergleichende Rechtswissenschaft Zeitschrift für europäisches Privatrecht Zeitschrift für Rechtspolitik Zeitschrift für Europarecht, internationales Privatrecht und Rechtsvergleichung Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht Zeitschrift für Wirtschaftsrecht Zeitschrift für Urheber- und Medienrecht

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Short titles of European legislation Access Directive

Directive 2002/19/EC of the European Parliament and of the Council of 7 March 2002 on access to, and interconnection of, electronic communications networks and associated facilities (OJ L 108, 24.4.2002, p. 7)

Anti-Terrorism Directive

Directive (EU) 2017/541 of the European Parliament and of the Council of 15 March 2017 on combating terrorism and replacing Council Framework Decision 2002/475/JHA and amending Council Decision 2005/671/JHA (OJ L 88, 31.3.2017, p. 6)

Authorisation Directive

Directive 2002/20/EC of the European Parliament and of the Council of 7 March 2002 on the authorisation of electronic communications networks and services (OJ L 108, 24.4.2002, p. 21)

AVMS Directive

Directive 2010/13/EU of the European Parliament and of the Council of 10 March 2010 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (OJ L 95, 15.4.2010, p. 1)

Brussels Convention

1968 Brussels Convention of 27 September 1968 on jurisdiction and the enforcement of judgments in civil and commercial matters (OJ L 299, 31.12.1972, p. 32)

Brussels I Regulation

Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ L 12, 16.1.2001, p. 1)

Brussels I bis Regulation

Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ L 351, 20.12.2012, p. 1)

Collective Rights Management Directive

Directive 2014/26/EU of the European Parliament and of the Council of 26 February 2014 on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market (OJ L 84, 20.3.2014, p. 72)

Computer Programs Directive

Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs (OJ L 111, 5.5.2009, p. 16)

Consumer Credit Directive

Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC (OJ L 133, 22.5.2008, p. 66)

Consumer Protection Regulation

Regulation (EU) 2017/2394 of the European Parliament and of the Council of 12 December 2017 on cooperation between national authorities responsible for the enforcement of consumer protection laws and repealing Regulation (EC) No 2006/2004 (OJ L 345, 27.12.2017, p. 1)

Consumer Rights Directive

Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council (OJ L 304, 22.11.2011, p. 64)

Consumer Sales Directive

Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees (OJ L 171, 7.7.1999, p. 12)

Data Protection Directive (1995)

Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (OJ L 281, 23.11.1995, p. 31)

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Short titles of European legislation Data Protection Directive (1997)

Directive 97/66/EC of the European Parliament and of the Council of 15 December 1997 concerning the processing of personal data and the protection of privacy in the telecommunications sector (OJ L 24, 30.1.1998, p. 1)

Digital Content Directive

Directive (EU) 2019/770 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the supply of digital content and digital services (OJ L 136, 22.5.2019, p. 1)

Directive on Consumer ADR

Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (OJ L 165, 18.6.2013, p. 63)

Distance Marketing of Financial Services Directive

Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC (OJ L 271, 9.10.2002, p. 16)

Distance Selling Directive

Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts (OJ L 144, 4.6.1997, p. 19)

Doorstep Selling Directive

Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises (OJ L 372, 31.12.1985, p. 31)

DSM Copyright Directive

Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the Digital Single Market and amending Directives 96/9/EC and 2001/29/EC (OJ L 130, 17.5.2019, p. 92)

E-Commerce Directive

Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (OJ L 178, 17.7.2000, p. 1)

eIDAS Regulation

Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC (OJ L 257, 28.8.2014, p. 73)

Electronic Communications Code Directive

Directive (EU) 2018/1972 of the European Parliament and of the Council of 11 December 2018 establishing the European Electronic Communications Code (Recast) (OJ L 321, 17.12.2018, p. 36)

Enforcement Directive

Directive 2004/48/EC of the European Parliament and of the Council of 29 April 2004 on the enforcement of intellectual property rights (Corrigendum OJ L 195, 2.6.2004, p. 16)

ePrivacy Directive

Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (OJ L 201, 31.7.2002, p. 37)

EU Charter

Charter of Fundamental Rights of the European Union (OJ C 326, 26.10.2012, p. 391)

European Standardisation Regulation

Regulation (EU) No 1025/2012 of the European Parliament and of the Council of 25 October 2012 on European standardisation (OJ L 316, 14.11.2012, p. 12)

EU VAT Directive

Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347, 11.12.2006, p. 1)

Framework Directive

Directive 2002/21/EC of the European Parliament and of the Council of 7 March 2002 on a common regulatory framework for electronic communications networks and services (OJ L 108, 24.4.2002, p. 33)

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Short titles of European legislation General Data Protection Regulation

Council Regulation 2016/679 of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (OJ L 119, 4.5.2016, p. 1)

Geo-blocking Regulation

Regulation (EU) 2018/302 of the European Parliament and of the Council of 28 February 2018 on addressing unjustified geo-blocking and other forms of discrimination based on customers' nationality, place of residence or place of establishment within the internal market and amending Regulations (EC) No 2006/2004 and (EU) 2017/2394 and Directive 2009/22/EC (OJ L 60I, 2.3.2018, p. 1)

Information Provision Directive

Directive (EU) 2015/1535 of the European Parliament and of the Council of 9 September 2015 laying down a procedure for the provision of information in the field of technical regulations and of rules on Information Society services (OJ L 241, 17.9.2015, p. 1)

InfoSoc Directive

Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (OJ L 167, 22.6.2001, p. 10)

Misleading and Comparative Advertising Directive

Directive 2006/114/EC of the European Parliament and of the Council of 12 December 2006 concerning misleading and comparative advertising (OJ L 376, 27.12.2006, p. 21)

Modernisation Directive

Directive (EU) 2019/2161 of the European Parliament and of the Council of 27 November 2019 amending Council Directive 93/13/EEC and Directives 98/6/EC, 2005/29/EC and 2011/83/EU of the European Parliament and of the Council as regards the better enforcement and modernisation of Union consumer protection rules (OJ L 328, 18.12.2019, p. 7)

NIS Directive

Directive (EU) 2016/1148 of the European Parliament and of the Council of 6 July 2016 concerning measures for a high common level of security of network and information systems across the Union (OJ L 194, 19.7.2016, p. 1)

Online Intermediation Services Regulation

Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services (OJ L 186, 11.7.2019, p. 57)

Open Internet Access Regulation

Regulation (EU) 2015/2120 of the European Parliament and of the Council of 25 November 2015 laying down measures concerning open internet access and amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services and Regulation (EU) No 531/2012 on roaming on public mobile communications networks within the Union (OJ L 310, 26.11.2015, p. 1)

Package Travel Directive

Directive (EU) 2015/2302 of the European Parliament and of the Council of 25 November 2015 on package travel and linked travel arrangements, amending Regulation (EC) No 2006/2004 and Directive 2011/83/EU of the European Parliament and of the Council and repealing Council Directive 90/314/EEC (OJ L 326, 11.12.2015, p. 1)

Payment Services Directive II

Directive (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 337, 23.12.2015, p. 35)

Platform Regulation

Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services (OJ L 186, 11.7.2019, p. 57)

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Short titles of European legislation Portability Regulation

Regulation (EU) 2017/1128 of the European Parliament and of the Council of 14 June 2017 on cross-border portability of online content services in the internal market (OJ L 168, 30.6.2017, p. 1)

Price Indication Directive

Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers (OJ L 80, 18.3.1998, p. 27)

Product Liability Directive

Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products (OJ L 210, 7.8.1985, p. 29)

Professional Qualifications Directive

Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications (OJ L 255, 30.9.2005, p. 22)

Revised AVMS Directive

Directive (EU) 2018/1808 of the European Parliament and of the Council of 14 November 2018 amending Directive 2010/13/EU on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (Audiovisual Media Services Directive) in view of changing market realities (OJ L 303, 28.11.2018, p. 6)

Revised SatCab Directive

Directive (EU) 2019/789 of the European Parliament and of the Council of 17 April 2019 laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes, and amending Council Directive 93/83/EEC (OJ L 130, 17.5.2019, p. 82)

Rome I Regulation

Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (OJ L 177, 4.7.2008, p. 6)

Sale of Goods Directive

Directive (EU) 2019/771 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the sale of goods, amending Regulation (EU) 2017/2394 and Directive 2009/22/EC, and repealing Directive 1999/44/EC (OJ L 136, 22.5.2019, p. 28)

SatCab Directive

Council Directive 93/83/EEC of 27 September 1993 on the coordination of certain rules concerning copyright and rights related to copyright applicable to satellite broadcasting and cable retransmission (OJ L 248, 6.10.1993, p. 15)

Services Directive

Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ L 376, 27.12.2006, p. 36)

Sexual Abuse Directive

Directive 2011/93/EU of the European Parliament and of the Council of 13 December 2011 on combating the sexual abuse and sexual exploitation of children and child pornography, and replacing Council Framework Decision 2004/68/JHA (OJ L 335, 17.12.2011, p. 1)

Small Claims Procedure Regulation

Regulation (EC) No 861/2007 of the European Parliament and of the Council of 11 July 2007 establishing a European Small Claims Procedure (OJ L 199, 31.7.2007, p. 1)

Social Security Coordination Regulation

Regulation (EC) No 883/2004 of the European Parliament and of the Council of 29 April 2004 on the coordination of social security systems (OJ L 166, 30.4.2004, p. 1)

Technical Standards and Regulations Directive

Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations (OJ L 204, 21.7.1998, p. 37)

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Short titles of European legislation Timeshare Directive (1994)

Directive 94/47/EC of the European Parliament and the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects of contracts relating to the purchase of the right to use immovable properties on a timeshare basis (OJ L 280, 29.10.1994, p. 83)

Tobacco Products Directive

Directive 2014/40/EU of the European Parliament and of the Council of 3 April 2014 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco and related products and repealing Directive 2001/37/EC (OJ L 127, 29.4.2014, p. 1)

Unfair Commercial Practices Directive

Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (OJ L 149, 11.6.2005, p. 22)

Unfair Terms Directive

Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts (OJ L 95, 21.4.1993, p. 29)

Universal Service Directive

Directive 2009/136/EC of the European Parliament and of the Council of 25 November 2009 amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws (OJ L 337, 18.12.2009, p. 11)

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Introduction* Bibliography: Brynjolfsson/McAfee, The Second Machine Age (WW Norton 2014); Commission, ‘Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law’ COM(2011) 635 final; Commission, ‘A Digital Single Market Strategy for Europe’ COM(2015) 192 final; Commission, ‘Proposal for a Regulation of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; Crémer/De Montjoye/ Schweitzer, ‘Competition Law in the Digital Era’ (2019); European Law Institute, ‘Statement on the European Commission’s Proposed Directive on the Supply of Digital Content to Consumers (2016); Juncker, ‘A New Start for Europe’ (July 2014); Lohsse/Schulze/Staudenmayer, ‘Trading Data in the Digital Economy’ in: Lohsse/Schulze/Staudenmayer (eds), Trading Data in the Digital Economy: Legal Concepts and Tools (Nomos 2017), p. 13–24; Schulze (ed.), Common European Sales Law – Commentary (Nomos 2012); Schulze, ‘Supply of Digital Content. A New Challenge for European Contract Law‘ in: De Francheschi (ed.), European Contract Law and the Digital Single Market (Intersentia 2016), p. 127–143; Schulze, ‘Die Digitale-Inhalte-Richtlinie – Innovation und Kontinuität im europäischen Vertragsrecht’ (2019) 4 ZEuP 695–723; Schulze/Staudenmayer, ‘Digital Revolution – Challenges for Contract Law’ in: Schulze/Staudenmayer (eds), Digital Revolution: Challenges for Contract Law in Practice (Nomos 2016), p. 19–32; Schulze/ Staudenmayer/Lohsse (eds), Contracts for the Supply of Digital Content (Nomos 2017); Schulze/Zoll, European Contract Law (2nd edn, Nomos 2018); Spindler, ‘Contracts for the Supply of Digital Content – Scope of application and basic approach – Proposal of the Commission for a Directive on contracts for the supply of digital content’ (2016) 3 ERCL 183–217; Staudenmayer, EG Richtlinie 1999/44/EG zur Vereinheitlichung des Kaufgewährleistungsrechts’ in: Grundmann/Medicus/Rolland (eds), Europäisches Kaufgewährleistungsrecht (Carl Heymanns 2000), p. 27–47; Staudenmayer (ed.), Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law, Textbook (C.H. Beck 2012); Staudenmayer, ‘Digitale Verträge – Die Richtlinienvorschläge der Europäischen Kommission’ (2016) 4 ZEuP 801–831; Staudenmayer, ‘Auf dem Weg zum digitalen Privatrecht – Verträge über digitale Inhalte’ (2019) 35 NJW 2497–2501; Staudenmayer, ‘The Directives on Digital Contracts – First steps towards the Private Law of the Digital Economy’ (2020) 2 ERPL, 219–250; Terryn/Claeys (eds), Digital Content & Distance Sales (Intersentia 2017); Wendehorst/Jud (eds), Ein neues Vertragsrecht für den digitalen Binnenmarkt – Zu den Richtlinienvorschlägen der Europäischen Kommission vom Dezember 2015 (Manz 2016). A. The new challenges for EU law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. EU Digital Law Commentary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Legislation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Digital Content Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Consumer Rights Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. E-Commerce Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Portability Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Aim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. The new challenges for EU law Digitisation is one of the most important trends of the current century. It will change 1 our economy and society as fundamentally as the industrial revolution did.1 Our economy is in a process of transition towards a ‘digital economy’.2 This term does not mean a separate economy or a specific sector of the overall economy. The changes caused by digitisation will ultimately lead to the entire economy becoming digital.

* This introduction expresses only the personal opinions of the authors and does not bind in any way the European Commission. 1 cf. the fundamental thesis of Brynjolfsson/McAfee, p. 6 et seq. While the invention of the steam engine by James Watt replaced human and animal muscle power, digitisation will multiply exponentially the possibilities of using the human brain. 2 See Lohsse/Schulze/Staudenmayer, p. 13 et seq.

Reiner Schulze / Dirk Staudenmayer

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Introduction 2

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At present, there is a global race to reap the benefits of emerging digital technologies or developments such as artificial intelligence, quantum computing or the growth of the Internet of Things. There is a clear and strong political willingness and momentum around the world to harvest the growth advantages of digitisation. While this is being achieved with tools such as industrial policy and support for research, the law will be another tool that should contribute to obtaining the economic benefits out of the process of digitisation. An EU legal framework, adapted to these challenges, may also be able influence global standards and serve as a model for the developing laws of other countries. While digitisation will bring many beneficial developments for our economy and society, it may also have risks. In Europe, there is a willingness to safeguard the structure and main features of our social market economy and guarantee our fundamental values.3 The law is a tool which may be utilised to achieve this objective. One prominent example of the fundamental values, to which the EU is committed and which is manifest in the EU Charter of Fundamental Rights (Art. 8 EU Charter) and the adoption of the GDPR, is the protection of personal data. Digitisation therefore presents the European Union with the challenge to develop its legal framework. The challenges facing primary and secondary EU law extend to numerous policy fields such as competition law,4 intellectual property law, consumer protection, and judicial cooperation. The EU has the internal market as one of the advantages and privileged tools at its disposal. Accordingly, the European Commission declared the ‘Digital Single Market’ to be one of its priorities.5 Its first step towards the adaptation of its legal and policy framework was its ‘Digital Single Market Strategy’6 (hereinafter ‘DSM Strategy’) from May 2015. This strategy provided the political basis for a series of subsequent Commission initiatives with the aim of creating a framework to build a European Digital Single Market and to use it as a motor for the growth of the European economy. These initiatives included the further development of EU law, not only through new legislation but also through reforms of existing EU law. Since then, the EU’s legal responses to the challenges of digitisation – or in short: EU digital law – have contributed to the significant development of the acquis communautaire in various areas. Contract law has an important position in this developing legal framework, given its central role for a functioning market economy.7 Whereby contracts are the tool which makes transactions work in the economy, contract law provides the general framework within which these transactions take place. It is an area of law which is already experiencing a rapid and profound change due to the influence of digitisation. The impact covers a variety of matters, such as the pre-contractual information and communication, the conclusion and performance of a contract, as well as new subject matter of contracts and forms of trade, together with associated new contract practices. Contract law could thus be facing a phase of modernisation.8 3 cf. Political guidelines of Commission President von der Leyen, 4 available online under https://ec.eur opa.eu/commission/sites/beta-political/files/political-guidelines-next-commission_en.pdf (last accessed 23 January 2020). 4 cf. Crémer/De Montjoye/Schweitzer, 52 et seq. on the position of competition law and policy in the regulatory landscape and p. 70 et seq. how competition law could be adapted, available online under https: //ec.europa.eu/competition/information/digitisation_2018/report_en.html (last accessed 23 January 2020). 5 See Juncker, available online under https://ec.europa.eu/commission/sites/beta-political/files/junckerpolitical-guidelines-speech_en.pdf (last accessed 11 September 2019). 6 COM(2015) 192 final. 7 See Schulze/Staudenmayer, p. 19. 8 See Schulze/Zoll, § 1, mn. 61 et seq.

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Introduction It is therefore not surprising that some of the measures proposed by the European 7 Commission soon after the publication of the ‘DSM Strategy’ concerned contract law. As one of the first legislative initiatives, the Commission presented in December 2015 proposals for directives concerning digital contracts. These were the ‘Proposal for a Directive on certain aspects concerning the supply of digital content’9, which formed the basis for the Digital Content Directive, and the ‘Proposal for a Directive on certain aspects concerning contracts for the online and other distance sales of goods’10, later on extended to all sales and being the basis for the Sale of Goods Directive, which regulates goods with digital elements. The final versions of the proposed Directives were adopted in May 2019. Both Directives concern core areas of contract law such as the contractual nature of the performance and the remedies available to the buyer. The Digital Content Directive also covers other matters, in particular the seller’s obligation to perform and, to a certain extent, the concept of counter-performance. When regulating these matters for consumer contracts, they follow the traditional scope and dual objectives of consumer contract legislation: to contribute to the proper functioning of the (digital) single market and to ensure a high level of consumer protection (for digital contracts)11. However, this does not mean that EU measures adapting private law to the needs of the digital economy are at present, or will be in the future, restricted to B2C contracts. The Digital Content Directive and the Sale of Goods Directive are thus the first, im- 8 portant step towards – and at present at the centre of – the new European contract law legislation which responds to the changes brought about by digitisation. However, these two Directives do not represent the entirety of the EU’s legislative re- 9 sponse in this area. The EU’s first response with relevance for contract law implementing the ‘DSM Strategy’ took the form of the Portability Regulation in June 2017. The Geoblocking Regulation followed in February 2018 and prohibited unjustified geo-blocking and related forms of discrimination.12 In July 2019, shortly after the adoption of the Directives on Digital Content and Sale of Goods, another important measure touched upon another area of contract law: the ‘Platform Regulation’ 13. This Regulation intends to ensure the transparency of, and trust in, the online platform economy in B2B relations, 14 in particular through rules on contract terms (e.g. Art. 8 Platform Regulation). Looking at these legislative responses to the needs of the ‘digital economy’ as a whole, the possibility of a versatile and far-reaching development emerges which could take European contract law well beyond the acquis communautaire of the ‘pre-digital era’.

B. EU Digital Law Commentary I. Legislation 1. Digital Content Directive This commentary is centred on ‘EU Digital Law’ in the field of contract law due to its 10 paramount importance for the development of the internal market. The focus is on the COM(2015) 634 final. COM(2015) 635 final. 11 See Art. 1 DCD; Art. 1 SGD. 12 The Geoblocking Regulation was not included in this Commentary as key aspects of its content are referred to in the context of portability of digital content. 13 This Regulation could not be included in this edition of the Commentary due to the short timeframe between its finalisation and publication in the Official Journal and the copy deadline. 14 See Recital 3 Platform Regulation. 9

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Introduction Digital Content Directive as it is not only one of the pioneering accomplishments within ‘EU Digital Law’ but covers, and fully harmonises, core areas of contract law. It is extremely important for contractual practice because it applies to millions of contracts that EU citizens conclude on a daily basis – from downloading software to streaming music and films and even to buying a DVD. It is also of far-reaching importance for the development of the system and the doctrine of European contract law. It transfers concepts and principles from consumer sales law to new areas, combines them with innovative approaches to digital content and in this way outlines some features of a European general contract law.15 When dealing with digital issues, it contains ground-breaking new developments, such as the inclusion of data as counter-performance into the scope 16 and a new obligation of the trader to arrange for updates of digital content or digital services17. 11 a) Approach. The focus of legislation, and in this context the Proposal for the Digital Content Directive, on the ‘Digital Single Market’ was part of a new approach in the area of European contract law.18 For European contract law, this was not just a response to the changes brought about by digitisation, it also has to be viewed from the perspective of a chronological development. European contract law lived in the 1990 s through a phase of rapid development through legal acts with far-reaching and profound effects on national contract law and contractual practice – such as the Unfair Terms Directive and the Consumer Sales Directive. However, these directives were all of a minimum harmonisation nature, i.e. Member States had to implement the directives in their national law, but could do so with a higher level of consumer protection standards.19 In its first attempts to switch to full harmonisation, the Community legislator was treading carefully. The first directive, where the Commission Proposal followed a full harmonisation approach, was the Distance Marketing of Financial Services Directive. The Council agreed to the full harmonisation approach of this Directive as a matter of principle. However, it chose a minimum harmonisation approach for the rules on pre-contractual information,20 as the national rules in this area were too dissimilar. The Consumer Credit Directive was the first to follow a full harmonisation approach in its entirety. While ultimately a consensus on full harmonisation was found, the price paid was that within its scope, the Directive still left a wide margin of implementation to Member States.21 12 An attempt by the Commission Proposal for the Consumer Rights Directive22 to consolidate and transform four existing minimum harmonisation contract law directives in one full harmonisation Directive failed. The Consumer Rights Directive did not replace the Consumer Sales and Unfair Terms Directives. These key Directives of European contract law retained their minimum harmonisation approach. The Proposal for a Common European Sales Law23 (CESL) was a reaction to this failure; it suggested an optional harmonisation approach as alternative.24 However, despite approval by the European Parlia-

See Schulze (2019), 695 et seq. See Digital Content Directive → Art. 3, mn. 46 et seq. 17 See Digital Content Directive → Art. 8, mn. 110 et seq. 18 COM(2014) 910 final, 6. 19 As to the disadvantages of the minimum harmonisation approach see Staudenmayer (2012), p. IX et seq. 20 cf. Art. 4(2) Distance Marketing of Financial Services Directive. 21 The best example is Art. 16 Consumer Credit Directive on early repayment. 22 COM(2008) 614 final. 23 COM(2011) 635 final; for an overview see Staudenmayer (2012), p. VII et seq. For more details see Schulze (2012). 24 As to the functioning of an optional harmonisation approach see Staudenmayer (2012), p. XVI et seq. 15 16

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Introduction ment to the approach25, this attempt ultimately failed in Council, due to the resistance from a number of Member States. The Commission drew the lessons from the experiences with the Consumer Rights Directive and the CESL for its Proposal for the current Digital Content Directive. 26 The optional harmonisation approach was dropped, the form of a directive was chosen and the aim of the Proposal was for full harmonisation. Nevertheless, the Digital Content Directive draws greatly from the CESL in terms of content and drafting. The provisions on conformity serve as an example, but others may also be found in other provisions.27 The CESL had already integrated rules on the supply of digital content into its system of general contract and sales law and thus played a pioneering role worldwide. The Digital Content Directive draws on this model by largely following the structures and concepts that have developed in European contract law, particularly in the field of (consumer) sales law.28 The Commission Proposal has been the subject of lively legal discussions over the following years,29 nevertheless a number of core elements of the Commission Proposal’s regulatory model remained unchanged in the legislative process. This concerns, for example, a wide scope achieved through a very broad notion of ‘digital content’ and ‘digital services’. Another example is that the Directive does not replace the traditional contract types of national laws (such as purchase, service, and rental contracts), but rather uses an overarching approach which covers all types of supply of digital content and digital services and prescribes certain results to be achieved, for instance in the form of consumer remedies. A very important step is that the final version of the Directive essentially follows the Commission Proposal with regard to the inclusion of data, although with some modifications in the drafting, whether it can be explicitly viewed as counter-performance, and the limitation to personal data. The same applies to conceptual continuity in relation to the acquis communautaire in consumer contract law and to the CESL as regards the definitions of ‘consumer’ and ‘trader’ defining the scope, conformity, burden of proof, liability for non-conformity and the structure of remedies. There are certain innovative approaches in the Commission Proposal which took into account specific features of digital content. They include a generic remedy to bring digital content into conformity, thereby eliminating the distinction between repair and replacement, and specific requirements for the supply of digital content, such as ‘interoperability’, and consideration of the ‘digital environment’.30 However, the Commission Proposal also underwent a number of changes in the course of the legislative process. Some of them involve drafting rather than substance (such as the express reference ‘digital services’ alongside ‘digital content’), while others relate to issues of far-reaching importance. In particular, it was only in the course of the legislative process that the question whether goods with digital elements are regulated in the Digital Content Directive or in the Sale of Goods Directive was finally clarified. In a different manner from the approach taken in the Commission Proposal,31 the European Parliament initially insisted on the inclusion of goods with digital elements only in the Digital Content Directive. See the European Parliament legislative resolution of 26 February 2014 (OJ C 285, 29.8.2017, p. 235). As to the Commission approach see Staudenmayer (2016), 804 et seq. 27 See ibid. and Staudenmayer (2020) for the cases where the Directives use substantive models or drafting from the CESL. 28 Schulze (2016), p. 134 et seq. 29 See, for example, the statement from the European Law Institute; Spindler, 183 et seq.; Schulze (2016); the contributions in Schulze/Staudenmayer/Lohsse, Terryn/Claeys, and Wendehorst/Jud. 30 Schulze (2019), 711–712. 31 See Staudenmayer (2016), 810 et seq. 25

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The Council took the opposite position, i.e. to regulate goods with digital elements only in the Sale of Goods Directive. But it quickly became clear to the Council that, based on that decision, it would be necessary to adapt the Consumer Sales Directive. Its provisions, dating back to 1999, were obviously not conceived with goods with digital elements in mind. In addition, the European Parliament established an iunctim during the trilogue negotiations on the Digital Content Directive. Before the decision of the Council to regulate goods with digital elements in sales law, the European Parliament took as its – not unjustified – starting point, that the Digital Content Directive would be adopted in any event while an adoption of the Sale of Goods Directive in Council was uncertain. While in the trilogue negotiations, the European Parliament conceded changing its initial approach towards regulating goods with digital elements only in the Sale of Goods Directive, it insisted on adoption of both Directives simultaneously. This presumed that the European Parliament had to agree with the way goods with digital elements would be regulated in the Sale of Goods Directive in order to ensure adoption of the Digital Content Directive. In addition to this factor, there was the element of time pressure since both Directives needed to be voted in plenary before the dissolution of the European Parliament, ahead of the elections in May 2019. This meant in practice that an agreement on both Directives needed to be achieved in February 2019. On the basis of work by the Commission during the course of 2018, which was fed into the legislative process in Council, this led to an elaboration of a regime for goods with digital elements in the Sale of Goods Directive to which the European Parliament ultimately agreed. On this basis, it has been possible to establish the delimitation of the scope of both Directives. Accordingly, digital elements fall within the scope of the Sale of Goods Directive if they are incorporated in, or interconnected with, a physical object and are necessary for the performance of its functions and if the digital elements are provided with the goods under the sales contract. If these conditions are not fulfilled, the respective digital elements are regulated by the Digital Content Directive. Physical media fall within the scope of the Digital Content Directive if they are used exclusively as carrier of digital content, such as USB sticks or CDs. (Art. 3(3) and (4) DCD; Art. 3(3) and (4) SGD). A particularly important amendment to the Digital Content Directive during the legislative process, concerned the change in the conformity approach32, reflecting also widespread criticism 33. While the Commission Proposal in principle gave priority to the subjective element, the objective requirements are now the more important set of conformity criteria. 34 On the other hand, the complete lack of regulation of claims for damages is one of the ‘losses’ during the legislative procedure. While Art. 14 of the Commission’s Proposal regulated damages only in a very rudimentary manner, the final version of the Directive leaves this matter entirely to Member States’ law. 35 b) Structure. In contrast to other directives (e.g. Consumer Rights Directive, E-Commerce Directive), the Digital Content Directive is not divided into chapters or sections. Nonetheless, the content and order of the individual articles reveal features of a structure which allows to re-group its provisions into certain clusters. In common with other directives, in particularly the Consumer Rights Directive, the initial provisions contain a general description of subject matter and purpose (Art. 1 DCD), the definitions (Art. 2 DCD), a detailed definition of the scope (Art. 3 DCD) and the level of harmonisation (Art. 4 DCD). The definition of the scope in Art. 3(1) DCD is Digital Content Directive → Art. 6, mn. 22 et seq. For example, European Law Institute, 4, 18–21; Schulze (2016), p. 135; the comments by Colombi Ciacchi/van Schagen in: Schulze/Staudenmayer/Lohsse, p. 124–125. 34 Digital Content Directive → Art. 8, mn. 2. 35 For criticism see Schulze (2019), 720–721. 32

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Introduction even longer than the scope provision in the Consumer Rights Directive. Read together with the respective recitals, it reflects a strong effort of Member States in Council to describe – even more clearly than the scope itself – what the Digital Content Directive does not regulate. 36 The Digital Content Directive intentionally avoids a legal classification of the specific type of contract (such as a sales or services contract) to which it applies, but extends its scope to all contracts with consumers for the supply of digital content or services. A major novelty, with considerable implications for the future development of European contract law for the digital economy, is the fact that the Digital Content Directive is not only applicable if the consumer pays money to the trader but also if he provides personal data to the trader in return for the supply of digital content or a digital service.37 In the following cluster of provisions, the Directive establishes the basis for the sub- 21 sequent consumer remedies. It first provides the obligation on the trader to supply the digital content or digital service (Art. 5 DCD). This performance obligation is not contained either in the Consumer Sales Directive or in the Sale of Goods Directive. The Directive then turns to conformity of the supplied digital content or service (Arts 6–10 DCD). In this context, it defines the subjective requirements for conformity with the contract (Art. 7 DCD), objective requirements for conformity (which must be fulfilled in addition to the subjective requirements; Art. 8 DCD), the consequences of an incorrect integration (Art. 9 DCD) and the rights of the consumer in the event of use restrictions resulting from a violation of third-party rights (Art. 10 DCD). These provisions, which are based on the CESL, constitute a further development of the concept of conformity used in the Consumer Sales Directive.38 In a number of instances, they are tailored to the supply of digital content and services. Moreover, they also introduce concepts, which are new to European contract law and may also have a significant impact on new areas of private law in response to the challenges from new technologies. The most important is an obligation on the seller to ensure that the consumer is supplied with updates.39 Finally, they introduce a new distinction between the continuous supply over a period of time in contrast to a single act or a series of individual acts of supply. This distinction is designed to adapt the rules to the fact that the former category is more similar to the provision of services, while the latter is more like a sale.40 It is used to determine the period during which updates have to be supplied (Art. 8(2) DCD), for the guarantee period (Art. 11(2) and (3) DCD), the period for the burden of proof (Art. 12(2) and (3) DCD) and some means of exercising the remedies (Arts 14(5); 16(1) DCD). The following provisions on the liability of the trader (Art. 11 DCD), on the burden 22 of proof (Art. 12 DCD) and on remedies (Arts 13 and 14 DCD) reflect the structure of the provisions on the primary obligations of the trader in Art. 5 and Arts 6 et seq. DCD: they lay down first the consequences of non-performance pursuant to Art. 5 DCD and then the consequences of non-conformity pursuant to Arts 6 et seq. in as far as they do not apply to both non-performance and non-conformity. A remarkable difference to the Consumer Sales Directive is that the period for reversing the burden of proof with regard to non-conformity has been extended to one year (Art. 12(2) DCD). In principle, the Digital Content Directive provides for the same set and hierarchy of remedies in the case of non-conformity as the Consumer Sales Directive. However, it modifies this basic scheme in several respects by taking into account specific features of the supply of digital See Digital Content Directive → Art. 3, mn. 91 et seq. See Digital Content Directive → Art. 3, mn. 46 et seq. 38 See Digital Content Directive → Art. 6, mn. 4 et seq. 39 See Digital Content Directive → Art. 8, mn. 110 et seq. 40 See Digital Content Directive → Art. 8, mn. 132 et seq.

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Introduction content and digital services (e.g. by expressing subsequent performance with the phrase ‘to bring the digital content or digital service into conformity’ without providing a choice between ‘repair’ or ‘replacement’ – which is not meaningful for digital content or digital services). These provisions on remedies are supplemented by more detailed provisions on the exercise of the right of termination (Art. 15 DCD) and the obligations both parties have in such a case (e.g. to refrain from using digital content or to retrieve digital content; Arts 16–18 DCD). 23 The right of the trader to modify the digital content or digital service in accordance with Art. 19 DCD is closely related to the trader’s obligations to update in Arts 7 and 8 DCD and changed its purpose between the Commission Proposal and the Directive as finally adopted.41 This is also a matter with which the Directive is entering new legal territory. For the right of redress (Art. 20 DCD), it adopted the model of the Consumer Sales Directive.42 24 The last part of the Directive consists of largely familiar final provisions on the enforcement by the Member States (including the participation of public or private bodies), its mandatory nature, amendments to other legal acts, the transposition by Member States (adoption by 1 July 2021; application of the measures to comply with the Directive from 1 January 2022), the future review by the Commission, the entry into force and the Member States as addressees (Arts 21–27 DCD). These final provisions also include (although not necessarily where they might be expected to be found, namely under the heading ‘Transposition’ in Art. 24(2) DCD) the intertemporal rules on the contracts subject to the Directive.

2. Consumer Rights Directive In addition to the new provisions of the Digital Content Directive and the Sale of Goods Directive, a number of existing directives in the field of consumer protection remain of particular importance for the supply of digital products and the needs of the digital economy. This applies in particular to some provisions of the Consumer Rights Directive. This Directive was originally intended to bring together four earlier directives into a single set of rules, thereby giving greater coherence to core areas of consumer law. However, mainly due to the concerns of Member States in the Council, it eventually only replaced two earlier directives (Doorstep Selling Directive and Distance Selling Directive) when it was adopted in 2011. 26 In contrast to these earlier Directives, the Consumer Rights Directives prescribes full harmonisation. Its provisions focus on information duties and rights of withdrawal. Most of these provisions concern distance contracts (such as contracts concluded via the Internet that are particularly important for the supply of digital products) and offpremises contracts. With regard to information obligations, however, it also contains provisions applicable to other consumer contracts (‘on-premises contracts’). 27 With regard to the adaptation of EU law to the changes brought about by digitisation, the Consumer Rights Directive – similar to the draft CESL43 – also plays a pioneering role as some of its provisions explicitly deal with aspects of contracts for the supply of digital content. In particular, the list of information obligations contains the express obligation to inform the consumer about ‘the functionality, including applicable technical protection measures, of digital content’ (Arts 5(1)(g), 6(1)(r) CRD). It also imposes an obligation to provide information on the interoperability of digital content with hard25

Staudenmayer (2019), 2501. On the limitations of Art. 4 CSD, see Staudenmayer (2000), p. 42 et seq. 43 Above → mn. 12 et seq. 41

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Introduction ware and software (Arts 5(1)(h), 6(1)(s) CRD). In this respect, the Consumer Rights Directive had already introduced initial concepts surrounding ‘digital content’ into European consumer contract law.44

3. E-Commerce Directive The E-Commerce Directive dates from 2000, clearly before the impact of digitisation 28 on the economy and society was felt. However, the Directive was already based on an understanding of the crucial importance of electronic commerce for the internal market. To this end, it was intended to help remove legal obstacles to the development of electronic commerce and ensure the free movement of information society services (Art. 1 E-Commerce Directive). With this focus on new forms of commercial communication and information society 29 services, the E-Commerce Directive dealt with important legal issues. Two decades after its adoption, its revision, in order to adapt it to the changes that have occurred in the meantime, is now under discussion.45 Nevertheless, its provisions remain part of the framework conditions for the supply of digital products and thus also for contracting in this field. This applies not only to the provisions of this Directive on general information obligations and on commercial communication (Arts 5 et seq.) but also to the information obligations and the principles relating to placing the order pursuant to Arts 10 and 11 and to the liability of Internet intermediaries pursuant to Arts 12 et seq. E-Commerce Directive.46

4. Portability Regulation The Portability Regulation, like the Digital Content Directive, goes back to the Euro- 30 pean Commission’s 2015 DSM Strategy.47 However, the legislative procedure for the Regulation could be completed almost two years before the Digital Content Directive was adopted and its provisions already entered into force in April 2018. The Regulation is relatively concise with only nine articles. The Portability Regulation ‘introduces a common approach in the Union to the cross- 31 border portability of online content services’ by ensuring that subscribers to portable online content services which are lawfully provided in their Member State of residence, can access and use those services when temporarily present in a Member State other than their Member State of residence’ (Art. 1 Portability Regulation). For example, the subscriber of a streaming service should also be able to use the service if he is temporarily in another Member State, without incurring any additional burdens. It has considerable practical significance for the businesses concerned and the citi- 32 zens of the EU who can draw concrete practical advantages from its application. Moreover, it highlights the interfaces between EU contract law in the ‘digital age’ and other areas of law as well as the need for coherent solutions in the context of the DSM Strategy (e.g. with regard to data protection, copyright, telecommunications law and general media law).48

44 See Consumer Rights Directive → Art. 6, mn. 9. Definitions originally used in the Consumer Rights Directive have since been changed by the Modernisation Directive, see Digital Content Directive → Art. 7, mn. 34, and Consumer Rights Directive → Art. 6, mn. 9. 45 See, for example, E-Commerce Directive → Introduction to Arts 12–15, mn. 6–8. 46 For more detail see the comments on the E-Commerce Directive, Arts 10–11 and Arts 12–15. 47 For more detail see Portability Regulation → Introduction, mn. 58, 81 et seq. 48 For further details see Portability Regulation → Introduction, mn. 18 et seq.

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II. Aim 33

This commentary aims to provide information on the new law with which the EU is responding to the challenges of the digitisation and the needs of the digital economy in the field of contract law. With a team with authors from several EU Member States, the aim is to assist in ensuring that the common European responses to technological challenges and the needs of the digital economy, especially in a cross-border context, are effective in the legal practice of the Member States. This commentary should facilitate the direct application of the Portability Regulation as well as the transposition of the Digital Content Directive – and the updated Consumer Rights Directive – into Member States law and the application of their implementing legislation. In order to achieve this purpose, it is essential that the objectives, the precise content and potential problems with applying the new and already familiar European provisions are known, thoroughly explained and discussed. It is the hope of the editors that this commentary can contribute to an exchange of ideas and experiences among lawyers from many Member States. Only in this way, can a common understanding of European law be developed to facilitate the uniform application of EU regulations and effective harmonisation on the basis of EU directives.

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Directive (EU) 2019/770 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the supply of digital content and digital services (Text with EEA relevance) The European Parliament and the Council of the European Union, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee 1, Acting in accordance with the ordinary legislative procedure2, Whereas: (1) The growth potential of e-commerce in the Union has not yet been fully exploited. The Digital Single Market Strategy for Europe tackles in a holistic manner the major obstacles to the development of cross-border e-commerce in the Union in order to unleash this potential. Ensuring better access for consumers to digital content and digital services, and making it easier for businesses to supply digital content and digital services, can contribute to boosting the Union's digital economy and stimulating overall growth. (2) Article 26(1) and (2) of the Treaty on the Functioning of the European Union (TFEU) provide that the Union is to adopt measures with the aim of establishing or ensuring the functioning of the internal market, which is to comprise an area without internal frontiers in which the free movement of goods and services is ensured. Article 169(1), and point (a) of Article 169(2), TFEU provide that the Union is to contribute to the attainment of a high level of consumer protection through measures adopted pursuant to Article 114 TFEU in the context of the completion of the internal market. This Directive aims to strike the right balance between achieving a high level of consumer protection and promoting the competitiveness of enterprises, while ensuring respect for the principle of subsidiarity. (3) Certain aspects concerning contracts for the supply of digital content or digital services should be harmonised, taking as a base a high level of consumer protection, in order to achieve a genuine digital single market, increase legal certainty and reduce transaction costs, in particular for small and medium-sized enterprises (‘SMEs’). (4) Businesses, especially SMEs, often face additional costs, stemming from differences in national mandatory consumer contract law rules, and legal uncertainty when offering cross-border digital content or digital services. Businesses also face costs when adapting their contracts to specific mandatory rules for the supply of digital content or digital services, which are already being applied in several Member States, creating differences in scope and content between specific national rules governing such contracts. (5) Consumers are not always confident when buying cross border and especially when it is done online. One of the major factors for consumers' lack of confiOJ C 264, 20.7.2016, p. 57. Position of the European Parliament of 26 March 2019 (not yet published in the Official Journal) and decision of the Council of 15 April 2019. 1

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dence is uncertainty about their key contractual rights and the lack of a clear contractual framework for digital content or digital services. Many consumers experience problems related to the quality of, or access to, digital content or digital services. For instance, they receive wrong or faulty digital content or digital services, or they are not able to access the digital content or digital service in question. As a result, consumers suffer financial and non-financial detriment. In order to remedy such problems, both businesses and consumers should be able to rely on fully harmonised contractual rights in certain core areas concerning the supply of digital content or digital services across the Union. Full harmonisation of some key regulatory aspects would considerably increase legal certainty for consumers and businesses. Harmonised consumer contract law rules in all Member States would make it easier for businesses, especially SMEs, to supply digital content or digital services across the Union. They would provide businesses with a stable contract law environment when supplying digital content or digital services in other Member States. They would also prevent legal fragmentation that otherwise would arise from new national legislation regulating specifically digital content and digital services. Consumers should benefit from harmonised rights for the supply of digital content and digital services that provide a high level of protection. They should have clear mandatory rights when they receive or access digital content or digital services from anywhere in the Union. Having such rights should increase their confidence in acquiring digital content or digital services. It should also contribute to reducing the detriment consumers currently suffer, since there would be a set of clear rights that will enable them to address problems they face with digital content or digital services. This Directive should fully harmonise certain key rules that have, so far, not been regulated at Union or national level. This Directive should define its scope in a clear and unequivocal manner and provide clear substantive rules for the digital content or digital services falling within its scope. Both the scope of this Directive and its substantive rules should be technologically neutral and future-proof. This Directive should lay down common rules on certain requirements concerning contracts between traders and consumers for the supply of digital content or a digital service. For this purpose, rules on the conformity of digital content or a digital service with the contract, remedies in the event of a lack of such conformity or a failure to supply and the modalities for the exercise of those remedies, as well as on the modification of digital content or a digital service, should be fully harmonised. Fully harmonised rules on some essential elements of consumer contract law would make it easier for businesses, especially SMEs, to offer their products in other Member States. Consumers would benefit from a high level of consumer protection and welfare gains by fully harmonising key rules. Member States are precluded within the scope of this Directive from providing for any further formal or substantive requirements. For example, Member States should not provide for rules on the reversal of the burden of proof that are different from those provided for in this Directive, or for an obligation for the consumer to notify the trader of a lack of conformity within a specific period. This Directive should not affect national law to the extent that the matters concerned are not regulated by this Directive, such as national rules on the forma-

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tion, validity, nullity or effects of contracts or the legality of the digital content or the digital service. This Directive should also not determine the legal nature of contracts for the supply of digital content or a digital service, and the question of whether such contracts constitute, for instance, a sales, service, rental or sui generis contract, should be left to national law. This Directive should also not affect national rules that do not specifically concern consumer contracts and provide for specific remedies for certain types of defects that were not apparent at the time of conclusion of the contract, namely national provisions which may lay down specific rules for the trader's liability for hidden defects. This Directive should also not affect national laws providing for non-contractual remedies for the consumer, in the event of lack of conformity of the digital content or digital service, against persons in previous links of the chain of transactions, or other persons that fulfil the obligations of such persons. Member States also remain free, for example, to regulate liability claims of a consumer against a third party other than a trader that supplies or undertakes to supply the digital content or digital service, such as a developer which is not at the same time the trader under this Directive. Member States should also remain free, for example, to regulate the consequences of a failure to supply, or of a lack of conformity of, digital content or a digital service, where such failure to supply or lack of conformity is due to an impediment beyond the control of the trader and where the trader could not be expected to have avoided or overcome the impediment or its consequences, such as in the event of force majeure. Member States should also remain free, for example, to regulate the rights of parties to withhold the performance of their obligations or part thereof until the other party performs its obligations. For example, Member States should be free to regulate whether a consumer, in cases of a lack of conformity, is to be entitled to withhold payment of the price or part thereof until the trader has brought the digital content or digital service into conformity, or whether the trader is to be entitled to retain any reimbursement due to the consumer upon termination of the contract until the consumer complies with the obligation provided for in this Directive to return the tangible medium to the trader. Member States should also remain free to extend the application of the rules of this Directive to contracts that are excluded from the scope of this Directive, or to otherwise regulate such contracts. For instance, Member States should remain free to extend the protection afforded to consumers by this Directive also to natural or legal persons that are not consumers within the meaning of this Directive, such as non-governmental organisations, start-ups or SMEs. The definition of a consumer should cover natural persons who are acting outside their trade, business, craft or profession. However, Member States should also remain free to determine, in the case of dual purpose contracts, where the contract is concluded for purposes that are partly within and partly outside the person's trade, and where the trade purpose is so limited as not to be predominant in the overall context of the contract, whether and under which conditions that person should also be considered a consumer. This Directive should apply to any contract whereby the trader supplies or undertakes to supply digital content or digital service to the consumer. Platform providers could be considered to be traders under this Directive if they act for purposes relating to their own business and as the direct contractual partner of the consumer for the supply of digital content or a digital service. Member 13

Digital Content Directive States should remain free to extend the application of this Directive to platform providers that do not fulfil the requirements for being considered a trader under this Directive. (19) The Directive should address problems across different categories of digital content, digital services, and their supply. In order to cater for fast technological developments and to maintain the future-proof nature of the notion of digital content or digital service, this Directive should cover, inter alia, computer programmes, applications, video files, audio files, music files, digital games, ebooks or other e-publications, and also digital services which allow the creation of, processing of, accessing or storage of data in digital form, including software-as-a-service, such as video and audio sharing and other file hosting, word processing or games offered in the cloud computing environment and social media. As there are numerous ways for digital content or digital services to be supplied, such as transmission on a tangible medium, downloading by consumers on their devices, web-streaming, allowing access to storage capabilities of digital content or access to the use of social media, this Directive should apply independently of the medium used for the transmission of, or for giving access to, the digital content or digital service. However, this Directive should not apply to internet access services. (20) This Directive and Directive (EU) 2019/771 of the European Parliament and of the Council3 should complement each other. While this Directive lays down rules on certain requirements concerning contracts for the supply of digital content or digital services, Directive (EU) 2019/771 lays down rules on certain requirements concerning contracts for the sale of goods. Accordingly, in order to meet the expectations of consumers and ensure a clear-cut and simple legal framework for traders of digital content, this Directive should also apply to digital content which is supplied on a tangible medium, such as DVDs, CDs, USB sticks and memory cards, as well as to the tangible medium itself, provided that the tangible medium serves exclusively as a carrier of the digital content. However, instead of the provisions of this Directive on the trader's obligation to supply and on the consumer's remedies for failure to supply, the provisions of Directive 2011/83/EU of the European Parliament and of the Council4 on obligations related to the delivery of goods and remedies in the event of the failure to deliver should apply. In addition, the provisions of Directive 2011/83/EU on, for example, the right of withdrawal and the nature of the contract under which those goods are supplied, should also continue to apply to such tangible media and the digital content supplied on it. This Directive is also without prejudice to the distribution right applicable to these goods under copyright law. (21) Directive (EU) 2019/771 should apply to contracts for the sale of goods, including goods with digital elements. The notion of goods with digital elements should refer to goods that incorporate or are interconnected with digital content or a digital service in such a way that the absence of that digital content or digital service would prevent the goods from performing their functions. Digital content or a digital service that is incorporated in or interconnected with 3 Directive (EU) 2019/771 of the European Parliament and of the Council of 20 May 2019 (see page 28 of this Official Journal). 4 Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council (OJ L 304, 22.11.2011, p. 64).

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Digital Content Directive goods in that manner should fall within the scope of Directive (EU) 2019/771 if it is provided with the goods under a sales contract concerning those goods. Whether the supply of the incorporated or interconnected digital content or digital service forms part of the sales contract with the seller should depend on the content of this contract. This should include incorporated or interconnected digital content or digital services the supply of which is explicitly required by the contract. It should also include those sales contracts which can be understood as covering the supply of specific digital content or a specific digital service because they are normal for goods of the same type and the consumer could reasonably expect them given the nature of the goods and taking into account any public statement made by or on behalf of the seller or other persons in previous links of the chain of transactions, including the producer. If, for example, a smart TV were advertised as including a particular video application, that video application would be considered to be part of the sales contract. This should apply regardless of whether the digital content or digital service is preinstalled in the good itself or has to be downloaded subsequently on another device and is only interconnected to the good. For example, a smart phone could come with a standardised pre-installed application provided under the sales contract, such as an alarm application or a camera application. Another possible example is that of a smart watch. In such a case, the watch itself would be considered to be the good with digital elements, which can perform its functions only with an application that is provided under the sales contract but has to be downloaded by the consumer onto a smart phone; the application would then be the interconnected digital element. This should also apply if the incorporated or interconnected digital content or digital service is not supplied by the seller itself but is supplied, under the sales contract, by a third party. In order to avoid uncertainty for both traders and consumers, in the event of doubt as to whether the supply of the digital content or the digital service forms part of the sales contract, Directive (EU) 2019/771 should apply. Furthermore, ascertaining a bilateral contractual relationship, between the seller and the consumer, of which the supply of the incorporated or interconnected digital content or digital service forms part should not be affected by the mere fact that the consumer has to consent to a licensing agreement with a third party in order to benefit from the digital content or the digital service. (22) In contrast, if the absence of the incorporated or interconnected digital content or digital service does not prevent the goods from performing their functions, or if the consumer concludes a contract for the supply of digital content or a digital service which does not form part of a sales contract concerning goods with digital elements, that contract should be considered to be separate from the contract for the sale of the goods, even if the seller acts as an intermediary of that second contract with the third-party supplier, and could fall within the scope of this Directive. For instance, if the consumer downloads a game application from an app store onto a smart phone, the contract for the supply of the game application is separate from the contract for the sale of the smart phone itself. Directive (EU) 2019/771 should therefore only apply to the sales contract concerning the smart phone, while the supply of the game application could fall under this Directive, if the conditions of this Directive are met. Another example would be where it is expressly agreed that the consumer buys a smart phone without a specific operating system and the consumer subsequently concludes a 15

Digital Content Directive contract for the supply of an operating system from a third party. In such a case, the supply of the separately bought operating system would not form part of the sales contract and therefore would not fall within the scope of Directive (EU) 2019/771, but could fall within the scope of this Directive, if the conditions of this Directive are met. (23) Digital representations of value such as electronic vouchers or e-coupons are used by consumers to pay for different goods or services in the digital single market. Such digital representations of value are becoming important in relation to the supply of digital content or digital services, and should therefore be considered as a method of payment within the meaning of this Directive. Digital representations of value should also be understood to include virtual currencies, to the extent that they are recognised by national law. Differentiation depending on the methods of payment could be a cause of discrimination and provide an unjustified incentive for businesses to move towards supplying digital content or a digital service against digital representations of value. However, since digital representations of value have no other purpose than to serve as a method of payment, they themselves should not be considered digital content or a digital service within the meaning of this Directive. (24) Digital content or digital services are often supplied also where the consumer does not pay a price but provides personal data to the trader. Such business models are used in different forms in a considerable part of the market. While fully recognising that the protection of personal data is a fundamental right and that therefore personal data cannot be considered as a commodity, this Directive should ensure that consumers are, in the context of such business models, entitled to contractual remedies. This Directive should, therefore, apply to contracts where the trader supplies, or undertakes to supply, digital content or a digital service to the consumer, and the consumer provides, or undertakes to provide, personal data. The personal data could be provided to the trader either at the time when the contract is concluded or at a later time, such as when the consumer gives consent for the trader to use any personal data that the consumer might upload or create with the use of the digital content or digital service. Union law on the protection of personal data provides for an exhaustive list of legal grounds for the lawful processing of personal data. This Directive should apply to any contract where the consumer provides or undertakes to provide personal data to the trader. For example, this Directive should apply where the consumer opens a social media account and provides a name and email address that are used for purposes other than solely supplying the digital content or digital service, or other than complying with legal requirements. It should equally apply where the consumer gives consent for any material that constitutes personal data, such as photographs or posts that the consumer uploads, to be processed by the trader for marketing purposes. Member States should however remain free to determine whether the requirements for the formation, existence and validity of a contract under national law are fulfilled. (25) Where digital content and digital services are not supplied in exchange for a price, this Directive should not apply to situations where the trader collects personal data exclusively to supply digital content or a digital service, or for the sole purpose of meeting legal requirements. Such situations can include, for instance, cases where the registration of the consumer is required by applicable laws for security and identification purposes. This Directive should also not apply to situations where the trader only collects metadata, such as information 16

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concerning the consumer's device or browsing history, except where this situation is considered to be a contract under national law. It should also not apply to situations where the consumer, without having concluded a contract with the trader, is exposed to advertisements exclusively in order to gain access to digital content or a digital service. However, Member States should remain free to extend the application of this Directive to such situations, or to otherwise regulate such situations, which are excluded from the scope of this Directive. This Directive should apply to contracts for the development of digital content that is tailor-made to the specific requirements of the consumer including tailor-made software. This Directive should also apply to the supply of electronic files required in the context of 3D printing of goods, to the extent that such files fall under the definition of digital content or digital services within the meaning of this Directive. However, this Directive should not regulate any rights or obligations related to goods produced with the use of 3D printing technology. Given that this Directive should apply to contracts which have as their object the supply of digital content or a digital service to the consumer, it should not apply where the main subject matter of the contract is the provision of professional services, such as translation services, architectural services, legal services or other professional advice services, which are often performed personally by the trader, regardless of whether digital means are used by the trader in order to produce the output of the service or to deliver or transmit it to the consumer. Similarly, this Directive should not apply to public services, such as social security services or public registers, where the digital means are only used for transmitting or communicating the service to the consumer. This Directive should also not apply to authentic instruments and other notarial acts, regardless of whether they are performed, recorded, reproduced or transmitted by digital means. The market for number-independent interpersonal communications services, which do not connect with publicly assigned numbering resources, is rapidly evolving. In recent years, the emergence of new digital services which allow interpersonal communications over the internet, such as web-based e-mail and online messaging services, has led more consumers to use such services. For such reasons, it is necessary to provide effective consumer protection with respect to such services. This Directive should therefore also apply to number-independent interpersonal communications services. This Directive should not apply to healthcare as defined in Directive 2011/24/EU of the European Parliament and of the Council5. The exclusion of ‘healthcare’ from the scope of this Directive should also apply to any digital content or digital service that constitutes a medical device, as defined in Council Directive 93/42/EEC6 or 90/385/EEC7 or Directive 98/79/EC of the European Parliament and of the Council8, where such medical device is prescribed or provided by a health professional as defined in Directive 2011/24/EU. However, this Directive should apply to any digital content or digital service that constitutes a

5 Directive 2011/24/EU of the European Parliament and of the Council of 9 March 2011 on the application of patients' rights in cross-border healthcare (OJ L 88, 4.4.2011, p. 45). 6 Council Directive 93/42/EEC of 14 June 1993 concerning medical devices (OJ L 169, 12.7.1993, p. 1). 7 Council Directive 90/385/EEC of 20 June 1990 on the approximation of the laws of the Member States relating to active implantable medical devices (OJ L 189, 20.7.1990, p. 17). 8 Directive 98/79/EC of the European Parliament and of the Council of 27 October 1998 on in vitro diagnostic medical devices (OJ L 331, 7.12.1998, p. 1).

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medical device, such as health applications, that can be obtained by the consumer without being prescribed or provided by a health professional. Union law relating to financial services contains numerous rules on consumer protection. Financial services, as defined by the law applicable to that sector, in particular in Directive 2002/65/EC of the European Parliament and of the Council9, also cover digital content or digital services relating, or giving access, to financial services and are therefore covered by the protection of Union financial services law. Contracts relating to digital content or digital services that constitute a financial service should therefore be excluded from the scope of this Directive. This Directive should not apply to digital content or a digital service that is provided to a public audience as part of an artistic performance or other event, such as a digital cinematographic projection or an audiovisual theatrical performance. However, this Directive should apply if digital content or a digital service is provided to a public audience by signal transmission such as digital television services. Free and open source software, where the source code is openly shared and users can freely access, use, modify and redistribute the software or modified versions thereof, can contribute to research and innovation in the market for digital content and digital services. In order to avoid imposing obstacles to such market developments, this Directive should also not apply to free and open source software, provided that it is not supplied in exchange for a price and that the consumer's personal data are exclusively used for improving the security, compatibility or interoperability of the software. Digital content or digital services are often combined with the provision of goods or other services and offered to the consumer within the same contract comprising a bundle of different elements, such as the provision of digital television and the purchase of electronic equipment. In such cases, the contract between the consumer and the trader includes elements of a contract for the supply of digital content or a digital service, but also elements of other contract types, such as sale of goods or services contracts. This Directive should only apply to the elements of the overall contract that consist of the supply of digital content or digital services. The other elements of the contract should be governed by the rules applicable to those contracts under national law or, as applicable, other Union law governing a specific sector or subject matter. Likewise, any effects that the termination of one element of the bundle contract could have on the other elements of that bundle contract should be governed by national law. However, in order to ensure consistency with the sector-specific provisions of Directive (EU) 2018/1972 of the European Parliament and of the Council10 regulating bundle contracts, where a trader offers, within the meaning of that Directive, digital content or a digital service in combination with a number-based interpersonal communications service or an internet access service, the provisions of this Directive on the modification of digital content should not apply to the digital content or digital service element of the bundle.

9 Directive 2002/65/EC of the European Parliament and of the Council of 23 September 2002 concerning the distance marketing of consumer financial services and amending Council Directive 90/619/EEC and Directives 97/7/EC and 98/27/EC (OJ L 271, 9.10.2002, p. 16). 10 Directive (EU) 2018/1972 of the European Parliament and of the Council of 11 December 2018 establishing the European Electronic Communications Code (OJ L 321, 17.12.2018, p. 36).

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The relevant provisions of Directive (EU) 2018/1972 should instead apply to all elements of the bundle, including the digital content or digital service. The provisions of this Directive concerning bundle contracts should only apply to cases where the different elements of the bundle are offered by the same trader to the same consumer under a single contract. This Directive should not affect national laws governing the conditions under which a contract for the supply of digital content or digital services can be considered to be linked with or ancillary to another contract that the consumer has concluded with the same or another trader, the remedies to be exercised under each contract or the effect that the termination of one contract would have on the other contract. The commercial practice of bundling offers of digital content or digital services with the provision of goods or other services is subject to Directive 2005/29/EC of the European Parliament and of the Council11 concerning unfair business-toconsumer commercial practices in the internal market. Such bundling is not in itself prohibited under Directive 2005/29/EC. However, it is prohibited where it is deemed unfair, following a case-by-case assessment pursuant to the criteria laid down in that Directive. Union law on competition also allows addressing tying and bundling practices, when they affect the competitive process and harm consumers. This Directive should be without prejudice to other Union law governing a specific sector or subject matter, such as telecommunications, e-commerce and consumer protection. It should also be without prejudice to Union and national law on copyright and related rights, including the portability of online content services. The pursuit of activities falling within the scope of this Directive could involve the processing of personal data. Union law provides a comprehensive framework on the protection of personal data. In particular, this Directive is without prejudice to Regulation (EU) 2016/67912 and Directive 2002/58/EC13 of the European Parliament and of the Council. That framework applies to any personal data processed in connection with the contracts covered by this Directive. Consequently, personal data should only be collected or otherwise processed in accordance with Regulation (EU) 2016/679 and Directive 2002/58/EC. In the event of a conflict between this Directive and Union law on the protection of personal data, the latter should prevail. This Directive should not regulate the conditions for the lawful processing of personal data, as this question is regulated, in particular, by Regulation (EU) 2016/679. As a consequence, any processing of personal data in connection with a contract falling within the scope of this Directive is lawful only if it is in conformity with the provisions of Regulation (EU) 2016/679 relating to the legal

11 Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council (‘Unfair Commercial Practices Directive’) (OJ L 149, 11.6.2005, p. 22). 12 Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) (OJ L 119, 4.5.2016, p. 1). 13 Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications) (OJ L 201, 31.7.2002, p. 37).

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Digital Content Directive grounds for the processing of personal data. Where processing of personal data is based on consent, in particular pursuant to point (a) of Article 6(1) of Regulation (EU) 2016/679, the specific provisions of that Regulation including those concerning the conditions for assessing whether consent is freely given apply. This Directive should not regulate the validity of the consent given. Regulation (EU) 2016/679 also contains comprehensive rights as to the erasure of data and data portability. This Directive should be without prejudice to those rights, which apply to any personal data provided by the consumer to the trader or collected by the trader in connection with any contract falling within the scope of this Directive, and when the consumer terminated the contract in accordance with this Directive. (39) The right to erasure and the consumer's right to withdraw consent for the processing of personal data should apply fully also in connection with the contracts covered by this Directive. The right of the consumer to terminate the contract in accordance with this Directive should be without prejudice to the consumer's right under Regulation (EU) 2016/679 to withdraw any consent given to the processing of the consumer's personal data. (40) This Directive should not regulate the consequences for the contracts covered by this Directive in the event that the consumer withdraws the consent for the processing of the consumer's personal data. Such consequences should remain a matter for national law. (41) There are various ways for the trader to supply digital content or digital services to consumers. It is opportune to set simple and clear rules as to the modalities and the time for performing that obligation to supply which is the main contractual obligation of the trader, by making the digital content or a digital service available or accessible to the consumer. The digital content or digital service should be considered to be made available or accessible to the consumer when the digital content or digital service, or any means suitable for accessing or downloading it, has reached the sphere of the consumer and no further action is required by the trader in order to enable the consumer to use the digital content or digital service in accordance with the contract. Considering that the trader is not in principle responsible for acts or omissions of a third party which operates a physical or virtual facility, for instance an electronic platform or a cloud storage facility, that the consumer selects for receiving or storing the digital content or digital service, it should be sufficient for the trader to supply the digital content or digital service to that third party. However, the physical or virtual facility cannot be considered to be chosen by the consumer if it is under the trader's control or is contractually linked to the trader, or where the consumer selected that physical or virtual facility for receipt of the digital content or digital service but that choice was the only one offered by the trader to receive or access the digital content or digital service. Where the physical or virtual facility cannot be considered to have been chosen by the consumer, the obligation of the trader to supply the digital content or digital service should not be considered to have been fulfilled if the digital content or digital service is supplied to the physical or virtual facility but the consumer cannot receive or access the digital content or digital service in accordance with this Directive. In those cases, the consumer should have the same remedies as would apply if the trader had failed to supply the digital content or digital service. With regard to the time of supply, in line with market practices and technical possibilities, and in order to provide for a certain degree of flexi20

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bility, the digital content or digital service should be supplied without undue delay, unless the parties decide to agree otherwise in order to cater for other supply models. The digital content or digital service should comply with the requirements agreed between the trader and the consumer in the contract. In particular, it should comply with the description, quantity, for example the number of music files that can be accessed, quality, for example the picture resolution, language and version agreed in the contract. It should also possess the security, functionality, compatibility, interoperability and other features, as required by the contract. The requirements of the contract should include those resulting from the pre-contractual information which, in accordance with Directive 2011/83/EU, forms an integral part of the contract. Those requirements could also be set out in a service level agreement, where, under the applicable national law, such type of agreement forms part of the contractual relationship between the consumer and the trader. The notion of functionality should be understood to refer to the ways in which digital content or a digital service can be used. For instance, the absence or presence of any technical restrictions such as protection via Digital Rights Management or region coding could have an impact on the ability of the digital content or digital service to perform all its functions having regard to its purpose. The notion of interoperability relates to whether and to what extent digital content or a digital service is able to function with hardware or software that is different from those with which digital content or digital services of the same type are normally used. Successful functioning could include, for instance, the ability of the digital content or digital service to exchange information with such other software or hardware and to use the information exchanged. Given that digital content and digital services are constantly developing, traders may agree with consumers to provide updates and features as they become available. The conformity of the digital content or digital service should, therefore, also be assessed in relation to whether the digital content or service is updated in the manner that has been stipulated in the contract. Failure to supply updates that had been agreed to in the contract should be considered a lack of conformity of the digital content or digital service. Moreover, defective or incomplete updates should also be considered a lack of conformity of the digital content or digital service, given that that would mean that such updates are not performed in the manner stipulated in the contract. In order to be in conformity and to ensure that consumers are not deprived of their rights, for example in cases where the contract sets very low standards, the digital content or digital service should not only comply with the subjective requirements for conformity, but should in addition comply with the objective requirements for conformity set out in this Directive. Conformity should be assessed, inter alia, by considering the purpose for which digital content or digital services of the same type would normally be used. It should also possess the qualities and performance features which are normal for digital content or digital services of the same type and which consumers can reasonably expect, given the nature of the digital content or digital service, and taking into account any public statements on the specific characteristics of the digital content or digital service made by or on behalf of the trader or other persons in previous links of the chain of transactions.

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Digital Content Directive (46) The standard of reasonableness with regard to any reference in this Directive to what can be reasonably expected by a person should be objectively ascertained, having regard to the nature and purpose of the digital content or digital service, the circumstances of the case and to the usages and practices of the parties involved. In particular, what is considered to be a reasonable time for bringing the digital content or digital service into conformity should be objectively ascertained, having regard to the nature of the lack of conformity. (47) For the period of time that the consumer would reasonably expect, the trader should provide the consumer with updates, including security updates, in order to keep the digital content or digital service in conformity and secure. For instance, as regards digital content or digital services, the purpose of which is limited in time, the obligation to provide updates should be limited to that time, while for other types of digital content or digital service the period during which updates should be provided to the consumer could be equal to the liability period for lack of conformity or could extend beyond that period, which might be the case particularly with regard to security updates. The consumer should remain free to choose whether to install the updates provided. Where the consumer decides not to install the updates, the consumer should, however, not expect the digital content or digital service to remain in conformity. The trader should inform the consumer that the consumer's decision not to install updates which are necessary for keeping the digital content or digital service in conformity, including security updates, will affect the trader's liability for conformity of those features of the digital content or digital service which the relevant updates are supposed to maintain in conformity. This Directive should not affect obligations to provide security updates laid down in Union law or in national law. (48) Regulation (EU) 2016/679 or any other Union law on data protection should fully apply to the processing of personal data in connection with any contract falling within the scope of this Directive. In addition, this Directive should be without prejudice to the rights, obligations and non-contractual remedies provided for by Regulation (EU) 2016/679. Facts leading to a lack of compliance with requirements provided for by Regulation (EU) 2016/679, including core principles such as the requirements for data minimisation, data protection by design and data protection by default, may, depending on the circumstances of the case, also be considered to constitute a lack of conformity of the digital content or digital service with subjective or objective requirements for conformity provided for in this Directive. One example could be where a trader explicitly assumes an obligation in the contract, or the contract can be interpreted in that way, which is also linked to the trader's obligations under Regulation (EU) 2016/679. In that case, such a contractual commitment can become part of the subjective requirements for conformity. A second example could be where noncompliance with the obligations under Regulation (EU) 2016/679 could, at the same time render the digital content or digital service unfit for its intended purpose and, therefore, constitute a lack of conformity with the objective requirement for conformity which requires the digital content or digital service to be fit for the purposes for which digital content or digital services of the same type would be normally used. This would be the case, for example, if the trader of data encryption software fails to implement appropriate measures as required by Regulation (EU) 2016/679 to ensure that by design personal data are not disclosed to unautho22

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rised recipients, thus rendering the encryption software unfit for its intended purpose which is the secure transferring of data by the consumer to their intended recipient. Finally, there could be cases where the trader's non-compliance with its obligations under Regulation (EU) 2016/679 can also constitute a lack of conformity of the digital content or digital service with the objective requirement for conformity which requires the digital content or digital service to possess the features which are normal for digital content or digital services of the same type and which the consumer can reasonably expect. For instance, if the trader of an online shopping application fails to take the measures provided for in Regulation (EU) 2016/679 for the security of processing of the consumer's personal data and as a result the consumer's credit card information is exposed to malware or spyware, that failure could also constitute a lack of conformity of the digital content or digital service within the meaning of this Directive, as the consumer would reasonably expect that an application of this type would normally possess features preventing the disclosure of payment details. Where the facts leading to non-compliance with requirements under Regulation (EU) 2016/679 also constitute a lack of conformity of the digital content or digital service with subjective or objective requirements for conformity as provided for in this Directive, the consumer should be entitled to the remedies for the lack of conformity provided for by this Directive, unless the contract is already void or voidable under national law. In order to ensure sufficient flexibility, it should be possible for the parties to deviate from the objective requirements for conformity. Such a deviation should only be possible if the consumer was specifically informed about it and if the consumer accepts it separately from other statements or agreements and by way of active and unequivocal conduct. Both conditions could, for instance, be fulfilled by ticking a box, pressing a button or activating a similar function. When applying the rules of this Directive, traders should make use of standards, open technical specifications, good practices and codes of conduct, including in relation to the commonly used and machine-readable format for retrieving the content other than personal data, which was provided or created by the consumer when using the digital content or digital service, and including on the security of information systems and digital environments, whether established at international level, Union level or at the level of a specific industry sector. In this context, the Commission could call for the development of international and Union standards and the drawing up of a code of conduct by trade associations and other representative organisations that could support the uniform implementation of this Directive. Many types of digital content or digital services are supplied continuously over a period of time, such as access to cloud services. It is therefore necessary to ensure that the digital content or digital service is in conformity throughout the duration of the contract. Short-term interruptions of the supply of digital content or a digital service should be treated as instances of lack of conformity where those interruptions are more than negligible or recur. Moreover, given the frequent improvement of digital content and digital services, in particular by updates, the version of digital content or of a digital service supplied to the consumer should be the most recent one available at the time of the conclusion of the contract, unless the parties have agreed otherwise. In order to work properly, the digital content or digital service needs to be correctly integrated into the consumer's hardware and software environment. A 23

Digital Content Directive lack of conformity of the digital content or digital service that results from an incorrect integration should be regarded as a lack of conformity of the digital content or digital service itself, where it was integrated by the trader or under its control, or by the consumer following the trader's instructions for integration, and the incorrect integration was due to shortcomings in the required integration instructions, such as incompleteness or a lack of clarity making the integration instructions difficult to use for the average consumer. (53) Restrictions of the consumer's use of the digital content or digital service in accordance with this Directive could result from limitations imposed by the holder of intellectual property rights in accordance with intellectual property law. Such restrictions can arise from the end-user license agreement under which the digital content or digital service is supplied to the consumer. This can be the case when, for instance, an end-user licence agreement prohibits the consumer from making use of certain features related to the functionality of the digital content or digital service. Such a restriction could render the digital content or digital service in breach of the objective requirements for conformity laid down in this Directive, if it concerned features which are usually found in digital content or digital services of the same type and which the consumer can reasonably expect. In such cases, the consumer should be able to claim the remedies provided for in this Directive for the lack of conformity against the trader who supplied the digital content or digital service. The trader should only be able to avoid such liability by fulfilling the conditions for derogating from the objective requirements for conformity as laid down in this Directive, namely only if the trader specifically informs the consumer before the conclusion of the contract that a particular characteristic of the digital content or digital service deviates from the objective requirements for conformity and the consumer has expressly and separately accepted that deviation. (54) Legal defects are a particularly important issue in relation to digital content or digital services, which are subject to intellectual property rights. Restrictions on the consumer's use of digital content or a digital service in accordance with this Directive could be a result of a violation of third-party rights. Such violation might effectively bar the consumer from enjoying the digital content or digital service or some of its features, for instance when the consumer cannot access the digital content or digital service at all or cannot do so lawfully. That might be due to the fact that the third party rightfully compels the trader to stop infringing those rights and to discontinue offering the digital content or digital service in question or that the consumer cannot use the digital content or digital service without infringing the law. In the event of a violation of third-party rights that results in a restriction that prevents or limits the use of the digital content or digital service in accordance with the subjective and objective requirements for conformity, the consumer should be entitled to the remedies for the lack of conformity, unless national law provides for the nullity of the contract, or for its rescission, for example for breach of legal warranty against eviction. (55) The trader should be liable to the consumer in the event of a lack of conformity of the digital content or digital service, and for any failure to supply the digital content or digital service. As digital content or digital services can be supplied to consumers through one or more individual acts of supply or continuously over a period of time, it is appropriate that the relevant time for the purpose of

24

Digital Content Directive establishing conformity of the digital content or digital service be determined in the light of those different types of supply. (56) Digital content or digital services can be supplied to consumers through a single act of supply, for instance when consumers download an e-book and store it on their personal device. Similarly, the supply can consist of a series of such individual acts, for instance where consumers receive a link to download a new ebook every week. The distinctive element of this category of digital content or digital service is the fact that consumers thereafter have the possibility to access and use the digital content or digital service indefinitely. In such cases, the conformity of the digital content or digital service should be assessed at the time of supply, and therefore the trader should only be liable for any lack of conformity which exists at the time when the single act of supply or each individual act of supply takes place. In order to ensure legal certainty, traders and consumers should be able to rely on a harmonised minimum period during which the trader should be held liable for a lack of conformity. In relation to contracts which provide for a single act of supply or a series of individual acts of supply of the digital content or digital service, Member States should ensure that traders are liable for not less than two years from the time of supply, if under their respective national law the trader is only liable for any lack of conformity that becomes apparent within a period of time after supply. (57) Digital content or digital services could also be supplied to consumers in a continuous manner over a period of time. Continuous supply can include cases whereby the trader makes a digital service available to consumers for a fixed or an indefinite period of time, such as a two-year cloud storage contract or an indefinite social media platform membership. The distinctive element of this category is the fact that the digital content or digital service is available or accessible to consumers only for the fixed duration of the contract or for as long as the indefinite contract is in force. Therefore, it is justified that the trader, in such cases, should only be liable for a lack of conformity which appears during that period of time. The element of continuous supply should not necessarily require a long-term supply. Cases such as web-streaming of a video clip should be considered continuous supply over a period of time, regardless of the actual duration of the audio-visual file. Cases where specific elements of the digital content or digital service are made available periodically or on several instances during the fixed duration of the contract, or for as long as the indefinite contract is in force, should also be considered a continuous supply over a period of time, for instance where the contract stipulates that a copy of anti-virus software can be used for a year and will be automatically updated on the first day of each month of this period, or that the trader will issue updates whenever new features of a digital game become available, and the digital content or digital service is available or accessible to consumers only for the fixed duration of the contract or for as long as the indefinite contract is in force. (58) Member States should remain free to regulate national limitation periods. However, such limitation periods should not prevent consumers from exercising their rights throughout the period of time during which the trader is liable for a lack of conformity. While this Directive should therefore not harmonise the starting point of national limitation periods, it should nevertheless ensure that such periods still allow consumers to exercise their remedies for any lack of conformity that becomes apparent at least during the period during which the trader is liable for a lack of conformity. 25

Digital Content Directive (59) Due to the specific nature and high complexity of digital content and digital services, as well as the trader's better knowledge and access to know-how, technical information and high-tech assistance, the trader is likely to be in a better position than the consumer to know why the digital content or digital service is not supplied or is not in conformity. The trader is also likely to be in a better position to assess whether the failure to supply or the lack of conformity is due to the incompatibility of the consumer's digital environment with the technical requirements for the digital content or digital service. Therefore in the event of a dispute, while it is for the consumer to provide evidence that the digital content or digital service is not in conformity, the consumer should not have to prove that the lack of conformity existed at the time of supply of the digital content or digital service or, in the event of continuous supply, during the duration of the contract. Instead, it should be for the trader to prove that the digital content or digital service was in conformity at that time or during that period. That burden of proof should be on the trader for a lack of conformity which becomes apparent within one year from the time of supply where the contract provides for a single act of supply or a series of individual acts of supply, and for the duration of the contract where the contract provides for continuous supply over a period of time. However, where the trader proves that the consumer's digital environment is not compatible with the technical requirements, of which the trader informed the consumer in a clear and comprehensible manner before the conclusion of the contract, the consumer should have the burden of proving that the lack of conformity of the digital content or digital service existed at the time of supply of the digital content or digital service where the contract provides for a single act of supply or a series of individual acts of supply or, where the contract provides for continuous supply over a period of time, for the duration of the contract. (60) Without prejudice to the fundamental right to the protection of private life, including confidentiality of communications, and to the protection of personal data of the consumer, the consumer should cooperate with the trader in order for the trader to ascertain whether the cause of the lack of conformity lies in the consumer's digital environment using the technically available means which are least intrusive for the consumer. This can often be done for instance by providing the trader with automatically generated incident reports or with details of the consumer's internet connection. Only in exceptional and duly justified circumstances where, despite the best use of all other means, there is no other way possible, consumers may need to allow virtual access to their digital environment. However, where the consumer does not cooperate with the trader and the consumer had been informed of the consequences of non-cooperation, it should be for the consumer to prove not only that the digital content or digital service is not in conformity, but also that the digital content or digital service was not in conformity at the time of supply of the digital content or digital service where the contract provides for a single act of supply or a series of individual acts of supply or, where the contract provides for continuous supply over a period of time, for the duration of the contract. (61) Where the trader has failed to supply the digital content or digital service, the consumer should call upon the trader to supply the digital content or digital service. In such cases, the trader should act without undue delay, or within an additional period of time as expressly agreed to by the parties. Considering that 26

Digital Content Directive

(62) (63)

(64)

(65)

digital content or a digital service is supplied in digital form, the supply should not require, in the majority of situations, any additional time to make the digital content or digital service available to the consumer. Therefore, in such cases, the obligation of the trader to supply the digital content or digital service without undue delay should mean having to supply it immediately. If the trader then fails to supply the digital content or digital service, the consumer should be entitled to terminate the contract. In specific circumstances, such as where it is clear that the trader will not supply the digital content or digital service or where a specific time for the supply is essential for the consumer, the consumer should be entitled to terminate the contract without first calling upon the trader to supply the digital content or digital service. In the case of lack of conformity, consumers should be entitled to have the digital content or digital service brought into conformity, to have a proportionate reduction in the price, or to terminate the contract. Depending on the technical characteristics of the digital content or digital service, the trader should be allowed to select a specific way of bringing the digital content or digital service into conformity, for example by issuing updates or making a new copy of the digital content or digital service available to the consumer. Given the diversity of digital content and digital services, it is not appropriate to set fixed deadlines for the exercise of rights or the fulfilling of obligations related to digital content or digital services. Such deadlines would not take account of such diversity and could be either too short or too long, depending on the case. It is therefore more appropriate to require that digital content and digital services be brought into conformity within a reasonable time. Such requirement should not prevent the parties from agreeing on a specific time for bringing the digital content or digital service into conformity. The digital content or digital service should be brought into conformity free of any charge. In particular, the consumer should not incur any costs associated with the development of an update for the digital content or digital service. Where bringing digital content or a digital service into conformity is legally or factually impossible or where the trader refuses to bring the digital content or digital service into conformity because to do so would impose disproportionate costs on the trader, or where the trader has failed to bring the digital content or digital service into conformity within a reasonable time, free of charge and without causing significant inconvenience to the consumer, the consumer should be entitled to the remedies of price reduction or termination of the contract. In certain situations, it is justified that the consumer should be entitled to have the price reduced or the contract terminated immediately, for instance where the trader previously failed to successfully bring the digital content or digital service into conformity or where the consumer cannot be expected to maintain confidence in the ability of the trader to bring the digital content or digital service into conformity due to the serious nature of the lack of conformity. For example, the consumer should be entitled to directly request a price reduction or the termination of the contract where the consumer is supplied with anti-virus software which is itself infected with viruses and would constitute an instance of lack of conformity of such a serious nature. The same should apply where it is clear that the trader will not bring the digital content or digital service into conformity within a reasonable time or without significant inconvenience for the consumer. 27

Digital Content Directive (66) In a situation where the consumer is entitled to a reduction of the price paid for the digital content or digital service which is supplied over a period of time, the calculation of the price reduction should take into consideration the decrease of value of the digital content or digital service due both to the lack of conformity and to the time during which the consumer was unable to enjoy the digital content or digital service in conformity. (67) Where the digital content or digital service is supplied in exchange for a price, the consumer should be able to terminate the contract only if the lack of conformity is not minor. However, where the digital content or digital service is not supplied in exchange for a price but personal data are provided by the consumer, the consumer should be entitled to terminate the contract also in cases where the lack of conformity is minor, since the remedy of price reduction is not available to the consumer. In cases where the consumer pays a price and provides personal data, the consumer should be entitled to all available remedies in the event of a lack of conformity. In particular, provided all other conditions are met, the consumer should be entitled to have the digital content or digital service brought into conformity, to have the price reduced in relation to the money paid for the digital content or digital service or to have the contract terminated. (68) Where the consumer terminates the contract, the trader should reimburse the price paid by the consumer. However, there is a need to balance the legitimate interests of consumers and traders where the digital content or digital service is supplied over a period of time and the digital content or digital service was in conformity only for part of that period. Therefore, upon termination, the consumer should only be entitled to the part of the price paid that corresponds and is in proportion to the length of time during which the digital content or digital service was not in conformity. The consumer should also be entitled to any part of the price paid in advance for any period that would have remained after the contract was terminated. (69) Where personal data are provided by the consumer to the trader, the trader should comply with the obligations under Regulation (EU) 2016/679. Such obligations should also be complied with in cases where the consumer pays a price and provides personal data. Upon termination of the contract, the trader should also refrain from using any content other than personal data, which was provided or created by the consumer when using the digital content or digital service supplied by the trader. Such content could include digital images, video and audio files and content created on mobile devices. However, the trader should be entitled to continue to use the content provided or created by the consumer in cases where such content either has no utility outside the context of the digital content or digital service supplied by the trader, only relates to the consumer's activity, has been aggregated with other data by the trader and cannot be disaggregated or only with disproportionate efforts, or has been generated jointly by the consumer and others, and other consumers can continue to make use of it. (70) The consumer could be discouraged from exercising remedies for a lack of conformity of digital content or a digital service if the consumer is deprived of access to content other than personal data, which the consumer provided or created through the use of the digital content or digital service. In order to ensure that the consumer benefits from effective protection in relation to the right to terminate the contract, the trader should therefore, at the request of the con-

28

Digital Content Directive

(71)

(72)

(73)

(74)

sumer, make such content available to the consumer following the termination of the contract. The consumer should be entitled to retrieve the content within a reasonable time, without hindrance from the trader, in a commonly used machine-readable format and free of charge, with the exception of costs generated by the consumer's own digital environment, for instance the costs of a network connection as those costs are not specifically linked to the retrieval of the content. However, the obligation of the trader to make available such content should not apply where the content only has utility within the context of using the digital content or digital service, or relates only to the consumer's activity when using the digital content or digital service or has been aggregated with other data by the trader and cannot be disaggregated or only with disproportionate efforts. In such cases, the content does not have significant practical use or interest for the consumer while taking into account also the interests of the trader. Moreover, the obligation of the trader to make available to the consumer, upon termination of the contract, any content that is not personal data and has been provided or created by the consumer should be without prejudice to the trader's right not to disclose certain content in accordance with applicable law. Where the contract is terminated, the consumer should not be required to pay for the use of the digital content or digital service for any period during which the digital content or a digital service was not in conformity because that would deprive the consumer of effective protection. However, the consumer should also refrain from using the digital content or digital service and from making it available to third parties, for instance by deleting the digital content or any usable copy or rendering the digital content or digital service otherwise inaccessible. The principle of the liability of the trader for damages is an essential element of contracts for the supply of digital content or digital services. Therefore, the consumer should be entitled to claim compensation for detriment caused by a lack of conformity or a failure to supply the digital content or digital service. The compensation should put the consumer as much as possible into the position in which the consumer would have been had the digital content or digital service been duly supplied and been in conformity. As such a right to damages already exists in all Member States, this Directive should be without prejudice to national rules on the compensation of consumers for harm resulting from infringement of those rules. This Directive should also address modifications, such as updates and upgrades, which are carried out by traders on the digital content or digital service which is supplied or made accessible to the consumer over a period of time. Considering the fast-evolving character of digital content and digital services, such updates, upgrades or similar modifications may be necessary and are often advantageous for the consumer. Some modifications, for instance those stipulated as updates in the contract, may form part of the contractual commitment. Other modifications can be required to fulfil the objective requirements for conformity of the digital content or digital service as set out in this Directive. Yet other modifications, which would deviate from the objective requirements for conformity and which are foreseeable at the time of conclusion of the contract, would have to be expressly agreed to by the consumer when concluding the contract.

29

Digital Content Directive (75) In addition to modifications aimed at maintaining conformity, the trader should be allowed under certain conditions to modify features of the digital content or digital service, provided that the contract gives a valid reason for such a modification. Such valid reasons could encompass cases where the modification is necessary to adapt the digital content or digital service to a new technical environment or to an increased number of users or for other important operational reasons. Such modifications are often to the advantage of the consumer as they improve the digital content or digital service. Consequently, the parties to the contract should be able to include clauses in the contract which allow the trader to undertake modifications. In order to balance consumer and business interests, such a possibility for the trader should be coupled with a right for the consumer to terminate the contract where such modifications negatively impact the use of or access to the digital content or digital service in more than only a minor manner. The extent to which modifications negatively impact the use of or access to the digital content or digital service by the consumer should be objectively ascertained having regard to the nature and purpose of the digital content or digital service and to the quality, functionality, compatibility and other main features which are normal for digital content or digital services of the same type. The rules provided for in this Directive concerning such updates, upgrades or similar modifications should however not concern situations where the parties conclude a new contract for the supply of the digital content or digital service, for instance as a consequence of distributing a new version of the digital content or digital service. (76) Consumers should be informed of modifications in a clear and comprehensible manner. Where a modification negatively impacts, in more than a minor manner, the access to or use of digital content or a digital service by the consumer, the consumer should be informed in a way that allows the information to be stored on a durable medium. A durable medium should enable the consumer to store the information for as long as is necessary to protect the interests of the consumer arising from the consumer's relationship with the trader. Such media should include, in particular, paper, DVDs, CDs, USB sticks, memory cards or hard disks as well as e-mails. (77) Where a modification negatively impacts, in more than a minor manner, the access or use of the digital content or digital service by the consumer, the consumer should enjoy as a result of such a modification the right to terminate the contract free of any charge. Alternatively, the trader can decide to enable the consumer to maintain access to the digital content or digital service at no additional cost, without the modification and in conformity, in which case the consumer should not be entitled to terminate the contract. However, if the digital content or digital service that the trader enabled the consumer to maintain is no longer in conformity with the subjective and the objective requirements for conformity, the consumer should be able to rely on the remedies for a lack of conformity as provided for under this Directive. Where the requirements for such a modification as laid down in this Directive are not satisfied and the modification results in a lack of conformity, the consumer's right to bring the digital content or digital service into conformity, have the price reduced or the contract terminated, as provided for under this Directive, should remain unaffected. Similarly, where, subsequent to a modification, a lack of conformity of the digital content or digital service that has not been caused by the modification arises, the consumer should continue to be entitled to rely on remedies as provided 30

Digital Content Directive

(78)

(79)

(80) (81) (82)

(83)

for under this Directive for the lack of conformity in relation to this digital content or digital service. The lack of conformity of the digital content or digital service as supplied to the consumer is often due to one of the transactions in a chain that links the original designer to the final trader. While the final trader should be liable towards the consumer in the event of a lack of conformity, it is important to ensure that the trader has appropriate rights vis-à-vis different persons in the chain of transactions in order to be able to cover the liability towards the consumer. Such rights should be limited to commercial transactions and they should therefore not cover situations where the trader is liable towards the consumer for the lack of conformity of digital content or a digital service that is composed of or built upon software which was supplied without the payment of a price under a free and open-source licence by a person in previous links of the chain of transactions. However, it should be for the Member States under their applicable national law to identify the persons in the chain of transactions against which the final trader can turn and the modalities and conditions of such actions. Persons or organisations regarded under national law as having a legitimate interest in protecting consumer contractual and data protection rights should be afforded the right to initiate proceedings to ensure that the national provisions transposing this Directive are applied, either before a court or before an administrative authority which is competent to decide upon complaints, or to initiate appropriate legal proceedings. Nothing in this Directive should prejudice the application of the rules of private international law, in particular Regulations (EC) No 593/200814 and (EU) No 1215/201215 of the European Parliament and of the Council. The Annex to Regulation (EU) 2017/2394 of the European Parliament and of the Council16 should be amended to include a reference to this Directive so as to facilitate cross-border cooperation on enforcement of this Directive. Annex I to Directive 2009/22/EC of the European Parliament and of the Council17 should be amended to include a reference to this Directive so as to ensure that the collective interests of consumers laid down in this Directive are protected. Consumers should be able to benefit from their rights under this Directive as soon as the corresponding national transposition measures begin to apply. Those national transposition measures should, therefore, also apply to contracts of an indefinite or fixed duration which were concluded before the application date and provide for the supply of digital content or digital services over a period of time, either continuously or through a series of individual acts of supply, but only as regards digital content or a digital service that is supplied from the date of application of the national transposition measures. However,

14 Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I) (OJ L 177, 4.7.2008, p. 6). 15 Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ L 351, 20.12.2012, p. 1). 16 Regulation (EU) 2017/2394 of the European Parliament and of the Council of 12 December 2017 on cooperation between national authorities responsible for the enforcement of consumer protection laws and repealing Regulation (EC) No 2006/2004 (OJ L 345, 27.12.2017, p. 1). 17 Directive 2009/22/EC of the European Parliament and of the Council of 23 April 2009 on injunctions for the protection of consumers' interests (OJ L 110, 1.5.2009, p. 30).

31

Art. 1

(84)

(85) (86)

(87)

Subject matter and purpose

in order to ensure a balance between the legitimate interests of consumers and traders, the national measures transposing the provisions of this Directive on the modification of the digital content or digital service and the right to redress should only apply to contracts concluded after the application date pursuant to this Directive. In accordance with the Joint Political Declaration of 28 September 2011 of Member States and the Commission on explanatory documents18, Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified. The European Data Protection Supervisor was consulted in accordance with Regulation (EC) No 45/2001 of the European Parliament and of the Council19 and delivered an opinion on 14 March 201720. Since the objectives of this Directive, namely to contribute to the functioning of the internal market by tackling in a consistent manner contract law related obstacles for the supply of digital content or digital services while preventing legal fragmentation, cannot be sufficiently achieved by the Member States but can rather, by reasons of ensuring the overall coherence of the national laws through harmonised contract law rules which would also facilitate coordinated enforcement actions, be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives. This Directive respects the fundamental rights and freedoms and observes the principles recognised, in particular, by the Charter of Fundamental Rights of the European Union, including those enshrined in Articles 16, 38 and 47 thereof,

Have adopted this Directive:

Article 1 Subject matter and purpose The purpose of this Directive is to contribute to the proper functioning of the internal market while providing for a high level of consumer protection, by laying down common rules on certain requirements concerning contracts between traders and consumers for the supply of digital content or digital services, in particular, rules on: – the conformity of digital content or a digital service with the contract, – remedies in the event of a lack of such conformity or a failure to supply, and the modalities for the exercise of those remedies, and – the modification of digital content or a digital service.

OJ C 369, 17.12.2011, p. 14. Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (OJ L 8, 12.1.2001, p. 1). 20 OJ C 200, 23.6.2017, p. 10. 18

19

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Reiner Schulze

Art. 1

Subject matter and purpose

Bibliography: Bach, ‘Neue Richtlinien zum Verbrauchsgüterkauf und zu Verbraucherverträgen über digitale Inhalte’ (2019) 24 NJW 1705–1768; Commission, ‘A Digital Single Market Strategy for Europe’ COM(2015) 192 final; Commission, ‘Proposal for a Regulation of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; Commission, ‘A digital single market in Europe’ (2016); Dannemann/Schulze (eds), German Civil Code, Vol. I (C.H. Beck 2020); De Franceschi, ‘European Contract Law and the Digital Single Market’ in: De Franceschi (ed.), European Contract Law and the Digital Single Market (Intersentia 2016), 1–17; Lohsse/ Schulze/Staudenmayer, ‘Introduction’ in: Lohsse/Schulze/Staudenmayer (eds), Data as Counter-Performance – Contract Law 2.0? (Nomos 2020), 7–19; Moens/Trone, Commercial Law of the European Union (Springer 2010) Schulze, ‘Die Digital-Richtlinie – Innovation und Kontinuität im europäischen Vertragsrecht’ (2019) 4 ZEuP 695–723; Schulze/Kadelbach/Janssen (eds), Europarecht (Nomos 2020); Staudenmayer, ‘Auf dem Weg zum digitalen Privatrecht – Verträge über digitale Inhalte’ (2019) 35 NJW 2497– 2501. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Subject matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Individual areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Borderline to ‘unaffected’ areas of Member State law . . . . . . . . . . . . . . . . . . . . . 4. ‘Gold plating’ by the Member States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 6 11 11 14 19 34

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Type of transposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Conflicts between purpose and limited subject matter . . . . . . . . . . . . . . . . . . . . . . .

35 35 37

A. Function Art. 1 outlines the purpose and subject matter of the Directive in a concise form. The 1 purpose is to contribute to the proper functioning of the internal market while ensuring a high level of consumer protection. The definition of the subject matter is phrased as a means to achieve this purpose (‘by laying down common rules on…’). The provisions of the Directive then extend to certain requirements for contracts, which focus specifically on the parties (trader and consumer) and the subject matter of the contract (supply of digital content or digital services). Within this framework, the various aspects covered by the Directive’s provisions on 2 contractual requirements are specified in three express references: (i) conformity with the contract; (ii) remedies for lack of conformity or non-supply, including the way and manner of supply; (iii) modification of digital content or digital services. However, this list only comprises the main subject matter of the Directive, without being exhaustive, as indicated by ‘in particular, rules on’ indicates. The statement of the purpose and subject matter of the Directive in Art. 1 is not sim- 3 ply a political declaration of intent bearing no legal relevance. It expresses the underlying legislative concerns and values which must be observed when applying all provisions of the Directive. The contents of Art. 1 can therefore serve as important instruments in interpreting its subsequent provisions. For example, the information concerning the purpose of the Directive with regard to the functioning of the internal market and consumer protection can be used to interpret the provisions concerning the rights and obligations of consumers and traders with regard to conformity (Arts 6 et seq.) or remedies (Arts 13 et seq.). The information in Art. 1 on the subject matter, in addition to the provisions on scope in Art. 3, may contribute in particular to defining the scope of the harmonisation by the Directive (especially with regard to the stipulation in Art. 4 that Member States

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may not maintain or introduce divergent provisions, irrespective of whether they provide for a lower or higher level of consumer protection; full harmonisation).

B. Context The reference to ‘the proper functioning of the internal market’ in Art. 1 refers to the corresponding provisions in the Treaty on the Functioning of the European Union (in particular Art. 26(1) and (2) TFEU). The objective of establishing a high level of consumer protection combines Art. 1 DCD with Art. 169(1) and (2)(b) TFEU, which provide that the EU shall contribute to the attainment of a high level of consumer protection by measures taken in the context of the completion of the internal market pursuant to Art. 114 TFEU.1 5 With this reference both to the functioning of the internal market and to a high level of consumer protection, Art. 1 follows on from the justifications for the adoption of most of the previous legislative acts in the field of consumer contract law. Furthermore, with regard to the subject matter of the Directive, it adopts two core concepts of European consumer law, namely the concepts of conformity with the contract and the remedies for lack of conformity, which had already been introduced into EU law two decades earlier via the Consumer Sales Directive. In this respect, the Digital Content Directive expresses a continuity in terms of the purposes and concepts of European consumer contract law in the attention given to the new area of contracts for the supply of digital content or digital services.2 Moreover, it is consistent with Art. 1 SGD not only with regard to the definition of the purpose but also with regard to the use of these two key concepts in describing the subject matter of the Sale of Goods Directive. However, the Sale of Goods Directive does not refer to contracts for the supply of digital content or digital services, but rather to contracts of sale. In addition, these two key concepts are supplemented in the Sale of Goods Directive by the express inclusion of commercial guarantees, whereas Art. 1 DCD mentions the modification of digital contents or digital services as a third additional area of regulation. 4

C. Explanation I. Purpose The purpose of the Directive in Art. 1 combines the two elements: ‘the proper functioning of the internal market’ and ‘a high level of consumer protection’. Each have their own meaning and specific basis in EU primary law. However, they are integrated by Art. 1 into a uniform purpose of the Directive. 7 With regard to EU primary law, the intended contribution to the proper functioning of the internal market establishes, above all, the reference to Art. 26(1) and (2) TFEU. 3 In view of the new challenges posed by the ‘digital revolution’, the European Commission presented a ‘Digital Single Market Strategy’4 (hereinafter ‘DSM Strategy’) in 2015 to realise the potential of the internal market, on the basis of which the Commission present6

See Recital 2. Schulze, 699. 3 See Recital 2. 4 COM(2015) 192 final. 1

2

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ed the Proposal for the Digital Content Directive5 as one of the first legislative initiatives.6 Accordingly, Recital 1 mentions at the beginning that the ‘DSM Strategy for Europe tackles in a holistic manner the major obstacles to the development of cross-border e‑commerce in the Union’. This wording is too narrow in that it specifically mentions ‘e‑commerce’, although the DSM Strategy responds to the challenges of digitisation to a much wider extent.7 The Directive can therefore be characterised as one of the first legislative measures for the realisation of the internal market with regard to the challenges of digitisation. With regard to the ‘major obstacles’ to the development of the Digital Single Market, 8 the recitals address in particular the differences that exist between the mandatory rules of the Member States in the field of consumer contract law which have recently been extended to mandatory rules for the supply of digital content or services.8 They highlight the legal uncertainty this creates and the resulting transaction costs for businesses, especially SMEs.9 On the other hand, the harmonisation of consumer contract law provisions is intended to provide businesses with a ‘stable contract law environment’10 for crossborder transactions. This should make it easier for them to make digital content or digital services available throughout the EU and also prevent the otherwise expected ‘legal fragmentation’ through new national rules specific to digital content and digital services.11 The establishment of a high level of consumer protection as the purpose of the Di- 9 rective finds its basis in primary law mainly in Art. 169(1) and (2)(a) TFEU in conjunction with Art. 114 TFEU.12 Furthermore, Art. 38 EU Charter also stipulates that Union policies shall ensure a high level of consumer protection. Against this background, the European Commission’s DSM Strategy has also attached great importance to the interests of consumers and has, for example, characterised ‘better access for consumers and businesses to online goods and services across Europe’ as one of its three ‘pillars’. 13 The Digital Content Directive ties in with this by seeking to give consumers better access to digital content and digital services.14 It considers a lack of consumer confidence and legal certainty in cross-border transactions to be a key problem for the development of the digital economy in the internal market.15 It seeks to remedy this by ensuring that both business and consumers can rely on fully harmonised contractual rights in a number of core areas concerning the supply of digital content or digital services.16 These clear rights should afford consumers a high level of protection to enable them to receive or access digital content or digital services from anywhere in the Union.17 The proper functioning of the internal market and the provision of a high level of 10 consumer protection do not coexist in Art. 1 as separate and isolated objectives. The stipulation of the purpose of the Directive results rather from the combination of these COM(2015) 634 final. See Introduction → mn. 7. 7 For an overview see the Commission publication ‘A digital single market in Europe’ available from the Publications Office of the European Union website under op.europa.eu/en/web/general-publications/ publications (access 21 January 2020); De Franceschi, p. 1 et seq. 8 See Recital 4. 9 Recitals 3 and 4. 10 Recital 7. 11 Recital 7. 12 See Recital 2. 13 COM(2015) 192 final, 3. 14 Recital 1. 15 Recital 5. 16 Recital 6. 17 Recital 8. 5

6

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two elements, as is expressed in the text of the provision by the use of the singular form ‘purpose’ and the conjunction ‘while’ (or in the German language version the word ‘dabei’). The recitals explain this combination of the two elements of purpose from different perspectives. In particular, a high level of consumer protection is considered essential to achieve a ‘genuine digital internal market, increase legal certainty and to reduce transaction costs for businesses, in particular SMEs’18. It is considered equally necessary to ensure consumer access to digital content and services and to facilitate the supply of digital content and digital services to businesses in order to boost the Union’s digital economy and to stimulate overall growth.19 The aim is to strike a balance between achieving a high level of consumer protection and promoting the competitiveness of enterprises.20

II. Subject matter 1. General Art. 1 makes fundamental statements, which are specified and supplemented by the provisions of Art. 3 concerning the scope of application. The Directive then contains common rules on certain requirements for contracts concerning the supply of digital content or digital services. The personal scope of application of the Directive is thus limited to contracts between traders and consumers (i.e. B2C). These two notions are defined in Art. 2 Nos 5 and 6 in a similar way as in other EU directives on consumer contract law.21 12 The substantive scope of application is described by the wording ‘contracts for the supply of digital content or digital services’, irrespective of the traditional classification of the types of contract (such as sales, lease, etc.). The Directive can therefore cover several of these traditional types of contracts and is limited only by the subject matter of the contract, namely the supply of digital content or digital services.22 This outlines a broad scope of application of the Directive, covering all types of digital content (including, for example, content to which the consumer has access only in a cloud) and digital services. The distinction between digital content and digital services does not aim at a different regulation, but primarily serves to clarify this wide scope.23 13 It also follows from the wording ‘certain requirements relating to contracts’ that, although Directive concerns contract law, it does not seek to regulate it in its entirety in the form of a codification. Rather, it is limited to rules on individual aspects of contract law. 11

2. Individual areas Art. 1 makes express reference two three individual areas. These show that, although the Directive by no means intends to regulate the law of contract for digital content or digital services as a whole, it does cover core areas of contract law. 15 The conformity of digital content or digital services with the contract concerns the content and scope of key obligations of the business and the corresponding rights of the 14

Recital 3. Recital 1. 20 Recital 2. 21 For further details see → Art. 2 DCD, mn. 21 et seq. and → Art. 3 DCD, mn. 11 et seq. 22 For more detail see → Art. 3 DCD, mn. 27 et seq. 23 Staudenmayer, 2498. 18

19

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consumer. It is regulated in detail in Arts 6 et seq. following the trader’s obligation to provide the digital contents or digital services (Art. 5). The remedies for lack of conformity or non-delivery and the way in which these 16 remedies are used are essential to protect the consumer in the event of an infringement of his rights. They require the liability of the trader under Art. 11 and are regulated in Arts 13 et seq. Within this framework, Art. 13 sets out the remedies for failure to supply and Art. 14 the remedies for lack of conformity. Art. 15 deals with the exercise of the right to terminate the contract and Arts 16–18 with the obligations of the trader and the consumer in case of termination of the contract. While conformity and remedies for lack of conformity were already the subject of 17 previous directives for other types of contracts (in particular the Consumer Sales Directive), the third area mentioned in Art. 1 leads to the new area of modification of digital content or digital services. The questions surrounding updates and modifications of digital content are covered by several provisions in the Digital Content Directive – Arts 7(d), 8(2) and in particular Art. 19.24 As the word ‘in particular’ in Art. 1 shows, the list of subject matter of intended regu- 18 lation is not exhaustive. For example, there is no express reference to the provisions on the supply of digital content or digital services (Art. 5), the rights of third parties (Art. 10), the liability of the trader (Art. 11), and the burden of proof (Art. 12). The trader’s rights of recourse against previous links in the business chain (Art. 20) also receive no mention; though through which the Directive also affects contractual relations in the B2B area. In addition, the Directive also contains provisions on enforcement before the courts or administrative authorities (Art. 21).

3. Borderline to ‘unaffected’ areas of Member State law a) Harmonised areas. The delimitation of the matters covered by the harmonisation 19 of laws by the Directive in relation to the law of the Member States not affected by the Directive is made more difficult by the fact that the Digital Content Directive regulates the contractual relationships between traders and consumers pursuant to Art. 1 only with regard to ‘certain requirements’, and therefore only in part. Moreover, the absence of a provision on a particular subject matter does not necessarily mean that it does not fall within the scope of the Directive and that national law is not affected. Rather, the absence of a provision due to the desired full harmonisation (Art. 4) may be based on the fact that the European legislator does not want to include this subject matter in the scope of the Directive and precisely excludes such a legal rule (for example, to exclude a right that was previously granted in some Member States). In these cases, the Member States are prevented from maintaining or creating their own rules on the subject matter (even if they would be advantageous to the consumer). If the Directive is ‘silent’, it is therefore necessary to clarify in each case whether the objects in question are left to regulation by the Member States or whether they are prohibited by Member State legislation because of the fully harmonising nature of the Directive. Unless this distinction is clearly apparent from the wording of the provision in 20 question and the definition of Art. 3, an interpretation of those provisions is necessary. The general principles for the interpretation of EU law are decisive in this respect. 25 In addition to the literal, historical, and contextual methods of interpretation, above all, the teleological or purposive methods are therefore to be considered. In this context, the

24 25

On the relationship between these provisions see → Art. 7 DCD, mn. 53 et seq. See Moens/Trone, p. 341 et seq.; Borchardt in: Schulze/Kadelbach/Janssen, § 15, mn. 31 et seq.

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21

22

23

24

25

Subject matter and purpose

provisions of Art. 1 on the purpose and subject matter of the Directive must also be taken into account. The recitals in particular can provide information about the legislative intentions regarding delimitation. With regard to the rules governing the three key elements specifically mentioned in Art. 1 (conformity with the contract; remedies; modification), Recital 11 underlines the objective of fully harmonising the rules in each of these areas. The wording ‘[f]ully harmonised rules on some essential elements of consumer contract law’ may suggest that for these areas full harmonisation should cover subject areas as a whole. However, this reference to ‘essential elements’ does not necessarily mean that all matters conceptually attributable to them would be affected by full harmonisation (and therefore no additional rules by Member States in this area would be permitted). For example, the concept of ‘remedies’ in earlier European legislative projects (Arts 106(1)(e), 159 et seq. CESL), in the law of Member States and in international commercial law (Arts 45(1)(b), 74 et seq. CISG) also includes, in addition to the remedies provided for in Arts 13 and 14, damages. However, the absence of this remedy under the provisions of the Digital Content Directive does not in any way exclude the freedom of the Member States to regulate the right to damages in national law (as Art. 3(10) expressly clarifies), despite the full harmonisation character of these provisions. However, as a consequence of full harmonisation, Recital 11 precludes the provision or maintenance by Member States of additional substantive or formal requirements to those laid down in the Directive for these ‘essential elements’. In particular, Member States may not therefore impose additional requirements in order to enable consumers to seek the remedies provided for in the Directive in the event of non-supply or lack of conformity. This concerns, for example, two situations explicitly mentioned in Recital: reversal of the burden of proof and the consumer’s obligation to provide information on the lack of conformity. The aspects of the burden of proof regarding the provision and lack of conformity of digital content or digital services are regulated conclusively in Art. 12. Member States may not adopt deviating provisions. The Directive does not regulate the consumer’s obligations to examine the digital content or digital services provided and to notify the trader of any lack of conformity. The Directive therefore does not require the consumer to inform the trader of a lack of conformity within a certain period of time in order to obtain the right to use the remedies (unlike the provisions on the rights of the buyer in some Member States and Arts 38 et seq. CISG; and also unlike Art. 5(2) SGD, which has left it to the discretion of the Member States to provide for such an information obligation). It follows from Recital 11 that the absence of a provision on such information obligations in the Directive should not be understood as a gap which Member States can fill through their legislation. On the contrary, the European legislator has made a final provision in this respect which does not contain any information obligations for the consumer. It must not be changed by the Member States by maintaining or introducing such an obligation. b) Non-harmonised fields. For some other matters, however, the Directive explicitly states that these are not affected by its provisions. This concerns in particular the area of copyright and related rights [Art. 3(9)];26 the relationship with data protection law and the primacy of EU law in this area over the Directive27 and the aspects of general contract law not covered by the Directive.

26 27

38

For more detail see → Art. 3 DCD, mn. 144 et seq. For more detail see → Art. 3 DCD, mn. 137 et seq.

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With regard to contract law, Art. 3(10) and the first sentence of Recital 12 explicitly mention the formation, validity, nullity or effects of contracts, including the consequences of the termination of a contract. Art. 3(10) restricts this by adding ‘in so far as they are not regulated in this Directive’. It follows from the German language version 28 that this limitation refers not only to the consequences of the termination of a contract but to the aspects of contract law as a whole. Accordingly, these matters should not be strictly excluded for each case. Rather, it may be necessary to examine on a case-by-case basis whether a provision of the Directive contains a rule on any of these matters. For example, the possible effects of the recognition of data as counter-performance by Art. 3(1) on provisions of Member States on the conclusion of contracts may be considered.29 Apart from possible exceptions of this kind, the Directive does not, by virtue of Art. 3(10), affect matters regarding the conclusion of contracts, for example, provisions of Member States concerning the requirements for agreement between the parties, the intention to be legally bound, the minimum content of a contract or requirements in such areas as consideration (in Common law) or causa (e.g. in Spanish law).30 The concept, conditions and system of the rules on the formation of contracts and the other matters referred to in Art. 3(10) and Recital 12 are quite different in the Member States. However, the standards of the Directive must be applied uniformly, irrespective of how these matters are described and structured in the law of another Member State. The Directive is therefore without prejudice, for example, to those rules on the formation, validity, nullity or effect of contracts which, in the law of some Member States, are based on concepts such as ‘lack of intention’, ‘absolute invalidity’ (e.g. on the grounds of mistake, deceit or threat) or ‘relative invalidity’. The Directive also does not affect rules governing the consequences of infringements of the law or ‘morality’ for the validity or effects of contracts. Furthermore, Recital 12 states that Member States are free to regulate the legality of the digital content or digital service through private or public law rules, including criminal law. This may have the effect of excluding or restricting the supply of different digital content or digital services in the Member States, thereby reducing in different ways the actual scope of application of the Directive. Furthermore, Art. 3(10) does not affect the freedom of the Member States to regulate the right to compensation for detriment caused by a lack of conformity.31 The restriction ‘in so far as they are not regulated in this Directive’ does not refer to this subject (not even in the German language version). Compensation for damages is thus completely excluded from the harmonisation of laws by the Directive. Art. 14 of the Commission’s Proposal for the Digital Content Directive, on the other hand, provided for a rudimentary regulation of damages in view of the economic damage to the consumer’s digital environment.32 However, this was removed in the legislative procedure. As was already the case with the Consumer Sales Directive and now also with the Sale of Goods Directive, the harmonised consumer protection law does not therefore extend to contracts for digital content or digital services either. The law of the Member States should also be left to determine the legal nature of contracts for the supply of digital content or digital services (Recital 12 2nd sentence). In particular, Member States may decide whether to consider such contracts as, for example, contracts of sale, service or rental contracts, or as a contract sui generis. This possibility for Member States may be of considerable importance for legal issues outside the 28

‘soweit diese Aspekte nicht in dieser Richtlinie geregelt werden’. On this question, Lohsse/Schulze/Staudenmayer. 30 See also → Art. 3 DCD, mn. 56, 83, 148 et seq. 31 See Recital 73. 32 See COM(2015) 634 final. 29

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26

27

28

29

Art. 1

Subject matter and purpose

matters governed by the Directive, in particular for obligations of the parties not covered by the Directive, such as the consumer’s obligation to pay or ‘duties of protection’ of both parties with regard to the rights and interests of the other party.33 For the scope of application of the Directive, however, the latter provides that its provisions are to apply to all contracts relating to digital content or services, irrespective of such classifications according to contract type (Art. 3(1)34). 30 Other distinctions concern two legal institutions which play an important role in the system of French law and related rights, in particular the definition of ‘hidden defects’ (‘vice caché’) in the third sentence of Recital 12 embedded in the (somewhat cumbersome) wording that the Directive should not affect ‘national rules that do not specifically concern consumer contracts and provide for specific remedies for certain types of defects that were not apparent at the time of conclusion of the contract’. In essence, it is intended to leave intact specific rules of Member States on the liability of the trader for hidden defects. According to the fourth sentence of Recital 12, the Directive also excludes non-national provisions which, in the event of a lack of conformity, provide the consumer with non-contractual remedies against persons in previous links of the contractual chain. Therefore, in addition to the recourse of the last trader in the contractual chain against previous links provided for in Art. 20, the law of Member States may also provide for an ‘action directe’ of the consumer against links in the contractual chain before the trader who concluded the contract with the consumer. In addition, Member States are free to establish consumer claims against other third parties (outside the contractual chain), such as a developer of the defective digital product.35 This clarification makes it clear that the Directive is intended to ensure the consumer’s protection in his contractual relationship with the provider of the digital content and digital services, but does not limit the protection of the consumer to that relationship. 31 The regulation of the consequences of non-performance or lack of conformity is also left to the Member States under the conditions described in Recital 14: the non-performance or the lack of conformity must be due to an impediment beyond the control of the trader which he could not be expected to avoid or overcome or the consequences of which he has been unable to avoid or overcome. Conversely, it follows that the provisions of the Directive are exhaustive with regard to impediment over which the trader has control and which he has been able to avoid or overcome. For these cases, Member States should therefore not introduce or maintain additional rules on the consequences of non-performance or lack of conformity (beyond the transposition of the provisions of the Directive). In particular, no additional provisions exempting the trader from the obligation to provide or to perform in accordance with the contract are permitted in this respect). 32 The distinction between the two types of impediments to provision or lack of conformity may give rise to difficulties. Recital 14 mentions force majeure as an instance in which the Member States may regulate the consequence thereof, but expressly mentions it only as an example. However, legislation, case law and doctrine in the Member States use quite different legal concepts, systematic classifications and criteria in detail with regard to such impediments to performance (in addition to or instead of force majeure, for example, ‘impossibility for which the trader is not responsible’ or ‘no fault impossibility’ or, more generally, recourse to the ‘sphere’ of the trader). The delimitation according to

33 On such ‘duties of protection’ (Schutzpflichten) see Schulze in: Dannemann/Schulze, § 241 BGB, mn. 8 et seq. 34 See above → mn. 12; see also → Art. 3 DCD, mn. 28. 35 Recital 13.

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uniform European standards will therefore require case law and doctrine to substantiate the approach outlined in Recital 14. Moreover, Member States are in principle free to regulate the rights of the parties to 33 withhold performance until performance by the other party. Recital 15 describes this right with a number of examples. Member States may regulate whether, in the event of a lack of conformity, a consumer may withhold payment of the price or part thereof until the trader has brought the goods into conformity with the contract. They may also regulate whether the trader can withhold a refund due to the consumer on termination of the contract until the consumer has fulfilled his obligation to return the physical medium to the supplier [Art. 17(2)]. As a more general statement, it can be inferred from these examples that the possibility for Member States to lay down rights of retention is not limited to the primary obligations to perform, but should also extend to the reversal of the contract.

4. ‘Gold plating’ by the Member States In principle, EU law does not prevent the Member States from applying the provi- 34 sions of the Digital Content Directive of their own accord to situations which are not described in Art. 1 as the subject matter of the Directive and which do not fall within its scope of application under Art. 3. Rather, they are generally free to adopt provisions from directives also for matters not covered by the harmonisation of laws (as a form of ‘gold plating’; überschießende Umsetzung).36 Nevertheless, the European legislator has expressly clarified this for some situations in the recitals of the Digital Content Directive. For example, according to Recital 16, Member States are free to extend the protection offered to consumers by the Directive to natural or legal persons who are not consumers under Art. 2 No. 6. Examples are NGOs, start-ups and SMEs. If a person concludes a contract partly for commercial and partly for non-commercial purposes (‘dual use’) and the predominate purpose is not commercial, Member States may, according to Recital 17, determine whether and under what conditions this person should be considered a ‘consumer’.37 With regard to suppliers of digital content or digital services, Recital 18 states that Member States may extend the application of the Directive to platform operators who are not ‘traders’ as defined in Art. 2 No. 5.38

D. Transposition issues I. Type of transposition In accordance with Art. 288 TFEU, the Member States are obliged to transpose the 35 Digital Content Directive into their law. In doing so, they must also observe the provisions of Art. 1 on the subject matter and purpose of the Directive. However, according to Art. 288 TFEU, the Directive leaves the choice of form and means to the national authorities. In this respect, each Member State may determine the manner in which it wishes to transpose the Directive. In particular, it is free to adapt the transposing provisions to the structure and style of its national legislation. Therefore, Member States are not obliged to reproduce the content of Art. 1 in a separate provision based on the model 36 On the problem of interpretation in relation to gold-plating see, for example, Remien in: Schulze/ Kadelbach/ Janssen, § 14, mn. 35. 37 See → Art. 3 DCD, mn. 23 et seq. 38 See → Art. 3 DCD, mn. 11 et seq.

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of the Directive or otherwise not to include the wording of Art. 1 in their transposition provisions. Member States which usually introduce general provisions on the purpose and subject matter of the regulation into their laws or amendments to laws do not therefore need to change this legislative technique in order to transpose the Directive. Each Member State is, however, obliged to follow the provisions of Art. 1 on the subject matter and purpose of the Directive when transposing it into national law. 36 When applying the provisions which a Member State has created to implement the Directive, the courts and authorities are also obliged to observe the provisions of Art. 1 concerning the subject matter and purpose. This applies irrespective of whether the Member State has expressly included these provisions in its transposition provisions. The statements of Art. 1 concerning the subject matter and the Directive as a whole may therefore become relevant for the interpretation of all provisions of the Member States which serve to transpose any provision of the Directive in conformity with the Directive.

II. Conflicts between purpose and limited subject matter Apart from some problems to be addressed in the relevant provisions, a particular challenge in transposing the Directive may be that the limitations of the subject matter are not always consistent with the purpose pursued under Art. 1. This is evident, for example, with regard to the possibility for Member States to limit the rights to be granted to the consumer under the Directive by provisions on the exclusion of the trader’s obligation to perform and on the trader’s rights of retention. According to Recital 14, Member States may regulate the consequences of non-performance or lack of conformity where the lack of performance or lack of conformity is also due to an impediment to performance which is not attributable to the trader.39 The rights of Member States in this respect can be based on very different concepts and legal institutions (such as force majeure, impossibility, adaptation of the contract in case of change of circumstances, etc.). 40 As a result, the consequences of such non-performance or lack of conformity may vary considerably from one Member State to another, in particular as regards the exemption from the obligation to perform. The intended legal harmonisation of the trader’s performance obligations in the supply of digital content or digital services and the corresponding rights of the consumer is thus impeded by the diversity of national provisions for the exclusion of these obligations and rights in the event of impediments to performance.41 The different grounds for exclusion can therefore ultimately affect both sides of the purpose of the Directive according to Art. 1: they can both reduce the actual scope of consumer protection in individual Member States and counteract the desired facilitation of cross-border transactions. 38 In view of this problem, the Member States should carefully consider, when implementing the Digital Content Directive, what effects even their provisions on matters not included in the harmonisation of laws may have on the rights and obligations under the Directive. In particular, an inappropriate extension of the grounds for exclusion of the trader’s obligation to provide digital services, which could affect the purpose of the Directive, should be avoided. If, in extreme cases, such an extension would lead to an undermining or circumvention of the protective purposes of the Directive, it may infringe the provisions on the binding nature of the objectives of directives (Art. 288 TFEU). For the EU, for its part, a future evaluation of the experience with the Directive could raise 37

See above → mn. 31 et seq. Bach, 1706. 41 Schulze, 708.

39 40

42

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the question of whether the purpose of the Directive according to Art. 1 can be achieved without including other subject matter in the harmonisation of laws. Also with regard to the exclusion of damages in the harmonisation of remedies, 42 the 39 relationship between the purpose and the limitation of the subject matter of the Directive seems particularly problematic.43 In the case of contracts for digital content or digital services, consumer protection could be considerably impaired if, for example, Member States were to link compensation for damages and consequential damages to fault and impose the burden of proof on the consumer. This concerns both the compensatory function of damages for non-performance and lack of conformity and its preventive effect in order to encourage the other party to perform in accordance with the contract. With regard to the proper functioning of the internal market, it may also be problematic that, in the absence of harmonisation, claims for damages – as a significant burden on the trader in cross-border transactions – remain difficult to calculate. Therefore, if the implementation of the remedies provided for in the Directive does not produce the desired results in terms of consumer protection and the proper functioning of the internal market, the question of harmonisation of damages in contracts for digital content or services may arise once again in the future.

Article 2 Definitions For the purposes of this Directive, the following definitions apply: (1) ‘digital content’ means data which are produced and supplied in digital form; (2) ‘digital service’ means: (a) a service that allows the consumer to create, process, store or access data in digital form; or (b) a service that allows the sharing of or any other interaction with data in digital form uploaded or created by the consumer or other users of that service; (3) ‘goods with digital elements’ means any tangible movable items that incorporate, or are interconnected with, digital content or a digital service in such a way that the absence of that digital content or digital service would prevent the goods from performing their functions; (4) ‘integration’ means the linking and incorporation of digital content or a digital service with the components of the consumer's digital environment in order for the digital content or digital service to be used in accordance with the requirements for conformity provided for by this Directive; (5) ‘trader’ means any natural or legal person, irrespective of whether privately or publicly owned, that is acting, including through any other person acting in that natural or legal person's name or on that person's behalf, for purposes relating to that person's trade, business, craft, or profession, in relation to contracts covered by this Directive; (6) ‘consumer’ means any natural person who, in relation to contracts covered by this Directive, is acting for purposes which are outside that person's trade, business, craft, or profession;

42 43

See above → mn. 28. See Schulze, 720–721.

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(7) ‘price’ means money or a digital representation of value that is due in exchange for the supply of digital content or a digital service; (8) ‘personal data’ means personal data as defined in point (1) of Art. 4 of Regulation (EU) 2016/679; (9) ‘digital environment’ means hardware, software and any network connection used by the consumer to access or make use of digital content or a digital service; (10) ‘compatibility’ means the ability of the digital content or digital service to function with hardware or software with which digital content or digital services of the same type are normally used, without the need to convert the digital content or digital service; (11) ‘functionality’ means the ability of the digital content or digital service to perform its functions having regard to its purpose; (12) ‘interoperability’ means the ability of the digital content or digital service to function with hardware or software different from those with which digital content or digital services of the same type are normally used; (13) ‘durable medium’ means any instrument which enables the consumer or the trader to store information addressed personally to that person in a way that is accessible for future reference, for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored. Bibliography: ARCEP, ‘End-user devices, Analysis of their influence on Internet Openness’ (May 2017); Benabou/Zolynski/Cytermann, Rapport du Conseil supérieur de la Propriété littéraire et artistique, Droit de la propriété littéraire et artistique, données et contenus numériques, September 2018, p. 28 et seq.; Busch et al., ‘The Rise of the Platform Economy: A New Challenge for EU Consumer Law?’ (2016) 1 EuCML 3–10; Commission, ‘A more coherent European contract law – an action plan’ COM(2003) 68 final; Commission, Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law’ COM(2011) 635 final; Commission, ‘Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises’ (OJ L 124, 20.5.2003, p. 36); Commission, ‘Proposal for a Directive of the European Parliament and of the Council amending Council Directive 93/13/EEC of 5 April 1993, Directive 98/6/EC of the European Parliament and of the Council, Directive 2005/29/EC of the European Parliament and of the Council and Directive 2011/83/EU of the European Parliament and of the Council as regards better enforcement and modernisation of EU consumer protection rules’ COM(2018) 185 final; David-Warcholak, Interopérabilité et droit du marché (Thèse Nantes 2011); Duponchelle, ‘Le droit à l’interopérabilité, Etude de droit de la consommation’(IRJS Editions, 2018); European Data Protection Supervisor, ‘Opinion on the Proposal for a Directive on certain aspects concerning contracts for the supply of digital content’ (14 March 2017) (OJ C 200, 23.6.2017, p. 10); European Parliament, Position of the European Parliament adopted at first reading on 17 April 2019 with a view to the adoption of Directive (EU) 2019/… of the European Parliament and of the Council […] as regards better enforcement and modernisation of EU consumer protection rules P8_TAPROV(2019)0399; Hall/Howells/Watson, ‘The Consumer Rights Directive – An Assessment of its Contribution to the Development of European Contract Law’ (2012) 2 ERCL 139–166; Hayek, Denationalization of Money: An Analysis of the Theory and Practice of Concurrent Currencies (IEA 1976); Idelberger, The concept of interoperability in European Union law – An analysis in competition law and intellectual property law (University of Lund 2013); Komninos/Czapracka, ‘IP Rights in the EU Microsoft Saga’ in: Etro/ Kokkoris (eds), Competition law and the enforcement of Article 102 (OUP 2010), p. 224–241 Kühn/van Reenen, ‘Interoperability and Market Foreclosure in the European Microsoft Case’ in: Lyons (ed.), Cases in European Competition Policy: The Economic Analysis (CUP 2007); Mochon/Petitdemange, ‘Rapport sur l’interopérabilité des contenus numériques, Conseil Supérieur de la propriété littéraire et artistique’ (April 2017); Rochfeld/Sénéchal, ‘Le contrat de fourniture de contenu numérique’ (2017) 1 Dalloz IP/IT 6–35; Rochfeld/Zolynski, ‘La « loyauté » des « plateformes », quelles plateformes, quelle loyauté?’ (2016) 11 Dalloz IP IT 520–525; Schulze (ed.), Common European Sales Law – Commentary (Nomos 2012); Schulze/ Staudenmayer/Lohsse, ‘Contracts for the supply of digital content, Regulatory Challenges and Gaps – An Introduction’ in: Schulze/Staudenmayer/Lohsse (eds), Contracts for the supply of digital content – Regulatory Challenges and Gaps (Nomos 2017), p. 13–30; Sein/Spindler, ‘The new Directive on Contracts for the Supply of Digital Content and Digital Services – Scope of Application and Trader’s Obligation to Supply –

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Part 1 (2019) 3 ERCL 257–279; Sein/Spindler, ‘The New Directive on Contracts for the Supply of Digital Content and Digital Services – Conformity Criteria, Remedies and Modifications – Part 2 (2019) 4 ERCL 365–391; Sénéchal, ‘La fourniture de données par le client via Internet, un objet contractuel?’ (2015) 5 Actualité Juridique Contrats d’affaires 212–216; Sénéchal, ‘L’opérateur de plateforme en ligne, régulateur économique par fourniture de prestations de services interpersonnelles, Un phénomène complexe à saisir selon trois approches de droit économique transversales et complémentaires’ in: Sénéchal/Stalla-Bourdillon (eds), Rôles et responsabilité des plateformes (IRJS Editions 2018); Sénéchal/Sauphanord-Brouillaud (eds), La proposition de directive du Parlement européen et du Conseil concernant certains aspects des contrats de fourniture de contenu numérique COM (2015) 634, Expertise du réseau Trans Europe Experts et de l’INRIA sollicitée par le bureau 3A de la DGGCRF’ (2017) 2 Revue Contrats Concurrence Consommation 21–56; Spindler, ‘Contract Law and Copyright Law – Regulatory Challenges and Gaps’ in: Schulze/ Staudenmayer/Lohsse (eds), Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Nomos 2017), p. 211–227; Zoll, ‘Personal Data as Remuneration in the Proposal for a Directive on Supply of Digital Content’ in: Schulze/Staudenmayer/Lohsse (eds), Contracts for the supply of digital content – Regulatory Challenges and Gaps (Nomos 2017), p. 13–30. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Digital content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Digital service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Goods with digital elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Trader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI. Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII. Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VIII. Personal data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IX. Digital environment, compatibility, functionality, interoperability . . . . . . . . . . . 1. Digital environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Functionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. ‘Compatibility’ and ‘interoperability’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . X. Durable medium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 6 9 13 18 21 23 26 31 34 35 39 48 56

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function Art. 2 serves to defines several key words and expressions used in the Digital Content 1 Directive. Such lists of definitions are a common feature in European legislation and have various functions, which are readily apparent in the context of the Digital Content Directive. As examples, one can first highlight that the definitions can serve to define the scope of application. Whereas Art. 3 determines the scope of application of the Digital Content Directive in a broader sense, by stipulating the types of contracts to which the Directive does or does not apply, the definitions used in Art. 2 can also serve to define the scope of application in a narrower sense on the level of the individual norm by stipulating the scope of a particular word. Secondly, particularly at EU level, the list of definitions is important for achieving coherent terminology across the acquis communautaire and to avoid fragmentation and divergent interpretations at national level, especially in light of the various language versions.1 Such purposes can especially be seen in the use of cross-references to other legislative instruments (e.g. Art. 2 No. 8 refers to the GDPR, whereas Art. 2 No. 11 CRD, following amendments from the Modernisation Directive, refers to definition of digital content under Art. 2 No. 1 DCD). Thirdly, the use of definitions can serve not only to alter the ordinary meaning of a word or an expression (e.g. 1

See COM(2003) 68 final, 8.

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‘consumer’) but also to give meaning to a new word or expression (e.g. ‘goods with digital elements’, ‘digital environment’), thereby limiting or facilitating a literal interpretation of the legislation. 2 It is to be noted, however, that the words and expressions listed in Art. 2 are not defined solely within Art. 2 itself. The recitals may contain a detailed explanation of particular words and expressions. Although the recitals are not legally binding,2 they can serve in the interpretation of the operative part of the legislation.3

B. Context The Digital Content Directive represents a significant development in the creation of a legislative framework which responds to the challenges presented by digitisation. Such responses not only require new terminology but also the integration into a pre-existing body of European legislation. In this respect, Art. 2 features a mixture of words and expressions – and corresponding definitions – which represent a new addition to the acquis communautaire (e.g. ‘goods with digital elements’, ‘digital environment’) or maintain well-established concepts (e.g. ‘consumer’ and ‘trader’). 4 Words and expressions particular to digital content are, however, not in each instance a new feature introduced by the Digital Content Directive – in conjunction with the Sale of Goods Directive – alone. In regulating the pre-contractual information duties and withdrawal rights, the Consumer Rights Directive introduced a definition of ‘digital content’ (Art. 2 No. 11 CRD) and the concepts ‘functionality’ (e.g. Art. 6(r) CRD) and ‘interoperability’(e.g. Art. 6(s) CRD). The regulation of the supply of digital content under the proposed CESL, which also extended to the trader’s obligations and the consumer’s remedies in relation to digital content, required definitions and clarifications of concepts related to digital content,4 yet also recognised key conceptual developments, in particular the supply of ‘non-monetary consideration’ in exchange for digital content.5 5 The Directive’s response to digitisation has resulted in the deviation or creation of particular definitions in Art. 2 from the pre-existing definitions in parts of the acquis and therefore the need to align particular definitions to ensure consistency within the acquis.6 Although the Consumer Rights Directive represents an early inclusion of the regulation of some aspects concerning digital content, in particular a definition of digital content (Art. 2 No. 11 CRD, in its original version), it has not been able to withstand the technological and conceptual developments.7 Even the proposed CESL recognised the ‘considerable degree of legal diversity and uncertainty’8 surrounding digital content. It is therefore not surprising that the Digital Content Directive is also accompanied by changes to accommodate the new developments. The 2019 Modernisation Directive therefore contains several amendments to the Consumer Rights Directive in order to achieve the desired consistency in concepts and terminology.9 Such consistency is also reflected in the use of the same definitions under the Sale of Goods Directive. 3

See e.g. CJEU, C-162/97 Nilsson EU:C:1998:554. For further detail see → Art. 3 DCD, mn. 23 et seq. 4 Art. 2(j) CESL-Regulation. 5 Recital 18 CESL. 6 COM(2018) 185 final, 6. The explanations of ‘functionality’ and ‘interoperability’ in Recital 19 CRD differ from the definitions under Art. 2 Nos 11 and 12 DCD, → Art. 7 DCD, mn. 33 et seq. 7 As already noted by Hall/Howells/Watson, 147. 8 Recital 17 CESL. 9 See, e.g., the explanations of ‘functionality’ and ‘interoperability’ in Recital 19 CRD; → Art. 7 DCD, mn. 33 et seq. 2

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C. Explanation I. Digital content ‘Digital content’ is broadly defined in Art. 2 No. 1 as ‘data which are produced and 6 supplied in digital form’, thereby serving to define the object of the contract. Although this definition overlaps with the definition of ‘digital content’ under Art. 2 No. 11 CRD, the Modernisation Directive changes Art. 2 No. 11 CRD by inserting a cross-reference to Art. 2 No. 1 DCD. At first glance the difference between the identically-worded definitions is not readily apparent. However, under the Consumer Rights Directive, the digital content supplied on a tangible medium falls under the definition of a ‘good’.10 The Digital Content Directive, however, adopts the opposite approach: the Directive applies to digital content which is supplied on a tangible medium, and to the tangible medium where this serves only to carry the digital content (e.g. film DVD). The definition in Art. 2 No. 1 DCD, which can also be found in Art. 2 No. 6 SGD, is 7 extremely broad. Recital 19 lists ‘computer programmes, applications, video files, audio files, music files, digital games, e-books or other e-publications‘ as examples. Beyond this, digital content could also include other concepts such as CAD files for 3D-printing.11 Nonetheless, although the digital content may satisfy the definition under Art. 2 No. 1, one of the exclusions in Art. 3(5) may apply thereby excluding the digital content from the scope of the Directive.12 Certain types of ‘data which are produced and supplied in digital form’ may, however, 8 not satisfy the definition of digital content in Art. 2 No. 1. This especially applies to ‘digital representations of value’ (e.g. e-vouchers), which includes virtual currencies (e.g. Bitcoin), as these are considered methods of payments and not digital content or digital services under the Directive.13

II. Digital service In contrast to the initial Proposal, the Digital Content Directive contains a separate 9 definition of a ‘digital service’ in Art. 2 No. 2 as a further object of the contract. Initially, the Commission proposed to include digital services under the expression ‘digital content’; the notion of ‘digital service’ resulted from changes during the legislative process. 14 The distinction, however, only merely serves to clarify the scope of the Directive. 15 In following the structure of initial Proposal, Art. 2 No. 2 contains two broad cat- 10 egories of services which each constitute a ‘digital service’. The first category is one which allows the ‘consumer to create, process, store or access in digital form’ (a); the second category concerns ‘services which allow the sharing of or any other interaction with data in digital form uploaded or created by the consumer or other users of that service’ (b). Recital 19 provides the examples of ‘software-as-a-service, such as video and audio sharing and other file hosting, word processing or games offered in the cloud computing environment and social media’, without making a strict distinction between the two categories of service listed under Art. 2 No. 2. See Consumer Rights Directive → Art. 5, mn. 14. Recital 26. For more detail see → Art. 3 DCD, mn. 39 et seq. 12 Sein/Spindler (Part 1), 262. 13 Recital 23. See Sein/Spindler (‘Part 1’), 267. 14 → Art. 3 DCD, mn. 40. 15 For detail → Art. 3, mn. 39 et seq. 10

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In contrast to digital content, digital services are more precisely defined via the main types of data utilisation: creation, processing, storage, access, sharing, interaction. The term ‘process’ is, in this respect, the most generic term and could encompass all the other terms and functions. The aim is to preserve the technological neutrality of the text and its future-proof character.16 12 The way in which these services are provided is indifferent and not specified in the definition under Art. 2 No. 2, which makes it possible to include, within the meaning of Recital 19: ‘transmission on a tangible medium, downloading by consumers on their devices, web-streaming, allowing access to storage capabilities of digital content or access to the use of social media’. 11

III. Goods with digital elements 13

14

15

16

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Art. 2 No. 3 defines ‘goods with digital elements’. Initially, the Commission’s Proposal used the term ‘embedded digital content’, which over the course of the legislative process was not only replaced by the term ‘goods with digital elements’ but also was adopted in the list of definitions.17 The definition of ‘goods with digital elements’ in Art. 2 No. 3 contains two definitions. Firstly, it defines ‘goods’ as ‘tangible moveable items’, thereby partially overlapping with Art. 2 No. 5(a) SGD.18 Secondly, it uses the term ‘digital elements’ as the collective term for ‘digital content’ and ‘digital services’. ‘Goods with digital elements’ is only used in the context of Art. 3(4) and therefore the definition in Art. 2 No. 3 serves to determine the scope of application – in a broader sense – of the Digital Content Directive. With reference to Art. 2 No. 3, Art. 3(4) excludes digital content or digital services from the scope of Directive if they are incorporated in or interconnected with goods (under the additional requirement that these goods are provided under a corresponding sales contract concerning those goods). The Sale of Goods Directive contains corresponding provisions in its Art. 2 No. 5(b) and Art. 3(3) in order to include the goods with digital elements in its scope of application. According to Art. 2 No. 3 – and correspondingly under Art. 2 No. 5(b) SGD – the decisive criterion for goods with digital elements is the role which the digital content or digital services play in ensuring that the items in which they are incorporated or interconnected with can perform their functions. This is to be ascertained by a ‘negative test’: if the absence of the digital content or digital service would prevent the goods from performing their functions, the goods in question fall under the definition of ‘goods with digital elements’. How the concept of ‘function’ is to be understood in this context is, however, not described in either Art. 2 No. 3 itself or in the recitals. The decisive aspect may primarily concern the type of use and the purposes of the goods as they would normally be used or as specified in the contract.19 Several different types of everyday objects will typically satisfy the definition as a ‘good with digital elements’ e.g. laptops, smartphones, smart watches. Growing importance is attached to those goods with digital elements which are designed for the ‘smart home’, such as ‘robot vacuum cleaners’ or ‘robot lawnmowers’.20 Though not yet in See Recitals 10 and 19. → Art. 3 DCD, mn. 4, 73 et seq. See also Introduction → mn. 16. 18 In contrast to Art. 2 No. 5(a) SGD it is not necessary under the Digital Content Directive to clarify the status of water, gas and electricity. 19 → Art. 3 DCD, mn. 76 et seq. See also Sein/Spindler (‘Part 1’), 272–273. 20 → Art. 3 DCD, mn. 73. 16

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widespread use, ‘self-driving cars’ also form a further type of goods with digital elements. According to Art. 3(4) in conjunction with Art. 2 No. 3, each of these types of goods do not fall within the Directive’s scope of application. However, they may fall under the Sale of Goods Directive if they satisfy the requirements of Art. 3(4) SGD. 21

IV. Integration According to Art. 2 No. 4, ‘integration’ means the linking and incorporation of digi- 18 tal content or a digital service with the components of the consumer’s digital environment in order for the digital content or digital service to be used in accordance with the requirements for conformity provided for by this Directive. In order to work properly, the digital content or digital service needs to be correctly integrated into the consumer’s hardware and software environment. Depending on the subject matter of the contract, the corresponding type of supply of digital content/service, and the consumer’s digital environment, the nature and extent of the integration may vary. The notion of ‘integration’ is, in this respect, directly linked to four other concepts that are also defined in the Art. 2: the notion of ‘digital environment’ (Art. 2 No. 9), the notions of ‘compatibility’ (Art. 2 No. 10), ‘functionality’ (Art. 2 No. 11), and ‘interoperability’ (Art. 2 No. 12). Correct integration may be decisive for the consumer’s actual use of the digital con- 19 tent or digital service to be supplied by the trader. Depending on the contract itself, correct integration may form one of the supplier’s obligations (integration by the trader or under his responsibility22) or to be undertaken by the consumer, for which the consumer requires the correct instructions.23 Accordingly, the definition in Art. 2 No. 4 is of central importance to Art. 9, according to which a lack of conformity resulting from the incorrect integration of the digital content or digital service into the consumer’s digital environment shall be regarded as lack of conformity of the digital content/service. A particular question arises with regard to a distinction between ‘integration’ and ‘in- 20 stallation’, especially as the latter concept is not defined either in the Digital Content Directive or in the Sale of Goods Directive. Different use of these terms can be seen in the Digital Content Directive, e.g. Art. 9(b) refers to ‘integration instructions’ – thus incorporating Art. 2 No. 4 – whereas Art. 8(3)(b) refers to ‘installation instructions’. A difference can be seen in this context since Art. 8(3)(b) applies to updates. This presupposes that the digital content/service to be updated has already been linked and incorporated (‘integrated’) in the consumer’s digital environment and therefore suggests that the legislator intended ‘integration’ to be a broader concept than ‘installation’.

V. Trader Art. 2 No. 5 defines ‘trader’, thereby contributing to determining the Directive’s per- 21 sonal scope of application.24 The central aspect of the definition concerns whether the person is acting for ‘purposes relating to that person’s trade, business, craft, or profession’ in relation to contracts covered by the Digital Content Directive. Precise bound-

→ Art. 3 DCD, mn. 76 et seq. Art. 9(a). See → Art. 9 DCD, mn. 42 et seq. 23 Art. 9(b). See → Art. 9 DCD, mn. 47 et seq. 24 For detail → Art. 3 DCD, mn. 11 et seq.

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aries between ‘trade, business, craft, or profession’ need not be drawn.25 Applying the principle noscitur a sociis indicates that ‘craft’ does not concern mere hobbies, but rather a professional craft.26 22 The definition of ‘trader’ in Art. 2 No. 5 is, however, not straightforward. ‘Platform providers’ are not necessarily to be considered ‘traders’ for the purposes of the Digital Content Directive, unless they act for purposes are related to their own business and as ‘direct contractual partner of the consumer for the supply of digital content or a digital service’.27 In particular, the latter requirement has the effect that the Directive does not apply to platforms in as far as they function as intermediaries. However, the Member States may nonetheless extend the application of the Digital Content Directive to platform providers who do not fulfil these requirements.28 In addition, the question arises whether a public authority under some exceptional circumstances can satisfy the definition of ‘trader’ where services are provided on a commercial basis.29

VI. Consumer Art. 2 No. 6 defines the notion of ‘consumer’, which is central to determining the personal scope of application of the Directive.30 In principle, this definition reiterates, with only slight modifications, the definition chosen under the existing directives in European consumer law as well as the Rome I and the Brussels I bis Regulations. 24 Pursuant to Art. 2 No. 6 a consumer may only be a natural person, which means legal persons do not qualify as consumers. The exclusion of legal persons from the definition means that non-profit organisations, i.e. legal entities that are not traders within the definition in Art. 2 No. 5, do not qualify as consumers. Start-ups, i.e. persons who conclude contracts for their future31 or beginning trade, business, craft, or profession or SMEs do not qualify as consumers, either32. However, despite the limitation under the Directive, Member States should remain free to extend the protection afforded to consumers by this Directive also to natural or legal persons that are not consumers within the meaning of this Directive, such as NGOs, start-ups or SMEs.33 25 The purposes for which the person is acting must be outside that person’s trade, business, craft, or profession. Such limitation has given rise to the question of ‘dual purpose’ contracts, e.g. where a natural person purchases an item that is used both private and for professional purposes, and whether the recipient of the good or service may nonetheless qualify as a consumer and receive the statutory protection. Under the Consumer Rights Directive, the decisive aspect in a dual use scenario is whether the predominant purpose in the overall context of the contract is or is not trade-related.34 Protection under the Directive (such as the right of withdrawal) will therefore be afforded if the predominant 23

25 Wendehorst in: Schulze (2012), Art. 2 CESL, mn. 12. However, some national laws do define some aspects of this definition e.g. s 2(7) Consumer Rights Act defines ‘business’ as including ‘the activities of any government department or local or public authority’. 26 → Art. 3 DCD, mn. 9. 27 Recital 18. 28 For detail → Art. 3 DCD, mn. 22. 29 See n 25 in relation to the definition of ‘business’ under UK law. See Sein/Spindler (‘Part 1’), 261 and → Art. 3 DCD, mn. 11 et seq. 30 For detail → Art. 3 DCD, mn. 23 et seq. 31 CJEU, C-269/95 Benincasa EU:C:1997:337. 32 Small and medium-sized enterprises (SMEs) are defined in the Commission recommendation 2003/361. 33 Recital 16. 34 Recital 17 CRD.

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purpose is outside the trade, business, craft or profession. However, the Digital Content Directive adopts a different approach by allowing the Member States to determine whether and under what conditions the consumer criterion is satisfied in a dual use scenario.35

VII. Price According to Art. 2 No. 7, ‘price’ means money or a digital representation of value that is due in exchange for the supply of digital content or a digital service. This definition is especially important for determining the scope of application – in a broader sense – of the Directive.36 According to Recital 23, ‘Digital representations of value such as electronic vouchers or e-coupons are used by consumers to pay for different goods or services in the digital single market. Such digital representations of value are becoming important in relation to the supply of digital content or digital services, and should therefore be considered as a method of payment within the meaning of this Directive. Digital representations of value should also be understood to include virtual currencies, to the extent that they are recognised by national law’. This definition is very innovative, because it accepts, a ‘concurrence of currencies’ 37 and in line with the recent development of crypto-currencies and blockchains since 2009, that payment of a price can be considered as payment, not only in public currency, of the ‘euro’ type, but also in private currencies, of the ‘Bitcoin’ or ‘Ethereum’ type, if these private currencies receive national recognition. The legislative process witnessed different views on whether only payment in official state currency or also in ‘private’ virtual currency should be permitted. For instance, a competition policy argument was raised in relation to permitting the use of ‘private’ currency. However, due to the scepticism from several Member States, a comprise solution was adopted which permitted the payment in virtual currencies, but only in as far as they are recognised under national law.38 Recital 23 states also that: ‘Differentiation depending on the methods of payment could be a cause of discrimination and provide an unjustified incentive for businesses to move towards supplying digital content or a digital service against digital representations of value. However, since digital representations of value have no other purpose than to serve as a method of payment, they themselves should not be considered digital content or a digital service within the meaning of this Directive’. Further clarification will be needed whether a digital asset with several functions (e.g. utility tokens issued during an initial coin offering linked to the launch of a new blockchain infrastructure), and that has not only the purpose to serve as a method of payment, could be considered as a price in the meaning of Art. 2 No. 7.

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30

VIII. Personal data The initial Proposal for a Digital Content Directive lacked a definition of ‘personal 31 data’. In contrast, Art. 2 No. 8 defines ‘personal data’ through a cross-references to the definition in Art. 4 No. 1 GDPR. On the one hand, the use of the cross-reference highFor the background to this policy decision → Art. 3 DCD, mn. 23 et seq. → Art. 3 DCD, mn. 31 et seq. 37 See Hayek. 38 → Art. 3 DCD, mn. 33.

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lights and avoids the risk of creating legal fragmentation and uncertainty in the acquis through the use of new definitions or a diverging interpretation of a definition when applied in a different context.39 On the other hand, the cross-reference indicates the strong interactions between European consumer law and European data protection law due to modern business practices, yet more significantly subtly emphasises the superior protection of personal data as a fundamental right under and not merely as a tradable asset.40 32 Art. 4 No. 1 GDPR defines personal data as ‘any information relating to an identified or identifiable natural person (“data subject”); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person’. This definition is very comprehensive, extending to all data that can be attributed to a natural person by any means.41 33 In light of this definition of personal data, it is also necessary to draw a distinction to ‘content other than personal data’ and ‘other data’ referred to in Art. 16(3). Although such types of data are not expressly defined, one may perceive them in the context of Art. 4 No. 1 GDPR as data which is not related to an identified or identifiable natural person because, for example, it is anonymous from the beginning or has been anonymised.42

IX. Digital environment, compatibility, functionality, interoperability 34

The four concepts will be considered together, as they linked in a technical respect. In addition, the boundary between these concepts has long been blurred and they are regularly used interchangeably. Art. 2 therefore has the merit of proposing four distinct definitions. Finally, these concepts each have the common feature that they have been previously seized by both intellectual property law and competition law43.

1. Digital environment 35

According to Art. 2 No. 9, ‘digital environment’ means hardware, software and any network connection used by the consumer to access or make use of digital content or a digital service. ‘Hardware’, ‘software’ and ‘network connection’ are thus central to the definition of digital environment, yet are not defined in the Directive. Moreover, these concepts are also central to Art. 9 on the integration of the digital content/service into the consumer’s digital environment.44 ‘Hardware’ applies to the physical components, such as a computer (and its component parts) and its accessories (e.g. mouse and keyboard). ‘Software’ comprises, for example, a program used to run a computer (e.g. the 39 European Data Protection Supervisor, 3, available under https://edps.europa.eu/sites/edp/files/publica tion/17-03-14_opinion_digital_content_en.pdf (accessed 31 January 2019). 40 Recital 24. 41 → Art. 16 DCD, mn. 26. For a detailed explanation of personal data in the context of the Digital Content Directive → Art. 3 DCD, mn. 46 et seq. 42 → Art. 3 DCD, mn. 50. and → Art. 16 DCD, mn. 37. 43 Idelberger, available under http://lup.lub.lu.se/student-papers/record/3803863 (accessed 4 November 2019); Mochon/Petitdemange, available under https://www.culture.gouv.fr/Sites-thematiques/Propriete-litt eraire-et-artistique/Conseil-superieur-de-la-propriete-litteraire-et-artistique/Travaux/Missions/Missiondu-CSPLA-sur-l-interoperabilite-des-contenus-numeriques (accessed 4 November 2019); Komninos/ Czapracka; Kühn/van Reenen; CJEU, T-201/04 Microsoft Corp. v Commission EU:T:2007:289; CJEU, T-167/08 Microsoft Corp. v Commission EU:T:2012:323. 44 For more detail → Art. 9 DCD, mn. 18 et seq.

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operating system, anti-virus program, word processing program etc.) but also single data.45 ‘Network connection’ covers all devices used to connect the consumer’s end-device with other computers (e.g. modems, routers etc.). Although most components of the consumer’s end-device are covered by ‘hardware’ and ‘software’, the broad concept of ‘network connection’ is especially important under Art. 9, namely the circumstances which are in particular attributable to the consumer’s Internet service provider, but which do not necessarily lie within the consumer’s sphere of physical influence.46 Following the ‘ARCEP Study’, the digital environment used by the consumer can be 36 seen as a technical chain that connects the consumer to the information, content, applications and services.47 Several essential links can be identified within this technical chain.48 Where hardware is concerned, these are above all the links between consumers and 37 digital content or digital services. Hosting services often play a decisive role here as they can often reach all Internet users (all with the assistance of a transit operator) who are connected to a network via their end-device.49 The supplier of digital content/services often delivers data to these hosting providers and thereby create the link to the consumers as end-users. As far as software links between consumers and digital content or digital services are 38 concerned, the operating systems of the consumer devices are of outstanding importance. They are indispensable for almost every consumer data exchange via the Internet. Also an ‘online interface’ provides an example of such software, which includes many different forms of data transmission over the Internet. Art. 2 No. 16 Geo-blocking Regulation defines an online interface as ‘any software, including a website or a part thereof and applications, including mobile applications, operated by or on behalf of a trader, which serves to give customers access to the trader's goods or services with a view to engaging in a transaction with respect to those goods or services’; this definition includes applications of all kinds and also ‘App Stores’.

2. Functionality According to Art. 2 No. 11, ‘functionality’ means the ability of the digital content or 39 digital service to perform its functions having regard to its purpose. This concept is especially important for the subjective criteria of conformity in Art. 7(a)50 and for the objective criteria in Art. 8(1)(b)51. Although Recital 43 refers to the notion of functionality, it actually provides very little 40 guidance as it merely refers to ‘the ways in which digital content or a digital service can be used’. For instance, the absence or presence of any technical restrictions such as protection via Digital Rights Management or region coding could have an impact on the ability of the digital content or digital service to perform all its functions having regard to its purpose’. Two elements in particular deserve to be highlighted: the notion of functions used in 41 the definition of Art. 2 No. 11 and the notion of digital right management used in Recital 43. 45 See ISO/IEC/IEEE 24765:2017 on Systems and software engineering (Vocabulary), explained in more detail → Art. 9 DCD, mn. 20. 46 → Art. 9 DCD, mn. 21. 47 ARCEP, mn. 3.2. 48 → Art. 9 DCD, mn. 21. 49 ARCEP, mn. 3.2.1. 50 → Art. 7 DCD, mn. 35. 51 → Art. 8 DCD, mn. 50.

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Art. 2 42

43

44

45

46

47

Definitions

a) Functions It is not easy to distinguish between the functions of a good with digital elements and the functions of a digital content or a digital service. For example, a smartphone is able to combine several uses from different devices in a single device (telephone, photo, video, video game, multimedia player, personal assistant) due to the functions of digital services and digital contents. And in fact, most often, new functions of digital content and digital services emerge via end-user devices, and via goods with digital elements. Services using machine learning, or artificial intelligence, are increasingly represented in devices. Artificial intelligence supports many services and performs various functions, in particular to highlight services or content, without the user always being aware of it. By automating certain tasks, artificial intelligence will often support the user in making decisions. Sometimes, artificial intelligence can assist by making a recommendation to the user; in other cases, artificial intelligence will make decisions for the user, without necessarily informing him of the other options available to him. The significant increase in the use of voice assistance is characteristic of the change in the features of digital services. Voice is used to interact with a search engine or a voice assistant performing multiple tasks. Furthermore, the evolution of terminal equipment is marked by the emergence of new terminals that are increasingly lighter, i.e. whose certain functionalities are no longer provided locally, on physical equipment, but in the cloud. For example, some smartphones offer to locate certain services in the cloud, such as storage capacities, whether they are accompanied by additional services such as automatic backups or file sharing with third parties. b) Digital Rights Management. ‘Digital Rights Management’ (DRM) is not expressly mentioned in the definition of functionality under Art. 2 No. 11, however it is noted in Recital 43 as an example for the absence or presence of any technical restrictions that may affect the functionality. In using this approach the legislator has intended to maintain a degree of consistency with the explanation of functionality in Recital 19 CRD.52 Furthermore, DRM has been enshrined in European law by Arts 6 and 7 InfoSoc Directive, in the context of the fight against counterfeiting. Art. 6(3) InfoSoc Directive states that the expression ‘technological measures’ means any technology, device or component that, in the normal course of its operation, is designed to prevent or restrict acts, in respect of works or other subject matter, which are not authorised by the rightholder of any copyright or any right related to copyright as provided for by law or the sui generis right provided for in Chapter III of Directive 96/9/EC. DRM has a dual function of controlling access and tracking contents on the Internet.53 Rightholders have the ability to control access to and use of contents and works through DRMs. However, there is no general right of access to information contained in contents or subject matters protected by DRMs. The sanctions in some Member States which exist vis-á-vis measures to circumvent DRM protection prevent protected works or objects from being directly accessible or that they may be copied.54 In other words, DRMs are a legal limitation of the potential functionality of a digital content or of a digital service55.

→ Art. 8 DCD, mn. 50. For more detail see Benabou/Zolynski/Cytermann, mn. 3.2.4. 54 ibid. 55 ibid. 52 53

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3. ‘Compatibility’ and ‘interoperability’ According to Art. 2 No. 10, ‘compatibility’ means the ability of the digital content or digital service to function with hardware or software with which digital content or digital services of the same type are normally used, without the need to convert the digital content or digital service. The scope of this definition extends to both the subjective [Art. 7(a)] and objective aspects of conformity [Arts 7(a), 8(1)(b)]. Due to the definition in Art. 2 No. 10, the key criterion for compatibility is for the digital content or digital service to function with hardware or software ‘normally’ used for such digital content or digital service. In case of doubt, therefore, an empirical consideration of the actual circumstances is required. For example, the question may arise as to what types of players or computers a film on a DVD can normally be viewed on (e.g. due to regional coding).56 In contrast to compatibility, interoperability under Art. 2 No. 11 refers to the ability of digital content or digital services to ‘function with hardware or software’ on such hardware or software that is different from that with which digital content or digital services of the same type are normally used. This concerns, for example, the question whether an app intended for an Android operating system will also work on a different operating system (e.g. windows or IOS).57 In contrast to compatibility, interoperability is only provided as a subjective criterion for conformity.58 Digital content or digital services must therefore only be interoperable within the meaning of the definition of Art. 2 No. 12 if the contract between trader and consumer so provides (with the consequence that without such a contractual agreement, for example, the e-book reader software that a trader provides to a consumer need not necessarily be suitable for the consumer to be able to read all e-book formats). 59 From a technical point of view, significant differences between compatibility and interoperability are apparent.60 In particular, compatibility presupposes that one of the connected elements can adapt to the other. For example, compatibility may exist between earlier and later versions of a system. It is ‘backwards’ when a system or technology can work with earlier versions (e.g. with an earlier operating system). It is ‘upwards’ when a system is able to work with later future versions. In all these cases, compatibility is based on the fact that one of the elements contains the technical instructions necessary to interact with the other. This nature of one of the two elements allows, in particular, the transfer of data. However, unlike interoperability, it is not necessary for data reuse to have a reciprocal capability. Interoperability, on the other hand, is characterised by an exchange of data on the one hand and the ability for reciprocal use of the exchanged data. This basis therefore provides for an emphasis of the following further distinctions: interoperability is established by the insertion of an open communication standard, compatibility requires the prior step of incorporating instructions for each existing or future technology system.61 Interoperability is built by reference to a norm or a standard adopted by several operators or publishers, whereas compatibility only implies the adaptation of one technology to the characteristics of another.62 For further examples → Art. 7 DCD, mn. 37. Sein/Spindler (‘Part 2’), 371. 58 → Art. 7 DCD, mn. 34, 36, 38. 59 For more details and on the economic impact of including compatibility but not interoperability as an objective criterion of conformity → Art. 8 DCD, mn. 46–48. 60 Duponchelle, p. 57–58. 61 Duponchelle, p. 58. 62 David-Warcholak, p. 14. 56 57

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48

49

50

51

52

53

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Definitions

Compatibility is a sufficient concept when the consumer remains in a given digital environment where all hardware and software are compatible with each other. 55 Interoperability will not be achieved if the digital ecosystem composed of hardware and software is closed and if no system of mutual communication between hardware and software has been technically planned. Closed digital ecosystems of hardware and software pose competition challenges and the interoperability requirement in Digital Content Directive will help to overcome them. 54

X. Durable medium According to Art. 2 No. 13, ‘durable medium’ means any instrument which enables the consumer or the trader to store information addressed personally to that person in a way that is accessible for future reference, for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored. This definition corresponds to the definition of ‘durable medium’ used e.g. in Art. 2 No. 10 CRD. As under the Consumer Rights Directive, the Digital Content Directive uses the notion of durable medium in the context of the provision of information, specifically on the modification of the digital content or digital service (Art. 19). 57 The definition of durable medium under Art. 2 No. 13 contains three key functional characteristics: the medium has to allow information to be addressed personally to the recipient; the medium has to allow the information to be accessible for future reference for an adequate period of time; the medium has to allow the unchanged reproduction of the information stored. As stated by AG Bobek in BAWAG, ‘the concept of a “durable medium” is […] independent from the physical structure or hardware characteristics of a medium or support. It relies, rather, on the functional features that govern its operation and that allow it to fulfil the requirements of storability and unchanged reproduction […]. Thus, as long as those conditions are fulfilled, the actual type and shape of a “durable medium” may change with the evolution of technical possibility over time’63. In essence, and as stated by the ECJ in Content Services, ‘in the context of new technologies, a substitute for paper form may be regarded as capable of meeting the requirements of the protection of the consumer so long as it fulfils the same functions as paper form.’ 64 58 Alongside paper, Recital 76 lists further examples of instruments which, in principle, satisfy the definition of a ‘durable medium’: DVDs, CDs, USB sticks, memory cards or hard disks as well as e-mails. This list is not exhaustive. Other instruments may also qualify as durable media provided they satisfy the aforementioned criteria. For instance, an application or video file may qualify as a durable medium. A PDF file may also qualify as a durable medium. An ‘ordinary website’ will not qualify as a durable medium, whereas a ‘sophisticated website’ may qualify.65 59 The Digital Content Directive also refers a ‘tangible medium’ [e.g. Art. 3(3)]. Although this concept is not expressly defined, it is apparent that the emphasis is on the tangible (corporeal) nature of the medium. Accordingly, a medium such as a DVD can be both a tangible and a durable medium, however an e-mail or a video file would not qualify as a tangible medium. 56

CJEU, C-375/15 BAWAG EU:C:2016:695, para. 42. CJEU, C-49/11 Content Services EU:C:2012:419, para. 41. 65 ibid., para. 47 with reference to a 2007 Report by the European Securities Markets Expert Group (ESME) on the ‘Distance Marketing Directive and Markets in Financial Instruments Directive’. Sein/ Spindler (Part 2), 389, n 83, also note that notifications on social networks will not suffice. 63

64

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Scope

D. Transposition issues Although not defined in Art. 2, Recital 12 expressly refers to national law for the defi- 60 nition of the concept of contract for the supply of digital content or services, which will raise important transposition issues.66 This Recital 12 is only partially consistent with Art. 2 No. 5 and Art. 2 No. 6 CRD as reformed by the Modernisation Directive and states that a sales contract ‘means any contract under which the trader transfers or undertakes to transfer ownership of goods to the consumer, including any contract having as its object both goods and services’ and that a service contract ‘means any contract other than a sales contract under which the trader supplies or undertakes to supply a service, including a digital service, to the consumer’.

Article 3 Scope 1.

This Directive shall apply to any contract where the trader supplies or undertakes to supply digital content or a digital service to the consumer and the consumer pays or undertakes to pay a price. This Directive shall also apply where the trader supplies or undertakes to supply digital content or a digital service to the consumer, and the consumer provides or undertakes to provide personal data to the trader, except where the personal data provided by the consumer are exclusively processed by the trader for the purpose of supplying the digital content or digital service in accordance with this Directive or for allowing the trader to comply with legal requirements to which the trader is subject, and the trader does not process those data for any other purpose. This Directive shall also apply where the digital content or digital service is developed in accordance with the consumer's specifications. With the exception of Articles 5 and 13, this Directive shall also apply to any tangible medium which serves exclusively as a carrier of digital content. This Directive shall not apply to digital content or digital services which are incorporated in or interconnected with goods within the meaning of point (3) of Article 2, and which are provided with the goods under a sales contract concerning those goods, irrespective of whether such digital content or digital service is supplied by the seller or by a third party. In the event of doubt as to whether the supply of incorporated or interconnected digital content or an incorporated or interconnected digital service forms part of the sales contract, the digital content or digital service shall be presumed to be covered by the sales contract. This Directive shall not apply to contracts regarding: (a) the provision of services other than digital services, regardless of whether digital forms or means are used by the trader to produce the output of the service or to deliver or transmit it to the consumer; (b) electronic communications services as defined in point (4) of Article 2 of Directive (EU) 2018/1972, with the exception of number-independent interpersonal communications services as defined in point (7) of Article 2 of that Directive; (c) healthcare as defined in point (a) of Article 3 of Directive 2011/24/EU;

2. 3. 4.

5.

66

Rochfeld/Sénéchal, 6 et seq.

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6.

7. 8.

9.

Scope

(d) gambling services, namely, services that involve wagering a stake with pecuniary value in games of chance, including those with an element of skill, such as lotteries, casino games, poker games and betting transactions, by electronic means or any other technology for facilitating communication and at the individual request of a recipient of such services; (e) financial services as defined in point (b) of Article 2 of Directive 2002/65/EC; (f) software offered by the trader under a free and open-source licence, where the consumer does not pay a price and the personal data provided by the consumer are exclusively processed by the trader for the purpose of improving the security, compatibility or interoperability of that specific software; (g) the supply of digital content where the digital content is made available to the general public other than by signal transmission as a part of a performance or event, such as digital cinematographic projections; (h) digital content provided in accordance with Directive 2003/98/EC of the European Parliament and of the Council1 by public sector bodies of the Member States. Without prejudice to paragraph 4 of this Article, where a single contract between the same trader and the same consumer includes in a bundle elements of supply of digital content or a digital service and elements of the provision of other services or goods, this Directive shall only apply to the elements of the contract concerning the digital content or digital service. Article 19 of this Directive shall not apply where a bundle within the meaning of Directive (EU) 2018/1972 includes elements of an internet access service as defined in point (2) of Article 2 of Regulation (EU) 2015/2120 of the European Parliament and of the Council2 or a number-based interpersonal communications service as defined in point (6) of Article 2 of Directive (EU) 2018/1972. Without prejudice to Article 107(2) of Directive (EU) 2018/1972, the effects that the termination of one element of a bundle contract may have on the other elements of the bundle contract shall be governed by national law. If any provision of this Directive conflicts with a provision of another Union act governing a specific sector or subject matter, the provision of that other Union act shall take precedence over this Directive. Union law on the protection of personal data shall apply to any personal data processed in connection with contracts referred to in paragraph 1. In particular, this Directive shall be without prejudice to Regulation (EU) 2016/679 and Directive 2002/58/EC. In the event of conflict between the provisions of this Directive and Union law on the protection of personal data, the latter prevails. This Directive shall be without prejudice to Union and national law on copyright and related rights, including Directive 2001/29/EC of the European Parliament and of the Council3.

1 Directive 2003/98/EC of the European Parliament and of the Council of 17 November 2003 on the reuse of public sector information (OJ L 345, 31.12.2003, p. 90). 2 Regulation (EU) 2015/2120 of the European Parliament and of the Council of 25 November 2015 laying down measures concerning open internet access and retail charges for regulated intra-EU communications and amending Directive 2002/22/EC and Regulation (EU) No 531/2012 (OJ L 310, 26.11.2015, p. 1). 3 Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society (OJ L 167, 22.6.2001, p. 10).

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10. This Directive shall not affect the freedom of Member States to regulate aspects of general contract law, such as rules on the formation, validity, nullity or effects of contracts, including the consequences of the termination of a contract in so far as they are not regulated in this Directive, or the right to damages. Bibliography: Ackermann, ‘Sektorielles EU-Recht und allgemeine Privatrechtssystematik’ (2018) 4 ZEuP 741–781; Bach, ‘Neue Richtlinien zum Verbrauchsgüterkauf und zu Verbraucherverträgen über digitale Inhalte’ (2019) 24 NJW 1705–1711; von Bar/Clive (eds), Principles, Definitions and Model Rules of European Private Law – Draft Common Frame of Reference (DCFR): Full Edition (Sellier 2009); Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the online and other distance sales of goods’ COM(2015) 635 final; Commission, ‘Impact Assessment accompanying the Commission proposal for Directives of the European Parliament and of the Council (1) on certain aspects concerning contracts for the supply of digital content and (2) on certain aspects concerning contracts for the online and other distance sales of goods’ SWD(2015) 274 final; Commission, ‘Amended proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the online and other distance sales of goods, amending Regulation (EC) No 2006/2004 of the European Parliament and of the Council and Directive 2009/22/EC of the European Parliament and of the Council and repealing Directive 1999/44/EC of the European Parliament and of the Council’ COM(2017) 637 final; Commission, ‘Impact Assessment accompanying the Commission proposal for Directive (EU) 2019/2161/EU as regards the better enforcement and modernisation of Union consumer protection rules’ SWD(2018) 96 final; Commission, ‘A European strategy for data' COM(2020) 66; Council of the European Union, Note from Presidency to Council of 1 June 2017, General approach, 9901/17 ADD 1; Council of the European Union, Note from Presidency to Permanent Representatives Committee/Council of 3 December 2018, General approach, 14951/18; Deutsches Institut für Vertrauen und Sicherheit im Internet (DIVSI), ‘Daten – Ware und Währung’ (2014); European Data Protection Supervisor, ‘Opinion 4/2017 on the Proposal for a Directive on certain aspects concerning contracts for the supply of digital content’ (March 2017); IMCO, ‘Report on the amended proposal for a directive of the European Parliament and of the Council on certain aspects concerning contracts for the sales of goods’ A8–0043–2018, from 27.2.2018; IMCO/JURI, ‘Report on the proposal for a directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ A8–0375–2017, from 27.11.2017; Jansen/Zimmermann (eds), Commentaries on European Contract Laws (OUP 2018); Kern, Anwendungsbereich der Warenkauf- und der Digitale Inhalte-RL’ in: Stabentheiner/Wendehorst/Zöchling-Jud (eds), Das neue europäische Gewährleistungsrecht (Manz 2019), p. 39–50; Lohsse/Schulze/Staudenmayer (eds), Data as Counter performance – Contract Law 2.0? (Nomos 2020); Mayer-Schönberger/Cukier, Big Data (Houghton Mifflin Harcout 2013); Metzger, ‘Verträge über digitale Inhalte und digitale Dienstleistungen: Neuer BGB-Vertragstypus oder punktuelle Reform?’ (2019) 12 JZ 577–586; Momberg, ‘Standard Terms and Transparency in Online Contracts’ in: De Franceschi (ed.), European Contract Law and the Digital Single Market – The Implications of the Digital Revolution (Intersentia 2016), p. 189–207; Morais Carvalho, ‘Sale of Goods and Supply of Digital Content and Digital Services – Overview of Directives 2019/770 and 2019/771’ (2019) 5 EuCML 194–201; Rifkin, The Age of Access (Penguin 2001); Savin, ‘Harmonising Private Law in Cyberspace: The New Directives in the Digital Single Market Context’ (2019) Copenhagen Business School Law Research Paper Series No. 19–35 1–20; Schlechtriem/Schwenzer (eds), Commentary on the UN Convention on the International Sale of Goods (CISG) (4 th edn, OUP 2016); Schulze, ‘Die Digital-Richtlinie – Innovation und Kontinuität im europäischen Vertragsrecht’ (2019) 4 ZEuP 695–723; Sein/ Spindler, ‘The new Directive on Contracts for the Supply of Digital Content and Digital Services – Scope of Application and Trader’s Obligation to Supply – Part 1’ (2019) 3 ERCL 257–279; Staudenmayer, ‘Die Richtlinien des Verbraucherprivatrechts – Bausteine für ein europäisches Privatrecht’ in: Schulte Nölke/ Schulze (eds), Europäische Rechtsangleichung und nationale Privatrechte (Nomos 1999), p. 63–78; Staudenmayer, EG Richtlinie 1999/44/EG zur Vereinheitlichung des Kaufgewährleistungsrechts’ in: Grundmann/Medicus/Rolland (eds), Europäisches Kaufgewährleistungsrecht (Carl Heymanns 2000), p. 27–47; Staudenmayer, ‘The Directive on the Sales of Consumer Goods and Associated Guarantees – A Milestone on European Consumer and Private Law’ (2000) 4 ERPL 547–564; Staudenmayer, ‘Digitale Verträge – Die Richtlinienvorschläge der Europäischen Kommission’ (2016) 4 ZEuP 801–831; Wendland, ‘Sonderprivatrecht für Digitale Güter’ (2019) 118 ZVglRWiss 191–203; Wilke, ‘(Verbrauchsgüter-)Kaufrecht 2022 – die Warenkauf-Richtlinie der EU und ihre Auswirkungen’ (2019) BB 2434–2447; Zöchling-Jud, ‘Das neue Europäische Gewährleistungsrecht’ für den Warenhandel (2019) 3 GPR 115–133.

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Scope A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. The Digital Content Directive as a consumer contract law directive . . . . . . . . . II. A step towards the adaptation of private law to the digital economy . . . . . . . . .

2 2 6

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Personal scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Trader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Substantive scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Included contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Object of the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Sectoral exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Electronic communication services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Healthcare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Gambling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Financial services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Free and open source software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Public performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. Public sector information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Bundle contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Regime of bundle contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Relationship with the European Electronic Communications Code . . . . . . V. Delimitations of the scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Delimitations in relation to other areas of EU law . . . . . . . . . . . . . . . . . . . . . . . . 2. Delimitations in relationship to national law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 7 11 23 27 27 39 91 92 94 100 102 104 106 109 112 115 115 124 128 129 147

A. Function* 1

Art. 3 has the classical double function of a scope article. Firstly, it determines the conditions of the applicability of the Digital Content Directive. These conditions need to be fulfilled before the Directive’s substantive rules can be applied. Secondly, it defines the extent of the full harmonisation approach under Art. 4. Only subjects that are regulated within the scope of the Directive, are fully harmonised;1 issues outside its scope are left to national law. When stipulating, what is and what is not regulated in the Digital Content Directive, Art. 3 determines, together with Art. 1 on the subject matter and purpose of the Directive, the effect of full harmonisation. In this context, Art. 3 displays a clear tendency of the legislator to expend considerable effort in describing what the Digital Content Directive does not regulate and therefore what is outside its scope and may be regulated by national law.2

B. Context I. The Digital Content Directive as a consumer contract law directive 2

Both its scope and a number of its substantive provisions (such as its rules on conformity and remedies), insert the Digital Content Directive into the system of the EU consumer contract law directives. With respect to the scope, this is manifested in the per* This commentary expresses only the personal opinions of the author and does not bind in any way the European Commission. 1 See also Recital 12 1st sentence. 2 Below → mn. 147 et seq.

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sonal scope. As with all other EU consumer contract law directives, it regulates B2C contracts. The regulation of the personal scope through the notions of trader and consumer is one of the common denominators of EU consumer contract law; it is based on the ‘structural imbalance’ between traders and consumers.3 The Digital Content Directive is also complementary to the Sale of Goods Directive, 3 which was adopted on the same day. Its relationship with the Sale of Goods Directive becomes topical in the regulation of goods with digital elements [Arts 2 No. 3 and 3(4)]. During the legislative process of both Directives, it was not obvious where goods 4 with digital elements would be dealt with. Unlike the approach4 taken in the Commission Proposal for a Digital Content Directive5, the EP initially insisted on the inclusion of goods with digital elements only in the Digital Content Directive. The Council took the opposite position i.e. to regulate goods with digital elements only in the Sale of Goods Directive. Having taken this decision, it quickly became clear to the Council that it would be necessary to adapt the Consumer Sales Directive and that therefore, the Commission Amended Proposal for a Sale of Goods Directive6 would need to be adopted. The Consumer Sales Directive provisions, dating back to 1999, were obviously not conceived with goods with digital elements in mind. In the Digital Content Directive trilogue negotiations, the EP conceded on changing its initial approach towards regulating goods with digital elements only in the Sale of Goods Directive. On the basis of Commission preparatory work during the course of 2018, which was fed into the legislative work on the Sale of Goods Directive in Council, a regime for goods with digital elements in the Sale of Goods Directive was worked out during the legislative process. The Digital Content Directive also seeks to be consistent as far as possible with the 5 Consumer Rights Directive. Besides aligning the definitions of trader and consumer, the scope element, where this consistency effort appears, concerns the tangible medium which serves exclusively as a carrier of digital content. Art. 3(3) does not apply Arts 5 and 13, but leaves the regulation of supply and remedies for lack of supply to Art. 18 CRD.

II. A step towards the adaptation of private law to the digital economy Beyond its tendency to slot in the system of EU consumer contract law directives, the 6 Digital Content Directive steps into unchartered territory. Beside its regulation of updates7, it makes a ground-breaking step by including data as counter-performance in its scope (Art. 3(1) 2nd subpara.).8

Staudenmayer (1999), p. 66 et seq. See Staudenmayer (2016), 810 et seq. 5 See Recital 11 DCD as well as Recital 13 COM(2015) 635 final. 6 COM(2017) 637 final. 7 → Art. 7 DCD, mn. 53 et seq. and → Art. 8 DCD, mn. 110 et seq. 8 Below → mn. 46 et seq. and Introduction → mn. 15. 3

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C. Explanation I. Personal scope According to Art. 3(1), the Digital Content Directive regulates contracts between traders and consumers.9 The effect of this approach, which is common to all EU consumer contract law Directives, is to exclude B2B contracts and contracts between private persons from the scope. 8 The respective definitions of traders and consumers in Art. 2 Nos 5 and 610 take over11 the respective definitions in the Consumer Rights Directive12. They also correspond to the traditional definitions in other directives of EU consumer contract law. 13 9 Unlike in the Consumer Sales Directive and previous EU consumer contract law directives, the definitions of ‘trader’ and ‘consumer’ in the Consumer Rights Directive and subsequently in the Digital Content Directive (and Sale of Goods Directive) also mention the term ‘craft’. The addition of this term was intended to align the definition with the Consumer Rights Directive and is not a material change.14 Since it should be regarded as in line with the other terms used such as ‘trade, business, … or profession’, it refers to professional craftsmen and is not intended to result in the inclusion of the consumer’s ‘do-it-yourself ’ activities15. 10 Unlike the Sale of Goods Directive16, Art. 3(1) does not refer to a contract between the seller/trader and the consumer but to ‘any17 contract where the trader supplies … digital content or a digital service to the consumer …’. However, this does not mean that other contracts, e.g. between the trader and a platform, under which the consumer could access digital content or use a digital service, are covered as well. It is clear from Art. 1 and Recital 11, which both refer to ‘contracts between traders and consumers’, that the Digital Content Directive applies only to B2C contracts. The respective reference to ‘any contract’ is the expression of the Digital Content Directive’s approach to avoiding a legal classification of the contract.18 7

1. Trader 11

The Commission Proposal for a Digital Content Directive had used the term ‘supplier’.19 The term of ‘trader’ is used in the Digital Content Directive because the Directive leaves to the Member States the legal qualification of the respective contracts. 20 For this reason, the term ‘trader’ coming from the Consumer Rights Directive was chosen, because it already covers different contracts in this Directive.

See also Recital 18 1st sentence. See also → Art. 2 DCD, mn. 21 et seq. 11 With very minor changes, avoiding gender-specific language. 12 Art. 2 Nos 1 and 2 CRD. 13 For instance, Art. 2(b) and (c) Unfair Terms Directive, Art. 1(2)(a) and (c) CSD, Art. 2(c) and (d) Distance Marketing of Financial Services Directive, Art. 3(a) and (b) Consumer Credit Directive, Art. 2(e) and (f) Timeshare Directive. 14 This is also mentioned by Wilke, 2437 for the Sale of Goods Directive. 15 The latter question had been raised by Zöchling-Jud, 117 for the Sale of Goods Directive. 16 Art. 3(1) SGD. 17 Emphasis added by the author. 18 Below → mn. 28. 19 Arts 3(1) and 2 No. 3 COM(2015) 634 final. 20 Below → mn. 28. 9

10

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The legislator discussed, in a horizontal way covering both Digital Content Directive and Sale of Goods Directive, whether intermediaries were to be included under the notions of ‘trader’/’seller’. For the Sale of Goods Directive, this discussion was initiated by the extension of the notion of the ‘seller’ in the Consumer Sales Directive by the Wathelet judgment of the ECJ21 and an EP amendment22 which tried to implement this judgment in a generalised way into the definition of ‘seller’. For the Digital Content Directive, the discussion came from the practically relevant question whether platforms should be included in the notion of ‘trader’. Ultimately, the legislator did not retain the EP amendment and thereby decided against the extension of the notion of ‘seller’ by the Wathelet judgment. Instead, the legislator retained under both Directives the traditional definitions of ‘trader’/’seller’ and the corresponding scope rules, while also confirming this in the recitals23. This decision of the legislator not to uphold the Wathelet judgment is to be welcomed, because this judgment went beyond the wording and purpose of the Consumer Sales Directive. The ECJ itself recognised24 that the Consumer Sales Directive does not concern the liability of intermediaries vis-à-vis consumers. Nevertheless, the Court subsequently interpreted the notion of seller as covering a trader who acts on behalf of a private individual where, from the point of view of the consumer, he presents himself as the seller of consumer goods under a contract in the course of his trade, business or profession. The ECJ interpretation of the wording is somewhat doubtful. While the ECJ acknowledged that ‘Article 1(2)(c) of that directive limits the circle of persons against whom consumers may take action in order to enforce their rights under that directive’ 25, it is simply noted that nothing in the wording of Art. 1(2)(c) CSD precludes a wider interpretation26. However, according to the Consumer Sales Directive definition, a seller ‘shall mean any natural or legal person who, under a contract, sells …’. This clearly refers to the contractual party of the consumer in a sales contract, and not to an intermediary representing the seller. The teleological interpretation of Art. 1(2)(c) CSD by the ECJ is not more convincing. Ultimately, the fundamental reasoning of the Court is that a contrary interpretation which excludes a trader acting as an intermediary from the scope of application of Art. 1(2)(c) CSD would undermine the overall purpose pursued by the EU legislation on consumer protection and laid down in Art. 169 TFEU, namely to ensure a high level of consumer protection and, consequently, consumer confidence.27 When the ECJ invokes ‘the EU legislation on consumer protection’, it would have been preferable if it had first carried out a systematic interpretation of the Consumer Sales Directive in the context of this EU legislation. The ECJ is certainly correct in stating that there is a significant imbalance concerning information between the consumer and the professional intermediary, in particular where the consumer is not informed of the fact that the owner of the goods sold is, in reality, a private individual.28 Indeed, the imbalance in terms of information is part of the ‘structural imbalance’29 characterising the rationale of consumer contract legislation. CJEU, C-149/15 Wathelet EU:C:2016:840, paras 27 et seq. IMCO, Amendment 43. 23 See the first sentences of both Recital 18 DCD and Recital 23 SGD. 24 CJEU, C-149/15 Wathelet EU:C:2016:840, paras 31–33. 25 ibid., para. 37. 26 ibid., para. 35. 27 ibid., para. 42. 28 ibid., para. 40. 29 Above → mn. 2. 21

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12

13

14

15

16 17

18

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However, the tool that the EU legislator uses in order to deal with the imbalance in terms of information is pre-contractual and contractual information requirements. The Consumer Sales Directive does not include such information requirements. It focuses on the other element, with which the legislator deals with the ‘structural imbalance’ between traders and consumers, i.e. providing the consumer with contractual rights where the performance of the contract is to the disadvantage of the consumer. 19 It is the Consumer Rights Directive (which had already been adopted at the time of the Wathelet case and judgment) which provides relevant pre-contractual information requirements. While the Consumer Rights Directive provides for the obligation to inform about the identity of the trader,30 it does not include the obligation for the intermediary to indicate that he is only an intermediary. It is interesting to note that the legislator has in the meantime recognised this gap and solved it for the most common situation, namely where platforms act as intermediaries.31 The Consumer Rights Directive now includes a new Art. 6a(1), which obliges an online marketplace to inform the consumer whether the third party offering the goods is a trader or not, and, where this party is not a trader, that the consumer rights stemming from Union consumer protection law do not apply to the contract.32 20 The Court rightly stresses that a trader could create confusion in the mind of the consumer by giving him the false impression that he is acting as the seller-owner of the goods33 and that the consumer’s ignorance concerning the capacity in which the trader acts in the sale would deprive him of his rights guaranteed by the Consumer Sales Directive34. However, in order to mitigate against such confusion, the EU legislator adopted the Unfair Commercial Practices Directive. According to its Art. 5(4)(a), misleading commercial practices (as defined in its Arts 6 and 7) are part of the unfair commercial practices prohibited by Art. 5(1) UCPD. The fact that in the Wathelet case the intermediary did not inform the consumer that it was only an intermediary, with the consequence that the consumer bought from a private person and therefore the Consumer Sales Directive rules would not apply, would have fulfilled the criteria of a misleading omission (according to Art. 7(1) UCPD). It omitted material information that the average consumer needs to take an informed transactional decision, i.e. to buy the car, and thereby was likely to cause the average consumer to take the transactional decision that he would not have taken otherwise. It is interesting that even the ECJ speaks about the consumer in the Wathelet case being ‘misled’.35 21 The Unfair Commercial Practices Directive foresees that Member States should adopt provisions on enforcement and penalties (according to its Arts 11 and 12). These national provisions could include private law remedies, for instance termination of the contract or the possibility for the consumer to claim damages for the fact that she concluded a contract which she would not have done had she been properly informed. Indeed, half the Member States had provisions linking breaches of the national implementation law of the Unfair Commercial Practices Directive to private law remedies. While the other half did not make explicit references to private law remedies, it may have been possible for consumers in those Member States to rely on certain remedies under general private

Arts 5(1)(b) and 6(1)(b) CRD. See Art. 4(5) Modernisation Directive. 32 See Consumer Rights Directive → Art. 6, mn. 32. 33 CJEU, C-149/15 Wathelet EU:C:2016:840, para. 34. 34 ibid., para. 38. 35 ibid., para. 41. 30

31

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law.36 It is interesting to note in this context that the EU legislator reinforced the redress possibilities under the Unfair Commercial Practices Directive.37 It now includes a new Art. 11a(1) which specifically mentions that consumers should have remedies, including the possibility to claim damages, a price reduction or termination of the contract. This amendment of the Unfair Commercial Practices Directive shows that the EU legislator wished to harmonise the existing civil law remedies for breaches of that Directive. However, the fact remains that the consumer had remedies in national law. It may be that in the Wathelet case, the conditions of such remedy were not fulfilled under Belgian law, which was presumably the applicable law.38 Nevertheless, this is not a reason for a wide interpretation of the Consumer Sales Directive in order to satisfactorily resolve the case. As regards platforms, Recital 18 2nd sentence (and similarly Recital 23 2nd sentence 22 SGD) clarifies that platforms can be considered as traders if they themselves supply the digital content or digital service to the consumer. In such cases, they would fall under the definition of trader in any case; this means also that the Digital Content Directive does not apply to platforms in their capacity as intermediaries. This is confirmed by Recital 18 3rd sentence (and also Recital 23 3rd sentence SGD), which, in order to respond to the request of a few Member States, explicitly gives Member States the possibility to extend this scope in national law to include platform providers that do not fulfil the requirements for being considered a trader.

2. Consumer During the legislative process, Council and EP also discussed, whether to include, beyond the traditional meaning of the notion of ‘consumer’, so-called dual-purpose contracts. The EP had proposed an amendment to the Sale of Goods Directive39 stating that in the case of dual-purpose contracts a natural person is considered a consumer. Several Member States also supported such an extension. The background of this discussion was that Recital 17 CRD had extended the notion of consumer while keeping the definition. This was done in order to include those contracts which the Consumer Rights Directive described as concluded for purposes partly within and partly outside the person’s trade and where the trade purpose is so limited as not to be predominant in the overall context of that contract. This transfers the ECJ’s Gruber case law40 from procedural law into substantive law and it extends its scope. In the Gruber judgment, the ECJ had opened its previously consistent case law41 on Art. 13 et seq. of the 1968 Brussels Convention42, interpreting the rule on the consumer jurisdiction in a narrow manner. While the ECJ as a matter of principle, did not accept that the jurisdiction of the consumer’s court has jurisdiction over for dual purpose contracts, it made an exception when the trade purpose is so limited that it is negligible in the overall context of the contract. The questions of whether the Gruber judgment or its transfer into substantive law and its extension in the Consumer Rights Directive should be supported is not one of concern here. In any case, the legislator was right not to take over the Consumer Rights Di36 See SWD(2018) 96 final, Part 1/3, 21 et seq. and Part 2/3, Table 8 in Annex 8 with an overview of the private law remedies in the different Member States. 37 See Art. 3(5) Modernisation Directive. 38 Belgian law contained private law remedies, see Table 8 in Annex 8 of Part 2/3 SWD(2018) 96 final. 39 IMCO, Amendments 13 and 42. 40 CJEU, C-464/01 Gruber EU:C:2005:32, paras 38 et seq.; C-498/16 Schrems EU:C:C:2018:37, para. 32; C-630/17 Milivojević EU:C:2019:123, para. 91. 41 See for example CJEU, C-150/77 Bertrand EU:C:1978:137 and C-269/95 Benincasa EU:C:1997:337. 42 These provisions correspond to Arts 17 and 18 Brussels I bis.

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23

24

25

26

Art. 3

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rective approach in the Directives.43 Firstly, the Consumer Rights Directive approach is questionable from a technical legislative perspective. Basically, there is a substantive difference between the consumer definition in Art. 2 No. 1 and Recital 17 CRD which goes beyond interpretation. Recitals are supposed to explain normative provisions or to help with their interpretation; they are not intended to include different content. In addition, Council and EP decided in the legislative process on the Consumer Sales Directive with good reasons and independently of each other, not to extend the scope but to keep the traditional term of ‘consumer’.44 Above all, one needs to keep in mind the different contents of each of the Digital Content Directive (and the Sale of Goods Directive) and the Consumer Rights Directive. The economic impact of extending the scope of the Directives to dual purpose contracts would be considerably more significant than for the Consumer Rights Directive. In terms of the pre-contractual information obligations, one of the main set of provisions under the Consumer Rights Directive, the economic impact would be negligible. The trader has the information available anyway, as he needs to provide it for pure consumer contracts. Although the exercise of the right of withdrawal does add costs for the trader, in practice these are not remotely comparable to the impact of remedies for non-conformity. However, as a concession to those Member States which want to keep this extension, Recital 17 (and Recital 22 SGD) permits this. This is an example of superfluous clarification. In their implementation of the Digital Content Directive into national law, Member States can in any event, extend its scope. Recital 16 (and Recital 21 SGD) expressly mentions this possibility and provides examples of extensions of the traditional notion of a ‘consumer’, i.e. non-governmental organisations, start-ups or SMEs.

II. Substantive scope 1. Included contracts The Digital Content Directive does not include a definition of what is a ‘contract’. The Commission Proposal for a Digital Content Directive45 had included such definition (‘an agreement intended to give rise to obligations or other legal effects’). However, as an expression of the general trend of Member States to minimise the interference of the Digital Content Directive into general contract law,46 the Council deleted this definition. 28 The Digital Content Directive, following the approach of the Commission Proposal for a Digital Content Directive47, intentionally avoids48 qualifying the legal nature of the included contracts. As the contracts in question are qualified differently in national laws,49 the intention is that Member States should be able to maintain these legal qualifications. 29 a) Contracts for the supply of digital content or digital services. The Digital Content Directive concerns, according to Art. 3(1) 1st subpara., contracts where on the one hand 27

For Zöchling-Jud, at 117, this is surprising. See Staudenmayer (‘Milestone’), 548 et seq. 45 Art. 2 No. 7 COM(2015) 634 final. 46 Below → mn. 147 et seq. 47 See Staudenmayer (2016), 804 et seq. 48 Recital 12. 49 As an example for the difficulties of qualification in national law, Metzger, 578. 43

44

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the trader supplies or undertakes to supply digital content or a digital service50 to the consumer. As a counter-performance the consumer pays or undertakes to pay a price. The wording in Art. 3(1) takes over the wording of the Commission Proposal for a Digital Content Directive, which distinguished immediate actual supply of digital content or a digital service from an undertaking to supply it. This distinction was made to cover cases where the digital content or digital service would be supplied later than at the conclusion of the contract, for instance where a digital song was not yet released at that time or where the digital content or digital service would be supplied over a period of time, and that supply had not yet begun. The Council applied the same distinction for the payment of the price or the provision of personal data. The latter is in practice especially common, for instance with respect to data provided during the use of social media. Neither Art. 3(1) nor the definition of ‘price’ in Art. 2 No. 7 make a distinction between whether the price is paid in one sum or in several over a period of time. For digital services, the latter may occur – in practice – more frequently than the former. The Digital Content Directive therefore also covers the payment of a price in instalments. 51 The Digital Content Directive does not limit ‘price’ to a sum of money in a government-issued currency. According to Art. 2 No. 752, ‘price’ includes a digital representation of value. Recital 23 explains that because of its frequent use in commercial practice this should also cover electronic vouchers or e-coupons, which may have been issued by the trader during a previous purchase and are used by the consumer in a subsequent transaction. Other examples could be digital games where the gamer wins certain assets which can be used in the game to acquire other features, such as fantasy weapons, additional game-play or to advance to another level in the game. The extension of the definition of price to virtual currencies was first discussed in the Council. On one hand the Council recognised the growing importance of virtual currencies as a means of payment and wanted to avoid limiting consumers from using them for this purpose. On the other hand, some Member States were sceptical about the inclusion of cryptocurrencies in the scope because they wanted to avoid setting a precedent recognising them under EU law. As a result, the third sentence of Recital 23 includes a proviso that they can only be included in the notion of ‘price’, if they are recognised by national law. Unlike the Digital Content Directive, where the notion of ‘price’ is enlarged, the Sale of Goods Directive does not include any provision or recital to this effect. This was briefly discussed during the final trilogues when the legislator made also efforts to align both Directives. However, since the legislator lacked sufficient evidence for a similarly frequent use of digital representation of value for goods and the aforementioned reluctance of some Member States to recognise virtual currencies in EU law, this concept was left undefined (as in the Consumer Sales Directive). b) Digital content or digital services developed according to consumer specifications. Art. 3(2) includes contracts where the digital content is developed according to the consumer’s specifications. This scope rule transfers the provision of Art. 1(4) CSD (which in turn was inspired by Art. 3(1) CISG)53 into the digital environment and includes, like the CESL,54 tailormade digital content, and in particular, tailor-made software.55 See also → Art. 2 DCD, mn. 6 et seq. Metzger, 577. 52 See also → Art. 2 DCD, mn. 26 et seq. 53 See Staudenmayer (‘Milestone’), 550. 54 Art. 2(j) CESL-Regulation. 55 Recital 26. 50

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30

31

32

33

34

35

36

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One example56 would be software developed following the request of an individual consumer to assist with their specific disabilities. 38 It also reflects an effort of the Digital Content Directive to be coherent with the Sale of Goods Directive, i.e. its Art. 3(2), which also includes tailor-made goods. 37

2. Object of the contract a) Digital content and digital services. The Digital Economy has led to the appearance of new products in the form of digital content and services; they constitute a fast-growing part of many retail sectors. For example in 2018, the total amount of worldwide subscriptions to online video services for the first time surpassed the amount of cable subscriptions.57 In the same year, paid streaming, free streaming and downloads accounted for 59 % of the total recorded music revenues worldwide and made up more than 50 % of revenue in 38 markets.58 The percentage of individuals aged 16–74 reading/downloading online newspapers/news magazines in the EU has nearly tripled from 20.7 % in 2007 to 60.6 % in 2017.59 40 The Commission Proposal for a Digital Content Directive60 had a single definition of digital content with three different subcategories, encompassing with the latter two digital services. Council and EP split this definition into two categories, in order to maintain consistency with the definition of ‘digital content’ in the Consumer Rights Directive. While the Digital Content Directive mentions both digital content and digital services, the differentiation does not lead to any differences in the substantive regime; it only serves to clarify the width of the scope. 41 Including both as objects of the contract follows the technology- and marketing method-neutral approach61 of the Commission Proposal for a Digital Content Directive. The reasoning of the Proposal was firstly to take into account the fast pace of the technological and commercial development. In addition, it was important to maintain a competitive environment. The purpose was to avoid certain businesses suffering from competitive disadvantages or having competitive advantages depending on how they design or market their products. This is particularly important for digital content and digital services, as the borderline between these two product categories are increasingly blurred. Finally, it was intended to prevent businesses from being able to re-structure their products in order to avoid falling within the regime of the Digital Content Directive. 42 The definition of digital content 62 itself is broad; the wording follows existing definitions of the Consumer Rights Directive63 and the CESL64. As in the CESL, the Commission Proposal for a Digital Content Directive mentioned examples in the proposed provision. Following the model of the Consumer Rights Directive, the Digital Content Di39

56 For more examples see Sein/Spindler, 262. Metzger, 578 points out that B2C contracts are likely to concern standardised products and that therefore this provision is in practice not very significant. 57 www.mpaa.org/wp-content/uploads/2019/03/MPAA-THEME-Report-2018.pdf, 31 (last accessed on 28 July 2019). 58 www.billboard.com/articles/business/8505270/ifpi-global-report-2019-music-sales-rise-paid-streami ng (using data from the annual Global Music Report 2019 by International Federation of the Phonographic Industry) (last accessed on 28 July 2019). 59 https://stats.oecd.org/ → Information and Communication Technology → ICT Access and Usage by Households and Individuals → ICT Access and Usage by Individuals → indicator D1G: Individuals using the Internet for reading/downloading online newspapers/news magazine (last accessed on 28 July 2019). 60 Art. 2 No. 1. 61 See also Recitals 10 2nd sentence and 19 3rd sentence. 62 → Art. 2 DCD, mn. 6 et seq. 63 See the same definition in Art. 2 No. 11 CRD. 64 Art. 2(j) CESL-Regulation.

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rective moves these examples to the recitals. For digital content Recital 19 includes as examples computer programmes, applications, video files, audio files, music files, digital games, e-books or other e-publications. The notion of digital content can also include CAD files for 3D-printing, while the 3D-printed goods themselves would fall under the Sale of Goods Directive.65 Compared to the Commission Proposal for a Digital Content Directive, Recital 19 adds the word ‘files’ to the examples of video, audio and music. The purpose of this addition is to emphasise that it is not the quality of the movie, music etc. that should be assessed, but rather of the file that carries them. According to Recital 19, digital services can include video and audio sharing and other file hosting, word processing, games offered in the cloud or social media. All kinds on digital content and digital services are included, independently of the access method.66 The Digital Content Directive thereby takes into account the transition to the Access Economy67, where property of things is no longer in the forefront, but rather, access to digital content and services. The object of the contract includes therefore not only digital content on a tangible medium but also digital content to which the consumer has access in the Cloud as well as digital services. b) Data as counter-performance. One major feature of the digital economy is the development, facilitated by the growing rollout of the Internet of Things, of a data economy with a huge mass of processed and stored data, the so-called phenomenon of ‘big data’. Big data is often characterised by reference to the 3 V’s68: high volume, high velocity and high variety. Some examples can make the ‘volume’ aspect of ‘big data’ more comprehensible. Even by the year 2013,69 Google was processing more than 24 Petabytes70 of data in a single day. This corresponded to thousands of times the quantity of all printed material in the US Library of Congress. Already by 2013, the global amount of stored information was estimated at 1,200 Exabytes71. If this had been saved on the now outdated CDROMs, the result would have created five towers of CD-ROMs reaching the moon. However, by now the year 2013 is, in terms of data processed and stored, almost the Stone Age. The rapid increase of processing and storing data in the past few years is even more impressive. It is estimated72 that in 2016 and 2017, 90 % of the data worldwide was created. In its new Data Strategy, the European Commission estimates according to which the volume of data produced in the world will grow from 33 zettabyte73 in 2018 to an expected 175 zettabyte in 2025.74 Combined with the datafication of business processes, this has led to one of the major trends in the digital economy, i.e. that data is regarded as a tradable asset. Not only is this very relevant to B2B transactions, it has also led in B2C transactions to the phenomenon that digital content and services are no longer paid exclusively with money but also with access to data. Based on studies and an EU-wide survey, the Commission had Recital 26. Recital 19. 67 cf. Rifkin. 68 It is unclear who came up first with this very frequently mentioned characterisation. In the meantime, other V’s and characteristics without ‘V’ have also been added. 69 The following examples are taken from Mayer-Schönberger/Cukier, p. 8 et seq. 70 A Petabyte is 1015 or 1 000 000 000 000 000 bytes, while 1 byte is a single character. 71 An Exabyte is 1018 or 1 000 000 000 000 000 000 bytes. 72 www.forbes.com/sites/bernardmarr/2018/05/21/how-much-data-do-we-create-every-day-the-mindblowing-stats-everyone-should-read/#2d35a00560ba (last accessed on 28 July 2019). 73 A Zettabyte is 1021 or a 1 with 21 zeros 74 COM(2020) 66 final, 2. 65

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noted in the Impact Assessment of its Proposal for a Digital Content Directive that a very large proportion of digital content provided to consumers is not paid with money but supplied against access to personal data granted by the consumer.75 This was identified as being particularly prevalent in the sectors involving audio-visual access to sports events and other audio-visual content, listening to digital music, playing online games and reading e-books. At the same time, this trend goes hand in hand with a growing consumer awareness that that their data has value and that they are indeed ‘paying’ with data when they are using online offers ‘for free’.76 Therefore, the Digital Content Directive takes a ground-breaking step and opens a new dimension of the adaptation of private law to the requirements of the digital economy. In its Art. 3(1) 2nd subpara., it includes digital content and digital services when they are provided against granting access to personal data.77 This concerns, for instance, data such as the consumer’s name, address, e-mail address, age, gender etc. which are often requested if one ‘registers for free’ on a website for the supply of digital content or a digital service. The Commission Proposal for a Digital Content Directive had included both personal and ‘other’ data, which could be provided as counter-performance.78 ‘Other data’ was meant to include any data which does not fall under the GDPR definition79 of ‘personal data’. This could be data which is anonymous from the outset, because it does not contain any identifiers and cannot on their own be used to identify individuals. In addition, it could include data which is no longer personal data because it has been fully anonymised by stripping out any information or identifier that might enable individuals to be identified. However, the European Data Protection Supervisor opinion80 considered that almost all data relevant for the Digital Content Directive would be personal data. The Digital Content Directive scope was subsequently restricted to only personal data. The time when data is provided is irrelevant.81 It could be at the moment of conclusion of the contract or at a later stage during the continuous supply of a digital service, for instance when data is provided using social media. The Digital Content Directive recognises that data is, if not already a form of ‘currency’ today, it is probably a de facto ‘currency’ of tomorrow. In addition to any significance for the market, another reason was that the borderline is often blurred between business models using money and those using data. For example, this applies to the so-called ‘freemium’ business models. This is where the access to digital content or a digital service initially takes place through granting access to data, but where at a later stage more extensive access or an upgrade must be paid for with conventional money. Due to its significance in terms of economic impact and legal policy, the inclusion of data as counter-performance under the Digital Content Directive proved a very controversial point both before the Council and the EP. The respective majority followed the Commission Proposal for a Digital Content Directive and included them into the scope. 75 SWD(2015) 274 final, 15. This is confirmed for instance for Germany, where 76 % of Internet users use exclusively or above all online offers where no money is paid; cf. DIVSI, 10, available under www.divsi. de (last accessed on 28 July 2019). 76 This applies to three quarters of German internet users. Cf. DIVSI, 11. 77 This is welcomed by Kern, p. 39; Morais Carvalho, 197; Sein/Spindler, 263, Savin, 10 et seq. (last accessed 17 January 2020). 78 Art. 3(1) COM(2015) 634 final. 79 Art. 4(1) GDPR. 80 European Data Protection Supervisor, mn. 37, available under https://edps.europa.eu/sites/edp/files/ publication/17–03–14_opinion_digital_content_en.pdf (last accessed 28 December 2019). 81 Recital 24 4th sentence.

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However, this controversial discussion had several impacts on the drafting of the relevant clauses and recitals. The Digital Content Directive avoids mentioning, in contrast to the wording under the Commission Proposal for a Digital Content Directive, that ‘in exchange, … the consumer … provides counter-performance other than money in the form of personal data or any other data…’.82 Following the consultation of the European Data Protection Supervisor by the Council, all references to personal data as ‘counter-performance’ or personal data provided ‘in exchange’ were deleted and a more neutral wording was used. To further disassociate personal data from counter-performance, the reference to supply of digital content without payment of price where personal data are provided is mentioned in a separate subparagraph. However, the adopted wording fails to disguise that in practice that is precisely the case.83 In addition, the Digital Content Directive in its Art. 3(8)84 and the respective Recitals 24, 37–40 contains an emphasis on (one might even say an exaggerated emphasis on) clarifying that the GDPR still applies. Not all data as counter-performance would lead to the application of the Digital Content Directive. The Commission Proposal for a Digital Content Directive never had the aim of regulating the entire Internet. The Commission Proposal wanted to achieve this by requiring that data is provided when performing the obligations of a contract and that the consumer ‘actively provides’ data. In addition, the Commission Proposal contained a definition of term ‘contract’85 as ‘an agreement intended to give rise to obligations or other legal effects’. The requirement of the ‘contract’ was included (beside the objective requirement of an agreement) to make sure that the parties had subjectively the intention to be legally bound, which is in all European legal systems a condition for the formation of contracts86. The condition of the ‘active’ provision of data went into the same direction. It served the purpose that the consumer was aware that he provided a counter-performance and it was supposed to exclude the collection of metadata and the IP-address87. During the legislative process the term and the definition of ‘contract’ as well as the term ‘actively’ were deleted. Only the first subparagraph of Art. 3 refers to a ‘contract’, while the second subparagraph on digital content or a digital service supplied when personal data is provided does not include the word ‘contract’. The purpose of this amended wording, in contrast to that which was put forward in the Commission Proposal for a Digital Content Directive, was to avoid the conclusion that whenever personal data is provided, a contract is concluded. In a general manner, Art. 3(10) and the first sentence of Recital 12 emphasise that the rules on formation of a contract are left to national laws. In the more specific context where personal data is provided, Recital 24 leaves it to the Member States to assess whether supplying personal data by the consumer fulfils the requirements for the conclusion of a valid contract.88 In addition, Recital 25 indicates that the collection of metadata does not fall within the scope of the Directive, except if national law regards this as a contract. The ultimate result goes in the same direction as the Commission Proposal for a Digital Content Directive. The term ‘provided’ already implies an active provision, as opEmphasis added by the author. Kern, p. 39, Metzger, 579, Schulze, 701, Sein/Spindler, 265 and Savin, 12, also consider this as counterperformance. 84 Below → mn. 137 et seq. 85 Art. 2 No.7, using the definition of Art. 2(a) CESL-Regulation; cf. also Art. 30 CESL. 86 See von Bar/Clive, Art. II.–4:101 DCFR, note IV. 12, in and from a legal history and comparative angle Christandl in: Jansen/Zimmermann, Art. 2:101(1), mn. 9–15. 87 See Staudenmayer (2016), 808. 88 Metzger, 584 is right in affirming that this will frequently be the case. 82 83

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posed to (from the consumer’s perspective) a more ‘passive’ collection. For a major example of such ‘passively’ collected data, i.e. ‘metadata’, Recital 25 clarifies that their collection is excluded from the scope. 58 While the notion of ‘metadata’ is not defined in the Digital Content Directive, it means literally data on (other) data. Recital 25 mentions as examples for metadata information concerning the consumer’s device or browsing history. The ‘consumer’s devices’ could include cameras, smartphones, computers etc. The ‘information’ referred to could include the device model and the serial number, the resolution, the date and time of use, the version of software used etc. However, metadata can be included where its collection is recognised by national law as part of a contract. This is part of a compromise found in the legislative process which concerns also the examples mentioned. The Council General Approach had excluded metadata as part of ‘automatically generated information’, which included alongside metadata ‘the IP address’ and ‘information collected and transmitted by cookies’. However, it did permit their inclusion ‘where this is considered as a contract by national law’.89 In the trilogue, the reference to the IP-address was deleted, because the ECJ had considered (even90) dynamic IP-addresses under certain conditions as personal data.91 The reference to ‘cookies’ was deleted, in order to leave it general national contract law to interpret which situations could be recognised as a contract, including those where data is collected through cookies following the consumer’s express consent. 59 Put simply, the Digital Content Directive’s approach to the treatment of personal data as a contractual counter-performance is to include personal data within its scope. This is qualified by the exception that this inclusion does not apply if the provision of such data is not considered to be part of a valid contract under general national contract law. The inclusion of personal data also applies to metadata if its collection is considered by national general contract law as a contract. As an overall result, this final compromise is rather complicated and puts considerable emphasis on the qualification by national general contract law of such cases as contracts. It is doubtful whether from a drafting perspective it was necessary to proceed in the way the Digital Content Directive did. It may have been sufficient to maintain the ‘contract’ criterion in the scope rule and leave its assessment to national law. The already mentioned effort to avoid qualifying data as counter-performance stood in the way of this simpler approach. Interestingly, this effort in Council stemmed in particular from some Member States with a Romanistic legal tradition where the element of ‘cause’ is still used. The Digital Content Directive approach with systematic references to national law as regards to the conclusion of a valid contract where data are provided by the consumer is a significant example of a general trend in the Digital Content Directive to avoid interfering with the general provisions of national contract law.92 60 The exception in Art. 3(1) 2nd subpara. excludes cases where personal data provided by the consumer is processed by the trader exclusively for the purposes of supplying the digital content or digital service in accordance with the Directive or to comply with legal requirements. However, if the data is also processed for other purposes, the respective contract falls into the scope of the Digital Content Directive. The former category concerns data, which the trader has to have in order to supply the digital content or digital service at all or to supply it in conformity with the contract, for instance the location of Council of the European Union (‘9901/17 ADD 1’), n 15. The ECJ had already considered in the judgment Scarlet Extended IP-addresses as personal data (C-70/10 Scarlet Extended EU:C:2011:771, para. 51). 91 CJEU C-582/14 Beyer EU:C:2016:779, paras 38 et seq. 92 Below → mn. 148 et seq. 89 90

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the consumer in case of a navigation app. Recital 25 gives an example for the latter category, i.e. that the registration of the consumer is legally required for security and identification purposes. In both cases, the trader cannot avoid processing the data and should therefore not be burdened with the liability resulting from the Directive. The similarities of the references to ‘exclusively processed by the trader for the purpose of supplying’ and ‘comply with legal requirements’ to Art. 6(1)(b) and (c) GDPR are not to be interpreted as references to the legal grounds for processing personal data under this provision. The first two sentences of Recital 38 clarify that the Digital Content Directive does not in any way interfere with the legal grounds of processing personal data under the GDPR. Therefore, the application of the Digital Content Directive is not determined on whether or which of these legal grounds apply for the processing of data. In practice, those cases would be rather limited in any case. For instance, in the navigation app example, the trader would have to use the information regarding the consumer’s location only in order to provide him with the requested trajectory and subsequently immediately delete all information and not use it for example for direct marketing purposes. It also follows from Art. 3(1), that in cases where neither the consumer pays or undertakes to pay a price nor provides or undertakes to provide personal data, the Digital Content Directive does not apply. While non-interference with homegrown traditions of national law is understandable, the Digital Content Directive approach leaves several open questions as to the treatment of data. To give one example,93 the Digital Content Directive explicitly94 does not regulate the consequences for the contract if the consumer as data subject withdraws the consent given for the processing of the data. At the implementation stage, this will raise the question of the impact of the GDPR on contract law, thereby touching the nature of a synallagmatic contract (or the criteria of ‘consideration’ in Common law systems or ‘causa’/‘cause’ in Romanistic systems, depending on the national laws 95). In practice, consent according to Art. 6(1)(a) GDPR is often likely to be the legal base for data processing.96 The fact that the consumer can at any time withdraw his consent granting the trader access to the consumer’s personal data, i.e. the counter-performance for the supply of digital content or the digital service, leaves open to the national legislator the possibility of making a choice e.g. whether or not to grant the trader a right to cease supplying the digital content or digital service. However, in this context, it is necessary to take into account that in practice, access to data granted as counter-performance is monetarised very quickly.97 Furthermore, one also needs to consider the GDPR rules on consent. One may indeed raise the question whether in a case where consent is withdrawn according to Art. 7(3) 1st sentence GDPR, and the contractually due performance is no longer delivered, consent is still freely given according to Art. 7(4) GDPR. 98 If this and other issues are regulated differently in national implementation laws, this may have significant impact on cross-border business models based on data as counterperformance. cf. more examples in Metzger, 584. Recital 40. 95 As to the different approaches in national laws see von Bar/Clive, Art. II.–4:101 DCFR, notes IV. 13.–29. DCFR, (and from a legal history and comparative angle Christandl in: Jansen/Zimmermann, Art. 2:101(1), mn. 17–20. 96 See also the example in Recital 24 9th sentence. 97 cf. European Data Protection Supervisor, mn. 69. 98 Bach, 1706 points also to the question of the scope of Art. 7(4) GDPR. 93

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With the inclusion of data as an alternative to money as counter-performance, the Digital Content Directive may possibly open a new approach in contract law.99 However, contract law is a very flexible area of law and therefore a ‘contract law 2.0’100 is probably unnecessary. Still, an approach undertaking some adaptations could be sensible. Beyond the necessity to comply with the GDPR, the inclusion of data into the scope of the Digital Content Directive may also change the way in which personal data are sometimes regarded. The Directive and the practice around contractually dealing with – personal – data is not about putting a price tag on a human right.101 One cannot ignore the fact that data – including personal data – has economic value and is being used as an asset in economic transactions. The aim therefore should not be to regulate business which deals with personal data out of the market but to frame these transactions. While ensuring full compliance with the GDPR, the Digital Content Directive therefore takes care that the equivalence relationship between digital content and services as contractual performance and data access provided as counter-performance is maintained, if the digital content or services turn out not to be in conformity with the contract. Such framing should also make sure that the data subject has control over personal data in a manner which among other things ensures that the data subject can get a fair economic value out of the respective transaction; an objective which corresponds, to what consumers want102. c) Digital content on a tangible medium. Art. 3(3) includes digital content supplied on a tangible medium in the scope of the Digital Content Directive. There were basically three different potential approaches to regulating digital content on a tangible medium which exclusively serves as a carrier, for instance the film on the DVD. The first option would have been to apply the rules on sales of goods to both the tangible medium and the digital content. Such an approach would probably have been the most easily comprehensible for the average consumer, as the consumer has a tangible item in its hand and the application of the rules on sales of goods would be intuitively the more obvious choice. However, such an approach would also have significant disadvantages. The economic added value of a plastic disc for instance compared to the value of the digital content saved on it is negligible. In addition, it would be against one of the strands of underlying reasoning of the Digital Content Directive, i.e. its neutrality as regards the distribution channel,103 to treat the same digital content, for instance a movie, differently, depending on whether it is distributed on a DVD or via web-streaming. A separate application of the Digital Content Directive on the digital content and of the Sale of Goods Directive on the tangible medium would be, legally speaking, the cleanest option. However, it would be very difficult for a non-lawyer consumer to understand that there are two separate sets of rights which, despite all efforts at consistency by the legislator, have differences. Recital 20 states the Digital Content Directive aims for the regime of digital content on a tangible medium, i.e. to meet the expectations of consumers and ensure a clear-cut and simple legal framework for traders. For these reasons, the legislator chose the option, retained in Art. 3(3) to apply the Digital Content Directive to both the digital con-

99 Wendland, 196 sees the Digital Content Directive as a basis for a future contract law for data; Carvalho, 197 considers this one of the main challenges for contract law in the coming years. 100 cf. the contributions in Lohsse/Schulze/Staudenmayer; Wendland, 196. 101 In order to take into account such concerns, Recital 24 expressly states that ‘the protection of personal data is a fundamental right and that therefore personal data cannot be considered as a commodity’. 102 See DIVSI, 12, 15. 103 See Recital 19 3rd sentence.

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tent and the tangible medium, provided the latter serves exclusively as a carrier of digital content.104 The most common cases of a tangible medium serving exclusively as a carrier for digital content, mentioned in Recital 20, are CDs or DVDs on which music, films or software are provided. For other media mentioned in Recital 20, such as USB sticks and memory cards, or other examples like portable hard drives, it will depend more on the circumstances of the case. If the medium is in fact only used because that is the easiest possibility to transfer a large volume of digital content, it serves exclusively as a carrier. However, tangible media that the consumer can reuse for different purposes and different content are unlikely to be mere carriers but rather to be an element of a bundle contract consisting in the supply of the tangible medium and the digital content provided on it. According to Art. 3(6), the Digital Content Directive would only apply to the digital content, while the Sale of Goods Directive would apply to the tangible medium. According to Art. 3(3) and Recital 20 4th sentence, Arts 5 on the supply of the digital content and 13 on the remedy for the failure of supply, do not apply. In the Digital Content Directive rules on delivery and remedies for failure of delivery were carved out, as the Consumer Rights Directive includes provisions on this subject matter. It follows from Art. 17(1) 2nd sentence and Recital 19 3rd sentence CRD that Art. 18 CRD on delivery and the remedies for non-delivery for goods applies to the tangible medium and the digital content instead.105 d) Goods with digital elements. Pursuant to Art. 3(4), so-called ‘goods with digital elements’ are excluded from the scope of the Digital Content Directive; such goods rather fall in the scope of the Sale of Goods Directive.106 Besides the flurry of new products in the form of digital content and services which have become available, the sale of consumer goods which contain digital content or are linked to digital services is also rapidly increasing. Due to the rapid growth of the Internet of Things107 and the increasing number of smart homes108, goods with digital elements are part of a fast-growing trend in many retail sectors. This is especially the case where such goods are linked with Artificial Intelligence. For instance, Amazon’s Echo Dot was the best-sold article on amazon.com for three Christmas sales in a row (2016, 2017 and 2018) 109. It was important to regulate such goods in order to ensure that both the Sale of Goods Directive and the Digital Content Directive encompass technological changes. It is the explicit intention of the legislator that the two Directives are complementary110; this is manifest in the drafting of the respective Articles and Recitals. 111. The distinction included in Recital 11 of the Commission Proposal for a Digital Content Directive stipulated the Digital Content Directive should not apply to ‘digital conConsequently, the Sale of Goods Directive specifies in its Art. 3(4)(a) that it does not apply. As to the relationship between the Digital Content Directive and the Consumer Rights Directive, below → mn. 134 et seq. 106 Art. 3(3) SGD. 107 The number of Internet of Things devices has evolved from 3.81 billion (2.28 billion in the consumer sector) in 2014 to 11.2 billion in 2018 (7.04 billion in the consumer sector) and is prospected to reach 20.41 billion (12.86 billion in the consumer sector) in 2020, www.statista.com/statistics/370350/internet-o f-things-installed-base-by-category/ (last accessed on 28 July 2019). 108 Household penetration is 10.9 % in 2019 and is expected to hit 22.5 % by 2023. There are 34.5 million smart homes in 2019 (+32.8 % year-over-year), www.statista.com/outlook/279/102/smart-home/euro pe?currency=eur (last accessed on 28 July 2019). 109 https://voicebot.ai/2018/12/26/amazon-echo-device-sales-break-new-records-alexa-tops-free-app-d ownloads-for-ios-and-android-and-alexa-down-in-europe-on-christmas-morning (last accessed on 28 July 2019). 110 Recital 20 1st sentence DCD, Recital 13 1st sentence SGD. 111 Art. 3(4) DCD, Art. 3(3) SGD, Recitals 20–22 DCD, Recitals 13–16 SGD. 104

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tent which is embedded in goods in such a way that it operates as an integral part of the goods and its functions are subordinate to the main functionalities of the goods.’ The Digital Content Directive would have applied to all other digital content or digital services, while the Sale of Goods Directive would have had to apply to those goods, including the embedded digital content or digital service. The EP utilised the notion of ‘embedded digital content’ which was broadly defined as any digital content pre-installed in a good.112 The definition covered both digital content supplied on a tangible medium and ‘smart goods’ or any other goods including software. As regards the so-defined ‘embedded digital content’, the EP wanted to apply the Digital Content Directive rules to the digital content or digital service and the Sale of Goods Directive rules to the goods themselves.113 The Council opted, in its General Approach on the Digital Content Directive, for an application of the sales rules to both goods and ‘embedded digital content’ while the Digital Content Directive should apply to other digital content or digital services. The notion of ‘embedded digital content’ covered digital content, either pre-installed or subsequently installed, which is necessary for the good to operate or perform its main functions.114 On the basis of work by the Commission during the course of 2018, which was fed into the legislative process in Council, a regime for goods with digital elements was elaborated in the Sale of Goods Directive. In the Council General Approach on the Sale of Goods Directive, a distinction, based on the notion of ‘goods with digital elements’, appeared, which was subsequently taken over also in the Digital Content Directive.115 This distinction and the definition ‘goods with digital elements’ corresponded to the present Digital Content Directive and Sale of Goods Directive distinction and definitions. The EP ultimately agreed to this for both Directives. 76 Art. 2 No. 3 (and Art. 2 No. 5 SGD) defines goods with digital elements as those that incorporate or are interconnected with digital content or a digital service such that the absence of that digital content or digital service would prevent the goods from performing their functions. Recital 14 SGD provides examples of such goods with digital elements. Art. 3(3) excludes them from the scope of the Digital Content Directive if the digital elements are provided with the goods under the sales contract, while in a mirror image provision, the Sale of Goods Directive applies to them.116 In this context it is irrelevant whether the digital content or digital service is already installed at the time of the conclusion of the contract of sales or whether it is, according to the contract, installed only later.117 As it is sufficient that digital content is ‘interconnected’, it does not even have to be embedded in the goods sold but could for instance be incorporated in other goods.118 Recital 21 (and Recital 15 SGD) mentions examples. 77 In order for digital content or digital services incorporated in or interconnected with goods to be excluded from the Digital Content Directive (and included in the Sale of Goods Directive) scope, two cumulative conditions must be met. 78 The first, functional criterion qualifies goods as ‘goods with digital elements’ if the incorporated or interconnected digital content or digital service is necessary for the goods to perform their functions. While this functional criterion is mainly factual in nature, it

IMCO/JURI, Amendment 70. ibid., Amendments 18, 63, 82. 114 Council of the European Union (‘9901/17 ADD 1’), Art. 2 No. 12, n 14, Art. 3(3 a). 115 Council of the European Union (‘14951/18’), Recitals 11 b–d, Art. 2(e)(ii). 116 Art. 3(3) and Art. 2 No. 5(b) SGD. 117 Recital 21 DCD and Recital 14 SGD. 118 Kern, p. 47, mentions the example of apps to be installed on a smartphone to remote control the sold goods. 112

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indirectly has also a contractual dimension,119 as (contractual) market practices will have an influence on what would be regarded as the ‘functions’ of goods with digital elements. In addition, the second, contractual criterion stipulates that such digital elements are provided to the consumer under the same sales contract as the goods. In contrast to the approach of the Commission Proposal for a Digital Content Directive and the Council General Approach on the Digital Content Directive, the functional criterion is no longer restricted to the ‘main functions’120 but refers to all ‘functions’. In order to counterbalance this extension, the Council introduced the contractual criterion. The trader should only be liable if he commits to such liability not only as regards the goods, but also as regards the digital content or digital service, by selling the goods with the digital elements under the sales contract. If, however, one of these conditions is not fulfilled, the Digital Content Directive will apply to the supply of digital content or digital service and the Sale of Goods Directive to the goods. If the functional criterion of Art. 3(4) is not fulfilled, but the digital content or digital service is still part of the same contract as the goods, Art. 3(6) applies to that bundled contract. As a result, the Digital Content Directive would apply to the digital content or digital service and the Sale of Goods Directive to the goods. If the functional criterion of Art. 3(4) is fulfilled, but the digital content or digital service is not supplied under the sales contract concerning the goods, the Digital Content Directive applies to the separate contract for the supply of the digital content or digital service, while the Sale of Goods Directive applies to the sales contract on the goods. Recital 22 (and Recital 16 SGD) provides examples.121 Whether goods are offered under the sales contract with digital elements, is to be determined either by express provision in the contract or as result of an interpretation of the sales contract.122 When Recital 21 4th and 5th sentences (and Recital 15 2nd and 3rd sentences SGD) refer to the explicit requirement in the contract, this means that the contract can explicitly exclude the digital element.123 For instance, a computer can be expressly sold as not containing certain software. This is a question of the scope of the Directives and therefore does not have to comply with the form requirements of Art. 8(5)124 (or Art. 7(5) SGD).125 However, the transparency obligation126 of the Unfair Terms Directive127 still applies.128 It ensures that such an exclusion is ‘drafted in plain, intelligible language’ and provides for an interpretation most favourable to the consumer, in the event of doubt. The jurisprudence of the ECJ emphasises the fundamental importance of providing information before concluding a contract on the terms of the contract and the consequences of concluding it.129 According to the ECJ, the transparency requirement cannot be reduced to contract clauses merely being formally and grammatically intelligible. The 119

ria.

While Zöchling-Jud, 118 et seq. seems to assess this exclusively on the basis of the conformity crite-

cf. Kern, p. 44 et seq. See also the examples ibid., p. 48 et seq. 122 See Recital 21 DCD and Recital 15 SGD, which also contain an example for such an interpretation. 123 Sein/Spindler, 273. 124 → Art. 8 DCD, mn. 161 et seq. 125 Sein/Spindler, 275 seem to agree with this. 126 Art. 5 Unfair Terms Directive. 127 As to the applicability of the Unfair Terms Directive → Art. 7 DCD, mn. 16–17. 128 As to the transparency problems of wrap contracts cf. Momberg, 195 et seq. 129 This emphasis has been made in the Kásler (CJEU, C-26/13 Kásler EU:C:2014:282, para. 70) and RWE (CJEU, C-92/11 RWE Vertrieb EU:C:2013:180), para. 44) judgments. 120

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ECJ regards the obligation in a broader sense. In Kásler, the ECJ required that the relevant clause allow the consumer to evaluate the economic consequences on him which derive from it.130 This case law envisages a consumer who is aware of what he agrees to and in fact, makes a conscious decision to agree. The transparency obligation under the Unfair Terms Directive assists by requiring clarity and disclosure of content of any such exclusion. Recital 21 6th sentence (and Recital 15 4th sentence SGD) does not explicitly mention the term ‘interpretation’ because Art. 3(10) leaves matters of general contract law to the national law and Member States were reluctant to include an explicit reference to the national rules of contract interpretation in the Directives, thereby avoiding even the faintest impression that they could be harmonised. However, in order to achieve the same result, the Recital paraphrases it by mentioning elements to be taken into account in the interpretation from the perspective of the consumer as the contractual party. Both Directives contain the same rebuttable presumption, namely that in cases of doubt, the sales contract covers these digital elements.131 However, the fact that this presumption is rebuttable is likely in practice to be limited. Recital 15 last sentence SGD already clarifies that the existence of an End-User License Agreement between the consumer and the third-party supplier of the digital content or digital service is irrelevant. If one had evidence to rebut the presumption, in all likelihood one would reach already through the interpretation of the contract the result that the sales contract does not cover the digital elements. Art. 3(4) (and Art. 3(3) SGD) also provide in the contractual criterion that the digital elements ‘are provided with the goods under a sales132 contract concerning those goods’. If goods with digital elements are not sold to but leased by the consumer, the rental contract in question would be a bundled contract according to Art. 3(6). The Digital Content Directive would apply to the supply of the digital elements, while national rental law would apply to the leasing element. In the context of the sale of goods with digital elements, it is irrelevant whether the consumer has also concluded a license agreement with the third party which supplies the digital content.133 The latter point touches upon an important element in both Directives. Art. 3(4) DCD and Art. 3(3) SGD specifically mention that it does not matter whether the digital element is provided by the seller or a third party, i.e. the supplier of the digital content or digital service. In cases where a digital service or digital content, supplied over a longer period of time, is linked with goods which the seller sells to a consumer, the digital content or service will often be provided to the consumer by a party other than the seller. This will be the case even though that consumer does not have a direct contractual relationship with that party, other than under the provisions of a license agreement. It is the seller who has a contract with that party and the options open to the seller in relation to the digital content or digital services provided by this third party will depend upon the terms of that contract. The right of redress in Art. 18 SGD (and Art. 20 DCD 134), in-

CJEU, C-26/13 Kásler EU:C:2014:282, paras 70–75. Arts 3(4) 2nd sentence DCD, 3(3) 2nd sentence SGD. 132 Emphasis added by the author. 133 Recital 21 last sentence DCD and Recital 15 last sentence SGD. 134 → Art. 20 DCD. 130

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tended to assist the seller in this context, leaves a large margin of manoeuvre for the implementation to the national legislator.135 Placing liability on the seller for the performance of the supplier of the digital con- 88 tent or digital service is not an obvious result. Nevertheless, the legislator included the performance of the third party in the liability for non-conforming goods of the seller with respect to remedies. One reason for this decision was to simplify the remedy process for consumers. Having separate remedies under different Directives and against different persons can be hard to understand for a consumer who has bought goods containing the digital content from a single seller.136 In addition, the legislator drew a comparison with traditional goods. Imagine for instance contracts of sale where the seller has delegated a part of his performance to a subcontractor. There, it is the seller who is liable to the consumer. One can equally think of liability for complicated products, where the seller is also liable for defective parts which have been integrated into the final product. e) Supply of digital content and services against advertising. In cases where there is no 89 counter-performance in form of price or personal data provided, the time listening to or watching advertising, before having access to digital content or a digital service, may have commercial value for the trader. Recital 25 4th sentence explicitly clarifies that such a situation, where there is no contract with the trader, is not covered as counter-performance in the Digital Content Directive. Other comparable cases of consumer activities which could be of economic interest for the trader and therefore possibly constitute a form of counter-performance, like writing a positive review of the respective digital content or service or supporting the trader on social media, are not mentioned in Recital 25. They could however constitute data as counter-performance and therefore fall within the scope. While not strictly necessary since the topic is outside the harmonised scope, 90 Recital 25 5th sentence does expressly state that Member States remain free to extend the scope of the national implementation of the Digital Content Directive to such cases. If Member States make this or other extensions, there is a risk it may lead to divergent mandatory rules in the Digital Single Market. The case of advertising-based supply of digital content/services is the only example expressly mentioned in Art. 25 as an example of contract for the supply of digital content or digital services remaining outside the scope of the Digital Content Directive scope that the future Commission report on the review of the application of the Digital Content Directive137 should consider in the event of possible further harmonisation.

III. Sectoral exemptions Art. 3(5) contains a number of sectoral exemptions. The exemptions for healthcare, 91 gambling and financial services have already been excluded in the Consumer Rights Directive138 and in the Commission Proposal for a Digital Content Directive139. The legislator did not want to include them in the scope, since certain specificities in those sectors would have necessitated detailed regulation. The exemptions on open source soft135 This right of redress goes back to Art. 4 CSD; the reasons why the EU legislator refrains from regulating this in a more detailed manner are explained in Staudenmayer (‘EG-Richtlinie 1999/44/EG’), p. 42 et seq. 136 Sein/Spindler, 270 formulate this in a very easy way: ‘a smart good is still a good, even if smart’. 137 → Art. 25 DCD, mn. 12 et seq. 138 Art. 3(3)(b), (c) and (d) CRD. 139 Art. 3(5)(c)–(e) COM(2015) 634 final.

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ware, public performance and public sector information have more of a legal policy background. The exemptions on services and electronic communication services are undertaking necessary distinctions, picking up on the respective topics already excluded in the Commission Proposal for a Digital Content Directive140.

1. Services Whereas the Digital Content Directive seeks to regulate ‘digital services’ as defined by Art. 2 No. 2, other services are excluded from its scope according to Art. 3(5)(a). The Digital Content Directive is not intended to regulate professional services, even where they use digital tools to perform the service. Recital 27 mentions examples such as translation services, architectural services, legal services or other professional advice services. The element of human skills is in the forefront of these services,141 even where digital means are used by the trader in order to produce the output or to deliver or transmit it to the consumer. For example, the Digital Content Directive will not apply to the service provided by a translator, even if he produces the translation using a translation software and sends it through ‘Dropbox’, nor to the provision of legal advice provided by a lawyer and communicated in digital format and by digital means.142 93 Recital 27 also embodies a compromise in Council, where several Member States wanted to exclude all public services and notarial acts. The final result is that as a matter of principle, public services where they fulfil the relevant scope criteria as ‘contract’, ‘trader’ and ‘digital service’, are included143 independently of whether they are delivered by a public register or a public body. However, they can also fall, as Recital 27 clarifies, into the exemption of Art. 3(5)(a) if the digital means are only used for transmitting or communicating the service to the consumer. 92

2. Electronic communication services Art. 3(5)(b) excludes certain electronic communication services from the scope of the Digital Content Directive, The Commission Proposal for a Digital Content Directive had excluded all traditional electronic communication services from its scope. This exclusion was an expression of the overall approach not to interfere with areas regulated by sector-specific legislation. The legislator did not follow this approach, although it had the advantage of regulatory simplicity. The result is a rather complicated regime in the Digital Content Directive, which is composed of Art. 3(5)(b) containing an exception with two layers and specific provisions on bundled contracts in Art. 3(6)144. 95 The relevant provision of the Commission Proposal for a Digital Content Directive145 had excluded ‘electronic communication services’, referring to the respective definition in Art. 2(c) Framework Directive. As a result, traditional electronic communication services which operate with the conveyance of signals, such as telecommunications, broadcasting transmission, etc. were excluded. 96 In September 2016, the Commission proposed a Directive establishing a European Electronic Communications Code, which was adopted in 2018. The European Electronic Communications Code introduces a broader definition of ‘electronic communication 94

See Art. 3(5)(a) and (b), albeit with differences in substance and wording. Sein/Spindler, 265 et seq. stress that these are professional services which are performed personally by the trader as a human being. 142 For examples of what would be covered, ibid., 266. 143 See also ibid., 261 as regards the notion of trader. 144 Below → mn. 115 et seq. 145 Art. 3(5)(b) COM(2015) 634 final. 140

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services’.146It encompasses not only signal conveyance services, formerly excluded by the Commission Proposal for a Digital Content Directive, but also Internet access services and so-called ‘interpersonal communication services’. The latter includes all services which allow direct interpersonal and interactive exchange of information.147 These services are either number-based148or number-independent.149 The former use the public telephone network such as voice telephony and SMS. The latter are not connected to the public telephone network, such as web-based e-mail, Voice over IP and online messaging services. Some of these latter services are wide-spread in practice, for instance WhatsApp, Voice over IP services such as Skype-to-Skype calls between the Skype apps of tablets, and web-based e-mail. Most importantly, they would fall under the Digital Content Directive definition of ‘digital services’. The legislator did not want to follow the Commission approach by leaving the regulation of these services to telecommunications law, but decided that the Digital Content Directive should cover these widely used services. Therefore, Art. 3(5)(b) contains a carve-out from the exception. It excludes all three 97 above-mentioned categories of electronic communication services but includes numberindependent interpersonal communications services within the scope of the Digital Content Directive.150 A possible overlap might have arisen from the fact that Art. 105 EECC regulates the 98 consumer’s right to terminate in the event of changes to contractual conditions as well as remedies in case of discrepancies between the actual performance and the contractually agreed performance. The Digital Content Directive has similar provisions, namely Arts 19 and 14. During the legislative procedure for the Digital Content Directive and the European Electronic Communications Code, which ran partly in parallel, the legislator ensured consistency between the two Directives by excluding number-independent interpersonal communications services from Art. 105 EECC. The Commission Proposal for a Digital Content Directive had also included an 99 Art. 16 on early termination of long-term contracts; this provision remained in a modified form, undergoing various changes in the negotiated text until almost the adoption of the Digital Content Directive. Since number-independent interpersonal communications services would also be covered by this provision, the European Electronic Communications Code had excluded them from the scope of its provision on contract duration and termination.151 However, as with the Digital Content Directive negotiations, it was not possible to find agreement on Art. 16 and this provision was completely deleted from the text of the Digital Content Directive as ultimately adopted. The result is that this aspect of number-independent interpersonal communications services remains excluded from the scope of Art. 105 EECC without being covered by a respective provision of the Digital Content Directive.

Art. 2 No. 4 EECC. Art. 2 No. 5 EECC. 148 Art. 2 No. 6 EECC. 149 Art. 2 No. 7 EECC. 150 See also Recitals 28 and 19 last sentence. 151 Art. 105(1) and (3) EECC.

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3. Healthcare Art. 3(5)(c) excludes ‘healthcare’ as defined in Art. 3(a)152 Cross-Border Healthcare Directive153; this exemption is focused on the notion of services provided by a health professional. These services are already subject to EU and even detailed national regulation and are therefore excluded.154 101 Art. 3(5)(c) and Recital 29 read in connection with Art. 3(a) Cross-Border Healthcare Directive would exclude also health-related applications and software if they are medical devices and are prescribed or provided by a health professional. The definition of a ‘medical device’ in Art. 2 No. 1 of Regulation 2017/745155 covers among other things, software intended to be used for medical purposes. Recital 29 clarifies however, that health apps, which are available without prescription from a health professional, e.g.156 a smartphone app monitoring the heartrate or the distance or number of steps that the user walks per day, are covered by the Digital Content Directive. 100

4. Gambling Art. 3(5)(d) excludes ‘gambling services’. Compared to the Consumer Rights Directive and the Commission Proposal for a Digital Content Directive, the definition of gambling services was adapted taking over elements from the definition of gambling in Art. 3(14) of the 4th Anti-Money-Laundering Directive157. 103 The gambling exclusion covers games of chance, even if they include elements of skill. On the other hand, the Digital Content Directive will apply to digital games which are entirely or predominantly games of skill. 102

5. Financial services Art. 3(5)(e) also excludes financial services, referring to the relatively broad definition of the Distance Marketing of Financial Services Directive158. Recital 30 refers to ‘numerous rules on consumer protection’ in EU financial services law, when explaining the exclusion. However, the respective EU regime does not contain rules which are comparable to those of the Digital Content Directive. As with the Consumer Rights Directive, the legislator shied away from regulating an area with many specificities. 105 More specifically, Recital 23 last sentence explains that digital representations of value serve as a payment method and should not be considered digital content or a digital service according to the Digital Content Directive. 104

152 ‘Healthcare means health services provided by health professionals to patients to assess, maintain or restore their state of health, including the prescription, dispensation and provision of medicinal products and medical devices.’. 153 Directive 2011/24/EU of the European Parliament and of the Council of 9 March 2011 on the application of patients’ rights in cross-border healthcare (OJ L 88, 4.4.2011, p. 45). 154 See also Sein/Spindler, 266. 155 Regulation (EU) 2017/745 of the European Parliament and the Council of 5 April 2017 on medical devices (OJ L 117, 5.5.2017, p. 1), which repealed the Directives 93/42/EEC and 90/385/EEC mentioned in Recital 29. 156 For other examples see Sein/Spindler, 267. 157 Directive (EU) 2015/849 of the European Parliament and the Council of 5 April 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (OJ L 141, 5.6.2015, p. 73). 158 According to its Art. 2(b) ‘financial service means any service of a banking, credit, insurance, personal pension, investment or payment nature’.

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6. Free and open source software The exemption for free and open source software in Art. 3(5)(f) was a reaction to 106 amendments by the EP159 and was added relatively late in the legislative process. Recital 32 explains the underlying reasoning. A free and open source approach can contribute to research and innovation. The notion of free and open source software is not defined in either the Article or in 107 the definitions. By choosing this combined notion, the legislator sought to avoid going into details about the open source development methodology or the free software movement. In order to apply this notion, Recital 32 explains what the legislator had in mind with this term. ‘Open-source’ means that everybody can access and modify the sourcecode. The criterion of ‘free’ is not linked to the absence of paying a price, because this element is mentioned separately in Art. 3(5)(f) and Recital 32. It means that the software license permits the running of the program, making changes as well as redistributing copies and modified versions of the software. In addition to the notion of free and open source software and its contents, Art. 3(5) 108 restricts the exemption further. It only applies in cases where the consumer does not pay a price, i.e. when the digital content or digital service is provided against data.160 Finally, it is necessary that the personal data provided by the consumer are exclusively processed by the trader for the purpose of improving the security, compatibility or interoperability of that specific software. The underlying reasoning is that the development of free and open source software relies on the feedback, input and further improvements made by those other than the initial software developer. It should be possible that the personal data of the consumer can be used for improvements of certain key aspects of the software, i.e. its security, compatibility or interoperability. If, however, the personal data are used for purposes going beyond these limits, the exemption does not apply.

7. Public performance Art. 3(5)(g) excludes from the scope of the Digital Content Directive digital content 109 provided to a public audience as part of an artistic performance or event. The Article and Recital 31 mention the examples of digital cinematographic projections or audiovisual theatrical performances. However, Art. 3(5)(g) and Recital 31 also clarify that the supply of digital content by 110 signal transmission, such as digital television services, even where provided to a public audience, does fall within the scope of the Digital Content Directive. This clause was added in the Council as a result of calls from a couple of Member 111 States who wanted to avoid a situation in which specific artistic performances using digital means would be included in the scope.

8. Public sector information Art. 3(5)(h) is, together with Art. 3(5)(a) and Recital 27,161 part of the way in which 112 the Digital Content Directive regulates public services.

IMCO/JURI, Amendments 60, 61 and 86. Metzger, 579 confirms that in practice both categories exist. 161 Above → mn. 92–93. 159

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Directive 2003/98 on the re-use of public sector information162, recently replaced by the Open Data Directive163, permits the re-use of documents held by public sector bodies for commercial or non-commercial purposes. The documents are made available, where possible, through electronic means. Charges shall not exceed the cost of collection, production, reproduction and dissemination, together with a reasonable return on investment. 114 In view of the opinion of some Member States in the Council to exempt public services164 and since there was no real profit involved, other than covering costs and the reasonable return on investment, the legislator decided to include this exemption. 113

IV. Bundle contracts 1. Regime of bundle contracts Art. 3(6) deals with cases where in a single contract between the same trader and the same consumer not only digital content or a digital service is supplied but also goods are sold or other services are provided. Recital 33 provides the example of the provision of digital television and the purchase of electronic equipment, for instance a modem. 116 Therefore, this provision does not cover cases in which there are two separate contracts. It does not cover either the situation of a contract which is linked with, or ancillary to, another contract concluded with the same or another trader. For the latter contracts, a question might arise for instance as to the effect the termination of one contract because of a lack of conformity has on another contract.165 Recital 34 clarifies that these cases shall be regulated by national law which would also deal with the remedies to be exercised under each contract or the effect that the termination of one contract would have on the other contract. 117 For the cases of single contracts between the same trader and the same consumer where digital content or a digital service as well as goods or other services are supplied, the legislator considered two choices166 as how best to regulate them. 118 It could apply a ‘split approach’, where one set of rules applies to one element of the contract and another set of rules applies to the other element. The Commission Proposal for a Digital Content Directive167 (and the Commission Proposal for an Online Sales Directive168) followed this approach, based on the example in the CESL for mixed-purpose contracts169. The argument in favour of this approach is that it comes to the same result as though there are two separate contracts and therefore in practice it would ease the qualification burden on ascertaining whether there is one single contract or two separate contracts. This would create greater legal certainty.170 115

162 Directive (EU) 2003/98/EU of the European Parliament and the Council of 17 November 2003 on the re-use of public sector information (OJ L 345, 31.12.2003, p. 90). 163 Directive (EU) 2019/1024 of the European Parliament and of the Council of 20 June 2019 on open data and the re-use of public sector information (OJ L 172, 26.6.2019, p. 56). 164 Above → mn. 93. 165 For instance, Art. 15 CRD, Art. 15 Consumer Credit Directive or Art. 46 CESL contain rules on this topic. 166 Art. II.–1:107 DCFR combines to a certain extent both approaches. Some national laws also foresee the possibility of a third approach, i.e. to apply general contract law (see von Bar/Clive, Art. IV.A.–1:101 DCFR, note 16 and Art. IV.A.–1:101 DCFR, notes 12–18. 167 Art. 3(6) COM(2015) 634 final. 168 Art. 1(2) COM(2015) 635 final. 169 Art. 9(1) CESL. 170 The DCFR suggests that ‘the practical results should preferably not differ depending on whether the parties conclude one contract or two.’ See von Bar/Clive, notes on Art. II.–1:107 DCFR.

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It could also make the question as to which rules apply dependent on in which category the contract primarily falls or which is the predominant element.171 The main weakness of this approach is that it would have to apply rules which are not designed for the element of the contract which is not predominant.172 The legislator decided in the Digital Content Directive on the first option. While according to Art. 3(6) the Digital Content Directive only applies to the elements of supply of digital content or a digital service, Recital 33 4th sentence explains that the other elements are dealt with by Union law where they are harmonised (for instance under the Sale of Goods Directive), or by the applicable national law (for instance if it is a rental contract). However, in the Sale of Goods Directive the legislator decided not to follow the ‘split approach’ of the Commission Proposal for an Online Sales Directive and in Recital 17 last sentence SGD, it left to Member States the freedom to classify a contract including elements of both sale of goods and provision of services as sales contract. This was included on the insistence of Member States which follow the CISG model, mainly the Nordic countries. For bundled contracts which contain elements of supply of digital content or a digital service and elements of sale, Member States must in any event follow the approach of Art. 3(6). In the interest of consistency, it would be advisable to do the same for other bundled contracts with elements of both sale of goods and provision of services. If the consumer terminates the contract with regard to the element of supply of digital content or digital service in accordance with Art. 13 for failure to supply, Art. 14 in case of lack of conformity or Art. 19 in cases of modification, the consequences of termination in those cases will be regulated by Art. 16 to the extent they concern the supply of the digital content or digital service. Art. 3(6) 3rd subpara. clarifies that when the contract is terminated with regard to one of the bundle elements, national law will determine the consequences for the remaining elements. This could concern for instance the question whether the contract should be considered terminated as a whole or continue to apply to the remaining elements of the bundle. This provision applies both ways. In other words, it applies to the effect of termination of the supply of digital content or digital service on the other element as well as to the termination of the other element on the supply of digital content or digital service. Recital 35 was introduced as a reaction to an EP amendment which had suggested to add another clause to the Annex of the Unfair Terms Directive the effect of which would have been that clauses bundling elements in a contract would be an example of an unfair clause.173 The Recital explains that under the Unfair Commercial Practices Directive a bundling clause would not in itself be treated as unfair and therefore prohibited but could amount to such on a case-by-case basis.

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2. Relationship with the European Electronic Communications Code The Digital Content Directive does not leave the relationship with the European Elec- 124 tronic Communications Code to the general provision of its Art. 3(7)174, but contains specific provisions on the interplay between these two Directives. As the legislator de171 See for instance Art. 3(2) CISG and the DCFR [Art. II.–I:107(3)(b)]. Cf. also in a different scenario in relation to the Consumer Sales Directive the ECJ in C-247/16 Schottelius EU:C:2017:638, para. 44. 172 For this reason, the DCFR considered this approach as ‘unacceptable’, see von Bar/Clive, notes on Art. II.–1:107 DCFR; however see also Art. II.– I:107(2) 2nd sentence DCFR. For the CISG, cf. the comments by Schwenzer and Hachem in: Schlechtriem/Schwenzer, Art. 3 CISG, mn. 17. 173 IMCO/JURI, Amendment 121. 174 Below → mn. 129 et seq.

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cided to include number-independent interpersonal communications services into the scope of the Digital Content Directive,175 it had to ensure consistency between the Digital Content Directive and the European Electronic Communications Code.176 125 Recital 33 6th and 7th sentences explain that the European Electronic Communications Code alone applies to all elements of bundle contracts (as defined by its Recital 283 2nd sentence177), where a trader offers digital content or a digital service in combination with a number-based interpersonal communications service or an Internet access service. In order to avoid an overlap with Art. 19 on the modification of digital content178, Art. 3(6) 2nd subpara. stipulates that Art. 19 does not apply to such bundle contracts. 126 As a result, Art. 107(1) EECC determines the relevant provisions that apply to all elements of the bundle, including the digital content or digital service elements. This includes Art. 105(4) EECC on the consumer’s right to terminate the contract in the event of changes to the contractual conditions, which will apply to the digital content or digital service element of the bundle rather than Art. 19 DCD. In addition, a number of provisions of the European Electronic Communications Code, which have no corresponding provision in the Digital Content Directive, will also apply.179 127 Art. 3(6) 3rd subpara., leaving the effect of termination of one element of a bundle contract on the other elements of the bundle contract to national law,180 carves out Art. 107(2) EECC. The latter provides that where a consumer terminates an element of the bundle due to lack of conformity with the contract or a failure to supply, the right to terminate the contract is also extended to the other elements of the bundle. For bundle contracts where a trader offers digital content or a digital service in combination with a number-based interpersonal communications service or an internet access service, this is an exception to Art. 3(6) which otherwise leaves Member States free to regulate this.

V. Delimitations of the scope 128

Art. 3(7)–(10) contain a number of delimitations of the scope of the Directive. These fall into two categories. The first determines the relationship with other areas of EU law, the second with national contract law. Above → mn. 97. See Recital 33 6th sentence. 177 Which contains a slightly wider definition of a bundle contract, i.e. ‘a bundle should be considered to exist in situations where the elements of the bundle are provided or sold by the same provider under the same or a closely related or linked contract’. 178 See → Art. 19 DCD. 179 Art. 102(3) on the provision of a contract summary to the consumer, Art. 103(1) on information requirements, Art. 105(1) on the initial contractual commitment period not exceeding 24 months, Art. 105(3) on the right to terminate at any time at no cost after automatic prolongation of the contract, 105(6) on a lack of compensation due when the consumer terminates the bundle contract before the end of the agreed contract period pursuant to the EECC or other provisions of Union or national law, Art. 106(1) on switching between providers. There is no conflict with the Digital Content Directive and Art. 105(5) on significant continued or frequently recurring discrepancy between the actual performance and the performance indicated in the contract which also applies. In such cases, Art. 105(5) refers to the remedies available to the consumer in accordance with national law, i.e. the national implementation rules of the Digital Content Directive. The Digital Content Directive lays down detailed conformity requirements which cover the ‘significant continued or frequently recurring discrepancy’ of the performance. Failure to meet these requirements under the Digital Content Directive triggers the Digital Content Directive remedies for lack of conformity. See also Recital 283 EECC which clarifies that: ‘Other contractual issues, such as the remedies applicable in the event of non-conformity with the contract, should be governed by the rules applicable to the respective element of the bundle, for instance by the rules of contracts for the sales of goods or for the supply of digital content’. 180 Above → mn. 122. 175

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1. Delimitations in relation to other areas of EU law a) General principle. The most general of the delimitation rules can be found in Art. 3(7). In case of a conflict, this provision gives precedence to other EU secondary legislation regulating a specific sector or subject matter over the Digital Content Directive. It had been included in the Commission Proposal for a Digital Content Directive181 and has its origin in Art. 3() 2 Consumer Rights Directive. The emphasis of this provision is on the term ‘conflicts’. Art. 3(7) only applies in case of ‘conflict’ between a Digital Content Directive provision and a rule of another EU act. Where the legislator saw such conflict, for instance between Art. 19 and the Art. 105(4) EECC, the legislator solved it, i.e. in Art. 3(6) 2nd subpara.182. Despite the fact that Recital 36 mentions ‘telecommunications’ as a specific sector, the legislator has addressed the issue and a recourse to Art. 3(7) does not appear necessary. Another example mentioned in Recital 36 as a specific sector is ‘e-commerce’. It is possible to imagine cases where both the Digital Content Directive and the E-Commerce Directive apply at the same time, for instance in the context of ‘hosting’ activities covered by Art. 14 E-Commerce Directive, i.e. an information society service that consists of the storage of information provided by a recipient of the service, which could also be a digital service according to Art. 2 No. 2(a). Concretely, this means that relevant provision of the E-Commerce Directive would apply. For instance, under the E-Commerce Directive information must be given according to its Arts 5 and 10 and the principles for the placing of the order under its Art. 11 must be followed. It is however more difficult to find a situation of conflict between both Directives. While the Digital Content Directive regulates contractual liability of the supplier to the consumer for lack of conformity, the hosting privilege of Art. 14(1) the E-Commerce Directive typically (although not necessarily exclusively) concerns [in the light of the conditions mentioned in letters (a) and (b)] non-contractual liability of the hosting service provider vis-à-vis third parties. If, however, there were cases where a conflict might exist, Art. 3(7) would apply. Therefore Art. 3(7) functions as a catch-all clause, in the event of a conflict which the legislator has not already solved. While the comparison with the Consumer Rights Directive shows that the reference to ‘subject matter’ is not indispensable, the Commission Proposal for a Digital Content Directive added it to clarify the word ‘sector’. The adjective ‘specific’ applies to both ‘sector’ and ‘subject matter’. b) Relationship with the Consumer Rights Directive. Another example mentioned in Recital 36 is ‘consumer protection’, which raises the case of the Consumer Rights Directive.183 It is an open question whether the Consumer Rights Directive is as a Union act which strictly speaking governs ‘a specific sector or subject matter’, since the Consumer Rights Directive applies to all contracts concluded between a trader and a consumer184. It is clear, in any event, that the Consumer Rights Directive, which also covers digital content and digital services,185 applies in parallel to the Digital Content Directive. Recitals 20 and 42 acknowledge for specific cases that the right of withdrawal and the pre-contractual information obligations contained in the Consumer Rights Directive apply.

Art. 3(7) COM(2015) 634 final. Above → mn. 124 et seq. 183 As to the applicability of the Unfair Terms Directive→ Art. 7 DCD, mn. 16–17. 184 Art. 3(1), above → mn. 7 et seq. 185 cf. Recital 19 CRD. The Consumer Rights Directive refers now to the respective Digital Content Directive definitions. See Art. 4(1)(d) and (e) and Recital 30 1st sentence Modernisation Directive. 181

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In addition, the Consumer Rights Directive is another example, where the legislator identified a conflict for digital content supplied on a tangible medium, i.e. between Arts 5 and 13 on the one hand and Arts 17(1), 18 and 20 CRD on the other hand. It resolved the issue under Art. 3(3)186. The Consumer Rights Directive treats digital content supplied on a tangible medium as ‘goods’ (see Recital 19 CRD). The penultimate sentence of Recital 20 also confirms that the Consumer Rights Directive provisions on ‘for example…the nature of the contract under which these goods are supplied should also continue to apply to any such tangible media and the digital content supplied on it’. c) Data protection law. A delimitation provision which raised much discussion in the legislative process is Art. 3(8). It is based on a much simpler worded provision in the Commission Proposal for a Digital Content Directive.187 The wording of Art. 3(8) and the respective Recitals with their very strong (one might even say exaggerated) emphasis on clarifying that the GDPR still applies, is a result of the controversy over the inclusion of data as counter-performance188 under the scope of the Digital Content Directive. Art. 3(8) states firstly that the GDPR applies to processing of personal data and secondly, that in case of conflict between the Digital Content Directive and the GDPR, the latter prevails. The first subparagraph of Art. 3(8) and Recital 37 2nd–4th sentences basically provide that the GDPR regulates processing of personal data and that it applies in parallel to the Digital Content Directive. The Digital Content Directive and the GDPR regulate, and apply in parallel to, two different aspects of the same real-life situation, i.e. when personal data is given as counter-performance for digital content or digital services. The Digital Content Directive establishes the contractual rights and obligations of the contractual parties, while the GDPR contains the rights and obligations of the data subject and the controller/processor as regards the processing of this personal data. Concretely, this means that the same natural person would have in his capacity as consumer the contractual rights stemming from the Digital Content Directive and, in his capacity as data subject, the rights laid down in the GDPR. The latter include inter alia the right to receive information on the collected data, the right to access collected personal data, the right to obtain from the data controller the rectification of inaccurate personal data, the right ‘to be forgotten' (i.e. to have personal data erased) and the right to data portability. The legislator was concerned that the fact that data are given as counter-performance under the contract of supply of digital content or digital services could be construed as an additional legal base for processing data or would otherwise permit deviation from the GDPR rules. For this reason, the legislator inserted the second subparagraph of Art. 3 and respective explanations in Recitals 24, 37–40. This clarifies that the lawfulness of processing personal data is exclusively dealt with by GDPR. Hence, any trader who processes personal data in the context of a contract for the supply of digital content or digital services needs to comply with its rules. It is also clarified that the list of legal bases in Art. 6(1) GDPR for processing personal data is exhaustive and that the Digital Content Directive does not add to, or interfere with, those legal grounds for lawfully processing data. Although the legislator’s concern is understandable (even if the response is slightly excessive), there is no ‘conflict’ between the Digital Content Directive and data protection law, where according to Art. 3(8) 2nd subpara. the latter would prevail. The real issue at stake is the lack of contract law rules dealing specifically with the consequences of Above → mn. 67 et seq. Art. 3(8) COM(2015) 634 final. 188 Above → mn. 46 et seq. 186 187

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the GDPR. Regulating rights and obligations of private persons in the data economy cannot be left to data protection law alone but must also be dealt with in private law.189 The impact on the contract for the supply of digital content and digital services of the withdrawal of consent explicitly not regulated by the Digital Content Directive190has been discussed above.191 Another example of a factor discussed during the legislative process but not regulated in the Directive is what happens to contracts falling within the scope of the Digital Content Directive, which are in infringement of the GDPR. On one hand, one could argue that such contracts are illegal and therefore void. On the other hand, the argument against invalidity is that in such cases the consumer would not have rights other than those derived from the GDPR and the trader who did not respect the GDPR would be in a better position that the trader who does respect it.192 A third example could be the question what happens if the consumer ‘undertakes’ the obligation to provide personal data but fails to do so. Given that contract law is a very flexible area of law, a ‘contract law 2.0’193 is probably unnecessary. Nevertheless, making some adaptations supporting the application of the GDPR with appropriate amendments to contract law rules could be a sensible approach. d) Copyright law. The final delimitation to other areas of EU law is mentioned in Art. 3(9) and the related Recitals 20 6th sentence and 36 2nd sentence. It was based on the Commission Proposal for a Digital Content Directive.194 Art. 3(9) basically states that all the rules of EU and national copyright law remain unaffected by and apply in parallel to the Digital Content Directive. The effect is that the distribution rights of a rightholder with respect to digital content and digital services, (e.g. in the streaming market) are regulated by copyright law. The implications of the exercise of those rights in terms of conformity and the resulting consumer remedies, are regulated by the Digital Content Directive.195 During the legislative procedure, the principle that the Digital Content Directive should be without prejudice to copyright law was not controversial. However, the EP did suggest a couple of amendments imposing an obligation on suppliers to inform consumers on copyright exceptions and authorised uses of the digital content, such as private copying, as well as related rules on conformity and prohibiting contractual terms preventing consumers from enjoying exceptions from copyright restrictions. 196 Ultimately these EP amendments were not taken over into the Digital Content Directive because the legislator wanted to leave matters related to copyright exceptions or limitations to copyright law rather than to the Digital Content Directive.

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2. Delimitations in relationship to national law The Digital Content Directive (and the Sale of Goods Directive) takes pains to clearly 147 describe what it does not regulate and is therefore left to national law or, in other instances, the extent of flexibility it leaves to implementation. A first manifestation of this is the sheer number of recitals: 82 in the Digital Content Directive (and 72 in the Sale of Goods Directive). This compares with a mere 26 recitals in the Consumer Sales DirecAckermann, 767 et seq. See Recital 40. 191 Above → mn. 64. 192 See the contribution by Hacker, ‘Regulating the Economic Impact of Data as Counter-Performance: From the Illegality Doctrine to the Unfair Contract Terms Directive’ in: Lohsse/Schulze/Staudenmayer. 193 cf. the contributions in: Lohsse/Schulze/Staudenmayer; Wendland, 196. 194 Recital 21. 195 → Art. 8 DCD, mn. 156, Art. 10 DCD. 196 IMCO/JURI, Amendments 36 and 121. 189

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tive, which itself at the time, also dealt with a new and significant area of European contract law. A high number of recitals in relation to a relatively modest number of normative provisions is a sign of a difficult legislative process, as there is a tendency to make concessions in the recitals to the minority interests in Council and EP to secure agreement. The provisions on the exemptions and the delimitations of the scope are other examples of this tendency. Art. 3(10) (the Sale of Goods Directive contains the same provision197) expresses this tendency in relationship to national general contract law.198 It states that issues of national general contract law are left to national law. This provision follows the model of Art. 3(5) CRD. Art. 3(10) includes a non-exhaustive list of examples, i.e. rules on the formation, validity, nullity or effects of contracts, including the consequences of termination to the extent not regulated by the Digital Content Directive. Examples for the latter include rules on the interest rate for delayed reimbursement or sanctions for breaches of the obligations under Art. 17(3) and (4). Art. 3(10) also mentions damages. The Commission Proposal for a Digital Content Directive had included provisions on damages199 which were already rather limited in terms of added value200. Only certain damages, i.e. concerning damage to the hardware and software of the consumer, were regulated, while immaterial damage was excluded. The harmonisation effect was very limited, since they only stipulated the principle of the supplier’s liability for damage caused by a lack of conformity with the contract or a failure to supply the digital content. The provisions left it to Member States to lay down the detailed conditions for the exercise of the right to damages. Their main added value was twofold. Firstly, the stipulation that the consumer shall be placed in a position as closely as possible to that he would have been in if the digital content had been supplied in conformity with the contract.201 Existing contractual practices, where the damage claims of the consumer are transformed into so-called service credits, which grant the consumer only discounts on prices for future supplies of the digital content as exclusive compensation for losses, would no longer have been possible.202 Secondly, many contracts exclude damage claims, especially for consequential damage or envisage a cap. Due to the mandatory nature203 of the right to damages, a complete exclusion would no longer have been possible. During the legislative procedure the EP proposed a similar approach.204 Nevertheless, these provisions were the first ones deleted by the Council. Recital 73 is a compromise in this respect. Member States can keep their rules on contractual damages and the principle of placing the consumer as closely as possible in the position he would have been in had the digital content or digital service been supplied in conformity, is explicitly mentioned. Recital 12 adds illegality of digital content or digital service to the examples of general contract law topics mentioned in Art. 3(10). What is illegal content, and the conseArt. 3(6) and Recital 18 SGD. An example for a Member State position can be seen in Kern, at p. 38, as regards the corresponding provision in the Sale of Goods Directive). While she considers this provision as unnecessary, she mentions that it was included to meet concerns from Member States that their liberty to regulate general contract law could be restricted. 199 Arts 2 No. 5 and 14 as well as Recitals 10 and 44 COM(2015) 634 final. 200 Compared to the considerably more detailed rules in Chapter 16 CESL. 201 Art. 14(1) 2nd sentence. 202 cf. Recital 44 COM(2015) 634 final. 203 See Art. 19 COM(2015) 634 final, now Art. 22 DCD. 204 IMCO/JURI, Amendments 56 and 113. 197

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quences of it for the contract for the supply of digital content or digital services, is regulated by national law. An example which is absent from both Art. 3(10) and the Recitals is a right to early termination of long-term contracts. This was initially included in the Commission Proposal for a Digital Content Directive205. At the very end of the legislative procedure, it was not retained in the Digital Content Directive, since Council and EP could not agree whether, and to what extent, the trader should have right for compensation. Art. 3(10) is complemented by a number of clarifications in the Recitals. Some of these are useful, since they give more precision to the scope, and therefore the blocking effect, of full harmonisation. For example, Recital 15 leaves the right of a contractual party to withhold performance to Member States, while Recital 14 does the same with the consequences of force majeure. The cumulative conditions of the latter are inspired by Art. 88(1) CESL. There are other clarifications concerning points which would not have been included as part of the scope anyway and are therefore superfluous, for instance Recital 12 last sentence, on non-contractual remedies and Recital 13 on liability claims against third parties. The Digital Content Directive does not contain a rule corresponding to Art. 3(7) SGD, excluding from the scope of the Sale of Goods Directive national rules on hidden defects and the short-time-right to reject. Instead of the rule in Art. 3(7) 1st sentence SGD, Recital 12 3rd sentence206 was introduced at a very late stage of the legislative process. It contains the same content, while interpreting Art. 3(10). It clarifies that the Digital Content Directive does not affect general contract law remedies for defects, which were not apparent at the time of the conclusion of the contract. It explicitly mentions that this concerns national provisions providing a special regime for hidden defects. Accordingly, Member States with legal systems based on the Code Napoléon tradition (like France and Belgium) can retain their general contract law remedies for ‘vices cachés’. Whether the notion of hidden defects and the relevant national remedies really fit or are easily applicable to distinctive nature of digital content or digital services, is debatable, but this would require an in-depth analysis of the respective national laws which is not the purpose of this commentary. In any event, the reference in Recital 12 was politically necessitated in order to obtain the required majority in Council. The exclusion in Art. 3(7) 2nd sentence SGD is not contained in Recital 12. The Member States having rights to reject in their national laws (UK, Ireland) did not insist because the respective national rules do not apply to digital content or digital services.

Article 4 Level of harmonisation Member States shall not maintain or introduce, in their national law, provisions diverging from those laid down in this Directive, including more, or less, stringent provisions to ensure a different level of consumer protection, unless otherwise provided for in this Directive. Bibliography: Bach, ‘Neue Richtlinien zum Verbrauchsgüterkauf und zu Verbraucherverträgen über digitale Inhalte’ (2019) 24 NJW 1705–1768; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on consumer rights’ COM(2008) 614 final; Commission, ‘Proposal for a Regulation of 205 206

Art. 16 COM(2015) 634 final, see Staudenmayer (2016), 825. The Sale of Goods Directive includes the same in the fifth sentence of its Recital 18.

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the European Parliament and of the Council on a Common European Sales Law’ COM(2011) 635 final; IMCO, ‘Comparative Study on the Transposition of EC Law in the Member States (June 2007); Loos, ‘Full harmonisation as a regulatory concept and its consequences for the national legal orders. The example of the Consumer rights directive’ (2010) 3 Centre for the Study of European Contract Law Working Paper 1– 34; Staudenmayer, ‘The Directives on Digital Contracts – First steps towards the Private Law of the Digital Economy’ (2020) 2 ERPL 219–250; Zöchling-Jud, ‘Das neue Europäische Gewährleistungsrecht für den Warenhandel’ (2019) 3 GPR 115–133. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Full harmonisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Aims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Exceptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 4 10 11

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Art. 4 stipulates the degree of harmonisation as full harmonisation. It thereby restricts the Member States’ scope in implementing the Directive, in particular in that neither more nor less stringent provisions with regard to the level of consumer protection are permitted.

B. Context Art. 288 TFEU provides the legal framework for the transposition of directives into the law of the Member States: a directive is binding on the Member States as to the result to be achieved, but leaves the choice of form and methods to the respective national authorities. Within this framework, most directives on consumer protection were limited to the objective of establishing a minimum standard of consumer protection for certain matters (‘minimum harmonisation’; e.g. the Consumer Sales Directive). When transposing such ‘minimum harmonisation’ directives, Member States are free to maintain or introduce a higher level of consumer protection (e.g. to provide consumers with longer periods to exercise their rights afforded by the directive). However, over recent years one can observe an increase in the number of directives that prescribe a certain level of consumer protection which Member States may neither exceed nor fall short of (‘full harmonisation’).1 A significant example of this is the Consumer Rights Directive, which replaced two earlier minimum harmonisation directives, the Doorstep Selling and Distance Selling Directives, with fully harmonised provisions. 3 However, the European Commission’s earlier attempts to fully harmonise the law on consumer sales guarantees (in particular the conformity with the contract and remedies) both as part of the Consumer Rights Directive2 and through a Regulation on a Common European Sales Law3, ultimately failed. Nonetheless, the trend towards full harmonisation has now also reached these areas of contract law: the Sale of Goods Directive replaces and fully harmonises the provisions on conformity and remedies under the Consumer Sales Directive.4 At the same time, Art. 4 also provides for full harmonisa2

Loos, 7 et seq.; Staudenmayer, 220 et seq. COM(2008) 614 final. 3 COM(2011) 635 final; see Introduction → mn. 12. 4 Art. 4 SGD. 1

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tion for consumer contracts for digital content or digital services within the scope of the Digital Content Directive, including the provisions on conformity and remedies (Arts 6 et seq., 13 et seq.).

C. Explanation I. Full harmonisation At the heart of Art. 4 is the prohibition on Member States to maintain or introduce in their national law provisions diverging from the provisions of the Digital Content Directive. Art. 4 thus expresses the decision of the European legislator to favour full harmonisation of the standards and rights within the scope of the Directive. The recitals of the Directive underline the choice of this level of harmonisation, explicitly using the phrase ‘fully harmonised’.5 This obligation of full harmonisation covers all aspects that, according to Art. 3 and in consideration of Art. 1, fall within the Directive's scope of application, unless provided otherwise.6 As minimum harmonisation, full harmonisation prevents Member States from adopting or maintaining provisions which are less favourable to the consumer than the provisions of the directive. However, in contrast to minimum harmonisation, no deviations in favour of the consumer are allowed. The Digital Content Directive thus aims at a uniform level of consumer protection for the matters regulated in all Member States (as expressed e.g. in Recital 11 with the wording: ‘[t]he Directive should lay down common rules…’). This level of consumer protection should be high (as Recitals 2 and 3 underline with reference to Art. 169 TFEU). The phrase 'high level of consumer protection' may justify a political assessment (although this is not legally binding) that the level of protection via the Directive should be higher than the average of the current level of consumer protection in the Member States, but does not have to reach the highest level that exists in any of the Member States.7 If, therefore, Member State law contains legislative provisions which protect the consumer more than those provided for in the corresponding directive, the Member State must amend its law in this respect in the same way as a Member State with a lower level of consumer protection than that provided for in the directive. The Member States must ensure that their law is consistent with the substance of the provisions of the directive, taking into account the purpose of those provisions, without deviations. This does not only concern the substantive law of the Member States. On the contrary, procedural rules must not lead to the provisions of the directive being circumvented or watered down.8 In particular, Member States are precluded from providing for any further formal or substantive requirements concerning consumer rights within the scope of the directive.9 The decisive factor is that the laws of the Member States are consistent with the content of the directive. However, according to Art. 288 TFEU, the Member States are free to choose the form and means by which they achieve this substantive conformity. The Member States are therefore not obliged, for example, to adopt the wording of the indiIn particular Recitals 9 and 11. Below → mn. 11–12. 7 Critical, Loos, 3–5. 8 Pursuant to the ‘principle of effectiveness’, see CJEU, C-33/76 Rewe-Zentralfinanz EU:C:1976:188; C-45/75 Comet EU:C:1976:191. 9 As expressed in Recital 11. 5

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vidual provisions of the directive. Rather, they may express the content of the directive in the concepts and terminology of their national law, provided that this does not lead to factual deviations from the provisions of the directive. Member States are also not precluded from choosing a different structure for the provisions than the directive. They can decide whether to transpose the directive by means of a specific piece of individual legislation or to incorporate the provisions for transposition into a code together with other matters (be it a civil code, consumer code or a commercial code). Member States are also free to integrate the provisions of the directive into the system of such a code. The decisive factor is always the actual conformity with the directive. If there are several possibilities of interpreting the national provisions, at least one of them must lead to an interpretation in conformity with the directive.10 8 Provisions deviating from a directive may not be maintained or introduced in the laws of the Member States. The implementation of a directive therefore concerns both past and future legislation of the Member States. When transposing a directive, Member States must examine whether their existing law differs from the provisions of the directive. If this is the case, they must repeal these provisions or amend them in such a way that they are compatible with the directive. However, separate legislation to repeal earlier conflicting provisions is not necessary if, in order to transpose the directive, new provisions are adopted in accordance with the directive and, under the law of the Member State, these provisions repeal the conflicting earlier provisions on the basis of the principle of lex posterior derogat legi priori. For the period after the adoption of the transposition provisions, the national legislator remains obliged by Art. 4 to continue not to create provisions deviating from the Directive. 9 According to the wording of Art. 4, Member States may not maintain or introduce any divergent provisions ‘in their national law’. In this respect, national law is the whole body of the law of the Member State. If in a Member State the competence to legislate lies partly with institutions which are not competent for the entire territory of the Member State (such as ‘autonomous regions’), Art. 4 also applies to such institutions within the Member State.11 Even though the wording of Art. 4 may not be entirely clear in this respect, this is already apparent from the wording of Art. 288 TFEU, which refers to the ‘national authorities’ as a whole.

II. Aims 10

The European legislator considers full harmonisation through the Digital Content Directive to be necessary, particularly with regard to the smooth functioning of the internal market and the guarantee of a high level of consumer protection.12 Its justification refers to advantages for both traders and consumers: fully harmonised rules for some essential elements of consumer contract law would make it easier for businesses to offer their products in other Member States.13 Businesses, especially SMEs, would be

10 e.g. the decisions of the CJEU in C-14/83 Von Colson EU:C:1984:153, para. 26; C-106/89 Marleasing EU:C:1990:395, para. 8; C-91/92 Faccini Dori EU:C:1994:292, para. 26; C-101/01 Lindqvist EU:C:2003:596, para. 87; C-397/01 Pfeiffer EU:C:2004:584, para. 119. C-119/05 Lucchini EU:C:2007:434, para. 60; C‑282/10 Dominguez EU:C:2012:33, para. 27. 11 For an overview see IMCO, available online under www.europarl.europa.eu/RegData/etudes/etudes/j oin/2007/378294/IPOL-JURI_ET(2007)378294_EN.pdf (accessed 21 January 2020). 12 See Recitals 1 et seq.; see → Art. 1 DCD, mn. 6 et seq. 13 Recital 11. See also Staudenmayer, 222; critical Loos, 4.

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spared transaction costs if they did not have to take account of different national laws.14 For consumers, a high level of consumer protection in the supply of digital content or digital services would be guaranteed throughout the EU, in particular through clear mandatory rights when they receive or access digital content or digital services from anywhere in the EU.15 Consumers would also benefit from the welfare gains resulting from facilitating cross-border transactions.16 From the point of view of the European legislator, these advantages seem to outweigh the disadvantages for consumers in individual Member States resulting from the fact that full harmonisation excludes the more favourable rules in their country (without the recitals specifically referring to this).

III. Exceptions The general rule on full harmonisation in Art. 4 is limited by the reservation ‘unless 11 otherwise provided in this Directive’. The only such exception foreseen in the Directive concerns the important question of the guarantee period for which Art. 11(2) 2 nd subpara. provides a two-year minimum period.17 Compared to the Sale of Goods Directive, Art. 4 of which contains the same clause, the Digital Content Directive thus deviates less from the principle of full harmonisation. In particular, it does not limit full harmonisation with regard to the duration of the reversal of the burden of proof for the existence of a defect at the time of transfer of risk (Art. 12(2) in contrast to Art. 11(2) SGD). Nor does the Digital Content Directive give the Member States the possibility to introduce an obligation to notify within a certain period of time in order to enable the consumer to exercise his rights concerning lack of conformity (in contrast to Art. 12 SGD). A particular restriction of full harmonisation in practice is, however, possible for the 12 Digital Content Directive with regard to the concept of ‘consumer’, without this being expressly provided for in any of the provisions of the Directive. For the definition of consumer, Art. 2 No. 6 is based on the fact that the consumer concludes a contract outside his trade, business, craft or profession. Neither Art. 2 nor any other provisions of the Directive expressly regulate the case where a person concludes a contract partly for such purposes and partly for commercial purposes (a so-called ‘dual use’ contract). Rather, Recital 17 deals with this situation.18 If the commercial purpose is not predominant in the overall context of the contract, Recital 17 states that in cases of ‘dual use’ Member States shall be free to determine whether and under what conditions a person shall also be considered a consumer.19 This is viewed as a limitation of the scope of the Directive.20 The Member States shall therefore be free to maintain corresponding rules because these fall outside the Directive’s scope of application. However, such a clarification of the limitation in the recitals could be problematic in view of the decision of the CJEU on the non-binding effects of recitals.21

14 See Recital 4 – on the difficulties for cross-border transactions which arise due to minimum harmonisation and Art. 6(2). 15 Recital 8. 16 Recital 11. 17 → Art. 11 DCD, mn. 20 et seq. 18 See → Art. 2 DCD, mn. 25 and more detailed → Art. 3 DCD, mn. 26. 19 For criticism see e.g. Bach, 1706; Zöchling-Jud, 116–117. 20 → Art. 3 DCD, mn. 23 et seq. 21 Especially in light of CJEU, C-162/97 Nilsson EU:C:1998:554, para. 54, in which the Court states that ‘the preamble to a Community act has no binding legal force and cannot be relied on as a ground for derogating from the actual provisions of the act in question.’.

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D. Transposition issues In addition to the issues already addressed above, full harmonisation requires particular attention when examining which situations should not be regulated by the Member States. If a provision of the Directive does not cover a particular situation, this does not necessarily mean that the Member States can regulate it as they wish. On the contrary, it must always be examined whether a situation which has not been regulated also falls within the scope of the directive and the principle of full harmonisation precludes the Member States from adopting a provision which goes beyond the directive or deviates from it. 14 The absence of a provision in the directive may therefore mean that a corresponding national provision to that effect is to be repealed. For example, the conditions of a right mentioned in the directive may constitute an exhaustive list. In such cases, the Member States may not create or maintain additional conditions through their legislation. Recital 11 clarifies this for the rights of the consumer arising from the provisions of the Directive on conformity, remedies and modification of the digital content or services: Member States are precluded within the scope of this Directive from providing for any further formal or substantive requirements. It may also be necessary to define the extent to which the consequences of a provision are fully covered by the Directive. For example, it follows from Recital 14 that the provisions of Art. 5 on the obligation of the trader to supply do not generally prevent Member States from regulating the consequences of failure to supply. However, Recital 14 states the additional condition that the failure to supply must be due to an impediment beyond the control of the trader, which the trader could not be expected to have avoided or overcome. Conversely, this suggests (despite the wording ‘for example’ in this Recital) that the Member States may not restrict the provision of Art. 5 by providing for an exemption of the trader from the obligation to perform if the trader was able to avoid or overcome the impediment to performance or is otherwise responsible for it.22 If one follows this view, full harmonisation would partly cover the regulation of the consequences of obstacles to performance and partly leave it to the law of the Member States. Such questions, which are of particular importance for implementation in the Member States, arise for a number of provisions and are discussed in the comments thereon.23 13

Article 5 Supply of the digital content or digital service 1. The trader shall supply the digital content or digital service to the consumer. Unless the parties have agreed otherwise, the trader shall supply the digital content or digital service without undue delay after the conclusion of the contract. 2. The trader shall have complied with the obligation to supply when: (a) the digital content or any means suitable for accessing or downloading the digital content is made available or accessible to the consumer, or to a physical or virtual facility chosen by the consumer for that purpose; (b) the digital service is made accessible to the consumer or to a physical or virtual facility chosen by the consumer for that purpose. → Art. 1 DCD, mn. 31–32 and → Art. 5 DCD, mn. 31 et seq. In the case of Art. 5, for example, there is also the question of whether the Directive only provides an obligation for the trader to supply as a corresponding right of the consumer is at least not explicitly mentioned either in Art. 5 or in Art. 13; for further details → Art. 5 DCD, mn. 30. 22

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Bibliography: Bach, ‘Neue Richtlinien zum Verbrauchsgüterkauf und zu Verbraucherverträgen über digitale Inhalte’ (2019) 24 NJW 1705–1711; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; Council of the European Union, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content (First reading) – General approach’ 9641/17 + ADD 1; Grünberger, ‘Verträge über digitale Güter’ (2018) 218 AcP 213–296; Metzger, ‘Verträge über digitale Inhalte und digitale Dienstleistungen: Neuer BGB-Vertragstypus oder punktuelle Reform?’ (2019) 12 JZ 577–586; Schulze (ed.), Common European Sales Law – Commentary (Nomos 2012); Schulze, ‘Supply of Digital Content – A New Challenge for European Contract Law’ in: De Franceschi (ed.), European Contract Law and the Digital Single Market (Intersentia 2016) 127–143; Schulze, ‘Die Digital-Richtlinie – Innovation und Kontinuität im europäischen Vertragsrecht’ (2019) 4 ZEuP 695–723; Schulze/Zoll, European Contract Law (2nd edn, Nomos 2018); Sein/Spindler, ‘The new Directive on Contracts for the Supply of Digital Content and Digital Services – Scope of Application and Trader’s Obligation to Supply – Part 1’ (2019) 3 ERCL 257–279; Spindler/Sein, ‘Die endgültige Richtlinie über Verträge über digitale Inhalte und Dienstleistungen’ (2019) 7 MMR 415–420; Staudenmayer, ‘The Directive on the Sale of Consumer Goods and Associated Guarantees – A Milestone in the European Consumer and Private Law’ (2000) 4 ERPL 547–564; Staudenmayer, ‘Digitale Verträge – Die Richtlinienvorschläge der Europäischen Kommission’ (2016) 4 ZEuP 801–831; Staudenmayer, ‘Auf dem Weg zum digitalen Privatrecht – Verträge über digitale Inhalte’ (2019) 35 NJW 2497–2501; Wendland, ‘Sonderprivatrecht für Digitale Güter’ (2019) 118 ZVglRWiss 191–203. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. European contract law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Comparative remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Obligation to supply digital content or digital service . . . . . . . . . . . . . . . . . . . . . . . . 1. Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Legal consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Due date of supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Compliance with the obligation to supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Digital content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Digital services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9 9 9 13 17 19 23 24 29

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Relationship to existing provisions in the Member States . . . . . . . . . . . . . . . . . . . . II. Possible model function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function Art. 5(1) 1st sentence places the trader under the obligation to supply the digital 1 content or digital service to the consumer. It serves to protect the consumer should the trader not supply the digital content or digital service (‘non-performance’ by the trader). In contrast, Arts 6 et seq. concern the required conformity of the supplied digital content or digital service with the contract and therefore these provisions protect the consumer from the trader’s ‘non-conforming’ performance. The obligation that the trader is to supply the digital content or digital service forms 2 the basis for the consumer’s rights in the event of non-performance. The trader is liable in such instances pursuant to Art. 11(1). Art. 13 affords the consumer the following remedies: according to Art. 13(1) the consumer call upon the trader to supply the digital content or digital service and may terminate the contract if the trader fails to do; or may terminate the contract immediately if the criteria under Art. 13(2) are satisfied. Art. 5(1) 2nd sentence supplements the 1st sentence as it determines the time at which 3 the trader is to supply the digital content or digital service (‘due date of supply’). It therefore concerns an aspect of performance of the trader’s obligation. The Digital Con-

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tent Directive regulates this aspect in the context of the obligation to supply under Art. 5(1) as the due date for supply forms a requirement for the trader’s liability under Art. 11 and for the consumer’s remedy under Art. 13. 4 Art. 5(2) contains criteria for the performance of the obligation to supply. The legislator has strived to set ‘simple and clear rules’1 in a general manner to encompass the various technical variants which in practice can serve the supply of digital content and to accommodate – as yet unknown – future technological developments. Furthermore, these criteria for the performance of the obligation to supply shine light on the notion of supply as they indicate various means by which the obligation can be performed.

B. Context I. European contract law The provisions on the obligation to supply the digital content or the digital service (Art. 5) and on the liability for breach of this obligation (Art. 11) are to be viewed in the context of two-pronged liability for breaches of contract in European contract law. This development was inspired by the structure of provisions on the seller’s obligations under the CISG to deliver the goods (Arts 30, 31 CISG) and to deliver goods conforming to the contract (Arts 35 et seq. CISG). It is against this background that the Consumer Sales Directive adopted the concept of conformity as the basis for its provisions on the trader’s obligations as the seller (Art. 2 CSD) and accordingly linking the consumer’s rights as the purchaser to the concept of conformity (Art. 3 CSD). 2 However, the provisions of the Consumer Sales Directive only concerned non-conforming performance, not non-performance. This gap in European consumer sales law was later closed by Art. 18 CRD which, in as far as the provision applies (Arts 3 and 17 CRD), obliges the trader to deliver the goods in accordance with the contract or, in the absence of an agreement on delivery, without undue delay. However, Art. 18 CRD does not stipulate in such express terms as Art. 5(1) DCD that the trader shall deliver the goods to the consumer. Furthermore, the proposed CESL intended to also include both aspects in its list of the seller’s main obligations (and thereby already expressly included digital content and used the term ‘supply’ in this context): to deliver the goods or to supply the digital content, and to ensure that the goods or digital content are in conformity with the contract (Art. 9(a) and (c) CESL).3 6 Although the proposed CESL has been withdrawn from the legislative process,4 the Digital Content Directive now follows this wider approach and provides the trader’s obligation to supply the digital content and the corresponding liability alongside the liability for non-conformity. In contrast to earlier directives, the Digital Content Directive thus contains a coherent system of performance obligations. It unites both elements of the performance obligation – the obligation to perform and the conformity of performance – and includes the legal consequences for the breach of each element [liability of the trader (Art. 11); burden of proof (Art. 12); remedy for the failure to supply (Art. 13); remedies for lack of conformity (Art. 14); exercise of the right of termination (Art. 15); obligations of the parties in the event of termination (Arts 16–18)]. 5

Recital 41. For details see e.g. Schulze/Zoll, p. 213 et seq.; Staudenmayer (2000), 547 et seq. 3 Schulze/Zoll, p. 216 et seq. 4 For more detail see Introduction → mn. 12. 1

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Furthermore, in contrast to the Consumer Sales Directive, the Digital Content Direc- 7 tive extends the trader’s obligations and liability to (digital) services. The Directive therefore broadens the two-pronged approach of contractual obligations and liability beyond sales law to other types of contracts and thereby outlines a possible model for general contract rules at European level.5

II. Comparative remarks The trader’s obligation to supply the digital content or the digital service corresponds 8 to the tradition in continental Europe whereby the obligor is, in principle, obliged to perform in natura and the obligee is afforded with the right to demand performance. In contrast, however, the Common law tradition does not afford the obligee with the right to claim performance, but rather views specific performance as an exceptional, equitable remedy and protects the obligee’s interests primarily through a claim to damages. The obligation to supply as per Art. 5 does not necessarily contradict the Common law tradition, however the extent to which a corresponding right to demand performance actually contradicts the Common law tradition depends on the interpretation of the Directive with regard to the degree the Member States are obliged to ensure judicial enforcement of the claim to supply.6

C. Explanation I. Obligation to supply digital content or digital service 1. Requirements The obligation under Art. 5(1) 1 st sentence to supply the digital content or digital ser- 9 vice requires a contract between the parties for the supply of digital content or a digital service; accordingly the obligation to supply does not arise when there is no contract between the parties (e.g. pursuant to the provisions on the conclusion of contract under the applicable national contract law, the incapacity of a party or disagreement (dissens) on the content excludes the effective conclusion of contract or the contract is void or voidable due to e.g. mistake or misrepresentation). The obligation to supply under Art. 5(1) 1st sentence requires further that the con- 10 tract is for digital content or a digital service pursuant to Art. 3. There is thus no obligation to supply on the basis of the Directive when a contract has been concluded, yet does not satisfy the requirements of Art. 3 and therefore does not fall within the scope of the Directive.7 For example, the performance of services by a translator, architect or lawyer will often not be a contract for the supply of a digital service falling within the scope of the Directive because the digital services does not form the main subject matter of the contract. This also applies if the trader uses digital forms or means to produce the output of such services (e.g. the building design or legal advice) or to deliver or transmit it to the consumer [Art. 3(5)(a)].8 In such instances the trader’s performance obligations do not arise from Art. 5 but from the national legal provisions on service contracts Schulze (2016), p. 143; Schulze/Zoll, p. 305. Below → mn. 20. 7 Recital 27. 8 → Art. 3 DCD, mn. 92; see also Recital 27. 5

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and/or from other provisions in EU law. In contrast, Art. 5 does extend to automated services (e.g. deepl.com or automated legal advice).9 11 The parties to the contract must always be a trader as the party obliged to supply the digital content or digital service and a consumer as the obligee. Trader is defined in Art. 2 No. 5 as every any natural or legal person […] acting for purposes relating to that person’s trade, business, craft, or profession, in relation to contracts covered by the Digital Content Directive.10 According to Art. 2 No. 6, the consumer is any natural person who, in relation to contracts covered by the Directive, is acting for purposes which are outside that person’s trade, business, craft, or profession.11 An obligation pursuant to Art. 5(1) 1st sentence therefore does not arise in contracts either between two traders or in contracts in which neither party is a trader (‘P2P-contracts’). However, the Member States may extend the protection afforded to consumers by the Directive also to natural or legal persons that are not consumers under Art. 2 No. 6, e.g. NGOs, start-ups or SMEs.12 12 Art. 5 does not apply when the trader is to deliver a tangible medium which serves exclusively as a carrier of digital content (e.g. a USB stick containing files, or a DVD containing a film). This restriction is set out in Art. 3(3) and modifies the underlying decision in this provision13 to apply the Digital Content Directive to tangible media.14 In such instances, Art. 18 CRD will apply instead of Art. 5 (and Art. 13).

2. Content The trader’s obligation under Art. 5(1) 1st sentence concerns the supply of digital content or a digital service. The term ‘digital content’ was used similarly in Art. 91 CESL.15 Recital 41 states that the obligation to supply is ‘the main contractual obligation’16. Supply represents a particularly regulated type of performance that is owed by one party within a contractual relationship, however it is not expressly defined in the Directive. The concept serves to cover, as broadly as possible, all types of transmission of digital content and digital services and all forms of access to such content and services. In this respect, it is ‘technology-neutral’ and shall remain sufficiently broad so as to include future technology. 14 The object of supply is always digital content or a digital service. Art. 2 No. 1 defines digital content as data which are produced and supplied in digital form. According to Art. 2 No. 2, the notion of digital service comprises a service that allows the consumer to create, process, store or access data in digital form, and a service that allows the consumer or other users to share or interact with data in digital form uploaded or created by the consumer or other users of the service. The obligation to supply under Art. 5(1) 1 st sentence may therefore refer to very diverse types of digital content and digital services, for example ‘computer programmes, applications, video files, audio files, music files, digital games, e-books or other e-publications, and also digital services which allow the creation of, processing of, accessing or storage of data in digital form, including software13

Spindler/Sein, 419. → Art. 2 DCD, mn. 21–22 and → Art. 3 DCD, mn. 11 et seq. 11 → Art. 2 DCD, mn. 23 et seq. and → Art. 3 DCD, mn. 23 et seq. 12 Recital 16. 13 See the corresponding provision in Art. 3(4)(a) SGD: ‘This Directive shall not apply to […] any tangible medium which serves exclusively as a carrier for digital content; […]’. 14 On the controversial aspects of this approach see Staudenmayer (2016), 810. 15 Zoll in: Schulze (2012), Art. 91 CESL, mn. 6. 16 See, however, the German version of the Digital Content Directive in which ‘main contractual obligation’ in Recital 41 is translated as ‘die wichtigste Vertragspflicht’ [‘the most important contractual obligation’ (emphasis added)]. 9

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as-a-service, such as video and audio sharing and other file hosting, word processing or games offered in the cloud computing environment and social media’17. The Directive does not regulate the details of how the content is to be supplied – this 15 depends in particular on the type of content or service to be supplied and the corresponding arrangement of the contractual obligations. However, the general criteria in Art. 5(2) allow for a distinction between several forms of supply which are covered by Art. 5. In particular, the recipient of the digital content can either be the consumer himself or a ‘physical or virtual facility’ offered by third party and chosen by the consumer (e.g. a cloud). This recipient can either directly receive the digital content or simply serve as a means which allows the consumer access to the content (e.g. an electronic platform). Furthermore, the digital content can be supplied for the purposes of Art. 5(2) if the trader makes the content ‘available’ to the consumer (such as by providing a download link to the content) or ‘accessible’ (e.g. through streaming).18 The provision concerns, however, only the trader’s obligations which refer to the sup- 16 ply of digital content or a digital service. In particular, it does not cover obligations which refer to other types of services.19 It also does not cover contractual obligations that do not refer to a performance obligation but rather to take account of the other party’s rights and interests, as provided as ‘protective obligations’ in the law of several Member States (such as in Germany in § 241(2) BGB).

3. Legal consequences Art. 5(1) 1st sentence contains the obligation for the trader to supply the digital con- 17 tent or digital service to the consumer. This obligation is linked to the trader’s liability under Art. 11 for any failure to supply in accordance with Art. 5 and to the provisions under Art. 13 on the remedy for the failure to supply. If Art. 13 entitles the consumer to terminate the contract, the consumer can exercise this right by means of a statement to the trader expressing the decision to terminate the contract (Art. 15). Arts 16 and 17 determine the respective rights and obligations of the parties in the event the consumer terminates the contract. Although Art. 5 places the trader under an obligation to supply, the provision does 18 not expressly state a right for the consumer to demand supply. However, it may be considered to view the claim to performance as a remedy for the consumer in the event of non-performance by the trader.20 According to this approach, the ‘call’ by the consumer to the trader to supply the digital content [Art. 13(1) 1 st sentence] is not only a precursor to termination but, furthermore, rather has its own significance as the assertion of a claim to (subsequent) performance in natura. This interpretation would correspond to the principles of most EU Member States with regard to the obligee’s rights to receive performance and thus also with the Directive’s objective to provide a high level of consumer protection. If one follows this approach, national law implementing the Directive will have to include a right for the consumer to claim performance.21 Rejecting this approach, however, gives rise to the question whether the full harmonisation underpinning the Digital Content Directive leaves any room (and, if so, to what extent) for judiciallyenforceable claims to performance in natura under national law.

Recital 19. Below → mn. 27. 19 Above → mn. 13. 20 Bach, 1706; Schulze (2019), 706–707. 21 On the admissibility of the transposition of the claim to performance as both a secondary and primary claim, see Bach, 1706. 17

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II. Due date of supply According to Art. 5(1) 2nd sentence, the point in time at which the trader is to supply the digital content or digital service is determined foremost by the agreement between the parties (‘primacy of agreement’), as apparent from the wording ‘unless the parties have agreed otherwise’. The principle of freedom of contract is therefore readily apparent. However, the extent of freedom of contract is limited by legislation (e.g. in the Unfair Terms Directive) where a significant and unjustifiable imbalance between the rights and obligations arises in a particular situation, e.g. when an agreement gives the trader the unrestricted freedom to determine the time of supply whereby the consumer must already perform his payment obligation. 20 To the extent the parties have not agreed otherwise, the trader shall supply the digital content or digital service without undue delay after the conclusion of the contract. The moment of the conclusion of contract depends on the provisions of the applicable national law on the conclusion of contract. In most cases the decisive aspect will be the moment a party accepts the offer made by the other party. Where digital content or digital services are concerned, without undue delay generally means the immediate supply because the supply in digital form typically does not require any additional time.22 The wording ‘undue delay’ only deviates minimally from the term ‘immediately’ in the Commission’s Proposal23, but enables more flexibility.24 21 Whether the trader has supplied the digital content or the digital service at the relevant point in time is determined pursuant to the criteria in Art. 5(2). If, according to these criteria, there has been no supply, the trader is liable pursuant to Art. 11 and the consumer may proceed as determined in Art. 13 (i.e. to terminate the contract either after the trader fails to supply after the consumer demands supply [Art. 13(1)] or to terminate the contract immediately if the criteria of Art. 13(2) are satisfied). 22 Although Art. 5(1) contains a rule concerning the time of performance it does not contain a rule on the timeframe of performance, i.e. the period in which the trader has to supply or make available the digital content or digital service (e.g. data made available for download).25 In principle, the agreement between the parties and the instrument of the consumer’s legitimate expectations will provide a basis for determining the timeframe for supply. If the performance is to rendered over a particular period of time, this period will determine the timeframe for performance. 19

III. Compliance with the obligation to supply 23

Art. 5(2) contains criteria to determine whether and when the trader has complied with the obligation to supply. The overarching aspect for the performance of the trader’s obligation is that the digital content or digital service must have reached the consumer’s sphere of influence and no further action is required by the trader in order for the consumer to use the digital content or digital service in accordance with the contract. 26 The decisive element is the availability or accessibility of the digital content or digital service to the consumer or to a physical or virtual facility (e.g. a cloud) chosen by the consumer for that purpose. The trader is no longer responsible once this has occurred and the digiRecital 61. Staudenmayer (2019), 2499. Art. 5(2) COM(2015) 634 final. 24 Sein/Spindler, 276–277. 25 Spindler/Sein, 419. 26 Recital 41; Staudenmayer (2019), 2499. 22

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tal content is in the consumer’s sphere of influence.27 However, despite the common basis, the provision distinguishes between digital content and digital services.

1. Digital content Art. 5(2)(a) provides, in different respects, two alternative forms of performance of the obligation to supply digital content. Firstly, the digital content can either be the direct object of supply or the supply refers to a ‘means’ that allows the consumer access to or to download the digital content. Where the first variant is concerned, the trader can, for example, install the software on the consumer’s computer. With respect to the second variant, the notion of ‘means’ is to be understood broadly in accordance with the principle of medium neutrality.28 For example, it comprises the use of social media or creating access to online portals where the digital content can be downloaded. Art. 5(2) does not prioritise the use of one variant over the other. This seems to afford the trader the choice between either method if the contract does not state otherwise or if one of the variants is not excluded or, under the circumstances, is not unreasonable in light of the purpose of the contract or the nature of the digital content. Secondly, the digital content or the ‘means’ for access or downloading can either be made available to the consumer (i.e. to their laptop or smartphone) or to a ‘physical or virtual facility’ chosen by the consumer (e.g. an electronic platform or a cloud). It may suffice in such instances for the trader to supply the digital content to this facility. The trader should not be liable for acts or omissions by the third-party operator of such facility.29 The trader will have therefore performed the obligation when the third party has received the digital content. The key requirement for this second method of performance of the supply obligation is, however, that the consumer has ‘chosen’ the physical or virtual facility for that purpose. The consumer can choose the facility for the purposes by making a corresponding declaration before, during or after the conclusion of contract. It can be made explicitly or implicitly. In any case, the choice of facility must be made by the consumer through a conscious and autonomous decision. Accordingly, the consumer will not have selected the facility where it has been offered by the trader as the only possibility to receive the digital content.30 Equally, one cannot assume that the consumer has chosen the facility when controlled by or contractually-linked to the trader31 (e.g. in an operator of platform offers apps which he certifies and controls himself32). In such instances, the trader will not have performed the supply obligation as long as the consumer has not made a conscious decision regarding the facility.33 Where the trader has supplied the digital content to a physical or virtual facility, curing the lack of a declaration by the consumer to select the facility appears only to be compatible with the provision where the trader has acted in a manner that does not serve to limit the consumer’s options. The burden of proving these requirements lies with the trader [see Art. 12(1)]. 34 Thirdly, Art. 5(2)(a) distinguishes between ‘is made available’ and ‘[is made] accessible’ as methods to supply the digital content. ‘Is made available’ concerns situations of permanent supply to the consumer. Similar to a sales contract, a degree of permanent Spindler/Sein, 419. Grünberger, 236–237; Wendland, 206 et seq. 29 See Recital 41; Metzger (with comments on the transposition into national law), 580. 30 Recital 41. 31 ibid. 32 Sein/Spindler, 277–278. 33 Recital 41; Spindler/Sein, 419. 34 Sein/Spindler, 278. 27 28

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control over the digital content is transferred to the consumer. 35 The trader can make the digital content available by, for example, sending the consumer a link allowing the digital content to be downloaded. In contrast, ‘is made accessible’ applies in situations in which the consumer does not receive a permanent right but rather access for a particular period of time, for instance via a streaming subscription (e.g. for software, music, films etc.). Unlike ‘is made available’, where the permanent nature allows for a sales contract analogy, making the digital content ‘accessible’ is better compared with a hire agreement due to the consumer’s temporary right of use. In this respect, the inclusion of this method of performance underlines the importance of a right of use (which has received little attention in European legislation) alongside sale and services (in a narrow sense) for European contract law.36 28 The compliance vis-à-vis the consumer or the physical or virtual facility chosen by the consumer for that purpose is the decisive aspect in all methods of supply of the digital content. According to the wording of Art. 5(2), it is not necessary that the trader personally undertakes the acts of supply; compliance by a third party is not excluded. In this latter case, the same standards for compliance applicable to the trader will also apply to the third party. The trader remains responsible for supply (except where the consumer has chosen a physical or virtual facility to receive the digital content37). Further clarification is necessary, however, with regard to whether, and to what extent, the full harmonisation approach prevents national law from adopting restrictions on performance by a third party.38

2. Digital services 29

According to Art. 5(2)(b), the trader can only fulfil the obligation to supply digital services by making the service accessible to the consumer or to a physical or virtual facility chosen by the consumer for that purpose. The aforementioned comments on these facilities and performance by a third party apply accordingly. 39 However, due to their nature, ‘making available’, i.e. the permanent transfer of the digital content, and the use of a ‘means’ to access or download the digital content, do not apply to digital services.

D. Transposition issues I. Relationship to existing provisions in the Member States 30

Transposing Art. 5 into the law of the Member States will require clarification and distinction between those aspects that are subject to full harmonisation and those which continue to remain subject to pure national law, i.e. where there is no underlying EU legislation. For example, the question whether and to what extent the Directive contains not only an obligation for the trader to supply but also a corresponding right for the consumer to demand supply.40 This question concerns both substantive as well as procedural law. Art. 21(1) obliges the Member States to ensure compliance with the Directive See also Wendland, 208, with reference to Council of the European Union, 24, n 52. Wendland, 206 et seq. 37 Above → mn. 25. 38 In this respect, Recital 13 offers little insight in stating that ‘Member States also remain free, for example, to regulate liability claims of a consumer against a third party’ though without going into further detail beyond this sole example. 39 Above → mn. 25. 40 Above → mn. 18. 35

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through adequate and effective means. This provision obliges the Member States to ensure that the consumer e.g. can judicially enforce a claim for reimbursement [Art. 16(1)] following termination of the contract (Art. 13). The approach of the continental-European legal tradition would suppose that the substantive obligation for the trader to supply the digital content or digital service corresponds with a subjective right of the consumer, thereby allowing the consumer to judicially enforce the supply of the digital content or service. It may be necessary for the CJEU to clarify whether the Member States are obliged to provide such a judicially-enforceable claim for performance of the obligation under Art. 5. Furthermore, one must bear in mind that several matters of pure national law are 31 closely intertwined with matters of national law that serve to implement EU legislation. In such circumstances, the features of national law in these areas may make it more difficult or even prevent fulfilment of the Directive’s objectives. This especially concerns the question of impediments to performance, such as impossibility. Art. 5 does not contain any rule whether the obligation to supply the digital content or digital service also exists when the supply was objectively (i.e. for anyone) or subjectively (i.e. for the obligor) impossible at the time the contract was concluded (initial impossibility) or has become impossible after the conclusion of contract (subsequent impossibility). The Directive also does not approach notions such as force majeure and their effects as impediments to performance of the obligation to supply and, beyond this, the trader’s liability under Art. 11. Recital 14 instead clarifies that the Member States are free to regulate such matters in national law to a considerable extent: Member States should have the possibility to determine the consequences when the failure to supply is due to an impediment beyond the control of the trader or where the trader could not be expected to have avoided or overcome the impediment or its consequences. Although this makes it clear that there is an exclusion of impediments to performance of the supply obligation (such as impossibility or force majeure) from the scope of the Directive, there is a lack of a precise definition with regard to the individual matters that remain in the national domain. Furthermore, it is not clear from the Directive whether Recital 14 implies that the Member States may not release the trader from his performance obligation if the failure to supply is due to an impediment within the control of the trader or where the trader could be expected to have avoided or overcome the impediment or its consequences.41 Similar remarks apply to the right for the parties to withhold performance until the 32 other party has performed their obligation. According to Recital 15, Member States should remain free to regulate this issue and gives the examples of withholding payment of the price until the digital content or digital service has been brought into conformity, and withholding reimbursement where the contract has been terminated. The general approach underpinning Recital 15 must, however, also apply accordingly to a right to withhold payment where the digital content or digital service has not been supplied (or supplied on time). The self-restraint exercised by the European legislator does, however, create prob- 33 lems with respect to the use of a ‘clear contractual framework’ to increase confidence in cross-border transactions and to lower transaction costs.42 Consequently, the obligation to supply under Art. 5 is subject to various internal market restrictions of differing types and scope, depending on the law of the Member State.43 The national law may, for example, adopt the concept of impossibility or notions such as force majeure, it may apply fault-based or objective criteria, it may allow or exclude an alteration to the contract → Art. 1 DCD, mn. 31–32, 37 and → Art. 4 DCD, mn. 14. Recitals 3 et seq. 43 See Schulze (2019), 708. 41

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where there is ‘an interference with the basis of the transaction’ (Störung der Geschäftsgrundlage), etc. In essence, the absence of harmonisation of the reasons for the exclusion of the performance and of the withheld performance leads factually to the – somewhat pointedly expressed – consequence that a trader is obliged to supply the digital content or digital service, except when national law states otherwise. The variety of reasons in national law which excuse non-performance by the trader can thus themselves be an impediment to achieving effective harmonisation. 34 One will ultimately only overcome this contradiction between the objective and the content when there is EU-wide harmonisation of all crucial aspects of the law surrounding non-performance and defective performance. As long as European legislation does not broaden the scope of harmonisation, case law and doctrine will only be able to determine the limits in those individual cases in which Member State law inappropriately excludes or excuses the trader’s performance to the effect that the protective purpose of the Directive is undermined or circumvented. The basis can be found not only in EU secondary law, namely Art. 21, but also in EU primary law, namely Art. 288 TFEU (‘A directive shall be binding, as to the result to be achieved’) as well as principles of EU law anchored in Art. 4(3) TEU (e.g. sincere cooperation). In this way, however, just extreme restrictions on the trader’s performance obligations, which exceed the existing impediments to performance under national law, will at best be avoided. 35 Furthermore, the relationship between the trader’s liability under Arts 5 and 11 to claims to damages under national law requires particular consideration. As a result of such liability, the consumer is entitled to terminate the contract (Art. 13). Under Member State law, the obligee may, however, seek damages alongside termination or in addition to termination if the obligor does not perform a contractual obligation. In contrast to the other obligees, the consumer in a contract for the supply of digital content or a digital service would be denied this possibility if one were to view Arts 5, 11 and 13 as an exhaustive rule in this respect. It is therefore with good reason that Recital 73 emphasises that the ‘principle of the liability of the trader for damages is an essential element of contracts for the supply of digital content or digital service’ and that this also concerns the claim to compensation where there is a failure to supply the digital content. The Recital clarifies that the Directive is without prejudice to national rules on the compensation of consumers which arises from a breach of the Directive’s provisions. 36 However, it appears questionable that the European legislation thus leaves the issue of damages entirely to the Member States and has not foreseen any harmonisation. Even the rudimentary provision on compensation for any economic damage to the digital environment of the consumer was removed during the legislative process.44 The absence of any harmonisation vis-à-vis damages is hardly compatible with both of the Directive’s objectives: a high level of consumer protection and a proper functioning of the internal market.45 A claim to damages is often more appropriate for the consumer than the termination of the contract for non-performance because comparable alternative digital services are often not available or available on time. A claim to damages also carries greater weight in ensuring that the other party performs in conformity with the contract. From the consumer’s perspective, it is therefore of considerable importance whether the compensation is, for example, linked to a fault and who bears the burden of proof. From the trader’s perspective, it must appear problematic (especially where cross-border transactions are concerned) that the damages, as the most serious potential burden in the case of non-performance (or defective performance), continue to remain difficult to cal44 45

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culate because of the lack of harmonisation. There is therefore the continued need for future European legislation to harmonise the law of damages in relation to the supply of digital content.

II. Possible model function The transposition of the provision into the law of the Member States will generally 37 have to consider that Art. 5 and the associated provisions in Art. 11 et seq. regulate the performance obligation and liability for non-performance not just for a specific type of contract (such as sale or hire). The implementing provisions will thus be on the level of general law rather than in the context of separate provisions for individual contract types. This is most likely to concern general contract law (or a part of the general law of obligations containing general rules for all types of contracts) in those Member States that have integrated consumer law into general civil law (as in e.g. Germany and the Netherlands). If consumer law is contained in a separate codification (as in e.g. France, Italy, Spain), the question will arise whether the Directive is to be transposed in a general part or separate chapter of the codification. Some thought will have to be given to the question of the extent to which the Direc- 38 tive’s rules on the performance obligation and the liability for non-performance are compatible with the existing general provisions in national law and the extent to which they can serve as a model for future developments in national law. Accordingly, the particular provisions serving to transpose Art. 5 can fit either as substantiating overarching principles or as exceptions in the national legal system. The Member States could thereby possibly consider an extension of Art. 5 in its transposed form to natural or legal persons which have similar needs for protection as a consumer.46 Moreover, the Member States could question whether the rules in Art. 5 on the obligation to supply, the time for supply and the criteria for complying with this obligation are suitable for application in the B2B or P2P context. In this case, the Directive’s provisions could serve as a model for corresponding rules in general contract law for the supply of digital content or digital services.

Article 6 Conformity of the digital content or digital service The trader shall supply to the consumer digital content or a digital service that meets the requirements set out in Articles 7, 8 and 9, where applicable, without prejudice to Article 10. Bibliography: Bach, ‘Neue Richtlinien zum Verbrauchsgüterkauf und zu Verbraucherverträgen über digitale Inhalte’ (2019) 24 NJW 1705–1711; von Bar/Clive (eds), Principles, Definitions and Model Rules of European Private Law – Draft Common Frame of Reference (DCFR) (Sellier 2009); Bundesrat, ‘Beschluss des Bundesrats: Vorschlag für eine Richtlinie des Europäischen Parlaments und des Rates über bestimmte vertragsrechtliche Aspekte der Bereitstellung digitaler Inhalte COM(2015 634 final’ BR-Drs. 168/16 of 22.4.2016; Colombi Ciacchi/van Schagen, ‘Conformity under the Draft Digital Content Directive: Regulatory Challenges and Gaps’ in: Schulze/Staudenmayer/Lohsse (eds), Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Nomos 2017), p. 99–125; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM (95) 520 final; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 46

e.g. NGOs, start-ups, SMEs; see Recital 16.

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final; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the online and other distance sales of goods’ COM(2015) 635 final; European Law Institute, Statement of the European Law Institute on the European Commission’s proposed Directive on the Supply of Digital Content to Consumers’ (2016); Faber, ‘Bereitstellung und Mangelbegriff ’ in: Stabentheiner/Wendehorst/Zöchling-Jud (eds), Das neue europäische Gewährleistungsrecht (Manz 2019), p. 63–110; Geiregat/Steennot, ‘Proposal for a Directive on Digital Content: Scope for Application and Liability for a Lack of Conformity’ in: Claeys/Terryn (eds), Digital Content & Distance Sales – New Developments at EU Level (Intersentia 2017), p. 99–166; Jansen/Zimmermann (eds), Commentaries of European Contract Laws (OUP 2018); Mak, ‘The new proposal for harmonised rules on certain aspects concerning contracts for the supply of digital content’ (European Parliament, Directorate General for Internal Policies, Policy Department C in-depth analysis, PE 536.494, 2016); Manko, ‘Contracts for the supply of digital content’ (2016), European Parliament, European Parliamentary Research Service, PE 582.048; McMeel/Grigoleit, ‘Interpretation of contracts’ in: Dannemann/Vogenauer (eds), The Common European Sales Law in Context (OUP 2013), p. 341–372; Metzger, ‘Verträge über digitale Inhalte und digitale Dienstleistungen: Neuer BGB – Vertragstypus oder punktuelle Reform’ (2019) 12 JZ 577–586; Morais Carvalho, ‘Sale of Goods and Supply of Digital Content and Digital Services – Overview of Directives 2019/770 and 2019/771’ (2019) 5 EuCML 194–201; Riem/Abold, ‘Mängelgewährleistungspflichten des Anbieters digitaler Inhalte’ (2018) 2 ZUM 82–91; Schlechtriem/Schwenzer (eds), Commentary on the UN Convention on the International Sale of Goods (CISG) (4th edn, OUP 2016); Schulze, ‘Die Digitale-Inhalte-Richtlinie – Innovation und Kontinuität im europäischen Vertragsrecht’ (2019) 4 ZEuP 695–723; Sein/Spindler, ‘The new Directive on Contracts for Supply of Digital Content and Digital Services – Conformity Criteria, Remedies and Modifications – Part 2’ (2019) 4 ERCL 365–391; Spindler, ‘Verträge über digitale Inhalte – Anwendungsbereich und Ansätze – Vorschlag der EU-Kommission zu einer Richtlinie über Verträge zur Bereitstellung digitaler Inhalte’ (2016) 3 MMR 147–153; Staudenmayer, ‘EG-Richtlinie 1999/44/EG zur Vereinheitlichung des Kaufgewährleistungsrechts’ in: Grundmann/Medicus/Rolland (eds), Europäisches Kaufgewährleistungsrecht (Heymanns Verlag 2000), p. 27–47; Staudenmayer, ‘The Directives on Digital Contracts – First steps towards the Private Law of the Digital Economy’ (2020) 2 ERPL 219–250; Staudenmayer, ‘Towards a European Private Law of the Digital Economy?’ in: Janssen/SchulteNölke (eds), Researches in European Private Law – Contributions in Honour of Reiner Schulze’s Seventieth Birthday (Nomos 2020), p. 65–90; Twigg-Flesner, ‘Disruptive Technology – Disrupted Law – How the Digital Revolution Affects (Contract) Law’ in: De Franceschi (ed.), European Contract Law and the Digital Single Market – The Implications of the Digital Revolution (Intersentia 2016), p. 21–48; Wilke, ‘(Verbrauchsgüter-)Kaufrecht 2022 – die Warenkauf-Richtlinie der EU und ihre Auswirkungen’ (2019) 46 BB 2434–2447; Zöchling-Jud, ‘Das neue Europäische Gewährleistungsrecht für den Warenhandel’ (2019) 3 GPR 115–133. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Previous conformity approaches in European contract law . . . . . . . . . . . . . . . . . . 1. Consumer Sales Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. CESL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Full harmonisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 4 5 9 12

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Conformity approach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Subjective and objective conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. The subjective approach under the Commission Proposal for a Digital Content Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. The approach under the Digital Content Directive . . . . . . . . . . . . . . . . . . . . . . . . II. Consistency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Relationship to Arts 9 and 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18 18 18 22 28 36 39

A. Function* 1

Art. 6 inserts (as with Art. 5 SGD) an umbrella provision into the Digital Content Directive which provides an introduction to the first important group of substantive pro* This commentary expresses only the personal opinions of the author and does not bind in any way the European Commission.

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visions in the Directive, i.e. the rules on conformity and, to a certain extent Art. 10. 1 Rules on conformity are a necessary precondition for regulating consumer remedies. When they stipulate requirements for conformity, they also define what constitutes a lack of conformity as the condition for the trader’s liability [in Art. 11(2) and (3)] and the consumer’s remedies (in Art. 14). Art. 6 is also an element serving to describe the scope of the Digital Content Direc- 2 tive. It therefore plays an important role in determining the extent of the full harmonisation approach of the Directive in its Art. 4. Art. 6 states the obligation of the trader to supply digital content or a digital service 3 which is in conformity. Art. 6 also serves to make the distinction that the obligation to supply digital content or a digital service in conformity is separate from the obligation of the trader to supply digital content or a digital service at all; the latter obligation2 is regulated in Art. 5. While the former obligation triggers the liability of the trader and the remedies of Art. 14, a non-performance of the obligation to supply digital content or a digital service at all also leads to the liability of the trader3, but with the remedy provided under Art. 13.

B. Context I. Previous conformity approaches in European contract law The approaches of the Consumer Sales Directive and of the CESL provide different 4 precedents in European contract law4 as to regulating conformity as a precondition to consumer remedies. Neither of these approaches are entirely subjective or objective. They both contain, to a differing extents and in different ways, elements of a subjective and an objective nature and combine these subjective and objective elements to define conformity. The main difference between these approaches that could have an impact in practice lies in the degree to which they give priority to subjective or objective elements.

1. Consumer Sales Directive The Consumer Sales Directive as a matter of principle took a subjective approach. 5 Conformity with what was agreed in the contract was the benchmark: the seller must deliver goods to the consumer which are in conformity with the contract of sale.5 According to this approach, it is up to the parties to determine in their contract what qualities the goods in question should have and consequently, what constitutes a lack of conformity with the contract. This approach of ‘conformity with the contract’ had its origin in the subjective ap- 6 proach of Art. 35(1) CISG.6 The Commission chose the principle of ‘conformity with the contract’ as the basis of its Proposal because it considered it as a common denominator

Faber, p. 74 is critical as to the function of Art. 6 in the Digital Content Directive. → Art. 5 DCD, mn. 5–6. 3 Art. 11(1) DCD. 4 As to the different approaches in national laws see von Bar/Clive, Art. IV.A.–2:301 DCFR, notes I. 1.–8. As to the approaches in legal history starting from Roman law, see Martens in: Jansen/Zimmermann, Art. 18:203(1), mn. 2–6. 5 Art. 2(1) CSD; Recital 7 CSD. See also Zöchling-Jud, 119. 6 Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 6. 1

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in the legal orders of the Member States.7 The European legislator retained it for the same reason.8 7 The Consumer Sales Directive added a number of presumptions to this principle of a subjective approach, focusing on the contract. Under the conditions of Art. 2(2)(a)–(d) CSD, the goods were presumed to be in conformity with the contract. These presumptions were – at least as a matter of principle – not conditions of conformity with the contract. They were rebuttable presumptions of this conformity, 9 which, in a dispute, would facilitate the seller’s ability to state that the goods in question conform to the contract. 8 In the CISG from which three of the four conditions stem,10 they constitute conditions of objective conformity.11 In practice, the presumptions of Art. 2(2) CSD cover most normal cases of non-conformity with the contract. In addition, Recital 7 CSD acknowledged that a number of national laws have objective conformity criteria. Therefore, Recital 8 CSD gave Member States the possibility to use them in their implementing legislation as objective conformity criteria, i.e. criteria which have to be fulfilled independently of the contract. Indeed, a number of Member States took up the possibility offered by Recital 8.

2. CESL The conformity approach followed by the CESL was different. Firstly, it made a distinction between the obligation of the seller to deliver the goods or supply the digital content12 and the obligation to ensure that the goods or the digital content are in conformity with the contract13. The latter obligation was defined with a subjective and an objective element.14 The subjective element consists in stating that the goods or digital content needed to comply with three subjective conformity criteria, each of which referred to the requirements of the contract.15 In addition16, it required that the goods fulfilled objective conformity criteria, referring to the provisions containing a number of objective conformity criteria17, on incorrect installation18 and on third party rights19. 10 These objective conformity criteria had a more important effect than the subjective criteria. They had to be fulfilled in any case, independently of subjective criteria mentioned explicitly in the contract, deducted via interpretation20 or implied21, or whether the contract included subjective criteria at all. While the parties could by a contractual agreement deviate from these requirements, such deviation was subject to mandatory restrictions.22 11 The legislator of the Digital Content Directive and Sale of Goods Directive continued a path of a mixed conformity approach, basing itself more on the CESL model. 9

COM (95) 520 final, 11. Recital 7 CSD. 9 Recital 8 CSD. Staudenmayer (2000), p. 34. 10 Art. 2(2)(a)–(c) CSD correspond to Art. 35(2)(a)–(c) CISG. 11 Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 13. 12 Art. 91(a) CESL. 13 Art. 91(c) CESL. 14 Art. 99(1) and (2) CESL. 15 Art. 99(1) CESL. 16 See the ‘also’ in Art. 99(2) CESL. 17 Art. 100(a)–(g) CESL. 18 Art. 101 CESL. 19 Art. 102 CESL. 20 cf. Art. 66(a) and Chapter 6 (Arts 58–65) CESL. 21 Arts 66(d) and 68 CESL. 22 Art. 99(3) and (4) CESL. This was taken up in Arts 8(5) and 7(5). See → Art. 8 DCD, mn. 153 et seq. 7

8

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II. Full harmonisation The rules on conformity are one of the key themes of the full harmonisation approach under the Digital Content Directive. The first article of the Digital Content Directive dealing with its subject matter and purpose indicates, as is the case in the Consumer Sales Directive, that only certain aspects of the areas of law in question are regulated.23 In addition, it lists the relevant provisions by categories, of which conformity is the first one, so as to describe and at the same time delimitate, the scope of the Directives more precisely. Together with the other elements mentioned in Art. 1, the rules on conformity therefore describe the scope of what is regulated in the Digital Content Directive.24 The full harmonisation approach in Art. 4 extends only to subjects that are regulated within the scope of the Directive.25 Issues outside its scope are left to national law. For subjects regulated in the scope of the Digital Content Directive, the blocking effect of full harmonisation under Art. 4 precludes Member States from maintaining or introducing conformity rules that are different from those contained in the Directive. 26 The Digital Content Directive27 displays a particular tendency of the legislator to expend considerable effort in clearly describing what the Directive does not regulate and therefore what is outside its scope and may be regulated by national law or what is left to flexibility in national implementation. Firstly, one notices the Directive’s sheer number of recitals28, 82 in total of which 31 deal with issues of scope29. Furthermore, the Digital Content Directive contains a number of sectoral exemptions30 and some delimitations in relation to other areas of EU law.31 Finally, the Digital Content Directive states also that questions of national general contract law are left to national law.32 It is complemented by several, separate recitals. As regards conformity, Recital 14 explains that Member States remain free to regulate the consequences of a lack of conformity due to force majeure.33 The way force majeure is described in generic terms in Recital 14 was inspired by the CESL34, which in turn is based on the CISG35. For Member States with legal systems based on the Code Napoléon tradition (like France and Belgium) the third sentence of Recital 12 mentions that their general contract law remedies for so-called ‘vices cachés’ or hidden defects 36 remain unaffected by the Directive. While → Art. 1 DCD, mn. 11 et seq. See also Recital 11 1st and 2nd sentences. 25 See also Recital 12 1st sentence. 26 See also Recital 11 5th sentence. 27 The following applies mutatis mutandis also to the Sale of Goods Directive. 28 This compares with the mere 26 recitals in the Consumer Sales Directive, which itself at the time also dealt with a new and important area of European contract law. A high number of recitals in relation to a relatively modest number of normative provisions is a sign of a difficult legislative process, since there is a tendency to make concessions in the recitals to the minority interests in Council and EP to secure agreement. 29 Recitals 9–34, 36–40, 47, 58, 78. 30 → Art. 3 DCD, mn. 91 et seq. 31 → Art. 3 DCD, mn. 129 et seq. 32 Art. 3(10) and Recital 12. This provision follows the model of Art. 3(5) CRD. 33 As to the different approaches in national and international laws see von Bar/Clive, Art. III.–3:104 DCFR, notes I. 1.–11. DCFR; Rüfner in: Jansen/Zimmermann, Art 8:108, mn. 11–16; Schwenzer in: Schlechtriem/Schwenzer, Art. 79 CISG, mn. 5. As to the approaches in legal history Rüfner in: Jansen/ Zimmermann, Art. 8:108, mn. 3–10. 34 Art. 88(1) CESL. 35 Art. 79(1) CISG. 36 As to the national laws having a distinction between hidden defects and non-conforming delivery see von Bar/Clive, Art. IV.A.–2:301 DCFR, note I.6. 23 24

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12 13

14

15

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in the Sale of Goods Directive this is regulated in a normative provision37, the Digital Content Directive mentions this point only in a recital. The reason for this difference is that according to the understanding of the European legislator, the existing national rules on hidden defects do not apply to digital content or services. However, in order to make sure that the blocking effect of full harmonisation does not force those Member States which have such rules to abolish them in their implementation, Recital 12 makes it clear that the Digital Content Directive does not affect these national rules on hidden defects. 17 All these provisions and recitals are an expression of a general trend in the Digital Content Directive (and in the Sale of Goods Directive) to interfere as little as possible with national general contract law. They were politically expedient in order to obtain the necessary majority in Council. Some of these provisions are technically useful from a regulatory angle, for instance in the case of the force majeure recital which gives more precision to the Digital Content Directive’s scope, and therefore the blocking effect of full harmonisation. However, the Digital Content Directive also contains several clarifications concerning points which would not be part of the scope anyway and are therefore arguably superfluous.38

C. Explanation I. Conformity approach 1. Subjective and objective conformity As regards the terminology, it is notable that the Digital Content Directive (and the Sale of Goods Directive) use, for the first time in the European contract law, the notions of ‘subjective’ and ‘objective’ conformity requirements.39 19 The Consumer Sales Directive and the CESL had used the term ‘conformity with the contract’40, while speaking about ‘criteria for conformity’41 when objective conformity criteria were meant. The Commission Proposal for a Digital Content Directive had still consistently referred to the ‘conformity with the contract’. While this corresponded to the priority given by the Commission Proposal to the subjective conformity approach42, it was part of a more horizontal understanding which was also reflected in the Commission Proposal for an Online Sales Directive. According to this understanding, fulfilling both the subjective and the objective conformity requirements ensured overall conformity with the contract. 20 However, the legislator of the Digital Content Directive (and the Sale of Goods Directive) changed not only the conformity approach43 but also the terms used to establish it, albeit not consistently. In the Digital Content Directive, the legislator used almost always the term ‘conformity’ as a horizontal term to cover both the subjective and the objective conformity requirements. A first exception to this rule is Art. 7, which clarifies that the 18

Art. 3(7) 2nd sentence and Recital 18 SGD. See for instance Recitals12 last sentence and Recital 13. 39 Morais Carvalho, at 198, considers this even as one of the main innovations regarding conformity assessment criteria. Schulze, at 710, emphasises that conformity becomes a general term in European contract law going beyond sales law. 40 Art. 2 CSD, Art. 99 CESL. 41 Art. 100 CESL. 42 Below → mn. 22 et seq. 43 Below → mn. 28 et seq. 37

38

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subjective requirements need to be fulfilled ‘in order to conform with the contract’. This is appropriate, because obviously subjective requirements are linked to the contract. The more important exception to this rule is Art. 1, confirmed by Recital 11, which identifies s as one of the main categories of provisions which are regulated in the scope of the Digital Content Directive ‘the conformity of digital content or a digital service with the contract’ and remedies in case of the lack of ‘such conformity’. In the Sale of Goods Directive, the situation is the same, with the addition of Recital 25 SGD which adds an important clarification. It explains that ‘any reference to conformity’ in the Sale of Goods Directive ‘should refer to conformity of the goods with the sales contract’ and continues stating that ‘conformity should be assessed based on both subjective and objective requirements for conformity’. If one looks therefore at the provisions of both Directives regulating their subject matter, and takes into account the clarifying Recital 25 SGD, one can conclude that the concept of the Commission Proposals has been retained in both Directives. Still, this means that the objective conformity criteria are conditions laid down in the 21 law which digital content or a digital service (as well as goods) must respect, independently of the contract.44 If they do, this is considered as a confirmation of overall conformity of the digital content or a digital service with the contract. This means therefore that they are neither to be considered as (expressly or) tacitly agreed terms which are dealt with in Art. 7 nor as implied terms45,46 but as criteria of a statutory nature, reflecting objective benchmarks laid down by the law. This view is supported by the fact that deviations from these standards can only be carried out through complying with certain restrictive conditions [in Art. 8(5)], again laid down by the law. So, the law – not the contract – defines the objective standards to be fulfilled and the manner one can deviate from them.

2. The subjective approach under the Commission Proposal for a Digital Content Directive Compared to the adopted version of the Digital Content Directive, the Commission 22 Proposal for the Digital Content Directive followed a different approach as regards conformity. It gave priority to the subjective approach, with a subsidiary application of objective conformity criteria. Very similar to Art. 7, Art. 6(1) of the Commission Proposal for a Digital Content Di- 23 rective mentioned in points (a)–(d) the main criteria for subjective conformity, while always referring to the requirements of the contract or an agreement between the parties. But obviously in practice, contracts often contain only rather vague or incomplete 24 wording concerning the level of performance47, which may be even intentionally done by the trader. In cases that the contract did not, or not in a sufficiently comprehensive See for the Sale of Goods Directive also Zöchling-Jud, 119. Which Art. 68 CESL used in addition to conformity criteria. The objective conformity criteria are not even ‘terms implied in law’, as known in English law, see McMeel/Grigoleit, p. 367 et seq. For examples of implied terms principles in national laws cf. von Bar/Clive, Art. II.–9:101 DCFR, notes II. 8.–15. 46 Morais Carvalho considers at 198 that objective conformity criteria are indirectly part of the contract. While under the CISG US American courts and parts of the doctrine consider the criteria of Art. 35(2) CISG as implied warranties (see Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 13 with further references), the approach of Art. 8 DCD is different from Art. 35(2) CISG, as the former does not have the proviso of a different agreement of the parties, as contained in the latter. 47 cf. the work (http://ec.europa.eu/justice/contract/files/expert_groups/availability_working_paper_en .pdf) of the Commission Cloud Computing Expert Group (http://ec.europa.eu/justice/contract/cloud-co mputing/expert-group/index_en.htm), which provided input into the preparation of the Commission Proposal for a Digital Content Directive (accessed 22 November 2019). 44

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way, stipulate the criteria specified in Art. 7 which the consumer could use to prove a lack of conformity of the digital content or digital service, it should not be to the detriment of the consumer that the trader has not included a complete or sufficiently accurate description of the digital content or digital service. Therefore, Art. 6(1) of the Commission Proposal for a Digital Content Directive added objective conformity criteria, but only ‘to the extent that the contract does not stipulate’ subjective conformity requirements.48 25 The first reason for this subjective approach was to avoid a conflict with the contractual possibilities, granted by copyright law to the rightholder. The consumer’s contractual party is practically never the rightholder, but almost always a licensee; normally there would be (one or several) sub-licensees integrated into the value chain between the first licensee and the consumer. Restrictions by the rightholder are passed on in this chain of transactions; the contractual party of the consumer at the end of the chain is bound by these restrictions. Establishing objective conformity criteria can lead to a dilemma for the last sub-licensee. On the one hand, he could be obliged, when supplying digital content or a digital service which is in conformity, to provide it with certain features which are normal for digital content or digital services of the same type and which the consumer may reasonably expect. On the other hand, it could be that according to the restrictions of the rightholder passed on to him, he may not be allowed to do so. Such a dilemma which would create a contradiction with copyright law opportunities needs to be avoided; the Commission Proposal for a Digital Content Directive tried to achieve this aim with a subjective conformity approach. 26 The second reason was, not to make it very difficult or even impossible to put socalled beta- versions on the market. Before its release, software goes through different development stages. A beta version is a version of a software which already works for its main functions, but is not yet finalised, because it has not been tested for defects. This testing is often done by end-users which give feedback to the developer. Therefore the suppliers know that there can be defects without knowing them concretely. The suppliers count on the users’ feedback, in order to improve the software. These practices should not be prevented, since the suppliers are small start-ups which are particularly innovative. 27 The approach in the Commission Proposal for a Digital Content Directive was criticised in the Member States49, in the EP50 and in legal doctrine51.

3. The approach under the Digital Content Directive 28

The wording of Art. 6 is based on the understanding that the trader is indeed obliged to supply digital content or a digital service which is in conformity. The Digital Content Directive therefore does not restrict itself to provide simply remedies in cases where the digital content or digital service show a lack of conformity, but it does create an obligation.

48 This is also the approach followed by Art. 35(2) CISG, see Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 13. 49 See for instance the position of the German Bundesrat, mn. 27. 50 Manko, 21 et seq. 51 Colombi Ciacchi/van Schagen, p. 112 et seq.; European Law Institute, 18 et seq. available online under www.europeanlawinstitute.eu/fileadmin/user_upload/p_eli/Publications/ELI_Statement_on_DCD.pdf (last accessed 7 December 2019); Faber, p. 103 et seq.; Geiregat/Steennot, p. 165; Mak, 15 et seq.; Spindler, 152; Twigg-Flesner, p. 45. Riem/Abold, 85 et seq. argue for the priority of the subjective conformity criteria.

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Note that the wording of Art. 6 already provides that the requirements of all three conformity provisions – ‘Arts 7, 8 and52 9’ – need to be met. Recital 45 1st sentence confirms that Art. 6 needs to be understood in this manner. Art. 8 also specifies that its conformity criteria apply in addition to the subjective conformity criteria of Art. 7. Subjective (Art. 7) and objective (Arts 8 and 9) conformity criteria apply therefore cumulatively53; both categories need to be respected54. This means that if digital content or digital service fails to fulfil the objective criteria, it is not in conformity with the contract, even if it fully fulfils the subjective criteria. Vice versa, if it fulfils the objective criteria, but does not fulfil the subjective criteria, it is still not in conformity. As both Arts 7 and 8 partially regulate the same topics in the subjective and objective conformity criteria, differences in terms of requirements are possible. The requirements in the contract as regards the subjective conformity criteria in Art. 7 can go beyond the requirements as regards the objective conformity criteria in Art. 8. In such a case, the conformity requirements as agreed in the contract would have to be complied with, while the objective conformity requirements would be respected anyway. The subjective conformity requirements can also lead to a lower standard than the objective conformity criteria in Art. 8, in which case they would prevail, but only if this is done under the conditions of Art. 8(5). The reference to ‘where applicable’ in Art. 6 does not change the fact that the objective criteria in Art. 8 apply in any case. It clarifies55 that the subjective criteria of Art. 7 apply only if agreed in the contract56 and that Art. 9 only applies if there is an integration of the digital content or digital service into the consumer’s digital environment57. The Digital Content Directive (like the Sale of Goods Directive) follows the approach that digital content or a digital service must in any event respect objective conformity criteria and in addition, subjective criteria. This approach corresponds to the Commission Proposal for an Online Sales Directive58, which did not follow the approach of the Consumer Sales Directive but the approach of the CESL. This meant that Council and EP deviated from the subjective approach of the Commission Proposal for a Digital Content Directive, which focused for the purpose of determining conformity, primarily on the terms of the contract. The reason for this deviation was to avoid handicapping the consumer through contract terms defining the contractual performance in a way which is disadvantageous to him.59 Consumer contracts are regularly not individually negotiated but based on standard terms and conditions put forward by the trader. Consumers in practice do not read those standard terms and conditions. If they do, they may not, as non-lawyers, always understand them. If they read the standard terms and conditions, understand them and want to change them, it is in practice likely that the trader is not willing to negotiate its standard terms and conditions. This ultimately leaves consumers only with a choice between buying the product and accepting the standard terms and conditions as they are or not buying the product at all. The practical result is that traders have within the limits of the content control by Emphasis added by the author. Like already the presumptions of conformity in Art. 2(2) CSD; see Recital 8 CSD. 54 Emphasised also by Metzger, 581; Wilke, 2437 with reference to the corresponding provision under the Sale of Goods Directive and to a possible need to adapt German law. 55 Faber, p. 74 links this clause to the specific conformity criteria. However, both the introduction of Art. 7 and some objective conformity criteria in Art. 8 [e.g. Art. 8(1)(a)] clarify that they only apply where relevant. 56 → Art. 7 DCD, mn. 8 et seq. 57 → Art. 9 DCD, mn. 24 et seq. 58 Art. 4(3) COM(2015) 635 final. 59 Recital 45. Cf. Zöchling-Jud, 120; Metzger, 581. 52 53

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the Unfair Terms Directive, have a relatively wide margin to define the contents of the contract. In addition, the Unfair Terms Directive according to its Art. 4(2) does not apply to the definition of the main subject matter of the contract. This exception would cover the basic elements how the digital content or digital services is described and at least the main features it should possess. 34 The reasons why the Commission Proposal for a Digital Content Directive chose a predominately subjective approach, i.e. to avoid conflicts with copyright law and continuing to allow beta-versions, remain valid. The legislator took them into account by including in the Digital Content Directive (and in the Sale of Goods Directive) a provision60 of the CESL61, which was also in the Commission Proposal for an Online Sales Directive62. This provision allows the trader to pass on existing copyright restrictions or to clarify that the digital content or the digital service have specific deficiencies. 63 Supplying beta versions is still possible through the wording of the relevant objective conformity criterion.64 35 The introduction of objective conformity criteria and the cumulative application of subjective and objective conformity criteria constitute an increase of consumer protection in the Digital Content Directive, compared to the Consumer Sales Directive approach and the Commission Proposal for a Digital Content Directive. It has the effect that consumers can always rely on objective criteria to establish non-conformity, and in addition on subjective criteria where they are more favourable, unless the objective conformity are formally derogated in accordance with Art. 8(5). It achieves the result the legislator had in mind.65 It avoids a scenario where the seller provides in the standard terms and conditions a low-quality description of the digital content or digital service requiring rather low quality to which the consumer agrees. In such a scenario, the consumer would have renounced to remedies for the digital content or digital service not being up to standards which would be considered normal for the digital content or digital service without realising it, or because he had no choice.

II. Consistency The conformity provisions of the Digital Content Directive are the best example of a general trend of the Digital Content Directive legislator to maintain a consistent legislation.66 This consistency manifests itself in two dimensions. 37 In its first dimension, there is clear trend to stay as close as possible to the Consumer Sales Directive, even if the Consumer Sales Directive harmonised only the sale of goods. The Consumer Sales Directive was adopted (almost to the day) 20 years before the Digital Content Directive (and the Sale of Goods Directive). It had been implemented in all Member States and constituted the core of national sales law for almost 20 years. It is therefore understandable and appropriate that a Directive which is transferring the remedies for the sale of goods to digital content and digital services – and adapting them 36

→ Art. 8 DCD, mn. 63, 156. Art. 99(3) CESL. 62 Art. 4(3) COM(2015) 635 final. 63 See Recital 53. 64 → Art. 8 DCD, mn. 63. 65 Recital 45 1st sentence. 66 See Introduction → mn. 21. This effort even extends to the future review of the Digital Content Directive and the Sale of Goods Directive. See → Art. 25 DCD, mn. 10 et seq. 60

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to the specificities of the digital economy67 – should be as consistent as possible in approach and wording with the existing sales law in order to facilitate familiarisation with the new law and the daily practice of its application. Concretely, this means that the Digital Content Directive largely tries to use wording from the Consumer Sales Directive. This comes out particularly well in the conformity provisions.68 In addition to this, the legislator borrowed also from the CESL, which in a number of aspects constitutes a more modern regulation of sales law than the Consumer Sales Directive. Using the model of, and wording from, the CESL improves the quality of the legislation. In its second dimension, the consistency effort also shows between the Digital Con- 38 tent Directive and the Sale of Goods Directive. Both Directives have a number of commonalities69 which stem from a conscious effort of the legislator to be as coherent as possible between them. With respect to the chronology of the work, the order was that the Council commenced with discussion of the text of the Digital Content Directive and completed that first. During this discussion on the Digital Content Directive it was obvious that Member States had the precedent effect of the Digital Content Directive rules for the Sale of Goods Directive in mind. The coherence between both texts was improved during the discussion on the Sale of Goods Directive and in the trilogue on both Directives.

III. Relationship to Arts 9 and 10 While the Digital Content Directive (and the Sale of Goods Directive) follow as a 39 matter of principle the conformity approach of the CESL, this is only partially the case as regards the relationship with Arts 9 and 10. As in the CESL70, Art. 6 includes the correct integration of digital content or digital 40 service into the consumer’s digital environment in Art. 9 as an objective conformity criterion, additional to those in Art. 8. Art. 9 takes over the integration provision of Art. 2(5) CSD, into the digital world. The wording comes from Art. 101 CESL and was adapted to digital content. Therefore, an incorrect integration of digital content or a digital service which has been done by the trader or under his responsibility or was due to shortcomings in the integration instructions, is considered a lack of conformity. The relationship between Arts 6 and 10 is different. In the CESL the reference to ob- 41 jective conformity criteria also included a reference to the provision requiring that the goods are free of third party rights. The Commission Proposal for a Digital Content Directive (and for an Online Sales Directive)71 followed the CESL approach. However, Art. 6 states that it is ‘without prejudice to Article 10’. While it is correct that Art. 10 will lead in the majority of Member States to the application of the consumer remedies for lack of conformity in Art. 14, Art. 6 does not include the absence of legal defects in the obligation of the supplier.72

67 As to the Digital Content Directive in the context of the adaptation of the private law framework to the needs of the Digital Economy see Staudenmayer (‘Towards a European Private Law’), p. 69 et seq. 68 Bach, at 1707, considers already the notion of conformity in the Consumer Sales Directive as unnecessarily detailed and is therefore critical as to the conformity approach in the Digital Content Directive. 69 Staudenmayer (‘The Directives on Digital Contracts’) describes in detail the commonalities and differences with regard to scope, conformity and consumer remedies. 70 Art. 99(2) CESL. 71 Art. 8 COM(2015) 634 final and Art. 7 COM(2015) 635 final. 72 Morais Carvalho, at 198, still considers that legal defects are included in the concept of lack of conformity.

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The first reason why the legislator took in Art. 6 another approach as regards legal defects for the Digital Content Directive (and the Sale of Goods Directive) is that the provision on third party rights changed its function compared to its predecessor in the Commission Proposal. The Commission Proposal for a Digital Content Directive drafted the respective provision73 as objective conformity criterion based on the relevant CESL rule74, which in turn had its origin in the CISG75. Due to the change between the Commission approach, which gave priority to subjective conformity and the priority given by the Digital Content Directive to objective conformity criteria, this rule has changed its purpose. Together with Art. 8(5)76, it now covers the impact of copyright restrictions in the value chain between the copyright holder and the trader.77 Art. 8(5) gives the trader a tool to avoid a dilemma where he has to deliver digital content that according to the objective conformity criteria have to contain certain features, while according to copyright restrictions those same features are impermissible. The provisions on third party rights regulate those cases where the trader delivers digital content that does correspond to the objective conformity criteria, but which infringe the copyright license. For example, this could lead to the consumer not being able to use certain features of the digital content when the copyright holder enforces his copyright.78 The provision on third party rights anticipates such conflicts by providing remedies for the consumer in those cases. 43 In Art. 6, the second reason for treating Art. 10 differently is that the legal consequences are not as clear-cut as they were under the Commission Proposal for a Digital Content Directive. Indeed, for most Member States the remedies for lack of conformity will apply. However, certain Member States wanted to maintain the existing possibility under their legislation to treat contracts infringing copyright law as null and void79 and Art. 10 preserves this possibility. 42

Article 7 Subjective requirements for conformity In order to conform with the contract, the digital content or digital service shall, in particular, where applicable: (a) be of the description, quantity and quality, and possess the functionality, compatibility, interoperability and other features, as required by the contract; (b) be fit for any particular purpose for which the consumer requires it and which the consumer made known to the trader at the latest at the time of the conclusion of the contract, and in respect of which the trader has given acceptance; (c) be supplied with all accessories, instructions, including on installation, and customer assistance as required by the contract; and (d) be updated as stipulated by the contract. Bibliography: von Bar/Clive (eds), Principles, Definitions and Model Rules of European Private Law – Draft Common Frame of Reference (DCFR) (Sellier 2009); Colombi Ciacchi/van Schagen, ‘Conformity under the Draft Digital Content Directive: Regulatory Challenges and Gaps’ in: Schulze/Staudenmayer/ Art. 8 COM(2015) 634 final. Arts 99(2) and 102 CESL. 75 Arts 41 et seq. CISG. 76 → Art. 8 DCD, mn. 156. 77 See Recitals 53 et seq. 78 Recital 54. 79 See also Sein/Spindler, 391. 73

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Lohsse (eds), Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Nomos 2017), p. 99–125; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM (95) 520 final; Commission, ‘Proposal for a European Parliament and Council Directive on the sale of consumer goods and associated guarantees’ COM(2015) 634 final; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the online and other distance sales of goods’ COM(2015) 635 final; Druschel, Die Behandlung digitaler Inhalte im Gemeinsamen Europäischen Kaufrecht (GEKR) (Herbert Utz Verlag 2014); Faber, ‘Bereitstellungspflicht, Mangelbegriff und Beweislast im Richtlinienvorschlag zur Bereitstellung digitaler Inhalte’ in: Wendehorst/Zöchling-Jud (eds), Ein neues Vertragsrecht für den digitalen Binnenmarkt? (Manz 2016), p. 89–130; Faber, ‘Bereitstellung und Mangelbegriff ’ in: Stabentheiner/Wendehorst/Zöchling-Jud (eds), Das neue europäische Gewährleistungsrecht (Manz 2019), p. 63–110; Jansen/Stijns, ‘Proposal for a Directive on Certain Aspects Concerning Contracts for the Online and Other Distance Sales of Goods: Scope of Application, Definitions and Conformity’ in: Claeys/Terryn (eds), Digital Content & Distance Sales – New Developments at EU Level (Intersentia 2017), p. 55–94; Jansen/Zimmermann (eds), Commentaries of European Contract Laws (OUP 2018); Loos et al., ‘Analysis of the applicable legal frameworks and suggestions for the contours of a model system of consumer protection in relation to digital content contracts’ (2011); Mak, ‘The new proposal for harmonised rules on certain aspects concerning contracts for the supply of digital content’ (European Parliament, Directorate General for Internal Policies, Policy Department C in-depth analysis, PE 536.494, 2016); Momberg, ‘Standard Terms and Transparency in Online Contracts’ in: De Franceschi, European Contract Law and the Digital Single Market (Intersentia 2016), p. 189–207; Schlechtriem/Schwenzer (eds), Commentary on the UN Convention on the International Sale of Goods (CISG) (4th edn, OUP 2016); ; Schulze (ed.), Common European Sales Law (CESL) – Commentary (Nomos 2012); Schulze, ‘Die Digitale-InhalteRichtlinie – Innovation und Kontinuität im europäischen Vertragsrecht‘ (2019) 4 ZEuP 695–723Spindler, ‘Verträge über digitale Inhalte – Anwendungsbereich und Ansätze – Vorschlag der EU-Kommission zu einer Richtlinie über Verträge zur Bereitstellung digitaler Inhalte’ (2016) 3 MMR 147–153; Staudenmayer, ‘EG-Richtlinie 1999/44/EG zur Vereinheitlichung des Kaufgewährleistungsrechts’ in: Grundmann/Medicus/Rolland (eds), Europäisches Kaufgewährleistungsrecht (Heymanns Verlag 2000), p. 27–47; Wendehorst, ‘Aktualisierungen und andere digitale Dauerleistungen’ in: Stabentheiner/Wendehorst/Zöchling-Jud (eds), Das neue europäische Gewährleistungsrecht (Manz 2019), p. 111–139; Wendland, ‘GEK 2.0? Ein europäischer Rechtsrahmen für den Digitalen Binnenmarkt – Der Kommissionsvorschlag für eine Richtlinie über bestimmte vertragsrechtliche Aspekte der Bereitstellung digitaler Inhalte’ (2016) 1 GPR 8–19; Wilke, ‘(Verbrauchsgüter-)Kaufrecht 2022 – die Warenkauf-Richtlinie der EU und ihre Auswirkungen’ (2019) 46 BB 2434–2447. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Requirement of a contract between the trader and the consumer . . . . . . . . . . . . II. Subjective conformity criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Agreed features . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Agreed purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Agreed accessories and assistance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Agreed updates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 8 18 24 42 48 53

A. Function* Art. 7 constitutes (like Art. 6 SGD), under the umbrella provision of Art. 6, the first 1 substantive conformity provision of the Digital Content Directive. It provides subjective conformity criteria for digital content or digital services. Compared to the objective conformity criteria in Art. 8, this is the less important of 2 the provisions on conformity criteria, as its requirements only need to be fulfilled if, and to the extent, they are agreed in the contract.

* This commentary expresses only the personal opinions of the author and does not bind in any way the European Commission.

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B. Context 3

4

5

6

7

The Consumer Sales Directive had added a number of presumptions to its subjective conformity principle.1 Under the conditions of Art. 2(2)(a)–(d) CSD, the goods were presumed to be in conformity with the contract. These presumptions again make an appearance in the requirements of Art. 7. The first Consumer Sales Directive presumption 2 concerned, among others, the situation where the goods comply with the description given by the seller. The CESL included the description required by the contract among the subjective conformity criteria. 3 The second presumption4 concerned the situation where the goods are fit for any purpose for which the consumer requires them and which he made known to the seller at the time of conclusion of the contract. The wording of the original Consumer Sales Directive Commission Proposal, which was closer to Art. 35(2)(b) CISG (namely, that the presumption does not apply if circumstances show that the buyer did not rely on the seller’s explanation), was deleted. The rationale was that, while this situation may be quite common in B2B sales as regulated by the CISG, it is quite rare in B2C transactions. However, a condition was added, namely that the seller must have accepted the requirement of the consumer to make sure that a specific consumer requirement could not be imposed unilaterally on the seller. The CESL retained the second Consumer Sales Directive presumption among the objective conformity criteria5, but brought it closer to the CISG wording. This was understandable as CESL dealt with B2C and B2B contracts. Beyond the presumptions in Art. 2(2) CSD, the CESL contained a subjective conformity criterion regarding accessories and instructions.6

C. Explanation I. Requirement of a contract between the trader and the consumer The requirement of a contract presumes first of all that a valid contract exists, although this is already a necessary criterion for the application of the Directive. According to Art. 3(10) questions such as whether the contract has been validly concluded are left to national law. This means for instance that it is up to national law to decide whether forms of contracting used for purchasing digital content or a digital service, like click-wrap, browse-wrap or shrink-wrap agreements7, constitute a validly concluded contract8. 9 It results from Arts 7 and 3(1), that the contract in which the subjective conformity requirements are stipulated, is the contract between the trader and the consumer. While this may seem obvious because the Directive only applies to those contracts, it excludes that agreements between the consumer and a third party (for instance with the 8

→ Art. 6 DCD, mn. 7. Art. 2(2)(a) CSD. 3 Art. 99(1)(a) CESL. 4 Art. 2(2)(b) CSD. 5 Art. 100(a) CESL. 6 Art. 99(c) CESL. 7 For an explanation of these forms of contracting see Momberg, p. 192. 8 For an overview of the situation in some Member States see Loos et al., 66 et seq., available under https://op.europa.eu/en/publication-dewxstail/-/publication/4fee0cc7-5f4d-46c5-897b-48844f07f027/lang uage-en/format-PDF/source-108616371 (last accessed 16 November 2019). 1 2

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software developer/rightholder in a so-called end-user license agreement) have any effect on the subjective conformity criteria.9 Recital 42 4th sentence clarifies that pre-contractual information which is an integral part of the contract according to the Consumer Rights Directive10 is part of the contractual requirements defining the conformity criteria. This clarification stems from the CESL, where it was part of the objective conformity criteria.11 The Commission Proposal for a Digital Content Directive included it as part of the subjective conformity criteria. 12 This was not due to the subjective approach of the Commission Proposal for a Digital Content Directive, because the Commission Proposal for an Online Sales Directive had counted it also as part of the subjective conformity criteria.13 There are arguments both ways as to whether this element should be regarded as part of the subjective conformity or as objective conformity criterion. On one hand, the fact that it is Art. 6(5) CRD, which makes mandatory pre-contractual information requirements14 an integral part of the contract, might point to its more objective nature. On the other hand, these are part of the contract which suggests its subjective nature. In any case, the legislator decided that, as a conformity criterion, it is not indispensable15, as it is part of the contract anyway. Therefore, this element ended up only as a clarification in a recital. In addition, the last sentence of Recital 42 clarifies also that service level agreements can be understood as part of the subjective requirements. For instance, cloud computing contracts often include service level agreements which contain the technical specifications of such contracts. While they may be in a separate document from the contract, they are legally speaking part of the contract. This last sentence of Recital 42 confirms this, albeit under the proviso of the applicable national law. This proviso was necessary because of Art. 3(10) which leaves to national law the question of what is considered part of a contract. Referring to the stipulations of the contract means that the contractual requirements may result from individually negotiated terms, but in most cases [except for Art. 7(b)] are likely to result from the standard terms and conditions of the trader. It also means that the contract may need interpretation. Interpretation may be required on the question of whether, and to what extent, the contract contains stipulations such as mentioned in Art. 7(a)–(d), but also in cases where contractual stipulations appear contradictory. Unlike the CESL16, the Digital Content Directive does not contain rules on interpretation of the contract; on the contrary, Art. 3(9) leaves national general contract law intact. The contract would therefore need to be interpreted according to the principles of national law.17 However, there can be limits resulting from EU secondary law. Contractual agreements dealing with subjective conformity agreements can be subject to the Unfair Terms Directive. None of the provisions of the Digital Content Directive clearly stipu-

9 So already for the subjective conformity approach of the Commission Proposal for a Digital Content Directive Faber (2016), p. 100 et seq. 10 Art. 6(5) CRD. 11 Arts 100(f), 69 CESL. 12 Art. 6(1)(a) COM(2015) 634 final. 13 Art. 6(1)(c) COM(2015) 635 final. 14 Art. 6(1) CRD. 15 Therefore Zoll in: Schulze (2012), Art. 100, mn. 14, considered it already as superfluous for the CESL. 16 Chapter 6 Arts 58–65 CESL. 17 This has been criticised for the Commission Proposal for a Digital Content Directive by Colombi Ciacchi/van Schagen, p. 104 et seq.

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late that the Unfair Terms Directive does not apply.18 The provisions of Arts 3(7)–(9) refer in a general [Art. 3(7)] or a specific way [Art. 3(8)–(9)] to sector specific Union law, which should have precedence. Art. 3(10) refers to national general contract law, regulating among others the validity or nullity of contracts, which shall not be affected by this Directive. The implementation of the Unfair Terms Directive, leading to unfair terms being considered not binding and regulating the validity of the remainder of the contract is part of this general contract law which the legislator chose not to interfere with. 17 The content control of the Unfair Terms Directive does not apply to the definition of the main subject matter of the contract.19 As a derogation from the general purpose of the Directive, the ECJ interprets Art. 4(2) Unfair Terms Directive strictly. 20 Contractual terms establishing the main subject matter of the contract are understood as being those that lay down the essential obligations of the contract and, as such, characterise it. Features such as the description, quantity and quality of the digital content or service, are likely to be part of the terms defining the main subject matter of the supply contract. However, this non-application is under the proviso that the relevant standard terms and conditions are drafted in plain, intelligible language. The general transparency principle21 also applies to the core terms establishing the main subject matter of the contract. 22

II. Subjective conformity criteria Art. 7 mentions in (a)–(d) different subjective conformity criteria. Art. 7 includes the criteria which are normally used in contracts to describe the features of products and which in such case have to be respected by the digital content or digital service. The fact that the introductory sentence of Art. 7 uses the terms ‘the digital content or digital service shall’ does not mean the contract needs to prescribe these or other features or specificities of the digital content or digital service. 19 Art. 7 clarifies that these criteria are cumulative criteria23. It also states that they apply only where there are relevant, i.e. where the contract contains such clauses24. Such clarifications were not included in Art. 2(2) CSD and had to be provided in Recital 8 CSD; Art. 99 CESL only clarified the cumulative nature. 20 Art. 7 clarifies that these subjective conformity criteria are not exhaustive. 25 The parties remain free to agree in the contract on other subjective conformity criteria for the digital content or digital service. In order to ensure that the supplemental subjective conformity criteria would be part of subjective conformity, there should be a link to the subject matter of the contract, i.e. according to Art. 3(1) the supply of digital content or digital services. However, it follows from the principle of freedom of contract which [with the limits of Art. 8(5)] is manifested in Art. 7 that this link should be understood in a broad sense. For instance, a contract could include a requirement that the digital content or digital service needs to possess the features required to obtain a specific technical certification or already have been certified accordingly. Even a contract term which requires for instance, that the digital content or digital service has to meet the fully discretionary 18

cf. the test of the ECJ in C-290/16 Air Berlin EU:C:2017:523, paras 44–45. Art. 4(2) and Recital 20 Unfair Terms Directive. 20 CJEU, C-26/13 Kásler EU:C:2014:282, paras 49–50. 21 Art. 5 Unfair Terms Directive. 22 This is confirmed in ECJ case law, see C-26/13 Kásler EU:C:2014:282, para. 68. 23 See ‘and’ at the end of Art. 7(c). 24 See ‘where applicable’ at the end of the introductory sentence in Art. 7. 25 See the wording ‘in particular’ in the introductory sentence in Art. 7 and ‘and other features’ in Art. 7(a). 18

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approval of a certain third party could be a valid subjective conformity requirement. It is therefore clear that what really counts with respect to the existence and content of such terms is what is prescribed in the contract itself. The different subjective conformity criteria mentioned in Art. 7(a)–(d) can be divid- 21 ed up in two groups. The first group [Art. 7(a)] concerns defects of the digital content or digital service itself. The second group [Art. 7(b)–(d)] concerns additional, extraneous requirements, which only have to be fulfilled because the parties agreed them. The subjective conformity criteria need to be read together with the respective clauses 22 in the objective conformity criteria in Art. 8(1) and Art. 8(5). Almost all subjective conformity criteria have corresponding criteria in the list of objective conformity criteria. 26 It is possible to agree something different from an objectivised standard in Art. 8 always by introducing higher requirements than those in the objective conformity criteria. If, however, the contractual agreement falls below the benchmark of the respective clause in the objective conformity criteria, then it is necessary to comply with the requirements of Art. 8(5). A comparison with the corresponding objective conformity criteria in Art. 8(1) 23 demonstrates why the criteria in Art. 7 are included among the subjective criteria; they all refer in different ways to criteria agreed by the parties. Art. 7(a), (c) and (d) refer directly to contractual terms, while Art. 7(b) refers to an agreement on a particular purpose by the parties.

1. Agreed features Art. 7(a) has its origin in the CESL27 and was adapted to digital content and digital 24 services. It takes over the approach of the Commission Proposal for a Digital Content Directive (referring to features of the digital content or digital service required by the contract), while highlighting in a non-exhaustive manner the most important of them. The first group of features specifically mentioned (‘description, quantity and quality’) include the classical features as regards goods. These stem from the Commission Proposal for an Online Sales Directive28 which is based on the CESL29. The second group (‘functionality, compatibility, interoperability’) in the most part have their origin in the Commission Proposal for a Digital Content Directive and are more ‘digital-specific’. a) Description, quantity and quality. The way ‘description’ is used as a conformity cri- 25 terion in Art. 7(a) differs from its use in the Consumer Sales Directive 30. While the Consumer Sales Directive spoke about the ‘description given by the seller’, Art. 7(a) uses, in line with the categorisation as subjective conformity criterion, the element that it is ‘required by the contract’. A distinction between what may appear to be an exaggerated praise of the digital content or digital service by the trader and a statement which the trader intended to be binding is no longer relevant. If the description of the digital content or digital service is in the contract, one can presume that the trader intended it to be binding. The ‘description’ as referred to in Art. 7(a) is a generic term covering all kinds of contractual statements about the features of a digital content or digital service. The only requirement beyond the mere inclusion of the statement in the contract could be

26 Art. 7(a) has very largely a counterpart in Art. 8(1)(b), Art. 7(b) in Art. 8(1)(a), Art. 7(c) in Art. 8(1) (c) and Art. 7(d) in Art. 8(2). 27 Art. 99(1)(a) and (c) CESL. 28 Art. 4(1)(a) COM(2015) 635 final. 29 Art. 99(1)(a) CESL. 30 Art. 2(2)(a) CSD. For a summary of the contents of the description criterion under the Consumer Sales Directive cf. Martens in: Jansen/Zimmermann, Art. 18:203(2), mn. 8.

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that it would be sufficiently concrete that the existence or non-existence of such statement could be proven by one or the other contractual party. 26 The so-called aliud, i.e. the supply of a digital content or digital service different from the one agreed by the parties, falls also under the subjective conformity requirement of ‘description’.31 In a number of Member States a distinction is made between a lack of conformity and the delivery of an aliud.32 A decision on this question is necessary for among other reasons, because the Digital Content Directive contains two different remedies. This means that in case of supply of digital content or a digital service which is different from that which was agreed, the remedies for non-conformity of Art. 14, not the remedy for the failure to supply according to Art. 13, will apply. The practical results of the remedies are likely to be similar. Bringing the supply of an aliud into conformity according to Art. 14(1) would mean the supply of the initially agreed digital content or digital service, which is the same result as the remedy of Art. 13(1) 1 st sentence. The only difference are the other conditions [Arts 13 and 14(3)]. The possibility for the consumer to choose price reduction or termination if the trader has not supplied the initially agreed digital content or digital service [according to Art. 14(3) and 4(a)] gives the consumer somewhat more flexibility than the termination right according to Art. 13. 27 As with the Consumer Sales Directive, one of the influences on the choice of the notion of conformity was the fact that the introduction of such a – for the time – modern notion would render irrelevant33 the distinction between a lack of conformity (triggering remedies for a lack of conformity) and an aliud, (leading to the general regime for nonperformance). The DCFR as the basis for the CESL34, which was the source for the first group of conformity criteria in Art. 7(a), had already abandoned this distinction.35 In both the Digital Content Directive and the Sale of Goods Directive, independently of the fact that the Digital Content Directive contains a remedy for failure to supply while the Sale of Goods Directive does not, it is desirable that the solution as to the notion of conformity is the same. The main reason to abandon this distinction is to avoid its complexity36. Abolishing it would make the application of the law easier in practice. 28 The ‘quantity’ criterion is in practice less pertinent for a digital content or digital service than it is for goods. It may however still be relevant; the second sentence of Recital 42 provides the example of the number of music files. Other examples could be the number of copies available to the consumer, the number of access keys, or a license allowing use on a specific number of devices.

31 Jansen/Stijns, p. 83 agree as regards to the corresponding provision under the Commission Proposal for an Online Sales Directive, while referring indistinctively to ‘quantity, quality and description’. 32 As to the different approaches in national laws see von Bar/Clive, Art. IV.A.–2:301 DCFR, notes I. 14.–17. 33 Staudenmayer, p. 34. Cf. also the Commission Proposal for the Consumer Sales Directive, COM (95) 520 final, 11. This is the same situation in the CISG (Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 4, 11); the conformity approach of the Consumer Sales Directive was based on the conformity concept of the CISG. 34 Zoll in: Schulze (2012), Art. 99, mn. 21 argues also for including the aliud under the relevant provision of Art. 99(1)(a) CESL. 35 von Bar/Clive, Art. IV.A–2:301 DCFR, Comment E. 36 cf. von Bar/Clive, Art. IV.A.–2:301 DCFR, note III. 16. as to the difficulties using this distinction in different laws.

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The ‘quantity’ criterion would become operational in two variants, namely if less quantity or a higher quantity of a digital content, than agreed in the contract is supplied. Both constitute a lack of conformity according to Art. 7(a).37 The category of less quantity than agreed does not cover the case of the digital content or digital service not being supplied at all. As already explained38, this is covered by the provisions on the supply and the remedy for failure to supply.39 The Digital Content Directive does not contain provisions on the obligations of the consumer. Therefore, it does not contain rules on an obligation to take supply of digital content or digital services comparable to Art. 130 CESL or Art. 52(2) CISG. The questions whether the consumer has to accept the supply of a quantity less than agreed or whether the consumer may retain or refuse the higher quantity than agreed and what are the consequences if he retains excess quantity, are regulated [according to Art. 3(7)] by national general contract law40. If however, the consumer retains the excess quantity delivered, this no longer can be considered a lack of conformity.41 Subject to the existence of more specific or different rules in national general contract law, this should be considered an acceptance on the side of the consumer of a new offer by the trader of conforming digital content or digital service which goes beyond the terms of the initial contract. The consequence would be that the consumer would need to pay for the excess quantity.42 The criterion of ‘quality’ refers to the way in which the features of the digital content or digital service perform according to their functions and purpose. Whether the consumer uses the features of the digital content or digital service in question is irrelevant; they would have to perform according to the required standard. The second sentence of Recital 42 provides certain practical examples, such as picture resolution, language and version agreed in the contract. b) Functionality, compatibility and interoperability. Art. 7(a) also adds the criteria of functionality, compatibility and interoperability, which are specific to digital products and stem (either as a criterion or in substance) from the Commission Proposal for a Digital Content Directive 43. They are also used in the Sale of Goods Directive, principally in order to cover goods with digital elements. The respective definitions of these terms44 are, like all other definitions, specific to the purpose of these Directives. At the time of the adoption of the Digital Content Directive, they were not identical with the notions of functionality and interoperability used in the Consumer Rights Directive45 and they are not identical with the relevant technical

37 So already for the supply of less quantity in the Commission Proposal for a Digital Content Directive, Faber (2016), p. 102 and for the supply of an excess quantity Jansen/Stijns, p. 84 as regards to the corresponding provision under the Commission Proposal for an Online Sales Directive. In the CISG the situation is comparable, see Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 6, 8. 38 → Art. 6 DCD, mn. 3. 39 → Art. 13 DCD, mn. 15. 40 As to the different approaches in national laws see von Bar/Clive, Art. IV.A.–3:105 DCFR, notes II. 4.–6. 41 See already for the situation under Art. 99(1)(a) CESL Zoll in: Schulze (2012), Art. 99, mn. 17. 42 This is also the solution of Art. 130(4) CESL and Art. 55(2) 2 nd sentence CISG. 43 Art. 6(2) COM(2015) 634 final. 44 In Art. 2 Nos 10–12. 45 Recital 19 of the initial version of the Consumer Rights Directive. However, the amended version of the Consumer Rights Directive aligns the definitions of compatibility, functionality and interoperability to the Digital Content Directive in Art. 2 Nos 19, 20 and 21 CRD. See Art. 4(1)(e) Modernisation Directive.

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standards of compatibility and interoperability46. They describe certain purposes or expectations which are relevant for the determination of conformity, i.e. that the respective products perform their functions (functionality), either with the usual hard-/software (compatibility) or with alternative hard-/software (interoperability).47 The definition of the functionality criterion in Art. 2 No. 1148 refers to the ability of the digital content or digital service to perform its functions in the light of its purpose. As this criterion is included among the subjective conformity criteria of Art. 7, the contents of the respective functions as well as the purpose element would be derived from the contract. Recital 43 includes the example of the absence of technical restrictions, such as protection via Digital Rights Management (DRM) or region coding. This reference in the Recital is an attempt by the legislator to be consistent with Recital 19 CRD which explains the term of functionality used in the Consumer Rights Directive, even if the explanations are not identical. In the Commission Proposal for a Digital Content Directive, which was based on a subjective conformity approach, the substance of what are now the criteria of compatibility and interoperability were covered under the term ‘interoperability’. This referred to ‘the ability of digital content to perform all its functionalities in interaction with a concrete digital environment’.49 In Council, this notion was split into two different criteria: compatibility and interoperability. Their commonality, stemming from the Commission Proposal for a Digital Content Directive, is that they both refer to ‘the ability of the digital content or digital service to function with hard- or software’. The element which distinguishes them is whether they function in interaction with the usual soft- or hardware or a different one. The latter distinction is significant, since interoperability is included only among the subjective conformity criteria, i.e. it applies only where it has been agreed under the terms of the contract. Compatibility, however, is mentioned among both subjective and objective conformity criteria, i.e. it is the norm. The definition of the compatibility criterion in Art. 2 No. 1050 refers to the ability to function with the hard- or software with which digital content or digital service of the same type would normally be used. Compatibility is therefore relevant for example to the question of whether a digital game can be played on an Xbox, whether an e-book can be read on an iPad or whether a CD with music, or a DVD can be used on different players and a computer. The interoperability criterion, defined in Art. 2 No. 1251, refers to the ability to function with the hard- or software different from those with which digital content or digital service of the same type would normally be used. The reason why the legislator included interoperability (only) in Art. 7(a) [and not in Art. 8(1)(b)] is that without a contractual commitment as pre-supposed in Art. 7, it would be excessive for a trader to guarantee that the digital content or digital service must function with a type of hard- or software that the trader did not anticipate to work with the digital content or digital service sold.

46 IEEE 610.12 – 1990, adapted by ISO /IEC/IEEE 24765:2010. However, the last sentence of Recital 43 adds the relevant substance from the ISO standard of interoperability in the element of functioning used in the definition of interoperability in Art. 2 No. 12. 47 Schulze (2019), at 712, sees the integration of these concepts as a sign for taking into account in European contract law more strongly the interplay of digital content and digital services with the digital environment. 48 → Art. 2 DCD, mn. 39 et seq. 49 Art. 2 No. 9. 50 → Art. 2 DCD, mn. 48 et seq. 51 See also Recital 43. → Art. 2 DCD, mn. 48 et seq.

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By the final reference to ‘other features’, Art. 7(1)(a) indicates that the enumeration 39 of elements, despite being fairly comprehensive, is not exhaustive. Other features could be security52, accessibility and continuity, as mentioned in Art. 8(1)(b). Art. 7 does not contain a provision corresponding to Art. 8(4) which determines that 40 in cases a digital content or digital service is provided over a period of time, it shall be in conformity throughout the duration of that period. As the relevant Recital 51 does not make the distinction between a digital content or digital service provided in a single act of supply or a series of individual acts on the one hand and a continuous supply over a period of time on the other hand,53 it has been argued that Art. 8(4) should also apply in the case of Art. 7.54 The Commission Proposal for a Digital Content Directive included a provision corresponding to Art. 8(4) in the single article dealing with subjective and objective conformity.55 Such an interpretation by analogy is not necessary because there is no gap. The application of Art. 7 probably in most, if not all, cases comes to the same result. The period during which the digital content or digital service provided over a period of time will need to perform its functions is determined, as a matter of principle, by the contract. As mentioned earlier,56 the subjective conformity criteria need to be read together 41 with the respective clauses in the objective conformity criteria in Art. 8(1), in this case point (b), and Art. 8(5). If the contract foresees a duration shorter than the period foreseen in Art. 8(4), this could only be done under the conditions of Art. 8(5).

2. Agreed purpose Art. 7(b), which refers to a particular purpose agreed between the consumer and the 42 trader is a provision stemming from the second presumption of the Consumer Sales Directive57 and from the objective conformity criterion of the CESL58. It differs from the CESL which also applied to B2B contracts and had therefore used drafting originating from the CISG59. The Digital Content Directive has retained from the Consumer Sales Directive the requirement that the seller has to agree to the particular purpose communicated by the consumer. The Commission Proposal for a Digital Content Directive60 had taken this require- 43 ment over among the subjective conformity criteria and the legislator retained it there, almost without any changes to the wording. A classification as subjective conformity criterion is more appropriate61 since Art. 7(b) includes the offer and the acceptance. The former is described as the consumer making known the purpose to the trader and the latter is explicitly mentioned by Art. 7(b).

See Recital 42. This distinction is used for the period during which updates need to be provided, the legal guarantee period and the period for the shift of the burden of proof. See → Art. 8 DCD, mn. 99 et seq., → Art. 11 DCD, mn. 15 and → Art. 12 DCD, mn. 3. 54 Faber (2019), p. 77 et seq. 55 Art. 6(3) COM(2015) 634 final. 56 Above → mn. 22. 57 Art. 2(2)(b) CSD. For an overview of national rules see von Bar/Clive Art. IV.A.-2:302 DCFR, notes I. 5.–9. 58 Art. 100(a) CESL. 59 Art. 35(2)(b) CISG. 60 Art. 6(1)(b) COM(2015) 634 final. 61 Accordingly Zoll in: Schulze (2012), Art. 100, mn. 1, considers it as part of those criteria where the intention of the parties has been communicated to the counterpart, without drawing the conclusion of its more subjective nature. 52

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The legislator only added that the consumer had to communicate the particular purpose ‘at the latest’ at the time of conclusion of the contract, thereby clarifying that it could also be done before. It does not matter how the consumer communicates the particular purpose to the trader or even how clear the communication of the consumer is. 62 Neither the Consumer Sales Directive, the CESL nor the Digital Content Directive contain the clarification in Art. 35(2)(b) CISG, namely that the consumer makes the particular purpose known ‘expressly or impliedly’, but the result is the same. Provided that the trader understands it, the acceptance by the trader is the key criterion. While Art. 7(b), unlike the CESL but in common with the Consumer Sales Directive, explicitly mentions the acceptance by the trader, it does not require, as for instance Art. 8(5) that the trader needs to accept explicitly the consumer’s expressed purpose. Therefore, implicit acceptance by the trader is sufficient. However, the fact that the trader has accepted needs to be established without doubt.63 This also means that to agree the fitness for the particular purpose is part of the contract, not only an underlying understanding.64 45 The ‘particular purpose’ mentioned in Art. 7(b) would be different from ‘the purposes for which digital content or digital services of the same type would normally be used’ in the objective conformity criterion of Art. 8(1)(a). It would concern an uncommon use of application of the digital content or digital service, which would however still be possible to be realised by the digital content or digital service. 46 In most other references to the consumer, the Digital Content Directive has the average consumer in mind. In Art. 7(b), however, it is the individual consumer, who is party to the contract and who requests a particular purpose. As the trader could not foresee this behaviour of an individual consumer, a requirement of ‘acceptance’ on the side of the trader is necessary. 47 Art. 7(b) is another example of the general trend by the legislator to be consistent with the precedent of the Consumer Sales Directive and sales law in general. For the average, standardised digital content or service it would be rare that the consumer requires a particular purpose as mentioned in Art. 7(b), because such standardised digital content or service is mostly sold online where the ability of the consumer to communicate a particular purpose is limited. In addition, it would require a specialised knowledge on the side of the consumer which is possible but unusual. However, the Digital Content Directive applies according to Art. 3(2) also to digital content or digital service developed in accordance with the consumer specifications.65 Art. 7(b) could play a role for the consumer specifications66 or for other individually negotiated contracts.67 44

3. Agreed accessories and assistance 48

Art. 7(c) includes among the subjective conformity criteria accessories, instructions, including on installation, and customer assistance, if and to the extent they are contractually agreed. It has its origin in the CESL68, from where the Commission Proposal for a 62 As regards the Commission Proposal for a Digital Content Directive, Spindler, at 151 et seq., raised doubts. 63 As regards the Commission Proposal for a Digital Content Directive, Spindler points out at 151 that the requirements for establishing acceptance of the trader should not be too low. 64 Wilke, 2437 with reference to the corresponding provision under the Sale of Goods Directive and to the German law and case law under the Consumer Sales Directive. The situation is different under Art. 35(2)(b) CISG; see Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 22. 65 → Art. 3 DCD, m. 35 et seq. 66 This was already indicated by Druschel, p. 276, for Art. 100(a) CESL. 67 As regards the Commission Proposal for a Digital Content Directive pointed out by Wendland, 15. 68 Art. 99(1)(a) and (c) CESL.

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Digital Content Directive69 took it over. While, strictly speaking, the cases covered in point (c) are cases of failure to supply, the Digital Content Directive considers them nevertheless as cases of lack of conformity. The term ‘accessories’ covers all items, be they tangible or in digital form, which may have an impact on the access to or use of the digital content or digital service.70 This could include packaging of digital content supplied on a tangible medium71 (if for instance gift wrapping has been agreed when ordering a music CD or a film DVD). Instructions which are necessary for the consumer to access or use the digital content or digital service are already included in the objective conformity criteria.72 Given the complexity of digital content or digital services, instructions of a different scope and degree of detail might go beyond simply helping the consumer to access or use the digital content or digital service. These might constitute an additional service feature and therefore an additional advantage which parties may agree to include in the contract. The installation of digital content is mentioned as an explicit case of instructions because installation is often necessary for the functioning of the digital content or digital service and therefore an important part of the instructions. While this was not mentioned in the Commission Proposal for a Digital Content Directive, the legislator took this specific emphasis on installation instructions among other instructions over from the CESL73 (which also covered digital content). The criterion of ‘customer assistance’ does not have its origin in the CESL, but for two reasons was included in the subjective conformity criteria of the Commission Proposal for a Digital Content Directive74 and in the Digital Content Directive itself. The first reason aims at maintaining consistency with the Consumer Rights Directive. The Consumer Rights Directive had included the element of customer assistance in its precontractual information requirements75 which become in case of distance and offpremises contracts integral part of the contract76. The second and more important reason is the complexity of digital content or digital services which may make inclusion of customer assistance in the contract an additional selling point. This relevance of the second reason is supported by a comparison with the Sale of Goods Directive. While the Consumer Rights Directive also applies to contracts covered by the Sale of Goods Directive, neither the Commission Proposal for an Online Sales Directive nor the Sale of Goods Directive contain the customer assistance criterion in the subjective or objective criteria. This indicates that the complexity of digital content or digital services, a feature which is less applicable to goods77, was the main reason for including this criterion.

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4. Agreed updates Digital content or digital services are frequently updated or modified albeit to a dif- 53 ferent extent and nature. The Digital Content Directive distinguishes between several

69 Art. 6(1)(c) COM(2015) 634 final. This criterion in the Commission Proposal for a Digital Content Directive was supported by Mak, 16. 70 See Zoll in: Schulze (2012), Art. 99, mn. 24 for the corresponding provision in Art. 99(1)(c) CESL. 71 For more detail on packaging as an accessory → Art. 8 DCD, mn. 83. 72 See therefore Art. 8(1)(c), → Art. 8 DCD, mn. 82. 73 Art. 100(e) CESL. 74 Art. 6(1)(c) COM(2015) 634 final. 75 Art. 6(1)(m) CRD. 76 Art. 6(5) CRD. 77 Albeit one could argue that the complexity argument applies also to goods with digital elements regulated in the Sale of Goods Directive. However, in such a case the parties can always agree to include customer assistance in the contract.

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different modifications of digital content or digital services.78 All of them are related to, and most of them regulated by, conformity provisions. The most fundamental category are the updates mentioned in Art. 8(2)79 which aim at maintaining conformity of the digital content or digital service. Security updates were at the forefront of the legislator’s reasoning.80 In certain cases, foreseeable at the time of conclusion of the contract, it may be necessary to anticipate future updates, which do not maintain, but deviate from the objective conformity criteria and have therefore to be agreed under the conditions of Art. 8(5). Updates as mentioned in Art. 7(d) may have a different quality. The provision of regular software updates can be an important competitive feature for a trader and purchase factor for a consumer. But the modifications may go beyond updates and become upgrades, which change the features of the product or sometimes even transform it. Therefore, if contractually agreed, these constitute a significant subjective conformity criterion.81 The last relevant provision in Art. 19 allows the trader to make other modifications of digital content or digital services. Compared to the Commission Proposal for a Digital Content Directive this provision changed its function. In the Commission Proposal for a Digital Content Directive82 which was based on the subjective conformity approach, its purpose was to limit the possibilities of the trader to agree modifications in advance within the contract. When the legislator changed the conformity approach,83 it was necessary to grant the trader a possibility, despite the requirements of the objective conformity criteria, to undertake changes which were not yet foreseen at the time of the conclusion of contract and go beyond maintaining conformity. As such modifications are very frequently favourable to the consumer, they should be allowed provided that certain conditions are met. The term ‘update’ in Art. 7(d) covers all contractually agreed modifications of the digital content or digital service. As already explained above,84 if such contractually agreed updates go below the threshold of the update obligation in Art. 8(2), this can only be done under the conditions of Art. 8(5). This means that the contractually agreed updates according to Art. 7(d) have to go beyond the requirements of Art. 8(2) or agree under the conditions of Art. 8(5) an update obligation deviating from the requirements of Art. 8(2). Such a contractually agreed update may even go so far as to constitute an upgrade. The latter is confirmed by Recital 44, which speaks not only about ‘updates’ but also about ‘features’. This refers to contractually agreed changes going beyond simple updates and changing the digital content or service in the manner of an upgrade. Updates have to be done ‘as stipulated by the contract’. That contractual stipulation requirement includes both whether updates should be done at all and the modalities of how the updates are done, e.g. the frequency and degree85. Art. 7(d) does not include a provision corresponding to Art. 8(3); the latter does not refer to the former, either.86 This is however not problematic, as the parties can agree in the contract a clause picking up the topic regulated in Art. 8(3). If the parties agree an update going beyond the requirements of Art. 8(2)or agree under the conditions of cf. Recitals 74 et seq. → Art. 8 DCD, mn. 110 et seq. 80 cf. Recital 47. 81 This criterion in the Commission Proposal for a Digital Content Directive was supported by Mak, 16. 82 Art. 15 COM(2015) 634 final. 83 → Art. 6 DCD, mn. 4 et seq. 84 Above → mn. 55. 85 So already for the Commission Proposal for a Digital Content Directive, Faber (2016), p. 109. 86 This has been criticised by Wendehorst, at p. 134, who would like to apply Art. 8(3) also to Art. 7(d). 78

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Art. 8(5)an update obligation deviating from the requirements of Art. 8(2), the parties can also agree modalities different from Art. 8(3). When requiring that updates are done ‘as stipulated by the contract’, Art. 7(d) does 60 not only require that the updates are supplied. The last sentence of Recital 44 confirms that when contractually agreed updates are supplied and it turns out that they are defective or incomplete, such updates are considered a lack of conformity because they are not performed ‘as stipulated by the contract’.

Article 8 Objective requirements for conformity 1. In addition to complying with any subjective requirement for conformity, the digital content or digital service shall: (a) be fit for the purposes for which digital content or digital services of the same type would normally be used, taking into account, where applicable, any existing Union and national law, technical standards or, in the absence of such technical standards, applicable sector-specific industry codes of conduct; (b) be of the quantity and possess the qualities and performance features, including in relation to functionality, compatibility, accessibility, continuity and security, normal for digital content or digital services of the same type and which the consumer may reasonably expect, given the nature of the digital content or digital service and taking into account any public statement made by or on behalf of the trader, or other persons in previous links of the chain of transactions, particularly in advertising or on labelling unless the trader shows that: (i) the trader was not, and could not reasonably have been, aware of the public statement in question; (ii) by the time of conclusion of the contract, the public statement had been corrected in the same way as, or in a way comparable to how, it had been made; or (iii) the decision to acquire the digital content or digital service could not have been influenced by the public statement; (c) where applicable, be supplied along with any accessories and instructions which the consumer may reasonably expect to receive; and (d) comply with any trial version or preview of the digital content or digital service, made available by the trader before the conclusion of the contract. 2. The trader shall ensure that the consumer is informed of and supplied with updates, including security updates, that are necessary to keep the digital content or digital service in conformity, for the period of time: (a) during which the digital content or digital service is to be supplied under the contract, where the contract provides for a continuous supply over a period of time; or (b) that the consumer may reasonably expect, given the type and purpose of the digital content or digital service and taking into account the circumstances and nature of the contract, where the contract provides for a single act of supply or a series of individual acts of supply. 3. Where the consumer fails to install, within a reasonable time, updates supplied by the trader in accordance with paragraph 2, the trader shall not be liable for

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any lack of conformity resulting solely from the lack of the relevant update, provided that: (a) the trader informed the consumer about the availability of the update and the consequences of the failure of the consumer to install it; and (b) the failure of the consumer to install or the incorrect installation by the consumer of the update was not due to shortcomings in the installation instructions provided by the trader. 4. Where the contract provides for a continuous supply of digital content or digital service over a period of time, the digital content or digital service shall be in conformity throughout the duration of that period. 5. There shall be no lack of conformity within the meaning of paragraph 1 or 2 if, at the time of the conclusion of the contract, the consumer was specifically informed that a particular characteristic of the digital content or digital service was deviating from the objective requirements for conformity laid down in paragraph 1 or 2 and the consumer expressly and separately accepted that deviation when concluding the contract. 6. Unless the parties have agreed otherwise, digital content or a digital service shall be supplied in the most recent version available at the time of the conclusion of the contract. Bibliography: Bach, ‘Neue Richtlinien zum Verbrauchsgüterkauf und zu Verbraucherverträgen über digitale Inhalte’ (2019) 24 NJW 1705–1711; von Bar/Clive (eds), Principles, Definitions and Model Rules of European Private Law – Draft Common Frame of Reference (DCFR): Full Edition (Sellier 2009); Colombi Ciacchi/van Schagen, ‘Conformity under the Draft Digital Content Directive: Regulatory Challenges and Gaps’ in: Schulze/Staudenmayer/Lohsse (eds), Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Nomos 2017), p. 99–125; Commission, ‘Proposal for a European Parliament and Council Directive on the sale of consumer goods and associated guarantees’ COM(2015) 634 final; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the online and other distance sales of goods’ COM(2015) 635 final; Dannemann/ Schulze (eds), German Civil Code – Commentary (C.H. Beck 2020); European Law Institute, ‘Statement of the European Law Institute on the European Commission’s proposed Directive on the Supply of Digital Content to Consumers’ (2016); Faber, ‘Bereitstellung und Mangelbegriff ’ in: Stabentheiner/Wendehorst/ Zöchling-Jud (eds), Das neue europäische Gewährleistungsrecht (Manz 2019), p. 63–110; IMCO/JURI, ‘Report on the proposal for a directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ A8–0375–2017, from 27.11.2017; Jansen/Stijns, ‘Proposal for a Directive on Certain Aspects Concerning Contracts for the Online and Other Distance Sales of Goods: Scope of Application, Definitions and Conformity’ in: Claeys/Terryn (eds), Digital Content & Distance Sales – New Developments at EU Level (Intersentia 2017), p. 55–94; Jansen/Zimmermann (eds), Commentaries of European Contract Laws (OUP 2018); Loos et al., ‘Analysis of the applicable legal frameworks and suggestions for the contours of a model system of consumer protection in relation to digital content contracts’ (2011); Mak, ‘The new proposal for harmonised rules on certain aspects concerning contracts for the supply of digital content’ (European Parliament, Directorate General for Internal Policies, Policy Department C in-depth analysis, PE 536.494, 2016); Maultzsch, ‘Der Entwurf für eine EU- Richtlinie über den Online-Warenhandel und andere Formen des Fernabsatzes von Waren’ (2016) 5 JZ 236–245; Metzger, ‘Verträge über digitale Inhalte und digitale Dienstleistungen: Neuer BGB-Vertragstypus oder punktuelle Reform?’ (2019) 12 JZ 577–586; Momberg, ‘Standard Terms and Transparency in Online Contracts’ in: De Franceschi, European Contract Law and the Digital Single Market – The Implications of the Digital Revolution (Intersentia 2016), p. 189–207; Morais Carvalho, ‘Sale of Goods and Supply of Digital Content and Digital Services – Overview of Directives 2019/770 and 2019/771’ (2019) 5 EuCML 194–201; Schlechtriem/Schwenzer (eds), Commentary on the UN Convention on the International Sale of Goods (CISG) (4th edn, OUP 2016); Schulze (ed.), Common European Sales Law (CESL) – Commentary (Nomos 2012); Schulze, ‘Die Digital-Richtlinie – Innovation und Kontinuität im europäischen Vertragsrecht’ (2019) 4 ZEuP 695–723; Sein/Spindler, ‘The new Directive on Contracts for Supply of Digital Content and Digital Services – Conformity Criteria, Remedies And Modifications – Part 2’ (2019) 4 ERCL 365–391; Spindler, ‘Verträge über digitale Inhalte – Anwendungsbereich und Ansätze – Vorschlag der EU-Kommission zu einer Richtlinie über Verträge zur Bereitstellung digitaler Inhalte’ (2016) 3 MMR 147–153; Staudenmayer, ‘Die Richtlinien des Verbraucherprivatrechts – Bausteine für ein europäisches Privatrecht’ in:

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Schulte Nölke/Schulze (eds), Europäische Rechtsangleichung und nationale Privatrechte (Nomos 1999), p. 63–78; Staudenmayer, ‘The Directive on the Sale of Consumer Goods and Associated Guarantees – A Milestone in the European Consumer and Private Law’ (2000) 4 ERPL 547–564; Staudenmayer, ‘EGRichtlinie 1999/44/EG zur Vereinheitlichung des Kaufgewährleistungsrechts’ in: Grundmann/Medicus/ Rolland (eds), Europäisches Kaufgewährleistungsrecht (Heymanns Verlag 2000), p. 27–47; Staudenmayer (ed.), Proposal for a Regulation of the European Parliament and of the Council on a Common European Sales Law, Textbook (C.H. Beck 2012); Staudenmayer, ‘Digitale Verträge – Die Richtlinienvorschläge der Europäischen Kommission’ (2016) 4 ZEuP 801–831; Staudenmayer, ‘Auf dem Weg zum digitalen Privatrecht – Verträge über digitale Inhalte’ (2019) 35 NJW 2497–2501; Wendehorst, ‘Aktualisierungen und andere digitale Dauerleistungen’ in: Stabentheiner/Wendehorst/Zöchling-Jud (eds), Das neue europäische Gewährleistungsrecht (Manz 2019), p. 111–139. Wendland, ‘Sonderprivatrecht für Digitale Güter’ (2019) 118 ZVglRWiss 191–203; Zöchling-Jud, ‘Das neue Europäische Gewährleistungsrecht’ für den Warenhandel’ (2019) GPR 115–133. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Objective conformity criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Fit for purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Performance features reasonably expected by the consumer . . . . . . . . . . . . . . 3. Accessories and instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Trial version . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Reasonable consumer expectations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Version due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Conformity during continuous supply over a period of time . . . . . . . . . . . . . 2. Most recent version . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Updates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Update obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Failure to install . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11 12 16 35 71 84 93 98 99 104 110 111 147 153 153 161

A. Function* Under the umbrella provision of Art. 6, Art. 8 introduces, like Art. 7 SGD, a second 1 set of substantive conformity criteria into the Digital Content Directive. It provides the objective conformity criteria, with which digital content or digital services have to comply. As its statutory requirements have to be fulfilled independently of contractual stipula- 2 tions, Art. 8 contains more important provisions on conformity criteria, compared to the subjective conformity criteria to be found in Art. 7. In addition, the obligation to provide updates constitutes a ground-breaking development in European contract law.

B. Context The Consumer Sales Directive had added a number of presumptions to its subjective 3 conformity principle.1 Under the conditions of Art. 2(2)(a)–(d) CSD, the goods were presumed to be in conformity with the contract. Some of these presumptions also appear in the objective conformity requirements of Art. 8. * This commentary expresses only the personal opinions of the author and does not bind in any way the European Commission. 1 → Art. 6 DCD, mn. 7.

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The first presumptions2 under the Consumer Sales Directive included, alongside compliance with the description given by the seller, the case where the goods must possess the qualities of the goods which the seller has held out to the consumer as a sample or model. At the time of the Proposal for the Consumer Sales Directive in 1996, a similar clause could be found in a number of national laws.3 The CESL also contained the requirement for compliance with sample or models in the objective conformity criteria. 4 The third presumption5 contained the criterion that the goods are ‘fit for the purpose for which goods of the same type are normally used’. This was based on the CISG6 and a condition used in the laws of some Member States7 (for example in s 14(2B) of the English Sales of Goods Act 1979) and the CESL took the provision over among the objective conformity criteria (subject to a slight difference in wording).8 The fourth presumption9 related to the quality and performance which are normal in goods of the same type and which the consumer can reasonably expect, given the nature of those goods. The wording here borrowed from provisions in English and German law. The reference to the reasonable expectations, resembles s 14(2A) of the English Sale of Goods Act 1979 and the clause on ‘the quality and performance which are normal in goods of the same type’, is fairly close to the definition of the so-called ‘Gattungsschuld’ in German civil law10. This presumption was significant at the time of adoption of the Consumer Sales Directive since it introduced a requirement that public statements about the specific characteristics of the goods made by the seller, but also other persons (i.e. the producer or his representative, particularly in advertising or on labelling) are taken into account. Such a clause was new to most civil laws at the time. It considers that a consumer who buys goods mainly according to its brand, for example a car, may not make his choice as a result of direct contractual negotiations with the seller. He may be more influenced by the advertising statements of the producer. Given the consumers’ reliance on such statements, it was considered important to include them in the assessment of conformity with the contract. Only concrete statements were taken into account; mere advertising puffery were not included. However, the final seller was not made liable for all types of statements. Art. 2(4) CSD excluded public statements which the seller could not have known or corrected, or which did not influence the consumer’s decision. Beyond the presumptions in Art. 2(2) CSD, the CESL contained an objective conformity criterion regarding accessories and instructions.11 According to Art. 2(3) CSD there was no lack of conformity if, at the time of conclusion of the contract, the consumer was aware or could not reasonably be unaware of the lack of conformity. This clause had its origin in Art. 35(3) CISG. The second alternative referred to cases where the consumer could not have failed to notice the lack of conformity.12

Art. 2(2)(a) CSD. See the references to examples from national laws given by Martens in: Jansen/Zimmermann, Art. 18:203(2), mn. 9. 4 Art. 100(c) CESL. 5 Art. 2(2)(c) CSD. 6 Art. 35(2)(a) CISG. 7 See further examples given by Martens in: Jansen/Zimmermann, Art. 18:203(2), mn. 11. 8 Art. 100(b) CESL. 9 Art. 2(2)(d) CSD. 10 See § 243 BGB and, for example, Schulze in: Dannemann/Schulze, § 243 BGB, mn. 1 et seq. 11 Art. 100(d) CESL. 12 Already under Art. 35(3) CISG for commercial sales contracts this was understood as going beyond gross negligence and covering only the obvious cases, see Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 37. 2

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Art. 99(3) CESL followed a different approach. It allowed agreement deviating from 9 objective conformity criteria under the conditions of positive consumer knowledge and an acceptance of the goods with the lack of conformity. The Commission Proposal for an Online Sales Directive13 largely followed the model 10 of Art. 99(3) CESL.

C. Explanation The objective conformity criteria are considerably borrowed from the CESL and the 11 Consumer Sales Directive but are adapted to digital content and digital services while containing certain new elements.

I. Objective conformity criteria Compared to the presumptions in Art. 2(2) CSD and the CISG wording14, Art. 8(1) contains a clear obligation of conformity (‘… the digital content or digital service shall …’). The objective conformity criteria in Art. 8(1) contain standards and expectations with which digital content and digital service must comply. Art. 8(1) clarifies that the different objective conformity criteria mentioned in (a)–(d) are cumulative criteria15. Some of them apply only where there are relevant. Art. 8(1)(c) only applies ‘where applicable’ and Art. 8(1)(d) only applies if a trial version was indeed ‘made available by the trader’. Such clarifications were not included in Art. 2(2) CSD and had to be clarified in Recital 8 CSD; Art. 100 CESL only clarified the cumulative nature. In the event that the different objective conformity criteria in Art. 8(1)(a)–(d) reach different results, one would need to give priority to the more specific criteria. This means that Art. 8(1)(d) would receive priority over Art. 8(1)(a) and (b) and Art. 8(1)(b) would have priority over Art. 8(1)(a), while Art. 8(1)(c) would be applied alongside the other criteria.16 The reason that the Digital Content Directive cites the criteria mentioned in (a) to (d) among the conformity criteria of Art. 8, is that they contain objective benchmarks of comparison in contrast to the subjective criteria in Art. 7 which refer to benchmarks agreed by the parties in the contract. The criteria under Art. 8(1)(a) refer to normal use of a digital content or digital service of the same type. Those under Art. 8(1)(b) refer to normal features of a digital content or digital service of the same type which the consumer may reasonably expect17. Those under Art. 8(1)(c) to the accessories and installations which the consumer may reasonably expect and of Art. 8(1)(d) to a concrete trial version made available by the trader.

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1. Fit for purpose Art. 8(1)(a) contains the objective conformity criterion being ‘fit for the purpose for 16 which digital content or digital services of the same type would normally be used’; this

COM(2015) 635 final. Art. 35(2) CISG (‘goods do not conform … unless …’). 15 See ‘and’ at the end of Art. 8(c). 16 cf. for a similar situation under Art. 35(2) CISG Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 13. 17 For the nature of the reasonable consumer expectations as an objectivised criterion below → mn. 93 et seq. 13

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reflects wording from the Consumer Sales Directive18, the CESL19 and the Commission Proposal for a Digital Content Directive20. Following the approach in the CESL and the Commission’s Proposal, it is included among the objective conformity criteria. a) Fitness for the purpose of normal use. Art. 8(1)(a) specifically mentions ‘the purposes’, i.e. all purposes for which digital content or digital services of the same type would normally be used. If there are several purposes for which digital content or digital services of the same type would normally be used, it is not sufficient that it is fit for one or several amongst them. The relevant purpose is the one, for which digital content or digital services of the same type would normally be used. Fitness for an occasional or exceptional use is not required. While Art. 8(1)(b) refers to the reasonable expectations of the consumer, Art. 8(1)(a) does not explicitly mention that the relevant use standard is that of the consumer.21 But given that the consumer is the contractual party for whose use the digital content or service is intended, it can be assumed that indeed the normal use would be the use of the consumer. The benchmark would be the average consumer, i.e. neither the IT-expert nor the consumer lacking completely any digital experience. In the Digital Content Directive (and the Sale of Goods Directive), there are several references to digital content or digital services ‘of the same type’. This notion is used in the objective conformity criteria22 of Art. 8(1)(a) and (b) and in the definitions of compatibility and interoperability23 as well as in the respective Recitals24. It is to be understood in the same way throughout the Digital Content Directive (and, as a matter of principle, also in the Sale of Goods Directive and the conformity criteria in Art. 2(2)(c) and (d) CSD), even if some language versions of the Digital Content Directive (and the Sale of Goods Directive) use a different wording for some instances of ‘the same type’ within one Directive or a wording for ‘the same type’ that diverges from the Consumer Sales Directive in the same language. In order to approach the question of what is meant by the ‘normal use of digital content or digital service of the same type’, one needs to recognise that, compared with goods, the answer is a more moving target. Digital content or digital service as a commodity are still relatively new. Market usages and practices are evolving and evolving fast, especially in view of the very innovative character of the market. Nevertheless, the Digital Content Directive wants to compare with the same type, i.e. it seeks a standardised approach. In addition, it refers to what is ‘normal’, i.e. it seeks an objective approach. When comparing with other digital content or digital services, those digital contents or digital services which share a common purpose of use are relevant. What is ‘normal’, is objectively ascertained and depends on the usages and practices of the average consumer.25 What this means concretely, depends on the purpose of the relevant digital content or digital service category for the normal consumer user group. As regards digital con-

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Art. 2(2)(c) CSD. For an overview of national rules see von Bar/Clive, Art. IV.A.–2:302 DCFR, notes I.

Art. 100(b) CESL. Art. 6(2) COM(2015) 634 final, Art. 5(a) SGD. 21 The situation is less obvious in the commercial sales contract to which Art. 35(2)(a) CISG applies; see Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 17. 22 See also Art. 7(1)(a) and (d) SGD. 23 Art. 2 Nos 10 and 12. See also Art. 2 Nos 8 and 10 SGD. 24 Recitals 43, 45, 48, 53 and 75. 25 cf. Recital 46 which applies according to its wording only to the reasonable test,but can be made instrumental also in this context. 19

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tent26 it would depend on whether it is for instance a digital music file, movie, game or a computer program, and as regards digital service27 whether it is for instance a photo editing software, a data storage facility in the cloud, or social media. For example, if a consumer buys a music file with the song of well-known singer, the purpose of the music file is to listen to it and normal use would not include the ability of the consumer to edit the song by recording changes to the music file. If a consumer for example concludes a contract for the use of storing and editing his photos in the cloud, the normal use of this type of digital service would not include the sharing and interaction with other users of these photos. This is confirmed by the legislator using the terms ‘of the same type’ having their origin in the Consumer Sales Directive, while avoiding the reference to ‘of the same description’, which was contained in the Commission Proposal for a Digital Content Directive and in the CESL. This is part of a general tendency of the legislator to take over wherever possible the wording of the Consumer Sales Directive that had been used in its implementation in national laws. It also clarifies that the comparison in Art. 7(1)(a), is of an objective nature and does not depend on consumer expectations which are used in the different criterion of Art. 7(1)(b). b) Regulatory or other standards. Art. 8(1)(a) also tries to help with the interpretation of the moving target of the ‘normal use’. For this reason, it states that in the assessment whether the digital content or digital service is fit for the purpose for which digital content or digital services of the same type are normally used, any existing Union and national law, technical standards or, in the absence of such technical standards, applicable sector-specific codes of conduct should be taken into account. This is stipulated under the proviso of ‘where applicable’. This means of course firstly that such rules and standards can only be taken into account if and where they exist. It also means however that they apply in the version applicable at the moment when, or during the period during which, conformity is assessed. When applying these different factors to be taken into account, it needs to be kept in mind that they are relevant at two different levels. Firstly, Art. 3(7)–(9) refer in a general [Art. 3(7)] or a specific way [Art. 3(8)–(9)] to sectoral Union law, which must be given precedence. Art. 3(10) refers to national general contract law, regulating among other things, the validity or nullity of contracts, which shall not be affected by this Directive. This means that these rules continue to apply; the consequences of non-compliance with these provisions is regulated in these rules, but not as such in the Digital Content Directive. However, it may be that a non-compliance with these rules constitutes a lack of conformity, but only where the Digital Content Directive conditions for such a lack of conformity are met, since these are intended to harmonise this assessment. Recital 48 DCD is an example for this distinction. The Recital is a response to the question of whether a GDPR infringement constitutes a lack of conformity of the digital content. During the legislative process, a minority in the EP considered whether to treat each infringement of the GDPR as being also a lack of conformity. This idea was not accepted by the Council. Recital 48 explains that a qualification as lack of conformity would depend on the circumstances of each case. It refers to categories and examples when an infringement of the GDPR rules could be considered as subjective or objective lack of conformity. 28 ‘Existing Union and national law’ can also shape what is considered ‘the purpose for which digital content or digital services of the same type would normally be used’. An → Art. 2 DCD, mn. 6 et seq.; → Art. 3 DCD, mn. 42–43. → Art. 2 DCD, mn. 9 et seq.; → Art. 3 DCD, mn. 44–45. 28 cf. Metzger, 581. 26

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example would be the right to make private copies. Art. 3(9) states that the Digital Content Directive should be without prejudice to EU and national copyright law. EU copyright law allows Member States to foresee a levy-based right to make private copies, which can be coupled with a restriction of the numbers of private copies.29 National implementation laws have regulated this differently. In a Member State where national law foresees the right to make private copies, the absence of technical protection measures preventing private copies and therefore retaining the possibility to make private copies would be considered ‘normal use’ according to Art. 8(1)(a). EU copyright law also foresees the right to make a back-up copy of computer programs30 which would consequently be regarded as a normal purpose for which a computer program could be used. Secondly, the wording of Art. 8(1)(a) explicitly states that such regulatory or technical standards or applicable self-regulatory standards should be only ‘taken into account’, when assessing whether the digital content or digital service is fit for the purpose for which digital content or digital services of the same type are normally used.31 This is particularly obvious for industry codes of conduct which cannot replace existing Union laws. Going beyond these more obvious cases, it also means that the determination of whether a specific digital content or digital service is fit for the purpose for which digital content or digital services of the same type are normally used, does not necessarily require the compliance with public law requirements,32 for instance in the area of cybersecurity or even fundamental rights, such as the right to privacy. The non-compliance does not lead as such to a lack of conformity;33 Recital 48 demonstrates this in relation to violations of the right to privacy protected by the GDPR. However, it may be the case if the conditions for a lack of conformity according to Arts 7 or 8 are fulfilled. This does not only refer to Art. 8(1)(a), but could also refer to other cases of non-conformity 34, as demonstrated by Recital 48 where it mentions an example for Art. 8(1)(b). The legislator has amended the choice of the benchmarks from that referred to in the Commission Proposal for a Digital Content Directive35. Art. 8(1)(a) simply refers to ‘technical standards’. It no longer contains the reference in the Commission Proposal to meet ‘international technical standards’. This widens the benchmark include national technical standards.36 On the other hand, the legislator only retained the reference to industry codes of conduct. It did not consider good industry practices37 sufficient and therefore it dropped the respective reference in the Commission Proposal. Technical standards according to Art. 8(1)(a) are standards as referred to in Art. 2 No. 1 European Standardisation Regulation, which means in particular that they are Arts 5(2)(b) and 6(4) 2nd subpara. InfoSoc Directive. Art. 5(2) Computer Programs Directive. 31 Schulze (2019), at 711, sees this as a positive opening towards an adaptation of conformity rules to technological development. 32 This is required in some national laws. For an overview see von Bar/Clive, Art. IV.A.–2:302 DCFR, notes VIII. 29 DCFR. For commercial sales contracts to which Art. 35(2)(a) CISG applies see Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 18 et seq. 33 cf. the example used by Faber, at p. 107, for cars infringing environmental standards. 34 ibid., p. 107, where Faber comes to the same result without invoking Recital 48. 35 Art. 6(2)(b) COM(2015) 634 final. 36 As regards the Commission Proposal for a Digital Content Directive, the question had already been raised by Mak, 18, Spindler, 152, and Faber, p. 112. 37 The Institute of Electrical and Electronics Engineers (IEEE) is a technical professional society – promoting the development and application of electro technology. The technical specifications developed by IEEE, for instance the IEEE Project P2301 – Guide for Cloud Portability and Interoperability Profiles, are not recognised as international standards within the meaning of the European Standardisation Regulation but could have been examples for good practices. 29

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adopted by European, international or national standardisation bodies38. The relevant European standardisation bodies are CEN (Comité Européen de Normalisation; European Committee for Standardization) and CENELEC (Comité Européen de Normalisation Électrotechnique; European Committee for Electrotechnical Standardization); an international one is ISO (International Organization for Standardization). They are independent, non-governmental organisations with a membership of national standardisation bodies. CEN has published more than 16000 European Standards and related documents; ISO has published more than 19000 International Standards and related documents39. Taking into account such technical benchmarks in the assessment of Art. 8(1)(a) has 34 been criticised for a lack of requirements as to the development of such standards, in particular the participation of consumer interests40. While this argument is justified as regards industry codes of conduct which could be used in the absence of technical standards, it has less weight as regards EU and also to a certain extent, international standards41. The applicable EU Standardisation Regulation emphasises the representation of societal interests and societal stakeholders in European standardisation activities 42 and the Commission finances them43.

2. Performance features reasonably expected by the consumer Art. 8(1)(b) requires the compliance with quantity as well as quality and performance 35 features which are normal for digital content or digital service of the same type and which the consumer may reasonably expect. The requirement that product features need to correspond to what is normal for 36 products of the same type and what the consumer may reasonably expect,44 was one that was taken over from the Consumer Sales Directive45. As regards the quantity and the quality/performance features, Art. 8(1)(b) contains two criteria, i.e. that they are normal for digital content or digital services of the same type and that the consumer may reasonably expect them. These are cumulative criteria. This is different from Arts 100(g), 5(2) CESL, which only made reference to reasonable consumer expectations. The legislator did not simply rely on an abstract legal term like the ‘reasonable consumer expectations’ which in itself is already objectivised46, but wanted to frame that criterion by adding further a clearly objective criterion, i.e. what is normal for digital content or digital services of the same type.

See Art. 2 Nos 8–10 European Standardisation Regulation. Examples of international technical standards in the domain of cloud computing are ISO/IEC 19086 on cloud computing service level agreements (SLA) which will include common terminology, metrics (precise descriptions how SLA objectives are measured and reported), requirements (describe what elements should be in SLAs) and security (SLA terms relating to security and privacy) and ISO/IEC 19941 on cloud computing interoperability and portability, specifying interoperability and portability types, the relationship and interactions between these two aspects, and common terminology and concepts. 40 Already as regards the Commission Proposal for a Digital Content Directive, see Spindler, 152; Faber, p. 112, Colombi Ciacchi/van Schagen, p. 120. As regards the Digital Content Directive see Schulze (2019), 711 et seq. 41 For an overview of consumer interests in ISO standardisation see https://www.iso.org/files/live/sites/i soorg/files/archive/pdf/en/standardsandconsumer.pdf (accessed 2 November 2019). 42 Art. 5 and Recitals 17, 19, 34. 43 Arts 16(d), 17(4)(b), 24(1)(b), Annex III 2. and Recitals 22, 41 European Standardisation Regulation. 44 In Art. 8(1)(b) DCD, Art. 7(1)(d) SGD. 45 Art. 2(2)(d) CSD. For an overview of national rules see von Bar/Clive, Art. IV.A.–2:302 DCFR, notes I. 21.–27. 46 Below → mn. 93 et seq. 38

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The criterion of the ‘quantity’, which is normal for digital content or digital services of the same type and the consumer may reasonably expect, is less pertinent to digital content or digital service than it is for goods. It may nevertheless be relevant; the second sentence of Recital 42 (albeit, strictly speaking, applicable to the quantity criterion in the context of subjective conformity) gives as an example the number of music files. Other examples could be the number of copies available to the consumer, the number of access keys, or the number of devices on which the digital content or digital service can be used. The ‘quantity’ criterion would be relevant in two ways, namely: less quantity or higher quantity. Both may constitute a lack of conformity according to Art. 8(1)(b). 47 The category of less quantity than that agreed does not cover the case of the digital content or digital service not being supplied at all. As already explained,48 this is covered by the provisions on the supply and the remedy for failure to supply.49 The Digital Content Directive does not contain provisions on the obligations of the consumer. Therefore, it does not contain rules regarding the obligation to take supply of digital content or digital services comparable to Art. 130 CESL or Art. 52(2) CISG. The issue of whether the consumer has to accept the supply of a quantity less than agreed or whether the consumer may retain or refuse the higher quantity than agreed and the consequences if he retains excess quantity, are regulated [according to Art. 3(7)] by national general contract law50. If however, the consumer retains the excess quantity delivered, this no longer can be considered a lack of conformity.51 Subject to the existence of more specific or different rules in national general contract law, this should be considered an acceptance on the side of the consumer of a new offer by the trader of conforming digital content or digital service which goes beyond the terms of the initial contract. The consequence would be that the consumer would need to pay for the excess quantity.52 The criterion of ‘qualities and performance features’53 refers to the manner and the extent that the digital content or digital service can perform its functions and purpose. Whether the consumer uses the features of the digital content or digital service in question is irrelevant; they would have to perform according to the required standard. The second sentence of Recital 42, (albeit, strictly speaking, applicable to the quality criterion in the context of subjective conformity) provides certain practical examples, such as picture resolution. Another could be the sound quality of a digital audio or music file. The obligation that the quality has to be ‘normal’ for digital content or digital service of the same type means that the digital content or digital service does need not be of a superior quality but equally means that inferior quality would be unacceptable. The digital content or digital service in question is required to have the average quality of the same type. In light of fast technological progress, the simple fact that a more developed product of the same type is put on the market, does not create a lack of conformity of the digital content in question. The question of the consequence of technological progress is 47 So already for the supply of less quantity in the Commission Proposal for a Digital Content Directive, Faber, p. 102 and for the supply of an excess quantity Jansen/Stijns, p. 84 as regards to the corresponding provision under the Commission Proposal for an Online Sales Directive. In the CISG the situation is comparable, see Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 6, 8. 48 → Art. 6 DCD, mn. 3. 49 → Art. 13 DCD, mn. 15. 50 As to the different approaches in national laws see von Bar/Clive, Art. IV.A.–3:105 DCFR, notes II. 4.–6. 51 See already for the situation under Art. 99(1)(a) CESL, Zoll in: Schulze (2012), Art. 99 CESL, mn. 17. 52 This is also the solution of Art. 130(4) CESL and Art. 55(2) 2 nd sentence CISG. 53 As regards the Commission Proposal for a Digital Content Directive, Mak, 16 et seq., calls it a concept of an ‘open-textured nature’ because quality standards do not yet exist.

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answered by Art. 8(6). While this provision requires that the most recent version at the time of the conclusion of the contract has to be provided, it also follows from this requirement that it is sufficient in terms of conformity, for this version to be supplied. 54 It needs to be emphasised that the quality criterion relates to the digital content or the digital service. It does not relate to its content. For example, if the e-book or digital film purchased is of bad quality from the point of view of the writing, directing or from an artistic point of view, does not amount to lack of conformity leading to the consumer remedies of Art. 14. The Digital Content Directive does not contain a clause equivalent to Art. 6(2)(a) of the Commission’s Proposal, which is based on Art. 100(g) 2nd sentence CESL and differentiates between whether a price has been paid or data has been provided. When the legislator wanted to make such a distinction, it is justified by reasons linked to other factors and specifically indicated, i.e. in the case Art. 14(6). For this provision it was appropriate to make such a distinction. In the Digital Content Directive (like in the Sale of Goods Directive) the right to termination is restricted to a more than minor lack of conformity. However, the Digital Content Directive makes a distinction in relation to cases of the supply of digital content provided against personal data. In these cases, no price is paid and therefore the remedy of price reduction is not pertinent. Since the consumer should not be without remedies at the second level of the hierarchy, this limitation of the termination right to a more than minor lack of conformity should only apply to contracts which foresee the payment of a price. However, the general intention of the Digital Content Directive to extend its scope beyond contracts where a price is paid to contracts where data is provided is a clear indication that there should not be any other differentiations than the one specifically indicated. Therefore, digital content or a digital service supplied against data should fulfil the same standards as if provided against the payment of a price. What is a normal performance feature of a digital content or digital service of the same type depends, as with Art. 8(1)(a), upon a comparison with other digital content or digital service of the same category. When the Digital Content Directive seeks to compare with the same type, it seeks a standardised approach. For this comparison, those digital contents or digital services which share a common purpose of use are relevant. When the Digital Content Directive refers to what is ‘normal’, it seeks also an objective approach. What is ‘normal’, is to be objectively ascertained and depends on the usages and practices of the average consumer.55 Still, as with Art. 8(1)(a), the question of what is normal for digital content or digital service of the same type is, compared with goods, a moving target. Digital content or digital service as a commodity are still relatively new. Market usages and practices are evolving and evolving fast, especially in view of the very innovative character of the market. Art. 8(1)(b) also contains a list of performance features: functionality, compatibility, accessibility, continuity and security. All criteria stem (either as criterion or in substance) from the Commission Proposal for a Digital Content Directive56. In the Proposal, which was based on a subjective conformity approach, the substance of what are now the criteria of compatibility and interoperability [in Art. 7(a)], were covered under the term ‘interoperability’. This referred to ‘the ability of digital content to perform all its 54 Loos et al., 118, mention also an analogy with Art. 6(2) Product Liability Directive. The text of the study is available under https://op.europa.eu/en/publication-detail/-/publication/4fee0cc7-5f4d-46c5-897 b-48844f07f027 (last accessed 4 February 2020). 55 cf. Recital 46 which applies according to its wording only to the reasonable test, but can be made instrumental also in this context. 56 Art. 6(2) COM(2015) 634 final.

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functionalities in interaction with a concrete digital environment’.57 In Council, this notion was split into two different criteria: compatibility and interoperability. Their commonality, stemming from the Proposal, is that they both refer to ‘the ability of the digital content or digital service to function with hard- or software’. The element which distinguishes them is whether they function in interaction with the usual soft- or hardware or a different one. The latter distinction is significant, since it is notable that interoperability is not mentioned among the performance features. Interoperability is only mentioned among the subjective conformity criteria,58 i.e. it is only required if the contract provides for it. This means that the Digital Content Directive for instance does not presume that reasonable consumer expectations would extend to all e-book formats to be readable with any available e-book reader software or all iPhone apps to be able to work with an Android phone.59 One Member State had advocated consistently in Council to include, with regard to e-books provided by a supplier with a strong market position, interoperability as an objective conformity requirement. However, most of the Member States did not consider this as an issue to be regulated in contract law, but rather through productspecific legislation or competition law. The other reason the legislator did not include interoperability among the objective conformity criteria in Art. 8(1)(b) is that it would be excessive to require a trader to guarantee that the digital content or digital service functions with a type of hard- or software that the trader did not anticipate would work with the digital content or digital service. However, compatibility is mentioned in the objective conformity criteria of Art. 8(1)(b), i.e. it is the norm. This distinction and the resulting inclusion of the compatibility criterion and noninclusion of the interoperability criterion in the objective conformity criteria has a significant economic impact. It is the legislator’s differentiated way of dealing with marketing practices that have a ‘lock-in effect’ in which traders try to bind consumers to a particular technology or service. Practices that prevent the use of the digital content or digital service with hardware or software with which digital content or digital service of the same type are normally used and where such use may reasonably be expected, are no longer possible. Other practices, which concern the use of the digital content or digital service with hardware or software with which digital content or digital service of the same type are not normally used or where the consumer may not reasonably expect such use, can be continued under the Digital Content Directive. The respective definitions of the terms ‘functionality’ and ‘compatibility’60 are, like all other definitions, specific to the purpose of these Directives. At the time of the adoption of the Digital Content Directive, they were not identical with the notions used in the Consumer Rights Directive61 and they are not identical with the relevant technical standard of compatibility62. They describe certain purposes or expectations which are relevant for the determination of conformity, i.e. that the respective products perform their functions (functionality) with the usual hard-/software (compatibility). The definition of the functionality criterion in Art. 2 No. 1163 refers to the ability of the digital content or digital service to perform its functions in the light of its purpose. Art. 2 No. 9. → Art. 7 DCD, mn. 33, 36, 38. 59 Examples mentioned by Sein/Spindler, 371. 60 In Art. 2 Nos 10–11. 61 Recital 19 of the initial version of the Consumer Rights Directive. However, the Modernisation Directive aligns the definitions of compatibility, functionality and interoperability to the Digital Content Directive in Art. 2 Nos 19, 20 and 21 CRD. 62 IEEE 610.12 – 1990, adapted by ISO /IEC/IEEE 24765:2010. 63 → Art. 2 DCD, mn. 39 et seq. 57 58

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As this criterion is included among the objective conformity criteria, the contents of the respective functions as well as the purpose element would be derived from a comparison with what is normal for digital content or digital service of the same type and the reasonable consumer expectations. Recital 43 includes the example of ‘the absence or presence of any technical restrictions’, such as protection via Digital Rights Management or region coding. This reference in the Recital is an attempt by the legislator to be consistent with Recital 19 CRD, which explains the term of functionality used in the CRD, even if the explanations are not identical. The definition of the compatibility criterion in Art. 2 No. 1064 refers to the ability to function with the hard- or software with which digital content or digital service of the same type would normally be used. Compatibility is therefore in practice relevant for example65 to the question of whether a digital game can be played on a Microsoft Xbox or Sony PlayStation, whether an e-book can be read on an iPad or a Kindle, whether a music file can be played on an iPod or by Microsoft Media Player, whether music on a CD, or a film on a DVD can be used on different players and on a computer or whether a software requires a certain sound and graphic card or processor speed. The criteria of accessibility, continuity, security are not specifically defined; they can be more easily understood than the previous criteria. Accessibility of digital content or digital services includes providing easy access to the digital content or digital service for the consumer as the contractual party. This may be caused by technical problems, for instance when downloading digital content or accessing it from the cloud, or by technical protection measures in the context of Digital Rights Management.66 Technical protection measures can take a variety of forms, e.g. the digital content or digital service can only be used in certain areas, at certain times or for a limited number of occasions. If restrictions of access caused by technical protection measures are not normal for digital content or digital service and do not correspond to reasonable consumer expectations, but stem from intellectual property rights restrictions imposed by the rightholder, they cause a dilemma for the trader, which was one of the reasons for the initially subjective conformity approach of the Commission’s Proposal for a Digital Content Directive67. On one hand, the trader is bound by the restrictions imposed by the rightholder, on the other hand by the obligation in Art. 8(1)(b). The legislator took this dilemma into account in Art. 8(5)68 and Art. 1069.70 This notion may also refer to access for consumers with sensory or cognitive impairments or consumers who rely on adaptive and assistive technologies like screen magnifiers. The criteria for what is ‘normal’ for digital content or digital service of the same type and what the consumer may reasonably expect act here as a qualifier. The benchmark cannot cover all special needs but rather demonstrates the degree of accessibility of the average digital content or digital service of the same type and for the average consumer. 71.72 The ‘continuity’ element refers to the requirement that the qualities and performance features of the digital content or digital service are to be provided without interruption. In this context, one also needs to consider that this concerns digital content or digital → Art. 2 DCD, mn. 48 et seq. Most of these examples are taken from Loos et al., 116. 66 See Loos et al., 109 et seq. 67 → Art. 6 DCD, mn. 22 et seq. 68 Below → mn. 156. 69 → Art. 10 DCD, mn. 2 et seq. 70 cf. also Recitals 53 et seq. 71 → Art. 10 DCD, mn. 2 et seq. 72 cf. also Recitals 53 et seq. 64 65

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service which by nature may not be completely continuous. One can conclude from Recital 51 that interruptions of a negligible quality or duration73 or those which occur only on a singular basis do not lead to interruptions which would contradict continuity. Short term interruptions that are more than negligible or recur would constitute a lack of conformity according to Art. 8(1)(b) under the element of ‘continuity’. The ‘security’ criterion can relate to a general cybersecurity dimension, i.e. protecting the digital content or digital service itself as well as the consumer’s digital environment against cyber-attacks aiming at accessing, changing or destroying data or even hardware. In addition, it can also refer to more specific risks related for instance to personal data or digital payment processes. Unlike Art. 7(1)(a), Art. 8(1)(b) does not include an explicit reference to ‘other features’. However, the list of features in Art. 8(1)(b), despite being fairly comprehensive, is not exhaustive either (as indicated by the word ‘including’). Art. 8(1)(b) does not restrict itself to the criterion of performance features which are normal for the same type but adds the cumulative requirement of reasonable consumer expectations. What the consumer may reasonably expect, is an abstract legal term which is used several times in the Digital Content Directive and in particular in the objective conformity criteria.74 Its meaning and therefore the question whether, and to what extent, performance features can be reasonably expected will depend on the nature of digital content or digital service that is the subject of the contract. It is therefore difficult to describe this in a general way. It covers at least those performance features necessary for the consumer to access and use the digital content or digital service according to its purpose. It follows from the structure of Art. 8, i.e. the relationship between Art. 8(1)(b) and (6)75, that the consumer cannot reasonably expect a more recent version of the digital content or service to be provided as part of the performance features. To an even greater extent than the criterion defining what a digital content or digital service of the same type is, this criterion of ‘the reasonable consumer expectations’ is developing. The fast-evolving innovative nature of the market and technology for the different digital contents or digital services, a high level of product differentiation and varying licensing practices and conditions are elements of this development.76 In order to cater for the interpretation and application of the variable character of the ‘performance features …, normal for digital content or digital services of the same type’ and the abstract legal term of reasonable consumer expectations, Art. 8(1)(b) provides additional help. As in the Consumer Sales Directive77, it refers to the nature of the digital content or digital service and to public statements made by persons in earlier links of the transaction chain, so as to use them to assess both criteria, in particular, ‘reasonable consumer expectations’. The first assessment element of the ‘nature’ of the relevant digital content or digital service depends on the category, and within this category, of the product or service in question. For digital content it would depend for instance whether it is a digital music file, movie, game or a computer program, for digital service, whether it is for instance a photo editing software and data storage facility in the cloud or social media. The normal performance for each of these different categories varies and can scarcely can be deBelow → mn. 102. Below → mn. 93 et seq. 75 Below → mn. 104 et seq. 76 See Loos et al., 104. As regards the Commission Proposal for a Digital Content Directive Mak, 15 was of the opinion that for this reason objective benchmarks for this assessment are usually not available. 77 Art. 2(2)(d) CSD. 73

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scribed in a general manner. If, for example, a consumer buys a digital movie, its natural function is to be watched, not to be edited. In case of a data storage facility in the Cloud, its natural function is storage not interaction with the data. In contrast, for social media interaction would be inherent to its ‘nature’ as a service. The reference to ‘the nature of the digital content or digital service’ takes into account 63 a concern which, among others, initially lead the Commission in its Proposal to adopt a subjective conformity approach, i.e. the case of the so-called beta versions. The same reference to ‘the nature of the goods’ in the context of the sales of traditional goods in the Consumer Sales Directive 78 and now in the Sale of Goods Directive 79, allows the seller to sell in particular second-hand goods. These are used and have therefore suffered from a certain depreciation. Without being able to take into account the depreciation of second-hand goods, the seller would always be burdened with the liability for remedies. Instead, the element of the ‘nature’ of the goods includes the fact that they are second-hand and therefore may not be in a comparable shape to brand new goods. As digital content is not subject to depreciation, this reasoning does not play a role in the Digital Content Directive. However, a comparable case, to a certain extent, can be found in the area of digital content and digital services, the so-called ‘beta version’. Before its release, software goes through different development stages. A beta version is a version of a software which works already in its main functions, but is not yet finalised because it has not been tested for defects. This testing is often done by end-users who give feedback to the developer. If digital content or a digital service is supplied as a beta version, the nature of the digital content or a digital service is qualified as not yet fully tested and therefore capable of displaying dysfunctions. This influences, i.e. therefore lowers the reasonable expectations of a consumer as to the quality and performance features, comparable to the quality difference between brand new and second hand goods.80 It is therefore not necessary to recur to the waiver possibility of Art. 8(5). Applying the latter provision to beta versions would be difficult anyway, as it is precisely the point of beta versions that specific defects, i.e. ‘a particular characteristic of the digital content or digital service’ in the words of this provision, are not yet known. In the Consumer Sales Directive, public statements were included as an assessment 64 element, because they are an important basis for the consumer’s transaction decision. 81 Therefore, and for reasons of consistency with the Consumer Sales Directive, the Digital Content Directive adopts such element. While the Consumer Sales Directive refers to statements of ‘the seller, the producer or his representative’, the Digital Content Directive (and the Sale of Goods Directive) take into account the statements of the trader and those of ‘other persons in previous links of the chain of transactions’. Compared to the Consumer Sales Directive, the Digital Content Directive wording has the advantage of covering the entire value chain.82 It results from the wording that it is not necessary that the other persons in previous links of the chain act on behalf of the trader. When Art. 8(1)(b) uses the terms ‘the chain of transactions’ what it has in mind is the chain of transactions which specifically concern the digital content or digital service supplied by

See also Recital 8. Art. 7(1)(d). 80 Faber, at p. 87, 89, comes to the same result, but links it to the criterion ‘of the same type’. 81 Staudenmayer (2000), p. 35. 82 Already for the Commission Proposal for a Digital Content Directive, Faber, at p. 115, was arguing to include companies in the same conglomerate and with the same corporate identity as the trader. 78 79

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the trader to the consumer. It therefore does not include public statements, for instance by persons in previous links which are not in charge of the territory of the consumer. 83 The conditions that were used in the Consumer Sales Directive84 for determining when a trader/seller is not liable for such public statements are also included.85 Both the Consumer Sales Directive and the Digital Content Directive require the seller to ‘show’ one of the elements. This is an expression of the general principle of the burden of proof being on the party seeking to rely on the element in question; it is up to the trader to prove one of these elements. As to the three conditions (i)–(iii) in Art. 8(1)(b), which were taken over from the Consumer Sales Directive,86 they describe three different categories. In a simplified manner of describing these categories, the first case (i) deals with a lack of knowledge of the trader, in the second case (ii) the trader has done something with that public statement and the third case (iii) has to do with the decision-making process of the consumer. Art. 8(1)(b)(i) is fulfilled if the trader did not have positive knowledge about the public statement in question or, when using the diligence required, given the circumstances of the case and the usages and practices of the parties involved,87 could not have known about it. Art. 8(1)(b)(ii) is in substance identical to Art. 2(4) 2 nd indent CSD. In addition to the text of the Consumer Sales Directive, the Digital Content Directive (and the Sale of Goods Directive) describe the way in which the statement is to be corrected. The requirement for the correction to take place ‘in the same way’ or ‘in a way comparable to how, it had been made’ aims to ensure that the correction reaches the same target audience as the initial public statement. Art. 8(1)(b)(ii) does not require that the individual consumer who is a party to the contract became aware of the correction. In the system of Art. 8(1)(b), questions of how knowledge of the consumer influences his decisions are dealt with by (iii). The condition of Art. 8(1)(b)(iii) could be fulfilled if the trader shows that the individual consumer did not have knowledge of the initial public statement, did not care about the initial statement or it had been corrected in a way which does not meet the requirements of point (ii) but the individual consumer became aware of the corrected statement. It is not necessary for (iii) that the public statement in question is no longer available on the market,88 as, in the system of Art. 8(1)(b), (ii) deals with a case category in which the trader has done something with the public statement in question while (iii) focuses on the decision-making process of the consumer. It follows from the structure of Art. 8 and the relationship of Art. 8(1) with Art. 8(5), that the public statements cannot lower the conformity standard required by Art. 8(1) (b). This can only be done under the conditions of Art. 8(5). The public statements can however raise the benchmark. This is confirmed by the exceptions in (i)–(iii), the aim of which is clearly to prevent in certain cases that the trader is made liable to a greater extent by promises given by other parties in the chain of transactions. 83 Maultzsch, 240, saw a legal uncertainty for such an example as regards the corresponding provision in the Commission Proposal for an Online Sales Directive. 84 Art. 2(4) CSD. 85 Art. 8(1)(b)(i)–(iii). 86 Art. 2(4) CSD. 87 While Recital 46 does not directly concern the case of Art. 8(1)(b)(i), some of its elements describing the ‘reasonableness’ test can be used. 88 Differently Maultzsch, 240, as regards the corresponding provision in the Commission Proposal for an Online Sales Directive, with references to the doctrinal debate on this point on the German implementation of the Consumer Sales Directive.

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3. Accessories and instructions The objective conformity criterion of Art. 8(1)(c) concerning accessories and instructions which the consumer may reasonably expect, was taken from the Commission Proposal for an Online Sales Directive89 which was based on the objective conformity criteria mentioned in the CESL90. The term ‘accessories’ covers all items, be they tangible or in digital form, which may have an impact on the access to or use of the digital content or digital service.91 A category of accessories could be specific hardware which is necessary to use the digital content or service as intended. This could be for instance an external authentication device in cases where the digital content or digital service requires the consumer to log in by means of a unique PIN code, randomly generated for each individual login by such a device. The tangible medium which serves exclusively as a carrier of digital content supplied on it, is not an accessory according to Art. 8(1)(c). It follows from Art. 3(3) 92 that the digital content with the tangible medium which serves exclusively as its carrier for its supply is the object itself of the contract. Some of the accessories may also have a value of their own and may be sold separately. However, if the consumer may reasonably expect to receive them with the digital content or digital service at stake, their supply is part of the objective conformity and they are likely to be included in the price calculation made by the trader. Instructions were already included in the objective conformity criteria of the Commission Proposal for an Online Sales Directive93 and of the CESL. Given the complexity of digital content or digital services, instructions are in fact more than a selling point and an additional advantage, which parties should agree in the contract.94 In contrast to many traditional goods, instructions are frequently necessary for accessing or using digital content or digital services and are therefore also included in the objective conformity criteria of the Digital Content Directive.95 Although installation instructions are mentioned as a specific case among other instructions in Art. 7(c), they are not mentioned explicitly in Art. 8(1)(c). They could however be covered since Art. 8(1)(c) refers to ‘any’ instructions. Where installation by the consumer is a precondition for the functioning of the digital content or digital service or it is necessary for installing the updates foreseen in Art. 8(2), installation instructions would normally be an important part of the instructions and therefore something ‘the consumer may reasonably expect to receive’. The same applies to integration instructions. The fact that integration instructions are dealt with in Art. 9(b) does not mean they cannot be covered by Art. 8(1)(c). As explained immediately below, Art. 9(b) concerns shortcomings in the integration instructions, while Art. 8(1)(c) ensures that integration instructions are in fact provided. Art. 8(1)(c) does not specifically state which accessories or instructions concretely are meant but instead requires that the consumer would have to ‘reasonably expect them’. Art. 5(b) COM(2015) 635 final. Art. 100(e) CESL. For an overview of national rules see von Bar/Clive, Art. IV. A.–2:302 DCFR, notes I. 16.–20. 91 See Zoll in: Schulze (2012), Art. 99 CESL, mn. 24 for the corresponding provision in Art. 99(1)(c) CESL. 92 → Art. 3 DCD, mn. 67 et seq. 93 Art. 5(b) COM(2015) 635 final. 94 See therefore Art. 7(c) → Art. 7 DCD, mn. 50. 95 As the Commission Proposal for a Digital Content Directive, Faber, p. 108 had argued for their inclusion among the objective conformity criteria. 89

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This is an abstract legal term which is used several times in the Digital Content Directive and in particular in the objective conformity criteria.96 Its meaning and therefore whether and to what extent accessories and instructions need to be provided, will depend on the kind of digital content or digital service that is the subject of the contract. It is therefore difficult to generalise its contents. It covers at least those accessories and instructions which are necessary97 for the consumer to access or use the digital content or digital service according to its purpose. Art. 8(1)(c) does not contain any explicit requirements as to the content or the way of presentation of the instructions. The wording does not indicate that the reasonable consumer expectations also extend to substantial requirements as to the content or the presentation of the instructions. In addition, Art. 9(b) contains an objective conformity requirement triggering the trader’s liability for incorrect integration of the digital content or digital service due to shortcomings98 in the integration instructions. Recital 52 provides examples for such shortcomings, i.e. incompleteness and a lack of clarity making the instructions difficult to use for the average consumer. This implies that substantial problems of the instructions should be dealt with under Art. 9(b) and its conditions. This is confirmed by what occurred during the legislative process. While the provision on integration of digital content in the Commission Proposal99 contained a reference on the instructions delivered according to the subjective and objective conformity requirements, this reference related only to the fact that they are delivered at all. The relevant cross-referenced provisions among the subjective and objective conformity requirements did not contain language capable of being interpreted as relating to the content or the way the instructions are presented. In particular, they did not include any reference to ‘reasonable consumer expectations’. Further, the legislator removed these references from the Digital Content Directive. Therefore the systematic interpretation of Arts 8(1)(c) and 9(b) permits the conclusion that the ‘reasonable consumer expectations’ in Art. 8(1)(c) can extend only to some fundamental flaws of the instructions that would make it not only difficult, but practically impossible to use the instructions according to their purpose. This could be the case if they are completely incomprehensible. For instance if a digital content developed in China intended for sale in the EU is provided only with instructions in Mandarin. A similar approach would concern the way the instructions are received. For instance, where the digital content itself is provided by way of download from a website, instructions can be considered as received if the consumer is also provided with a link to the same website for downloading the instructions. If however, the consumer needs to undertake disproportionate steps himself to obtain the instructions, for instance to phone the trader (only) during business hours and at the consumer’s own expense, one could not consider the instructions as ‘received’. When comparing Art. 8(1)(c) with Art. 7(c), one notices that the criterion of ‘customer assistance’, which is contained in Art. 7(c), is not mentioned in Art. 8(1)(c). The reason is that the legislator considered the element of customer assistance, where agreed in the contract, to be a competition parameter which has therefore its place among the subjective conformity criteria. It did however not consider it as something which the

Below → mn. 93 et seq. See already for the corresponding provision in the CESL, Zoll in: Schulze (2012), Art. 100 CESL, mn. 13. 98 → Art. 9 DCD, mn. 52 et seq. 99 Art. 7(b) COM(2015) 634 final. 96

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trader was systematically expected to supply with the digital content or digital services in question. When comparing Art. 8(1)(c) with the corresponding Sale of Goods Directive provi- 83 sion100, it is notable that the latter specified packaging among possible accessories. 101 The Digital Content Directive does not contain such a reference to packaging. This is because digital content or digital services will be mostly supplied online, therefore packaging does not play a role. However, that does not mean it cannot be included. Packaging can be an accessory that the consumer may reasonably expect in case of digital content supplied on a tangible medium, for instance a DVD film, where normally it would be supplied in a standard DVD case to avoid scratches. Packaging would certainly be part of the consumer’s reasonable expectations where it is necessary to preserve and protect102 the digital content supplied on a tangible medium.

4. Trial version The objective conformity criterion of compliance with a trial version in Art. 8(1)(d) stems from the Consumer Sales Directive103. The CESL had used the Consumer Sales Directive wording and included the criterion among the objective conformity criteria. 104 The wording of the Commission Proposal for an Online Sales Directive was closely aligned to the Consumer Sales Directive approach; it had included, among the subjective criteria, compliance with samples or models as an example of a description required by the contract. While the Commission Proposal for a Digital Content Directive had not included such a criterion, the legislator adapted the wording to digital content and digital services and retained it among the objective conformity criteria. This is an example of the legislator’s tendency in the Digital Content Directive (and the Sale of Goods Directive) to endeavour to stay close to the Consumer Sales Directive wording, while also borrowing from CESL.105 Examples for such tests versions include situations where a consumer downloads a music file and the trader offers him the possibility to listen to a part of the song before downloading it or a sample of an e-book where the consumer can read a chapter before buying and downloading the entire book. While one can very well include the criterion of the trial version among the objective conformity criteria, the reason the Commission Proposal for an Online Sales Directive included it as a sub-category of the ‘description required by the contract’ among the subjective criteria still persists. The criterion has a certain intrinsic subjective element. 106 If the trial version made available by the trader to the consumer before the conclusion of the contract shows certain dysfunctions, the supplied version does not need to be better. Art. 8(5) does not apply here because in such a case the digital content or digital service does not deviate from the objective conformity requirement of Art. 8(1)(d). The reason why the criterion of Art. 8(1)(d) is included, is that digital content or digital services are often bought online where no direct contact with the trader relevant for the transaction decision, takes place. A trial version may have an important influence on Art. 7(1)(c) SGD. This picks up on the objective conformity criterion in Art. 100(d) CESL. For an overview of national rules see von Bar/Clive, Art. IV.A.–2:302 DCFR, notes I. 13.–15. 102 cf. the requirement in Art. 100(d) CESL. 103 Art. 2(2)(a) CSD. For an overview of national rules see von Bar/Clive, Art. IV.A.–2:302 DCFR, notes I. 10.–12. 104 Art. 100(g) CESL. 105 → Art. 6 DCD, mn. 29 et seq. 106 Morais Carvalho, 198 considers this even as within the subjective conformity criteria. 100

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the consumer’s transaction decision, may it be whether to buy the digital content or digital service at all or which version to choose where there are several. It is therefore appropriate that the conformity of the digital content or digital service is assessed comparing with this trial version. The reason for a trial version to be included among the conformity criteria, i.e. allowing the consumer to test-run the digital content or digital service, also influences the interpretation of the notion of ‘preview’. It should put consumers in a position to examine the object of the contract. A ‘preview’ should be itself a digital content or digital service and should be able to be used accordingly. However, it will be more limited in its features compared to a trial version or the digital content or digital service itself owed under the contract. An example could be a movie trailer which is comprised of selected scenes of the movie. A mere representation of the digital content or digital service, such as a screenshot, should not be understood as a ‘preview’. It would not allow for an examination of the digital content or digital service by the consumer, similarly to a mere photo of a good that would not qualify as a ‘sample or model’ under the Sale of Goods Directive or Consumer Sales Directive either. The trial version must have been ‘made available by the trader to the consumer before the conclusion of the contract’. Making the trial version available means that the consumer would be able to access the trial version and use its features according to the purpose of digital content or digital service in question. It also must be the trader, not the consumer, who makes the trial version available.107 ‘Making available’ does not mean that there is an agreement between the contractual parties; insofar there is no difference to the previous wording (‘held out’) of the Consumer Sales Directive and the CESL, on which Art. 8(1)(d) is based.108 The previous wording of the Consumer Sales Directive and the CESL used a clarification, namely that the seller had held out a sample or model to the consumer. The Digital Content Directive simply speaks about ‘made available by the trader before the conclusion of a contract’ and does not contain the clarification that it would have to be made available ‘to the consumer’. However, since the Digital Content Directive speaks about a trial version which presupposes that the version can be indeed trialled and also presumes that there is a two-person-relationship when referring to the contract, it may be assumed that the trial version will be made available ‘to the consumer’. This would exclude for instance, digital content accessible to the general public simply by way of a picture available online. The provision of Art. 8(1)(d) does not provide room for any statements of the trader which could possibly contradict features of the trial version.109 There is no sign in the wording for this. As to the systematic position of Art. 8(1)(d), it is clear that deviations from this would need to be done under the conditions of Art. 8(5). The purpose of this provision in the conformity rule of a B2C Directive, providing the basis for consumer remedies, does not lend itself to such an interpretation either. Consequently, such statements would be irrelevant. If for instance the trial version is working perfectly, but the trader states that in reality the digital content or digital services has certain flaws, this would not influence the effect of Art. 8(1)(d). The trial version itself would set the relevant standard for conformity.

107 A so-called ‘order sample’ is not accepted in commercial contracts under Art. 35(2)(c) CISG either, see Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 29. 108 Art. 2(2)(a) CSD, Art. 100(c) CESL, in turn based on Art. 35(2)(c) CISG. 109 As it is recognised for a sample ‘without obligation’ under Art. 35(2)(c) CISG for commercial sales contracts, see Schwenzer in: Schlechtriem/Schwenzer, Art. 35 CISG, mn. 28.

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This interpretation based on the wording of Art. 8(1)(d) is confirmed by an historic 92 interpretation. In the legislative process the EP had suggested an amendment110 introducing this conformity criterion which however contained an exception in case ‘the difference between the digital content or digital service supplied and the trial version or preview was brought to the consumer’s attention before the conclusion of the contract’. However, the legislator did not retain this exception. Therefore, deviations from the trial version or preview require an agreement according to Art. 8(5).

5. Reasonable consumer expectations In three instances,111 the Digital Content Directive (like the Sale of Goods Directive112) when dealing with conformity uses the abstract legal term of ‘reasonable expectations’. The Consumer Sales Directive took over from UK law, the notion of what ‘the consumer can reasonably expect’113. In addition, it used the qualification ‘reasonably’114 in relation to the situation where the seller is not liable for public statements by the producer because he could not reasonably be aware of them; this was taken over in Art. 8(1)(b) (i). CESL had liberally used the ‘reasonableness’ test, known from UK law.115 In terms of legislative technique, the Commission Proposal for an Online Sales Directive116 used the CESL approach117. When it referred to expectations it explained in a horizontal manner that this means ‘reasonable expectations’ and it defined the latter according to objective factors. The Digital Content Directive legislator preferred to consistently use the express term ‘reasonable consumer expectations’. The Digital Content Directive explains in Recital 46 that reasonable expectations are to be ascertained in an objective manner and includes some assessment elements, i.e. the nature and purpose of the digital content or digital service, the circumstances of the case and the usages and practices of the parties involved. The benchmark of when something can be reasonably expected is therefore not within the subjective horizon of the consumer in question. As with the ‘normal use of digital content or digital service of the same type’ under Art. 8(1)(a) and what is ‘normal for digital content or digital service of the same type’ under Art. 8(1)(b), reasonable consumer expectations are something of a moving target compared with traditional goods. Digital content or digital service as a commodity are still relatively new. In light of the fast-evolving innovative character of digital content and digital services offered on the market the respective reasonable consumer expectations will also evolve.

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II. Version due Art. 8(4) and (6) link the objective conformity requirements in Art. 8(1) with the 98 trader’s liability in Art. 11(3) and (2), in particular when the latter establishes the time

IMCO/JURI, Amendment 98. Art. 8(1)(b) and (c), (2)(b). 112 Art. 7(1)(c) and (d), (3)(a) SGD. 113 Art. 2(2)(d) CSD; see Staudenmayer (2000), 552. 114 Art. 2(4) 1st indent CSD. 115 cf. Staudenmayer, (2012), p. XXIII. 116 Art. 5(b) and (c) and Recital 18 COM(2015) 635 final. 117 Art. 5(2) (1) CESL. 110

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during which conformity is assessed. They basically determine which version is to be assessed during the relevant period or at the relevant time.

1. Conformity during continuous supply over a period of time 99

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Art. 8(4) stipulates that in cases where a digital content or digital service is provided over a period of time, it shall be in conformity throughout the duration of that period. This provision together with the objective conformity requirements in Art. 8(1) creates the basis for the trader’s liability in Art. 11(3), which determines the time for assessing conformity as, the period of time during which the digital content or digital service is to be supplied under the contract. The digital content or digital service supplied needs to fulfil the objective conformity criteria during this entire time. This provision takes over Art. 6(3) of the Commission Proposal for a Digital Content Directive which is based on Art. 105(4) CESL. The reference to ‘a period of time’ includes both contracts for a period specified by the contract as well as contracts for an indefinite period of time.118 Recital 51 gives an example for a digital service provided over a period of time, i.e. access to cloud services. Recital 51 2nd sentence provides a type of ‘de minimis – interpretation’ for the obligation that the digital content or digital service needs to remain in conformity. Short-term interruptions do not constitute a lack of conformity 119 if they are negligible or occur only in singular cases. If these short-term interruptions are either more than negligible or recur, they would infringe Art. 8(4) and may constitute a lack of conformity according to Art. 8(1)(b) under the element of ‘continuity’. What is to be considered ‘negligible’ must be ascertained objectively in the light of the circumstances of the case, in particular the nature, purpose and duration of the supply of the digital content or digital service owed. For instance, a one-minute interruption could be considered negligible in the context of a one-month music-streaming subscription (and therefore not constitute a lack of conformity), while an interruption of the same duration could be more than negligible (and therefore amount to a lack of conformity) in the context of a 90-minute stream of a football game. It has been correctly pointed out120 that if over the period of time, the objective conformity requirements would be fulfilled to a lesser extent, Art. 8(5) would apply. It seems however an open question whether there are concrete examples of this121 as digital content does not generally suffer, like goods, from reduction of quality through use over time and therefore should stay in conformity if it was once in conformity.

2. Most recent version Art. 8(6) requires that the version of the digital content or digital service supplied should be the most recent one available at the time of the conclusion of the contract. This provision, together with the objective conformity requirements in Art. 8(1), creates the basis for the trader’s liability in Art. 11(2), which determines as the moment at which conformity is assessed the time of supply. 105 This provision takes over Art. 6(4) of the Commission Proposal for a Digital Content Directive. It is also a less complicated way of expressing the substantive content of Art. 103 CESL. 104

cf. Recital 57 3rd sentence. Faber, at p. 100, however, seems to consider this also as a delimitation between lack of conformity and non-supply. 120 Faber, p. 78. 121 The example, mentioned ibid., seems to be more of a case for Art. 8(6). 118

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Art. 8(6) chooses as the relevant time the conclusion of the contract because this is the moment when the consumer decides to purchase a specific version and assesses whether it is worthwhile providing the counter-performance due for this version. Art. 11(2) determines as the moment of assessing conformity, the moment of supply. This follows the classical reasoning, stemming from sales law.122 This moment is chosen because the digital content or digital service at this time has entered the sphere of the consumer and the consumer can assess its conformity. In the vast majority of cases, the moment of the conclusion of the contract and the moment of supply will be almost identical. Art. 5(1) 2 nd sentence requires that the digital content or digital service is supplied ‘without undue delay’. Unless the parties agree otherwise, the latter deadline is to be understood, as a matter of principle, to be immediate supply.123 Recital 61124 justifies this with the nature of the digital content or digital service where it does not take additional time to supply it. Art. 8(6) is part of the Digital Content Directive’s system dealing with new versions of digital content or services which frequently appear on the market. Basically, the trader fulfils his obligations if he provides the most recent version of the digital content or service, available at the time of the conclusion of the contract. Versions brought to the market after the conclusion of the contract do not need to be provided. This may be different, according Art. 8(2), when an update is required to keep the digital content or digital service in conformity. Going beyond that, it may also be different if a more recent version is required under a specific contractual agreement of the parties according to Art. 7(d). Finally, the trader may provide a more recent version under the conditions of Art. 19. Art. 8(6) is one of the two cases in the Digital Content Directive125 where an agreement deviating from Art. 22 is possible. An agreement deviating from the requirement of Art. 8(6), does not have to comply with the conditions of Art. 8(5), as the latter only concerns deviations from the objective conformity requirements in Art. 8(1) and (2).

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III. Updates A ground-breaking, new development126 in the Digital Content Directive (and the 110 Sale of Goods Directive) is for updates to be taken into account in the conformity approach. The Digital Content Directive distinguishes between several different modifications of digital content or digital services.127 All of them are related to, and most of them regulated by, conformity provisions. The most important category are the updates regulated in Art. 8(2).

122 Art. 3(1) CSD as well as Art. 10(1) SGD determine the moment of delivery as the time to assess conformity. 123 Staudenmayer (2019), 2499 et seq.; → Art. 5 DCD, mn. 20. 124 Strictly speaking, Recital 61 refers to Art. 13, which, however, uses also the deadline of ‘without undue delay’ in the context of supply and can therefore also be used for interpreting Art. 5. 125 The other one is included in Art. 5(1). 126 Wendehorst, at p. 111, calls it one of the most innovative elements of the Digital Content and the Sale of Goods Directives, constituting a change of paradigm and supports it strongly (p. 138). Schulze (2019), at 713, also emphasises that European contract law ventures into unchartered territory. Metzger, at 581, considers it central from a consumer protection angle. 127 cf. Recitals 74 et seq. As to the different modifications of digital content or digital services → Art. 7 DCD, mn. 53 et seq.

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1. Update obligation 111 112

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The initial Commission Proposal for a Digital Content Directive did not provide for an update obligation beyond those which are contractually agreed. Art. 8(2) provides an obligation on the trader to inform of and supply updates to the consumer. While the information obligation is instrumental in order for the consumer to decide whether to install the update, the obligation to supply updates is clearly at the core of the provision. As to the period of time during which this has to be done, the provision makes a distinction between a one-off or a series of individual acts of supply and the continuous supply of digital content or digital services. a) Purpose and nature of the update obligation. The aim of the Digital Content Directive’s provisions on conformity and consumer remedies is to ensure the equivalence of performance and counter-performance. The purpose of the update obligation is therefore to ensure that digital content or a digital service which is in conformity at the moment or during the period where conformity is assessed, remains in conformity for a certain period, despite changes in the digital world around it128. For instance in hardware or software with which it is normally used. The update obligation in Art. 8(2) is therefore relevant if an update is necessary to maintain conformity of the digital content or digital service.129 This means that the update obligation is limited to those updates required to maintain conformity. The seller does not have to provide upgrades, i.e. modifications that improve the digital content or digital service or add functions, where maintaining its conformity does not require this.130 If the trader or the consumer want to provide or receive upgrades, this can be agreed as part of the subjective requirements for conformity according to Art. 7(d).131 Its non-performance triggers the remedies of Art. 14.132 The fact that the obligation to supply updates is related to those updates which are necessary to maintain conformity, also has consequences for the application of remedies for lack of conformity. As the update obligation serves to maintain conformity of the digital content or digital service, the consumer rights in Art. 14 do not aim at remedying the lack of supply of the update,133 but at re-establishing the conformity or a balance between performance and counter-performance which would have existed if the update had been supplied.134 For instance, when applying Art. 14(5), it is not the purpose of the price reduction to be proportionate to the failure of supply of the update, but to relate to the lack of conformity which the update was supposed to fix. The consumer’s right of termination is not granted because of a failure to supply an update, but because of the lack of conformity which the update should have prevented. Therefore, the application of Art. 14(6) needs to treat the nature of this lack of conformity as a ‘minor’ one and not as a failure to supply the update. The updates referred to in Art. 8(2) will frequently be security updates which are needed to ensure a continued secure and safe use of the digital content or digital service in the face of a proliferation of cybersecurity threats after the purchase. Security updates This is more clearly spelled out in Recital 31 2nd sentence SGD. This is also emphasised by Wendehorst, p. 122. 130 ibid., p. 123. 131 → Art. 7 DCD, mn. 53 et seq. While the distinction between updates and upgrades is mentioned in Recital 74, this is more clearly spelled out in Recital 30 3rd sentence SGD. 132 Wendehorst, p. 120 et seq., mentions as a consequence that the trader cannot be sued for developing and supplying updates. 133 This, however, seems to be the understanding of Wendland, 212 et seq. 134 Wendehorst, p. 120 et seq. 128

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were indeed at the forefront of the legislator’s reasoning. This is not only manifested in Art. 8(2) which explicitly mentions security updates. Recital 47 also emphasises the duty to keep the digital content or digital service with security updates in conformity and secure. Although security is part of the objective conformity requirements in Art. 8(1)(b) and Art. 8(2) emphasises security updates, the Digital Content Directive does not have as its purpose to ensure in general cybersecurity or the security of the Internet of Things. The legislator has clarified, in Recital 47 last sentence, that technical cybersecurity rules should continue to apply. Art. 8(2) is not restricted to security updates either; for instance other features like functionality or compatibility could also be relevant. An example could be an ‘app’ marketed to cross-border commuters allowing to them find public transport connections, taking into account real-time public transport data in three neighbouring countries. If, in one of the countries the technical specifications under which the data is provided are changed and the app cannot use data from this country any longer, updating the app to the new specifications would be required. An underlying condition for the obligation to provide updates to keep the digital content or digital service in conformity is that the installation must be possible. To install the updates is in most cases is in practice not problematic since most types of digital content or digital services can, or even must be, connected to the Internet and therefore can have an interface which allows the provision and installation of updates, without the consumer having to take any measure or have any knowledge, other than that needed for the first installation or typical use. Such devices might commonly need for instance security updates, as their Internet connection makes them potentially vulnerable to new cybersecurity threats. There are also types of digital content that cannot connect to the Internet (e. g. the film on a DVD or the music on a CD). As they will in all likelihood not need updates to be kept in conformity, the practical problem of installing updates will not arise either. In other cases, where types of digital content cannot connect directly to the internet, but to a computer, a smartphone, a local network etc. and therefore be exposed to cybersecurity threats as well, it may be possible to update such devices by connecting them to these Internet capable devices and downloading and running a specific update application. In cases, where the consumer needs specific knowledge for this, the instructions foreseen in Art. 8(1)(c) would have to also cover the installation of updates. b) Addressee of the update obligation. The Digital Content Directive does not oblige the trader to create or provide updates himself. This is not foreseen in the wording of either Art. 5 or Art. 8(2). The trader needs to ‘ensure that the consumer is … supplied with updates’. This means that the updates can also, and will in practice mostly be, provided by a third party. However, the Digital Content Directive does not limit the trader’s obligation to updates that the developer has already made available. The seller has to ensure in its contractual relationship with the developer that the relevant updates are indeed made available and can subsequently be provided to the consumer. This is not unproblematic.135 While the trader is obliged to ensure that the consumer is provided with updates, he normally cannot create the updates themselves but has to rely on the developer of the digital content or digital service. The trader’s possibilities to influence availability and development of updates are limited. The legislator had several possibilities to regulate this three-party-relationship136; two main possibilities were actually considered in the legislative process. One option Critical also ibid., p. 113. Wendehorst, p. 118 et seq., develops several models how this three-party-relationship can be constructed. 135

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would have been to give the consumer a direct claim against the developer. However, the consumer generally does not have a direct contractual relationship with that party, other than an End-User License Agreement.137 It is the trader who has a contract with the developer. The second reason why this option is not very practical is that having separate remedies against different persons would be difficult to understand by a consumer who has bought the digital content or digital service from a single trader. The other option was placing the liability for the performance of the third party on the trader. 122 The legislator decided in favour of this second option in order to simplify the remedy process for consumers and because of an analogy with traditional sales law. Such a three-party-relationship is not an issue unique to updates for digital content or digital services but is familiar from traditional sales law. In the classical sale of goods scenario, the seller only receives a box containing certain goods from the producer or from a wholesaler and passes them on to or ships them to the consumer, without being able to influence any characteristics of the goods. Often, sellers will not be able to repair goods on their own either. One can also very well imagine contracts of sale where the seller has outsourced a part of the performance to a subcontractor or consider liability for complicated products, where the seller is also liable for parts which have been integrated into the final product. For all lack of conformity resulting from such case categories, the seller is liable to the consumer regardless of whether it was caused by the seller himself or by a third person. Therefore, with an analogy to those case categories in traditional sales law, the legislator concluded that it would be justified to include the actions or omissions of the developer in the liability of the trader. 123 In order to reduce the economic burden on the trader, the trader’s right of redress in Art. 20 (and Art. 18 SGD, where the updates to goods with digital elements are even specifically mentioned) is made available against third parties. However, this right of redress, which goes back to Art. 4 CSD,138 is very broadly formulated. It prescribes the result to be achieved, the modalities of which are regulated in national law. During the legislative process, there was a discussion to make this right of redress more stringent in order to help the trader in such three-party-relationships.139 The legislator however decided to follow the approach of the Consumer Sales Directive. The main reason for this was that the relationship between the trader and the developer is a B2B contractual relationship where the principle of freedom of contract applies, to a much stronger degree than in a B2C relationship. The legislator hesitated to interfere with this B2B contract because the structural imbalance as common denominator of consumer contracts 140 cannot be assumed as in B2C contracts. It very much depends on the market whether there is a party with a stronger bargaining power and which party that is. If in some cases the trader is faced with a party with such stronger bargaining power, this would not necessarily be the case in all contracts. 124 To ease the burden on the trader, the other, legally possible alternative would be to conclude an agreement according to Art. 8(5). It will probably depend on the competition in the relevant market whether such instrument could be used often since informing consumers specifically and concretely that conformity updates are not provided or

137 ibid., p. 121, where Wendehorst points out that full harmonisation of the Digital Content Directive does not prevent that the consumer can still have a direct claim on the basis of the end user license agreement if this agreement foresees update obligations. 138 As to its meaning and impact in the Consumer Sales Directive which is largely the same as in the Digital Content Directive see Staudenmayer (‘EG-Richtlinie 1999/44/EG’), p. 42 et seq. 139 Wendehorst, p. 139, sees this as a possible solution. 140 Staudenmayer (1999), p. 67 et seq.

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placing the responsibility entirely on the developer and making the consumer agree to this expressly and separately141 is not an attractive marketing feature.142 c) Information obligation on updates. Art. 8(2) provides an information obligation on updates. Given that this obligation only concerns updates that eventually become necessary to maintain conformity, it does not require giving information at the time of purchase, and it cannot be fulfilled by giving information at that time either. Rather, the trader has to inform the consumer about an update if, and when, this becomes available.143 The details of giving this information are left to the trader to implement. As for the update obligation, the Digital Content Directive does not oblige the trader to inform the consumer himself; he just needs to ‘ensure that the consumer is informed’. This means that the updates can also be provided by a third party such as the developer. It will depend on the relevant business model whether it is the trader himself or the developer acting on behalf of the trader who informs the consumer. As it will be necessary to process personal data, for instance contact details for the purpose of informing consumers about the availability of updates in order to fulfil this obligation, the GDPR rules have to be respected by the trader and possibly the developer.144 How this information is given is also left to the trader and to the developer. For instance, in the case of a smartphone app that needs an update, this could be done by means of a pop-up message on the screen. In practice, it is likely that the developer will have an interest to design the digital content, digital services and goods with digital elements in a way that the information concerning such updates arrives directly on the product.145 The trader will also have an interest to store the evidence that such information has been given. The trader has also an interest to inform the consumer at the same time about the availability of the update and the consequences of the consumer not installing it. This would fulfil the condition of Art. 8(3) (a) to ensure that the seller is not liable for a lack of conformity caused by the consumer not installing the update.146 d) Time period for the update obligation. The period during which such updates should be provided is significant. For the purpose of determining this period, Art. 8(2) (a) and (b) takes over a distinction used by the Digital Content Directive (and the Sale of Goods Directive) in the context of the regulation of the guarantee periods147, i.e. the distinction between digital content which is provided in a single act of supply or a series of individual acts of supply and digital content which is provided continuously over a period of time. The former category is characterised by the fact that the consumer thereafter has the possibility to access and use the digital content indefinitely.148 In the latter category, the digital content or digital service is available or accessible to the consumer only for the fixed period of the contract or for as long as the indefinite contract is in force.149 Below → mn. 161 et seq. Wendehorst, p. 134, however expects even that this will be very frequently done. 143 Schulze (2019), 713, considers it as not excluded that the consumer is informed at the same time as the supply of the update. 144 Wendehorst, p. 123 et seq., is critical as to the burden for the trader, resulting from the application of the GDPR, and the privacy implications for the consumer. 145 It is therefore not necessary to prescribe this as a design requirement and objective conformity criterion, ibid., p. 124. 146 Below → mn. 147 et seq. 147 → Art. 11 DCD, mn. 15. 148 Recital 56 3rd sentence. 149 Recital 57 3rd sentence. 141

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Such a distinction was necessary for defining guarantee periods adequately. As regards the former, one can still use the traditional sales law approach. This means that conformity is assessed at the moment, when the goods leave the sphere of the seller. In this case, the general liability period can start at that moment. Accordingly, the Digital Content Directive (and the Sale of Goods Directive) takes over this approach used in the Consumer Sales Directive and provides for a two-year period starting from this moment.150 However, for digital content which is provided continuously over a period of time, the borderline with a service is blurring. If one chooses an approach with a general liability period starting from a specific moment, this could lead to an undesirable result in the case of long-term contracts stretching over several years. A general liability period, starting for instance with the conclusion of the contract or with the first supply, would have expired before the completion of the period during which the digital content is due. A general liability period going beyond that time would not be appropriate either. Such an approach would lead to the undesirable result that the digital content would have to be brought into conformity at a time when the consumer, according to the contract, no longer has a right to this performance. For these reasons the legislator chose, for digital content which is provided continuously over a period of time, the period of time during which the performance itself is due.151 During the legislative process the category of digital content which is provided in a single act of supply or a series of individual acts of supply was perceived as ‘sales-like’, while the category of digital content which is provided continuously over a period of time was perceived as ‘services-like’.152 This perception is different from the distinction between digital content and digital services in Art. 2 Nos 1 and 2 and throughout the Digital Content Directive. Based on an approach which was neutral as regards the distribution method and technology,153 the Commission had treated digital services as a sub-category of digital content154 in its Proposal for a Digital Content Directive and foreseen the same substantive regime. Both branches of the legislator wanted to separate the notions of digital content and digital service but maintain the approach of the Commission’s Proposal having one single regime. The legislator knew the regime the CESL had created for obligations and remedies of parties in service contracts related to sales contracts or contracts for the supply of digital content.155 It shied away from the regulation which would be necessary for dealing with service contracts, in particular the distinction of what should be achieved in service contracts156 and the regulation of the related remedies. In other words, the distinction between contracts where the contract requires the achievement of a specific result (‘obligation de résultat’) and those where the service provider must perform the service with a certain care and skill (‘obligation de moyens’) without having to achieve such a specific result. However, for the regulation of guarantee periods and the period for the supply of updates, a distinction between ‘sales-like’ and ‘services-like’ contracts was unavoidable.

Art. 11(2) subparas 1 and 2 DCD, Art. 10(1) SGD. Art. 11(3) subpara. 1. 152 Wendland, 210 et seq., sees three categories, i.e. sales-like, rental-like and services-like contracts. Schulze, 714 et seq., emphasises the difference to the traditional categorisation of sales and services. 153 Staudenmayer (2016)‚ 807. 154 Art. 2 No. 1(a)–(c) COM(2015) 634 final. 155 Chapter 15, Arts 147–158 CESL. 156 See Art. 148(1) and (2) CESL. 150

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In line with the regime of the general liability period, Art. 8(2)(a) provides that for contracts for continuous supply over a period of time the period during which updates keeping the digital content or digital service in conformity are required, is the period during which the digital content or digital service is to be supplied under the contract. Almost all digital services as defined by Art. 2 No. 2 will fall in this category.157 Recital 57 provides the example of a two-year cloud storage contract or an indefinite social media membership. An example for digital content being supplied continuously over a period of time would be a film the consumer downloads and which he can watch as often as he wishes, but only during the three days after the download. When taking up the distinction in Art. 11(2) and (3), this provision does not only correspond to a need for consistency with the guarantee period for this kind of digital content or digital service in Art. 11(3) but chooses the adequate period for the update obligation. Longer or shorter periods for the reasons explained for the guarantee period would not be suitable. In addition, the length of update obligation in Art. 8(2)(b) corresponds also to the obligation of the trader to provide the digital content or digital service in conformity continuously over the entire supply period pursuant to Art. 8(4). The update obligation for contracts where the digital content or digital service is provided in a single act of supply or a series of individual acts of supply will mostly concern digital content.158 Recital 56 provides for the first sub-category the example of the consumer downloading an e-book and storing it on their device. An example for the second sub-category given by Recital 56 is the consumer being a member of an online library where he has the right to download a new e-book every week. Its length is more problematic. The update obligation applies during ‘the period of time that the consumer may reasonably expect’. Defining a deadline with an abstract legal term is not ideal for legal certainty.159 The purpose of deadlines, such as the general liability period or the period during which updates need to be provided, is to create legal certainty. This may lead to unsatisfactory results in individual cases, but the possibility for traders to foresee their liability and to calculate prices accordingly has more weight. A fixed period, best in line with the trader’s general liability period, was discussed in the legislative procedure but the majority in both the EP and the Council decided in favour of the present solution. Recital 47 explains that the abstract legal term of what ‘the consumer may reasonably expect’ can result in three options. The period could be shorter than the general liability period; the Recital gives the example of a digital content or digital service, the purpose of which is limited in time. It could also be equal to, or longer than, the general liability period. Recital 47 mentions security updates as an example for the latter. It is notable that the last explanation in Recital 47 as to the period going beyond the general liability period has a corresponding explanation in Recital 31 SGD related to goods with digital elements. The explanation in Recital 31 7th sentence SGD, that the period reasonably expected will ‘normally’ be ‘at least as long’ as the general liability period, is not contained in the Digital Content Directive. However, one will not be able to deduce an argument from this for the interpretation of the Digital Content Directive. The reference in Recital 31 7th sentence SGD has its specific reasoning in the Sale of Goods Directive, regulating goods with digital elements. Recital 31 7th and 8th sentences SGD explain an approach which has the underlying reasoning of a parallelism of the digital elements to the general liability period for the goods with digital elements. The consumer would reason157 See Wendehorst, at p. 115, who also mentions the machine translation of a single document as an example for an exception. 158 ibid. 159 This is therefore criticised by Bach, 1707; Schulze (2019), 714; Wendehorst, p. 138.

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ably expect to be supplied with updates as long as the goods are supposed to function, i.e. normally as long as the general liability period runs. Therefore, the first part of Recital 31 7th sentence SGD states that in general the update period is at least as long as the general liability period. Recital 31 8th sentence SGD refers to the more common category of cases, i.e. the update period being limited to the general liability period. The second part of Recital 31 7th sentence SGD states the exception, i.e. where the update period could go beyond the general liability period. It refers to security updates as the main example. National legislators and courts are therefore left with a case-by-case interpretation of the ‘reasonable consumer expectations’.160 In any case, according to Recital 46, this notion is to be objectively ascertained.161 For this purpose, Art. 8(2) (b) adds criteria – ‘the type and purpose of the digital content or digital service’ and the ‘circumstances and nature of the contract’. Recital 46 refers in addition to the circumstances of the case and the usages and practices of the parties involved. The first element to be taken into account for ‘the reasonable expected duration of the update period’ is the type and purpose of the digital content or digital service. Recital 47 explains that for digital content or a digital service, the purpose of which is limited in time, the obligation to provide updates should be limited to that time. For instance,162 a smartphone ‘app’ for a specific event (such as a football world cup or the Eurovision Song Contest) cannot be expected to be updated after the event. In contrast, the period could be significantly longer for a health ‘app’ which monitors the user’s heart rate. Recital 47 adds that for other types of digital content or digital services the period during which updates should be provided to the consumer could be equal to the liability period for lack of conformity or even extend beyond that period. Recital 47 mentions alternative security updates as example for the latter. Even if the update period goes beyond the general liability period, the trader should not be obliged to provide security updates indefinitely. However, this would be the case if one postulates that the update period should correspond to the period during which the digital content can be used163, as digital content is not subject to depreciation. While the criteria of ‘type and purpose of the digital content or digital service’ are relatively easy to understand, the elements of the ‘circumstances and nature of the contract’ are less evident. The ‘nature’ of the contract does not refer to the legal qualification of the contract for the supply of digital content or a digital service in national law, which the Digital Content Directive leaves to national law164. For the reasons already explained165, these elements do not refer either to whether the digital content or services are supplied for money or for data. Art. 8(5) explicitly mentions that changes to the effects of the update obligation in Art. 8(2) can only be done under the conditions of Art. 8(5). Therefore, the elements of the ‘circumstances and nature of the contract’ can be understood as taking into account factors related to the contract which lead to the reduction of the period of time that the consumer may reasonably expect, if these factors are implemented in the contract in a way which is conform to Art. 8(5).

Above → mn. 93 et seq. Schulze (2019), 714 also considers this as an objective benchmark. 162 Sein/Spindler, 369, give the example that the duration of the period could be reduced to having no updating obligation at all, e.g. in case of buying digital photographs delivered to the consumer’s e-mail. 163 Wendehorst, p. 130. 164 Recital 12. 165 Above → mn. 44. 160

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In addition, one also has to take into account the link with Art. 7(d). The updates 145 agreed according to this provision can go significantly beyond the obligation of Art. 8(2). For instance, an obligation not only to provide updates to keep the digital content or digital service in conformity, but also to provide upgrades that adapt the relevant digital content or digital service to the technical or commercial progress and change the product itself. If this is the case, the latter changes to the digital content or digital service in question may supersede or superimpose themselves on the former.166 An update according to Art. 8(2) would only need to be provided to the extent it would make sense to fulfil its purpose of keeping the initially supplied digital content or digital service in conformity. For the cases, where the update period is different from the general liability period, 146 Art. 11(2) section 1 foresees an exception from the normal general liability period (‘without prejudice to point b) of Art. 8(2)’).

2. Failure to install The Digital Content Directive expressly does not create an obligation of the consumer 147 to install updates.167 Recital 47 stresses that the consumer should be free to choose whether to install updates. The reason for this is that the legislator was aware of the possibility that forced updates could alter functionalities of the digital content or the digital service;168 it should be therefore up to the consumer to decide. As already explained,169 it is not the purpose of the update obligation to ensure cybersecurity for the digital environment of the consumer and in general. As evidenced by Recital 47 last sentence, the legislator did not consider contract law as the right tool to achieve this objective,170 but leaves this justified policy objective to public law cybersecurity standards171. If however the consumer does not install the updates necessary for maintaining con- 148 formity, Recital 47 states clearly that the consumer cannot expect the digital content or the digital service to remain in conformity. In case of non-instalment of the update by the consumer, the trader’s liability is waived subject to the condition of having informed the consumer of this and the existence of a causal link between the failure to update and the lack of conformity. Art. 8(3) does not stipulate in detail what kind of information the trader has to pro- 149 vide regarding the update. The question is therefore whether the information obligation extends to all technical details of the update which need to be given in a way which is comprehensible tor the average consumer, in order to allow the consumer to take a fully informed decision on whether to install the update. Alternatively the information would act as a warning to the extent that the consumer loses his remedies as to any lack of conformity due solely to the non-installation of the update. The wording points to the second alternative, as Art. 8(3)(a) only obliges the trader to inform about whether an update is available, but not the details of the update. This interpretation is supported by the 166 While not linking this to the element of ‘circumstances and nature of the contract’, Sein/Spindler, 370, seem, as regards the end result, to go into the same direction. 167 However, Sein/Spindler, 370, see Art. 8(3) as doing this indirectly. 168 Wendehorst, p. 125, sees also this interest, but seems to favour also automatic updates at least for certain products. 169 Above → mn. 117. 170 Different from Wendehorst, p. 124 et seq. 171 The Cybersecurity Act (Regulation 2019/881/EU of the European Parliament and the Council of 17 April 2019 on ENISA and on information and communications technology cybersecurity certification and repealing Regulation (EU) No. 526/2013, OJ L 151, 7.6.2019, p. 15), setting a new mandate for ENISA, the EU Agency for Cybersecurity, and establishing the European cybersecurity certification framework, which came into force on 27 June 2019, is a first step in this context.

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absence of any hint in Recital 47 as to the contents of this information; it only contains reasoning related to the liability of the trader or its lack thereof in case of non-installation of the update. Compared to the relatively detailed condition given in Art. 19(1)(c) as to how information as to changes of digital content or digital services are to be provided (i.e. ‘in a clear and comprehensible manner’), Art. 8(3) does not contain any specific conditions. As a consequence, the information therefore should only relate to the simple availability of the update and is not required to include its technical details. 150 Similarly to the information obligation in Art. 8(2),172 the question arises also whether this information can be given in a summary manner at the time of conclusion of the contract or first supply. While this information obligation is a burden for the trader,173 neither wording nor a teleological interpretation admit such an approach. If information is given in a summary manner at the time of conclusion of the contract or first supply, it cannot fulfil its purpose to allow the consumer to decide whether to install the update. Such an intention can only be fulfilled if the trader informs the consumer about an update if and when this becomes available. 151 As with the information obligation under Art. 8(2),174 it is left to the trader who gives the information and how it is given. The practical result is likely to be that digital content, digital services and goods with digital elements will in the future be designed, if they are not already, in a way that the information concerning such updates arrive directly on the product. 152 Art. 8(3) only refers to the update obligation in Art. 8(2). It does not refer to the update obligation in Art. 7(d) which itself does not include a provision corresponding to Art. 8(3).175 For the cases of the update obligation in in Art. 7(d), the parties can agree a clause in the contract picking up the topic regulated in Art. 8(3).176

IV. Waiver 1. Purpose 153

Art. 8(5) (and the corresponding Sale of Goods Directive provision177) deal with the general issue of knowledge of the consumer of a lack of conformity. On one hand the liability of the trader/seller is, as matter of principle, strict, i.e. some kind of requirement of fault, for instance knowledge of the trader/seller of the lack of conformity, is not necessary to establish liability giving rise to remedies for lack of conformity. On the other hand, it seems to be against the principle of good faith to make the trader/seller liable if the consumer knew of a lack of conformity and bought the product nevertheless.178 All national laws have rules on this issue.179 Art. 35(3) CISG and Art. 2(3) 1st alt. CSD, with modifications, regulate this general issue by excluding liability in case of knowledge or

Above → mn. 125 et seq. Wendehorst, at p. 133 et seq., does not seem to interpret this provision differently but is critical as to the practical result because of this burden. 174 Above → mn. 125 et seq. 175 This has been criticised by Wendehorst, p. 134 who would like to apply Art. 8(3) also to Art. 7(d). 176 → Art. 7 DCD, mn. 53 et seq. 177 Art. 7(5) SGD. 178 Martens in: Jansen/Zimmermann, Art. 18:203(2), mn. 6, also discusses the possible lines of reasoning for an exception from the seller’s liability in case of the buyer’s knowledge. 179 For references and an overview of national laws see von Bar/Clive, Art. IV.A.–2:307 DCFR, notes I. 1.–5. For references to examples from national laws and the situation under Roman law cf. also Martens in: Jansen/Zimmermann, Art. 18:203(2), mn. 2 et seq. 172

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presumed knowledge. The Digital Content Directive, however, follows the approach of CESL,180 by combining the requirements of positive knowledge and acceptance. When solving this issue, this waiver aims at reconciling both the interests of the trader and the consumer. The legislator of the Digital Content Directive (and the Sale of Goods Directive) went quite far in providing a basis for consumers’ rights. It referred in Art. 8(1)(b), the most far-reaching objective conformity requirement, to the ‘reasonable consumer expectations’ as one assessment element for the expected performance features. In addition, the legislator wanted to avoid a situation in which a negative description of the performance of the digital content or digital service could be hidden somewhere in lengthy standard terms and conditions that the consumer would sign without reading. This reasoning in favour of the consumer’s interests needed also to take into account the trader’s interest. For sales of traditional goods, a rule on this issue allowing the seller to sell in particular second hand goods where he is aware of certain defects without the opportunity to point the buyer to specific existing flaws of second hand goods, would mean that the seller would always be burdened with the liability for remedies. The legislator inserted Art. 8(5) in order to take into account the reason why the Commission had in its Proposal chosen the subjective approach. The reason, among others, was to permit the supply of digital content subject to restrictions on the basis of intellectual property.181 A trader, who is supplying digital content created by a third party and is therefore a mere (sub)license holder and subject to restrictions imposed by the developer of the content, should not be left in a dilemma whereby on one hand he has to conform to the restrictions imposed on him, while on the other hand supplying digital content with restrictions placing him in a position of not complying with objective conformity criteria. This provision allows the trader to pass on existing copyright-based restrictions.182 The legislator therefore chose the model of Art. 4(3) of the Commission Proposal for an Online Sales Directive which serves the same purpose, by making it possible among others to sell second-hand goods. The aim which the legislator had in mind was a consumer who is completely and concretely aware of what he agrees to and takes an active and conscious decision to accept it. Art. 8(5) also influences the content of what can be required in the contract according to Art. 7, which in turn must be read together with Art. 8(1) and (5).183 Art. 8(5) only allows a waiver from the objective conformity criteria of Art. 8. It does not mention the possibility of a waiver from the objective conformity criterion of Art. 9. This follows the example of the CESL184, but differs from Art. 4(3) of the Commission Proposal for an Online Sales Directive which served as a model for Art. 8(5). While the waiver clause in the Commission Proposal was, following the model of the CESL, contained in the provision on the subjective conformity criteria, its transfer into Art. 8(5) goes beyond a simple change of legislative technique. The legislator did not want the trader to have a possibility for waiver of the requirement for correct integration of the digital content or digital service. Art. 8(5) does not include a reference to the subjective conformity criteria either, because any deviation can be foreseen in the contract itself. Art. 99(3) CESL. This is summarised in Recital 49 as allowing ‘sufficient flexibility’. 182 See Recital 53. 183 → Art. 7 DCD, mn. 22. 184 Art. 99(3) CESL does not refer to Art. 101 CESL. This was criticised by Zoll in: Schulze (2012), Art. 99 CESL, mn. 6. 180

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2. Conditions The Digital Content Directive adopted certain elements from the Commission Proposal for an Online Sales Directive and the CESL, while it went beyond them on other points in order to achieve a higher level of consumer protection. 162 a) Knowledge. All texts contain, as first element of the waiver, positive knowledge of the consumer. CESL and the Commission Proposal for an Online Sales Directive restrict themselves to simply stating the requirement of positive knowledge. They do not elaborate and therefore do not differentiate in terms of the means by which the consumer gained the positive knowledge. The Digital Content Directive, however, prescribes in Art. 8(5) and Recital 49 that the consumer has to be specifically informed. This implies a duty on the trader, if the trader wants to take advantage of such a waiver.185 This is confirmed by the last sentence of Recital 53, which states that ‘the trader specifically informs the consumer’. The difference therefore is that the wording in the Digital Content Directive excludes the possibility that the consumer either from his own initiative or otherwise, for instance through information circulating in social media or the internet community, has acquired the positive knowledge. The commonality is that in all these texts positive knowledge is necessary. Less strict variations of knowledge, as in the Consumer Sales Directive,186 are insufficient. 163 Unlike Art. 19(1)(d) or the pre-contractual information requirements in a number of consumer contract directives, Art. 8(5) does not require that the consumer is informed on a durable medium (Art. 2 No. 13). This is appropriate because the general purpose of the requirement to provide information on a durable medium is to ensure that the consumer can store the information as evidence to meet the burden of proof, in the event that the trader has not fulfilled its obligation. However, in a case of Art. 8(5), the burden of proof for the waiver and its conditions will be on the trader. The trader will consequently have an interest in holding evidence that he has fulfilled his duty, but that does not require that the trader provides the information to the consumer in a durable medium. 164 It is however debatable whether it is sufficient that the information is made available via a mere reference to a hyperlink or by similar means by which the consumer has to undertake an additional positive action to obtain the information. The wording (‘specifically informed’) is not entirely clear but seems to indicate that the consumer should receive the information without having to actively obtain it. If one sees the information requirement in the context of both requirements of Art. 8(5) (i.e. the specific information as well as the express and separate acceptance) it becomes clear that the legislator foresees a specific positive action of the consumer for the second requirement, while it is silent on the first. Although this is not entirely conclusive, it seems to indicate that it should not be necessary that the consumer must take action to obtain the information. Finally, the whole purpose of Art. 8(5) is that deviations from the objective requirements of Art. 8(1) and (2) are possible only under strict conditions. This becomes clear if one compares the wording of Art. 8(5) with Art. 4(3) of the Commission Proposal for an Online Sales Directive and Art. 99(3) CESL, which were the provisions, from which the legislator took inspiration for Art. 8(5). The legislator did not simply adopt those provisions but changed them, thereby raising the threshold. Not only did the legis161

185 Faber, at p. 83, would not exclude that the consumer is informed by a third party but mentions that in any case that it would be difficult for the trader to provide the proof of the consumer’s positive knowledge and to conceive the compliance with the requirement of an express and separate agreement of the consumer, without the trader having himself informed the consumer. 186 Art. 2(3) CSD: ‘… the consumer … could not reasonably be unaware …’.

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lator require the conditions of ’express and separate acceptance’187. It also replaced the knowledge criterion (‘the consumer knew of the specific condition’) with the condition that ‘the consumer was specifically informed’. Therefore, the criterion that ‘the consumer was specifically informed’ needs to be interpreted to mean that the trader must actively bring the information sufficiently clearly and transparently to the consumer’s attention. This would not be fulfilled in cases where the consumer needs to actively search for the information, for instance if the information is in a hyperlink incorporating other hyperlinks or the consumer needs to scroll and search the hyperlink on the website. As regards the time when the consumer has to have ‘positive knowledge’, all texts refer to the time of the conclusion of the contract. However, there is a difference. Under the CESL and the Commission Proposal for an Online Sales Directive, this meant that the information could be contained in the pre-contractual information and it was sufficient that at the time of the conclusion of the contract the consumer had this knowledge. However, when linking the duty to inform the consumer to the indication of the relevant time, i.e. the conclusion of the contract, the Digital Content Directive requires that the consumer is informed at the time of the conclusion of the contract, not beforehand. 188 As regards the subject of the consumer knowledge, all texts make this concrete. Art. 8(5) requires an information about a ‘particular characteristic’189. This means that the information cannot be provided in abstract terms but must be product specific and refer to concrete features. Nor is it sufficient if the seller expressly mentions that there is a deviation from the objective requirements while not specifically naming the pertinent characteristics. This is a requirement where the Digital Content Directive is less favourable to beta versions than the Commission Proposal, as such waiver will not be possible for unknown defects. In addition, it is not sufficient simply to describe the relevant feature of the digital content or digital service. Art. 8(5) as well as the Recitals 49 and 53 are concerned that the consumer comprehends the implications of this feature and in the light of the information is enabled to take a reasonable transaction decision. This therefore requires that the information indicates that this feature deviates from the objective conformity requirements. It must be clear to the consumer that the reason this characteristic is mentioned, is that the digital content or digital service does not meet the standard that could otherwise be expected. b) Agreement by the consumer. The knowledge element alone is insufficient. The second element of the waiver is agreement by the consumer. While this element is common to all texts, there is a development in terms of the specific modalities. For the CESL it was sufficient that the consumer ‘accepted’ which does not add anything to the requirements necessary for concluding a contract. In order to avoid that such acceptance could be done in the standard terms and conditions190, the Commission Proposal for an Online Sales Directive already required that the consumer ‘expressly’ accepted. The Digital Content Directive goes one step further, requiring that the consumer not only expressly agrees on the deviation from the objective conformity criteria, but does so separately. 191

187 Which added the criterion of ‘separate’ acceptance in comparison with the Commission Proposal for an Online Sales Directive and the criterion of ‘express and separate’ acceptance compared to the CESL. 188 As regards the identical provision in the Sale of Goods Directive, Zöchling-Jud, at 120, would accept it if it is done at the latest by the time of conclusion of the contract. 189 Art. 99(3) CESL and Art. 4(3) COM(2015) 635 final use the terms ‘specific condition’. 190 Zoll in: Schulze (2012), Art. 99 CESL, mn. 27, seems to consider that already under the CESL the acceptance according to Art. 99(3) CESL could only be done by a negotiated term. 191 Sein/Spindler, at 374, argue therefore that ‘click-wrap’ and ‘shrink-wrap’ contracts can no longer be used for this purpose.

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The Digital Content Directive explains that these conditions could be fulfilled for instance by ticking a box, pressing a button or activating a similar function.192 The requirement of express acceptance means that the agreement of the consumer cannot be tacit. Recital 49 assists by stipulating that an express agreement requires active and unequivocal conduct. It also results from Recital 49, that the requirement of a ‘separate’ agreement is not fulfilled if it is contained in other statements or agreements, such as the agreement to the standard terms and conditions,193 the explicit acknowledgment of the consumer that the order implies an obligation to pay194, or the consent for processing data.195 Among the frequently used forms of contracting used when purchasing digital content or a digital service, like click-wrap, browse-wrap or shrink-wrap196, clickwrap agreements could fulfil the conditions for Art. 8(5), while browse-wrap or shrinkwrap agreements would not. While the wording of Art. 8(5) is not clear on this point, 197 Recital 49 clarifies that the need to have an agreement which is ‘separate’ means that the agreement has to be ‘separate’ from other agreements but not ‘separate’ from the information. Such a result corresponds more to the purpose of the rule because it ensures a conscious decision of the consumer, since it is clear to the consumer what he precisely accepts. A different interpretation would have led to even more formalities than what Art. 8(5) already foresees. Art. 8(5) creates also a link between the consumer’s acceptance and the deviation, by stating that the consumer accepted ‘that’ deviation. The acceptance therefore needs to refer to, and only covers, the specific deviation from the objective conformity requirements as regards the particular characteristics of the digital content or digital service. 198 Art. 8(5) does not foresee any formal requirements. Keeping evidence of the acceptance by the consumer would be in the interest of the trader, in the event he has to demonstrate fulfilment of his burden of proof with respect to the deviation of the agreement from the objective conformity requirement.199 When referencing such examples as a ticking a box, pressing a button or activating a similar function,200 the Digital Content Directive clearly had in mind the online conclusion of contracts typically used in the supply of digital content or digital services. For online transactions, keeping the evidence would not be difficult. In an offline transaction, when for instance, digital content supplied is on a tangible medium which serves exclusively as a carrier for the digital content, this may be more burdensome.201 The consumer may also give the statement of acceptance to another party than the trader.202 The Digital Content Directive takes into account the situation, likely to be quite frequent in practice, that the consumer is not in direct contact with the trader but concludes the contract via an online platform. In stating that the platform could be considered a trader where it acts as the direct contractual partner of the consumer for the supply of digital content or a digital service, the Digital Content Directive recognises Recital 49. Zöchling-Jud, at 120, criticises this with regard to the Sale of Goods Directive. See also European Law Institute, 19, available online under www.europeanlawinstitute.eu/fileadmin/ user_upload/p_eli/Publications/ELI_Statement_on_DCD.pdf (last accessed 7 December 2019). 194 According to Art. 8(2) 2nd subpara. CRD for distance contracts. 195 These examples are mentioned by Faber, p. 85. 196 For an explanation of these forms of contracting see Momberg, p. 192. 197 Faber, at p. 85, interprets Art. 8(5) as meaning that the acceptance needs to be separate from the information. 198 ibid. 199 ibid, p. 86. 200 Recital 49. 201 Zöchling-Jud, at 120, criticises this with regard to the Sale of Goods Directive. 202 Faber, at p. 86, raises the question. 192

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that platforms are normally an intermediary.203 The platform as an intermediary to the trader would therefore be capable of providing the information and receiving the acceptance by the consumer. Despite the formulation used by Art. 8(5) of informing the consumer, it results from 174 the wording used subsequently (‘the consumer expressly and separately accepted’) that the waiver is done in form of an agreement between the trader and the consumer. As these waivers are not likely to be individually negotiated,204 the possible applica- 175 tion of the Unfair Terms Directive to such agreement and its impact is a relevant issue.205 The waivers which can be agreed according to Art. 8(5) are not mandatory or otherwise prescribed. Art. 8(5) provides the parties with the possibility to agree such waivers. Therefore, they are not exempted from the application of the Unfair Terms Directive according to its Art. 1(2) which only concerns clauses reflecting mandatory statutory provisions. Clauses which refer to particular characteristics of the digital content or digital service, deviating from specific objective conformity requirements do not relate to the definition of the main subject matter of the contract according to Art. 3(1). This would be to supply digital content or digital services against the payment of a price or the provision of personal data. It does not relate either to the adequacy of price and remuneration against the digital content or digital service. As Art. 8(5) allows the agreement of such waivers under relatively restrictive, i.e. con- 176 sumer friendly conditions, it does not appear that a waiver would fulfil the unfairness test of the Unfair Terms Directive206. However, the transparency obligation207 of the Unfair Terms Directive still applies.208 It ensures that the waiver is ‘drafted in plain, intelligible language’ and provides for the interpretation most favourable to the consumer, in the event of doubt. This requirement is in line with the aim which the legislator had in mind for Art. 8(5). The jurisprudence of the ECJ emphasised the fundamental importance of providing information before concluding a contract on the terms of the contract and the consequences of concluding it.209 According to the ECJ, the transparency requirement cannot be reduced to contract clauses merely being formally and grammatically intelligible. The ECJ regards the obligation in a broader sense. In the Kásler judgment, the ECJ required that the relevant clause allow the consumer to evaluate the economic consequences for him which derive from it.210 Both Art. 4(2) Unfair Terms Directive and Art. 8(5) are aimed at a consumer who is aware of what he agrees to and in fact, makes a conscious decision to agree. Therefore, the application of the transparency requirement of the Unfair Terms Directive provides in addition to Art. 8(5) useful requirements as to clarity and content of the specific information that a particular characteristic is deviating from objective conformity requirements.

203 See Recital 18. From this Recital it can also be understood that in the legislator’s opinion intermediaries do not fall in the scope of the Directive, which is different from the ECJ approach in the Wathelet judgment (CJEU, C-149/15 Wathelet EU:C:2016:840, paras 33 et seq.). See → Art. 3 DCD, mn. 11 et seq. 204 Art. 3(2) Unfair Terms Directive. 205 As to the applicability of the Unfair Terms Directive → Art. 7 DCD, mn. 16–17. 206 Art. 3(1) Unfair Terms Directive would require the respective clause would, contrary to the requirement of good faith, impose a significant imbalance in the parties’ rights and obligations arising from the contract, to the detriment of the consumer. 207 Art. 5 Unfair Terms Directive. 208 Faber, at p. 85, considers the relevance of the transparency principle of the Unfair Terms Directive in case of a long list of deviations in form of pre-formulated acceptance declarations of the consumer. As to the transparency problems of wrap contracts cf. Momberg, p. 195 et seq. 209 Beside the Kásler judgment, this emphasis had already been made in the RWE judgment (CJEU, C-92/11 RWE Vertrieb EU:C:2013:180), see para. 44. 210 CJEU, C-26/13 Kásler EU:C:2014:282, paras 70–75.

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According to the ECJ interpretation of the transparency requirement in the RWE judgment211, it is insufficient for the consumer to be simply referred to a legislative or regulatory act determining the rights and obligations of the parties. Rather, the consumer needs to be informed of the content of the provisions concerned. If one applies this transparency requirement to a waiver according to Art. 8(5), it would mean that to meet the information requirement with regards to the deviation, it is insufficient to refer simply to the respective objective conformity requirement, rather it is necessary to state how it deviates from conformity.

Article 9 Incorrect integration of the digital content or digital service Any lack of conformity resulting from the incorrect integration of the digital content or digital service into the consumer’s digital environment shall be regarded as lack of conformity of the digital content or digital service if: (a) the digital content or digital service was integrated by the trader or under the trader’s responsibility; or (b) the digital content or digital service was intended to be integrated by the consumer and the incorrect integration was due to shortcomings in the integration instructions provided by the trader. Bibliography: Bamberger/Roth/Hau/Poseck (eds), Beck'scher Online-Kommentar BGB (‘BeckOK BGB’) (53rd edn, C.H. Beck 1.2.2020); Herberger/Martinek/Rüßmann/Weth/Würdinger (eds), juris PraxisKommentar BGB (‘juris PraxisKommentar’) (9th edn, Juris 2020); Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the online and other distance sales of goods’ COM(2015) 635 final; European Law Institute, ‘Statement of the European Law Institute on the European Commission’s Proposed Directive on the Supply of Digital Content to Consumers’ (2016); European Parliament, ‘Report on the proposal for a directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ A8–0375/2017; Faust, ‘Digitale Wirtschaft – Analoges Recht: Braucht das BGB ein Update?, Gutachten A zum 71. Deutschen Juristentag’ (C.H. Beck 2016); Geiregat/Steennot, ‘Proposal for a Directive on Digital Content: Scope of Application and Liability for a Lack of Conformity’ in: Claeys/Terryn (eds), Digital Content & Distance Sales (Intersentia 2017), p. 95–166; Grundmann/Bianca (eds), EU-Kaufrechts-Richtlinie (Otto Schmidt 2002); Gebauer/Wiedmann (eds), Zivilrecht unter europäischem Einfluss (2nd edn, Boorberg 2010); Loos, ‘Not Good but Certainly Content’ in: Claeys/Terryn (eds), Digital Content & Distance Sales (Intersentia 2017), p. 3–54; Ramberg, ‘Digital Content – A Digital CESL II – A Paradigm for Contract Law via the Backdoor’ in: Grundmann (ed.), European Contract Law in the Digital Age (Intersentia 2018), p. 315–328; Riehm/Abold, ‘Mängelgewährleistungspflichten des Anbieters digitaler Inhalte’ (2018) 2 ZUM 82–91; Riesenhuber, ‘Interpretation of EU Secondary Law’ in: Riesenhuber (ed.), European Legal Methodology (Intersentia 2018), p. 231–260; Rosenkranz, ‘Eigenverantwortung und Verbraucherschutz bei Verträgen über digitale Inhalte’ (2018) 1 GPR 28–37; Säcker/Rixecker/Oetker/Limperg/Westermann (eds), Münchener Kommentar zum Bürgerlichen Gesetzbuch: BGB, Band 4: Schuldrecht (‘MüKo BGB’) (8th edn, C.H. Beck 2019); Schmidt-Kessel/ Erler/Grimm/Kramme, ‘Die Richtlinienvorschläge der Kommission zu Digitalen Inhalten und OnlineHandel – Teil II’ (2016) 2 GPR 54–70; Schulze (ed.), Common European Sales Law – Commentary (Nomos 2012); Schulze, ‘Supply of Digital Content – A New Challenge for European Contract Law’ in: De Franceschi (ed.), European Contract Law and the Digital Single Market – The Implications of the Digital Revolution (Intersentia 2016), p. 127–143; Spindler, ‘Contracts for the Supply of Digital Content’ (2016) 3 ERCL 183–217; Spindler, ‘Contracts for the Supply of Digital Content – The Proposal of the Commission for a Directive on Contracts for the Supply of Digital Content’ in: Grundmann (ed.), European Contract Law in the Digital Age (Intersentia 2018), p. 281–314; Staudenmayer, ‘Digitale Verträge – Die Richtlinienvorschläge der Europäischen Kommission’ (2016) ZEuP 801–831; von Staudinger, Kommentar zum Bürg211

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erlichen Gesetzbuch – Buch 2: Recht der Schuldverhältnisse: §§ 433–480 (‘Staudinger BGB’) (Sellier/de Gruyter 2014); Stürner, ‘Vertragsrechtliche Aspekte der Bereitstellung digitaler Inhalte’ (2017) 2 JURA 171–178. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Art. 9 and the acquis communautaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Art. 9 in the legislative process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Art. 9 in the system of the Digital Content Directive . . . . . . . . . . . . . . . . . . . . . . . . .

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C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Scope of application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Constituent elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Digital environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Incorrect integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Lack of conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Causation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. By the trader or under the trader’s responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Or by the consumer and due to shortcomings in the instructions . . . . . . . . 7. Relevant point in time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Legal consequence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Mandatory nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16 16 18 18 24 35 39 42 47 57 59 63 67

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function Art. 9 addresses an essential criterion of digital content:1 digital content and digital 1 services cannot function without corresponding hardware and software (i.e. digital environment) of the consumer and in most cases functionality also requires a technical linking (i.e. integration) of the content.2 This integration can damage the consumer’s digital environment or affect the digital content itself. Art. 9 addresses (only) the risk to the digital content as an essential part of the quid pro quo relationship established by the contract. Integration-based damage to the digital environment remains outside the scope of the Directive (and thus outside the scope of harmonisation). The provision therefore extends the concept of non-conformity following Art. 6 to 2 the case of incorrect integration of the digital content or digital services into the consumer’s digital environment. It thus determines the contractual obligations of the trader and his liability in the event of incorrect integration in accordance with Art. 11(2) and (3). This triggers the consumer’s (minimum) rights under Art. 14, which may be exercised under further conditions. The relevant point in time at which the lack of conformity must exist is set at the time at which the integration is completed. Art. 9(a) and (b) limit the responsibility of the trader by laying down further condi- 3 tions for his liability. The wording ‘or’ shows that the conditions are not cumulative, but may be fulfilled alternatively. The allocation of responsibilities between traders on the one hand and consumers on the other is based on the concept of spheres of influence. 3 Art. 9(a) mentions the case in which the trader himself carried out the integration or was responsible for it (according to the contractual agreement between the parties). Art. 9(b) assigns responsibility to the trader also in cases where the consumer himself

Going even further (‘specific feature’) Faust, A45; similarly Spindler (2018), p. 297. See Recital 52. 3 Rosenkranz, 35; Spindler (2016), 200; Spindler (2018), p. 298. 1

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should carry out the integration but where that integration was not fully successful due to incorrect instructions.

B. Context I. Art. 9 and the acquis communautaire 4

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The basic regulatory concept of Art. 9 is not unknown to EU private law. Art. 2(5) CSD already contained a similar provision, which has become known as the ‘IKEAclause’ or ‘DIY-provision’. Any lack of conformity resulting from an incorrect installation was to be deemed a lack of conformity of the goods if the contractually-owed installation was carried out by the seller or the incorrect installation by the consumer is due to a shortcoming in the installation instructions. The provision did not expressly specify who had to provide the installation instructions. Art. 101(1) CESL adopted the same approach4 and for the first time extended this provision to digital content. The wording of Art. 9 DCD is clearly rooted in Art. 101(1) CESL.5 The Sale of Goods Directive contains an almost6 identical provision in its Art. 8. Art. 8 SGD and Art. 9 DCD are to be interpreted in the same sense as far as possible. The parallel legislative process of the two Directives and the legislator’s efforts to create a coherent overall system of EU contract law for goods and digital content as possible are the arguments in favour of this7. Art. 8 SGD explicitly covers incorrect instructions from the seller as well as those from the person who provides digital content or digital services. In view of the scope of application of the two Directives, such a separation cannot occur in the case of the Digital Content Directive, since the Sale of Goods Directive alone is to be applied to digital content or digital services which are incorporated in or interconnected with goods8. Nevertheless, the question also arises for the Digital Content Directive as to whether the seller is also liable for installation instructions he has not created himself.9 In contrast to all those provisions Art. 9 uses the word ‘integration’ instead of ‘installation’. Although scholars agree that the latter term could have been used without any drawbacks,10 and uniform terminology in the acquis communautaire could be secured, a distinction between the two concepts is reasonable. An initial indication of an intention to distinguish between the two concepts may be seen in the absence of a definition of ‘installation’ from the Digital Content Directive (and the Sale of Goods Directive), whereas the legislator has defined ‘integration’ in Art. 2 No. 4.11 The term ‘installation’, which usually relates to goods, would appear to be too narrow for ‘digital content’, because it could be understood as a limitation to software.12 The difference between the two concepts is best seen in the context of Art. 8(3)(b) and Art. 9(b), in relation to instructions.13 See Art. IV.A.–2:304 DCFR with an almost identical wording. Staudenmayer, 814. 6 For details on the only difference below → mn. 44. 7 cf. Introduction → mn. 11 et seq. 8 See Recital 21 and Art. 3(4); for details → Art. 3 DCD, mn. 77 et seq. 9 For details, see below → mn. 51. 10 Loos, 37; Geiregat/Steennot, p. 135. 11 Below → mn. 24 et seq. 12 Below → mn. 29, 48. 13 Below → mn. 49 and → Art. 8 DCD, mn. 75 et seq.; see also → Art. 2 DCD, mn. 20. 4

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Art. 9

Art. 9 is flanked by information obligations in the Consumer Rights Directive. Pur- 9 suant to Art. 6(1)(r) and (s) CRD, the trader must, where applicable, in the case of a distance or off-premises contract provide the consumer before the conclusion of a contract with information regarding the digital content. This expressly involves information about the functionality, including applicable technical protection measures, of the digital content and any relevant interoperability of the digital content with hardware and software that the trader is aware of or can reasonably be expected to have been aware of. The same is true under Art. 5(1)(g) and (h) CRD for all other contracts covered by the Consumer Rights Directive.14 This information duty could and should enable the consumer to avoid incompatibility between his digital environment and the provided digital content or digital services. Nevertheless, it is the consumer’s responsibility to determine whether the digital content and services offered will work in his digital environment.

II. Art. 9 in the legislative process The provision has not undergone any substantive changes in the legislative process. 10 Nevertheless, the wording was regularly adapted to the wording of the respective draft Directives. In addition to the insertion of the term ‘digital services’ in the Council’s version, reference should also be made of the linguistic streamlining in the trilogue negotiations.15 In substance, nothing has been lost in the final version, which is why the legislative process can in this regard be described as successful.

III. Art. 9 in the system of the Digital Content Directive Art. 9 must be interpreted in the light of the provisions on conformity with the con- 11 tract under Arts 7 and 8. This is indicated by Art. 6 in its express reference to Arts 7, 8 and 9 as components of a unified concept of conformity.16 Art. 11(2) 1st subpara. and (3) 1st subpara. also refer to Art. 9 in addition to Arts 7 and 8 for the notion of contractual conformity of digital content and services. Furthermore, Art. 7(c) expressly mentions ‘instructions, including on installation’ as part of the subjective requirements for conformity, while Art. 8(1)(c) still mentions ‘instructions’ as part of the objective requirements.17 Two elements of the provision are defined in Art. 2: Art. 2 No. 4 specifies the term 12 ‘integration’18, Art. 2 No. 9 defines the ‘digital environment’19 more precisely. The rule on burden of proof in Art. 12(4) also refers to the consumer’s digital envi- 13 ronment. Accordingly, the reversal of the burden of proof of Art. 12(2) and (3) does not apply, if the digital environment of the consumer is not compatible with the technical requirements of the digital content or digital service and the trader informed the consumer of such requirements in a clear and comprehensible manner before the conclusion of the contract. According to Art. 12(5), the consumer’s indirect obligation is to assist the trader in investigating the reason for a lack of conformity and to cooperate in determining whether the lack of conformity was due to his digital environment.

For details Consumer Rights Directive → Art. 5, mn. 41 et seq. Below → mn. 50. 16 → Art. 6 DCD, mn. 40. 17 For details → Art. 7 DCD, mn. 48 et seq., and → Art. 8 DCD, mn. 75. 18 Below → mn. 24 et seq. 19 Below → mn. 18 et seq. 14

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Art. 9 and the concept of integration should not be confused with the concept of interoperability in the sense of Art. 7(a) and Art. 2 No. 12. Integration is supposed to make the digital content work as it should, interoperability indicates whether or not this is technically possible.20 15 Recital 52 explains briefly the basic concept of Art. 9 and provides some examples. 14

C. Explanation I. Scope of application Art. 9 applies to all contracts for the provision of digital content or services covered by the Directive.21 In particular, responsibility for the integration is not limited to the supply of digital content on an initial or one-off occasion, but applies to contracts for a continuous supply over a period of time for each of the individual acts of supply. This follows from an interpretation in accordance with Art. 8(4) and especially Art. 11(2) 1 st subpara. that holds the trader liable for a lack of conformity for the whole period. 17 Even in the case of contracts providing for a single act of supply, a relevant act of integration may occur when updates, patches or subsequent versions are provided [e.g. in accordance with Art. 7(d) or Art. 8(2)]. 16

II. Constituent elements 1. Digital environment Art. 2 No. 9 defines the notion of ‘digital environment’. Accordingly, it includes ‘hardware, software and any network connection used by the consumer to access or make use of digital content or a digital service’. The terms ‘hardware’, ‘software’ and ‘network connection’ themselves are not specified in the Directive. They must therefore be defined by applying the general criteria of statutory interpretation.22 19 ‘Hardware’ comprises all physical components of a data processing system according to a general understanding. This includes, first of all, the essential components of a computer with case, central processing unit, computer data storage, graphics card, sound card, speakers and motherboard.23 Usually, accessories such as mouse, keyboard, screen, printer and external data storage devices of all kinds are added.24 This broad understanding is supported by the purpose of Art. 9. Here, the interaction with the digital content and services supplied is in the focus. The relevant hardware is therefore determined positively and negatively by the fact that it is suited to hinder (directly) the proper functioning of the digital contents and services owed. 20 The term ‘software’ could be interpreted in relation to the term ‘computer programs’ in the sense of Art. 1 Computer Programs Directive. However, this Directive does not specify this term any further and has a different purpose,25 which is reflected in the inclusion of draft programs. The current ISO/IEC/IEEE 24765:2017 on Systems and software engineering (Vocabulary) defines software in three different ways ranging from 18

Geiregat/Steennot, p. 136. For details on the scope of application see → Art. 3 DCD. 22 cf. Riesenhuber, p. 231 et seq. For a broad understanding Geiregat/Steennot, p. 135. 23 https://en.wikipedia.org/wiki/Computer_hardware (accessed 25 February 2020). 24 https://de.wikipedia.org/wiki/Hardware (accessed 25 February 2020). 25 Protection of the computer program manufacturer, not of third parties using the computer program. 20

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‘program used to run a computer’ to ‘programs, procedures, rules, associated documentation, and data’.26 In line with the above considerations, all components of a broad understanding of software that are capable of hindering (directly) the proper functioning of the digital content and services should be covered here. Consequently, technical programming records and documentations are regularly excluded, but single data necessary for the operation of the program and the hardware are not. The term ‘network connection’ should be understood accordingly. It thus means all 21 devices that are supposed to connect the consumer’s end-device with other computers. Most of the components of the end-device itself will already be covered by ‘hardware’ and ‘software’. However, the term also includes, in particular, the lack of performance including a complete loss of function of the consumer’s Internet connection.27 It thus refers to circumstances which do not necessarily lie within the consumer’s sphere of physical influence, but which are in particular attributable to the consumer’s Internet service provider. Art. 9 hereby expresses at the same time – and with justification – that the issue here 22 is an appropriate distribution of risks between the consumer and his specific contractual partner. In this contractual relationship, other persons with whom the consumer has also concluded contracts are to be attributed to the consumer and belong to the consumer’s sphere of (legal) influence. On the one hand, it follows from this that even cloud services or other facilities operated by third parties belong to the consumer’s digital environment.28 If the digital content or service is to be used in such an environment, the trader must ensure that integration is possible there. On the other hand, defects in consumer’s software, for example, are also part of the 23 consumer’s sphere of risk, even if this software was supplied by another trader based on another contract for the supply of digital content or services. The consumer shall be responsible in relation to the respective trader for his other contractual partners in this respect. This is appropriate as the reversal of the burden of proof sufficiently protects the consumer from having to take responsibility vis-à-vis all traders for a lack of conformity caused by one (or more) of his previous contractual partners.29 A joint liability of all providers of digital content or services (e.g. operating system, browser, plug-in, platform, other content), which are only coincidentally connected via a joint contractual partner (i.e. the customer), is only justified if their liability has already been established according to the aforementioned principles.30

2. Incorrect integration Art. 2 No. 4 legally defines ‘integration’. According to this definition, the term con- 24 cerns the linking and incorporation of digital content or a digital service with the components of the consumer’s digital environment in order for the digital content or digital service to be used in accordance with the requirements for conformity provided for by this Directive. The wording of Art. 2 No. 4 and Art. 9 suggest that ‘integration’ refers only to the measures of integration and not to the outcome. These integration measures must be incorrect in the sense of Art. 9, while the result of the integration must represent 26 Para. 3.3783: ‘1. computer programs, procedures and possibly associated documentation and data pertaining to the operation of a computer system (…) 2. all or part of the programs, procedures, rules, and associated documentation of an information processing system (…) 3. program or set of programs used to run a computer’. 27 Staudenmayer, 823. 28 Loos, p. 37. 29 On the burden of proof → mn. 63 et seq. 30 Differently Riehm/Abold, 88.

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a ‘lack of conformity’.31 It is therefore required that both the act of integration and the result are erroneous (in a non-technical sense). ‘Incorporation’ appears to focus on the alteration of the state of the consumer’s digital environment. The focus here is on the interactive adaptation of the software components of the digital environment and the digital content and services. An inseparable fusion of the digital content with the components of the consumer’s digital environment is not required. Contrary to the somewhat misleading wording (‘the components’), a coupling with all components of the digital environment is also not necessary, but a connection with one component is sufficient. This is why every (simple) installation routine fulfils the concept of integration.32 The term ‘linking’ is used even more openly. Again, there is no need for an inseparable connection and no need for a modification in the consumer’s digital environment. Nevertheless, in most cases at least authorisations for the use of hardware or network resources are likely to be registered in the consumer’s software. The definition components ‘linking’ and ‘incorporation’ do not necessarily have to occur simultaneously. The cumulative enumeration only serves the purpose of recording as many technical measures as possible. A clear distinction is therefore neither necessary nor possible according to the above. The transitions are fluid. In order not to unduly restrict consumer protection and to exclude the possibility of manipulation, integration measures should also be included which are not technically necessary. This applies, first of all, to the case where the trader’s integration measures are not state-of-the-art. However, this also applies to the case in which the contents could be used without integration,33 but are integrated in accordance with the agreement of the parties or the objective consumer expectation.34 Thus, the definition in Art. 2 No. 4 refers to the Directive’s standards of contractual conformity, i.e. to the provisions of Arts 7 and 8. The notion of ‘installation’ in the sense of Arts 7(c) and 8(3)(b) is in essence of no relevance for the interpretation of Art. 9, even from a systematic point of view. 35 In the context of Art. 8, the term refers to updates and apparently has only software in mind and not the more extensive digital contents or services (which includes films or music). Whether ‘installation’ within the framework of Art. 7 fulfils a delimitation function at all is doubtful in view of its use as an example. However, this can also be left out here, because Art. 2 No. 4 exhaustively defines ‘integration’.36 At best, this raises the question whether Art. 2 No. 4 should inspire the interpretation of ‘installation’. The act of integration must – as is clear from the wording (‘in order to’) – take place precisely for the purpose of making the content or services usable. However, this objective does not have to be the only one pursued by trader or consumer. It is therefore also possible for the trader to aim at other goals with the same act of integration, such as the installation of (possibly unauthorised) tracking software. Art. 9 is not limited to the first integration. It thus also covers the case that the digital content or service was correctly integrated in the first place but later migrated to another digital environment of the consumer and the second or a subsequent integration was in31 On this linguistic confusion, see already European Law Institute, 48, available at www.europeanlawins titute.eu/fileadmin/user_upload/p_eli/Publications/ELI_Statement_on_DCD.pdf (accessed 25 February 2020). 32 Hesitant Spindler (2016), 200; Spindler (2018), p. 297 et seq. 33 In view of the broad concept of ‘linking’, this should of course only rarely be an issue. 34 In this sense also Schulze, ‘Supply of Digital Content’, p. 137. 35 Below → mn. 49. 36 For details → Art. 2 DCD, mn. 18 et seq.

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correct.37 The wording is open for such an interpretation, which is in line with the understanding of Art. 2(5) CSD38 and the Digital Content Directive’s purpose of consumer protection. In order to avoid an overly extensive liability of the trader, the possibility of multiple use must be agreed in the contract or derive objectively from the nature of the digital content or services. The integration measure has to be ‘incorrect’. This simple observation nevertheless 32 addresses two further points. First, the result of the integration itself is characterised by the requirement ‘lack of conformity’.39 Secondly, as in the (former) Consumer Sales Directive, an integration correctly carried out in spite of a faulty instruction does not lead to the rights under Arts 11 and 14. It seems reasonable to assume that the term ‘incorrect’ should also be defined with 33 regard to the agreement between the parties and that it derives its standard from the contract.40 However, such an understanding would have several weaknesses. First, Art. 9 would then refer a total of four times to the specific contract (once expressly as a result of the integration41, then expressly within the framework of Art. 2 No. 4 as the purpose of the integration,42 here for the incorrectness of the integration and, finally, with regards to the legal consequences43). Secondly, one can assume that the modalities of integration only very rarely are the subject of a specific agreement between consumer and trader, so that an objective standard would have to be applied nonetheless. And thirdly, an objective standard is less susceptible to manipulation by the trader in his favour, especially in general terms and conditions. Therefore, a strictly objective standard should be applied to ‘integration’ and integration measures must meet the technical standards common on the market (‘lege artis’). Consequently, not the highest technical standard can be demanded here, but an average one is sufficient, in order not to burden the trader unnecessarily. Any deviation from this standard is then sufficient. It is not necessary that the inte- 34 gration has failed completely. The defectiveness of only individual parts of the digital content or the digital service also constitutes integration deficiencies in this respect.

3. Lack of conformity The incorrect integration must result in a lack of conformity. This qualifies the out- 35 come of the integration process. At the same time, it is clear that not every objectively incorrect measure of integration triggers the trader’s liability. A disturbance of the contractual balance is necessary. The wording ‘any’ indicates that the term must be interpreted broadly. However, it 36 does not expressly specify which point of reference of the conformity comparison is to be applied. From Art. 6 and the identical denomination as ‘lack of conformity’ in Art. 9 it can be concluded that the latter refers to the notion of non-conformity according to Arts 7 and 8. It should thus be read as ‘[a]ny lack of conformity with the contract resulting…’. The digital content or service must therefore no longer be as usable as the con-

Critical Geiregat/Steennot, p. 152. cf. Leible in: Gebauer/Wiedmann, Ch. 10, mn. 63; in this sense on § 434(2) 1 st sentence BGB, Westermann in: MüKo BGB, § 434 BGB, mn. 40, differently (only one-time actions) Pammler in: JurisPraxiskommentar, § 434 BGB, mn. 143; Faust in: BeckOK BGB, § 434 BGB, mn. 105. 39 Above → mn. 24, and in detail below → mn. 35 et seq. 40 Ramberg, p. 320. 41 Below → mn. 36. 42 Above → mn. 28 et seq. 43 Below → mn. 59 et seq. 37

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tractual agreements under Art. 7 or the objective requirements under Art. 8 stipulate. 44 Thus, it is not the integration measure that is compared,45 but the usability of digital content or services with the contractual standard of ‘correctness’. A (separate) agreement specific on the result of the integration is neither necessary nor is such an agreement likely to be made on a regular basis. 37 It may come as a surprise why Art. 9 refers to the lack of conformity of the contract already in the requirements when the same is also imposed as a legal consequence. 46 This is somewhat confusing because it sounds circular. The regulatory objective of this wording is that restrictions on usability that arise specifically as a result of integration can be assigned to the trader’s sphere of responsibility even if the digital content itself is not defective. 38 The term ‘conformity’ does not extend to the case where an integration measure damages the consumer’s digital environment or creates or increases risks of damage. 47 These risks are not part of the contractual determination of quid pro quo by the parties and therefore not covered by the Digital Content Directive but outside its scope of harmonisation.48

4. Causation The lack of conformity must be the consequence of (‘resulting from’) the incorrect integration. A causal link in the sense of conditio sine qua non is required. This is also fulfilled when the faulty integration renders the consumer’s digital environment defective and only because of this the digital content no longer functions. 40 Co-causality is sufficient. Therefore, the faulty act of integration does not have to be the only cause for the lack of conformity. This can be the case when the integration of the digital content was incorrect but only results in a lack of conformity after a second integration of another digital content. If only the first integration was incorrect, only the first trader will be liable. If also the second integration was incorrect, both traders are liable.49 41 Co-causality also exists if the condition of the consumer’s digital environment contributes to the incorrect integration. Arts 7 or 8 can already be directly applicable in such cases. If the consumer’s digital environment could also be the reason for the lack of conformity in parallel with the act of faulty integration, the burden of proof rule under Art. 12(4) applies.50 However, it is not clear which consequences occur if it is proven that both reasons have contributed to the lack of conformity. To the extent that the effects of the contributions on the digital content or service cannot be distinguished from each other, the trader should still be liable for reasons of consumer protection. The consumer’s digital environment can then be taken better into account in the re-supply [Art. 14(2)] of the digital content and its integration. 39

For details → Arts 7 and 8 DCD. Above → mn. 32 et seq. 46 Below → mn. 59 et seq. 47 Likewise Geiregat/Steennot, p. 141. 48 cf. above → mn. 1. 49 Above → mn. 23 and below→ mn. 70. 50 This is also pointed out by Riehm/Abold, 88. 44 45

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5. By the trader or under the trader’s responsibility Art. 9(a) stipulates the further condition that the integration must have been carried out by the trader or under his responsibility. If this is not the case, the trader can only be liable under the additional conditions set out in Art. 9(b). Art. 9(a) lists two equivalent alternatives which do not have to be clearly distinguished from each other because of the identical legal consequences. It is therefore irrelevant which auxiliary persons of the trader fall under the first or the second alternative. The aspects of accountability and valuation, in particular the concept of the spheres of influence, are decisive for determining the extent of the trader’s liability. 51 Art. 9(a) describes this with the term ‘responsibility’, while Recital 52 uses the term ‘control’. Interestingly, Art. 2(5) CSD contained and now Art. 8(a) SGD contains the restriction ‘that the installation forms part of the sales contract’. In contrast, Art. 9(a) is based on Art. 101(1) CESL, which did not require this. It is not clear whether this difference is intended or just an editorial mistake. The literature on Art. 2(5) CSD understands this restriction as a reference to the Directive’s scope of application.52 Art. 8(a) SGD in conjunction with Recital 17 SGD seems also to be intended in this sense. For the Sale of Goods Directive, the distinction between a sales contract, a service contract or a contract for work and labour is fundamental because the Directive regulates only one of these types of contract, namely the sales contract. The Digital Content Directive, on the other hand, applies to all types of contracts as long as they fall within the general scope of application according to Arts 1 and 3 in conjunction with Art. 2 Nos 1 and 2. Art. 9 in substance therefore contains a similar restriction: if the integration service is dependent on the supply of digital content or services, it falls under Art. 9. Since digital content regularly has to be integrated, integration is likely to be a dependent ancillary service obligation. An exception exists if the trader makes it clear that he wishes to provide the integration exclusively as a gesture of fairness and thus outside contractual liability.53 The trader should have the opportunity to avoid strict contractual liability; the mere fact of carrying out the integration is not decisive. If the integration represents an independent service, there are two possible scenarios. First, if it falls directly under Art. 3(1) in conjunction with Art. 2 No. 2, then any faulty integration would already be a defect under Arts 7 or 8. Alternatively, if the integration is independent but not a digital service within the meaning of Art. 2 No. 2, it therefore falls under Art. 3(5)(a) and hence not under the Directive at all. The Member States are then free to impose a specific liability or not. Ultimately, the trader has to take responsibility for any integration carried out by himself, by dependent employees or even by contractors, as long as the involvement of the auxiliary is due to his (possibly general) consent. This wide attribution is therefore already a consequence of the Directive itself and must be ensured by national law within the framework of implementation.54 At the same time, however, the trader is only responsible for circumstances that he can control.55 Consequently, the supplier is responsible for the installation routine programmed by him (or under his responsibility), but not for errors caused by incorrect operation by the consumer. This can lead to scenarios in which a faulty integration result must be attributed to both consumer and trader. On the other hand, control does not make reference to the place where the integration takes place so that measures undertakcf. Rosenkranz, 35. Leible in: Gebauer/Wiedmann, Ch. 10, mn. 58. 53 Otherwise, it would be advisable for the trader to refrain from any non-compulsory integration measures. 54 cf. on Art. 2(5) CSD, Grundmann in: Grundmann/Bianca, Art. 2, mn. 44. 55 Spindler (2016), 200; Spindler (2018), p. 298. 51

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en by the trader at the place of business, of the consumer or of a third party even via the Internet can justify the trader’s responsibility.56

6. Or by the consumer and due to shortcomings in the instructions Art. 9(b) postulates another possibility for the liability of the trader. This alternative is to be considered if the integration should be carried out by the consumer. This is always the case if Art. 9(a) is not applicable. In the two-dimensional contract for the supply of digital content, integration can only ever be the obligation of either the trader or the consumer. Consequently, Art. 9(b) focuses solely on the parties’ agreement, expressed in the contract, of who is responsible for integration. It does not matter who actually carried out the integration. Art. 9(b) therefore also applies if the consumer engages a (professional) third party for the integration, e.g. a family member.57 A third party may even be the trader or the producer of the digital content itself, e.g. in the exceptional case mentioned above.58 48 In addition, the incorrect integration must be due to shortcomings in an integration instruction. Art. 9 therefore only applies to those instructions or parts of instructions that refer specifically to the integration of the digital content or service. Other (parts of) instructions, such as operating manuals do not fall under Art. 9(b). However, if the latter are inaccurate, the digital content itself will regularly be non-conforming within the meaning of Arts 7 or 8. The instructions can be given in paper form but also in digital form as a file or on a website.59 49 In the event that the integration obligation relates to updates within the meaning of Art. 8(2), a conflict between Art. 9(b) and Art. 8(3)(b) may arise. Both provisions are almost identically worded, except that one refers to ‘installation’ and the other to ‘integration’. In view of the identical regulatory objective, a relevant difference cannot arise: both provisions seek to exempt the trader from liability only (but then) if his instructions did not cause the defect. 50 The drafts of the Commission and Parliament had demanded that the ‘instructions were supplied in accordance with [now: Art. 7(c)] or should have been supplied in accordance with [now: Art. 8(1)(c)]’.60 This would have covered instructions that were either owed according to the express agreement of the parties or covered by the reasonable objective expectations of the consumer. The wording of the final version goes beyond this and covers all instructions provided by the trader, in particular those which the consumer could not expect. This raises a question similar to the one previously addressed: 61 should it be possible for the trader to cooperate in the integration process on a voluntary basis, in particular as a gesture of goodwill, without having to take contractual responsibility? A different approach to the two variations is not justified. Recital 52 seems to support this understanding when it refers to ‘required’ integration instructions. Therefore, it must be assumed here as above that Art. 9(b) covers only contractually-owed instructions. It can thus be inferred that the amendment of the wording in the legislative process only served to streamline it.62 47

Geiregat/Steennot, p. 136 et seq. In this sense Geiregat/Steennot, p. 138. 58 Above→ mn. 44. 59 Geiregat/Steennot, p. 138. 60 See COM(2015) 634 final and A8–0375/2017, respectively. 61 Above → mn. 44. 62 Otherwise, it would be advisable for the trader not to give any non-compulsory integration instructions to the consumer. 56

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Art. 9(b) includes only those instructions which have been provided to the consumer specifically by the trader. It therefore does not include instructions provided to the consumer by third parties, in particular the producer of the digital content. However, exceptions have to be made if the trader adopts instructions from third parties, e.g. through distribution or express reference. The objective of a high level of consumer protection would argue in favour of also covering all other instructions, but the trader would then be liable for circumstances that are entirely outside his sphere of influence and outside the bilateral contract between trader and consumer.63 Finally, the incorrect64 integration must be due to shortcomings in the integration instructions. Recital 52 cites as two key examples ‘incompleteness or a lack of clarity making the integration instructions difficult to use for the average consumer’. Nevertheless, it remains unclear which concrete requirements must be met by the instructions. In line with Recital 52, it can be assumed that the criterion for correct instructions is the level of understanding of an average consumer. Deviations from this should only be made if the circumstances of the contract indicate that consumers have a specific level of knowledge (or lack of knowledge). Due to Art. 22, however, it is not possible for the trader to determine the standard of correctness unilaterally or in the contract.65 In general, it is necessary that reasonably circumspect consumers can apply the instructions predominantly correctly. Although this question may be open to empirical assessment, it must nevertheless be answered by the courts as a question of law. There must therefore be a relationship between the severity of consequences of incorrect installation and the proportion of consumers who cannot comprehend the integration instructions: the greater the consequences, the lower the proportion. The examples of Recital 52 are also abstract terms that require further explanation. ‘Incompleteness’ presupposes an obligation to point out the missing circumstances. This gives rise to the question of the special characteristics of the consumer’s digital environment that must be taken into account in the instructions in accordance with these requirements and if these statements must be continually updated if necessary. 66 In this context, it should be remembered that, on the one hand, Arts 5 and 6 CRD oblige the trader to inform the consumer of the requirements for the use of his product. Instructions have to be provided for all digital environments not excluded in this guidance. On the other hand, neither the Consumer Rights Directive nor the Digital Content Directive require the trader to check beforehand which digital environment the specific consumer is using. The trader is therefore not obliged to provide installation instructions for every imaginable scenario. ‘A lack of clarity’ may arise if the instruction is written in a foreign language or incomprehensible due to a flawed translation. ‘A lack of clarity’ may also result from factual errors or technical terms that are incomprehensible to the average consumer. Instructions have shortcomings if they can only be read or accessed with technical devices that an average consumer does not possess. The instruction can be given in any form: orally, digitally or in writing. The wording ‘provided by the trader’ implies that the consumer has received the integration instructions and therefore it is not clear whether the complete absence of such instructions also falls under Art. 9(b). In any case, this will generally constitute a lack of conformity pursuant to Arts 7(c), 8(1)(c).67 On the one hand, it could be asserted that it Equally deliberative Geiregat/Steennot, p. 138 et seq. Above → mn. 32. 65 Below → mn. 67. 66 cf. Riehm/Abold, 88. 67 For details → Art. 7 DCD, mn. 48, 50 and → Art. 8 DCD, mn. 75 et seq. 63

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makes no difference whether the integration instructions are completely missing or so faulty that they are completely useless (e.g. if written in a foreign language).68 On the other hand, one can argue that in such case the consumer can already directly exercise the rights under Arts 11 and 14, that the consumer can therefore insist on the delivery of useful instructions and consequently undertakes an independent integration at his own risk.69 The wording supports the latter understanding when it presupposes that the instructions must have been ‘provided by the trader’. However, this is not the only possible interpretation of this provision as the legislator could also have been concerned solely with the exclusion of liability for third-party instructions.70 56 The incorrect integration is only due to the shortcomings when the former is caused by the latter in the sense of a condition sine qua non. The integration is therefore not incorrect if the consumer makes an error that is not caused by the instruction. This can be the case if the consumer knew of the shortcomings of the instructions. 71

7. Relevant point in time Art. 9 modifies the point in time at which the lack of conformity must exist. 72 Contrary to Art. 11(2) 1st subpara., it is not the time at which the digital content or services are made available that matters. Rather, the completion of the integration is decisive. Since the criterion of ‘lack of conformity’ refers to the result of the integration measures undertaken by the trader, Art. 9 shifts the relevant point in time to the rear without expressly stating so.73 If the digital contents or services are intended for multiple use in different digital environments,74 the respective integration measures are to be examined. In any case, the period of Art. 11(2) 2nd subpara. should still begin with the supply of the digital contents or services and not with the completion of the integration, in order not to let the trader be liable for an indefinite and possibly endless period of time. Alternatively, one could think of a time limit for the consumer to undertake the integration. Art. 8(2) of the Commission’s draft of the Sale of Goods Directive did contain a comparable provision,75 but nothing can be found now in the Digital Content Directive or the Sales of Goods Directive. 58 In the case of the integration of updates within the meaning of Art. 8(2)(b), each individual integration may again trigger the consequences of Art. 9. Art. 11(2) in conjunction with Art. 8(2)(b) expressly impose an obligation to provide updates on an ongoing basis, which is similar to those of long-term contracts. 57

68 cf. Faust in: BeckOK BGB, § 434 BGB, mn. 102 (on § 434(2) 2 nd sentence BGB that transposes Art. 2(5)2nd sentence CSD); also Geiregat/Steennot, p. 139. 69 cf. Zoll in: Schulze, Art. 101 CESL, mn. 9 (on Art. 101(1)(b) CESL). 70 Above → mn. 51. 71 Negligent ignorance, as in Art. IV.A.–2:307(2) DCFR, should not be enough. 72 Stürner, 175; see also → Art. 11 DCD, mn. 36. 73 It is not entirely clear why the corresponding provision of Art. 105(3) CESL was not copied. Recital 40 SGD at least clarifies that the notion of ‘delivery’ in the sense of Art. 10 SGD takes into account if the goods required installation. 74 Above→ mn. 31. 75 Art. 8(2) reads: ‘In cases where the goods were installed by the seller or under the seller’s responsibility, the time when the installation is complete shall be considered as the time when the consumer has acquired the physical possession of the goods. In a case where the goods were intended to be installed by the consumer, the time when the consumer had reasonable time for the installation but in any case not later than 30 days after the time indicated in paragraph 1 shall be considered as the time when the consumer has acquired the physical possession of the goods.’, see COM(2015) 635 final.

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III. Legal consequence At first glance, the nature of the legal consequence of Art. 9 appears unusual because the concept of lack of conformity is deemed both the factual as well as the legal consequence: However, this wording can also be found in Art. 8 SGD and was also proposed for Art. 101(1) CESL. Art. 2(5) CSD, on the other hand, ordered that the defective installation was ‘deemed to be equivalent’ to a lack of conformity of the consumer goods. The purpose of the legal consequence provision does not primarily lie in the reference to the standard of the lack of conformity (i.e. Arts 7 and 8) but rather in the indirect reference to the rights under Arts 11 and 14. The wording is intended to make it clear that the integration leads not just to a defective integration but also to a defect of the digital content itself. Integration thus becomes the trader’s primary duty because it triggers the same legal consequences as the supply of defective content or services. 76 Without this explicit order, it would be possible to classify integration as an ancillary duty and to adapt a different regime of legal consequences. In principle, the consumer can therefore not only exercise the rights under Art. 14(2) and (3) but also demand a price reduction or the termination of the contract, if the further conditions of Art. 14(4) and (5) are met. Insofar as the incorrect integration has not affected or damaged the digital content itself, however, it is sufficient for the trader to repeat the integration or provide correct integration instructions. In this case, a renewed supply of the digital content is not imperative and can therefore be disproportionate within the meaning of Art. 14(2).77 The qualification as ‘lack of conformity’ does not include the legal consequences for a ‘failure to supply’ under Art. 11(1) and Art. 13. This is consistent because an act of integration presupposes that the digital content or services have been made available. Art. 9 also does not address the question of the legal consequences of an integration-based damage to the consumer’s digital environment. This does not affect the relationship established by the contract and therefore remains outside the scope of the Directive.

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IV. Burden of proof The rules on the burden of proof for incorrect integration of digital content or ser- 63 vices into the consumer’s digital environment are also based on the concept of spheres of influence and further develop the allocation of responsibilities in Art. 9.78 A pragmatic regulatory regime can be seen in the complicated interplay of the different requirements of Art. 1279, although it does place a heavy burden on the trader.80 If only the general principles of the burden of proof were to be applied, according to 64 which each party must establish and prove the facts which are favourable to it, the consumer would have to prove the requirements laid down in Art. 9. In addition to lack of conformity, incorrect integration and causal relationship, the wording and scheme of Art. 9 would require the consumer to prove the facts of points (a) and (b). Art. 12(2) and (3) deviate from this and impose on the trader the burden of proving 65 correct integration. This follows from the uniform concept of non-conformity in the 76 In this sense Matusche-Beckmann in: Staudinger BGB, § 434 BGB, mn. 114; Pammler in: JurisPraxiskommentar, § 434 BGB, mn. 11. 77 Similarly regarding Art. 2(5) CSD Grundmann in: Grundmann/Bianca, Art. 2, mn. 44. 78 Schmidt-Kessel/Erler/Grimm/Kramme, 68; Staudenmayer, 823. 79 For details → Art. 12 DCD, mn. 11 et seq. 80 cf. Riehm/Abold, 90.

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sense of Art. 12(2) and (3), which equally encompasses Arts 7, 8 and 9. 81 Art. 12(4) formulates an exception for the case that the trader demonstrates that the digital environment of the consumer is not compatible with the technical requirements of the digital content or digital service and the trader informed the consumer of such requirements before the conclusion of the contract. In view of the uniform concept of conformity, this exception also applies in principle to incorrect integrations pursuant to Art. 9. Nevertheless, the specific scope of application of Art. 12(4) is limited within the context of Art. 9. If the consumer’s digital environment is not compatible with the digital content supplied, this can already have an effect on the causality of integration errors and lack of conformity. The trader may then have already provided the proof to the contrary required under Art. 12(2) and (3). If, by contrast, it is unclear whether the lack of conformity was caused by a faulty integration or by an incompatible digital environment, Art. 12(4) has a unique effect. The trader is then released from the burden of proof that it was not his faulty integration measure but the incompatible digital environment of the consumer. The consumer is protected from this burden of proof – which he rarely can cope with – only by a detailed examination of whether his digital environment meets the requirements, which the trader has informed him of. The corresponding information obligation under Art. 12(4) is supplemented by the pre-contractual information duties under Arts 5 and 6 CRD.82 66 Art. 12(4) is linked with Art. 12(5). According to the latter, the consumer is obliged to assist the trader in finding out whether the lack of conformity of the digital content or services is due to the consumer’s digital environment. As in Art. 12(4), the object of this provision is not specifically the incorrectness of the trader’s integration measure. The obligation to cooperate is primarily directed to the proof of incompatibility to be furnished by the trader, but can also refer to the burden of proof for the fulfilment of the requirements of Art. 9. It should be noted that the consumer’s duty of cooperation only commences after the conclusion of the contract and after the discovery of the lack of conformity with the contract and therefore cannot render obsolete the trader’s duty to provide information under Art. 12(4).

V. Mandatory nature The provisions of Art. 9 are semi-binding pursuant to Art. 22.83 The trader cannot derogate from them by stipulation in the contract to the detriment of the consumer. Such an agreement is only possible once the consumer has become aware of the lack of conformity. According to Art. 22(2), however, the Directive does not prevent contractual agreements that grant the consumer a higher level of protection. As the incorrectness of the integration refers to an objective standard, the trader particularly cannot circumvent this via Art. 7 or Art. 8(5).84 68 The semi-binding nature covers general terms and conditions as well as individual agreements. A clause, which directly or indirectly grants the trader the right to determine independently whether the digital content or services are in accordance with the contract, would additionally violate Art. 3(1) in conjunction with Art. 3(3) and point (m) Annex Unfair Terms Directive. 67

Above → mn. 11; and Art. 12(2) and (3) in conjunction with Art. 11(2) and (3) 1st subpara. Above → mn. 9. 83 For details → Art. 22 DCD. 84 Above → mn. 33 and → Art. 8 DCD, mn. 159. 81

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D. Transposition issues The principle of full harmonisation according to Art. 4 must be observed for implementation. The Member States may not deviate from the specific rules and requirements of Art. 9, either in favour of or to the detriment of the consumer.85 These strict rules apply to the facts and the legal consequences of Art. 9 as well as rules on the burden of proof of Art. 12. In implementation, therefore, all integration measures that are not provided independently of a contract for the supply of digital content or service must be classified as part of the trader’s duty to perform. Independent integration services are either directly covered by Art. 2 No. 2 or not covered by the Directive at all.86 The Member States have to classify integration as a primary obligation and may not assign other legal consequences to it. However, the legal consequences of any harm to the consumer’s digital environment because of an incorrect integration fall outside of the scope of the Directive. 87 If one assumes that every supplier of digital content that already forms part of the consumer’s digital environment is in the consumer’s sphere of risk in relation to the supplier of another digital content or digital service, there is not much room for joint and several liability of all traders.88 Finally, Member States are barred from imposing lower requirements for the liability of the trader. It is unclear whether faulty integration instructions may constitute a lack of conformity even if they have not led to incorrect integration, because they are mentioned in Art. 9(b). As in the case of other incorrect instructions, the standards set out in Art. 7(c) and Art. 8(1)(c) would apply directly.89 Literature on Art. 2(5) 2nd sentence CSD predominantly assumed that the legislator had regarded the correctness of the instructions as a matter of the general definition of a lack of conformity.90 Indeed, there are strong arguments in favour of Art. 9 only comprehensively regulating the legal consequences of an incorrect integration, but not conclusively determining the consequences of erroneous instructions. Member States should consider applying the rules to not only contracts with consumers but also to B2B and P2P contracts. The legislator’s key considerations for Art. 9 demand validity outside the B2C sector, too.

Article 10 Third-party rights Where a restriction resulting from a violation of any right of a third party, in particular intellectual property rights, prevents or limits the use of the digital content or digital service in accordance with Articles 7 and 8, Member States shall ensure that the consumer is entitled to the remedies for lack of conformity provided for in Article 14, unless national law provides for the nullity or rescission of the contract for the supply of the digital content or digital service in such cases. Bibliography: Bamberger/Roth/Hau/Posek (eds), Beck'scher Online-Kommentar BGB (‘BeckOK BGB’) (53rd edn, C.H. Beck 1.2.2020); Cab/Stabentheiner, ‘Neues aus Europa zum Vertragsrecht – Die verFor details → Art. 4 DCD. Above → mn. 44. 87 Above → mn. 1, 38 and 62. 88 Differently Riehm/Abold, 88. Above → mn. 23 and 41. 89 Above → mn. 48. 90 cf. Faust in: BeckOK BGB, § 434 BGB, mn. 97. 85

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brauchervertragsrechtlichen Vorschläge im Rahmen der digitalen Binnenmarktstrategie’ (2016) 4 wbl 177–186; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; Council, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content (first reading) – general approach’ 9901/17 ADD 1; European Law Institute, ‘Statement of the European Law Institute on the European Commission’s Proposed Directive on the Supply of Digital Content to Consumers’ (2016); European Parliament, ‘Report on the proposal for a directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ A8–0375/2017; European Parliamentary Research Service, ‘Contracts for supply of digital content – In-Depth Analysis’ PE 582.048 (2016); Ganzhorn, ‘Die Wirksamkeit von Weitergabeverboten in Allgemeinen Geschäftsbedingungen für E-Books’ (2015) 8 C&R 525–528; Gebauer/Wiedmann (eds), Zivilrecht unter europäischem Einfluss (2nd edn, Boorberg 2010); Geiregat/Steennot, ‘Proposal for a Directive on Digital Content: Scope of Application and Liability for a Lack of Conformity’ in: Claeys/Terryn (eds.), Digital Content & Distance Sales (Intersentia 2017), p. 95–166; Grünberger, ‘Verträge über digitale Güter’ (2018) 218 AcP 213–296; Grundmann/Bianca (eds), EU-Kaufrechts-Richtlinie (Otto Schmidt 2002); Hilty/Köklü/ Hafenbrädl, ‘Software Agreements: Stocktaking and Outlook – Lessons from UsedSoft v. Oracle from a Comparative Law Perspective’ (2013) 3 IIC 263–292; Loos, ‘Not Good but Certainly Content’ in Claeys/ Terryn (eds), Digital Content & Distance Sales (Intersentia 2017), p. 3–54; Merdi, ‘The proposed New Digital Single Market Contract Law Directives’ in: Synodinou et al. (eds), EU Internet Law (Springer 2017), p. 125–161; Metzger, ‘Verträge über digitale Inhalte und digitale Dienstleistungen’ (2019) 12 JZ 577–586; Riehm/Abold, ‘Mängelgewährleistungspflichten des Anbieters digitaler Inhalte’ (2018) 2 ZUM 82–91; Riesenhuber, ‘Interpretation of EU Secondary Law’ in: Riesenhuber (ed.), European Legal Methodology (Intersentia 2018), p. 231–260; Rifkin, The Age of Access: How the Shift from Ownership to Access is Transforming Capitalism (Tarcher 2000); Rosenkranz, ‘Die Auslegung von Ausnahmevorschriften’ (2015) 8 JURA 783–788; Schmidt-Kessel, Stellungnahme zu den Richtlinienvorschlägen der Kommission zum Online-Handel und zu Digitalen Inhalten (2016); Schmidt-Kessel/Erler/Grimm/Kramme, ‘Die Richtlinienvorschläge der Kommission zu Digitalen Inhalten und Online-Handel – Teil II’ (2016) 2 GPR 54–70; Schmitt, Gewährleistung bei Verträgen über digitale Inhalte (Verlag Österreich 2018); Schneider/Spindler, ‘Der Erschöpfungsgrundsatz bei ‘gebrauchter’ Software im Praxistext’ (2014) 4 C&R 213–223; Schonhofen, ‘UsedSoft and its aftermath – The resale of digital content in the European Union’ (2016) 16 Wake Forest J. Bus. & Intell. Prop. L. 262–297; Schulze (ed.), Common European Sales Law – Commentary (Nomos 2012); Schulze, ‘Supply of Digital Content – A New Challenge for European Contract Law’ in: De Franceschi (ed.), European Contract Law and the Digital Single Market – The Implications of the Digital Revolution (Intersentia 2016), p. 127–143; Sein/Spindler, ‘The new Directive on Contracts for Supply of Digital Content and Digital Services – Conformity Criteria, Remedies and Modifications – Part 2’ (2019) 4 ERCL 365–391; Spindler, ‘Contract Law and Copyright Law – Regulatory Challenges and Gaps’ in: Schulze/Staudenmayer/Lohsse (eds.), Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Nomos 2017), p. 211–227; Spindler, ‘Contracts for the Supply of Digital Content’ (2016) 3 ERCL 183–217; Spindler, ‘Contracts for the Supply of Digital Content – The Proposal of the Commission for a Directive on Contracts for the Supply of Digital Content’ in: Grundmann (ed.), European Contract Law in the Digital Age (Intersentia 2018), p. 281–314; Staudenmayer, ‘Digitale Verträge – Die Richtlinienvorschläge der Europäischen Kommission’ (2016) ZEuP 801–831; Staudenmayer, Die Richtlinien zu den digitalen Verträgen (2019) 4 ZEuP 663–694; Wendehorst, ‘Consumer Contracts and the Internet of Things’ in: Schulze/Staudenmayer (eds), Digital Revolution: Challenges for Contract Law in Practice (Nomos 2016), p. 189–223; Wendehorst, ‘Sale of goods and supply of digital content – two worlds apart: Study for the JURI Committee’ (2016).

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A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Art. 10 and the acquis communautaire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Art. 10 in the legislative process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Art. 10 in the system of the Digital Content Directive . . . . . . . . . . . . . . . . . . . . . . . .

8 8 12 16

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Scope of application . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Constituent elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Any right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Third party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Resulting restriction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Limitation of usability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Relevant point in time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Third-party rights 7. No fault requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Legal consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Reference to Art. 14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Opening clause for nullity or rescission of the contract . . . . . . . . . . . . . . . . . . . IV. Burden of proof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Mandatory nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55 56 58 61 65 67

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function Art. 10 deals with the limitations of usability due to third-party rights and focuses especially on intellectual property rights. Two aspects are decisive for understanding the purpose and effect of the provision: (i) the Digital Content Directive regulates the contract law aspects in contracts for the supply of digital content and services; (ii) it seeks to leave questions of the more specific legal systems, in particular copyright law, unaffected. The background to the provision and the reason for its extraordinary importance rests in the fact that digital content typically contains some form of copyrighted material for which consumers in most cases require a license. Digital products are often technically protected in such a way that the consumer cannot use them without proof of a license. The contract for the supply of digital content governed by the Directive is legally independent from the copyright license. The required license can either be transferred to the consumer by the trader, who in turn has acquired it through a chain of transactions from the rightholder, or the consumer is granted a sub-license by the trader or the consumer concludes a so-called End User License Agreement (EULA) directly with the rightholder. Art. 10 – in conjunction with Art. 3(9) – does not affect the legal position under copyright law. The provision therefore does not establish a right to use the contents which is effective vis-à-vis the rightholder. Nor does it determine whether and how licenses can be granted, how they work or what content they may have. The Digital Content Directive can leave all this unaffected because it establishes, so to speak, a primacy of contract. Art. 10 seeks to ensure that the relationship between the consumer and the rightholder is aligned with the contractual agreement between the consumer and the trader. If this is not the case, the consumer still has no remedy against the rightholder (as a non-contracting third party). However, he can assert remedies against his contractual partner, the trader. And since typically there is a contractual chain from the trader to the rightholder, the defect of title should ultimately revert to the rightholder. The regress provision of Art. 20 therefore plays an important role here. 1 The provision of Art. 10 therefore aims to integrate the external restrictions imposed by third-party rights into the contract and to subject them to the contractual standard. In this way, the multipolar distribution structures are indirectly coordinated with the bilateral contractual relationship between consumer and trader.2 Art. 10 intends to establish coherence between the content of the contract and the performance rendered. 3 This should also disrupt the factual and legal imbalances of power between consumer and rightholder by compensating the former.

On subject matter and limits of recourse → Art. 20 DCD. cf. Staudenmayer (2019), 684 et seq. 3 Schmidt-Kessel, 16, available at https://www.bundestag.de/resource/blob/422258/c3ecca9b7286f38bda 7e060f7b420c06/schmidt_kessel-data.pdf (accessed 25 February 2020). 1

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Technically, all this is done by defining the consumer’s legitimate expectations, which are formed by the digital content contract, of the characteristics and uses of the digital content as a reference point for conformity. These legitimate user expectations based on the specifically agreed contract type are the central, only decisive criterion. It is therefore not primarily the copyright or other (material) rights or restrictions that determine the scope of the consumer’s expectations, but the agreements made when the contract is concluded. Hereby the trader also has the chance to ensure that the consumer’s contractual expectations correspond to the specifications of the product he has distributed. This can be done in particular by means of Art. 8(5) or an initial disclosure of the license conditions. 7 However, Art. 10 and the Digital Content Directive do not aim to improve the transferability of digital content.4 Whether the consumer is entitled to a right to resell depends solely on the content of the digital content contract and therefore reflects its composition by the contracting parties. The Directive does not intend to stop the change from ownership to access, but to reflect it in contract law. 6

B. Context I. Art. 10 and the acquis communautaire The Consumer Sales Directive does not contain any specific rules on the rights of third parties regarding the purchased goods. Nevertheless, or rather because of this, it is controversial whether the general concept of contractual conformity within the meaning of Art. 2(1) CSD also covers the absence of encumbering rights of third parties. 5 In contrast to this, Arts 41 et seq. CISG already contained a number of provisions specifically on this question. Similar rules were included in Arts IV.A.–2:305 et seq. DCFR. 9 Art. 102 CESL also was supposed to contain a detailed and similar set of rules on the rights of third parties. The provision, firstly, expressly included ‘not obviously unfounded claims’. Secondly, Art. 102 CESL – following the example of the CISG – distinguished between (general) rights of third parties in Art. 102(1) CESL and those of intellectual property in Art. 102(2) CESL. The latter paragraph responded in a differentiated manner to the territoriality principle of intellectual property rights and additionally demanded knowledge or negligent ignorance on the part of the seller with regard to the rights of third parties.6 Art. 102(3) and (4) CESL additionally excluded the seller’s liability for intellectual property rights if the buyer knew or could be expected to have known about them. 10 The Sale of Goods Directive contains an identical provision in its Art. 9. Art. 9 SGD and Art. 10 DCD are to be interpreted in the same sense as far as possible. The parallel legislative process of the two Directives and the legislator’s efforts to create as coherent an overall legal system of sales law and law of contracts for digital content as possible are the arguments in favour of this. 8

cf. ibid., 15 et seq., 18. cf. Grundmann in: Grundmann/Bianca, Art. 2, mn. 14; Bianca in: Grundmann/Bianca, Art. 3, mn. 6 affirming. Negating, Faust in: BeckOK BGB, § 435 BGB, mn. 4; Leible in: Gebauer/Wiedmann, Ch. 10, mn. 74. 6 On the principle of territoriality in copyright see Portability Regulation → Introduction, mn. 30 et seq. 4 5

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The Consumer Rights Directive does not explicitly mention third party rights. One 11 could, however, argue that restrictions imposed by such rights fall under the notion of ‘main characteristics’ within the meaning of Art. 5(1)(a) CRD and Art. 6(1)(a) CRD.

II. Art. 10 in the legislative process Art. 10 has undergone significant changes in the legislative process, mainly at the initiative of the Council.7 The original wording was based on Art. 102(1) CESL.8 The Commission’s draft9 further distinguished between contracts for a single act of supply [Art. 8(1)] and contracts for a continuous supply over a period of time [Art. 8(2)]. This distinction was still present in the Parliament’s draft10. In accordance with the Council’s draft11, the matter is no longer to be found in Art. 10 of the final version of the Digital Content Directive, but in Art. 11(2) and (3) despite the fact that Art. 10 is not explicitly listed there.12 Based on the Parliament’s draft and Council’s draft, the wording of Art. 10 no longer aims at the absence of any third-party rights, but at the prevention of restrictions on usability resulting from these rights. The Commission’s draft was misleading because it only contained a somewhat loose inclusion of the intention to prohibit usability restrictions.13 The wording could thus give the impression of demanding digital content that is truly ‘free from rights of third parties’. However, this is usually impossible if the respective (national) copyright system provides for an inalienable moral right (at least to a certain extent) or indispensable economic rights.14 Nevertheless, the Council’s draft was almost even more misleading. It could be understood to state that usability restrictions were not prohibited, but that rights of third parties were expressly being protected. In addition, the Commission’s original draft did not contain any explicit rule as to what had to happen in the case of encumbering third-party rights. The new wording, which focuses on the non-conformity as a deviation from the contractually-agreed conditions, also determines the resulting legal consequences. These clarifications are to be welcomed and would otherwise have had to be supplemented by interpretation. In a user-friendly way, the new structure reflects the theoretical concept of a legal rule (facts trigger legal consequences). In the wake of these changes, the opening clause for Member States’ special modalities in the legal consequences was included at the initiative of the Council.15

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III. Art. 10 in the system of the Digital Content Directive Whereas Art. 10 forms part of the notion of non-conformity it is also dissociated 16 from it.16 This is both expressed in Art. 10 itself as well as in Art. 6. Firstly, Art. 10 explicitly refers to Arts 7 and 8. Secondly, according to Art. 6, the trader must observe See also → Art. 6 DCD, mn. 42. Staudenmayer (2016), 814. 9 COM(2015) 634 final. 10 A8–0375/2017. 11 9901/17 ADD 1. 12 Below → mn. 51 et seq. 13 Critical e.g. Grünberger, 249. 14 Spindler (2016), 202; Spindler (2018), p. 299; Cab/Stabentheiner, 185; Geiregat/Steennot, p. 143 et seq.; Loos, 36. 15 Below → mn. 61 et seq. 16 The latter emphasises Staudenmayer (2019), 684. See also → Art. 6 DCD, mn. 41. 7

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Art. 10 in addition to Arts 7–9. However, Art. 10 makes it clear that the rights of third parties do not constitute a lack of conformity by themselves, but that the resulting restrictions on use constitute the lack of conformity. Art. 6 reflects this in separating Art. 10 from the other provisions that constitute a (material) defect and regulating that the conformity requirements follow from ‘Articles 7, 8 and 9, without prejudice to Article 10’ and not just ‘Articles 7 to 10’. The legal consequences of Art. 10 are also formulated in accordance with this. Hence, rights of third parties do not lead to a lack of conformity and to the respective remedies, but ‘the consumer is [expressly] entitled to the remedies for lack of conformity’. Consequently, Art. 10 is not mentioned in Art. 11(1) 1 st subpara. and Art. 11(3) 1st subpara. None of this would – in fact – make it necessary to distinguish between material defects and defects of title, because ultimately the same provisions apply. However, a distinction is necessary for two reasons. First, the provisions on the burden of proof in Art. 12(2) and (3) only refer to Arts 11 and 6 and thus do not refer to Art. 10. Therefore, the burden of proof is not the same regarding material non-conformity compared to third-party rights.17 Furthermore, Art. 10 provides for an opening clause for nullity provisions in the Member States and thus deviates in substance from the rules laid down in Arts 11 and 14.18 It can be difficult to differentiate between material defects and defects of title in individual cases. The distinction must be based on the remaining different legal consequences. The wording of Art. 6 seems to give priority to the rules of material non-conformity. Teleologically, this would be well justified since the opening clause of Art. 10 collides with the harmonisation objective of Art. 4 and the Directive as a whole. Therefore such restrictions, which are linked to concrete characteristics of the digital contents or services and already fall under Arts 7–9, are usually not to be classified as defects of title. Art. 10 must be interpreted in the light of Art. 3(9). Accordingly, the Digital Content Directive does not regulate copyright issues and in particular does not affect the InfoSoc Directive. There is also a certain substantive proximity to Art. 3(5)(f), according to which the Digital Content Directive does not apply to software offered under a free and open-source license. A number of Recitals explain Art. 10 and its underlying principles. Thus Recital 21 clarifies with regard to the scope of application of the Directive, that the bilateral contractual relationship, between the trader and the consumer should not be affected by the mere fact that the consumer has to consent to a licensing agreement with a third party. Additionally Recital 36 intensifies Art. 3(9) stating that the Digital Content Directive does not touch the law on copyright and related rights. Finally, Recitals 53 and 54 broadly explain the background of Art. 10 and provide some examples for its application. Recital 53 focuses primarily on intellectual property rights, while Recital 54 concentrates on all other third-party rights. This gives rise to redundancies and the impression that the two recitals have tautologous elements and are not properly synchronised.

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C. Explanation I. Scope of application Art. 10 applies to all contracts for the provision of digital content or services covered 21 by the Directive. In particular, liability for encumbering third-party rights is not limited to the supply of digital content on an initial or one-off occasion, but encompasses contracts for a continuous supply over a period of time.

II. Constituent elements 1. Any right The Directive does not define the rights that may give rise to liability of the trader. Art. 10 only mentions intellectual property rights as a particular example. The provision, however, neither links different legal consequences to the legal nature of the right of the third party nor does the rest of the wording of Art. 10 contain restrictions as to legal nature. On the contrary, ‘any’ right is sufficient. A limitation cannot be derived from the function of the provision either. The conflicting right can therefore be based on all conceivable legal grounds. It may be not only of a private law but also of a criminal or administrative nature. It does not matter whether the legal position of the third party is just under Member State law or Union law or other. It may be based on a contract, on an individual act of public authority or directly on legislation. This means that practically the entire legal system can establish relevant rights of third parties. In view of this, the liability risk of the trader must be limited to an appropriate level. This is done by assuming that the consumer knows of general legal limitations on the use of the digital content.19 As many, if not most, rights of third parties are bound to the legal system of the state where they are granted and have to be recognised by the legal systems of other countries, the existence of the rights of third parties may depend on the legal system of the state in question. This, in turn, is ancillary to the other constituent elements of Art. 10, in particular to the limitation of usability.20 The latter refers to the contractually-agreed place of use, which is regularly the place of residence of the consumer. The third-party right must exist – especially according to the conflict of laws rules – in the legal system of this state. The right can furthermore be of a contractual nature or derived from property law. The only decisive factor is that the third party can invoke it against the consumer. Thus it may not only be directed against the third party’s contractual partner (e.g. the trader or one of his resellers), but must also bind the consumer. The right must have effect erga omnes in this respect, which will normally only be the case if it is attached to the digital content or service. (Non-exhaustive) examples of such third-party rights include copyright21, patents, trademarks, designs, moral rights, unjust enrichment, confiscation or other prohibitions of distribution. Restrictions from data protection law can also be relevant if the subject matter of the contract includes the disclosure of personal data regarding third parties to the consumer or any other processing of those by the consumer.

Below → mn. 41 et seq. Below → mn. 47 et seq. 21 Staudenmayer (2016), 814. 19

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However, the right does not necessarily have to relate to the digital content itself, but may also relate to its physical medium. Since the Directive also covers digital content sold on a tangible medium (see Recital 20) and because limitations on the use of the tangible medium likewise burden the consumer and hinder contractual use, differentiation here would be inappropriate.22 27 In addition, the subject matter of the right is not decisive as long as it prevents or limits the use in accordance with the provisions of the contract.23 The reference to the standard of Arts 7 and 8 delimits relevant and irrelevant rights of third parties. For example, the right may be directed at handing over or deleting the digital content, using or not using it in a certain way or transferring it to another consumer. ‘Right’ in the meaning of Art. 10 finally includes all types of legal position, irrespective of their nature or denomination in Member States’ legal systems, such as claims, titles, objections or pleas. Art. 10 is also fulfilled if the third party maintains legally ‘secured’ de facto control by restricting access to necessary digital infrastructure.24 26

2. Third party Third parties within the meaning of Art. 10 are in any case all legal entities that are not parties to the contract on the supply of digital content. These are in particular the manufacturer or producer of the content as well as other owners of rights to the content or medium. The state or other public entities may also be ‘third parties’, for example as far as administrative rights are concerned, but also as holders of patents or copyright positions. 29 The trader who is the contracting party is not a third party in the literal sense. There are also teleological arguments against its inclusion. The trader can grant the rights necessary for the contractual use as rightholder himself or waive their enforcement. Therefore, the function of Art. 10, to integrate external encumbrances into the contractual relationship,25 does not apply here. 30 The consumer is also not a third party. The corresponding scenarios in which the consumer is unaware of his right over the digital content are probably extremely rare. In such cases, the consumer would certainly have paid less if he had known of the right. But that is just a question of organising his own sphere of influence. 28

3. Violation The term ‘violation’ does not expressly clarify whether the legal positions must actually have been infringed or whether it is sufficient for respective legal positions to be invoked against the consumer even if this is in fact unfounded. The wording of Art. 10 points to the former understanding. In addition, the drafting process supports this interpretation. The similar provision of Art. 102(1) CESL expressly covered ‘not obviously unfounded claims’. Rather, a reverse conclusion can be drawn from this because it is not clear why the legislator should have omitted this clarification with his eyes open and intended its tacit inclusion. 32 Yet, the aim of the provision to keep the consumer free from any interference by third parties from outside the contract points in the opposite direction. If the consumer is confronted with claims or even actions from third parties, this will normally have an equally strong effect on him, irrespective of the factual existence of the invoked right. 31

In this sense also Geiregat/Steennot, p. 145. Below → mn. 41 et seq. 24 Wendehorst (‘Sale of goods and supply of digital content’), 17. 25 Above → mn. 5. 22

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Instead, the consumer, who is mostly a legal layman, cannot assess independently whether the right of the third party actually exists. In the case of obviously unfounded claims alone, one may expect the consumer to ignore those claims and continue to use the digital content or services provided. In addition, uncertainty about the existence of the third party’s right would have to 33 be clarified in the dispute between trader and consumer, although the third party would not be directly involved in this dispute. This unnecessarily complicates the dispute between consumer and trader. On the other hand, it carries little weight that the trader also regularly does not know whether the asserted rights exist. It is still more justifiable to expect the trader to obtain this information in advance along his supply chain and to disclose it to the consumer. It is therefore altogether appropriate to allow the substantiated assertion of a third party’s right to suffice. Irrespective of this, the third party’s right must of course not be subject to any objec- 34 tions or counterclaims on the part of the consumer. The legal position of the third party must therefore not have ended and must still be legally enforceable. This is the case, for example, where the consumer has concluded a license agreement but it has no effect visà-vis the rightholder, e.g. when the trader sold an illegal copy or the producer violated open-source licenses.26 This is also the case where the rightholder is willing to conclude a license agreement, but the consumer does not want to.

4. Resulting restriction The violation of the third party right must lead to a ‘restriction’. This term is to be 35 understood broadly and covers any legal or factual constraint on the consumer at his place of use.27 In view of the further requirement that the restriction must limit the contractual use,28 this criterion should not be of decisive additional importance. On the contrary, one can assume that a violated third-party right29 regularly impairs the consumer. However, here the question must be answered whether, even in the case of an existing 36 right of a third party, the third party must have already enforced or exercised this right or whether the mere existence of the right suffices under Art. 10. An illustrative example is a widely-reported dispute between two musicians about the authorship of a song. If the consumer derives his entitlement from only one of the two opponents, it is typically not to be feared that the other will, if he wins, sue the consumer for an injunction not to listen to the song. There are arguments for both sides. On the one hand, one could argue that digital 37 content is almost always subject to third-party rights and that all content would then not be in conformity with the contract. Especially in Member States with inalienable moral rights, the trader could never ensure with an erga omnes effect that these rights will not be exercised in the future. Furthermore, the trader can only fulfil his obligations under Art. 14 if he knows who exercises which rights. Without concrete indications, he cannot assess the legal situation himself.30 This suggests that only the exercise of the third party’s right leads to a lack of conformity. This lack of conformity would then have a

26 European Law Institute, 26, available at www.europeanlawinstitute.eu/fileadmin/user_upload/p_eli/P ublications/ELI_Statement_on_DCD.pdf (accessed 25 February 2020). 27 cf. Riehm/Abold, 88. 28 Below → mn. 41 et seq. 29 In the sense → mn. 31 et seq. above. 30 That is why Art. 102(2)(b) CESL restricted the obligation of the seller to rights, ‘which the seller knew of or could be expected to have known of at the time of the conclusion of the contract’.

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retroactive effect on the time of the supply in the sense of Art. 11(2) 1 st subpara.31 Alternatively, one could proceed analogously to the decision in Faber32 and regard the exercise of the right as the apparent defect, which is based on the right of the third party as the cause or origin.33 Both views would then require that the right of the third party already existed at the time of supply.34 38 On the other hand, one could argue that the consumer with his remedies thus depends on the third party and their decision to enforce their legal position. This could go so far that the third party decides to take action against the consumer only after expiry of the limitation period; in such situation the consumer would not be able to enforce a remedy against the trader.35 In addition, a consumer who learns of the legal position of the third party would be forced to behave unlawfully and thus possibly even be liable for damages. Finally, there is no need to ask how seriously the third party must pursue his rights, i.e. whether every (written?) request is sufficient, or whether a lawyer or even a court action is required. Or as the European Law Institute has expressed: ‘if a third party right, if it were enforceable, would have the effect of undermining the consumer’s legitimate expectations under the contract for digital content, then there will be a non-conformity’.36 39 Overall, it will be necessary to draw a distinction in order to reflect both aspects. If rights are attached to the digital content which, even without their enforcement, lead directly to the illegality of the consumer’s use, such an infringement cannot be demanded of the consumer. The consumer is then hindered in the use of the content even without enforcement. For instance, the license acquired by the trader only covers private use, but according to the contract, the content should also be used commercially. However, if the consumer’s use is legal until the right is exercised, the consumer will not be affected until then. As an example, the recall of a work on the basis of the moral right of the author or the termination of a license agreement by the rightholder can be cited, because the licenses once granted do not cease with retroactive effect (unless they remain in force anyway). 40 The restriction must be the consequence of (‘resulting from’) a violation of the third party right. Causation in the sense of conditio sine qua non is required. Co-causality would be sufficient.

5. Limitation of usability 41

The restriction37 must prevent or limit the use of the digital content. It follows that not every right of a third party leads immediately to the remedies under Art. 14. Rather, the consumer is protected only in his legitimate expectations of use. This is appropriate, because in digital content contracts the consumer usually only acquires a right to use. This differs from the situation in sales law or the law on contracts for work and services, where any defect in title limits the legal position in rem to be granted to the purchaser (namely uncontested ownership). Art. 10 strongly reflects this shift from ownership to access38 and therefore rightly refers to the provisions on contractual conformity

In this sense, apparently Spindler (2016), 202; Spindler (2018), 299. CJEU, C-497/13 Faber EU:C:2015:357. 33 So explicitly although in a different context Staudenmayer (2016), 822 et seq. 34 Below → mn. 51 et seq. 35 Likewise Sein/Spindler, 372. 36 European Law Institute, 26. 37 Above → mn. 35 et seq. 38 Seminal: Rifkin. 31

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in Arts 7 and 8.39 The reference to the contractual standard of the consumer’s legitimate expectations of use makes a list of concrete requirements superfluous. The restriction must exclude (at least) one contractually-agreed possibility of use. 42 Thus the interpretation of the contract’s subject matter according to Arts 7 or 8 is of relevance also within the framework of Art. 10.40 It is not necessary that the consumer wants to use the digital contents at the time of the assertion with regard to the hindered possibility of use. The consumer could want to do this at a later point in time and need not then be satisfied with limited functionality. It is therefore impossible to make a general assessment as to which functions the con- 43 sumer may expect and which restrictions have to be accepted. The reference to Arts 7 and 8 makes it clear, however, that the terms of the contract between the parties must first be considered [see especially Art. 7(a) and (b)]. If these are fruitless, the reasonable expectations of the average consumer are decisive. Should certain types of contract terms prevail on the market, this could have an impact on the legitimate expectation within the meaning of Art. 8(1)(a). For example, a consumer may currently not rely on the producer not prohibiting third parties from offering supplemental products to the contractual digital content.41 Furthermore, the trader can influence (and thus lower) the consumer’s expectations,42 e.g. to adjust the contents of the contract to the specific legal properties of the digital content offered by him.43 Art. 8(5) permits such agreements, albeit only under strict prerequisites.44 The mere reference to incomprehensible terms of an EULA should not suffice for this; the same applies to ‘click wrap’ or ‘shrink wrap’ agreements.45 The transparency requirements there prevent, among other things, agreements on usability from being too complicated. Accordingly, there are essentially no characteristics that the digital content must al- 44 ways have. It is neither necessary to grant a right to copy nor to always give a right to resell.46 The EU and Member States’ legal systems are only the default rule, against the background of which the contracting parties may negotiate and from whose specifications they may deviate.47 Here, Art. 7(a) and (b) as well as Art. 8(5) are essential instruments to protect the consumer. For this reason, the Digital Content Directive does not touch copyright law,48 but takes it as a starting point. Under contract law, the parties are free to make deviating agreements unless prohibited by the specific substantive law. For example, the copyright principle of exhaustion cannot be waived erga omnes by agreement between the parties,49 but a contractual claim for damages in the event of resale

39 This was demanded in the legislative procedure by, among others, European Law Institute, 24 et seq.; Cab/Stabentheiner, 185. 40 In this sense also Schmitt, p. 254. 41 cf. Wendehorst (‘Consumer Contracts and the Internet of Things’), p. 200 and 215. 42 This is pointed out in the sixth sentence of Recital 53. 43 Staudenmayer (2019), 684. 44 For details → Art. 8 DCD, mn. 153 et seq. and → Art. 6 DCD, mn. 42. 45 Sein/Spindler, 374. 46 Likewise Schmidt-Kessel, 18; different Metzger, 581; apparently also European Law Institute, 24 et seq.; deliberating Sein/Spindler, 373; see also the commentary under → Art. 11 DCD, mn. 37. 47 cf. Schmidt-Kessel et al., 60. 48 cf. Art. 3(9) and the commentary under → Art. 3 DCD, mn. 144 et seq., as well as above → mn. 3 and 19. 49 CJEU, C-128/11 UsedSoft EU:C:2012:407, para 77.

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might be permissible.50 Likewise, the Digital Content Directive does not prohibit a territorial restriction of use (‘geo-blocking’), but the Portability Regulation does.51 Due to the primacy of contractual agreements, individual patterns of the consumer’s expectations are possible. However, this can only be done in the contract for the provision of digital content and not afterwards. Therefore, an EULA following the conclusion of the contract does not influence the consumer’s legitimate expectations but must, conversely, correspond to them. A license agreement that contains more far-reaching restrictions than those agreed in the contract is still valid, but triggers the remedies of Art. 14.52 Use of the digital content under the condition of concluding a license agreement with a third party (in particular the rightholder) may already constitute a lack of conformity if the license agreement contains obligations and restrictions which the consumer did not have to expect according to the terms of the contract with the trader. 53 The conclusion of an EULA alone does not, however, constitute an infringement of the possibilities of use, because the consumer must always expect third-party rights to digital content. Although it would also be possible for the trader himself to grant the consumer a license (i.e. by a chain of license agreements up to the rightholder), it should be sufficient that the trader guarantees that the rightholder is willing to enter into a license agreement. 54 It would be an unnecessary burden on manufacturers and distribution channels if all distributors in the supply chain had to acquire the licenses themselves and pass them on to their downstream counterparts; agreeing a license directly with the consumer is much more efficient. Art. 10 in conjunction with Arts 7 and 8 indirectly addresses the territoriality of intellectual property rights, too. Intellectual property rights are typically subject to the territoriality principle.55 This means that the legal positions of an author or producer of digital content differ depending on the country in which the protected content is used. Although there are some uniform standards in the EU, these do not include all conceivable legal positions and are sometimes only minimum standards, which may be implemented differently in the Member States. Third-party rights differing by reason of territory make cross-border contracting more complicated because the trader needs to know the legal systems of all the Member States in which he intends to do business. However, the question as to under which legal system the digital content must be legally usable is not limited to intellectual property rights. Other legal restrictions may also differ from one Member State to another. It is therefore not surprising that Zoll wanted to apply the rules on intellectual property rights by analogy to administrative restrictions for the CESL.56 It is necessary to go even further and determine all fields of law with a single rule. It is just not plausible that, based on the identical contract, the protection of minors or the right to freedom of expression should be assessed according to principles different from those of intellectual property law.

50 The effects of copyright exhaustion on contractual resale prohibitions have not yet been clarified. Different from here e.g. Schneider/Spindler, 215; Ganzhorn, 525 et seq.; cf. also Schonhofen, 262; Hilty/ Köklü/Hafenbrädl, 263. 51 Spindler (2016), 202; Spindler (2018), p. 299. For details see the commentary on the Portability Regulation. 52 In this sense European Law Institute, 26. 53 In this sense Metzger, 581; Spindler (2017), p. 221 et seq.; Wendehorst (‘Sale of goods and supply of digital content’), p. 17. Further clarification was demanded by Schulze (2016), p. 137. 54 cf. Geiregat/Steennot, p. 146; also European Parliamentary Research Service, 5. 55 For further details see Portability Regulation → Introduction, mn. 30 et seq. 56 Zoll in: Schulze (2012), Art. 102 CESL, mn. 8.

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Several reference points can, however, be considered: (i) the consumer’s habitual resi- 49 dence, (ii) the trader’s place of business, (iii) the place where the content is used in fact, (iv) the place where the use is to be made under the contract, or (v) the legal system governing the digital content contract. Unfortunately, Art. 10 does not contain a clarification comparable to Art. 102(2)(a) CESL, which favoured solution (iv) over solution (i). 57 This balanced approach should also be followed for the Digital Content Directive. According to this approach, the contractually-agreed place of use is primarily decisive. If there is no such agreement, it is reasonable to assume that the consumer wants to use the content at his place of residence (or in the state of his place of residence). There, the contents must be usable in accordance with the general legal standards. This reference to the general legal standards is not only advantageous for both par- 50 ties. Although the consumer can expect – in the absence of differing agreements 58 – the statutory minimum rights, he must also adapt to the legally regulated boundaries. Thus, according to Art. 5(2)(b) InfoSoc Directive, the consumer may have a right to a private copy, but this may in turn be restricted by technical measures according to Art. 6(1) InfoSoc Directive. Inversely, the trader does not have to point out or explain the restrictions of use resulting from general legal provisions. However, Art. 10 will be infringed if the digital content provided differs from general legal provisions.

6. Relevant point in time The transfer of the risk from the trader to the consumer marks the point in time of 51 the assessment as to whether disadvantageous third-party rights exist. The trader does not have to remove later rights. In the same way, the consumer has to accept such rights and the corresponding loss in value. While Art. 8 of the Commission’s draft explicitly regulated the point in time for both 52 single-act and continuous supply, Art. 10 does not contain any specific instructions. Art. 11(2) and (3) regulate the relevant point in time, but only for lack of conformity in the sense of Arts 7, 8 and 9.59 Accordingly, one could draw a reverse conclusion and demand absence of third-party rights for both types of contract either only at the time of supply or for the entire period until limitation. On the other hand, it seems more appropriate to assume that the reference in Art. 10 to the standard of conformity in Arts 7 and 8 also refers to the relevant point in time. Thus, Art. 10 contains an indirect reference to Art. 11. The digital contents and services must therefore be free of restrictions due to third-party rights in the case of single act of supply pursuant to Art. 11(2) at the time of supply and during the entire term of the contract in the case of continuous supply contracts pursuant to Art. 11(3). It must also be made clear that it is not necessary for the assessment of whether third 53 parties are entitled to an encumbering right at the relevant point in time that it can already be exercised at that time. The decisive factor is that the legal basis of the right has already been established, that it is rooted in the legal relationships that existed at the time of supply.60 If, for example, an unfavourable EULA is only concluded after supply, the relevant legal basis is formed by the intellectual property rights of the third party that are attached to the digital content and that make the EULA necessary in the first place. Conversely, a sufficient pre-existing legal relationship should be lacking if, at the time of the conclusion of the contract, an ongoing legislative procedure gives reason to worry Merdi, 144 also argues for such a provision. Above → mn. 44 et seq. 59 Sein/Spindler stress that the reason for this omission is unclear, see 378 at n 18. 60 In this sense Sein/Spindler, 372. 57

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about future rights of third parties. The trader does not always have to clarify such circumstances, because otherwise he would be obliged to permanently monitor all legislative procedures. 54 Finally, it should be noted that the remedies under Art. 10 are also subject to limitation. If the consumer only discovers the defect of title after expiry of the limitation period, he can no longer enforce remedies against the trader.61

7. No fault requirement 55

Art. 10 and the resulting remedies do not require fault on the part of the trader. 62 It is not necessary that he was aware of the legal restrictions or their effects on the specific use of the consumer. The trader is liable even if he could not have known about the rights of third parties, e.g. because the rightholder subsequently changes the terms of the EULA.63 However, the Member States are free to provide for a fault requirement for claims for damages, which the Digital Content Directive does not regulate.

III. Legal consequences The definition of the legal consequences of Art. 10 has not remained unchanged in the legislative process.64 The original inclusion in the concept of non-conformity had the effect that the remedies provided for in the Directive would automatically have been applied. Now Art. 10 expressly orders the application of Art. 14. At the same time, the provision enables the Member States to attach different consequences to a defect of title. 57 The Directive thus remains consistent with its contractual approach. Art. 10 does not permit the consumer to disregard the rights of third parties and does not invalidate those rights. The consumer must adhere to his contractual partner and is bound to his contractual rights. Art. 10 therefore upholds the principle that the legal position of uninvolved third parties should not be impaired by a contract. 56

1. Reference to Art. 14 The primary consequence of Art. 10 is the instruction to the Member States to grant the consumer the remedies set out in Art. 14. On the legal consequences side, too, Art. 10 does therefore not equate the defect of title with the material defects. Still, it is noteworthy that the text of Art. 10 is explicitly addressed to the Member States, which is in the substantive part of the Directive only the case in Art. 11(2) 3rd subpara. and (3) 2nd subpara. The wording is presumably due to the opening clause.65 59 Nevertheless, the entitlement to have the digital content or service brought into conformity under Art. 14(1) is likely to fail because the trader will lack effective means to force the third party (usually his suppliers or the rightholder) to comply with the contract (usually by granting the respective license). The trader can then invoke the exception of impossibility under Art. 14(2). In this case, the consumer is entitled to the remaining remedies specified in Art. 14(1). 60 The reference to the remedies in Art. 14 also includes Arts 15–18, because those further define the rights of Art. 14. In contrast, the remedy for the failure to supply pur58

Spindler (2016), 202, n 78; Spindler (2018), 299, n 78. Riehm/Abold, 88. On the fault requirement of Art. 102(2) CESL, above → mn. 9. 63 Deliberative Geiregat/Steennot, p. 144. 64 Above → mn. 12 et seq. 65 Below → mn. 61 et seq. 61

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suant to Art. 13 is not covered. However, it cannot be concluded from this that the consumer cannot claim the supply of a contractual digital content. Such a claim arises first from Art. 14(1) in conjunction with Art. 14(2) and (3), which Art. 10 clearly incorporates. In addition, the legislator obviously assumed that a failure to supply does not fall under Art. 10, even if the trader only refrains from supplying, for example, because he does not knowingly wish to infringe the rights of third parties (e.g. because he has recognised that he has concluded a contract that he cannot perform). In such a case, Art. 13 is directly applicable.

2. Opening clause for nullity or rescission of the contract Art. 10 gives Member States the opportunity to provide for different legal consequences. This option has been incorporated at the instigation of individual Member States in the Council,66 which already had such provisions.67 Against the background of full harmonisation (Art. 4), such opening clauses are always problematic because they contradict the regulatory aim of creating a uniform internal market. This is not mitigated by the fact that only ‘nullity or rescission’ are permitted here, because the applicable Member States' rules on restitution are usually rather different. It is therefore regrettable that the political forces have not been able to achieve a more stringent solution here. The scope of the opening clause is defined by the terms ‘nullity’ and ‘rescission’. Both are – like all terms of the Directive – to be interpreted autonomously for the purposes of EU law, but not narrowly as exceptions.68 Since both notions trigger the same consequences, it is not necessary to make a clear-cut distinction. ‘Nullity’ means the automatic invalidity of the contract. The contract must therefore become ineffective without further action on the part of the parties (ipso iure). 69 ‘Rescission’ eventually also leads to the invalidity of the contract, but requires a specific act of annulment. In the absence of an explicit determination, this effect can be brought about directly by trader or consumer as well as upon their initiative by a court. According to the wording, in both cases the invalidity must refer to the contract as a whole and not only to single obligations arising from the contract. Art. 10, however, does not specify which concrete further consequences must result from the invalidity of the contract. Thus, there is also no rule that the resulting rights of the consumer must go further than those of Art. 14.70 Typically, at least a repayment claim of the consumer will be tied to the invalidity. Whether the trader also owes damages for entering into a contract that he cannot perform is left to the Member States.

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IV. Burden of proof Art. 12 does not contain specific rules on burden of proof for the case of Art. 10 and 65 third-party rights. This is the consequence of the fact that Art. 12(2) and (3) only refer to the lack of conformity within the meaning of Art. 11(2) and (3) in conjunction with Art. 6. It has already been stated that potential rights of third parties and the restrictions

Staudenmayer (2019), 685. cf. for the United Kingdom s 41, 42(5) and 45 Consumer Rights Act 2015. 68 Riesenhuber, mn. 4 et seq., 62 et seq.; Rosenkranz. 69 Riehm/Abold, 89. 70 Differently Metzger, 581. 66

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resulting from them are not non-conformities in the sense of Art. 6,71 but are only treated as such to a certain extent. 66 Therefore, in contrast to Art. 12(2) and (3), the general principles of burden of proof are to be applied, according to which each party must establish and prove the facts that are favourable to it. This means that the consumer must prove the facts necessary to establish all the constituent elements of Art. 10. The consumer must therefore prove both the limitation of the contractual usability and the existence and violation of thirdparty rights. The trader is thus generally not obliged to prove the absence of any potentially encumbering third-party right. In order to ward off a guarantee claim, it is moreover sufficient to prove that the consumer is not hindered in his contractual use. Other rules may apply according to the general principles of the law of burden of proof in the Member States if the consumer has rejected the digital content due to the existence of such rights.

V. Mandatory nature The provisions of Art. 10 are semi-binding pursuant to Art. 22.72 The trader cannot derogate from them by stipulation in the contract to the detriment of the consumer. Such an agreement is only possible once the consumer has become aware of the lack of conformity. According to Art. 22(2), however, the Directive does not prevent contractual agreements that grant the consumer a higher level of protection. However, this does not limit the trader’s right to determine the consumer’s legitimate expectations via Art. 7 and Art. 8(5).73 68 The semi-binding nature covers general terms and conditions as well as individual agreements. A clause, which directly or indirectly grants the trader the right to determine independently whether the digital content or services are in accordance with the contract, would additionally violate Art. 3(1) in conjunction with Art. 3(3) and point (m) Annex Unfair Terms Directive. 67

D. Transposition issues The principle of full harmonisation according to Art. 4 must be observed for implementation. The Member States may not deviate from the specific rules and requirements of Art. 10, either in favour of or to the detriment of the consumer.74 70 Consequently, the Member States in principle must provide for the remedies of Art. 14 in the event of defects of title. However, due to the prohibition of a deviation in favour of the consumer, a third-party right may not on its own, but only together with an interference with the purpose of the contract, trigger the liability of the trader. The principle of full harmonisation should not prevent to treat defects in title in the same way as material defects (as is the case in Germany). However, it should also be possible to implement the provision as a porte-fort clause75,76 although this does not cover all possible forms of licensing77. 69

Above → mn. 16. For details → Art. 22 DCD, mn. 7. 73 Above → mn. 41 et seq. 74 For details → Art. 4 DCD. 75 Thereby the trader commits himself (only) to influence the rightholder to grant a license. 76 Geiregat/Steennot, p. 146 propose this for Belgium. 77 On this topic, above → mn. 2. 71

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The Member States may not provide for an exception to the trader’s liability, as in Art. 102 CESL, if the consumer knows or could have known of the third-party rights’ restrictions. The legislator was aware of this exception and nevertheless did not consider it for Art. 10, so that this issue is (indirectly) covered by the scope of harmonisation. Moreover, this scenario is unlikely to be relevant anyway, since prior knowledge affects the consumer’s legitimate expectations and there should thus be no derogation from the standard of Arts 7 and 8. Art. 10 contains an opening clause according to which the Member States may also provide for nullity or rescission as the legal consequence of a defect of title. 78 This exception only applies to the consequences of third-party rights and is not applicable to the (material) non-conformity according to Art. 6. The opening clause benefits not only Member States that had introduced such rules before the adoption of the Directive. Member States can still choose to make use of it now. Neither the wording nor the aim of the Directive suggest that only existing rules can be maintained. Member States do also not have to provide for the consequences of nullity specifically only for contracts for the supply of digital content, but may do so. In addition, invalidity may be the only legal consequence that Member States provide for a defect of title. However, they must provide for either nullity, rescission or the remedies of Art. 14. The defect of title thus must not remain without sanction. Issues of copyright or other intellectual property rights are not covered by the scope of the Directive and Art. 10 in conjunction with the principle of full harmonisation. Member States are free to regulate the legal position of the rightholder and to provide for particular consequences for the infringement of the digital content contract by a license agreement, with due regard for specific EU law.79 Also the legal relations between the trader, his suppliers and the rightholder are not directly affected by Art. 10 and can be freely determined. Likewise, the consequences of a consumer’s violation of the rights of a third party and the respective claims against the consumer are not specified.80 Member States may therefore require that the third party must directly sue the trader or that in a legal dispute between consumer and rightholder the trader must always be involved, or that in a dispute between consumer and trader the alleged rightholder must always be involved.81

Article 11 Liability of the trader 1. The trader shall be liable for any failure to supply the digital content or digital service in accordance with Article 5. 2. Where a contract provides for a single act of supply or a series of individual acts of supply, the trader shall be liable for any lack of conformity under Articles 7, 8 and 9 which exists at the time of supply, without prejudice to point (b) of Article 8(2). If, under national law, the trader is only liable for a lack of conformity that becomes apparent within a period of time after supply, that period shall not be less than two years from the time of supply, without prejudice to point (b) of Article 8(2). Above → mn. 61 et seq. cf. Sein/Spindler, 372. 80 cf. European Parliamentary Research Service, 5. 81 cf. Geiregat/Steennot, p. 147 et seq. 78 79

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If, under national law, the rights laid down in Article 14 are also subject or only subject to a limitation period, Member States shall ensure that such limitation period allows the consumer to exercise the remedies laid down in Article 14 for any lack of conformity that exists at the time indicated in the first subparagraph and becomes apparent within the period of time indicated in the second subparagraph. 3. Where the contract provides for continuous supply over a period of time, the trader shall be liable for a lack of conformity under Articles 7, 8 and 9, that occurs or becomes apparent within the period of time during which the digital content or digital service is to be supplied under the contract. If, under national law, the rights laid down in Article 14 are also subject or only subject to a limitation period, Member States shall ensure that such limitation period allows the consumer to exercise the remedies laid down in Article 14 for any lack of conformity that occurs or becomes apparent during the period of time referred to in the first subparagraph. Bibliography: Bańczyk, Alokacja ryzyka zmiany okoliczności podczas wykonywania długoterminowej umowy o dzieło i o roboty budowlane – w kierunku umowy rozwijającej się (Wydawnictwo Uniwersytetu Jagiellońskiego 2017); von Bar/Clive (eds), Principles, Definitions and Model Rules of European Private Law – Draft Common Frame of Reference (DCFR): Full Edition (Sellier 2009); Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; Gudowski (ed.), Kodeks cywilny. Komentarz. Tom IV. Zobowiązania. Część szczegółowa (Wolters Kluwer 2017); Guibault/Helberger/Mak/Pessers/van der Sloot (eds), Towards a Cohesive European Framework (Kluwer 2013); Gsell, Der europäische Richtlinienvorschlag zu bestimmten vertragsrechtlichen Aspekten der Bereitstellung digitaler Inhalte (2018) 2 ZUM 75–82; Helberger/Loos/Guibault/Mak/Pessers, ‘Digital Content Contracts for Consumers’ (2013) 36 JCP 37–57; Jansen/Zimmermann (eds), Commentaries on European Contract Laws (OUP 2018); Köndgen, Selbstbindung ohne Vertrag (Mohr Siebeck 1981); Micken/Roberts/Oliver, ‘The digital continuum: the influence of ownership, access, control, and Cocreation on digital offerings’ (2019) AMS Review; Pecyna, Komentarz do ustawy o szczególnych warunkach sprzedaży konsumenckiej oraz o zmianie Kodeksu cywilnego (LEX 2003); Pisuliński, ‘Sprzedaż konsumencka’ in: Rajski (ed.) System Prawa Prywatnego, Prawo zobowiązań – część szczegółowa, Tom 7 (C.H. Beck 2018), p. 176–245; Schlechtriem/Butler, UN Law of International Sales (Springer 2009); Schmitt, ‘A new warranty law for digital content ante portas’ (2018) 2 University of Vienna Law Review 1–35; Schulze (ed.), Common European Sales Law (CESL) – Commentary (Nomos 2012); Schulze/Zoll, European Contract Law (2 nd edn, Nomos 2018); Staudenmayer, ‘Verträge über digitalen Inhalt. Der Richtlinienvorschlag der Europäischen Kommission’ (2016) 37 NJW 2719–2724; Staudenmayer, ‘Auf dem Weg zum digitalen Privatrecht – Verträge über digitale Inhalte’ (2019) 35 NJW 2497–2501; Zoll, Rękojmia. Odpowiedzialność sprzedawcy (C.H. Beck 2018).

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A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. European private law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Comparative remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 4 7

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Liability for failure to supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Non-performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Relationship to Art. 13 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Liability for lack of conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Time of supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Liability period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Limitation period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Continuous supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Definition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9 9 9 12 13 15 15 16 19 20 27 29 29 34

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Liability of the trader 3. Time of supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Limitation period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36 37

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Deterioration of digital content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Third party rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Incorrect integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

38 38 39 40

A. Function Art. 11 concerns the ‘liability of the trader’ and regulates thereby various different as- 1 pects. Art. 11(1) expresses the principle of the trader’s liability for non-performance (failure to supply). Art. 11(2) establishes the framework for the Member States’ legislation concerning 2 the time limits to exercise the rights arising in case of the lack of conformity. Art. 11(2) 1st subpara. formulates the principle of liability for any lack of conformity as well as stipulating the moment that is relevant for the existence of the lack of conformity. It functions as a borderline between the operation of the general law on non-performance and the rules on liability arising from the lack of conformity. Somewhat surprisingly, Art. 11(2) 2nd and 3rd subparas concern the limitation period. This mixture of looselyrelated issues is rooted in the Consumer Sales Directive and continued in the new Sale of Goods Directive. Art. 11(2) 2nd and 3rd subparas distinguish between two kinds of periods limiting the possibility to exercise the rights arising from the lack of conformity: the liability period beginning with the discovery of the lack of conformity (2nd subpara.) and the limitation period (3rd subpara.). The Digital Content Directive does not regulate these periods directly. It determines only the framework for the Member States to limit the remedies by applying different kinds of periods. A combination of both approaches may exist, but a consumer must have at least two years after the lack of conformity becomes apparent to exercise remedies. Art. 11(3) modifies the principle on the relevant moment in time for the existence of 3 the lack of conformity in the contracts for continuous supply of digital content. Art. 11(3) 2nd subpara. determines also the limits for the national legislator to confine the rights arising from the supply affected by the lack of conformity by establishing the limitation periods.

B. Context I. European private law Art. 11 is rooted in the Consumer Sales Directive. It not only follows Art. 5(1) CSD 4 on the period for the liability for the lack of conformity of the sold goods but also resembles the content of Art. 3(1) CSD on the relevant period for existence of the lack of conformity. Art. 11 is very closely related to the Sales of Goods Directive, whose Art. 10 regulates the question of the relevant time for the existence of the lack of conformity and the expiry period after the lack of conformity has become apparent. (Art. 10(1) and (2) SGD). Art. 10(4) and (5) SGD concern also the matter of the limitation period established by the Member States and determine the minimum limits. It governs in parallel also an issue applicable to those Member States which use the combination of such periods.

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This matter was also dealt with in CESL. Art. 105(1) CESL determines also the relevant time for the existence of the lack of conformity, which is the time of the delivery of the goods. Art. 105(4) CESL provides a rule especially envisaged for the supply of digital content which must be subsequently updated by the trader. The CESL requires in such instances that the seller must ensure the conformity with the contract throughout the duration of the contract. The drafters of the CESL have not tried to distinguish between the continuous supply of the digital content and the single act of supply with the obligation to update. It was probably the right decision to avoid the difficulties of the classifications of the different situations without clear criteria. 6 The indicated body of the European law has its own sources in the CISG. Art. 36(1) CISG concerns the liability of the seller for the lack of conformity which has existed at the time the risk passed.1 Art. 69(1) 1st sentence CISG governs the general principle of passing of risk refers to the moment of the handing over of the goods. 5

II. Comparative remarks The DCFR, in attempting to propose a synthesis of the comparative experiences, states in its Art. IV.A.–2:308(1) that the seller is liable for any lack of conformity which exists at the time when the risk passes to the buyer, even if the lack of conformity becomes apparent only after that time. The general notion of passing of risk is defined in Art. IV.A -5:102(1) DCFR, which states that the risk passes when the buyer takes over the goods or the documents representing them. In numerous legal systems 2 the passing of risk marks the moment when the defect or lack of conformity must exist in order to establish the liability of the seller. Exceptions do, however, exist with regard to the various kinds of defects. The lack of conformity resulting from third party rights is not necessarily linked to the passing of risk.3 8 The concept of the relevant moment for the existence of the defect or lack of conformity is characteristic for the sales contract or similar contracts (e.g. barter), when there is a single act of performance.4 No moment exists as the pre-requisite for the liability in contracts with continuous performance (e.g. rental contract). However, it must be stressed that the contract for continuous supply of digital content is not identical with long-term contracts.5 7

1 But in such situation, according to the CISG, it was for the buyer to prove that goods lacked conformity before the passing of risk, Schlechtriem/Butler, p. 121. This demand was partly weakened in the applicable EU directives on seller’s liability, see e.g. → Art. 12 DCD, mn. 5 et seq. 2 von Bar/Clive, p. 1338. The justification therefore is given on p. 1336, namely e.g. that the risk passes to the buyer when the seller can no longer control the good (good is out of his sphere of influence). On the risk of performance, Rüfner in Jansen/Zimmermann, p. 2023. 3 Zoll in: Schulze, Art. 105 CESL, mn. 3. 4 Staudenmayer (2019), 2500. 5 Below → mn. 33.

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C. Explanation I. Liability for failure to supply 1. Non-performance Art. 11(1) states a principle of the trader’s liability for ‘any failure to supply the digi- 9 tal content or digital service’. It must be read in conjunction with Art. 5, which defines the scope of the failure to supply the digital content or digital service. Art. 11(1) does not apply to a tangible medium, since also the application of the Art. 5 is excluded in such instances [Art. 3(3)]. The normative function of this reference is, however, limited. It must be read togeth- 10 er with Art. 13, which provides the remedies for the failure to supply. Art. 13 specifies the content of the trader’s liability; the system would be also operable even without Art. 5(1) 1st subpara. Art. 5(1) stipulates the duty to supply and Art. 13 the sanctions for breach thereof. There is no space between Arts 5(1) and 13 for another provision which would add normative content to the picture and therefore Art. 11(1) is superfluous. It is not satisfactory to state that an adopted provision has no function and such a 11 statement violates a duty of the interpreter to discover a normative meaning in each element of the legislation. Art. 5(1) clarifies that the Digital Content Directive provides liability for a failure to perform the primary duties arising from the contract. This is a different concept in relation to the Consumer Sales Directive, which does not touch (at least directly) on the failure to perform the primary contractual duties. However, Art. 11(1) does not provide a direct answer to the question whether the supply of an aliud (i.e. supplying digital content essentially different as agreed in the contract) breaches the obligation under Art. 5 or Art. 6, i.e. non-performance or non-conforming (i.e. defective) performance.6 Probably the latter is true. Art. 11(1) sharpens the line of distinction between the non-performance and improper performance of the contract. 7

2. Supply Art. 5(2) sets out the acts necessary in order for the trader to comply with the obliga- 12 tion to supply.8 Supply in the meaning of this Art. 5(2) and Art. 11(1) is not an equivalent of the ‘delivery’ in the sense of Art. 10(2) SGD. Although the Sale of Goods Directive leaves the definition of delivery to the Member States,9 one can generally state that ‘delivery’ requires the collaboration of both parties,10 whereas ‘supply’ under the Digital Content Directive is confined to the behaviour of the trader.

6 Similarly: CESL. Schulze/Zoll, p. 402. The issue was subject to controversy also under the Consumer Sales Directive, see: Zoll, p. 137 In favour of the argument that aliud performance constitutes lack of conformity e.g. Pisuliński, p. 199. See, however e.g. Pecyna, Article 4, mn. 7, who differentiates such classification with regard to knowledge of the buyer about the aliud character. Compare with Art. 35(1) CISG, according to which the good does not conform to the contract if it is different (aliud) to the agreed one, no matter how material this discrepancy, Schlechtriem/Butler, p. 115. 7 A uniform concept of lack of conformity of performance (including non-performance and defective performance), however, appears not only in other EU directives, i.a. in Art. 3(13) PTD, but also in Art. 87 CESL. Schulze/Zoll, p. 248, 251–252; Zoll in: Schulze, Art. 87 CESL, mn. 4. 8 See → Art. 5 DCD, mn. 23 et seq. 9 See Recital 38 SGD. 10 See e.g. the comparable distinction between ‘contract’ and ‘relation’ from the perspective of the timeframe and number of mutual obligations of the parties, Köndgen, p. 49.

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3. Relationship to Art. 13 Art. 11(1) must also be read in conjunction with Art. 13. Together with Art. 5, the combination of Arts 11 and 13 must be rather understood as a command towards the Member States to establish a framework for the liability for the failure to supply. Art. 11(1) sets minimum and maximum requirements for the liability in conjunction with the remedies of Art. 13. It means that the Member States must not add additional requirements to the conditions of liability. However, it does not concern the remedies that are not governed by this Directive. The Member States are free to determine the requirements, e.g. for a right to damages or other remedies insofar as they are not encompassed by the Directive.11 14 The language of Art. 11(1) read together with Art. 13 gives a picture of the system of law on non-performance as envisaged by the Directive. A right to demand specific performance (‘call for supply’) is treated as a ‘remedy’ and not just a primary right resulting from the contract.12 It is, however, also a characteristic feature of the approach adopted by the Directive that there is a clear distinction between the ‘failure to supply’ and the ‘lack of conformity’ which are considered different types of the non-performance and have remedies attributed. Although the result will be the same even without Art. 11(1), it is a provision which stresses once again the necessity to distinguish between the lack of conformity and failure to supply. 13

II. Liability for lack of conformity 1. Scope 15

Art. 11(2) applies where a contract provides for a single act of supply or a series of individual acts of supply. Art. 2 does not contain a definition of ‘contracts for a single act of supply’ or ‘series of individual act of supply’; a definition of ‘contracts for continuous supply’ [Art. 11(3)] is also absent. These categories are only defined in Recitals 56 and 57 by using examples. Recital 56 exemplifies the contracts for a single act of supply or a series of individual acts of supply as follows: ‘Digital content or digital services can be supplied to consumers through a single act of supply, for instance when consumers download an e-book and store it on their personal device. Similarly, the supply can consist of a series of such individual acts, for instance where consumers receive a link to download a new e-book every week.’ According to the definition contained in Recital 56, ‘the distinctive element of this category of digital content or digital service is the fact that consumers thereafter have the possibility to access and use the digital content or digital service indefinitely. In such cases, the conformity of the digital content or digital service should be assessed at the time of supply.’ It is however an open question whether this definition makes a sufficient distinction between contracts for a series of acts of supply and contracts for continuous supply. For instance, the definition provided in Recital 56 does not cover the case in which the consumer is entitled to download the digital content, but the time of the allowed usage is limited by time (or the prolongation of such usage depends on the renewal of the payment). It is quite likely that the decision of the 11 The Proposal for a Digital Content Directive had, though, a partial regulation in this matter in its Arts 2 No. 5 and 14 (ascertainment of claims for damage to the consumer’s digital environment). This right to damages was restricted to cases where the damage was done to the digital content and hardware of the consumer; regulation of other damages was excluded from the scope of the draft directive, see COM(2015) 634 final; see Staudenmayer (2016), 2722–2723. Recital 73, however, underlines that a right to damages exists in all Member States and the Directive should be without prejudice to those national rules. 12 Schulze/Zoll, p. 213–214, 242.

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European legislator not to include the definition in the operative part of the Directive, but only provide such a definition in the recitals, was a result of difficulties to define these different categories of contracts. The constant development of technology blurs the borderlines between these different kinds of relationships. The mixed form (partially downloaded, partially allowing only access to the digital content) obscures the clear classification. The legislator was aware of these difficulties, hence the reservation under Art. 8(2)(b). This reservation concerns the supply with updates, including security updates and information. The language of Art. 8(2) is also a result of difficulties in the proper delimitation between the contracts for continuous and single supply. It suggests that this distinction is not of legal but only of technical nature.

2. Conformity Art. 11(2) 1 st subpara. resembles Art. 11(1) by also stating the principle of liability for 16 a lack of conformity. However, the underlying meaning of Art. 11(2) 1st subpara. is directed less towards a somewhat redundant statement of the principle of liability for lack of conformity but rather primarily determines that liability requires the lack of conformity to have existed at the time of the supply. It is a provision inspired by sales law. Art. 11(2) 1st subpara. refers to the lack of conformity only in the sense of the Arts 7, 17 8 and 9. These provisions define the subjective and objective requirements for conformity (Arts 7 and 8, respectively), and the issue of incorrect integration (Art. 9). The violation of third party rights as defined in Art. 10 is not included. It means that the rule governing the relevant time for the lack of conformity does not apply to the ‘legal’ lack of conformity and the Digital Content Directive does not contain a direct rule which determines when the lack of conformity resulting from third party rights must arise at the latest to justify the entitlements to the corresponding remedies.13 Art. 11(2) 1st subpara. provides the reservation that the requirement for the lack of 18 conformity to exist at the time of delivery at the latest is without prejudice to Art. 8(2) (b). Art. 8(2)(b) sets the duty to inform, and to supply updates and security updates which the consumer could reasonably expect.14 A lack of conformity caused by the updates or subsequent information must, however, be linked with the update itself. The wording of Art. 11(2) 1st subpara. is misleading. It should not be understood in this way that in case of an expected update or information no relevant time is required for the existence of the lack of conformity. The lack of conformity must result from the missing or defective update or information.

3. Time of supply Art. 11(2) 1st subpara. stipulates that the lack of conformity must exist the time of 19 supply. This requirement is satisfied if the lack of conformity exists at the latest once the trader has performed his obligations pursuant to Art. 5(2). The lack of conformity must therefore exist at the latest at the moment that the digital content is made available or accessible to the consumer, or to a physical or virtual facility chosen by the consumer for that purpose [Art. 5(2)(a)] or the digital service is made accessible to the consumer or to physical or virtual facility choses by the consumer for that purpose [Art. 5(2)(b)]. 15 However, as the source of the non-conforming digital content will presumably often be in a programming error, a lack of conformity that did not exist at the time of supply will Below → mn. 39. Guibault et al., para. 5.4.2. On the reasonable expectation standard see: Schulze/Zoll, p. 42–43, 242–243; Zoll, p. 104, 111–112, 121–124. 15 For details → Art. 5 DCD, mn. 25–26. 13

14

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be an infrequent occurrence.16 Of course, the situation may arise that, due to the download of other digital content, the digital content of the contract in question does not work properly. Yet, even in such situation, it will be a matter of examination whether the consumer has been properly informed in advance of such possible interference.

4. Liability period 20

21

22

23

24

Art. 11(2) 2 nd subpara. has its own, independent role. It stipulates that Member States cannot set a time limit for discovery of the lack of conformity that is shorter than two years. According to the provision – or rather the absence of express rules to the contrary – the Member States are only free to abstain from imposing a liability period but also free, should they choose to adopt a liability period, to determine the time limit and to regulate the details thereof (calculation, interruptions, effects of expiration etc.). The idea of such time limit, parallel to the Sale of Goods Directive, is at least doubtful in relation to digital content or a digital service. Where goods are concerned, such time limit is justified by the natural process of deterioration leading to the difficulties in determining the origin of the lack of conformity and whether the non-conformity existed at the time of delivery.17 Digital content and services are not affected by the process of aging,18 therefore Member States imposing such a period will be making a policy decision to protect the traders [with the possible exception of the tangible medium in sense of the Art. 3(3)]. Art. 11(2) 2nd subpara. only protects the consumer by prohibiting a period which is shorter than two years. Art. 11(2) 2nd subpara. sets a minimum period for the Member State and does not contain any rules on various events that may influence the duration. For example, it does not matter whether the consumer was able to discover the lack of conformity within the two-year period. The provision requires only that two-year period must be observed. In principle, the two-year period commences with the completed supply in the sense of the Art. 5. The Member States may link the start of the period to a different event, but not with the effect that the period will be shorter than two years starting with the moment of supply. For example, Art. 11(1) 2 nd subpara. does not stipulate the effect of a repair or replacement on the two-year period e.g. whether the liability period is simply suspended or begins anew; this is to be determined by the Member States. The liability period ends if the lack of conformity has not become apparent before the (minimum) two-year period has lapsed. The appearance of the lack of conformity means that it was objectively visible to the consumer, which means that the reasonable consumer could perceive and recognise the lack of conformity. The start of the period is not contingent upon the consumer’s notification of the lack of conformity to the trader. 19 16 On such an example of lack of conformity of the device taking place in case of software update which affects proper functioning of the device itself, Zoll, p. 162–163. 17 Staudenmayer (2016), 2723. The Proposal for a Digital Content Directive did not contain such a limitation, see its Art. 9 and precisely Recital 43, stating i.a. the reason for lacking such limitation in the fact that digital content ‘is not subject to wear and tear’, COM(2015) 634 final. The borderline was supposed to be the prescription period only. This is, however, criticised e.g. by Schmitt, 20, for instance because of uncertainties and costs on the side of the supplier. At the same time, the consequences of the introduced period may be limited due to the minimal harmonisation character of the applicable provision of the Directive in this context – see e.g. Staudenmayer (2019), 2500. 18 Also on the digital content as not being subject to risk of loss or damage (because of low cost or lacking cost of preparing the tangible copy), which should justify further-reaching specificity of rules on digital content in comparison to the sale of goods – Rüfner in: Jansen/Zimmermann, p. 2029. 19 This concerns in particular the lack of the notification period regarding the lack of conformity (as in Art. 5(2) CSD) and maintained as a possibility for Member States in Art. 12 SGD. The same applies to the deceitful concealment of defects by the seller Trzaskowski in: Gudowski, Article 564, mn. 8.

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Art. 11(1) 2nd subpara. states that the rule included in this provision does not in- 25 fringe Art. 8(2)(b). It does not mean that the Member States cannot restrict the liability of the trader by imposing a limitation period with regard to expected updates and information. It must be only adjusted in order not to deprive a consumer of the remedies if the updates or information cause the lack of conformity. The adjustment requires the period to commence with the supply of the update or information, or if the lack of conformity results from the omission to provide expected update or information, from the time when the update or information should be provided. The Member States are not limited by Art. 11(2) 2nd subpara. in setting the liability 26 period in the case of the third-party rights as defined in Art. 10: these are not covered by the notion of the lack of conformity and therefore not included into the scope of Art. 11(2).

5. Limitation period Member States have the general competence to introduce or maintain their limitation 27 periods under the Digital Content Directive. Art. 11(2) 3 rd subpara. expresses this general competence, yet with the sole restriction that such limitation period must not end before the minimum two-year period pursuant to Art. 11(2) 2 nd subpara. expires. The Digital Content Directive does not place the Member States under the obligation to provide a limitation period in their national law. Accordingly, the Member States may provide only a limitation period for the remedies or only a period for discovery or they may decide to have a combination of these periods. However, in all these cases they cannot reduce the standard of protection. Generally, such a period cannot be shorter than two years from the time of supply. An exception is provided to the situation under Art. 8(2) (b), which stipulates a duty to inform and to supply the updates necessary keep digital content or service for the period which the consumer could reasonably expect. 20 The time of the ‘reasonable expectation’ restricts also the competence of the Member State to regulate the limitation period. The Member States are not limited by Art. 11(2) 3rd subpara. in setting the liability 28 period in the case of the third-party rights as defined in Art. 10: these are not covered by the notion of the lack of conformity and therefore not included into the scope of Art. 11(2).

III. Continuous supply 1. Definition Art. 11(3) provides an exception from the rule of Art. 11(2). This exception should be 29 regarded as a principle. The majority of contracts covered by Digital Content Directive are contracts on continuous supply: the increasing number of contracts on the supply of digital content – and by definition almost all contracts on supply of digital services – are based on providing access to the digital content within a prescribed timeframe.21 It is probably one of the paradoxes of the Digital Content Directive that one of the 30 central distinctions, which produces rich variety of consequences, is not properly defined. There is only a definition in Recital 57, stating that ‘digital content or digital services could also be supplied to consumers in a continuous manner over a period of time. Continuous supply can include cases whereby the trader makes a digital service available 20 21

On reasonable expectations with regard to digital content, Helberger et al., 50–53. e.g. Schmitt, 13.

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to consumers for a fixed or an indefinite period of time, such as a two-year cloud storage contract or an indefinite social media platform membership. The distinctive element of this category is the fact that the digital content or digital service is available or accessible to consumers only for the fixed duration of the contract or for as long as the indefinite contract is in force.’ 31 This same question arises why such a definition was placed in the Recital and not in the operative part of the Directive. The legislator probably wanted to weaken the normative effect of this definition, making it less strict and open to the various interpretations. However, the definition spelt out in Recital 57 is inaccurate and even misleading. According to the Recital, the distinctive feature is the fixed duration of the contract or the accessibility of the digital content for the consumer as long as the indefinite contract is in force. The criterion of the contract for the definite period of time is not useful in this context. It is visible in a case of the aforementioned situation,22 if under the contract the digital content is to be supplied in this way that the consumer downloads and saves it, but with the end of the contract the consumer loses the possibility to use the digital content. It does not make sense to qualify this contract as a contract for continuous supply. There is only one act of supply and download, but the supplier does not need to maintain the access over the duration of the contract. There is no justification in such situation for holding the supplier liable for a lack of conformity that did not exist at time of supply but rather occurs later. Actually, in the process of interpretation whether the examined contract is a contract for the single act of supply or for continuous supply, the assessment must be made from the reasonableness of the continuous liability for any lack of conformity arising during the time of liability, or it is reasonable that the supplier is liable for any act of supply which could be clearly distinguished from the other separate acts of supply. So it is a test whether the trader remains in control over the digital content throughout the whole duration of the contract, or at least during the contract after the act of supply, the supplier loses such control. 32 The current technology of providing access to the digital content is increasingly often based on the interaction within the complex environment. Therefore, the single act of supply must be considered an exception and continuous supply the rule.23 33 A contract for the continuous supply is not an equivalent of the ‘long-term contracts’24 well-known at least in some legal systems (e.g. Germany: Dauerschuldverhältnisse) but it relates primarily to the technology of the supply.25 Contracts for continuous supply must be understood in the technical and not legal sense. It means that from some national perspectives a long-term contract may constitute a contract for single supply (or series of single supply) under the Digital Content Directive. A contract for continuous supply means that the supply of the digital content or digital service depends on the necessity to maintain a technical facility for the whole duration of the contract to secure the access to the digital content or digital service. If the digital content or digital service function is in the off-line mode, it is a contract for the single supply.26

Above → mn. 15. On the example of long-term service contracts and their function in the Polish contract law, which is based on the sales contract, Bańczyk, p. 17, 91. 24 These may include i.a. framework agreements, contracts for services which are supposed to be performed during a long period of time, and supply contracts. Schulze/Zoll, p. 232–233. 25 See e.g. Helberger et al., 45 about technological and legal challenges to digital content contracts. 26 On performance at a point in time in contrast to performance over time see also Schulze/Zoll, p. 233–234. 22

23

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2. Conformity Art. 11(3) 1st subpara. stipulates that the trader is obliged to maintain the freedom 34 from the lack of conformity throughout the whole period of the contractual relationship between parties. There is not a particular moment on the timeline in which the lack of conformity must exist, so far the parties are bound by the contract and there is the obligation for the trader to maintain the facility allowing the consumer access to the digital content or digital service. Art. 11(3) 1st subpara. refers to lack of conformity under Arts 7, 8 and 9 and – similar 35 to Art. 11(2) 1 st subpara.27 – does not name Art. 10 (third party rights). This approach is confusing since the digital content and digital service must be free of the third party rights throughout the whole period of the contractual relationship. The reference to Arts 7, 8 and 9 is also superfluous. It probably only serves clarification purposes, but it is difficult to imagine which situation produces the reference to Art. 9. There is not a need to move the relevant time beyond the time of supply, due to the fact that all lack of conformities which arise within the duration of the legal relationship between the parties – independent of the moment at which they arise – are covered by Art. 14.

3. Time of supply According to Art. 11(3) 1 st subpara., the trader shall be liable for a lack of conformity 36 under Arts 7, 8 and 9 that occurs or becomes apparent within the period of time during which the digital content or digital service is to be supplied under the contract.28 The access to the digital content or service cannot be granted if the trader stops his active support of the system.29 The phrase ‘over the period of time’ does not have its own distinguishing function. The period of the contract may be fixed, but it could be also an indefinite period which ends upon termination of contract by notice.

4. Limitation period Art. 11(3) 2nd subpara. requires that the Member States must not impose a limitation 37 period in relation to the rights laid down in Art. 14 which would prevent their exercise for any lack of conformity that occurs or becomes apparent during the period of supply. This provision mirrors the function Art. 11(2) 3rd subpara. It should assure that a consumer does not lose his rights guaranteed by this Directive through the operation of the limitation period. This provision, however, is far-reaching. This provision allows the Member State to allow the limitation period to first commence when the contract for the continuous supply of digital content has come to an end. It means that, even if a certain lack of conformity which impeded the use of digital content many years ago and where the consumer has not exercised the remedies for several years, there can be no restriction by a limitation period if the contract is still binding between parties. This solution is probably too consumer-friendly.

Above → mn. 17. See, however, some doubts raised by Gsell, at 81, as to the consequences of lack of conformity only at a certain period within continuous supply. 29 ibid., as to doubts concerning the timespan in which e.g. updates to smartphone software should be provided. 27

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D. Transposition issues I. Deterioration of digital content 38

The whole idea underlining the rules of Art. 11 [with the exception of Art. 11(1)] is not self-evident in the case of contracts for supply of digital products. For contracts for sales of tangible goods it is necessary to determine the relevant moment of existence of the lack of conformity due to the fact that the goods deteriorate due to the natural process of aging or they can be damaged by the buyer itself or by other external forces. Such natural process of deterioration is highly unlikely where digital products are concerned. Where digital content has been delivered on the durable medium, the damage to the durable medium could influence the access to the digital content and the situation would be like that of tangible goods. Today, digital content or digital services are supplied mostly online and therefore there is no natural deterioration in the aforementioned sense. The buyer or other recipient could interfere with the digital content by changing its code and preventing it from functioning. It is, however, a problem, which could be solved differently, yet the full harmonisation approach underpinning the Digital Content Directive prevents the Member States from adopting better solutions. The current approach under the Directive only provides illusory solutions to the problem.

II. Third party rights 39

A further issue surrounding Art. 11 concerns the exclusion of liability for a breach of Art. 10 from the scope of Art. 11(2) 1 st subpara. and (3) 1st subpara. There are two possibilities to solve this question: it will either be regarded as an internal gap in the Directive and the correct solution must be found within the Digital Content Directive itself, or it should be seen as the matter not regulated by the Directive itself and thus left to the law of the Member States. The matter of third party rights is not easily settled on the level of the Directive itself. The Directive does not contain any rules governing the proprietary status of the digital content. It is a matter which is entirely left to national law. The concept of ‘third party rights’, as regulated in the Sale of Goods Directive, is much easier to approach on a supranational level as the concept of ownership,30 however far from being unique, is more universal. The question of the consumer’s proprietary entitlement under a contract for the supply of digital content (regardless the technicalities of the effects of the contracts establishing an obligation to transfer or provide access to the digital content) depends not only on the applicable national law but also on the type of contract.31 A contract for the supply of digital content is not one specific type of contract, but is rather a common denomination for the whole array of different transactions with very different obligations. Such diversity of the legal relationship excludes the possibility to determine a single moment on the timeline in which the lack of conformity resulting from third party rights may arise. It must be assumed that the Directive leaves much flexibility to the judge for the assessment whether the digital content or digital service is burdened by the rights of the third party in circumstances which justify the liability of the trader. Generally, however, it must be assumed that through the whole period of the usage of the digital content or digital service the consumer may expect that the 30 See also how marketing analyses on how consumers exercise their rights to digital content, Micken/ Roberts/Oliver, 3–5. 31 Schmitt, 4.

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digital content or digital service remains free from any third party rights which may restrict or prevent the use of the digital content or digital service and, as a matter of principle, it does not matter when these rights arise.32 A judge must, however, assess whether the existing third party rights should be regarded as the trader’s violation.

III. Incorrect integration Art. 11(2) 1st subpara. encompasses also the lack of conformity in the sense of Art. 9, 40 which includes into the notion of the lack of conformity also the incorrect integration of the digital content or digital service. However, it is lacking specific provisions which adjust the rule of the Art. 11(2) 1st subpara. to specifics of the integration of the digital content and digital service. The comparable provision to Art. 9 – Art. 8 SGD – extends not only the liability to the situations defined in this Article, but it also extends the relevant moment of the existence of the lack conformity after the delivery of the goods. Art. 9 has this same function – it extends the liability of the trader also beyond the point of supply. In case of the situation described in Art. 9(a), the lack of conformity must result from the incorrect integration of the digital content or service into the consumer’s digital environment. This provision itself determines the relevant time of the lack of conformity resulting from the incorrect installation. It must be a causal link between the incorrect installation and the lack of conformity. If such link is established, the requirements for the lack of conformity are established.33 Therefore, the reference in Art. 11(2) 1st subpara. to Art. 9(a) is superfluous or even misleading since it establishes liability for the lack of conformity emerging after the completion of the supply. Art. 9(b), which governs the incorrect integration by the consumer due to the short- 41 comings in the integration instructions provided by the trader, is more complicated. 34 The sense of the Art. 9(b) can be discussed and the result depends on the understanding of the lack of conformity. If the misleading instructions lead to the lack of conformity of the supplied digital content, Art. 9(b) does not extend the liability of the trader, but it limits only this liability by excluding the liability in case of the correct integration despite the misleading or incorrect instructions. Art. 9(b) would extend the liability in case of misleading instructions if it were not covered by Art. 8 (objective requirements for conformity). Art. 8(1)(d) states i.a. that the digital content must be delivered with the instructions which the consumer may reasonable expect to receive. It is the strong argument for the first alternative. If the role of the Art. 9(b) is only the limitation of the trader’s liability, it does not add anything to the matter of the relevant time of the existence of the lack of conformity. The open question is only whether Art. 9(b) may justify a conclusion that also in case of the subsequent delivery of the instruction after the supply of the digital content have been completed, it is still a case of the lack of conformity or another kind of non-performance not covered by the Directive. The wording of the Art. 11(2) 1st subpara. suggests that the lack of conformity, even in this case, must exist at the time of the supply at the latest. However, it would be nonsense if the later supply of the mis-

32 A different solution was proposed in the CESL where the notion of legal defect in case of digital content was understood as: rights of the third party or legal uncertainty in regard to these rights which exist at the time of the transfer of ownership or of the rights necessary to use the digital content. Zoll in: Schulze, Art. 105 CESL, mn. 10. 33 Similarly in Art. 99(2) in conjunction with Art. 101 CESL – Schulze/Zoll, p. 217; Zoll in: Schulze, Art. 101 CESL, mn. 1 et seq. 34 See → Art. 9 DCD, mn. 24 et seq.

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leading instructions would allow circumvention of the system.35 In as far as a consumer has not integrated the digital content into his digital environment, the supply of misleading instructions entitles the consumer to exercise the remedies (Art. 14). Such conclusion is supported also by the exception resulting from the Article.

Article 12 Burden of proof 1. The burden of proof with regard to whether the digital content or digital service was supplied in accordance with Article 5 shall be on the trader. 2. In cases referred to in Article 11(2), the burden of proof with regard to whether the supplied digital content or digital service was in conformity at the time of supply shall be on the trader for a lack of conformity which becomes apparent within a period of one year from the time when the digital content or digital service was supplied. 3. In cases referred to in Article 11(3), the burden of proof with regard to whether the digital content or digital service was in conformity within the period of time during which the digital content or digital service is to be supplied under the contract shall be on the trader for a lack of conformity which becomes apparent within that period. 4. Paragraphs 2 and 3 shall not apply where the trader demonstrates that the digital environment of the consumer is not compatible with the technical requirements of the digital content or digital service and where the trader informed the consumer of such requirements in a clear and comprehensible manner before the conclusion of the contract. 5. The consumer shall cooperate with the trader, to the extent reasonably possible and necessary, to ascertain whether the cause of the lack of conformity of the digital content or digital service at the time specified in Article 11(2) or (3), as applicable, lay in the consumer's digital environment. The obligation to cooperate shall be limited to the technically available means which are least intrusive for the consumer. Where the consumer fails to cooperate, and where the trader informed the consumer of such requirement in a clear and comprehensible manner before the conclusion of the contract, the burden of proof with regard to whether the lack of conformity existed at the time specified in Article 11(2) or (3), as applicable, shall be on the consumer. Bibliography: von Bar/Clive (eds), Principles, Definitions and Model Rules of European Private Law – Draft Common Frame of Reference (DCFR): Full Edition (Sellier 2009); Girot, User protection in IT contracts: A comparative study of the protection of the user against defective performance in information technology (Kluwer 2001); Gudowski (ed.), Kodeks cywilny. Komentarz. Tom IV. Zobowiązania. Część szczegółowa (Wolters Kluwer 2017); Jansen/Zimmermann (eds), Commentaries on European Contract Laws (OUP 2018); Łętowska, Ochrona niektórych praw konsumentów (C.H. Beck 2001); Loos, ‘Double Dutch – On the role of the transparency requirement with regard to the language in which standard contract terms for B2C contracts must be drafted’ (2017) 6 EuCML 54–59; Maultzsch, ‘Der Ausschluss der Beweislastumkehr gem. § 476 BGB a.E.’ (2006) 43 NJW 3091–3097; Micklitz/Reich/Rott/Tonner, European Consumer Law (Intersentia 2014); Podszun, ‘Procedural autonomy and effective consumer protection in sale of goods liability: Easing the burden for consumers (even if they aren’t consumers)’ (2015) 4 EuCML 149–153; Schulze/Zoll, European Contract Law (2 nd edn, Nomos, 2018); Staudenmayer, ‘Auf dem Weg zum digitalen Privatrecht – Verträge über digitale Inhalte’ (2019) 35 NJW 2497–2501; Tischner, ‘Model prze35 The objective of the protection granted by the provision is to ensure that the buyer has the right to use the digital content in accordance with the contract. Schulze/Zoll, p. 220.

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ciętnego konsumenta w prawie europejskim’ (2006) 1 Kwartalnik Prawa Prywatnego 199–244; Westerman (ed.), Münchener Kommentar zum Bürgerlichen Gesetzbuch: BGB Band 4: Schuldrecht, Besonderer Teil I §§ 433–534 (‘MüKo BGB’) (8th edn, C.H. Beck 2019); Zoll, ‘Der immer werdende Vertrag’ in: Stelmach/ Schmidt (eds), Krakauer-Augsburger Rechtsstudien. Die Rolle des Rechts in der Zeit der wirtschaftlichen Krise (Wolters Kluwer 2013), p. 133–140; Zoll, Rękojmia. Odpowiedzialność sprzedawcy (C.H. Beck 2018). A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. European private law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Comparative remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 5 9

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Failure to supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Lack of conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Becomes apparent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Presumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Continuous supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Discharging the burden of proof on the trader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Incompatibility of the consumer’s digital environment . . . . . . . . . . . . . . . . . . . . 2. Duty to cooperate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11 11 14 15 17 18 19 21 22 28

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Scope of presumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Period of presumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Presumption in contracts for continuous supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31 31 32 33

A. Function Art. 12 deals with the burden of proof concerning the failure to supply the digital 1 content or digital service, and the lack of conformity of the digital content or digital service, understood as the main requirements to exercise the remedies under Art. 14. It would be incorrect to classify Art. 12 as stating a reversed burden of proof: there is no universal standard regarding the burden of proof, which could be ‘reversed’. It must be viewed only as an incomplete set of rules on the burden of proof. This statement shall not be understood as a simple formality, but its consequences are significant for determining the scope of full harmonisation.1 Art. 12(1) provides a rule on the burden on proof according to which the trader must 2 prove that it has supplied the digital content or digital service in accordance with Art. 5. This rule protects the consumer, who in case of the reverse scenario would otherwise be faced with the difficulty to prove the negative circumstances, i.e. no supply.2 It is regularly much easier to prove positive circumstances, i.e. supply. However, it must be stressed that this rule applies only in relation to the remedies under Art. 13. The Member States are then free to govern this matter in relation to other remedies (primarily damages). Art. 12(2) concerns the burden of proof regarding the lack of conformity. The first of 3 these rules applies to the contracts for a single act of supply or for a series of individual acts of supply. Here there is a presumption that the lack of conformity, which becomes apparent within the one-year period after the supply, already existed at the time of supply. In case of the contracts for continuous supply, Art. 12(3) provides that the trader Below → mn. 32. Also Recital 59 and Staudenmayer, 2500. On those and other functions of the reversed burden of proof, Maultzsch, 3093. On the adequacy of the reversed burden of proof in regard to B2C transactions also Howells/Watson in: Schulze, Art. 28 CESL, mn. 8. 1

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must furnish proof that the digital content or digital service was in conformity with the contract for the lack of conformity which becomes apparent within this period. The function of Art. 12(2) is easier to understand since it is consequence of the rule under Art. 11(2) 1st subpara. A consumer should be protected by shifting3 to the trader the burden of proof regarding the moment of the existence of the lack of conformity, but only for the lack of conformity which becomes apparent within one-year period. It is modelled on European consumer sales law. However, this transfer from the sales law to the law on digital content and digital services is not very convincing due to differences vis-àvis a sales contract. The digital content does not deteriorate with the passage of the time and the situation after one year is no different to the period before.4 Even after one year has passed, the wording of the rule would not prevent the factual presumption5 that the lack of conformity has already existed at the moment of the supply. 4 Art. 12(4) and (5) specify the circumstances, in which the burden of proof is on the consumer, even though the case is covered by the Art. 12(2) and (3). The provisions soften the rigidness for the trader of the rules on the burden of proof, yet also attracts all the aforementioned associated ambiguities.

B. Context I. European private law In general, there are no rules in EU law which recognise any rule on the burden of proof as a principle. Art. 12 is thus not to be perceived as exception from an apparent more general approach, but rather as just stating a rule which also determines the scope of the operation of EU law in this respect. 6 Art. 12 closely mirrors Art. 11 SGD. Both solutions are rooted in the Consumer Sales Directive (Art. 5(3) CSD). The content of Art. 11(1) SGD and Art. 12(2) DCD are almost identical and they share in part the same subject matter since Art. 11(1) SGD applies also to the goods with digital elements (of course in such situation only the Sale of Goods Directive applies and not the Digital Content Directive).6 Although these provisions do share some common elements they are nonetheless different. In particular, one must be careful to consider the scope of application of the respective Directives, especially as the Digital Content Directive – and thereunder Art. 12 – applies to a vast array of contract types, and therefore not be misled into believing that the rules are exactly the same. 7 Art. 12(3) DCD and Art. 11(3) SGD contain also rules governing the continuous supply of the digital content (even probably the meaning of contracts for continuous supply in both cases is to be understood in this same manner), although the Sale of Goods Directive concerns in this case the digital content embodied into the sold goods). However, how this presumption functions in the respective cases is not so clear due to the uncertainty surrounding the circumstances to which it applies. Nevertheless, the main idea remains this same. The legislator seeks to adjust the concept of presumption 5

3 Podszun, 151–152, analyses the six-month liability period, stating, at the same time, on its increasing similarity to the statutory guarantee. 4 See similar considerations → Art. 11 DCD, mn. 21. 5 On the factual presumption operating next to the presumption as similar to Art. 5(3) CSD, Trzaskowski in: Gudowski, Article 559, mn. 8. 6 → Art. 3 DCD, mn. 73 et seq.

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to the situation of the long-term relationship between the parties and generally burdens the trader with proving that there is no lack of conformity. The CESL contains a rule providing a presumption that the lack of conformity, which 8 has been apparent within the six month period after the passage of the risk, existed at the time of the passing of the risk (Art. 105(2) CESL). 7 It is a rule which was designed to apply also to contracts for the supply of digital content.8 In contrast to the Digital Content Directive, however, the CESL did not adopt a presumption for contracts for continuous supply, which was probably the right approach.

II. Comparative remarks The DCFR followed in this respect the solution of the Consumer Sales Directive. Un- 9 der Art. IV.A.–2:308 DCFR, in a consumer sales contract, any lack of conformity which becomes apparent within six months of the time when risk passes to the buyer is presumed to have existed at that time unless this is incompatible with the nature of the goods or the nature of the lack of conformity. As in the Consumer Sales Directive, the presumption period is shorter (six months) than in the Digital Content Directive as well as the Sale of Goods Directive (where it is a one-year period9). The Consumer Sales Directive was implemented in all Member States and therefore there is a high level of similarity across the EU. Outside of the presumption’s scope, there are many more differences between the national laws, though generally the principle applies according to which the party who has an interest in drawing legal consequences from the given facts must prove the relevant facts.10 However, this is relaxed by factual presumptions or other approaches applied by the courts, based on factual presumptions, experience etc. Art. 12(1) has a unique nature as a rule determining explicitly the burden of proof 10 regarding the failure to supply. It is rather exceptional to have a specific provision expressly governing this matter. Usually, there are two groups of issues concerning the burden of proving the performance of the obligation. In legal systems distinguishing between the primary and secondary obligations between parties, it is generally sufficient to prove the fact of the existence of the obligation and all requirements necessary to demand performance, but it is not necessary to prove the fact of the non-performance (failure to perform) itself. Other systems, regarding the right to demand performance as one of remedies in case of non-performance and defective performance, require generally that the all relevant circumstances, including the non-performance, are to be proven by the obligee.

Zoll in: Schulze, Art. 105 CESL, mn. 1. ibid. 9 The extension of this period into one year is supposed to be an attempt to compromise with those Member States which according to the Consumer Sales Directive (setting the default period of six months) extended the period to two years, Staudenmayer, 2501. 10 Compare with Art. 6 Polish Civil Code, so that: ‘[t]he burden of proof of the fact lies on the one who derives legal effects from it’. 7

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C. Explanation I. Failure to supply Art. 12(1) states that the burden of proof regarding whether the digital content or digital service was supplied in accordance with Art. 5 shall be on the trader. It means that if the consumer is willing to exercise remedies under Art. 13, he must prove that the trader is under an obligation to supply the digital content or digital service. The consumer neither needs to prove that the digital content or digital service has not been supplied nor does he even have to demonstrate any probability of this fact11. 12 Art. 12(1) does not provide an explicit rule whether a consumer has any duty to cooperate with the trader to assess the ability of the consumer’s digital environment. 12 Art. 12(4) and (5) refer only to Art. 12(2) and (3). The problem is that in the light of the definition of supply under Art. 5 it is not unlikely that a consumer is not able to access the digital content or digital service or download it due to the flaws of his own digital environment. The trader must prove that the digital content or any means suitable for accessing or downloading the digital content is made available or accessible to the consumer, or to a physical or virtual facility chosen by the consumer for that purpose [Art. 5(2)(a)]; in case of the digital service that the digital service is made accessible to the consumer or to a physical or virtual chosen by the consumer for the purpose [(Art. 5(2)(b)]. It means that the trader must prove that he has done everything necessary for the consumer to acquire access to the digital content or digital service. The trader does not need to prove that the consumer has actually acquired access if the trader proves that he has done everything necessary to make this access available. If the consumer still does not gain access, despite the trader successfully proving compliance with his duties under Art. 5, it could be then a matter of the lack of conformity with the burden of proof resulting from Art. 12(2)–(5). 13 The Member States are only obliged to implement Art. 12(1) to the extent foreseen in the Directive. Art. 12(1) therefore applies only in relation to the remedies under Art. 13. The Member States are therefore free to decide on the rules regarding the burden of proof in the context of other remedies (e.g. damages) for non-performance. 13 11

II. Lack of conformity 14

Further provisions of Art. 12 concern the burden of proving a lack of conformity. Art. 12(2) sets out that the burden of proof with regard to whether the supplied digital content or digital service was in conformity at the time of the supply shall be on the trader for the lack of conformity which becomes apparent within a period of one year from the time when the digital content or digital service was supplied.

1. Supply 15

According to the wording of Art. 12(2), if the lack of conformity becomes apparent within the period of one year it is to be presumed that the lack of conformity existed at

11 However, based on the presumption from the Art. 5(3) CSD it is still necessary to prove the lack of conformity, CJEU, C-497/13 Faber EU:C:2015:357, para. 70. Cf. Schulze/Zoll, p. 220. 12 cf. Schulze/Zoll, p. 220. 13 As mentioned → Art. 11 DCD, mn. 13.

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the time of supply14. This provision refers to the cases described in Art. 11(2), which means contracts for the single act of supply or a series of individual acts of supply.15 The lack of conformity must become apparent within one year after the supply. ‘Sup- 16 ply’ is defined under Art. 5. It means that the one-year period starts to run when all requirements of Art. 5(2) have been satisfied. The Digital Content Directive does not contain any provision on computation of time, therefore Regulation No. 1182/7116 applies.17 Pursuant to Art. 3(2)(c) Regulation No. 1182/71: ‘a period expressed in weeks, months or years shall start at the beginning of the first hour of the first day of the period, and shall end with the expiry of the last hour of whichever day in the last week, month or year is the same day of the week, or falls on the same date, as the day from which the period runs. If, in a period expressed in months or in years, the day on which it should expire does not occur in the last month, the period shall end with the expiry of the last hour of the last day of that month.’ The analysed period is also a period which is calculated retroactively in sense of the Art. 3(4) Regulation No. 1182/71 because it is calculated retroactively from the appearance of the lack of conformity to the moment of the supply.

2. Becomes apparent Pursuant to Art. 12(2), the lack of conformity must become apparent within one year. 17 The Directive does not prescribe explicitly who must prove the appearance of the lack of conformity, therefore this will be left to national law. Usually, the burden of proof concerning the appearance of the lack of conformity, including the date thereof, will be on the consumer, since he derives the beneficial consequences from this fact – the presumption that the lack of conformity existed already at the moment of supply. The fact of becoming apparent should be understood (like under Art. 11(2) 3 rd subpara.) as becoming visible to the reasonable consumer.

3. Presumption Art. 12(2) establishes a presumption that the lack of conformity has existed at the 18 time of the supply. This presumption encompasses the relevant time, which means that the lack of conformity already existed at the time of the supply and also that the later malfunction of the digital content or digital service (and resulting lack of conformity apparently taking place thereafter) is due to reasons which existed at the time of the supply.

14 Similar to Art. 5(3) CSD, according to which any lack of conformity which becomes apparent within six months of the delivery of the goods shall be presumed to have existed at the time of delivery. 15 → Art. 11 DCD, mn. 15 et seq. 16 OJ L 124, 8.6.1971, p. 1. See also Unger in: Jansen/Zimmermann, p. 204, who notes the influential character of this Regulation, in particular on the DCFR and the CESL. 17 See Art. 1 Regulation 1182/71: ‘Save as otherwise provided, this Regulation shall apply to acts of the Council or Commission which have been or will be passed pursuant to the Treaty establishing the European Economic Community or the Treaty establishing the European Atomic Energy Community.’

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In this sense, the merit of the CJEU decision in Faber18 (in as far it concerns the burden of proof) is also useful to explain this provision.

III. Continuous supply Art. 12(3) establishes a presumption regarding the contracts for the continuous supply of digital content or digital service.19 Pursuant to Art. 12(3), the burden of proof with regard to whether the digital content or digital service was in conformity within the period of time during which the digital content or digital service is to be supplied under the contract shall be on the trader for a lack of conformity which becomes apparent within that period. 20 A contract for continuous supply is a contract where the trader is obliged to maintain the facility securing the access to the digital content or digital service. Therefore, the purpose of Art. 12(3) is not self-evident. According to Art. 11(3), the trader is liable for the lack of conformity that occurs or becomes apparent within the period during which the digital content or digital service is to be supplied under the contract. There is not a specific need for the presumption. If the lack of conformity becomes apparent and this appearance will be proven by the consumer, there is no need for any further proof since all relevant facts for liability are already established. The situation that a lack of conformity appears after the contractual period makes little sense if, during the last stages of the contractual relationship, the consumer has suffered no consequence of the lack of conformity and thus a remedy should not be available. 19

IV. Discharging the burden of proof on the trader 21

Art. 12(4) and (5) stipulate two circumstances in which the trader is not burdened with proving the conformity of the digital content or digital service: where the trader can demonstrate the incompatibility of the consumer’s digital environment with the technical requirements of the digital content, assuming that the consumer has been properly informed of such requirements before the conclusion of the contract [Art. 12(4)] or where the consumer fails to cooperate with the trader on determining whether the lack of the conformity results from the incompatibility of the consumer’s digital environment. Art. 12(4) and (5) do not apply where the trader has failed to supply the digital content or digital service.

1. Incompatibility of the consumer’s digital environment 22

a) Overview. Art. 12(4) discharges the trader from the requirement to prove the conformity with the contract at the relevant time if the trader demonstrates that the digital environment of the consumer is not compatible with the technical requirements of the 18 The CJEU judgment, C-497/13 Faber EU:C:2015:357, paras 73–75, based on Art. 5(3) CSD, makes clear that the presumption refers not only to the time of lack of conformity’s existence, but also to the existence of reason of such lack of conformity. Consequently, the presumption applies also when it is clear that the lack of conformity arose later but arose out of reasons within the purchased item already at the time of passing of risk. Similar wording can be seen in Art. 556(2) Polish Civil Code (which adopted such a solution even before Faber – see Zoll (2018), p. 156) and from latest decisions of German Federal Court of Justice (BGH) following Faber, namely the BGH judgment, 12.10.2016 – VIII ZR 103/15: NJW 2017, 1093, paras II.2, II.2.b), based on § 477 BGB. A similar example of such necessary extension of the scope of presumption when it comes to an electronic device follows from Lorenz in: MüKo BGB, § 476 BGB, mn. 4. 19 See → Art. 11 DCD, mn. 29, with regard to the definition of continuous supply.

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digital content or digital service.20 The trader may benefit from the reversal of the burden of proof only if he has informed the consumer of such requirements in a clear and comprehensible manner before the conclusion of the contract. The digital environment is defined in Art. 2 No. 9 as ‘hardware, software and any network connection used by the consumer to access or make use of digital content or a digital service’.21 In case of the contracts for a single supply or for a series of individual acts of single supply, if the lack of conformity appears in within the one-year period, a trader may rebut the presumption if the trader provides the evidence that the consumer’s digital environment does not comply with the technical requirements, which the trader has communicated to the consumer in the clear and comprehensible manner. It means that it suffices to show the discrepancy between the technical requirements and the digital environment. The trader does not – for the purpose of the exemption – need to prove that the lack of compliance with the specified requirement had or could have impact on the digital content. It is enough that any lack of compliance is proven. b) Information requirements. Art. 13(4) does not set any formal requirements for the information to be provided to the consumer in order to be exempted from the burden of proof. It could be in any form and does not need to be electronic or on the durable medium. The trader must however be able to prove that such information was provided, and it was clear and comprehensible. It means that the information must be easily understood22 by the average consumer.23 The question of the language of the information depends on the circumstances. It must be such language which the consumer could reasonably expect.24 If the whole website, through which the contract is concluded, offers certain languages and the consumer access to the process of concluding the contract, he also accepts that all communication will be in these languages. There is no right to the consumer’s language. The information must be provided before the conclusion of the contract. The Digital Content Directive does not provide a general rule on the moment of the conclusion of the contract. It is generally to be determined by national law. The function of acquiring information before the conclusion of the contract25 could be observed only if the information will be provided before the consumer has submitted his binding notice or declaration of intent.26 It should not matter whether this declaration is technically regarded as offer or acceptance. c) Continuous supply. In case of the contracts for the continuous supply of digital content or service, the proof of the incompatibility of the consumer’s digital content with the requirements must be assessed in the process of determining whether there is a lack 20 Compare with the inapplicability of the presumption from the Art. 5(3) CSD – see e.g. Maultzsch, 3096–3097. 21 See → Art. 2 DCD, mn. 35 et seq.; see also Staudenmayer, 2497 about the broad scope of this definition. 22 This means that they must be clear and comprehensible, as follows from Recital 34 CRD. On the actual possibility of the consumer to become acquainted with the content of the information both in terms of its external form and internal structure using the example of standard contract terms, Łętowska, p. 82. 23 Tischner, 199–244. 24 Issue discussed in the context of the unfair terms in consumer contracts and the transparency requirement: Girot, p. 327–329; Loos, 87; Micklitz/Reich/Rott/Tonner, p. 143. 25 See on the request to disclose resulting from good faith and fair dealing, as well as need to optimise the cost and ease of acquiring information of decisive importance to the party, Kästle-Lamparter in: Jansen/Zimmermann, p. 414–417. 26 It is comparable to the demand that pre-contractual information according to the Art. 5(1) CRD, must be delivered before the consumer is bound by a contract. On the meaning of pre-contractual information for conclusion of the contract see e.g. Zoll (2013), p. 133.

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24

25

26

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conformity attributable to the trader. The proof of such incompatibility must be understood as an important indication that the attribution of the lack of conformity must be examined. The exemption from the burden of proof must be understood in this way, that the consumer must then produce the evidence that the incompatibility of the digital environment has not impacted on the lack of conformity.

2. Duty to cooperate Art. 12(5) is closely related to Art. 12(4). It serves the trader in being able to prove that there is the incompatibility of the digital content or service with the consumer’s digital environment. 29 Art. 12(5) imposes on the consumer a duty to cooperate27 to the extent reasonably possible and necessary and it must be limited to the available technical means which are least intrusive for the consumer. The nature of the necessary cooperation must be determined considering all circumstances of the case – type of digital content and digital service, type of digital environment. Where there are different technical possibilities to verify the digital environment of the consumer, the method must be chosen which in the least possible way infringes on the private sphere of the consumer. The trader must prove that the chosen way is necessary to establish the relevant technical features of the digital environment. It will usually suffice that the consumer informs the trader of the technical specifications of his digital environment. The trader can, however, require such collaboration which is able to produce evidence reliable in case of a dispute between parties. 30 The consequence of the lack of the required collaboration is this same as under Art. 12(4), if the trader proves the incompatibility of the digital content with the consumer’s digital environment. 28

D. Transposition issues I. Scope of presumption 31

As Art. 12(2) does not provide any distinction, the presumption that the lack of conformity existed at the moment of supply should apply also in case of updates or information in contracts for a series of individual acts of supply. In such cases, however, there is a difficulty concerning the application of the respective presumption. It gives rise to the question of the result of the application of such presumption in these cases. The situation could arise that a lack of conformity of the digital content becomes apparent after several updates. If the lack of conformity appears within one year after the supply, the presumption of its existence at the time of supply applies. However, if the trader proves that the first supply was in conformity or the lack of conformity has become apparent after one year of the supply but less than one year of the updates, a question arises whether there is a presumption that the lack of conformity results from the updates, even if the consumer is not able to prove to which of updates the lack of conformity 27 Compare varied scopes of the obligations to cooperate, e.g. Arts III.–1:104 and IV.C.–2.108 DCFR. The duty to cooperate becomes of growing importance, but especially in service contracts, and includes e.g. the information duties already during the contract, in particular regarding the newly obtained information and notification of previously unknown risks, von Bar/Clive, p. 1652–1653, 1691. At the same time e.g. Art. 5.1.3. Unidroit Principles 2010 declare its further-reaching scope, so that the contract eventually becomes a ‘common project’ of the parties, p. 150.

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should be linked. As the result of the application of Art. 12(2), such presumption that the lack of conformity is a result of one of the updates is to be assumed.28

II. Period of presumption The Digital Content Directive is subject to full harmonisation (Art. 4). Accordingly, 32 the question is raised whether a national legislator is limited to maintain the one-year period of the presumption. At the first glance, one could be misled into thinking that the one-year period is covered by the scope of the full harmonisation. However, there is no general rule in EU law that it is a buyer (consumer) who bears the burden of proving the lack of conformity, even if such principle is widespread among the laws of the Member States.29 There are not enough grounds to draw an argument a contrario from Art. 11(2). This provision does not require specific rules on the burden of proof outside of its scope of application. Hence the Members States are not limited to establish their own rules outside of the wording of the Art. 12(2), e.g. by prolonging the presumption period beyond one year.

III. Presumption in contracts for continuous supply The function of Art. 12(3) is especially doubtful and it suffers from the lack of coher- 33 ence. In the case of contracts for continuous supply there is no need for the parallel presumption rule as in case of Art. 12(2); this is not because of the very nature of the digital content or digital service but because of the requirements concerning the legally-relevant lack of conformity. The wording of Art. 12(3) shows certain circularity: if the lack of conformity becomes apparent within the period of the contract’s binding power, the burden of proof that there is no lack of conformity should rest upon the trader. It is then unclear what is presumed and what exactly launches this presumption. This rule must be regarded as unnecessary and rather confusing.

Article 13 Remedy for the failure to supply 1. Where the trader has failed to supply the digital content or digital service in accordance with Article 5, the consumer shall call upon the trader to supply the digital content or digital service. If the trader then fails to supply the digital content or digital service without undue delay, or within an additional period of time, as expressly agreed to by the parties, the consumer shall be entitled to terminate the contract. 2. Paragraph 1 shall not apply, and the consumer shall be entitled to terminate the contract immediately, where: (a) the trader has declared, or it is equally clear from the circumstances, that the trader will not supply the digital content or digital service; 28 Precisely the BGH judgment, 12.10.2016 – VIII ZR 103/15: NJW 2017, 1093, paras II.2, II.2.b), which allows for the presumption to operate even though it is clear that the lack of conformity arose after delivery, but from the reason already existing at the time of the passing of risk. 29 Recital 11 5th sentence states that: ‘For example, Member States should not provide for rules on the reversal of the burden of proof that are different from those provided for in this Directive’. However, it still only applies to the provision on the burden of proof for the period of one year.

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(b) the consumer and the trader have agreed, or it is clear from the circumstances attending the conclusion of the contract, that a specific time for the supply is essential for the consumer and the trader fails to supply the digital content or digital service by or at that time. 3. Where the consumer terminates the contract under paragraph 1 or 2 of this Article, Articles 15 to 18 shall apply accordingly. Bibliography: Bach, ‘Neue Richtlinien zum Verbrauchsgüterkauf und zu Verbraucherverträgen über digitale Inhalte’ (2019) 24 NJW 1705–1711; Beale, The future of European contract law in the light of the European Commission’s proposals for Directives on digital content and online sales (2016) 23 IDP 3–20; Behar-Touchais, ‘Remedies in the Proposed Digital Content Directive: An Overview’ in: Schulze/Staudenmayer/Lohsse (eds), Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Nomos 2017), p. 129–140; Carvalho, ‘Sale of Goods and Supply of Digital Content and Digital Services – Overview of Directives 2019/770 and 2019/771’ (2019) 5 EuCML 194–201; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; Council of the European Union, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content (First reading) – Policy debate’ 9768/16 + INIT; Council of the European Union, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content (First reading) – Progress report’ 7429/17 + INIT; Council of the European Union, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content (First reading) – General approach’; Council of the European Union, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content (First reading) – General approach’ 9901/17 + ADD1; Fauvarque-Cosson, ‘The new proposal for harmonised rules for certain aspects concerning contracts for the supply of digital content (termination, modification of the digital content and right to terminate long term contracts)’ (2016); Gsell, ‘Rechtsbehelfe bei Vertragswidrigkeit in den Richtlinienvorschlägen zum Fernabsatz von Waren und zur Bereitstellung digitaler Inhalte’ in: Artz/Gsell (eds), Verbrauchervertragsrecht und digitaler Binnenmarkt (Mohr Siebeck 2018), p. 143–175; Gsell et al. (eds), beck-onlineGrosskommentar (‘BeckOGK BGB’); v. Hein (ed.), Münchener Kommentar zum Bürgerlichen Gesetzbuch, Band 12: Internationales Privatrecht II (7th edn, C.H. Beck 2018); Koch, ‘Rechtsbehelfe des Verbrauchers bei Verträgen über digitale Inhalte’ in Wendehorst/Zöchling-Jud, Ein neues Vertragsrecht für den digitalen Binnenmarkt? (Manz 2016), p. 131–158; Metzger, ‘Verträge über digitale Inhalte und digitale Dienstleistungen: Neuer BGB-Vertragstypus oder punktuelle Reform?’ (2019) 12 JZ 577–586; Riehm, ‘Irrungen und Wirrungen zur Fristsetzung und ihrer Entbehrlichkeit’ (2014) 29 NJW 2065–2069; Riehm/Abold, ‘Mängelgewährleistungspflichten des Anbieters digitaler Inhalte’ (2018) 2 ZUM 82–91; Schulze, ‘Die Digitale-Inhalte-Richtlinie – Innovation und Kontinuität im europäischen Vertragsrecht‘ (2019) 4 ZEuP 695–723; Spindler, ‘Contracts For the Supply of Digital Content – Scope of application and basic approach – Proposal of the Commission for a Directive on contracts for the supply of digital content’ (2016) 3 ERCL 183– 217; Spindler, ‘Contracts for the Supply of Digital Content – The Proposal of the Commission for a Directive on Contracts for the Supply of Digital Content’ in: Grundmann et al. (eds), European Contract Law in the Digital Age (Intersentia 2018), p. 281–312; Spindler/Sein, ‘Die Richtlinie über Verträge über digitale Inhalte‘ (2019) 8 MMR 488–493; Staudenmayer, ‘Auf dem Weg zum digitalen Privatrecht – Verträge über digitale Inhalte‘ (2019) 35 NJW 2497–2501; Zöchling-Jud, ‘Vertragsmäßigkeit von Waren und digitalen Inhalten – (rechtzeitige) Bereitstellung digitaler Inhalte’ in: Artz/Gsell (eds), Verbrauchervertragsrecht und digitaler Binnenmarkt (Mohr Siebeck 2018), p. 119–142; Zoll, The Remedies in the Proposals of the Online Sales Directive and the Directive on the Supply of Digital Content (2016) 6 EuCML 250–254.

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A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Modifications in relation to the Commission’s Proposal . . . . . . . . . . . . . . . . . . . . . . II. Interaction with other consumer protection directives . . . . . . . . . . . . . . . . . . . . . . . III. Application of private international law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 3 4 6

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Consumer’s right to demand performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Failure to supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Termination after request to the trader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Remedy for the failure to supply 3. Immediate termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Exercise of the right of termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Legal consequences of termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31 44 45

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Impossibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Possible diversity of national provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Termination without declaration by the consumer . . . . . . . . . . . . . . . . . . . . . . . . 3. Impossibility in case of delayed supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Legal consequences of impossibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Right to withhold performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Right to reject the supplied content or service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Differences between Art. 13 DCD and Art. 18 CRD . . . . . . . . . . . . . . . . . . . . . . . . . . V. Liability for damages and other remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Liability for damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Other remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

46 46 46 47 51 53 54 55 57 59 59 63

A. Function If the trader fails to supply the digital content or service, it is necessary to ensure that 1 the consumer has the possibility to restore his economic freedom which is, until then, restricted by the contract. Art. 13 therefore enables the consumer to terminate the contract under certain conditions in the event of a failure to supply. Correspondingly, the provision provides an incentive for the trader to supply the digital content in good time. In contrast to Art. 14 that deals with the lack of conformity, Art. 13 covers the situa- 2 tion in which the digital content is not supplied at all.1 Art. 13 must be seen in combination with Art. 1 2nd indent and Art. 5. While Art. 1 2nd indent emphasises that it is a particular aim of the Directive to lay down rules on remedies in the event of a failure to supply, Art. 5 is particularly important as according to Art. 13 the consumer may only terminate the contract if the trader has failed to supply the digital content in accordance with Art. 5.2

B. Context I. Modifications in relation to the Commission’s Proposal The provision of Art. 13 replaces Art. 11 of the Commission’s Proposal3 and contains 3 a major modification. According to Art. 11 of the Commission’s Proposal the consumer was entitled to terminate the contract immediately if the supplier had failed to supply the digital content in accordance with Art. 5 without a previous call upon the trader to supply. To justify this far-reaching remedy Recital 35 of the Commission’s Proposal stated that the failure to supply was ‘a serious breach of the main contractual obligation of the supplier’. However, this view is not convincing.4 It must be considered that the failure to supply in accordance with Art. 5 does not necessarily mean a definite and ultimate failure to supply. Instead, it generally implicates nothing more than a delay in supply. And a delay in supply cannot generally be considered a more serious breach of the main Below → mn. 14 et seq. See also Recital 39. 3 COM(2015) 634 final. 4 Gsell, p. 152; Fauvarque-Cosson, 9 – the text of the study is available under https://op.europa.eu/en/pu blication-detail/- /publication/dd839de3-c293-11e6-a6db-01aa75ed71a1/language-en/format-PDF (accessed 4 February 2020); no criticism in this respect by Beale, 9; Behar-Touchais, p. 131 et seq. 1

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contractual obligation than a supply with a lack of conformity. It can therefore not be justified that in case of a lack of conformity the consumer should only be entitled to terminate the contract under strict conditions (see Art. 12(3) of the Commission’s Proposal) while in case of a delay in supply the consumer could terminate the contract immediately.5 Additionally, further inconsistencies arise with respect to the distinction between the failure to supply and the lack of conformity. If the consumer is afforded the right to terminate the contract immediately in the event of a failure to supply while in the event of a lack of conformity he is only entitled to do so after a previous request, the trader will often argue that he supplied at least some digital content; and it would indeed be beneficial to the trader if he provided digital content that is severely not in conformity, only to bring about a lack of conformity and deprive the consumer from the right to terminate the contract.6 It is therefore with good reason that the European legislator has refrained from the consumer’s entitlement to terminate the contract immediately and conceded a second chance to the trader.7

II. Interaction with other consumer protection directives The Digital Content Directive is the first directive to address the consumer’s rights both in case of a failure to supply and in case of a lack of conformity. The Consumer Sales Directive and the Sale of Goods Directive do not contain any provisions as to the failure to supply8; instead, they only deal with the consumer’s rights in the event of a lack of conformity. Conversely, the Consumer Rights Directive only addresses the consumer’s rights for sales contracts in the event of a failure to supply (Arts 17, 18) but lacks provisions as to the lack of conformity. 5 Since a contract for the supply of digital content can also be a sales contract within the sense of Art. 17(1) CRD, the question arises which provisions should apply to sales contracts for the supply of digital content. The distinction is important since the conditions for the termination of the contract in both provisions are different.9 Even though the Digital Content Directive does not explicitly state that it prevails over the Consumer Rights Directive, this finding becomes apparent from Recital 20. It states that the provisions of the Consumer Rights Directive in the event of the failure to deliver shall apply to digital content which is supplied on a tangible medium, such as DVDs, CDs, USB sticks and memory cards, as well as to the tangible medium itself, provided that the tangible medium serves exclusively as a carrier of the digital content. This clearly indicates that in regards to other digital content, only Art. 13 DCD applies in the event of a failure to supply. Additionally, Art. 3(2) CRD states that if any provision of the Consumer Rights Di4

Gsell, p. 152. See Fauvarque-Cosson, p. 9 with reference to Art. 11 of the Commission’s Proposal; dissenting Spindler (2018), 303 and Spindler (2016), 205 et seq.; further criticism by Koch, p. 136. 7 See Council of the European Union (‘7429/17’), 3, n 8: ‘In particular, the Presidency is of the opinion that on the basis of the compromise currently discussed at technical level a proper balance between the interests of consumers and suppliers in relation to remedies for the failure to supply can be achieved. This compromise would include giving the supplier a second chance in case of failure to supply the digital content or digital service, subject to certain safeguards for the consumer where this second chance would not apply.’; Council of the European Union (‘9901/17’), 7: ‘With a view to preserving both the interests of suppliers and of consumers, the Presidency compromise on the remedies for the failure to supply includes a principal obligation of the consumer to give the supplier a second chance to supply the digital content or digital service.’. 8 See Recital 38 SGD. 9 Below → mn. 58 et seq. 5

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rective conflicts with a provision of another Union act governing specific sectors, the provision of that other Union act shall prevail and shall apply to those specific sectors.

III. Application of private international law As pointed out in Recital 80, the Digital Content Directive does not prejudice the ap- 6 plication of the rules of private international law.10 In this regard, Art. 6 Rome I can be of particular practical relevance. According to Art. 6(1) the contract for the supply of digital content or digital services shall be governed by the law of the country where the consumer has his habitual residence, provided that the professional either pursues his commercial or professional activities in the country where the consumer has his habitual residence (letter a) or by any means, directs such activities to that country or to several countries including that country (letter b). In such a case, the parties may choose a different law according to Art. 6(2) 1st sentence. However, according to Art. 6(2) 2nd sentence such a choice may not have the result of depriving the consumer of the protection afforded to him by provisions that cannot be derogated from by agreement by virtue of the law. Since according to Art. 22 DCD any contractual term which, to the detriment of the consumer, excludes the application of the national measures transposing this Directive, derogates from them or varies their effects prior to the failure to supply is brought to the trader's attention by the consumer shall not be binding to the consumer, thus the consumer cannot be deprived of the protection of the provisions implementing Art. 13 into national law. This does not necessarily mean, however, that those national provisions always apply. 7 As Art. 6(2) Rome I only grants the ‘protection’ to the consumer, a comparison has to be made between the protection provided by the national law implementing Art. 13 and the protection provided by the provisions of the chosen law with the result that the law which is more favourable to the consumer applies. It is widely acknowledged that the comparison must not be made between the two laws in general but rather by looking at the specific case in question.11 If, for example, the law chosen by the parties on the one hand grants the consumer the right to terminate the contract immediately in case of a failure to supply but on the other hand allows the parties to stipulate derogating contractual terms before the failure to supply is brought to the trader’s attention, the chosen law is partly more and partly less favourable. In order to prevent the trader from circumventing the consumer protection provisions of the Directive, the analysis must be based on the specific dispute.12 Thus, if there is no derogating agreement in the specific case, the chosen law would apply, and the consumer would be entitled to terminate the contract immediately. By contrast, if the parties have stipulated a derogating agreement to the detriment of the consumer, the law implementing the Directive would apply and the derogating agreement would be invalid. However, it would be too far-reaching to, in a first step, apply the law implementing 8 the Directive to ensure the invalidity of the derogating agreement in favour of the consumer and then, in a second step, apply the chosen law to afford the consumer the right to terminate the contract immediately because in this way the consumer would be af-

10 See also the explanatory memorandum of COM(2015) 634 final, 3 et seq.: ‘The proposal is compatible with the existing EU rules on applicable law and jurisdiction in the Digital Single Market […]’. 11 Rühl in: BeckOGK BGB, Art. 6 Rom I-VO, mn. 260. 12 See Martiny in: MüKo BGB, Art. 6 Rom I-VO, mn. 59.

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forded a legal position that neither the chosen law nor the law implementing the Directive provides.13

C. Explanation I. Consumer’s right to demand performance It is debated whether Art. 13(1) (together with Art. 5) affords the consumer the right to demand performance. Some argue in favour of such a right based on the assumption that Art. 13 not only sets out rules for the consumer’s right to terminate the contract but that the ‘call’ by the consumer to the trader to supply the digital content is not only a condition to be fulfilled to obtain the entitlement to terminate the contract but, furthermore, asserts the consumer the right to claim performance.14 Additionally, it is alleged that such a right would be in line with the provisions of the CISG.15 It is indeed accurate to assume that Art. 13 is to be classified as a remedy16 and the CISG does indeed grant the buyer the right to require performance by the seller (Art. 46 CISG) and, unlike Art. 28 CISG, the Digital Content Directive does not contain an exception clause for a court not to enter a judgment for specific performance unless the court would do so under its own law in respect of similar contracts of sale. Additionally, the German language version of Recital 41 could be interpreted in this way since it states that the trader’s obligation to supply is ‘die wichtigste Vertragspflicht des Unternehmers’17. 10 Nonetheless, it is not convincing to deduce a consumer’s right to claim performance from the Directive in general and from Art. 13 in particular. Recital 41 only points in this direction in the German language version. By looking at the other language versions it becomes clear that the obligation to supply is only to be qualified as the ‘main contractual obligation’18 as opposed to a collateral contractual obligation; additionally, even if the obligation to supply were ‘the most important contractual obligation’, it would not necessarily mean that the consumer actually has a right to claim performance. And the comparison with the CISG is unconvincing since the wording of Art. 46 CISG is quite different to Art. 13: Art. 46 CISG expressly states that ‘the buyer may require performance by the seller’ whereas Art. 13 does not contain any similar statement. Thus, it must be noted that the Directive does not give any hint of any kind that the consumer should be afforded a right to claim performance and it would be at least surprising if the European legislator wanted to set out a rule for such a decisive question without even alluding to it. 11 Furthermore, Art. 13 even indicates the opposite. First, the provision’s heading reads ‘remedy for the failure to supply’. By contrast, Art. 14 uses the plural (‘remedies for lack of conformity’) which indicates that Art. 13 does not contain two, but only one remedy which would be the right to terminate the contract. Second, and even more important, it should be noted that Art. 13(2) not only states that the consumer shall be entitled to ter9

See Magnus in: Staudinger BGB, Art. 6 Rom-I VO, mn. 145. → Art. 5 DCD, mn. 18; Schulze, 706 et seq. 15 Schulze, 706. 16 See the wording of Art. 1 2 nd indent, Recital 11 and the provision’s heading (‘remedy for the failure to supply’). 17 ‘the most important contractual obligation’. 18 English language version; see also the Spanish language version: ‘la principal obligación contractual’; the French language version: ‘la principale obligation contractuelle’; the Italian language version: ‘l’obbligo contrattuale principale’. 13 14

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minate the contract immediately under certain conditions; instead, Art. 13(2) states, that ‘paragraph 1 shall not apply’ if the conditions of the provision are fulfilled. If Art. 13(1) were to grant the consumer the entitlement to claim performance, it would make little sense to deprive the consumer of this entitlement where the trader declares that he will not supply the digital content. Therefore, all the indications lead to the conclusion that the purpose of Art. 13 is not to grant the consumer the right to claim performance, but rather to only lay down conditions for the consumer’s entitlement to terminate the contract. This finding, however, does not lead to the conclusion that the Member States are 12 prohibited from establishing rules that grant the consumer the right to claim performance due to Art. 4 and the full harmonisation character of the Directive. It is highly unlikely that the European legislator would undertake a severe interference into the legal system of the Member States without providing any indication; this is even more true in view of the fact that the obligee’s right to claim performance is an essential part of the continental civil law tradition. The fact that the Directive does not require the Member States to establish rules as to the consumer’s right to claim performance only means that this aspect falls outside the subject areas regulated by the Directive. The Member States are therefore, in this respect, allowed to establish their own rules regardless of the Directive.

II. Scope According to Art. 3(3), even though the Directive generally also applies to tangible 13 media which serve exclusively as a carrier of digital content, the application of Art. 5 and Art. 13 is excluded for these tangible media. Thus, if a consumer purchases a DVD, a CD, a USB stick or a memory card and the trader has failed to fulfil his obligation to supply, Art. 13 does not apply. However, as pointed out in Recital 20, the provisions of the Consumer Rights Directive on obligations related to the delivery of goods and remedies in the event of the failure to deliver apply instead which particularly refers to Art. 18 CRD.19

III. Requirements 1. Failure to supply The provision requires that the trader has failed to supply the digital content or digi- 14 tal service in accordance with Art. 5. In this regard it is essential to determine whether there is a failure to supply within the sense of Art. 13 or a lack of conformity which would lead to the application of Art. 14. ‘Failed to supply’ literally means that there is no supply at all by the trader. This may 15 become particularly problematic if supply by the trader is less than the owed quantity or different to the owed digital content or service. If, for instance, the trader is to supply a word processing program but only makes available a spreadsheet software, it could be considered that the trader has failed to supply the word processing program which would lead to the application of Art. 13. This consideration becomes even clearer if the trader provides digital content which is completely different from the owed content, e.g. in the case where the trader provides a completely worthless PDF file instead of stream19

seq.

See Carvalho, 197; as to the differences between Art. 13 DCD and Art. 18 CRD below → mn. 57 et

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ing access. Similar considerations apply if the trader is obliged to provide a software package but only makes half of the programmes available. In this case, it could be said that with regards to the missing programmes that the trader has failed to supply. However, in all the aforementioned cases it seems preferable to apply Art. 14 instead of Art. 13. Firstly, this is apparent from the wording of Art. 7(a) where description and quantity are set out as criteria for conformity20 which leads to the conclusion that any lack of quantity and any deviation from the description should be considered a lack conformity within the sense of Art. 14. Secondly, it would otherwise be virtually impossible to establish an adequate standard for the distinction of Art. 13 and Art. 14. It would always be necessary to decide in each individual case if the deviation from the description is sufficient or not. It must be conceded that it seems problematic that the trader can circumvent the application of Art. 13 by supplying digital content that is blatantly not in conformity. This holds even more true in view of the fact that the consumer has no right to reject the offered content or service.21 However, this can be taken into account by harmonising the requirements for termination in Art. 13 and Art. 14.22 16 The distinction between Art. 13 and Art. 14 becomes further problematic if the digital content or the digital service is to be supplied over a period of time and if the supply is interrupted during this period. Even though it could be assumed that the trader has failed to supply the digital content during the interruption period, it becomes apparent from Recital 51 that such interruption shall be treated as a lack of conformity rather than as a failure to supply so that Art. 14 applies instead of Art. 13. 17 Another potential conflict between Art. 13 and Art. 14 may arise if the trader agrees with the consumer to provide updates and features as soon as they become available. A failure by the trader to provide the updates and features that had been agreed upon in the contract could theoretically be qualified as a failure to supply; however, Recital 44 expressly states that such failure shall be considered a lack of conformity. 18 Both in case of an interruption of service and in the event of a failure to provide updates and features it seems consistent to assume that there is a lack of conformity instead of a failure to supply since the trader did provide a digital content or service so it cannot be said that there is no supply at all.

2. Termination after request to the trader In contrast to Art. 11 of the Commission’s Proposal23 the consumer is, in general, not entitled to terminate the contract immediately. Instead, it is necessary that, without prejudice to Art. 13(2), the trader, after the consumer has called upon the trader to supply, fails to supply the digital content or digital service without undue delay, or within an additional period of time, as expressly agreed to by the parties. 20 a) Request by the consumer. The Directive only states that the consumer shall call upon the trader to supply the digital content or services and does not set out any further requirements. This means firstly, that the request by the consumer does not require any particular form so that it can also be exercised by means of an e-mail or even just verbally. Secondly, it is sufficient that the consumer expresses in any way that he wants the trader to supply the digital content or service and that the trader has the possibility to understand to which content or service the consumer refers. It is important to bear in mind that the trader has already failed to supply despite having full knowledge of his 19

See also Recital 42; the quantity is also set out as an objective requirement in Art. 8(1)(b). Below → mn. 55–56. 22 Below → mn. 25. 23 COM(2015) 634 final; above → mn. 3. 20

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obligation. It is therefore enough for the consumer to refer to the owed content or service (e.g. by citing the order number or by attaching the confirmation e-mail) and demand supply. It is irrelevant whether the consumer’s request is made in a firm or in a courteous way. It is also possible for the consumer to demand supply in the form of a question (‘Could you please provide the owed content?’). In particular, it is not necessary that the consumer sets a time limit for the trader.24 b) Second failure to supply by the trader. Art. 13(1) places the trader under the obligation to supply the digital content or service without undue delay after the consumer’s request lest the consumer is entitled to terminate the contract. This is specified further in Recital 61 which states that in the majority of situations the supply should not require any additional time and that the trader has to supply the digital content or service immediately.25 Generally, it seems accurate to take into account that the trader does not need to deliver a movable thing, but that instead, he only needs to make the digital content or service available in digital form and it seems therefore accurate to assume that the trader should not be afforded too much time for his second attempt to supply. Additionally, it must be borne in mind that the trader had already agreed to supply the digital content or service to a due date so that he cannot assert the need for additional time to start with the fulfilment of his obligation. And finally, it must be remembered that the consumer’s right to termination is not a fault-based remedy so that it is irrelevant whether the trader failed to supply without any fault. Nonetheless, Recital 61 and the wording ‘immediately’ should be interpreted restrictively. Firstly, it would be too far-reaching, and would go against the European legislator’s aim to concede a second chance to the trader,26 if the latter were required to supply the content literally immediately. Secondly, it must be noted that Recital 61 has emerged from an explanatory note along the compromise version in the legal procedure where it is formulated – much more carefully – that ‘given the nature of digital content “without undue delay” in many circumstances could mean “immediately”’27. Thirdly, and most important, a restrictive interpretation is also supported by a comparison with the event of a lack of conformity: in case of a failure to supply the trader is, in most cases, supposed to supply the digital content or service immediately according to Recital 61. In the event of a lack of conformity, however, Recital 64 states, most surprisingly, that due to the diversity of digital content and services it is not appropriate to set fixed deadlines and that the digital content or service shall only be brought into conformity ‘within a reasonable time’. Such a difference is not convincing at all. First, it is hard to see why the diversity of the digital content implicates on the one hand that it is not appropriate to set fixed deadlines for the conformity but that the trader on the other hand should be obliged to supply the content or service immediately in case of a failure to supply. This holds especially true for the case in which the trader can simply replace the digital content. There is no reason why the replacement should take longer than the supply. And second, such a difference would encourage the trader to provide digital content that lacks conformity which may be illustrated by the following example: if the trader realises that he might not be able to supply on a due date, it would be advantageous for the trader to supply digital content which is completely unusable. With the supply of unusable content there would be no longer a failure to supply but instead ‘only’ a lack of Bach, 1709. See also Staudenmayer, 2500; Zöchling-Jud, 134 as to Art. 11 of the compromise version, see Council of the European Union (‘9901/17 + ADD1’). 26 Above → mn. 3. 27 Council of the European Union (‘9901/17 + ADD 1’), 26, n 54. 24

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conformity and the trader would have gained time because now he would only have to bring the content into conformity ‘within a reasonable time’ instead of ‘immediately’. It is, therefore, all in all, appropriate to harmonise the interpretation of the term ‘undue delay’ in Art. 13 with the interpretation of the term ‘within a reasonable time’ in Art. 14. Both in the event of a failure to supply and in the event of a lack of conformity it must be considered that digital content or a digital service is supplied in digital form so that the trader must, in many cases, supply within a short time frame, albeit not literally immediately. c) Agreement on an additional time. According to Art. 13(1) it is also possible for the parties to expressly agree on an additional period of time for the trader to supply. In this case, the trader does not need to supply the digital content or service without undue delay but only within the agreed period of time. Whereas such an agreement does not require any particular form and can also be a verbal agreement, strict criteria must be applied with respect to an express agreement since such an agreement means that the consumer actually waives his right to terminate the contract if the digital content or service is not supplied without undue delay, which in many cases means (almost) immediately.28 First, there must be a mutual agreement so that it is not sufficient that the trader unilaterally announces that he will supply the content or service within an additional period. Second, the parties must agree expressly which means that the agreement cannot be implied. It is not completely clear from the wording of the provision, whether the agreement must indicate a time period with a specific deadline, e.g. ‘three days’, ‘until tomorrow 6 p.m.’, ‘within the next five hours’, etc., or if it is also possible that the parties agree on a timeframe which is vaguer, e.g. ‘as soon as possible’. Even though the trader will probably be interested in agreeing upon a vaguer timeframe, there are good reasons to assume that a specific time period is necessary. First, the term ‘time period’ already implies that there is a starting time and an end time. Second, a vague timeframe then may require a separate interpretation of that vague term in case of a breach of contract which may work to the detriment of the consumer: if, for instance, the parties agreed on ‘supply as soon as possible’ and the trader fails to supply within two days thereafter, a termination by the consumer would be invalid if a court ruled that the agreement was to be interpreted in a way that the trader was to be granted at least three more days. Third, it must be borne in mind that an agreement on an additional time period is an improvement of the trader’s legal position: due to such an agreement, the trader gains additional time for the supply, whereas he would otherwise be obliged to supply (almost) immediately29 lest the consumer can terminate the contract; the trader may therefore be required to commit himself to a specific time period. Fourth, only in case of a specific time period can the consumer evaluate if it is worthwhile waiting or if he is better off with insisting on an (almost) immediate supply. Thus, a specific deadline is necessary to meet the requirement of an expressly agreed additional period of time which means that if the parties only agree on a vague time frame, the consumer may still terminate the contract if the trader fails to supply without undue delay. While the agreement does not need to make a reference to the Directive or to the national law implementing the Directive, the question rises whether the agreement needs to contain some sort of reference to the consumer’s right to terminate the contract (almost) immediately in case of a (second) failure to supply. In other words, if such an agreement is nothing more than a consumer’s waiver, does there need to be any refer28 29

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ence to the waiver? In favour of such a requirement it could be said that many consumers will lack the knowledge about the details of their right to terminate the contract so that a skilled trader will always try to talk the consumer into an express agreement in order to undermine the consumer’s right to terminate the contract (almost) immediately. Against such a requirement it could not be argued that an agreement on an additional time period is only supposed to facilitate the determination of the time period; if the consumer may, in most cases, demand (almost) immediate supply without an agreement, an additional time period is not just a facilitation but a deterioration of his legal position. For this reason, the wording ‘agree on an additional period of time’ also seems to indicate the necessity for a reference: if the parties must agree that the trader gets additional time, it is implied that the agreement must refer to the fact that the trader’s legal situation is improved by the agreement. If one takes the view that the Directive does not pursue the aim to set out rules for the 29 validity of the agreement of an additional time period but that this question is excluded from the scope of the Directive by Art. 3(10).30 It is important to bear in mind that the agreement’s effectiveness would be determined by the general provisions of the Member States. For instance, it could be possible that according to the provisions of a Member State the consumer is entitled to withdraw from the agreement if he was not aware of his entitlement to demand the (almost) immediate supply of the content or the service upon the conclusion of the agreement. Furthermore, it is possible that according to the provisions of a Member State the agreement is, in such a case, ineffective right from the beginning. As the agreement on an additional period of time is the exception to the rule that the 30 consumer can terminate the contract if the trader fails to supply (almost) immediately, the burden of proof for the existence and the content of such an agreement is on the trader.

3. Immediate termination According to Art. 13(2) the consumer is entitled, under certain conditions, to terminate the contract immediately without any previous request. a) Declaration by trader. According to Art. 13(2)(a) immediate termination is possible where the trader has declared that he will not supply the digital content or digital service or if this is equally clear from the circumstances. Art. 13(2)(a) acknowledges the need for an immediate termination of the contract where it would seem pointless for the consumer to call upon the trader to supply and where it therefore could not be expected from the consumer to afford the trader a second chance. The wording ‘will not supply’ means that the trader must declare or that it must be equally clear that he will definitely not supply the digital content or digital service. It is not sufficient that the trader only declares that he might possibly not be able to supply the content. However, Art. 13(2)(a) does not set out particular requirements for a specific intensity of the declaration made by the trader. It is therefore not necessary that the consumer realises that there is literally zero chance that the trader changes his mind. A statement by the trader such as ‘We will not supply the digital content no matter what happens’ is therefore not necessary. It is sufficient that the trader simply refuses the supply. For instance, a statement such as ‘We are sorry, but we are no longer able to deliver the digital content’ is enough because it is a refusal without prejudice. Furthermore, it is necessary that the trader declares or that is equally clear that he will ultimately not supply the digital content or service. Therefore, it does not suffice if 30

See also Recital 12.

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the trader only declares that he will not supply the digital content or service in good time. This finding is supported by a comparison with Art. 13(2)(b). If it is, according to Art. 13(2)(b), necessary that first a specific time for the supply is essential for the customer and that second the trader fails to supply the digital content or service, these requirements would be circumvented if the consumer were allowed to terminate the contract even though a specific time is not even essential for him and even though the trader has not yet failed to supply. b) Time is of the essence. According to Art. 13(2)(b) the consumer may terminate the contract immediately if the consumer and the trader have agreed that a specific time for the supply is essential for the consumer or where it is clear from the circumstances at the conclusion of the contract, and if the trader fails to supply the digital content or digital service by or at that time. In seeming contradiction to this wording, Recital 61 mentions neither an agreement nor that the importance of a specific time for the supply must be clear from the circumstances, but instead states that the consumer should already be entitled to immediately terminate the contract ‘where a specific time for the supply is essential for the consumer’. However, besides the fact that Art. 13 as a legal regulation prevails over a conflicting Recital, it can be assumed that the wording in Recital 61 does not intend to contradict Art. 13(2)(b) in the first place, but that the misleading formulation of Recital 61 only intends to reiterate the purpose of Art. 13(2)(b) without naming the respective requirements. The term ‘specific time’ is not identical with a point in time by which the trader must supply. It is important to note that the formulation in Art. 13(2)(b) does not read ‘by that time’, but rather ‘by or at that time’. This basically means that not only a timeframe can be essential for the consumer but also a specific time so that immediate termination is not only possible if supply is delayed but also if the trader supplies the owed content or service too soon.31 The consumer and the trader can firstly agree that a specific time for the supply is essential for the consumer. While such an agreement does not require any particular form, it is not sufficient that the parties agree on a specific time for the supply. Instead, it must become clear from the agreement itself that the consumer cannot be reasonably expected to call upon the trader to supply if the specific time for the supply is not met. This is, for example, the case if it is agreed that ‘supply must obligatorily be carried out on…’. If there is no express agreement, it is still possible that the specific time for the supply becomes clear from the circumstances. This is the case where the trader can, even in the absence of an agreement, not reasonably expect the consumer to afford him a second chance in the event of a premature or a delayed supply. It is necessary that the consumer obviously has an interest in a supply by or at the specific time, which goes further than the consumer’s general interest in a supply in good time.32 While it is necessary that the consumer’s interest in the digital content or service is obviously significantly lower in the event of a premature or a delayed supply, it is not a prerequisite that supply before or after the specific time is totally worthless for the consumer. 33 If, for instance, the trader is obliged to supply Christmas carols in digital form, the trader cannot reasonably expect to be afforded a second chance even if he fails to supply on Christmas despite the fact the carols could be of use to the consumer the following Christmas. c) Immediate termination where it is clear that the requirements of Art. 13 will be met. Art. 13 does not give an answer to an essential question: there will often be cases in See Riehm, 2066 as to the similar wording of Art. 18 CRD. See also the French language version: ‘indispensable’. 33 With regard to impossibility, below → mn. 51 et seq.

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which the requirements of Art. 13 are not met yet, but in which the consumer wants to declare or declares the termination of the contract nonetheless, because it is obvious that the requirements of Art. 13 will be met. First, it might be, that it is clear or that the parties have agreed that a specific time for 41 the supply is essential for the consumer and that it is further clear or the trader has declared that he will fail to supply by or at that time even though he has not yet failed to supply. In such a case, the requirements of Art. 13(2)(a) are not fulfilled because it is only clear that the trader will not supply the content in good time but not that he will ultimately not supply the content at all. And the requirements of Art. 13(2)(b) are not fulfilled either because the trader has not yet failed to supply. Second, it is conceivable that the trader does not declare that the digital content will ultimately not be supplied but that he announces that he will not supply the content in good time and that he will not be able to supply within a reasonable time after the due date either. In this case, the requirements of Art. 13(2)(a) are not met since the trader has not ultimately refused to deliver; and if the specific conditions as to the specific time for the supply of Art. 13 Art. 13(2)(b) are not met, an immediate termination cannot be based on Art. 13(2)(b) either. Both cases, however, have in common that it would be pointless for the consumer to 42 wait until the trader has not fulfilled his obligation on the due date and subsequently be required to call upon the trader to supply. In the first case, it is obvious that the requirements of Art. 13(2)(b) will be met on the due date and in the second case it is clear that the trader will not fulfil his obligation on the date of performance and it is further clear that it will not have any effect if the consumer afterwards calls upon the trader to supply, so that it is obvious that the requirements of Art. 13(1) will be fulfilled. Unlike Art. 72(1) CISG, and unlike Art. 14(4)(e), Art. 13 does not state explicitly how 43 to deal with these cases in which it is clear that the requirements for the termination of the contract will be met. Nevertheless, it seems appropriate to assume that the consumer shall, in such a case, have the right to terminate the contract. If the purpose of Art. 13(2) (a) is to prevent the consumer from having to call upon the trader if such a call is pointless and will have no effect, it is only consistent – in line with the situation covered by Art. 14(4)(e) – to grant the consumer the right to terminate the contract immediately if it is obvious that the requirements for termination will be met. The trader is not unreasonably disadvantaged either: If it is clear from the circumstances or even from a declaration by himself that he will not be able to fulfil the contract without the consumer having the right to terminate the contract, there is just no reason why the trader should be prevented from termination and it would go against the Directive’s aim to ensure a high level of consumer protection34, if the consumer would not be entitled to terminate the contract. Additionally, a failure to supply can lead to damages to the detriment of the consumer, with the result that not only the consumer has suffered damages but that the trader is also liable for that damage under the respective national rules.35 Finally, it is important to bear in mind that the question whether it was clear that the requirements of Art. 13 would be met will, at least for those applying the law, not rise ex ante but ex post in the vast majority of cases: The consumer will claim that he terminated the contract and it must be decided whether the termination by the consumer was effective or not. And the trader is adequately protected as the consumer bears the burden of proof for the fact that it was actually clear that the requirements of Art. 13 would be met. If,

34 35

Art. 1 and Recitals 2, 3, 11, 28, 36. See Schmidt-Ahrendts in: BeckOGK BGB, Art. 72 CISG, mn. 3 with respect to Art. 72 CISG.

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however, the customer can successfully prove it, it would be inappropriate to deem the termination ineffective.

4. Exercise of the right of termination 44

In the case where the consumer terminates the contract according to Art. 13(1) or (2), Art. 13(3) refers to Art. 15, according to which the consumer is to exercise the right to terminate the contract by means of a statement to the trader expressing the decision to terminate the contract. ‘By means of a statement’ indicates that the consumer must exercise termination means of a statement addressed to the trader. Apart from that, Art. 13(3) and Art. 15 do not set out any further requirements as to the consumer’s statement. First, the statement does not require any particular form36 so that it can be exercised e.g. by means of an e-mail, verbally, or even by conclusive conduct. Second, it is sufficient that the consumer expresses the decision to terminate the contract which only means that it must become clear for the trader that the consumer wants to refrain from the agreement. It is therefore not necessary that the consumer uses the word ‘termination’ or, still less, that he makes any reference to legal provisions. Statements such a ‘I don’t want to continue our agreement’ or ‘I want my money back’ will suffice.

IV. Legal consequences of termination 45

In the event of termination of the contract the detailed provisions of Arts 16–18 apply according to Art. 13(3).

D. Transposition issues I. Impossibility 1. Possible diversity of national provisions 46

Art. 13 does not contain any statement as to the question whether the trader’s obligation to supply arises in cases where the supply was objectively (i.e. for everyone) or subjectively (i.e. for the obligor) impossible at the time the contract was concluded (initial impossibility) and as to the question whether the obligation to supply continues to exist if the supply has become impossible afterwards (subsequent impossibility).37 Since the Directive does not require the Member States to ensure the consumer’s right to claim performance,38 the Member States may establish their own rules as to impossibility with almost no restriction. This view is not affected by Recital 14 which only states that the Member States should remain free to regulate the consequences of a failure to supply, where such failure is due to an impediment beyond the control of the trader, such as in the event of force majeure. Recital 14 is only of a declaratory nature and does not mean that Member States may only regulate the consequences of force majeure which is evidenced by the fact that Art. 3(10) gives the Member States the freedom to regulate the right to damages which includes obviously not only the consequences of force majeure. The fact that the Member States can establish their own rules as to impossibility is hardMetzger, 583. See Riehm/Abold, 89 as to the compromise version (Council of the European Union, ‘9901/17 + ADD 1’). 38 Above → mn. 9 et seq. 36

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ly compatible with the aim of full harmonisation which is illustrated by the amount of possible differences: The Member States can determine whether impossibility affects procedural or substantive law, they may determine whether impossibility is caused by the mere fact that supply is unreasonable for the trader, they may in this regard establish different limits as from which the trader may claim impossibility due to unreasonableness, they can decide whether impossibility affects the obligation ipso iure or if it is necessary that the trader expressly claims impossibility, they are free to decide in what way a temporary impossibility affects the parties’ rights, etc.

2. Termination without declaration by the consumer It is not completely clear how impossibility of supply affects the consumer’s right to terminate the contract, since Art. 13 does not, in contrast to Art. 14(4)(a), contain a specific rule. It appears necessary that the consumer does not have to call upon the trader to supply the digital content or service in case of impossibility as such a requirement would be nothing but pointless. Generally, this aim can be achieved by the application of Art. 13(2)(a): if the trader has either declared that supply is impossible or if the impossibility of the supply is clear from the circumstances, the consumer is entitled to terminate the contract immediately according to Art. 13(2). However, the question arises whether the consumer needs to declare termination in case of impossibility in the first place. Despite the fact that the Member States are generally free to establish national rules for impossibility,39 it could be questioned whether they are allowed to introduce a rule according to which there is no need for a declaration of termination in the event of impossibility. At least in the case of subsequent impossibility, where there has been a valid obligation in the beginning, one could get the idea that the conditions of Art. 13(3), Art. 15 would be circumvented by a rule that ‘terminates’ a contract without any exercise by the consumer and that therefore the effet utile would be violated. Nonetheless, it seems convincing to assume that such a national rule may be established. The situation Art. 13 deals with and the situation of impossibility are – as to the question whether there must be a declaration of termination – fundamentally different: if the trader fails to supply the digital content or service despite the possibility to supply, a declaration of termination by the consumer has a constitutive effect as the consumer ‘waives’ his entitlement to claim performance. This does not hold true for the case of impossibility: if it is impossible for the trader to supply anyhow, there is no claim for performance that could be subject to a ‘waiver’; it would therefore be pointless to require the consumer to declare termination. This conclusion is not affected by the fact that in case of a lack of conformity where it is impossible for the consumer to bring the digital content or service into conformity, the consumer must, according to Art. 14(4)(a), (6), Art. 15, exercise the right to terminate by means of a statement in order to terminate the contract; the decisive difference lies in the fact that in case of a lack of conformity the consumer has the choice to either terminate the contract or to demand a proportionate reduction of the price; this means, that unlike in the case of a failure to supply, the consumer must make a choice which is why a declaration of termination has a constitutive effect. Thus, due to the fundamental difference between Art. 13 and the situation of impossibility, it is up to the Member States to decide whether termination must be declared in the event of impossibility. If one takes the view that the Member States are not allowed to relieve the consumer from the necessity to declare termination in the case of impossibility, it is unclear 39

Above → mn. 46.

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whether a termination of the contract declared by the consumer is valid according to Art. 13(2)(a), if supply has been impossible but if the impossibility was not apparent for the contractual parties. If, for example, the trader is obliged to provide a certain software according to the contract and the consumer declares the immediate termination of the contract, the question arises if this termination is valid if it turns out afterwards that the software manufacturer had stopped to produce and deliver this software in the meantime so that supply would have been impossible for the trader anyway. In this case, supply was actually impossible, but the parties were unaware thereof so that it is questionable whether it was ‘clear from the circumstances’ that the trader would not supply the digital content within the sense of Art. 13(2)(a). In other words, the question is whether ‘clear from the circumstances’ means that it is clear from the objective circumstances or if it means that it has become apparent to the parties. It seems convincing to assume the former. Art. 13(2)(a) intends to facilitate termination for the consumer where it would be pointless to call upon the trader to supply. In the event of impossibility there is no longer a legitimate interest of the trader for a second chance to supply regardless whether the impossibility has become apparent or not; his only possible interest is to obtain clarification whether or not the consumer wants termination and due to the declaration by the consumer such clarification has been made.

3. Impossibility in case of delayed supply The finding that the Member States are allowed to establish rules according to which the consumer does not need to declare termination in case of impossibility,40 raises the further question whether the Member States are, in addition, completely free to decide when the trader’s obligation is to be deemed impossible. This becomes particularly relevant in cases where a specific time for the supply is not only essential but where it can be further assumed that a supply after the due date would be worthless for the consumer, e.g. where the trader is obliged to provide access to live streaming during a football match. In such cases, it can be justifiable to deem supply impossible after the end of the match. If, however, according to the national provisions of a Member State, the consumer does not need to declare termination in case of impossibility and if, furthermore, supply is deemed impossible under these provisions, these two findings combined lead to a result that seems to contradict Art. 13: according to Art. 13(2)(b) the consumer could undoubtedly terminate the contract immediately, but he would have to exercise his right by means of a statement according to Arts 13(3), 15. 52 All the same, the aforementioned combination of national provisions seems, at least in general, acceptable. There would only be a violation of the effet utile if it were apparent from Art. 13 that a termination is only possible by means of a statement if the conditions of Art. 13(2)(b) are fulfilled. This is not the case though. Art. 13(2)(b) aims to facilitate termination for the consumer by affording him the right to terminate the contract without a previous request and does so in all cases in which a specific time of supply is only essential for the consumer. This does not indicate that there could not be any cases of delayed supply in which a declaration of termination is dispensable; Art. 13 is therefore not deprived of its effectiveness for this reason only. However, a national provision does become problematic if the national law deems supply impossible in (almost) all cases in which the conditions of Art. 13 are met, because if so, Art. 13 would be of no use and therefore lose its effectiveness. For instance, a national provision according to which supply shall be impossible if the conditions laid down in Art. 13(2)(b) are met with the effect that the declaration of termination is dispensable leads to the result that there is 51

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Above → mn. 47 et seq.

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no longer any scope of application for Art. 13(2)(b) or, more precisely, that it makes no difference whether Art. 13(2)(b) would be implemented by the respective national law since a provision implementing Art. 13(2)(b) would have no scope of application.

4. Legal consequences of impossibility It is also uncertain whether the Member States are completely free to regulate the le- 53 gal consequences of impossibility or if they rather have to implement Arts 16–18. Generally, Art. 3(10) states that the Directive does not affect the freedom of Member States to regulate aspects of the termination of the contract in so far as they are not regulated in the Directive. Thus, the Member States are not obliged to implement Arts 16–18 for every kind of unravelling of the contract. It is therefore, in general, possible for the Member States to establish their own rules for the legal consequences of impossibility since impossibility is not regulated in the Directive. However, it seems appropriate to assume that the Member States are to implement Arts 16–18 in cases where the conditions of Art. 13 are met. This holds true in the aforementioned example:41 if, under national law, supply is deemed impossible in case of a delayed supply where a specific time is essential for the consumer, the requirements set out in Art. 13(2)(b) are met at the same time. And it seems appropriate to assume that the Directive intends to ensure the application of Arts16–18 in the case regulated by Art. 13(2)(b).

II. Right to withhold performance In contrast to the Sale of Goods Directive42, the Digital Content Directive does not 54 contain any rule as to the question whether the consumer has a right to withhold performance in the event of a failure to supply by the trader.43 This is – beside the exclusion of the right to damages44 and impossibility45 – another factor which clearly shows that the aim of a full harmonisation, that consumers and traders can actually rely on, will hardly be reached. Since the legal consequence of a right to withhold performance is not identical with the termination of a contract, a right to withhold performance will not circumvent the conditions laid down in Art. 13. This means that Member States are free to design the consumer’s right to withhold performance under national law with the effect that there might be different approaches: Member States can decide whether to establish a right to withhold performance in the first place as well as that they may introduce such a right in a fragmentary way, e.g. only in the event of a failure to supply, only in case of a lack of conformity, only where the supply over a period of time is interrupted46, etc. Likewise, it is up to the Member States to determine all the conditions and modalities for the consumer to exercise the right.

III. Right to reject the supplied content or service The Directive further lacks explicit regulation as to the consumer’s right to reject the 55 supplied content or service. Therefore, the question rises whether the consumer is entiAbove → mn. 51. See Art. 13(6) and Recital 18 SGD. 43 See Recital 15 and Spindler/Sein, 491. 44 Below → mn. 59 et seq. 45 Above → mn. 46 et seq. 46 In favour of a right to withhold performance in this case Beale, 12. 41

42

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tled to reject the digital content or digital service which the trader has made accessible to the consumer by claiming that the content or service suffers from a lack of conformity. Such a right would not be identical to the right to withhold performance. In contrast to the right to withhold performance, a right to reject the supplied content or service would also apply if the consumer had already fulfilled his contractual obligation. Additionally, and even more important, a right to reject the supplied content or service would have a direct impact on the distinction between Art. 13 and Art. 14. If the trader supplies a digital content which is not in conformity and if the consumer were not entitled to reject this content, Art. 14 would apply automatically since the trader would have supplied at least some content, which means that there would be no longer a failure to supply within the sense of Art. 13.47 Conversely, if the trader were afforded a right to reject, he could just refuse ‘acceptance’ of the supplied good with the effect that there would be no supply at all and that Art. 13 would be applicable. 56 However, even though the Directive does not mention a right to reject, it becomes clear from Art. 5(2) that a consumer’s right to reject is apparently not intended. Art. 5(2) explicitly states that the trader shall have complied with the obligation to supply when the requirements of Art. 5(2)(a) or (b) are met; and neither of these provisions require any ‘act of acceptance’ by the consumer. For instance, if the trader makes the digital content accessible to the consumer, he has complied with his obligation according to Art. 5(2)(a) without any further actions by the consumer being necessary. And the wording ‘shall have complied with the obligation to supply’ clearly implicates that in this case there shall be no ‘failure to supply’ within the sense of Art. 13, but rather a lack of conformity that is dealt with by Art. 14. It could be argued that Art. 5(2) refers to ‘the digital content’ which could be interpreted as ‘the owed digital content’ so that the trader would not have supplied ‘the digital content’ in case of a lack of conformity. Such a view is not convincing though: Art. 13(1) also uses the wording ‘has failed to supply the digital content’ and there is only a failure to supply where there is no supply at all, not in a case of a mere lack of conformity.48

IV. Differences between Art. 13 DCD and Art. 18 CRD Even though the Council of the European Union had emphasised the importance of a flawless interaction with the Consumer Rights Directive,49 transposition issues will occur due to the differences between Art. 13 DCD and Art. 18 CRD: these differences will lead to a fragmented legal situation with regard to sales contracts including sales contracts for digital content which is supplied on a tangible medium50 (governed by the Consumer Rights Directive) on the one hand and contracts on digital content and services (governed by this Directive) on the other hand. 58 First, Art. 18(2) 1st subpara. CRD presents significantly higher requirements as to the consumer’s request to deliver. While under Art. 13(1) it is sufficient that the consumer simply calls upon the trader to supply,51 Art. 18(2) 1 st subpara. CRD requires that the consumer calls upon the trader to undertake the delivery within an additional period of time. Second, according to Art. 13(1) the trader is, upon the consumer’s call to supply, 57

Above → mn. 14 et seq. Above → mn. 14 et seq. 49 Council of the European Union (‘9768/16’), 6: ‘Furthermore, with a view to overall coherence in EU consumer legislation it is of pivotal importance that the new legislation on digital content links well with Directive 2011/83/EU on consumer rights (“Consumer Rights Directive” – “CRD”).’. 50 Above → mn. 13. 51 Above → mn. 20. 47

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required to supply without undue delay lest the consumer can terminate the contract, whereas according to Art. 18(2) 1st subpara. CRD the trader is to deliver within the additional period of time appropriate to the circumstances set by the consumer. Third, an immediate termination is possible under Art. 13(2)(a) not only where the trader has declared that he will not supply but also where it is equally clear from the circumstances, while under Art. 18(2) 2 nd subpara. CRD it is necessary that the trader refuses to deliver and it will not suffice that it is clear from the circumstances that the trader will not supply. Fourth, according to Art. 13(2)(b) an immediate termination is only possible if a specific time for the supply is essential to the consumer and if this is either agreed upon by the parties or clear from the circumstances surrounding the conclusion of the contract; by contrast, according to Art. 18(2) 2 nd subpara. CRD an immediate termination is also possible if the consumer has unilaterally informed the trader about the essentiality prior to the conclusion of the contract.

V. Liability for damages and other remedies 1. Liability for damages According to Art. 3(10) the right to damages is expressly excluded from the scope of the Directive. This is further supported by Recital 73 according to which the Directive should be without prejudice to national rules on the compensation of consumers for harm resulting from infringement of those rules. However, Art. 11(1) states that the trader shall be liable for any failure to supply and Recital 73 specifies that ‘the principle of the liability of the trader for damages is an essential element of contracts for the supply of digital content or digital services’ and that ‘therefore, the consumer should be entitled to claim compensation for detriment caused by […] a failure to supply the digital content or digital service.’ It is implied therefore, that, even though the Directive does not lay down any specifications as to the right to damages, the Member States are generally obliged to implement rules according to which the consumer is entitled to claim damages. This leads to the question of the extent to which a consumer’s claim for damages under national law is (still) compatible with Art. 13.52 This does not concern the case where the failure to supply has caused additional damages, e.g. damages caused by the failure to supply an antivirus software; with regard to such damages the Member States are free to ensure that the trader is liable. The right to damages can be problematic though if the legal consequence is identical to the legal consequence of Arts 13, 15–18, hence if the consumer is e.g. entitled to demand reimbursement for all sums paid under the contract. For instance, if the right to damages of a Member State allows the consumer to demand reimbursement without any prior request, there is a danger that the conditions of Art. 13 could be circumvented; even though the Directive leaves the right to damages to the Member States, its effet utile must be preserved. However, the question whether there is actually a circumvention of the conditions for the termination laid down in Art. 13 strongly depends on the specific rules of the respective right to damages. First, one has to bear in mind that the consumer’s right to damages will often be a fault-based remedy, so that the conditions for the right to demand reimbursement would not be identical to the conditions of Art. 13. Second, it is 52 See Zoll, 251 et seq. who discusses the question whether the remedies set out in the Commission’s Proposal COM(2015) 634 final are exhaustive.

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important to look carefully at the respective right to damages and to examine whether it actually grants the right to reimbursement. For instance, if the consumer is entitled to claim damages in lieu of performance and if this means that he may demand compensation for the ultimate failure to supply, this legal consequence is not identical with Arts 13, 15–18. Since even though it is possible that, in the particular case, the damage amounts to an identical number as the sums paid under the contract, this is only the case if the digital content or service owed by the trader has the exact same value as the agreed price. If, however, the value of the owed digital content or service differs from the price, the amount of damage also differs from the sums paid under the contract. In any case, it should be noted that the aim of such a right to claim damages in lieu of performance is not identical with the aim to get reimbursed so that it seems appropriate to assume that Art. 13 is not incorrectly circumvented.

2. Other remedies The question of compatibility also arises with respect to other remedies under national law whose aim is to get the consumer reimbursed. This holds especially true for the consumer’s right to rescission for reason of mistake, of lack of consent, of change of circumstances or for reason of deception by the trader: on the one hand, Art. 3(10) excludes the general contract law from the scope of the Directive53, on the other hand it must be ensured that its effet utile is preserved. However, the same applies as with the right to damages: even though all of these remedies might lead to the legal consequence that the consumer must be reimbursed, hence a legal consequence which is identical to Arts 13, 15–18, these remedies will usually have a (protective) purpose that differs from the purpose of Art. 13 and will therefore have preconditions that are significantly different from Art. 13. Thus, while it is generally possible that a remedy under national law incorrectly circumvents Art. 13, this is only the case if the respective remedy shows identical or at least similar preconditions for the right to reimbursement. 64 It should also be clarified that the Directive in general and Art. 13 in particular do not affect the right of withdrawal resulting from Art. 9(1) CRD. According to Art. 9(1) CRD the consumer has a period of 14 days to withdraw from a distance or off-premises contract with the trader; as to digital content this right of withdrawal is, according to Art. 16(m) CRD, only excluded if the digital content is not supplied on a tangible medium and if the performance has begun with the consumer’s prior express consent and his acknowledgment that he thereby loses his right of withdrawal. 54 Thus, the consumer has, in most cases, a right of withdrawal after the conclusion of a contract for digital content or services according to the Consumer Rights Directive. However, Art. 3(2) CRD states that if any provision of the Consumer Rights Directive conflicts with a provision of another Union act governing specific sectors, the provision of that other Union act shall prevail and shall apply to those specific sectors. And, when reading Recital 20, one might get the impression that the provisions of the Consumer Rights Directive should only apply to digital content which is supplied on a tangible medium. Recital 20 states that ‘the provisions of [the Consumer Rights] Directive on, for example, the right of withdrawal and the nature of the contract under which those goods are supplied, should also continue to apply to such tangible media and the digital content supplied on it.” 65 The wording of Recital 20 is just misleading though. It must be noted that Recital 20 in general deals with the application of the Consumer Rights Directive on digital content supplied on tangible media. It can be assumed that the European legislator wanted to 63

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clarify in this context that also the right of withdrawal should be applicable. It would be far from convincing, however, to conclude per argumentum e contrario that the right of withdrawal should only be applicable to tangible media. There is just no compelling reason to justify an application only to tangible media. It can further be assumed that the Directive would contain a clear statement if the European legislator had actually intended to abolish the right of withdrawal as to digital content and service. All in all, it therefore seems appropriate to assume that the right of withdrawal must be considered a point of general contract law which is expressly excluded in Art. 3(10) from the scope of the Directive so that the provisions of the Consumer Rights Directive as to the right of withdrawal fully apply.

Article 14 Remedies for lack of conformity 1. In the case of a lack of conformity, the consumer shall be entitled to have the digital content or digital service brought into conformity, to receive a proportionate reduction in the price, or to terminate the contract, under the conditions set out in this Article. 2. The consumer shall be entitled to have the digital content or digital service brought into conformity, unless this would be impossible or would impose costs on the trader that would be disproportionate, taking into account all the circumstances of the case including: (a) the value the digital content or digital service would have if there were no lack of conformity; and (b) the significance of the lack of conformity. 3. The trader shall bring the digital content or digital service into conformity pursuant to paragraph 2 within a reasonable time from the time the trader has been informed by the consumer about the lack of conformity, free of charge and without any significant inconvenience to the consumer, taking account of the nature of the digital content or digital service and the purpose for which the consumer required the digital content or digital service. 4. The consumer shall be entitled to either a proportionate reduction of the price in accordance with paragraph 5 where the digital content or digital service is supplied in exchange for a payment of a price, or the termination of the contract in accordance with paragraph 6, in any of the following cases: (a) the remedy to bring the digital content or digital service into conformity is impossible or disproportionate in accordance with paragraph 2; (b) the trader has not brought the digital content or digital service into conformity in accordance with paragraph 3; (c) a lack of conformity appears despite the trader's attempt to bring the digital content or digital service into conformity; (d) the lack of conformity is of such a serious nature as to justify an immediate price reduction or termination of the contract; or (e) the trader has declared, or it is clear from the circumstances, that the trader will not bring the digital content or digital service into conformity within a reasonable time, or without significant inconvenience for the consumer. 5. The reduction in price shall be proportionate to the decrease in the value of the digital content or digital service which was supplied to the consumer compared

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to the value that the digital content or digital service would have if it were in conformity. Where the contract stipulates that the digital content or digital service shall be supplied over a period of time in exchange for the payment of a price, the reduction in price shall apply to the period of time during which the digital content or digital service was not in conformity. 6. Where the digital content or digital service is supplied in exchange for the payment of a price, the consumer shall be entitled to terminate the contract only if the lack of conformity is not minor. The burden of proof with regard to whether the lack of conformity is minor shall be on the trader. Bibliography: Bach, ‘Neue Richtlinien zum Verbrauchsgüterkauf und zu Verbraucherverträgen über digitale Inhalte’ (2019) 24 NJW 1705–1711; Behar-Touchais, ‘Remedies in the Proposed Digital Content Directive: An Overview’ in: Schulze/Staudenmayer/Lohsse (eds), Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Nomos 2017), p. 129–140; Carvalho, ‘Sale of Goods and Supply of Digital Content and Digital Services – Overview of Directives 2019/770 and 2019/771’ (2019) 5 EuCML 194–201; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; Council of the European Union, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content (First reading) – Policy debate’ 9768/16; Council of the European Union, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content (First reading) – General approach’; Council of the European Union, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content (First reading) – General approach’ 9901/17 + ADD1; Fauvarque-Cosson, ‘The new proposal for harmonised rules for certain aspects concerning contracts for the supply of digital content (termination, modification of the digital content and right to terminate long term contracts) (2016); Gsell, ‘Kaufrechtsrichtlinie und Schuldrechtsmodernisierung’ (2001) 2 JZ 65–75; Gsell, ‘Rechtsbehelfe bei Vertragswidrigkeit in den Richtlinienvorschlägen zum Fernabsatz von Waren und zur Bereitstellung digitaler Inhalte’ in: Artz/Gsell (eds), Verbrauchervertragsrecht und digitaler Binnenmarkt (Mohr Siebeck 2018), p. 143–175; Gsell, ‘Europäischer Richtlinien-Entwurf für vollharmonisierte Mängelrechte beim Verbraucherkauf – Da capo bis zum Happy End?’ (2018) 3 ZEuP 501–506; Höpfner/Fallmann, Die Reform des kaufrechtlichen Gewährleistungsrechts 2018 (2017) 52 NJW 3745– 3751; Koch, ‘Rechtsbehelfe des Verbrauchers bei Verträgen über digitale Inhalte’ in: Wendehorst/ZöchlingJud (eds), Ein neues Vertragsrecht für den digitalen Binnenmarkt? – Zu den Richtlinienvorschlägen der Europäischen Kommission vom Dezember 2015 (Manz 2016), p. 131–157; Koch, ‘Das System der Rechtsbehelfe’ in: Stabentheiner/Wendehorst/Zöchling-Jud (eds), Das neue europäische Gewährleistungsrecht – Zu den Richtlinien (EU) 2019/771 über den Warenkauf sowie (EU) 2019/770 über digitale Inhalte und digitale Dienstleistungen (Manz 2019), p. 157–196; Ostendorf, ‘Geplanter neuer Rechtsrahmen für OnlineWarenhandel und Bereitstellung digitaler Inhalte im Europäischen Binnenmarkt’ (2016) ZRP 69–72; Säcker et al. (eds), Münchener Kommentar zum Bürgerlichen Gesetzbuch, Band 4: Schuldrecht – Besonderer Teil I (§§ 433–534, Finanzierungsleasing, CISG) (‘MüKo BGB’) (8th edn, C.H. Beck 2019); Soergel, Bürgerliches Gesetzbuch (13th edn, Kohlhammer 2010); Spindler, ‘Verträge über digitale Inhalte – Haftung, Gewährleistung und Portabilität (2016) 4 MMR 219–224; Spindler/Sein, ‘Die Richtlinie über Verträge über digitale Inhalte‘ (2019) 8 MMR 488–493; Zoll, The Remedies in the Proposals of the Online Sales Directive and the Directive on the Supply of Digital Content (2016) 6 EuCML 250–254.

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A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Modifications in relation to the Commission’s Proposal . . . . . . . . . . . . . . . . . . . . . . II. Interaction with other consumer protection directives . . . . . . . . . . . . . . . . . . . . . . . 1. Consumer Rights Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Sale of Goods Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 5 8 8 9

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. General requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Lack of conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Time limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Entitlement to have the digital content or digital service brought into conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12 12 12 16

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Remedies for lack of conformity 1. Modalities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Limits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Price reduction and termination of the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Special requirements for the second level remedies . . . . . . . . . . . . . . . . . . . . . . . 2. Price reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20 30 43 44 59 66

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Scope of full harmonisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Frustrated expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Place of remedying the conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Liability for damage beyond the scope of the Directive . . . . . . . . . . . . . . . . . . . . . . . V. Right to withhold performance beyond the scope of the Directive . . . . . . . . . . .

76 76 77 78 79 85

A. Function Art. 14 is one of the key provisions of the Digital Content Directive. It sets out the 1 remedies available to the consumer in the event of a lack of conformity of the respective digital content or digital service for which the trader is liable under the Directive. Art. 14 thus harmonises the legal consequences of non-conforming performance and thereby fulfils the purpose as stipulated in Art. 1 2nd indent, namely to establish common rules on ‘remedies in the event of a lack of […] conformity […] and the modalities for the exercise of those remedies’. Accordingly, Art. 14 presupposes a lack of conformity as defined in Arts 7, 8 and 9 that falls within the time limits as laid down in Art. 11(2) and (3). By way of contrast, Art. 14 is not concerned with the situation in which the digital content is not supplied at all;1such a failure to supply the promised digital content or digital service is governed by Art. 13.2 The distinction shows that, unlike the CISG3 and the CESL4, the Digital Content Directive does not follow a uniform principle of ‘breach of contract’ or ‘non-performance’.5 Art. 14 provides three remedies: (i) bringing the digital content or digital service into 2 conformity, (ii) a proportionate reduction of the price and (iii) termination of the contract. In accordance with the Consumer Sales Directive6 as well as the new Sale of Goods 3 Directive7, the Digital Content Directive is also committed to the principle that in the event of a lack of conformity priority should be given to proper performance of the contract through remedying the non-conforming performance. 8 Accordingly, as a general rule under Art. 14 the consumer, in a first stage, is limited to requiring the trader to bring the digital content or digital service into conformity; price reduction or termination of the contract are only possible under restrictive conditions such as, in particular, the trader’s failure to remedy the lack of conformity within a reasonable time or an im1 But see with regard to difficulties in delimitation and deviations in quantity in particular which are also covered by the notion of al lack of conformity in the sense of the Directive below → mn. 12 et seq. 2 See with regard to the failure to supply → Art. 13 DCD. 3 See Art. 25 CISG. 4 See Art. 87 CESL. 5 See Koch (2016), p. 134 with regard to COM(2015) 634 final who considers this conceptual decision to be surprising. 6 See Art. 3(3) and (5) CSD. 7 See Art. 13(2)–(4) SGD. 8 See also Carvalho, 200; Koch (2019), at p. 162, who criticises the insufficiently clear articulation of this hierarchy in the text of the Directive; for doubts against the justification of such a hierarchy of remedies in what concerns contracts on digital content see Zoll, at 253, arguing that with regard to the specific nature of digital content an immediate termination of a contract on digital content is usually less burdensome for the trader than that of a contract on the sale of goods.

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possibility to do so.9 From the trader’s perspective, this hierarchy of remedies might be described as a general right to cure the lack of conformity and thus remain entitled to the payment of the agreed price. 4 In contrast to the Consumer Sales Directive,10 which followed the principle of minimum harmonisation and therefore did not prevent the Member States from granting the consumer an immediate right to price reduction or termination of the contract, the Digital Content Directive, just like the new Sale of Goods Directive11 is committed to the principle of full harmonisation, as stipulated in Art. 4.12

B. Context I. Modifications in relation to the Commission’s Proposal The main modifications of the content of the final version of Art. 14 when compared to the Commission’s Proposal13 are the following, each of which is dealt with in more detail in the relevant context: the Digital Content Directive no longer seeks to govern the compensation of damages, whereas a provision on the right to damages for ‘any economic damage to the digital environment of the consumer caused by a lack of conformity with the contract’ was contained in Art. 14 of the original Proposal.14 The extent of harmonisation under the Directive is therefore less than initially proposed by the Commission. 6 Furthermore, in comparison to the Proposal the final Directive provides for two additional rules under which the consumer is entitled to the transition from the primary remedy of a bringing into conformity of the defective digital content or digital service by the trader to the secondary level remedies of either a reduction in price or a termination of the contract. Art. 14(4)(c) thus grants such a right to a price reduction or a termination of the contract in situations in which a ‘lack of conformity appears despite the trader’s attempt to bring the digital content or digital service into conformity’15 and equally the second level remedies are available to the consumer under Art. 14(4)(d) if the lack of conformity is of a sufficiently serious nature to justify an immediate price reduction or termination of the contract16. The Directive thus restricts the trader’s right to cure the breach more strictly than originally proposed and correspondingly allows the consumer a more generous transition to the secondary remedies. 7 A further notable modification of the final text of the Directive is the change of the particular threshold for a termination of contracts: whereas the original proposal required a lack of conformity that ‘impairs functionality, interoperability and other main performance features of the digital content such as its accessibility, continuity and security’17 the Directive only excludes the right to termination in situations in which the lack of conformity is minor (Art. 14(6) 1st sentence). In addition, this limit to the consumer’s right to a termination only applies where the contract imposes an obligation on the con5

For a more profound review, below → mn. 43 et seq. See Art. 8(2) CSD. 11 Art. 4 SGD. 12 But see with regard to force majeure and hidden defects below → mn. 76. 13 COM(2015) 634 final. 14 Below → mn. 79 et seq. 15 Below → mn. 51 et seq. 16 Below → mn. 55 et seq. 17 See Art. 12(5) COM(2015) 634 final. 9

10

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sumer to pay a price in exchange for the supply of the respective digital content or digital service. The Directive thus allows termination of the contract in a more generous manner than originally proposed and thus ensures that the consumer is not denied any remedy in situations in which it is impossible or disproportionate to bring the respective digital content or digital service into conformity of the respective digital content or digital service and, at the same time, price reduction is not available due to the lack of payment of a price.18

II. Interaction with other consumer protection directives 1. Consumer Rights Directive As the Consumer Rights Directive is only concerned with the consumer-buyer’s 8 rights in the event of a failure to supply (Arts 17 and 18 CRD),19 whereas Art. 14 DCD exclusively deals with remedies in the case of a lack of conformity, there is only limited room for an overlap between Art. 14 and the Consumer Rights Directive. However, with regard to distance or off-premises contracts for digital content or digital services, Art. 9(1) CRD as a general rule grants the consumer a right to withdraw from the contract within a period of 14 days. Even though Art. 3(2) CRD stipulates that in the event of a conflict with a provision of another Union act governing specific sectors, the provision of that other Union act shall prevail, it must nonetheless be assumed that the Digital Content Directive, in particular Art. 14, does not affect the right of withdrawal under the Consumer Rights Directive. While there is indeed an overlap in that the consumer might use the right of withdrawal to respond to a lack of conformity, the exercise of the right of withdrawal is not subject to a non-conformity, indeed the consumer receives a right to withdraw only in specific circumstances where a strong information asymmetry to the consumer’s disadvantage is presumed. It cannot therefore be acknowledged that a real conflict exists between the right of withdrawal on the one hand and the stricter requirements for a termination of the contract under Art. 14 on the other. 20 This holds true irrespective of the somewhat ambiguous statement in Recital 20 21 which might insinuate that the right of withdrawal of a contract on digital content or digital services granted by Art. 9 CRD only applies in the event of tangible media and the digital content supplied on it.22

2. Sale of Goods Directive According to Recital 20, the Digital Content Directive and the new Sale of Goods Di- 9 rective should ‘complement each other’. Thus, digital content and digital services which are incorporated in or interconnected with goods and which are governed by the Sale of Goods Directive23 are excluded from the scope of the Digital Content Directive24. Therefore, in the event of a lack of conformity of such goods only the provisions of the new Sale of Goods Directive will apply.

For a review of this modification see below → mn. 67 et seq. → Art. 13 DCD, mn. 14 et seq. 20 See for a similar assessment → Art. 13 DCD, mn. 64 et seq. 21 See Recital 20 penultimate sentence and see also Art. 16(m) CRD. 22 Against such an interpretation of Recital 20 → Art. 13 DCD, mn. 64 et seq. 23 See Art. 3(3) SGD and Recital 15. 24 → Art. 3 DCD, mn. 73 et seq.; Recital 21. 18

19

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In contrast, the Digital Content Directive25 but not the new Sale of Goods Directive26 is generally applicable to tangible media which serve exclusively as a carrier of digital content and therefore only the Digital Content Directive provides for remedies in the event of a lack of conformity of digital content or digital services supplied on such tangible media. 11 If one single contract bundles elements of supply of digital content or digital services and elements of the provision of other services or goods together and it is concluded between the same parties, the Digital Content Directive only partially applies, that is to the elements of the contract that are related to the digital content or digital services. 27 Correspondingly, the Sale of Goods Directive will be applicable to those elements of such a bundle contract that are concerned with the sale of goods and fall into the scope of this Directive. Thus, in the event of such a bundle contract, the system of remedies for lack of conformity is divided and this holds even true with regard to the remedy of termination. In accordance with this assessment, Recital 33 clarifies that the effects of the termination of one element of the bundle contract on the other elements of that contract should be governed by national law. 10

C. Explanation I. General requirements 1. Lack of conformity Since the Directive clearly distinguishes between the remedy for the failure to supply on the one hand and the remedies for a lack of conformity on the other hand 28 and only the latter are regulated by Art. 14 (while the former falls under Art. 13 29), a precise distinction is necessary. Four situations are particularly problematic, the first two are wellknown from traditional sales law30: first, quantitative deviations, i.e. that too little or too much digital content or digital services are supplied. Secondly, extreme quality defects which make the supplied content or service appear as a total aliud (an alternative). Thirdly and with regard to digital content or digital service to be supplied over a period of time, there short- or long-term interruptions of supply might occur and, finally, the trader might fail to supply updates and features that had been agreed to in the contract. All four situations are basically covered by Art. 14.31 13 Actually, the quantity32 is explicitly mentioned in the Directive’s requirements for conformity and likewise are updates33 explicitly dealt with in this context. Thus, in the aforementioned cases it is clear from the very text of the Directive itself that they are to be considered as dealing with a lack of conformity and therefore will entail the remedies as stipulated in Art. 14. Recital 44 supports this interpretation with regard to updates 12

→ Art. 3 DCD, mn. 67 et seq.; Recital 20. See Art. 3(4)(a) SGD. 27 → Art. 3 DCD, mn. 115 et seq.; Recital 33. 28 Above → mn. 1. 29 It appears, by the way, preferable to understand Art. 13 to mean that it in fact governs only one single remedy, that is the right to terminate the contract, but not the right to a performance in natura, → Art. 13 DCD, mn. 9 et seq. with further references. 30 Thus, the lack of conformity within the meaning of Art. 35 CISG also extends to both deviations in quantity and the delivery of an aliud, see e.g. Gruber in: MüKo BGB, Art. 35 CISG, mn. 1. 31 See also and more in detail → Art. 13 mn. 15 et seq. 32 See Art. 7(a) and Art. 8(1)(b) as well as Recital 42. 33 See Art. 7(d) and Art. 8(2). 25 26

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and features that had been agreed to in the contract.34 A lack of supply of promised updates typically results in the respective digital content and digital services no longer being up-to-date and therefore can easily be interpreted as a lack of conformity. As to short-term interruptions of the supply of digital content or a digital service, it 14 becomes apparent from Recital 51 that they are also to be treated as instances of lack of conformity where those interruptions are more than negligible or are recurring. 35 However, it remains unclear whether and when such a short interruption will change into a longer interruption which can no longer be considered as a lack of conformity. In order to avoid legal uncertainty and in view of the fact that the Directive regulates the lack of conformity much more comprehensively than the failure to supply, it is preferable to treat even longer interruptions to supply as a lack of conformity and to apply Art. 14. Finally, with regard to the problem of aliud deliveries, there is simply no legally-se- 15 cure criterion for distinguishing the supply of defect digital content or digital service from the supply of an entirely different digital content or digital service that was not contracted for.36 Therefore, the supply of different digital content or digital service shall always be treated as lack of conformity.

2. Time limits As Art. 11(2) and (3) show, the trader is not liable under the Directive for any defec- 16 tive performance whatsoever, rather only for a lack of conformity that is covered by the time limits as laid down in these two paragraphs. Like other provisions of the Directive,37 Art. 11(2) and (3)38 distinguish between the situation of a contract providing for a single act of supply or a series of individual acts of supply39 on the one hand and contracts obliging the trader to continuously supply the respective digital content or service over a period of time40 on the other. With regard to the situation of a single act of supply or a series of individual acts of 17 supply, only a lack of conformity that exists at the time of supply will give rise to the trader’s liability under the Directive.41 Furthermore, Member States are free to stipulate liability periods in national law in order to limit the trader’s liability to such lacks of conformity that become apparent within a certain period of time after supply. However, such a liability period may not be less than two years from the time of supply.42 Finally the Directive does not prevent the Member States to establish limitation periods with regard to this situation.43 Yet, such a national limitation period must respect the two aforementioned time requirements, i.e. it must allow the consumer sufficient time to exercise the remedies offered by Art. 14 in the event of a lack of conformity that existed at the time of supply and became apparent within the liability period of at least two years

See also → Art. 13, mn. 17. See also → Art. 13, mn. 16. 36 See also → Art. 13, mn. 15. 37 See in particular Art. 12(2), (3) and (5) and furthermore Art. 8(2) and (4), Art. 14(5) 2 nd subpara., Art. 16(1) 2nd subpara., Art. 19(1). 38 See also Recital 55. 39 Art. 11(2), → Art. 11 DCD, mn. 15 et seq. 40 Art. 11(3), → Art. 11 DCD, mn. 29 et seq. 41 Art. 11(2) 1st subpara., → Art. 11 DCD, mn. 16 et seq. 42 Art. 11(2) 2nd subpara. and Recital 56. → Art. 11 DCD, mn. 20 et seq. 43 For the distinction between liability periods on the one hand and limitation periods on the other hand see already Art. 5(1) 1st and 2nd sentences CSD and CJEU, C-133/16 Ferenschild EU:C:2017:541. 34

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from the time of supply. Accordingly, a national limitation period must either be calculated longer than the liability period or commence later44.45 18 With regard to the situation of digital content or digital service to be supplied over a period of time, the trader is liable under the Directive for any lack of conformity occurring or becoming apparent within the contractual period of supply.46 Again, Member States may establish national limitation periods, though only to the extent that they do not prevent the consumer from exercising his remedies for any lack of conformity falling under the respective liability period.47 And again this means that national limitation periods must either be calculated longer than the respective liability period or commence later.48

II. Entitlement to have the digital content or digital service brought into conformity 19

According to Art. 14(2) and, as it were, on the first level of remedies, the consumer may (only) require that the digital content or digital service is brought into conformity. The Directive thus primarily grants a right to (conforming) performance or correspondingly – from the trader’s perspective – a right to cure the lack of conformity.

1. Modalities a) Trader’s right of selection. In contrast to the Sale of Goods Directive49 as well as to the Consumer Sales Directive50 (under which it is up to the consumer to decide whether he requires repair or replacement), Art. 14(2) does not specify either how the lack of conformity is to be remedied or entitles the consumer to choose between different possible ways of achieving conformity. Instead, the provision leaves it to the trader to select the appropriate way in order to remedy the lack of conformity. This is due to the possible variety of technical characteristics of digital content and digital services.51 Furthermore, with regard to typical ways of remedying a lack of conformity of digital content or digital services, it might not be easy to decide whether they would qualify as a repair or as a replacement. Such difficulties may occur, for example, where a software update is installed. 21 b) Reasonable time. According to Art. 14(3), the trader shall remedy the lack of conformity within a reasonable time commencing from the time he has been informed by the consumer of the lack of conformity. Parallel to the Consumer Sales Directive 52 as 20

44 Since the Member States are free to choose between these two options, Recital 58 is entirely right when emphasising that the Directive does not harmonise the starting point of national limitation periods. 45 See also Bach, 1708; but see also the dissenting view of Zöchling-Jud, 132, who considers it permissible for a national limitation period to end on the same day as the liability period. 46 Art. 11(3) 1st subpara. and Recital 57; this linking of the liability period with the contractual period of supply can be criticised to the extent that, in the case of long-term contracts it leads to a correspondingly long-term liability also for defects that fall within the initial period of the contract but are only discovered afterwards and perhaps only years later towards the end of the contract period, for further details see Gsell (‘Rechtsbehelfe bei Vertragswidrigkeit’), p. 169, n 111; → Art. 11 DCD, mn. 35. 47 Art. 11(3) 2nd subpara. → Art. 11 DCD, mn. 47 et seq. 48 See n 45. 49 See Art. 13(2) SGD. 50 See Art. 3(3) CSD. 51 See Recital 63; see also Zoll, 252. 52 See Art. 3(5) 2nd point CSD; Gsell (2001), 68; see also with regard to Art. 5(2) CSD, CJEU, C-497/13 Faber, EU:C:2015:357, para 62: ‘the obligation thereby imposed on the consumer cannot go beyond that of informing the seller that a lack of conformity exists’.

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well as to the Sale of Goods Directive53, Art. 14(3) does not impose an obligation on the consumer to set the trader a time limit for remedying the lack of conformity. All the consumer is supposed to do is to report the lack of conformity to the trader. 54 In addition, there is no form requirement for the notification of the lack of conformity. It is then for the trader to proceed with remedying the defect within a reasonable time. The European legislator deliberately avoids more precise time limits, since such dead- 22 lines would not give due consideration to the diversity of digital content and digital services.55 Accordingly, Art. 14(3) explicitly names the nature of the digital content or digital service as a factor to be considered, without however preventing other circumstances of the respective contract to be taken into account. As a general rule one can probably assume the following: the more complex and complicated it is to bringing the digital content or digital service into conformity, the more time the trader will usually have to be granted. Furthermore, a systematic interpretation of Art. 14(3) shows that the trader, in general, should be allowed more time to remedy a non-conforming performance than to make up for a failure to supply, since under Art. 13(1) 2nd sentence the trader is subject to the stricter limit of catching up on supply ‘without undue delay’, which means he is to supply ‘immediately’56. However, it will also have to be considered under Art. 14(3) that due to the fact that digital content and digital services are supplied in digital form, ‘the supply should not require, in the majority of situations, any additional time to make the digital content or digital service available to the consumer’57. Accordingly, the time afforded to the trader must be limited essentially to the time necessary to remedy the digital content or digital service in question, for example by developing a flawless software update. Art. 14(3) explicitly names the purpose for which the consumer required the respec- 23 tive digital content or digital service as a further factor to be considered in order to determine the reasonable period of time. Thus, particularly the consumer perspective is emphasised and since in the mass distribution of digital content and digital services the consumer hardly ever has the chance to inform the trader of the purpose he is pursuing with the respective contract, it must be assumed that the purpose is relevant irrespective of whether it has been notified to the trader or not. Furthermore, it should be noted that consumer interests are often short-lived and respond to short-term needs or are based on current trends. Therefore, a consumer does not normally have to tolerate a postponement of the period of faultless performance by several weeks or even months, especially not in the case of contracts that only run for a short period of time. According to the circumstances of the individual case, even a period of only a few hours may well be unacceptably long, depending on the intended purpose of use. If, for example, someone has ordered a certain digital content to enjoy it on his Saturday night off, a bringing into conformity which only takes place on Sunday may be unacceptable.58

See Art. 14(1)(b) SGD. See also Koch (2019), p. 164, according to whom notification of the defect via a chat function shall be sufficient. 55 See Recital 64. 56 See Recital 61 and for a detailed review → Art. 13 DCD, mn. 21 et seq. advocating a levelling of the interpretation of ‘without undue delay’ in Art. 13 and ‘within reasonable time’ in Art. 14(3), though. 57 See Recital 61 with regard to the failure to supply; see also → Art. 13 DCD, mn. 25. 58 See also Zoll, 253 who is in favour of a general right of the consumer to immediately terminate a contract for digital content which could be stopped by the trader‘s cure; and see Art. 13(2)(b) according to which in the event of a failure to supply the consumer is entitled to an immediate termination, where a specific time for the supply is essential for the consumer; see with regard to this rule → Art. 13 DCD, mn. 35 et seq. with an explanation of the ambiguous statement in Recital 61. 53 54

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According to Recital 64, the reasonable time requirement in Art. 14(3) ‘should not prevent the parties from agreeing on a specific time for bringing the digital content or digital service into conformity’. Even if this appears to be acceptable in principle, in view of the mandatory nature of the rights conferred by the Directive, as laid down in Art. 22(1) it should be required that such an agreement on a time limit to remedy the defect should at least meet the same requirements as stipulated in Art. 13(1) 2 nd sentence with regard to agreements on an additional period of time for performance. In particular, it is therefore appropriate to request that such an agreement be made ‘expressly’. 59 Furthermore, it seems reasonable to make a distinction both according to the time at which such an agreement is concluded and according to whether it is concluded on the basis of negotiated or non-negotiated contract terms. Thus, contract terms which are agreed in advance and grant the trader long periods for remedying a possible lack of conformity will have to be considered impermissible under Art. 22(1). Such agreements, which are only made after the consumer has reported the lack of conformity, may be problematic under Art. 3(1) Unfair Terms Directive in so far as they extend the period for a cure of the lack of conformity that is more detrimental to the consumer than what would apply in the absence of the agreement under Art. 14(3). 25 (c) Free of charge. In accordance with the Consumer Sales Directive60 as well as the Sale of Goods Directive,61 Art. 14(3) requires the trader to remedy the lack of conformity free of charge. Again, the nature of the digital content or digital service and the purpose for which the consumer required the respective digital content or digital service are relevant in this context. Art. 14(3) does not in itself specify what costs the consumer may not incur, but according to Recital 64 ‘in particular, the consumer should not incur any costs associated with the development of an update for the digital content or digital service’. As a general rule one can assume that the same measure applies as under the Consumer Sales Directive and Sale of Goods Directive. Under the Consumer Sales Directive the trader is required to bear all ‘the necessary costs incurred’62 to bring the goods into conformity, ‘particularly the cost of postage, labour and material’63. And according to the ECJ’s jurisprudence 64 issued with regard to the Consumer Sales Directive, the ‘free of charge’ requirement aims to protect the consumer from the risk of financial burdens which might dissuade him from asserting his rights and therefore means that ‘the seller cannot make any financial claim in connection with the performance of its obligation to bring the goods into conformity’.65 26 It is disputed that the costs to be borne by the trader also include costs for additional data usage incurred by the consumer because he has to re-download digital content after the trader has remedied the defect.66 However, bearing in mind that the ‘free of charge’ requirement serves to protect the consumer from the risk of financial burdens which might dissuade him from asserting his rights,67 the costs for additional data vol24

59 For a detailed review of the prerequisites of an agreed additional period under Art. 13 → Art. 13 DCD, mn. 26 et seq. 60 See Art. 3(2)–(4) CSD. 61 See Art. 14(1)(a) SGD. 62 See the definition in Art. 3(4) CSD. 63 See again Art. 3(4) CSD, with regard to which the ECJ has clarified that the adverb ‘particularly’ shows that the following list is not exhaustive, but illustrative, see CJEU, C-404/06 Quelle EU:C:2008:231, para. 31. 64 See CJEU, C-65/09 and C-52/18 Fülla EU:C:2011:396, para. 34; see also C-404/06 Quelle EU:C:2008:231, para. 34. 65 Concerning the problem of the extent of the consumer’s right to a cure of the defect in the event of frustrated expenditures see below → mn. 78. 66 See Koch (2019), p. 166 et seq. 67 See above, n 64.

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ume must also be borne by the trader. This is all the more so since, with regard to Art. 14(3), there is no Recital explaining that ‘the costs generated by the consumer’s own digital environment, for instance the costs of a network connection’ of the Internet connection shall not be covered by the ‘free of charge’ requirement. However, Recital 71 contains such a clarification with regard to the ‘free of charge’ requirement contained in Art. 16(4) in the context of the retrieval of digital content by the consumer after a termination of the contract.68 The ‘free of charge’ requirement also prevents the trader from making the consumer 27 pay for the advantage of receiving a replacement for the original non-conforming performance and thus for having the benefit of a new item, whereas in the (hypothetical) course of events where there is no lack of conformity, the object of performance would already have been used.69 However, as digital content and digital services by their nature are hardly ever subject to ‘wear and tear’70 this question will arise much less frequently than in relation to goods.71 Furthermore, the bringing into conformity would not be ‘free of charge’ if the con- 28 sumer were required to provide additional personal data exceeding the personal data required for the supply of the respective digital content or digital service.72 (d) Without any significant inconvenience. Furthermore, and again in line with the 29 Consumer Sales Directive73 as well as with the Sale of Goods Directive74, Art. 14(3) requires the trader to bring the defective digital content or digital service into conformity without any significant inconvenience to the consumer.75 Again, the nature of the digital content or digital service and the purpose for which the consumer required the respective digital content or digital service are named in the provision as the relevant factors in order to determine whether there is such a significant inconvenience. The ECJ has already outlined the ‘without any significant inconvenience’ requirement in the context of the sale of consumer goods and has made it clear that it is not only the interests of the consumer or only those of the trader that matter. Accordingly, on the one hand the threshold of a ‘significant’ inconvenience means that all inconvenience must be avoided, but ‘some investment from the consumer in terms of time and effort’ can legitimately be expected.76 On the other hand, any ‘burden likely to deter the average consumer from asserting his rights’ must be avoided77. Consequently, the ECJ emphasises in this context the legislative objective ‘to strike a fair balance between the interests of the consumer and the seller by guaranteeing the consumer, as the weak party to the contract, complete and effective protection from faulty performance […], while enabling account to be taken of economic considerations advanced by the seller’78. Significant inconvenience can Against such a reverse conclusion Koch (2019), p. 166 et seq. See CJEU, C-404/06 Quelle EU:C:2008:231, para. 41: by receiving such a benefit the consumer ‘is not unjustly enriched’; but see also below, mn. 74 et seq. 70 See Recital 43 COM(2015) 634 final. 71 See also Art. 16(1) 2nd subpara., according to which in the event of termination of the contract the trader shall reimburse the consumer for the proportionate part of the price paid corresponding to the period of time during which the digital content or digital service was not in conformity. In other words: the consumer has not even partly to pay for periods of time during which the respective digital content or digital service was not in conformity. 72 See Koch (2019), p. 167 with reference to Art. 3(1) 2 nd sentence. 73 See Art. 3(5) 3rd point CSD; CJEU, C-52/18 Fülla EU:C:2019:447, paras 40 et seq. 74 See Art. 14(1)(c) SGD. 75 Concerning the determination of the appropriate place for the bringing into conformity see below → mn. 77. 76 See CJEU, C-52/18 Fülla EU:C:2019:447, para. 40. 77 ibid. 78 ibid., para. 41; see also CJEU, C-65/09 and C-87/09 Weber/Putz EU:C:2011:396, para. 75. 68

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be assumed, for example, on account of the necessity of a time-consuming repetition of personalisation made in the meantime or the reinstallation of driver codecs or the like. 79

2. Limits Following the model of the Consumer Sales Directive80 and parallel to the Sale of Goods Directive81, Art. 14(2) provides two limits to the consumer’s right to have the digital content or digital service brought into conformity, namely where remedying the defect is impossible or would cause disproportionately high costs to the trader. 31 (a) Impossibility. Art. 14(2) 1st alt. explicitly names impossibility as limiting the consumer’s right to having the non-conforming digital content or digital service brought into conformity. Impossibility in the sense of Art. 14(2) covers factual as well as legal impossibility.82 Since situations in which remedying the lack of conformity would cause disproportionate costs are regulated separately, there is generally no need to interpret impossibility in a broad sense which would extend to grave obstacles aggravating proper performance. It is usually a matter of how much money a trader is willing to spend in order to overcome such an obstacle and therefore most possible cases of an aggravation of remedying a lack of conformity will be covered by the trader not being obliged to incur disproportionate costs. 32 Art. 14(2) does not distinguish between initial and subsequent impossibility 83 and one can therefore assume that this distinction is of no relevance in this context, i.e. the consumer’s right to having the digital content or digital service brought into conformity yields irrespective of whether the obstacle hindering proper performance already existed at the time of the conclusion of the contract or has intervened only later. 33 A further distinction within the possible forms of an impossibility of performance is between subjective impossibility, in the sense of (only) the trader being unable to cure the lack of conformity, whereas other persons might well be capable to offer the remedy, and objective impossibility, implying that nobody has the capacity to remedy the lack of conformity.84 Since the wording of Art. 14 does not address the trader’s perspective, it suggests a narrow interpretation in the sense of covering only objective impossibility. 85 Such a narrow understanding is perfectly sensible, since in most situations in which a third person will be able to perform the trader might well overcome the respective obstacle by way of engaging the third person in order to help him to perform properly. Thus, in such cases the trader’s capacity to perform properly will usually depend on his financial resources, i.e. to what extent he will be able to spend money on engaging third persons to help him to cure the respective lack of conformity. Yet, a financial incapacity of the trader should never be considered an impossibility in the sense of substantive contract law since this would unduly undermine the principle of pacta sunt servanda. If nec30

The example is taken from Koch (2019), p. 168. See Art. 3(3) 1st subpara. CSD. 81 See Art. 13(2) SGD. 82 See Recital 65 1st sentence, see also Art. 12(1) 1st subpara. COM(2015) 634 final which still explicitly dealt with the correction of the lack of conformity being ‘unlawful’. However, in the revised compromise text proposal dating from 1 June 2017 this term has already been suppressed and it has been announced, that a recital would clarify that the notion of ‘impossibility’ covers not only factual impossibility but also situations where bringing the digital content or digital service into conformity would not be possible due to any legal reason or impediment, see Council of the European Union (‘9901/17 ADD 1’), 27, n 56. 83 See for this distinction e.g. Ernst in: MüKo BGB, § 275 BGB, mn. 7. 84 See for this distinction ibid., mn. 6. 85 See Koch (2019), p. 170. 79 80

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essary, it should rather be taken into account on the level of enforcement law86 which clearly lies beyond the scope of the Digital Content Directive. However, one can imagine situations in which the trader is financially solvent but still 34 lacks the organisational skills necessary to remedy the lack of conformity within due time. In such cases there is no impossibility in the sense of Art. 14, i.e. the trader remains obliged to perform properly. Still, this does not necessarily mean that the consumer is confined to claim the cure of the lack of conformity as primary remedy. The consumer might instead be entitled to immediately proceed to a termination of the contract or a price reduction as second level remedies under Art. 14(4)(e) since the trader might have declared or it might have become clear from the circumstances that the trader would not remedy the defect in due time. Thus, with regard to such situations, the consumer’s legitimate interest in not having to wait for a cure of the lack of conformity that will not take place is not taken into account under the Directive by way of assuming impossibility, but by opening the way to the secondary remedies in the event of anticipated non-performance.87 The provision is not explicitly concerned with partial impossibility. However, espe- 35 cially in the event of contracts that run over a certain period of time, such a partial impossibility easily occurs, namely whenever the period for supply is fixed by contract terms and therefore cannot be made up for in the future. If, for example, a digital content or digital service shall be supplied continuously from January to March and at the end of February a lack of conformity still persists, it is partially impossible to bring the respective digital content or digital service into conformity since nobody can make up for the time that has already passed. Since it is no less pointless to give the consumer a right to claim the impossible in the case of partial impossibility than in the case of complete impossibility, the trader should be considered partially exempt from his obligation to bring the respective digital content or digital service into conformity under Art. 14(2) in the event of a partial impossibility. (b) Lack of proportionality. Art. 14(2) states the imposition of disproportionate costs 36 on the trader for the repair of the defect as a second limit to the consumer’s right to having the digital content or digital service brought into conformity. This exception to the trader’s obligation of bringing the respective digital content or digital service into conformity makes sense insofar as it prevents the trader from carrying out a cure even though this would be uneconomical, because the effort involved would clearly exceed the consumer’s interest in having the defect remedied. Thus, the ECJ’s88 assessment in relation to the corresponding provision in the Consumer Sales Directive that it aims at protecting the financial interests of the seller and to establish a fair balance between the interests of the consumer and the seller can also be considered valid for Art. 14(2). Accordingly, Art. 14(2) names the value of the respective digital content or service in faultless condition as well as the significance of the lack of conformity as decisive criteria for determining such disproportionality, while at the same time requiring that all the circumstances of the case be considered. Again, the Directive here follows the model of the Consumer Sales Directive89 as well as the Sale of Goods Directive90.

See, with regard to German contract law, e.g. Ernst in: MüKo BGB, § 275 BGB, mn. 13. Below → mn. 56 et seq. 88 See CJEU, C-65/09 and C-87/09 Weber/Putz EU:C:2011:396, paras 58, 73 and 75; para. 42. 89 See Art. 3(3) 2nd subpara. CSD. 90 See Art. 13(2) and (3) SGD. 86

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However, in contrast to the Consumer Sales Directive91 and to the Sale of Goods Directive92, the issue of whether the costs for the respective remedy are unreasonable ‘in comparison with the alternative remedy’ is not addressed in Art. 14(2). While according to the ECJ93 (under the Consumer Sales Directive) ‘disproportionality’ was limited to such a so-called relative disproportionality94, under the Digital Content Directive the concept of disproportionality extends to the so-called absolute disproportionality.95 As such, under Art. 14(2) the trader is very well entitled to refuse the only possible method of remedying the lack of conformity due to the disproportionate costs involved. This extension of the lack of proportionality concept is to be welcomed: if remedying a defect entails costs that are disproportionate to the consumer’s interest in performance it makes no sense to nevertheless grant the consumer the right to such a remedy simply because there is no alternative way to remedy the defect which would be less costly. Whilst the ECJ has clarified with regard to installed goods that the consumer’s right to a reimbursement of the cost of removing the non-conforming goods and of installing the replacement goods is not without limits, but might be confined by national law to the payment by the seller of a proportionate amount96, it was not clear under the Consumer Sales Directive whether such a limitation of the right to a cure of the defect was also permissible if disproportionate costs of the only possible remedy were incurred for reasons other than installation of the goods concerned.97 38 While it is thus clear that under Art. 14(2) an absolute lack of proportionality exempts, the provision is silent on the effects of the disproportionality of the costs of one method of remedying the defect in relation to another. However, as far as the Digital Content Directive is concerned, this missing reference to the relative lack of proportionality98 might easily be explained by the fact that the consumer does not have the right to choose the method (e.g. repair or replacement),99 but the trader decides how to remedy the defect. Actually, it should go without saying that the disproportionate costs 37

See Art. 3(3) 2nd subpara. CSD. See Art. 13(2) and (3) SGD. 93 See CJEU, C-65/09 and C-87/09 Weber/Putz EU:C:2011:396, operative part of the judgment of the Court, section 2: ‘Art. 3(3) of Directive 1999/44 must be interpreted as precluding national legislation from granting the seller the right to refuse to replace goods not in conformity, as the only remedy possible, on the ground that, because of the obligation to remove the goods from where they were installed and to install the replacement goods there, replacement imposes costs on him which are disproportionate with regard to the value that the goods would have if there were no lack of conformity and the significance of the lack of conformity. […]’. 94 For the terminology of relative and absolute lack of proportionality see ibid., para. 68. 95 With regard to COM(2015) 634 final see Gsell (‘Rechtsbehelfe bei Vertragswidrigkeit’), p. 148, 154 with further references. 96 See CJEU, C-65/09 and C-87/09 Weber/ Putz EU:C:2011:396, operative part of the judgment of the Court, section 2: ‘[…] That provision does not, however, preclude the consumer’s right to reimbursement of the cost of removing the non-conforming goods and of installing the replacement goods from being limited, in such a case, to the payment by the seller of a proportionate amount.’. 97 According to the wording of Art. 13(3) SGD it is at least clear, that the seller may refuse to bring the goods into conformity if both ways of remedying the defect (i.e. repair and replacement) would impose costs on the seller that would be disproportionate. In contrast, there is no clear statement in Art. 13 SGD that the seller is entitled to refuse to bring the goods into conformity on the ground that the only possible remedy would entail disproportionate costs. However, according to Recital 49 SGD the seller shall be entitled to refuse to bring the goods into conformity ‘if either repair or replacement is impossible and the alternative remedy would impose disproportionate costs on the seller’. In the interest of legal certainty, it would have been better if the legislator had expressed this in the wording of Art. 13 itself. For criticism regarding COM(2015) 635 final see Gsell (‘Rechtsbehelfe bei Vertragswidrigkeit’), p. 147 et seq. with further references. 98 Above → mn. 37. 99 Above → mn. 20. 91

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of a particularly expensive method of repair may not be relevant if the trader is free to resort to a less expensive method.100 This is all the more true in the present context, given that, according to the wording of Art. 14(2) and by way of contrast to the wording of the corresponding provision in the Sale of Goods Directive101, the disproportionality limit appears to be intended to intervene ex lege without the trader having to invoke it as a defence.102 Even if the question of disproportionality will regularly arise only in the specific context of what the trader has declared to do or not to do, this means strictly speaking that it must be possible to determine disproportionality objectively, irrespective of the trader’s declared willingness or unwillingness. As to the two specific criteria explicitly mentioned in Art. 14(2) as a measure for the 39 disproportionality test, that is the (hypothetical) value of the respective digital content or digital service of conforming quality as well as the significance of the lack of conformity, both must in principle presumably be determined in an objective way. As a rule, therefore, the trader is probably not obliged to spend considerably more than the value of a low-value digital content or digital service in order to remedy a lack of conformity. The corresponding holds presumably true with regard to the remedying of an objectively minor defect. Here, too, the trader does not regularly have to incur much more expense than the objective depreciation in value. However, bearing in mind that Art. 14(2) requires that all the circumstances of the 40 case be considered, there is room for considering subjective circumstances, and in particular circumstances lying in the person and sphere of the consumer, too. Thus, one may consider the extent of the damage that the consumer would be likely to suffer if the defect were not to be remedied at all and he had therefore to obtain conforming digital content or digital service of a similar nature elsewhere on the market. Such an understanding of the disproportionality test, according to which it may be permitted or even required to take account of subjective circumstances in the consumer's sphere, is further underpinned by the importance the ECJ has attached – with regard to the Consumer Sales Directive – to the priority of the bringing the defective performance into conformity within the hierarchy of the remedies for non-conforming performance. Accordingly, termination of the contract or a price reduction generally does not ensure the same level of protection for consumers as the bringing into conformity of the goods.103 However, where exactly in such cases the limits of the effort to be made by the trader lie is not clear beyond doubt and can only be clarified by the ECJ by means of certain (further) general guidelines which go beyond the specific individual case. Finally, a particular problem in this context arises from the non-tangible nature of 41 digital content and digital services.104 Even if a good suffers from a design defect that is inherent in all pieces or from a manufacturing defect that renders all pieces of a particular production series or batch defective, it does not alter the fact that repairing one piece does not affect the lack of conformity of the others. In contrast, lacks of conformity in digital content and digital services will often be design defects, which can be cured for all. The respective effort may easily seem disproportionate in relation to the value of the digital content or digital service owed to the individual consumer. However, the assessment will often be different if one looks at the entirety of contracts concluded by the trader for the digital product in question. The cost of producing, for example, a flawless 100 However, it may still be necessary to determine which options are technically available at all and to compare their relative costs, which is justly emphasised by Zoll, 254. 101 See Art. 13(3) SGD: ‘The seller may refuse to bring the goods into conformity […].’. 102 See also below → mn. 42. 103 See CJEU, C-65/09 and C-87/09 Weber/Putz EU:C:2011:396, para. 72. 104 With regard to the following see Behar-Touchais, p. 134 et seq.

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new version of a digital program will often appear to be proportionate if one does not consider the total cost but only a proportionate share calculated on the basis of the total number of contracts concerned. Considering that Art. 14(2) requires that all the circumstances of the case be taken into account, but above all that the Directive gives priority to the remedy of having the lack of conformity remedied, in such cases, where the effort to eliminate a lack of conformity is spread over a large number of contracts, it is appropriate with regard to the disproportionality test to attribute only a percentage of the total costs to each individual contract.105 42 When stating disproportionate costs as a limit of the consumer’s right to have the defect brought into conformity, Art. 14(2) does not take the subjective perspective of the trader, who is defending himself against a claim by refusing to remedy the defect on the ground of disproportionate costs. Insofar the wording of Art. 14(2) is in line with the Consumer Sales Directive106 but deviates from the Sale of Goods Directive107. It implies that the lack of proportionality of costs must be determined objectively and that the exemption applies ex lege irrespective of whether the trader invokes disproportionality or not. Supposing this is the case, it may have an impact on the consumer’s transition to the secondary level remedies: for even if the trader had not invoked disproportionality, but might perhaps even be willing to undertake the disproportionately expensive repair of the defect, one would have to consider the consumer to be entitled to move to the secondary rights under Art. 14(4)(a) on the basis of objectively disproportionate costs.108 For reasons of legal clarity and certainty, such an interpretation of Art. 14(4)(a) seems preferable. This is all the more so because the question of whether the consumer is entitled to terminate the contract or receive a price reduction is often raised ex post, namely when he brings an action in court for this right after he has exercised it in vain against the seller. Exceptionally, however, it may appear contrary to good faith if the consumer refuses the disproportionately expensive repair offered by the trader.

III. Price reduction and termination of the contract 43

The Directive provides for second level remedies in the form of the right to a proportionate reduction of the price or right to a termination of the contract. In other words: while the consumer can regularly seek cure of the lack of conformity as the primary remedy, price reduction and termination of the contract as second level remedies are subject to special requirements as laid down in Art. 14(4)(a)–(e).

1. Special requirements for the second level remedies 44

The Directive distinguishes in Art. 14(4)(a)–(e) between five alternative situations: Art. 14(b) and (c) deal with cases where the consumer was initially only entitled to request the trader to cure the defect, but the trader failed to (successfully or properly) bring the digital content or digital service into conformity. By way of contrast, Art. 14(a), (d) and (e) are concerned with situations in which the consumer enjoys an immediate right to a price reduction or termination of the contract, i.e. where the consumer is not initially being restricted to the first level remedy of having the digital content or digital 105 Koch (2019), p. 171 also wants take account of the fact that the cure of the defect will benefit other customers. 106 See Art. 3(3) 2nd subpara. CSD: ‘[…] the consumer may require the seller to repair the goods or he may require the seller to replace them […] unless this is impossible or disproportionate’. 107 See Art. 13(3) SGD: ‘The seller may refuse to bring the goods into conformity […].’. 108 See also below → mn. 45; for a deviating interpretation see Koch (2019), p. 169, n 69.

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service brought into conformity. However, the European legislator has not enacted a general and open provision, allowing the consumer an immediate exercise of the secondary remedies whenever this corresponds to his legitimate interest, but rather contented itself with enumerating certain important scenarios. Still, in an overall assessment of the requirements stipulated in (a), (d) and (e) for an immediate exercise of the secondary remedies one can say that the Directive covers the main possible situations where the consumer has a legitimate interest in not having to wait for the defect to be remedied. The Directive thus regulates the issue – in particular through (d) – in a sufficiently flexible manner109 thus creating a fairly satisfactory system for the transition to secondary remedies which also takes sufficient account of the trader’s interest in continued performance of the contract. (a) Impossibility or lack of proportionality. Art. 14(4)(a) deals with situations in which 45 it is impossible or disproportionate in the sense of Art. 14(2) to bring the digital content or digital service into conformity. A similar provision is contained in the Consumer Sales110 and in the Sale of Goods111 Directives. When bringing the respective digital content or digital service into conformity is impossible or where it is to be expected that the trader will deny it due to the disproportionate costs it will entail, it would be pointless to require from the consumer to nevertheless grant the trader a chance to cure the defect.112 It is to be borne in mind that according to the wording of Art. 14(2) the trader appears to be exempted ex lege in the event of an impossibility or a lack of proportionality.113 Therefore, if the consumer did not wait a reasonable time but immediately terminated the contract or immediately claimed a price reduction on account of a lack of conformity the trader cannot later successfully defend himself against an action for (partial) reimbursement of the price by asserting that the second level remedies were not (yet) available to the consumer since he (the trader) would have been prepared to incur disproportionately high costs in order to cure the defect if only the consumer would have been willing to wait and to accept a remedying of the lack of conformity. As little as Art. 14(2) is Art. 14(4)(a) explicitly concerned with partial impossibility. 46 Therefore, the question arises whether in the event of a partial impossibility the consumer might immediately exercise a secondary remedy with regard to the entire contract. If, for example, the contract runs from January to March with digital content or digital service to be supplied continuously during this period and a lack of conformity of one main feature of the respective digital content or digital service becomes apparent in February, which the trader is willing and capable to remedy at short notice, will the consumer then be entitled to immediately terminate the entire contract or proceed to a price reduction with effect also for March for the sole reason that it is impossible to remedy the defect for the contract period already elapsed? Or, if software supplied in a single act shows two defects, one of which can be remedied by the trader but the other cannot, can the consumer immediately terminate the whole contract or declare a reduction in price with effect for the whole contract? As far as the termination of a contract providing for a payment is concerned, an answer can be derived from Art. 14(6) and from Art. 16(1) 2nd subpara.: as on the one hand Art. 14(6) prevents the consumer from terminating the contract in the event of only a minor lack of conformity114 and on the other hand Art. 16(1) 2nd subpara. protects the trader, even in the event of a termination of the (enSee also Spindler/Sein, 488, 490. See Art. 3(5) 1st point CSD in conjunction with Art. 3(3) CSD. 111 See Art. 13(4)(a) in conjunction with Art. 13(3) SGD. 112 For the requirements of such an impossibility or lack of proportionality, above → mn. 30 et seq. 113 Above → mn. 42. 114 Below → mn. 67 et seq. 109

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tire) contract, from also reimbursing the consumer the (pro rata) price for periods during which the respective digital content or digital service was free of defects, it can be assumed that, even in the case of partial impossibility, the consumer shall indeed be considered entitled to terminate the (entire) contract immediately under Art. 14(4)(a), but only if the partial impossibility in question is not merely minor in relation to the entire contract. Yet, as a consequence of such a termination he will not be reimbursed for a period during which the trader’s supply of digital content or digital service was of conforming quality. As a general rule, Art. 16(1) 2nd subpara. appears sound since it avoids an enrichment of the consumer who partially enjoyed conforming performance. However, the consumer’s reimbursement should be extended to the periods of conforming performance where the only partial performance is of no interest to him. The application of Art. 16(1) 2nd subpara. should be restricted correspondingly. If, for example, the consumer is entitled under the contract to use a streaming service for 24 hours with regard to a certain film and halfway through watching the film the service is disrupted for the remaining hours it would not be reasonable to make the consumer pay for the hours he enjoyed the service. 47 With regard to the remedy of a reduction in price it is clarified by Art. 14(5) 2 nd subpara. for contracts running over a period of time that the reduction shall apply only to the period of time during which the digital content or digital service was not in conformity.115 From this might be derived with regard to such contracts running over a period of time that in the event of a partial impossibility an immediate reduction in price with effect for the entire contract cannot be considered permissible. Again, this seems sound as a general rule. Given that the contract is adapted but maintained in the event of a reduction in price, in general there is no justification for allowing the consumer to switch immediately to that second level remedy also in so far as there is no need for an adaptation of the contract, since the primary remedy of a cure of the respective lack of conformity is available. Therefore, in general, the consumer should only be entitled to an immediate reduction in price to the extent that the lack of conformity cannot (any longer) be remedied, whereas the trader should first be allowed to bring the respective digital content or digital service into conformity as far as this remains possible and correspondingly the consumer should therefore first have to insist on the cure of the defect to this extent.116 Yet again, and in accordance with what has been said above with regard to a termination of the contract,117 an exception to this general rule should be recognised under the Directive with regard to situations in which the partial bringing into conformity of the digital content or digital service is of no interest to the consumer. 48 (b) Failure to bring the digital content or digital service into conformity. Art. 14(4)(b) 118 opens the consumer’s way to the second level remedies in the event of the trader’s failure to meet his obligation to bring the respective digital content or digital service into conformity in accordance with the triple requirement as laid down in Art. 14(3), namely within a reasonable time, free of charge, and without any significant inconvenience.119 A similar, but considerably less clear provision can be found in the Sale of Goods Directive.120 As Art. 14(3) requires the trader to fulfil the three conditions of the triple requirement cumulatively, he is in infringement of Art. 14(3) if he disregards even Below → mn. 63. Below → mn. 63. 117 Above → mn. 46. 118 See also Recital 65. 119 For a more detailed explanation of this triple requirement see above → mn. 21 et seq. 120 See Art. 13(4)(a) SGD which unfortunately does not make reference to the triple requirement as laid down in Art. 14(1) but only to the further requirements stated in Art. 14(2) and (3). 115

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one of the three elements and consequently the prerequisites of Art. 14(4)(b) are already met if only one element of the triple requirement is disregarded by the trader. In practice, the most frequent case will probably concern the notification by the consumer of the lack of conformity but the trader fails to remedy it within a reasonable time and the consumer then legitimately terminates the contract or reduces the price. But even though Art. 14(4)(b) appears to be of considerable practical importance, the provision lacks some clarifications. In particular, it is not specific with regard to the aforementioned situation regarding the relevant points in time and whether the consumer loses the right to terminate the contract or to reduce the price once acquired under Art. 14(4)(b) if the trader finally complies properly with the triple requirement as laid down in Art. 14(3), without the consumer having previously exercised one of the two second level remedies. For example, can the consumer still terminate the contract or reduce the price if a reasonable time has already elapsed since the trader was notified of the lack of conformity but the trader now offers the consumer a conforming copy of the defective software initially supplied? It is hardly possible to derive an answer to this question from the mere text of the Directive. For reasons of legal certainty and legal clarity, the trader should be prevented from depriving the consumer of second level remedies once acquired by simply offering the previously failed cure of the lack of conformity at a later stage. Therefore, the consumer should be considered entitled to decline such an offer and to counter it with a termination of the contract or a reduction in price. Another scenario problematic under Art. 14(4)(b), which again raises doubts about the relevant points in time, is the following: assuming the trader successfully brought the respective digital content or digital service into conformity, but this was accompanied by significant inconvenience for the consumer, shall the consumer still be entitled to terminate the contract or reduce the price? A distinction should be made here: where the inconvenience is of such a nature that it has a lasting effect, and in particular is likely to affect confidence in the trader, the consumer should be able to rely on Art. 14(4) (b). Where, on the other hand, this is not the case, i.e. where the inconvenience is obsolete, Art. 14 should be interpreted restrictively and the consumer should not be entitled to terminate the contract or reduce the price even though the lack of conformity has meanwhile been successfully remedied.121 (c) Persisting non-conformity. According to Art. 14(4)(c) the consumer may also exercise a second level remedy where a lack of conformity appears despite the trader’s attempt to bring the digital content or digital service into conformity. The Commission’s Proposal did not contain a corresponding provision.122 However, the provision could already be found in the revised compromise text proposal dating from 1 June 2017123 and a parallel provision has been included in the Sale of Goods Directive124. Firstly, it should be noted that the provision is of no relevance insofar as the lack of conformity has not been successfully remedied and the consumer declares the termination of the contract or claims a reduction in price after a reasonable time has elapsed since the trader was notified of the defect. In this situation the consumer is already entitled under Art. 14(4)(b) to terminate the contract or claim a reduction in price. However, Art. 14(4)(c) comes into play where the trader has attempted in vain to bring the respective digital content or digital service into conformity but the consumer does not wait with the exercise of a second level remedy until a reasonable time has elapsed since 121 For a different interpretation see Koch (2019), p. 173 who considers Art. 14(4)(b) inapplicable in the event of a successful bringing into conformity. 122 See Art. 12(3) COM(2015) 634 final. 123 See Art. 12(3)(ba) Doc. Nr. 9901/17 ADD 1. 124 See Art. 13(4)(b) SGD.

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the trader was notified of the defect. The provision is quite strict towards the trader in that it only grants him one single attempt to remedy the defect. 125 If the trader wishes to adhere to performing the contract, he should therefore work diligently when attempting to bring the respective digital content or digital service into conformity and use the appropriate time to do so, rather than hastily declare the attempt to remedy the defect successful. 53 According to its wording, Art. 14(4)(c) also applies when a different lack of conformity appears after the trader’s successful attempt to remedy the lack of conformity originally reported by the consumer. If, for example, the trader provides an update in order to remove a lack of conformity of feature A of the respective digital content and afterwards a defect becomes apparent with regard to feature B of the respective content then the prerequisites of Art. 14(4)(c) might be satisfied. This is at least the case if one assumes that feature B was already not functioning properly at the time of the original supply, but the defect only became apparent later. If, on the contrary, feature B only subsequently fails to work properly due to a defective update, one might still apply Art. 14(4)(c) since even in the event of a contract providing for a single act of supply, where the trader, according to Art. 11(2) is only liable for a lack of conformity which exists at the time of supply126, one must interpret the term ‘time of supply’ in the sense of covering the subsequent supply of an update aiming at remedying a lack of conformity.127 54 The application of the provision seems even less problematic with regard to contracts providing for continuous supply over a period of time since, according to Art. 11(3) 1st subpara. as well as Art. 8(4), the liability period extends over the entire contractual period of supply128. However, a restrictive interpretation of the provision is required, especially with regard to long-term contracts. If, for example, a different defect becomes apparent two years after the first lack of conformity has been successfully remedied by the trader, it does not seem appropriate to grant the consumer an immediate right to a second level remedy. In such situations the trader should be granted a chance to remedy the new defect and therefore the consumer should have to call for a cure of the lack of conformity in the first place. Consequently, Art. 14(4)(c) should at least not apply where the lack of conformity becomes only apparent a considerable time after the trader’s attempt to bring the respective digital content or digital service into conformity and this new defect differs from the original lack of conformity in the sense of not even showing a functional overlap with the original defect. 55 (d) Serious nature of the lack of conformity. The consumer may have a legitimate interest in not allowing the trader to remedy the defect even in cases where it is neither impossible for the trader to remedy the lack of conformity nor entails disproportionate costs. Art. 14(4)(d) as well as (e) deal with such situations. Thus Art. 14(4)(d) covers cases in which the legitimate interest to immediately terminate the contract or claim a reduction in price results from the serious nature of the lack of conformity. This threshold of a particularly serious lack of conformity resembles the concept of a fundamental breach of contract familiar from Art. 25 CISG.129 It was not contained in the Commission’s Proposal,130 which was criticised exactly for the lack of such a provision generally 125 But see Koch (2019), p. 173 according to whom only the appearance of a different defect is covered by Art. 14(4)(c). 126 Above → mn. 17 et seq. 127 Such an interpretation is supported by the fact that Art. 11(2) contains the explicit clarification that it is ‘without prejudice to point (b) of Article 8(2)’. 128 Above → mn. 18. 129 For a detailed explanation of the situations covered by Art. 25 CISG see Gruber in: MüKo CISG, Art. 25 CISG, mn. 9 et seq. 130 See Art. 12(3) COM(2015) 634 final.

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allowing the consumer to proceed to the second level remedies whenever the non-conforming performance is of sufficiently serious nature.131 Yet the provision could already be found in the revised compromise text proposal dating from 1 June 2017132. A corresponding provision has been equally inserted into the text of the Sale of Goods Directive133. Art. 14(4)(d) is concerned in particular with situations in which ‘the consumer can- 56 not be expected to maintain confidence in the ability of the trader to bring the digital content or digital service into conformity’134. Where, for example, anti-virus software is supplied which is itself infected with a virus, such a serious nature of the lack of conformity can be assumed.135 Another reason for such a loss of sufficient confidence may be particularly reprehensible conduct on the part of the trader, for example where he has deliberately concealed the defect even though the consumer is clearly at risk of harm or where the trader has by technical means secured unauthorised access to the digital content or digital services supplied to the consumer.136 Furthermore, according to the circumstances of the respective contract, the seriousness of the breach of contract and a corresponding loss of confidence might also be due to the fact that the consumer had made it clear at the time of conclusion of the contract that conformity with the contract in a certain respect is of particular importance to him, and the trader then nevertheless fails to properly supply in precisely this respect.137 (e) Anticipated failure to (properly) bring the digital content or digital service into con- 57 formity. Under Art. 14(4)(e) the consumer is entitled to immediately exercise the secondary remedies in situations of an anticipated failure of the trader to (properly) remedy the lack of conformity: although the trader may not yet have attempted to cure the lack of conformity it might still be clear already that he will not successfully do so because either he has declared in advance that he will not bring the respective digital content or digital service into conformity or this might be clear from the circumstances. In such a situation it would be pointless to require the consumer to nevertheless grant the trader a chance to remedy the defect.138 The provision has no equivalent in the Consumer Sales Directive but is modelled on similar provisions that can be found e.g. in the CISG139, the DCFR140 and the CESL141. Furthermore, the Sale of Goods Directive contains a corresponding provision142. As nobody is clairvoyant, the provision requires a prognosis about the likelihood of 58 the persistence of the non-conforming performance in the future and it might be applied only if there is a high degree of probability of such a persistence of non-conformity. 143 The relevant perspective for this prognosis cannot be the perhaps only subjective imSee e.g. Gsell (‘Rechtsbehelfe bei Vertragswidrigkeit’), p. 149, 155. See Art. 12(3)(c) of Doc. Nr. 9901/17 ADD 1 and see with regard to this amendment of COM(2015) 634 final ibid., 149. 133 See Art. 13(4)(c) SGD. 134 See Recital 65 and already n 132 with regard to the compromise text dating from 1 June 2017, Doc. Nr. 9901/17 ADD 1, p. 29. 135 See Recital 65 for this example. 136 For a similar assessment with regard to the CISG see Gruber in: MüKo CISG, Art. 25 CISG, mn. 13 with further references. 137 See also with regard to the failure to supply Art. 13(2)(b) and above → mn. 23. 138 See also with regard to the similar rule in Art. 13(2)(a) → Art. 13 DCD, mn. 35 et seq. 139 See Art. 72 CISG. 140 See Art. III.–3:504 DCFR. 141 See Art. 116 and 136 CESL. 142 See Art. 13(4)(d) SGD. 143 For a similar assessment with regard to the CISG see Huber in: MüKo BGB, Art. 72 CISG, mn. 7 with further references. 131

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pression of the consumer, but must be that of a reasonable observer.144 Where the trader’s declaration not to bring the respective digital content or digital service into conformity is concerned, a sufficient degree of seriousness will therefore be necessary. 145 As a general rule, the fact that the trader doubts or even denies the lack of conformity in the first place when confronted by the consumer’s claim cannot be considered sufficient at least not as long as the trader shows himself willing to duly examine the matter further. On the other hand, Art. 14(4)(e) applies not only where it is clear from the trader’s statement or the circumstances that no remedying of the lack of conformity whatsoever will take place. The prerequisites of the provision are also met if it is highly likely that the modalities of remedying the defect will not satisfy the triple requirement as laid down in Art. 14(3), i.e. bringing the defect into conformity within a reasonable time, free of charge and without any significant inconvenience to the consumer146.

2. Price reduction (a) Payment of a price required. According to Art. 3(1) 2nd subpara., the scope of the Digital Content Directive is not limited to contracts stipulating the payment of a price but extends to contracts which oblige the consumer to provide personal data to the trader in exchange for the promised digital content or digital service.147 Yet, a reduction of the price obviously presupposes that the respective digital content or digital service was supplied in exchange for a payment of a price. Therefore, this condition is explicitly stated in Art. 14(4). The term ‘price’ is defined in Art. 2 No. 7 as meaning ‘money or a digital representation of value that is due in exchange for the supply of digital content or a digital service’.148 60 However, with regard to contracts which do not stipulate an obligation to pay a price, this may often result in the consumer lacking any truly effective remedy whatsoever under the Directive: for if in such cases the right to remedy the lack of conformity under Art. 14(2) is excluded on grounds of impossibility or disproportionality, the only remaining remedy is termination of the contract. Therefore, according to Art. 14(6), when no payment of a price has been agreed upon there is always a right to a termination of the contract even though the lack of conformity might be minor.149 Still, termination will often be of little interest to the consumer precisely because he does not have to pay a price anyway and therefore cannot be released from the obligation to pay such a price by way of terminating the contract. Accordingly, the main consequence of the termination of the contract is that he no longer receives the promised digital content or digital service. Yet, if he had had no interest in their supply, he would hardly have concluded the contract and an alternative supplier for the respective digital content or digital service who offers comparable conditions will not always be available on the market. For example, where the consumer uses a fitness app for a smartphone and in return provides certain personal data about his eating habits and then certain functions of the app prove to work poorly, he will hardly be interested in terminating the contract if there are no alternative providers on the market. What the consumer would need here would be an effective right to compensation for damages, which is beyond the scope of the Directive, however.150 59

ibid. For an according assessment with regard to Art. 13(2)(a) → Art. 13 DCD, mn. 36. 146 For a deeper analysis of this triple requirement → mn. 21 et seq. 147 → Art. 3 DCD, mn. 47 et seq. 148 → Art. 2 DCD, mn. 26 et seq., and → Art. 3 DCD, mn. 32. 149 See also Recital 67 2nd sentence. 150 Below → mn. 81. 144

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(b) Calculation. Art. 14(5) specifies how the reduction in price is to be calculated. The 61 first subparagraph contains the general rule according to which it is not permissible to simply deduct the (objective) decrease in value of the non-conforming digital content or digital service from the price, which the consumer agreed to pay in exchange. Instead, the provision requires a calculation as follows: in a first step the ratio between the value of the non-conforming digital content or digital service supplied by the trader and its (hypothetical) value in a conforming condition must be determined. In a second step the price must be reduced by using the same ratio, i.e. proportionally. If, for example, the price agreed on by the parties is 50€ and the value of the conforming digital content or digital service would be 40€, whereas the decrease in value due to the defect is 20€, then the reduced price to pay under Art. 14(5) is 25€ and not 30€. This relative method of calculating the reduction in price respects and maintains the equilibrium between the value of performance and counter performance, as agreed between the parties to the contract. This clearly shows that the reduction in price as a remedy is not aimed at compensation of damages but rather at adapting the subjective contractual balance to the reality of a defective performance. Corresponding rules on the calculation of a price reduction can be found e.g. in the 62 CISG151, as well as in the CESL152 and the DCFR 153, and again an equivalent provision is contained in the Sale of Goods Directive154. However, by way of contrast to the corresponding provisions contained in the CISG, the CESL and the DCFR, neither Art. 14(5) nor the provision contained in the Sale of Goods Directive specify the relevant point in time for the calculation of the value of the respective non-conforming digital content or digital service as well as the (hypothetical) value of the conforming digital content or digital service. In accordance with the aforementioned provisions contained in other supranational and international sets of rules, this should not be the time of the conclusion of the contract but the time of performance. With regard to contracts that provide for a supply of digital content or a digital ser- 63 vice over a period of time, Art. 14(5) 2nd subpara. clarifies that the reduction in price shall only apply to the period of time during which the digital content or digital service was not in conformity.155 As a general rule this seems appropriate in order to avoid an unjust enrichment of the consumer. However, there are cases where the partial proper performance is of no interest to the consumer and he would therefore not be enriched in an unjustified manner if he did not have to pay the unreduced price for it.156 Thus, for example, if a digital language course is supposed to run over a certain period of time and after several months the feature of setting up individual vocabulary lists fails in a manner that the consumer can no longer resort to even the lists created earlier, then it would be unfair to exempt the months during which the program worked properly from the price reduction since the consumer can no longer enjoy the benefits from the use of the program during this past period of conforming performance. Art. 14(5) 2nd subpara.

See Art. 50 1st sentence CISG. See Art. 120(1) 2nd sentence CESL. 153 See Art. III.–3:601(1) 2nd sentence DCFR. 154 See Art. 15 SGD. 155 Above → mn. 47. 156 Above → mn. 46 et seq. 151

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should therefore interpreted in a restrictive manner as not covering such situations of the consumer’s lack of interest in partial proper performance.157 64 (c) Exercise. Whereas Art. 15 explicitly states the modes of an exercise of the right to a termination of the contract, a similar provision is lacking with regard to a price reduction. However, since in many cases the consumer has the choice between a cure of the defect, a termination of the contract or a price reduction, it cannot be assumed that a price reduction applies ex lege. Therefore, one should also resort to Art. 15 with regard to a price reduction.158 Accordingly, it should be assumed that the consumer is required to express his decision for a price reduction to the trader by means of a statement. However, this statement is not subject to any form requirement. 65 (d) Reimbursement. As far as he has already paid the unreduced price the consumer shall be reimbursed after the exercise of his right to a price reduction as stipulated under Art. 18.159

3. Termination (a) General meaning of ‘termination’. As an alternative to the remedy of a price reduction the consumer is entitled to terminate the contract according to Art. 14(4) and (6). The Directive does not distinguish between a rescission on the one hand and a termination on the other depending on the duration of the contract but uniformly calls the right to end the contract ‘termination’160. This is in perfect line with the uniform and comprehensive as well as cross-sectional and open concept of contracts on the supply of digital content or digital services which is laid down in Art. 1 and Art. 2 Nos 1 and 2. This approach, which aims at maintaining the ‘future-proof nature of the notion of digital content or digital service’161 underpins the entire Directive and basically encompasses any kind of supply of the respective content or services irrespective of differences in the duration of the contract and irrespective of whether the supply shall take place in one single act or in a series of individual acts or continuously over a period of time.162 67 (b) Lack of conformity which is not minor. As an additional prerequisite of a termination of the contract, Art. 14(6) 1st sentence requires a lack of conformity that is not ‘minor’. Yet this condition only applies in the event of a contract that obliges the consumer to pay for the respective digital content or digital services. As in such cases the remedy of a price reduction is not available to the consumer, it makes perfect sense that termination is not dependent on any other condition except the consumer’s entitlement to move to the second level of remedies under Art. 14(4). Consumers who are not under a contractual obligation to pay would otherwise have no remedy at all if it were impossible or 66

157 A similar consideration not to impose on the consumer a partial performance which is of no value to him can be found in Art. 16(2) SGD, according to which in situations in which the lack of conformity only relates to some of the goods delivered the consumer may nevertheless terminate the contract with effect for the conforming goods if he ‘cannot reasonably be expected to accept to keep only the conforming goods’. 158 See already Koch (2019), p. 174 and with regard to the Sale of Goods Directive, Zöchling-Jud, 130. 159 See Art. 18(1) which explicitly refers to a price reduction under Art. 14(4) and (5). 160 The Sale of Goods Directive uses the same notion of ‘termination’, see e.g. Art. 16 SGD, whereas the wording of the Consumer Sales Directive was different, see Art. 3(5) and (6) CSD according to which the consumer is entitled under certain circumstances to ‘have the contract rescinded’. According to Art. 49(1) CISG ‘the buyer may declare the contract avoided’ while the CESL as well as the DCFR also use the term ‘termination’, see Art. 114 et seq. CESL and Art. III.–3:501 et seq. DCFR. 161 See Recital 19. 162 See with regard to this distinction in Art. 11(2) and (3) as well as in other provisions above before and including → mn. 37; see also non-exhaustive list of digital content and digital services in Recital 19.

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would entail disproportionate costs to bring the respective digital content or digital service into conformity.163 The threshold of a lack of conformity not only being minor must be considered far less strict for the consumer than that of ‘fundamental breach of contract’ under the CISG164.165 It is, however, in conformity with the Consumer Sales Directive166 and the Sale of Goods Directive167 as well as with the CESL168. Yet in the Commission’s Proposal termination was subject to a more detailed and probably more severe condition, i.e. a lack of conformity that ‘impairs functionality, interoperability and other main performance features of the digital content such as its accessibility, continuity and security.’ 169 It is to be appreciated that the European legislator finally decided in favour of replicating the general wording of the threshold as in the Consumer Sales Directive170. This grants the courts the necessary flexibility in order to take account of all the relevant circumstances of the respective contract. By way of contrast, the original proposal on the one hand seemed too strict in limiting the right to a termination to ‘main performance features’ even though for the individual consumer certain ancillary features might have been decisive for concluding the contract and a respective lack of conformity therefore not appearing to be minor. On the other hand, it is doubtful as to when the condition of a ‘main performance feature’ is met, particularly in situations in which the respective contract does not contain sufficient indications in order to allow a clear hierarchy of the various features of the respective digital content or digital service. Determining whether a defect is minor in the sense of Art. 14(6) will require consideration of the purpose of the contract and the contractual agreements. Where the consumer has made it clear at the time of conclusion of the contract that a certain feature is important to him, as a general rule the lack or malfunction of such feature will have sufficient weight. However, this should not mean that the interests of the consumer, which have not been communicated to the trader, should be irrelevant. Rather, all circumstances of the particular transaction should be considered, bearing in mind that consumer transactions concluded online are typically mass transactions and that there is usually no opportunity for the consumer to communicate to the trader a particular individual interest in use. Typically, the duration of the contract will also play a role. For example, where a particular feature has only been out of use for a very short period of time without any indication that this will be repeated and without any noticeable disadvantages for the consumer, it is rather more likely that a minor feature will be accepted. (c) Burden of proof. According to Art. 14(6) 2nd sentence the burden of proof with regard to the (lacking) significance of the defect shall be on the trader. However, if the trader claims the defect to be minor on the basis of certain facts apparent to him, the consumer will have to state the specific circumstances which prevent such an assessment. (d) Exercise. The exercise of the right to a termination is governed by Art. 15171. Accordingly, neither a court decision is required in order to terminate the contract nor does the contract come to an end automatically ex lege. Instead, a unilateral statement to Above → mn. 60. See Art. 49 in conjunction with Art. 25 CISG. 165 For a corresponding assessment with regard to Art. 3(6) CSD Gsell in: Soergel BGB, § 323 BGB, mn. 214. 166 See Art. 3(6) CSD. 167 See Art. 13(5) SGD. 168 See Art. 114(2) CESL where instead of the term ‘minor’ the term ‘insignificant’ is used, though. 169 See Art. 12(5) COM(2015) 634 final; for a critical assessment see Zoll, 254. 170 See above n 167. 171 For a deeper review → Art. 15 DCD. 163

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the trader expressing the consumer’s decision to terminate the contract is necessary as well as sufficient. By giving the consumer the power to end the contract himself the Directive is in line with other international and supranational sets of rules172 such as e.g. the CISG173, the CESL174, the DCFR175 and the new Sale of Goods Directive176. 72 (e) Extent of the termination. In contrast to the Sale of Goods Directive177, the Digital Content Directive does not explicitly provide for a partial termination of the contract. However, with regard to contracts which provide for the supply of the respective digital content or digital service over a period of time, Art. 16(1) 2nd subpara. limits the reimbursement of the price paid by the consumer to the proportionate part corresponding to the period of time during which the digital content or digital service was not in conformity. Thus, even though the entire contract will be terminated, the trader will retain the proportionate part of the received price that corresponds to the partial supply of conforming digital content or digital services thereby achieved a kind of partial termination.178 73 However, Art. 16(1) 2 nd subpara. is not applicable if there are no alternating phases of faultless and defective supply, but the digital content or digital service which is supplied at a given time is partly conforming and partly non-conforming. On the contrary, with regard to such a partially conforming and partially non-conforming supply Art. 17(3) expressly clarifies that the consumer shall not be liable to pay for any use made of the respective digital content or digital service in the period during which the digital content or digital service was not in conformity. Thus, for example, if according to the contract the consumer shall receive a certain digital content with feature A and feature B over a certain period of time and feature A works properly whereas feature B does not and he therefore terminates the contract, Art. 17(3) prevents the consumer from having to pay for the proper use he enjoyed of feature A. However, the consumer will have to pay for such a proper use of feature A if the contract states that in a first period digital content with feature A shall be supplied and afterwards digital content with feature B shall be supplied. If conforming digital content was supplied by the trader during the first phase, Art. 16(1) 2nd subpara. prevents the consumer from claiming back the proportionate part of the price he paid with respect to this phase. This shows that both rules, the one laid down in Art. 16(1) 2 nd subpara. on the one hand and the one stated in Art. 17(3) on the other, are difficult to reconcile. 74 Moreover, both rules are partly problematic for opposite reasons: the rule laid down in Art. 16(1) 2nd subpara. needs restriction insofar as it makes the consumer pay for the partially conforming performance even though this partial performance might be of no interest to him.179 In contrast, the rule stated in Art. 17(3) allows for an unjust enrichment of the consumer as far as the conforming features of the partly non-conforming supply satisfied his interests. Therefore, the application of Art. 17(3) should be limited to 172 The wording of Art. 15 was inspired by Art. 11(1)(b) CRD on the exercise of the right of withdrawal, see the revised compromise text proposal dating from 1 June 2017, Doc. Nr. 9901/17 ADD 1, 30, n 62. 173 See Art. 49(1) in conjunction with Art. 26 CISG. 174 See Art. 118 CESL. 175 See Art. III.–3:507(1) DCFR. 176 See Art. 16(1) SGD. 177 See Art. 16(2) SGD and above n 157. 178 Above → mn. 46; it does not actually make much difference in the result whether the creditor is barred from terminating the contract with regard to periods of time during which he received (proper) performance or whether he is granted a right to terminate the entire contract but the restitutionary effects of such a termination of the entire contract will not extend to such periods of time during which the creditor received (proper) performance. 179 Above → mn. 46.

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the extent to which the use made of the non-conforming digital content or digital service prior to the termination was of no interest to the consumer. Such an interpretation would actually confine the effects of the termination of the contract to the features or parts of the respective digital content or digital service which are actually impaired by the lack of conformity with the exception of such a partial preservation of the exchange of performance and counter-performance being of no interest to the consumer. However, since according to the Quelle decision180 the ECJ appears unwilling to make the consumer partly pay for the use of a non-conforming performance it seems doubtful whether the Court will allow limited application of Art. 17(3) imposing an obligation on the consumer to partly reimburse the trader to the extent the partially conforming performance is of interest to the consumer. (f) Reimbursement, data protection and other legal effects. The legal consequences of a 75 termination are harmonised by Arts 16–18, which, apart from the consumer’s obligations in the event of a termination,181 govern the reimbursement of the price paid by the consumer182 as well as the obligations of the trader with regard to personal data and content other than personal data provided or created by the consumer.183

D. Transposition issues I. Scope of full harmonisation Even though the Sale of Goods Directive is no less committed to the principle of full 76 harmonisation184 than the Digital Content Directive, the Sale of Goods Directive’s scope is explicitly limited in such a way that it still allows the Member States to deviate from its hierarchy of remedies with regard to defects that become apparent within 30 days after delivery, and hidden defects (latent defects).185 In contrast, the Digital Content Directive’s provisions do not contain such opening clauses for the Member States. Nevertheless, Recital 12186 explains that ‘national rules that do not specifically concern consumer contracts and provide for specific remedies for certain types of defects that were not apparent at the time of conclusion of the contract, namely national provisions which may lay down specific rules for the trader’s liability for hidden defects’ should not be affected by the Digital Content Directive. This legislative statement is surprising because one would say that given the absence of an opening clause comparable to the one contained in the Sale of Goods Directive187 under the Digital Content Directive such special national rules for hidden defects seem incompatible with Art. 4 insofar as they deviate from the Directive’s regime of remedies. And this all the more so if one considers that in the vast majority of cases liability for lack of conformity probably concerns hidden defects. If, for example, Member States were therefore allowed by way of national provisions with a scope not limited to B2C contracts to always grant the consumer an immediate right to terminate the contract if a latent defect becomes apparent, this would un180 See CJEU, C-404/06 Quelle EU:C:2008:231, para 41: by receiving such a benefit the consumer ‘is not unjustly enriched’ and already above → mn. 27. 181 See Art. 17. 182 See Art. 18 which in paragraph one explicitly refers to a termination according to Art. 14(4) and Art. 16(1). 183 For a deeper review see the commentary on these provisions. 184 Above → mn. 4, n 11. 185 See Art. 3(7) SGD. 186 See Recital 12 3rd sentence. 187 See above, n 185.

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dermine the fully harmonising effect of the Directive’s remedies regime as laid down in Art. 14, which generally only provides for a right to have the defect remedying in the first place. It is important to note that the general opening clause in Art. 3(10) cannot be considered a basis for such specific national remedies and this holds true irrespective of whether such remedies under national law derive from general contract law or not. For this opening clause only covers aspects ‘as far as they are not regulated in this Directive’, while the remedies for lack of conformity including hidden defects are indeed regulated by the Directive. Otherwise this would mean that the Member States would generally be allowed to thwart the remedies regime established by the Directive, with corresponding national rules based only on general contract law. Furthermore, Recital 14 could give the impression that, with regard to a lack of conformity due to force majeure or similar impediments beyond the control of the trader, the Member States could, for example, deviate from the Directive’s hierarchy of remedies or limit the available remedies to one single remedy. Yet, there is again no indication of such an interpretation of the Directive in its provisions and it would undermine their intended full harmonisation. The contradiction between Recitals 12 and 14 on the one hand and the text of the provisions of the Directive and namely Art. 4 on the other must be resolved in the spirit of the latter, since the Recitals do not have regulating effect themselves in a stand-alone way but serve the purpose of clarifying and explaining the Directive’s provisions. Therefore, in contrast to the situation under the Sale of Goods Directive, the Member States cannot be considered as entitled to provide remedies for hidden defects whose prerequisites differ from those of the Directive and they are not permitted to deviate from the Directive’s remedy regime with regard to force majeure either.

II. Frustrated expenditures 77

Where a repair requires the removal of goods that had been installed in a manner consistent with their nature and purpose before the lack of conformity became apparent, the Sale of Goods Directive188 explicitly expands the seller’s obligation to remedy the lack of conformity to the removal of the non-conforming goods and the installation of replacement goods or repaired goods or to bear the costs of such a removal and installation. In contrast, the Digital Content Directive does not contain any explanations as to the extent of the trader’s obligation to bring the respective digital content or digital service into conformity in situations in which the consumer previously has incurred certain expenditures in order to integrate the digital content or digital service into his individual digital environment and now these expenditures are frustrated and must be repeated in the course of the remedying of the defect. Thus, for example, the previous installation of software or system configuration might prove frustrated and the respective software might have to be de- and reinstalled or the corresponding system reconfigured once the trader has cured the defect.189 The ECJ190 was only asked in Weber/Putz to clarify the legal situation with regard to installed goods and did not tackle the general issue of frusSee Art. 14(3) SGD. See the opinion of the Federal Council of Germany (Bundesrat) on the German draft law on the reform of the law on building contracts and on the amendment of the seller’s contractual liability for defects BT-Drs. 18/8486, 83, according to which the seller‘s obligation to remedy the defect should also extend to cases in which software must be de- and reinstalled or systems have to be reconfigured. With regard to this problem of expenses on a purchased goods which become frustrated as a result of the seller remedying a lack of conformity beyond the situation of an installation of the good see also Höpfner/Fallmann, 3745 et seq. 190 See CJEU, C-65/09 and C-87/09 Weber/Putz EU:C:2011:396. 188

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trated expenses. As a result there has been considerable legal uncertainty as to the extent of the seller’s obligation to remedy a lack of conformity under the Consumer Sales Directive. Unfortunately, the European legislator did not avail himself of the opportunity presented by the Digital Content Directive and the Sale of Goods Directive in order to specify the trader’s obligations with regard to such frustrated expenses. It is thus left to future ECJ jurisprudence to clarify the legal situation in this regard. There is little justification for distinguishing between the frustrated costs of an installation of a defective good and frustrated expenditures on non-tangible digital content or digital service and therefore both situations should be treated equally.

III. Place of remedying the conformity Art. 14(2) does not specify the place in which the trader is supposed to remedy the 78 lack of conformity and where the consumer is expected to make the respective non-conforming digital content or digital service available to the trader. Determining the respective place is thus left to national law. Unlike for the sale of goods, the question will usually be of little practical relevance due to the non-tangible nature of digital content and services and the ease with which they can be transported digitally. Still, the ECJ’s recent case law191, enacted with regard to distance contracts on the sale of consumer goods may also become relevant in the context of contracts for digital content and digital services at least in individual cases, for example, where hardware must be transported for the purpose of bringing the non-conforming digital content or digital service into conformity: accordingly Member States are to determine the place at which the consumer is expected to make the non-conforming digital content or digital service available to the trader in a way that it is in line with the triple requirement for remedying the defect, namely a remedying free of charge, within a reasonable time, and without significant inconvenience to the consumer192. And as the ECJ has further elaborated with regard to a necessary transport of the non-conforming object to the trader’s place of business, this means that in certain cases and depending on the nature of the object in question (weight, size, fragility), as well as on the intended use by an average consumer, sending the object to the place of business of the trader might constitute a significant inconvenience for the consumer193. Yet, insofar as a transport of the non-conforming object might justly be imposed on the consumer, the ECJ only exceptionally grants him advance payment of the costs, namely only when those costs constitute such a burden as to deter him from asserting his rights.194 This case law will have to be taken into account when transposing Art. 14(2) into national law.

IV. Liability for damage beyond the scope of the Directive Whereas the Commission’s Proposal dealt in part with damages, though that is only 79 damage to the digital environment of the consumer caused by a lack of conformity with the contract or a failure to supply the respective digital content,195 the Directive makes no further attempt to harmonise the national rules on damages. According to Art. 3(10), the Directive shall not affect the freedom of Member States to regulate the right to damSee CJEU, C-52/18 Fülla EU:C:2019:447. ibid., operative part of the judgment, section 1. 193 ibid., para. 43. 194 ibid., operative part of the judgment, section 2. 195 See Art. 14 COM(2015) 634 final. 191

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ages.196 Nevertheless, Recital 73 emphasises that ‘the principle of the liability of the trader for damages is an essential element of contracts for the supply of digital content or digital services’ and ‘therefore, the consumer should be entitled to claim compensation for detriment caused by a lack of conformity or a failure to supply the digital content or digital service’ and furthermore even specifies the method of calculating compensation in such a way that ‘the compensation should put the consumer as much as possible into the position in which the consumer would have been had the digital content or digital service been duly supplied and been in conformity’. Even though this statement might give the impression that the Directive imposes key features of a harmonised European law on damages, this should not obscure the fact that the Directive actually does not regulate this issue. In other words, the regulation of damages is left to the Member States.197 80 It is therefore consistent for Recital 73 to conclude with a clarification in this respect, even if the reason given for not including damages in the Directive is not very convincing: the fact that ‘as such a right to damages already exists in all Member States’ does not eliminate the need for harmonisation, since conditions and scope of liability vary considerably between Member States.198 Given the fact that the Directive aims at encouraging businesses to expand their cross-border trade by doing away with additional costs stemming from differences in national mandatory consumer contract law as well as with legal uncertainty,199 the lack of harmonisation of damages law seems hardly comprehensible.200 It will typically be important for a trader to know under what conditions and to what extent he will be liable for damages in case of a lack of conformity or a failure to supply and whether the applicable national law is mandatory or may be waived under the contract. 81 Furthermore, the lack of a harmonising provision on damages in the Directive is particularly problematic with regard to contracts which do not provide for an obligation of the consumer to pay a price in exchange for the supply of a digital content or a digital service.201 As in this situation, termination of the contract is often of little interest to the consumer and thus there might be no truly effective remedy at all under the Directive whenever the trader is entitled to refuse a bring the digital content or digital service into conformity due to impossibility or disproportionate costs. 82 However, the outlines of the planned right to damages as laid down in the Commission’s Proposal202 were too vague in their requirements, consequences, and in their interaction with national law on damages.203 In addition, it was not clear why precisely only damage to the consumer’s digital environment should be harmonised, but not other damage caused by a lack of conformity or a failure to supply, and why such a partial har-

→ Art. 3 DCD, mn. 150. See also Koch (2019), 158. 198 This has been admitted in Council of the European Union (‘9768/16’), 8, mn. 15: ‘the extent and modalities may differ from one Member State to another’. 199 See Recital 4. 200 See already the criticism in this respect, expressed by Gsell (‘Rechtsbehelfe bei Vertragswidrigkeit’), and with regard to the Sale of Goods Directive which also does not cover compensation for damages Gsell (‘Europäischer Richtlinien-Entwurf ’), 501 et seq. 201 Above → mn. 60. 202 See n 195. 203 For a more detailed review see Spindler, 222 et seq.; Ostendorf, 71; Fauvarque-Cosson, 16 et seq., the text is available under https://publications.europa.eu/en/publication-detail/-/publication/dd839de3-c29311e6-a6db-01aa75ed71a1/language-en/format-PDF/source-search (accessed 12 February 2020); see also the assessment in Council of the European Union (‘9768/16’), mn. 15: ‘this provision was perceived as causing more confusion than clarity’. 196 197

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monisation should be desirable.204 Insofar, the restraint of the European legislator to harmonise the compensation of damages might seem the lesser of two evils. If the Member States retain the power to regulate liability for damages one may won- 83 der whether the Directive imposes certain limits thereon. Since the compensation of damages for non-conforming performance regularly involves putting the obligee in the position he would be in if proper performance had taken place205, such a compensation of the so-called positive interest, might very easily overlap with the Directive’s first level remedy of bringing the respective digital content or digital service into conformity, which also aims at the performance of the contract. And even if the compensation of damages is not calculated on the basis of what the situation would have been if the contract had been properly performed, but on the so-called negative interest, i.e. what it would have been if the obligee had not concluded the contract, an overlap with the remedies of the Directive, namely with the right of termination, is easily possible. In order not to undermine the harmonising effect of the rights conferred by the Di- 84 rective, but at the same time respecting the autonomy of the Member States in the regulation of damages, it will be necessary to make a distinction according to the following rule of thumb:206 on the one hand, the Member States should be considered as not entitled to attach, by way of compensation for damages, more or less the same legal consequences to a lack of conformity as provided for by the Directive but under different conditions, for example, to allow the contract to be terminated immediately, although the trader, pursuant to the Directive, must first be given a chance to remedy the defect. On the other hand, the Member States should be regarded as entitled to attach to a lack of conformity consequences other than those provided for in the Directive by way of compensation for damages, even if these are far-reaching. For example, it would presumably be permissible under national law to compensate the consumer on grounds of a lack of conformity for the damage resulting from the fact that under the Directive he may not terminate the contract immediately in the event of a lack of conformity but must wait for the digital content or digital service to be brought into conformity.

V. Right to withhold performance beyond the scope of the Directive Whereas the Sale of Goods Directive207 harmonises the consumer’s right to withhold 85 payment in the event of the seller’s failure to fulfil his obligations, the Digital Content Directive does not contain a corresponding provision. On the contrary, Recital 15 emphasises the Member States’ power ‘to regulate whether a consumer, in cases of a lack of conformity, is to be entitled to withhold payment of the price or part thereof until the trader has brought the digital content or digital service into conformity […]’. This legislative omission deserves criticism because it affects the harmonising effect of the Directive.208 Moreover, the fact that the Sale of Goods Directive contains such a right to withhold performance, but the Digital Content Directive does not, unnecessarily affects the uniformity of European contract law.209 Gsell (‘Rechtsbehelfe bei Vertragswidrigkeit’), p. 158. See e.g. Art. 160 CESL on the general measure of damages. 206 See also with regard to this problem → Art. 13 DCD, mn. 59 et seq. 207 See Art. 13(6) Recital 18 3rd sentence SGD. However, the extent of the harmonisation is limited, since the conditions and modalities for the consumer to exercise this right are explicitly left to the Member States. 208 → Art. 13 DCD, mn. 54. 209 See already Gsell (‘Rechtsbehelfe bei Vertragswidrigkeit’), p. 156 with critical remarks as to COM(2015) 634 final. 204

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Article 15 Exercise of the right of termination The consumer shall exercise the right to terminate the contract by means of a statement to the trader expressing the decision to terminate the contract. Bibliography: Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; Langhanke/ Schmidt-Kessel, ‘Consumer Data as Consideration’ (2015) 5 EuCML 218–223; Spindler, ‘Contracts for the supply of digital content’ (2016) 12 ERCL 183–217. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. European contract law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Comparative remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Relationship with other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Requirements for exercising the right to terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Statement to trader expressing decision to terminate . . . . . . . . . . . . . . . . . . . . . 2. Possible formal requirements for effective statement . . . . . . . . . . . . . . . . . . . . . . 3. Content of the statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Effectiveness of statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Withdrawal of consent to processing personal data . . . . . . . . . . . . . . . . . . . . . . . 6. Operation of right to terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function 1

The function of Art. 15 is to specify how a consumer can exercise the right to terminate the contract. The availability of the right to terminate is determined by Art. 14(4), and Art. 15 only applies once the consumer is entitled to terminate the contract in accordance with Art. 14(4). Once the consumer is entitled to terminate, the process of exercising that right is determined by Art. 15, and compliance with its requirements is necessary in order to exercise the right effectively. Exercising the right of termination will bring the contract between the consumer and the trader who supplied the digital content to an end and will activate the provisions in Arts 16–18.

B. Context I. European contract law 2

The wording of Art. 15 is identical to Art. 16(1) SGD but this particular provision was introduced in these Directives for the first time. A right to terminate a contract due to a breach of that contract by the trader can be found in various forms in other directives. In the Consumer Sales Directive, Arts 3(2) and 3(5)/(6) laid down the conditions for the availability of a right of rescission for sales contracts, but that Directive did not specify how a consumer should exercise this right. The steps a consumer had to take to effect rescission of the sales contract were expressly left to national law.1 The Package Travel Directive also provides for instances when a consumer may terminate a package travel 1

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contract (as defined in Art. 3(4) Package Travel Directive), but does not stipulate the means by which a consumer has to exercise that right. The requirement to exercise the right of termination by means of a statement given to 3 the trader may be compared with the requirements for the exercise of the right of withdrawal in the Consumer Rights Directive. Art. 11(1) CRD requires the consumer to ‘inform’ the trader of the decision to withdraw from the contract, either by using the model withdrawal form provided in Annex I(B) or by ‘any other unequivocal statement’2 setting out the decision to withdraw from the contract. Recital 44 CRD explains that the consumer remains free as to the choice of words used in informing the trader, although whatever words are chosen must unequivocally indicate the consumer’s decision to withdraw from the contract. It further states that this can be done by a variety of means, including a telephone call or a letter. Although the right of withdrawal under the Consumer Rights Directive is not the 4 same as the right to terminate the contract as the former does not depend on a lack of conformity with the contract before it may be exercised, the parallels between the exercise of the right of withdrawal under the Consumer Rights Directive and the right to terminate under the Digital Content Directive can be noted; in particular, Art. 11(1)(b) permits withdrawal by making an ‘unequivocal statement’ of the decision to withdraw. Unlike the Consumer Rights Directive,3 however, the Digital Content Directive does not provide a model statement for exercising the right to terminate the contract.

II. Comparative remarks Art. 15 is essentially concerned with the formalities required to exercise the right to 5 terminate the contract. In some Member States, there is traditionally a requirement that termination of a contract requires an order by a court to be effective (e.g. France). Other Member States treat termination essentially as a self-help remedy that does not require the involvement of a court (e.g. Germany). Art. 15 only requires that the consumer expresses the decision to terminate the contract in a statement to the trader, which means that the only formal requirement for the effective termination of the contract is that notice of the consumer’s decision is given to the trader.4

C. Explanation I. Relationship with other provisions Within the Digital Content Directive, Art. 15 stipulates the formal steps which a con- 6 sumer must adhere to in order to effectively exercise the right to terminate the contract. It sets out a discrete step between the preconditions for the availability of the right to terminate set out in Art. 14 and the consequences of the right of termination once exercised in Arts 16–18. As well as stipulating the precise way in which a consumer can exercise the right, Art. 15 therefore also acts as a precondition to the application of Arts 16– 18. This means that, if a consumer has attempted to terminate the contract by means other than those stipulated in Art. 15, the termination is not effective and therefore the

Art. 11(1)(b) CRD. Art. 11(1)(a) CRD. 4 cf. Art. III.–3:507 DCFR. See also Spindler, 208.

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trader’s and consumer’s respective rights and obligations under Arts 16–18 are not engaged.

II. Requirements for exercising the right to terminate 1. Statement to trader expressing decision to terminate 7

Art. 15 stipulates how a consumer must exercise the right to terminate. It requires that the consumer uses a statement which is made to the trader, and the statement must express the consumer’s decision to terminate the contract. The wording of Art. 15 differs from the wording initially contained in the Commission Proposal for a Digital Content Directive. There, the requirement was phrased more broadly and required the consumer to exercise the right of termination ‘by notice to the supplier given by any means’ (Art. 13(1) Commission Proposal for a Digital Content Directive)). The wording in the Proposal for the Digital Content Directive would have permitted a wide range of possible ways of indicating to the trader that the consumer wishes to terminate the contract. Under Art. 15, the requirement for a valid exercise has been limited to a statement which expresses the consumer’s intention to terminate.

2. Possible formal requirements for effective statement 8

The Digital Content Directive does not further elaborate the precise requirements for such a statement, such as its form or content. There is no specific form requirement stipulated in Art. 15, which suggests that the consumer can make the required statement in a variety of ways. Thus, the statement could be written or oral. If it is written, it can be made to the trader by a variety of routes. This could include a typed letter sent via the postal service, an e-mail, online chat, or perhaps even a message sent via any social media services provided by the trader. An oral statement could be made via a customer service helpline, where available.

3. Content of the statement a) No specific form of words. No specific form of words is required. However, it has to be clear from the statement that the consumer wishes to terminate the contract. It is unclear how precisely worded that statement needs to be. The phrase ‘expressing the decision’ to terminate the contract suggests that the required statement only needs to make it clear to the trader that the consumer seeks to terminate the contract, but it does not seem necessary that the consumer uses the exact terminology of the Digital Content Directive. As the effect of termination is to bring the contract for the digital content/digital service to an end, any clear statement which leaves the trader without any doubt that the consumer no longer wishes to be bound by the contract should suffice. Although the Digital Content Directive itself does not stipulate this, the substance of the statement, irrespective of how it is worded, will need to be unequivocal in expressing the consumer’s desire to bring the contract to an end. 10 b) Detail required for statement. Art. 15 is silent on the amount of detail which the consumer is expected to include in the statement, other than a sufficiently clear wording to make it clear to the trader that termination is sought. However, in order for the requirement of a statement to work, it seems that the consumer needs to provide at least information such as their name along with other information that will allow the trader to determine the contract which the consumer seeks to terminate. A statement which does not include this information might therefore not satisfy the essential requirement 9

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of Art. 15, which could mean that a consumer would be deemed not to have complied with the requirements of Art. 15, rendering the attempted exercise of the right to terminate ineffective.5 c) Reasons for exercising right to terminate. It is also not clear whether it is necessary 11 for a consumer to state a specific reason for the decision to terminate although one would generally expect that a consumer would have to state that the decision to terminate the contract is due to a lack of conformity and give a general indication of the way in which that lack of conformity has manifested.

4. Effectiveness of statement Art. 15 only requires that there is a statement. As already explained,6 whilst Art. 15 does not spell out any particular formal requirements regarding the statement, one can infer several such requirements. The vagueness of Art. 15 also leaves open whether any specific requirements operate regarding the point at which the statement becomes effective. This is an important question, because several of the obligations of both the trader and the consumer which are trigged by an effective exercise by the consumer of the right to terminate need to be completed within a fixed timescale.7 Furthermore, the trader’s obligation to discontinue the use of personal and non-personal data8 is activated at the point at which the right of termination takes effect. a) Time when statement is effective. The first question regarding the effectiveness of the statement is whether the statement takes effect as soon as it is made by the consumer, or only once the trader has become aware of the statement.9 The importance of this will vary depending on the precise means used by the consumer for making the statement. If it is done during an instantaneous conversation with the trader, e.g., via the telephone or an online customer service chat facility, one can assume that the period of time between the consumer making the statement and the trader receiving it is so short as to be negligible, and time will start to run immediately. However, if the statement is made by other means, such as an e-mail, the question will arise whether the moment at which the statement becomes effective is the time when it is sent by the consumer or when it was received by the trader. The other provisions of the Digital Content Directive regarding the consequences of exercising the right to terminate offer limited assistance for resolving this issue. Art. 17(2) and Art. 18(1) refer to the ‘date on which the trader is informed’ of the consumer’s decision to terminate the contract. This phrase could be interpreted in such a way as to suggest that all that is required is that the consumer has conveyed their decision to terminate the contract to the trader. However, this cannot mean that the statement takes effect as soon as it is sent by the consumer, because that would make the trader subject to the obligations triggered by the exercise of the right to terminate at a point when the trader does not yet have any knowledge, and could not be expected to have knowledge, of the consumer’s exercise of the right to terminate. Therefore, it seems reasonable to assume that the statement made by the consumer must have been received by the trader. b) Point at which trader has received statement. The proposition, developed above, that the statement must have been received leaves open the question of when precisely the trader can be said to have received, or have been informed of, the consumer’s stateBelow → mn. 12 et seq. Above → mn. 8 et seq. 7 See Art. 17(2) and Art. 18(1). 8 See Art. 16(2) and (3). 9 Associated with this is the practice question of how the consumer can prove that the trader has received the notice: Spindler, 208. 5

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ment regarding the termination of the contract. For example, if the statement is made by e-mail, the point of receipt could be (i) the moment the e-mail arrives in the trader’s email inbox; or (ii) if the e-mail was sent outside normal business hours, the moment when the trader’s normal business hours start; or (iii) once the trader could reasonably be expected to have read the e-mail, or (iv) when the trader has actually read the e-mail. Similar questions might arise with other forms of written communication, such as a direct message sent via Twitter, or a statement sent via a customer service form on the trader’s website. As there is no requirement for the trader to acknowledge receipt of the consumer’s statement, there is potential for disagreement as to when, and indeed whether, the exercise of the right to terminate has become effective. 16 There are further difficulties. One of these follows from the assumption that receipt of the statement by the trader is required. This raises a question about the consequences of a delay in receiving the statement or of non-receipt of the statement. A delay may be the result of technical difficulties in transmitting an electronic message from consumer to trader, and non-receipt could be caused e.g., by a spam filter which mistakenly categorises an e-mail containing the consumer’s statement as spam. With the Digital Content Directive silent on these points, this is a matter to be resolved by applying general principles regarding the effectiveness of electronic communications. 17 c) Statement not made using normally used communication channel. A final issue concerns the effectiveness of a statement made via a communication channel not normally used by the trader for the purposes of dealing with its customers. For example, the trader may operate a social media platform which permits users to address public posts to a particular recipient (e.g., on Twitter or Instagram), but do so purely for marketing purposes. A consumer who sends a message with the statement exercising the right to terminate the contract via this route may not be treated as having exercised the right correctly, with the consequence that the statement would be ineffective. In this regard, it is relevant to refer to the requirement in Art. 6(1)(c) CRD, dealing with the trader’s precontractual information obligation in respect of off-premises and distance contracts, which requires a trader to provide information about the address, telephone number and e-mail which a consumer can use to contact the trader, and Art. 6(1)(m) CRD, which requires information about after sale customer assistance. This information should indicate to a consumer how to contact a trader, and assuming that this information was given, a consumer could reasonably be expected to use of those communication channels as the route for making the statement of termination to the trader.

5. Withdrawal of consent to processing personal data 18

A particular difficulty might be caused in respect of a contract for digital content or a digital service where the consumer has not paid a price but only given permission to the trader to collect personal data within the meaning of the General Data Protection Regulation. Under Art. 6(1)(a) GDPR, consent to processing personal data is required in order for such processing to be lawful. There are other grounds for establishing the lawfulness of processing in Art. 6(1) GDPR, but in the context of most digital content and digital services within the scope of the Digital Content Directive, consent will be the key criterion. Consent to processing personal data may be withdrawn at any time,10 but there are no formal requirements for withdrawing consent other than the obligation to make withdrawal ‘as easy … as to give consent’.11 In a situation where the consumer has agreed to provide personal data in return for the digital content or the digital service on10 11

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ly, the question may arise whether a withdrawal of that consent to prevent further processing of the consumer’s personal data would also amount to a statement expressing the decision to terminate the contract. There are several reasons why this should not be the case. First, withdrawing consent to processing personal data should be treated distinctly from the statement required to exercise the right of termination. A consumer who has discovered a non-conformity in the digital content or digital service may wish to withdraw consent for further data processing until the lack of conformity has been remedied but may not wish to terminate the contract immediately. For that reason alone, the withdrawal of consent to processing should not be treated as a statement for the purposes of Art. 15. Secondly, the right to terminate under the Digital Content Directive presupposes that there is a non-conformity of the digital content or digital service entitling the consumer to exercise the right to terminate. However, a consumer can withdraw consent to processing personal data in circumstances where there is no lack of conformity of the digital content or digital service. Whilst the withdrawal of consent may affect the contract for the supply of the digital content or digital service resulting in the contract coming to an end (although not invariably so),12 this is separate from the right to terminate for a lack of conformity under Art. 14(1) and (4). In the absence of specific EU rules on this particular point, it would be for national law to resolve. Finally, as withdrawal of consent to the processing of personal data may be effected in way that does not involve a statement being made by the consumer to the trader (such as unticking a box in the user preferences), withdrawal of consent would not satisfy the requirements of Art. 15. Even where the consumer withdraws consent through a statement to the trader, its wording may not ‘express the decision to terminate the contract’. For these reasons, withdrawal of consent to the processing of personal data should not be treated as satisfying the requirements of Art. 15. However, the situation discussed here should not be confused with the consequences of exercising the right to terminate the contract with regard to the processing of personal data.13

6. Operation of right to terminate Once the right to terminate has been exercised, the respective obligations of the trad- 19 er (under Arts 16 and 18) and the consumer (under Art. 17) are triggered. The wider effect of exercising the right of termination will vary depending on the type of supply contract under which the digital content or digital service was provided to the consumer. In the case of a single act of supply, remedies for non-conformity will only be available if the digital content or digital service was not in conformity with the contract at the time of supply. Where digital content or a digital service is provided on a continuous basis, a non-conformity which only arises during the time of supply can also give rise to the various remedies. As is evident from the second sentence of Art. 16(1), termination will only operate prospectively from the point at which the non-conformity manifested in the case of contracts involving the continuous supply of digital content or a digital service.

D. Transposition issues The full harmonisation nature of the Digital Content Directive means that Member 20 States will not be able to depart from the substance of its provisions when transposing 12 13

Langhanke/Schmidt-Kessel, 222. See the discussion of Art. 16(2) → Art. 16 DCD, mn. 25 et seq.

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the Directive into national law. In the context of Art. 15, this means that there is only one route by which the right to terminate can be exercised validly, and Member States cannot offer alternative means of exercising that right. Conversely, no further formalities on the exercise of the right to terminate the contract can be imposed. 21 As discussed, 14 there are many open questions regarding the precise requirements regarding the statement which has to be made by the consumer. Absent any guidance from the CJEU (which may eventually be forthcoming), Member States will have to rely on any rules of national law to address these issues. One issue concerns the content of the statement which a consumer has to make to the trader to exercise the right to terminate, in particular which details a consumer has to include with regard to the contract and the grounds for exercising the right to terminate. Moreover, it will become important to establish when precisely the various time periods which are triggered by the consumer’s statement of termination will commence. This will depend on the rules applicable to the effectiveness of communications between contracting parties generally.

Article 16 Obligations of the trader in the event of termination 1. In the event of termination of the contract, the trader shall reimburse the consumer for all sums paid under the contract. However, in cases where the contract provides for the supply of the digital content or digital service in exchange for a payment of a price and over a period of time, and the digital content or digital service had been in conformity for a period of time prior to the termination of the contract, the trader shall reimburse the consumer only for the proportionate part of the price paid corresponding to the period of time during which the digital content or digital service was not in conformity, and any part of the price paid by the consumer in advance for any period of the contract that would have remained had the contract not been terminated. 2. In respect of personal data of the consumer, the trader shall comply with the obligations applicable under Regulation (EU) 2016/679. 3. The trader shall refrain from using any content other than personal data, which was provided or created by the consumer when using the digital content or digital service supplied by the trader, except where such content: (a) has no utility outside the context of the digital content or digital service supplied by the trader; (b) only relates to the consumer's activity when using the digital content or digital service supplied by the trader; (c) has been aggregated with other data by the trader and cannot be disaggregated or only with disproportionate efforts; or (d) has been generated jointly by the consumer and others, and other consumers are able to continue to make use of the content. 4. Except in the situations referred to in point (a), (b) or (c) of paragraph 3, the trader shall, at the request of the consumer, make available to the consumer any content other than personal data, which was provided or created by the consumer when using the digital content or digital service supplied by the trader.

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Above → mn. 7 et seq.

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The consumer shall be entitled to retrieve that digital content free of charge, without hindrance from the trader, within a reasonable time and in a commonly used and machine-readable format. 5. The trader may prevent any further use of the digital content or digital service by the consumer, in particular by making the digital content or digital service inaccessible to the consumer or disabling the user account of the consumer, without prejudice to paragraph 4. Bibliography: Behar-Touchais, ‘Remedies in the Proposed Digital Content Directive’ in: Schulze/Staudenmayer/Lohsse (eds), Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Nomos 2017), p. 129–140; Clayes/Vancoillie, ‘Remedies, modification of digital content and right to terminate long-term digital content contracts’ in: Clayes/Terryn (eds), Digital Content and Distance Sales – New developments at EU level (Intersentia 2017), p. 167–232; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; European Data Protection Supervisor, ‘Opinion 4/2017 on the Proposal for a Directive on certain aspects concerning contracts for the supply of digital content’ (14 March 2017) (OJ C 200, 23.6.2017, p. 10); Feiler/Forgó/Weigl, The EU General Data Protection Regulation (GDPR): A Commentary (Globe Law and Business 2018); Spindler, ‘Contracts for the supply of digital content’ (2016) 12 ERCL 183–217; Twigg-Flesner, ‘Conformity of 3D prints – Can current Sales Law cope?’ in: Schulze/Staudenmayer (eds), Digital Revolution – Challenges for Contract Law in Practice (Nomos 2016), p. 35–66; Twigg-Flesner, ‘Remedies in European Contract Law – Themes and Controversies’ in: Hofman/Kurz (eds), Law of Remedies: A European Perspective (Intersentia 2019), p. 251–274; Weber, ‘Data Protection in the Termination of Contract’ in: Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Nomos 2017), p. 189–207; Wendehorst, ‘How to Reconcile Data Protection and the Data Economy’ in: Lohsse/Schulze/Staudenmayer (eds), Trading Data in the Digital Economy: Legal Concepts and Tools (Nomos 2017), p. 327–355; Zoll, ‘The Remedies in the Proposals of the Online Sales Directive and the Directive on the Supply of Digital Content’ (2016) 6 EuCML 250–254. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. European contract law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Comparative remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 4 5

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Trader’s obligation to reimburse all sums paid under the contract . . . . . . . . . . . III. Limitation of obligation to reimburse where digital content/digital service provided over a period of time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Consumer has paid a price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Digital content or digital service supplied over a period of time . . . . . . . . . . 3. Lack of conformity for some of the period of supply only . . . . . . . . . . . . . . . . . 4. Partial reimbursement where all criteria met . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Trader’s obligations in respect of personal data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Trader’s obligation in respect of content other than personal data . . . . . . . . . . . 1. Content other than personal data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Obligation to refrain from using content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Exceptions to the obligation to refrain from using content . . . . . . . . . . . . . . . . VI. Trader’s obligation to make content other than personal data available . . . . . . 1. Purpose of this obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Content other than personal data within the scope of Art. 16(4) . . . . . . . . . 3. Content to be made available on request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Timescale for making request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Content to be made available . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Consumer’s entitlement to retrieve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Exceptions to obligation under Art. 16(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII. Trader’s right to prevent further use of digital content or digital service . . . . .

6 6 7 12 14 15 16 19 24 36 37 39 41 49 49 50 51 53 55 65 72 75

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function Art. 16 lays down some of the obligations of the trader after the consumer has exercised the right to terminate the contract. Generally speaking, after termination, it is the responsibility of each party to return to the other party what was received under the contract. The first sentence of Art. 16(1) therefore requires a trader who supplied digital content or a digital service to reimburse the consumer for all sums which the consumer paid under the contract. This is qualified by the second sentence of Art. 16(1), which deals with a contract for the supply of the digital content or digital service over a period of time where the lack of conformity with the contract only affected some of that period. In that case, the duty to reimburse a consumer is limited to the price paid for the period when the content or service was not in conformity with the contract. 2 It is in the nature of many contracts for the supply of digital content or digital services that a consumer will provide both personal data and non-personal data to the trader. Art. 16(2)–(4) therefore set out the obligations of the trader with regard to data provided by the consumer. With regard to personal data, Art. 16(2) refers to the General Data Protection Regulation and requires the trader to comply with the requirements thereunder. Dealing with content other than personal data, Art. 16(3) requires the trader not use such content except where one or more of the circumstances in subparagraphs (a) to (d) apply. Art. 16(4) provides that the trader has to make such content available to the consumer if requested. 3 Finally, Art. 16(5) empowers the trader to take steps to prevent the consumer from continuing to use the digital content or digital service after termination of the contract. 1

B. Context I. European contract law 4

Whilst the right to terminate a contract for breach (i.e., a lack of conformity) has been a feature of European contract law since the Consumer Sales Directive,1 it has taken longer for European rules dealing with the effects of termination to find their way into EU legislation. In the second Package Travel Directive, for example, Art. 11(5) requires the organiser of the package to refund payments made by the consumer. The Sale of Goods Directive also stipulates that that trader must reimburse the consumer in the case of termination due to a lack of conformity.2 The Digital Content Directive goes further than previous directives in several ways: first, it introduces additional modalities for complying with the obligations which arise following the termination of the contract by the consumer. Secondly, the Digital Content Directive addresses the novel situation of what must be done with the data provided by the consumer to the trader. In that sense, the Digital Content Directive could be regarded as further advancing the evolution of the European system of contract law remedies.3

See Art. 3 CSD. Art. 16(3)(b) SGD. 3 Twigg-Flesner (2019), p. 261; Zoll, 251. 1 2

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II. Comparative remarks Arts 16–18 address some of the restitutionary obligations of both parties following 5 termination of the contract.4 Generally speaking, the obligation to make restitution of what has been received under the contract prior to termination is found in all the laws of contract of the Member States. As most Member States do not have specific contract law rules regarding the supply of digital content and digital services, the consequences of terminating a contract involving digital content/digital services would be addressed by applying the rules applicable to termination of a contract in general. The novelty of Art. 16 is that it contains provisions dealing with the ‘restitution’ of data,5 especially content other than personal data, which is an aspect hitherto not generally addressed at national level.

C. Explanation I. System The Digital Content Directive provides a number of provisions which deal with the 6 consequences of the consumer’s decision to exercise the right to terminate the contract. These are contained in Arts 16–18. A precondition before these provisions are engaged is that the consumer has terminated the contract in accordance with the requirements in Art. 15. Once this has been done, a number of obligations for both the trader and the consumer are triggered by Arts 16–18. Art. 16 focuses on the obligations of the trader both in respect of any sums paid by the consumer and any data, whether personal or non-personal, provided by the consumer.

II. Trader’s obligation to reimburse all sums paid under the contract Art. 16(1) deals with the trader’s obligation to refund the consumer once the contract 7 has been terminated. The obligation arises once the consumer has exercised the right to terminate the contract in accordance with Art. 15. The purpose of Art. 16(1) is merely to establish the trader’s obligation to reimburse the consumer, but does not deal with the related modalities. These are dealt with in Art. 18 DCD, which provides the timescale and method of reimbursement in the case of both the exercise of the right to terminate and the alternative right of the consumer to ask for a price reduction. The first sentence of Art. 16(1) stipulates the trader’s general obligation to reim- 8 burse the consumer ‘for all sums paid under the contract’. The limitation on this obligation set out in the second sentence of Art. 16(1) is discussed below. 6 The obligation on the trader is to reimburse the consumer ‘for all sums paid under 9 the contract’. If the consumer has paid a price for the digital content or digital service, then the price will be covered by this obligation. The same will be the case if the con-

cf. Art. III.–3:510 DCFR. It may not be appropriate to speak of restitution of data at all, but rather of ‘re-establishing data ownership of the consumer’: Weber, p. 195. 6 Below → mn. 12 et seq. 4

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sumer paid a price as well as provide personal data,7 in which case the obligation under Art. 16(1) covers the reimbursement of the price paid.8 10 However, the obligation to reimburse the consumer is not limited solely to the price paid by the consumer for the digital content or digital service. The phrase ‘all sums paid under the contract’ has to be understood in a broader sense; otherwise, the term ‘price’ would have been used in Art. 16(1) 1st sentence. In this regard, it should be noted that the second sentence of Art. 16(1) expressly refers to the payment of a price for the digital content or digital service in limiting the trader’s obligation to reimburse the consumer. 9 11 Therefore, the general obligation in Art. 16(1) is not limited to the price (where paid) but extends to any other sums paid under the contract. An example of such an ‘other sum’ would be a so-called ‘in-app purchase’, i.e., additional elements for digital content. Many applications can be acquired without paying a price, but in order to utilise certain features, a consumer has the option of paying a price to access those features. A further example might be an additional payment for a special event offered on an online streaming service which is not covered by the consumer’s regular subscription and only available for a separate payment (‘pay-per-view’). On termination, a consumer is therefore not only entitled to receive a refund of the price itself, but also of any additional payments which have been made during the course of the contract, subject to the limitation imposed by the second sentence of Art. 16.

III. Limitation of obligation to reimburse where digital content/ digital service provided over a period of time Whilst Art. 16(1) 1st sentence, establishes a general obligation on the trader to reimburse the consumer for all sums paid under the contract, this obligation is qualified by the second sentence of this provision. 13 The second sentence of Art. 16(1) applies where three requirements are met: (i) the consumer paid a price for the supply of the digital content or the digital service; (ii) the digital content or digital service has been supplied over a period of time; and (iii) the non-conformity only affects some of the period during which the digital content or digital service was supplied prior to termination of the contract. Each of these requirements requires further elaboration. 12

1. Consumer has paid a price. 14

The definition of ‘price’ includes both money and a ‘digital representation of value’,10 but it does not include data (whether personal or non-personal). Therefore, Art. 16(1) 2nd sentence does not apply where the consumer has only agreed to provide personal data to the trader supplying the digital content or digital service. A difficulty may be caused by a situation where the consumer has been supplied with digital content or a digital service and, at the time of supply, has only undertaken to provide personal data, and subsequently acquires additional features of the digital content or digital service against the payment of a price. In this instance, the consumer has paid a price for some 7 The personal data provided by the consumer would be personal data other than that required for the purpose of supplying the digital content or digital service or to enable the trader to comply with legal requirements to which the trader is subject: see Art. 3(1) 2nd part. 8 Art. 16(2) cross-refers to the GDPR as far as the trader’s obligations regarding the consumer’s personal data are concerned. 9 Below → mn. 12 et seq. 10 Art. 2 No. 7; → Art. 2 DCD, mn. 26 et seq. and → Art. 3 DCD, mn. 32 et seq.

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elements of the digital content or the digital service. Therefore, Art. 16(1) 2 nd sentence should also apply to payments made in order to access such additional elements even where the consumer did not pay a price for the basic digital content or digital service.

2. Digital content or digital service supplied over a period of time The requirement that the digital content or digital service is supplied over a period of 15 time excludes the one-off acquisition of digital content or (less likely) a digital service, such as a computer game only used on the consumer’s device, or word-processing software installed on a desktop computer. Digital services, in particular, are usually supplied over a period of time. Common examples of this include cloud-based storage and other cloud-based applications, and audio-visual streaming websites.

3. Lack of conformity for some of the period of supply only Finally, the lack of conformity on the basis of which the consumer decided to exercise 16 the right to terminate the contract was not present from the moment the supply of the digital content or digital service commenced until the point of termination, but only affected some of the period of supply. This might be the case, e.g., where the digital content or digital service was updated and the update created the lack of conformity, or where there was a significant or recurring interruption in the supply of the digital content or digital service.11 It may not always be straightforward to determine whether digital content or a digital 17 service was provided in a single act of supply or supplied over a period of time, and therefore whether a reimbursement after termination for a lack of conformity should cover the whole period or only the period when the lack of conformity was apparent. This difficulty is acute where the lack of conformity may have been present from the start but only materialises much later. Art. 16(1) 2 nd sentence refers to the digital content or digital service having ‘been in conformity for a period of time’ and restricts the reimbursement to the period during which the digital content/service ‘was not in conformity’. This phrasing suggests that Art. 16(2) 2nd sentence is not intended to apply to instances where a latent lack of conformity only becomes an issue at a later point after a period of trouble-free use of the digital content or digital service by the consumer. This difficulty may be illustrated by the following example12 concerning software 18 which worked on one common operating system turns out to be incompatible with a different operating system despite a statement by the trader that the software would be compatible with either system. The consumer had been able to use the software without difficulty on one system for a period of time and only realised that there was a lack of conformity when transferring to the other operating system. Strictly speaking, as the lack of conformity was there from the moment supply commenced, this situation would not be covered by Art. 16(1) 2nd sentence, but by Art. 16(1) 1st sentence and therefore entitle the consumer to reimbursement of all sums paid. However, in such a situation, it may seem disproportionate to require the trader to reimburse the consumer for all sums paid on the basis that the lack of conformity was present from the start. In the absence of a provision in the Digital Content Directive which might allow the trader to reduce the amount to be reimbursed in instances where there was a lack of conformity from the start which only became a problem after a time, an answer may be provided on the basis of the general approach in the Directive to balance the interests of traders and con11 12

cf. Recital 51. Taken from Clayes/Vancoillie, p. 210.

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sumers respectively. 13 This might lead to a solution which would treat the delayed materialisation of a lack of conformity ab initio as a reason to determine the amount of the reimbursement due to the consumer by analogy with Art. 16(2). The alternative would be to leave this matter entirely to national law, but not every national law may provide a clear solution for this issue.

4. Partial reimbursement where all criteria met Where all three requirements apply, the effect of Art. 16(1) 2 nd sentence is to limit the trader’s obligation to reimburse the consumer for the price paid. Instead of requiring the trader to reimburse the consumer for all sums paid under the contract, the trader only has to reimburse the consumer for a proportion of the price which corresponds to the period during which the lack of conformity subsisted. For example, assume a consumer has agreed to pay 15€ per month for access to a cloud-based digital service for a total period of twelve months. After 7 months, recurring disruptions to the digital service start to occur, which accumulatively constitute a lack of conformity 9 months into the contract. At this point, the consumer decides to exercise the right to terminate the contract. On termination, the trader’s obligation to reimburse the consumer arises, but as the digital service was in conformity for the first 7 months after conclusion of the contract, the consumer would only be entitled to a reimbursement for months 8 and 9. 20 Furthermore, as well as refunding the consumer for any price already paid, the consumer has to be reimbursed for any price paid in advance in respect of the period of the contract which would have remained if the contract had not been terminated by the consumer. In the example given above, assume that the consumer who entered into a contract for the supply of a digital service for a 12-month period paid a lump sum for the entire period in advance (e.g., 180€). As the contract was terminated at the end of month 9, the consumer would be refunded a proportionate amount which in this instance would be one-third of the price paid (corresponding to 4 out of 12 months), i.e., 60€ to cover both the period of non-conformity before termination and the period that would have remained had the contract not been terminated. 21 Art. 16(1) only deals with payments already made by the consumer but not the obligation on the consumer under the contract to make payments at certain intervals during the contract period. The extinction of the consumer’s liability after termination is not directly addressed in the Digital Content Directive, but this extinction of liability results from the fact that the contract has been terminated, which removes the trader’s contractual entitlement to future payments.14 22 The justification for the qualification in Art. 16(1) 2nd sentence is the desire to balance the respective interests of the consumer and the trader. 15 Where it applies, the consumer will have had a period of time during which the digital content or digital service was in conformity with the contract. It would therefore be against the trader’s interests if the consumer was reimbursed for all of the price paid, because this would mean that the consumer would have had free use of the digital content or digital service for a period. The balance between trader and consumer in this instance appears to have been struck in the right place, not least because the consumer is not precluded from bringing a claim for damages under the rules of the applicable national law if additional compensation is required.16 19

cf. Recital 68. cf. Art. III.–3:509 DCFR. 15 Recital 68. 16 Recital 73. 13 14

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This solution can be compared to what would happen under a contract involving the 23 hire/leasing of goods for a fixed period of time where a lack of conformity manifests some time into the hire period. If the consumer is entitled to terminate the contract at that point, the trader will usually not be required to reimburse the consumer for any hire-charges covering the period during which the goods were in conformity with the contract. This comparison does not conflict with the Digital Content Directive because the Directive does not determine the legal nature of a contract involving the supply of digital content or digital services, leaving this issue to national law.17

IV. Trader’s obligations in respect of personal data Art. 16(1) deals with the reimbursement of the price paid by the consumer for the 24 supply of the digital content or digital service. In this regard, it corresponds with an obligation of the trader already familiar from other contexts, such as reimbursement of the price paid for goods when a consumer sales contract is terminated.18 However, in most cases, the supply of digital content and digital services is not limited to a consumer paying a price; indeed, in many instances, a consumer is supplied with digital content or a digital service without charge, but undertakes to provide personal and/or other data to the trader instead. When the contract for the supply of digital content is terminated, it is therefore necessary to address the trader’s obligations in respect of both personal and non-personal data supplied by a consumer. Art. 16(2) deals with personal data. The definition of ‘personal data’ for the purpos- 25 es of the Digital Content Directive is the same as that in the General Data Protection Regulation.19 The definition of personal data in the GDPR is detailed and states as follows: any information relating to an identified or identifiable natural person (‘data subject’); an identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identity of that natural person.20

This is an extremely broad definition21 which only excludes data which could not be 26 attributed to a natural personal by any means from its scope. So as long as it remains possible to somehow link data to a natural person, it will fall within the GDPR’s definition of personal data. It could, for example, extend to cover matters such as data transmitted whilst using connected devices such as a car, despite the fact that this data might seem to be technical and therefore non-personal.22 The Commission Proposal for a Digital Content Directive contained detailed rules 27 regarding the trader’s obligations in respect of all types of data provided by a consumer.23 However, during the legislative process, this was amended to apply only to data which is not personal data, on the basis that the General Data Protection Regulation already provides a comprehensive EU framework for protecting personal data.24 More17 Recital 12, which also mentions ‘sales, service, rental or sui generis contract’ as possible contract types for supplying digital content or digital services. 18 See e.g., Art. 16(3)(b) SGD. 19 Art. 2 No. 8; → Art. 2 DCD, mn. 31 et seq., → Art. 3 DCD, mn. 46 et seq. 20 Art. 4 No. 1 GDPR. 21 European Data Protection Supervisor, 11. 22 Wendehorst, p. 330. 23 See Art. 13 COM(2015) 634 final. 24 See Recital 24.

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29

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over, the European Data Protection Supervisor had identified a number of serious conflicts between the Commission Proposal for a Digital Content Directive and the EU’s legal framework with regard to the protection of personal data.25 As a result, Art. 16(2) DCD does not impose any additional obligations on a trader in respect of the consumer’s personal data; instead, this provision requires the trader to comply with the obligations imposed by the GDPR. Therefore, if the trader supplying the digital content or digital service was provided with personal data by the consumer, irrespective of whether or not the consumer paid a price for the supply of the digital content or digital service, the obligations in respect of the consumer’s personal data following termination of the contract are governed by the GDPR. Here, a number of key points regarding the trader’s obligations under the GDPR will be noted; for a fuller discussion of all the aspects of the GDPR, the reader should refer to a commentary on the GDPR.26 A trader who is provided with personal data by a consumer could be both a ‘controller’27 and a ‘processor’28 for the purposes of the GDPR. If the trader merely receives the data and transfers it to a third party for processing, the trader will be a controller only; if the trader also processes the data, then it would also be a processor. Detailed obligations for controllers and processors are specified in chapter IV of the GDPR. The principles for processing personal data and the rights of the data subject29 under the GDPR are of direct relevance to the trader’s obligations regarding the handling of personal data after termination of the contract. In particular, processing of personal data must be lawful;30 personal data must only be collected for ‘specified, explicit and legitimate purposes’31, and the personal data thus collected must be ‘adequate, relevant and limited to what is necessary’32 for those purposes.33 Personal data may only be processed where this is lawful in accordance with the criteria in Art. 6(1) GDPR. In most instances, the basis for lawful processing will be Art. 6(1)(a) GDPR, which regards as lawful any processing of personal data to which the data subject has given its consent. Further criteria of particular relevance to contracts for the supply of digital content or digital services might be processing which is ‘necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract’, 34 and compliance by the trader of any legal obligation which applies to the trader in respect of personal data.35 However, if the personal data provided by a consumer under a contract for the supply of digital content or digital services is ‘exclusively processed by the trader for the purpose of supplying the digital content or digital service in accordance with this Directive or for allowing the trader to comply with legal requirements to which the trader is subject’,36 then such a contract would be beyond the scope of the Digital Content Directive, although the GDPR would still apply. Art. 8 EU Charter, and the GDPR: European Data Protection Supervisor, 11. e.g., Feiler/Forgó/Weigl. 27 Art. 4 No. 7 GDPR. 28 Art. 4 No. 8 GDPR. 29 An ‘identified or identifiable natural person’ (Art. 4 No. 1 GDPR), which will include consumers within the Digital Content Directive. 30 Art. 5(1)(a) GDPR. 31 Art. 5(1)(b) GDPR. 32 Art. 5(1)(c) GDPR. 33 See Art. 5 GDPR for all the principles relating to the processing of personal data. 34 Art. 6(1)(b) GDPR. 35 Art. 6(1)(c) GDPR. 36 Art. 3(1) 2nd sentence. 25

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The standard situation likely to arise in contracts for the supply of digital content or digital services which fall within the Digital Content Directive will therefore be where the consumer has given consent to the processing of personal data by the trader. With regard to consent to data processing, it has to be freely given37 and given separately from any other declarations which might be made at the same time.38 In the case of a contract for the supply of digital content or a digital service, this will generally require a separate clear point at which the consumer is asked whether he consents to the processing of personal data – it would not be sufficient to include a term among the other terms of the contract by which the consumer gives consent to personal data processing.39 Assuming, therefore, that consent is the main basis on which the trader collects and processes the personal data provided by the consumer, a key issue following termination of the contract for the supply of digital content or a digital service is how this effects the consent to processing previously given to the consumer. As far as the withdrawal of consent is concerned, the GDPR states that the data subject is able to do so at any time, and that withdrawing consent has to be as easy as giving consent.40 Furthermore, once consent is withdrawn, any further processing of personal data would not be lawful unless another lawful reason for processing continues to apply 41 but this does not affect any lawful processing which was carried out before consent was withdrawn.42 The question therefore is whether a consumer’s statement to the trader under Art. 15 DCD to exercise the right to terminate would be sufficient to constitute withdrawal of consent to further processing of the consumer’s personal data. As a matter of consumer protection, this question should be answered positively because consumers would expect that the effect of terminating the contract would be to bring all aspects of the legal relationship with the trader to an end. Furthermore, if consent to data processing was given by the consumer when entering into the contract, then the requirement that withdrawal of consent must be ‘as easy …as to give consent’43 would suggest that termination of the contract should have the additional effect of constituting withdrawal of consent. In any case, the consumer must have been informed by the trader at the time of consenting to the collection of personal data that this consent can be withdrawn.44 Assuming that termination has the effect of withdrawing consent to further processing, then absent any other basis for lawful processing, the trader would not be permitted to make any further use of the personal data provided by the consumer. Moreover, a consumer will have the right to ask the trader to erase all the personal data concerning that consumer.45 Furthermore, a consumer can request the trader to provide the consumer with all the personal data collected by the trader in a ‘structured, commonly used and machine-readable format’.46

Art. 7(3) GDPR. Art. 7(2) GDPR. 39 European Data Protection Supervisor, 15. 40 Art. 7(3) GDPR. 41 For which, see Art. 6 GDPR. 42 Art. 7(3) GDPR. 43 Art. 7(3) GDPR. 44 Art. 13(2)(c) GDPR. 45 Art. 17(1)(b) GDPR. This is the right to erasure, sometimes referred to as the right to be forgotten. 46 Art. 20(1) GDPR. This is the right to data portability. 37 38

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V. Trader’s obligation in respect of content other than personal data 36

Art. 16(3) sets out the trader’s obligations in respect of any content other than personal data provided by the consumer when using the digital content or digital service. Before examining these obligations further, it is necessary to determine the kind of content which is within the scope of Art. 16(3).

1. Content other than personal data There is no separate definition of ‘content other than personal data’, but on the basis that personal data for the purposes of the Digital Content Directive has the same meaning as it does for the GDPR, content other than personal data must be any content which is not ‘information relating to an identified or identifiable natural person’.47 Recital 69 gives as examples of such content ‘digital images, video and audio files and content created on mobile devices’, but Recital 24 refers to ‘photographs or posts that the consumer uploads’ to a social media service as personal data. It may therefore not always be easy to determine whether something is personal data or not. For example, a photo taken of a landscape which does not contain any people is probably content other than personal data, whereas a holiday snap taken on a beach of a particular person probably is personal data. Indeed, many types of content/data which might not appear to be personal data at first sight will be treated as personal data if it is possible to link the data or content in question to natural person.48 38 This could cause difficulties for a trader because the obligations in respect of personal data under the GDPR are stricter than those regarding content other than personal data under the Digital Content Directive. 37

2. Obligation to refrain from using content The general obligation of a trader in respect of content other than personal data is to ‘refrain from using’ it. This does not mean that the trader is obliged to delete such content after termination of the contract. Indeed, the trader’s obligations under Art. 16(4) to make such content available to the consumer on request could only be complied with by not deleting such content immediately after the consumer has terminated the contract. 40 It is not clear what is meant by ‘using’ content other than personal data. It probably means more than merely the passive act of continuing to store such content on the trader’s storage facility. The word ‘use’ suggest that some kind of action is taken in respect of such content. This could be as straightforward as simply allowing others to access the content other than personal data, e.g., on a photo-sharing website. Permitting others to view the content would be a basic way of using the data. A more significant step would be to continue to permit others to download such content. A different way of using the content other than personal data would be to process such content, e.g., by aggregating it with content provided by other users. The effect of the obligation to refrain from using the consumer’s content other than personal data means that all of these instances are not permitted once the consumer has terminated the contract. 39

Art. (4)(1) GDPR. European Data Protection Supervisor, 11, and see the discussion in respect of personal data under Art. 16(2), above → mn. 24 et seq. 47

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3. Exceptions to the obligation to refrain from using content However, the obligation not to use the content other than personal data is not an absolute one, and there are four instances where this obligation does not apply. These are listed in Art. 16(3)(a)–(d). These instances are separate instances in respect of which the trader’s obligation to refrain from using such content does not apply. The trader is therefore not required to stop using the content once the content is covered by one of these instances. As these instances constitute a limitation on the general obligation to refrain from using the consumer’s content, they will need to be construed strictly. 49 Where only some of the content provided by the consumer falls under one of the instances listed, the limitation applies only to those parts of the consumer’s content within those instances. Consequently, any content other than personal data which is not within at least one of the four instances in Art. 16(3)(a)–(d) remains within the scope of the obligation to refrain from using such content. a) Content has no utility outside context of digital content/service supplied by trader. The first exception is that the content in question is of a kind that could not be used in a context other than the digital content or digital service which was supplied by the trader. One such instance might be a computer game which allowed the consumer to design the game scenery, or features of the consumer’s avatar within the game. Whilst this would constitute content other than personal data created by the consumer whilst using the digital content/service, it would have no use outside that digital content/service, and so the trader would not be required to refrain from using the content.50 It does, however, raise a question in respect of instances where the trader can continue to derive value from such content after the contract has been terminated by the consumer, e.g., by allowing other users of the digital content or service to access the content. For example, in a simulation game involving the design of a racecourse or a town, the finished designs might be made available to other users, possibly for a small fee. The content would still have no utility outside the context of that digital content/service and therefore be of no use to the consumer who has terminated their contract, but the trader can continue to derive a benefit from that content. This issue goes beyond the Digital Content Directive itself and would have to be addressed in national law. b) Content only relates to the consumer’s activity when using the digital content/service. Secondly, where the content is specific to the consumer’s activity whilst using the digital content or digital service, there is also no obligation on the trader to refrain for using it. This could, for example, be content which feeds into quantitative information about how often a particular video, film or audio recording has been accessed, or how much content has been added by consumers in a particular month.51 c) Content has been aggregated with other data by the trader and cannot be disaggregated or only with disproportionate efforts. A third instance is where the content is of a kind which constitutes data suitable for aggregation. Although this will not apply to content such as photographs or videos, which are generally retained as distinct content, it could cover data recorded continuously whilst using the digital content or digital service. It could, for example, relate to data collected by sensors or directly provided by way of manual recording by the consumer, whilst the consumer was using the digital content/ service. Such data may subsequently have been aggregated into larger data sets and pro49 For example, see CJEU, C‑51/17 OTP Bank and OTP Faktoring EU:C:2018:750, para. 54 or CJEU, C-266/18 Aqua Med EU:C:2019:282, para. 34. 50 As will be discussed below, this exception also relates to the trader’s obligation to make the content available for retrieval by the consumer under Art. 16(4). 51 Weber, p. 200.

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cessed and potentially put to further use. Once such data has been combined with other data, it might not be possible to remove the specific data provided by one particular consumer or only possible with considerable effort. In that case, the trader remains free to use that data even after termination of the contract by the consumer. 46 A related aspect which may be relevant to determining whether the consumer can require the disaggregation of the relevant content is whether the effect of aggregation is to extinguish the identity of the relevant content initially provided by the consumer.52 If the content supplied by the consumer is no longer identifiable, then disaggregation would not be possible. However, this should not lead to claim by the consumer over the aggregated data instead.53 47 d) Content has been jointly generated with other consumers, who are able to continue to use content. The final exception relates to content which has not been solely created by the consumer whose contract was terminated, but has been generated together with other consumers. One example of this might be a document which a number of authors have worked on using a cloud-based service. If one of the authors terminates the contract due to a non-conformity, the other authors who might not be affected by that nonconformity under their contracts could continue to work on the document.54 A further example would be a collaborative platform, e.g., for creating design-files for items which could subsequently be used for 3D-printing. Other users than the consumer who terminated the contract could still continue to work on the design file. 48 Overall, these exceptions to the trader’s obligation under Art. 16(3) ostensibly seek to balance the interests of consumer and trader, and those of third-party users with whom the consumer may have collaborated whilst using the digital content/service. It may be asked whether the balance between consumer and others has been struck in the right place. The first exception, in particular, is arguably tilted rather too far in favour of the trader because it might allow the trader to gain value from content other than personal data provided by the consumer without any benefit flowing to that consumer.

VI. Trader’s obligation to make content other than personal data available 1. Purpose of this obligation 49

In respect of personal data, an individual has the right to receive personal data provided to a data controller in a structured, commonly used and machine-readable format, combined with the right to transmit such data to another data controller (the ‘right to data portability’).55 Art. 16(4) makes available a similar right to a consumer in respect of content other than personal data. Where a consumer has provided both personal data and content other than personal data to the trader, the combination of Art. 16(4) DCD and Art. 20 GDPR should ensure that a consumer who has terminated the contract can retrieve all the data which has been provided to the trader.

2. Content other than personal data within the scope of Art. 16(4) 50

The type of content other than personal data within the scope of Art. 16(4) is content ‘which was provided or created by the consumer when using the digital content or digiSee ibid., p. 198 regarding the question of ownership of combined data. ibid. 54 There may, however, be implications under national copyright law in this instance: Spindler, 209. 55 Art. 20 GDPR. 52

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tal service supplied by the trader’.56 In many instances, this will be content which the consumer has uploaded, such as photographs or other digital images, or videos, as well as text documents and other data files uploaded by the consumer. It would also include content such as computer-aided design files such as those used for the purposes of 3Dprinting.57

3. Content to be made available on request The trader’s obligation to make available content other than personal data requires 51 the consumer to make a request to that effect. The requirement of a request by the consumer means that the trader is not obliged to make such content available of its own motion as soon as the consumer has exercised the right to terminate the contract. Rather, it will be necessary for the consumer to make a separate request to receive such content. Art. 16(4) only states that a request by the consumer is necessary before the trader is 52 obliged to make such content available, but does not specify any further details about this request. Thus, there are no specific formalities such as the use of a particular form or choice of words under this provision. Presumably, a simple request to be allowed to retrieve all the data provided to the trader would suffice, and the consumer would not be required to specify with precision what sort of content other than personal data is covered by such a request.58

4. Timescale for making request In setting out the requirement that the consumer make a request, Art. 16(4) does not 53 set a specific time limit within which the consumer is required to act. However, a time limit is stated in Art. 16(4) 2nd sentence, which concerns the consumer’s entitlement to retrieve such content. Retrieval by the consumer has to be made within a reasonable period of time. It is arguable that this time limit could extend to the entirety of Art. 16(4), which would mean that the consumer has to make the request to the trader within a reasonable period of time. However, there is no reference in the second sentence of Art. 16(4) as to the point in time at which this time period commences; therefore, it is also possible that the reasonable period of time only relates to the consumer’s entitlement to retrieve the content other than personal data once the trader has complied with the request. However, even if the time limit in the second sentence of Art. 16(4) only refers to the 54 consumer’s entitlement to retrieve the content, then national laws are likely to require that the consumer has to make the request within a reasonable period of time after termination of the contract in any event. The Digital Content Directive does not oblige the trader to store content other than personal data for any period of time and therefore not indefinitely; therefore, the consumer’s right to make a request under Art. 16(4) cannot be without a time limit, and it can be assumed that the consumer has to make the request to the trader within a reasonable period of time after exercising the right to terminate the contract. Determining whether a particular timescale is reasonable will depend on the individual circumstances of the consumer’s contract with the trader.

Art. 16(4) 1st sentence, final part. See generally Twigg-Flesner (2016). 58 This is subject to the exceptions to the obligation put on the trader by this provision, discussed below → mn. 72–74. 56

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5. Content to be made available 55

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On receipt of the consumer’s request, the trader only has to make content other than personal data available to the consumer. In effect, the trader has to grant access to the consumer only and is not required to supply such content to the consumer. Once the trader has done so, the consumer then has to take steps to retrieve that data. a) Relationship with consumer’s obligation to refrain from using digital content/service. The relationship between Art. 16(4) and Art. 17(1) has not been addressed explicitly in the Digital Content Directive. Art. 17(1) requires that the consumer refrain from using the digital content or digital service, which must mean that the consumer should not attempt to access the digital content or digital service for any reason. It is possible to interpret Art. 16(4) as qualifying the consumer’s obligation under Art. 17(1), which would mean that notwithstanding the requirement to refrain from using the digital content or digital service, the consumer must be permitted to access the digital content or digital service to request the trader to make available content other than personal data and retrieve such content. Alternatively, Art. 16(4) could be interpreted as not affecting the scope of Art. 17(1), but instead as a separate right to request access without having to access the digital content or digital service. The latter interpretation might be preferable on the basis that one way in which the consumer is expected to comply with the obligation under Art. 17(1) is by deleting the digital content making the digital content/service inaccessible by other means.59 Where a consumer has done so immediately after terminating the contract, the trader’s obligation under Art. 16(4) would enable the consumer to recover content other than personal data by other means. Such an interpretation would also ensure a better alignment of Art. 16(4) DCD with Art. 20 GDPR concerning the portability of personal data. On the basis that Art. 16(4) must allow the consumer to gain access to content other than personal data even when the digital content or digital service is no longer accessible, the trader’s obligation to make such content available must entail that the trader has to provide separate technical means by which the content is made available. For example, this could be a link provided to the consumer in an e-mail from which the consumer can access and retrieve the data, or a specific section on the trader’s website. b) Content must be in ‘commonly used and machine-readable’ format. With regard to the trader’s obligation to ‘make available’ content other than personal data, it can be inferred from Art. 16(4) 2nd sentence that the trader will only comply with this obligation if such content is made available ‘in a commonly used and machine-readable format’. Although this requirement as to format is only made explicit in the context of the consumer’s entitlement to retrieve content other than personal data, it has to be the case that such content is already in a format suitable for retrieval when it is made available. The requirement that the content is in a commonly-used and machine-readable format mirrors that in Art. 20 GDPR on data portability of personal data. In the case of content other than personal data within the scope of Art. 16(4), it will usually be easy to determine what the required commonly-used format is. In the case of content uploaded by the consumer, this should be the same file format type which the consumer used when providing the content, such as a JPEG file for images or a ‘.docx’ file for documents. In contrast, it would not be sufficient to make the relevant content available in a format which could only be read using the digital content or digital service supplied by the trader and to which the consumer has no access after termination of the contract. The obligation to make the relevant content available in a commonly-used format will be more important where the relevant content had been provided by the consumer 59

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by means other than uploading a complete file. In such a situation, the relevant content should be made available in a file format suitable for the nature of the content – e.g., images should be provided as JPEG files rather than in a PDF file.60 Using a commonly-used format such as JPEG or ‘.docx’ would also satisfy the requirement that the content is in a ‘machine-readable’ format. Presumably, it would suffice that the content could be read using a machine which has appropriate software for accessing the particular file format, but not that the consumer has to have this already installed in his digital environment. The fact that the content has to be made available in a machine-readable format is a means of keeping the trader’s obligation within reasonable boundaries. The trader has to make the content available to the consumer in digital form only and could not be required to supply the content in physical form, such as print-outs of photographs or word-processed documents. c) Timescale for complying with the request. There is no specific time limit by which the trader must comply with the consumer’s request to make the content available. However, it can be suggested that by analogy with other provisions in the Digital Content Directive, the trader should act ‘without undue delay’61 or at least within a reasonable period of time.62 Either criterion would mean that the trader would not be able to wait for a long period of time before responding to the consumer’s request and act promptly, although acting without ‘undue delay’ would suggest a faster reaction than acting within a reasonable period of time. The ‘undue delay’ criterion would also seem to be in line with other instances where a timescale for action by the trader is set in the Digital Content Directive and it is therefore suggested that the trader has to make the relevant content available without undue delay after receiving the consumer’s request. Similarly it is not specified for how long the trader must keep the relevant content available to the consumer. However, as Art. 16(4) 2nd sentence requires the consumer to retrieve the content within a reasonable time, the trader need not keep the content available indefinitely and will be able to stop making the content available at some point. Although it is difficult to determine a specific point when the trader is permitted to stop making the relevant content available, a reasonable point might be one month after the consumer’s request. 63 In this regard, one needs to bear in mind that the impact of terminating a contract is to bring the contractual relationship between the parties to an end. Whilst the restitutionary obligations after termination will subsist for a time, they will not do so indefinitely. However, a definite answer would require a ruling from the CJEU. One instance which might prompt such a ruling might be a national rule setting a specific time limit, the compatibility of which with the Digital Content Directive is subsequently challenged. Until that point, a challenge to a trader’s decision to stop making the content requested by the consumer after a period of time would need to be resolved on a case-by-case basis.

60 cf. Behar-Touchais, p. 137, suggesting that the format should also be ‘easily exploitable’ by the consumer, and Clayes/Vancoillie, p. 206, arguing that the format ‘should allow further (reasonably expected) use by the consumer’. 61 cf. Art. 18(1) on making reimbursements owed to a consumer. 62 cf. Art. 14(1)(b) SGD. 63 One might wish to drawn an analogy with Art. 14(1) CRD, under which a consumer may be required to return goods within 14 days from exercising the right of withdrawal, to argue that the trader only has to make the relevant content available for 14 days. However, if that had been the intention of the European legislator, then this should have been made explicit in the Digital Content Directive.

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6. Consumer’s entitlement to retrieve 65

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Having made the request to the trader, the consumer is entitled to ‘retrieve’ the content.64 The act of retrieval will be the process by which the consumer obtains the relevant content other than personal data in a commonly used and machine-readable format, i.e., in digital form. It is implicit in the notion of an entitlement to retrieve that the consumer, having made the request to the trader for the latter to make the relevant content available, must take a deliberate step in order to acquire the content. Thus, the entitlement to retrieve does not oblige the trader to transfer the relevant content to the consumer, but merely that the consumer has to be put in a position where the consumer can do what is required to obtain the relevant content. a) Timescale for retrieving content. As already noted, the consumer must act within a reasonable time to retrieve the content made available by the trader.65 Whilst this does not require immediate action by the consumer, it does mean that the consumer should act swiftly to retrieve the relevant content. It was argued above that the trader’s obligation to make the content available does not require the trader to do so for an indefinite period of time, and so it is in the consumer’s interest to retrieve the content swiftly once the trader has made available the relevant content after receiving the consumer’s request. It is not clear if the consumer can make a fresh request under Art. 16(4) if the consumer has failed to retrieve the data within a reasonable time after it was made available following the initial request. On the one hand, it might be arguable that the consumer should be allowed to make a fresh request if not much time has passed since the contract itself was terminated. On the other hand, as already noted,66 the effect of termination is to end the contractual relationship between the parties, and the legal aftermath of terminating a contract should not continue indefinitely. Consequently, there should not be an automatic entitlement to making a further request if the consumer has failed to retrieve the relevant content after making the initial request. Equally, it cannot be ruled out that a consumer should, in certain circumstances, be entitled to make a further request. One obvious instance would be where the trader has made the content available for an extremely short period of time only. In that case, a further request should be possible. b) Conditions for retrieval. Further to requiring the consumer to retrieve the relevant content within a reasonable time, Art. 16(4) 2nd sentence stipulates a number of conditions in respect of the consumer’s entitlement to retrieve which are best characterised as aspects of the trader’s overall obligation under Art. 16(4). The requirement that the content has to be made available in a commonly-used and machine-readable format has already been discussed.67 In addition, retrieval has to be made possible free of charge and without hindrance from the trader. The requirement that retrieval must be free of charge essentially relates to a potential attempt by the trader to charge the consumer to allow retrieval of the relevant content. It does not cover general charges such as the consumer’s connection to the Internet68 or additional charges by the consumer’s network provider if the act of retrieving the content would exceed the consumer’s data allowance. The requirement that retrieval must be ‘free of charge’ means that the trader cannot impose any charges on the consumer for this, but has to make the relevant content available to and permit retrieval by the consumer at no additional cost to the consumer. Art. 16(4) 2nd sentence. Above → mn. 63. 66 Above → mn. 63 et seq. 67 Above → mn. 58 et seq. 68 See Recital 71. 64

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Charging the consumer would be one obstacle in the way of retrieving the content, 71 but the trader could impose other, non-pecuniary obstacles. As this would make it more difficult, or even impossible, for the consumer to retrieve the content which the trader is obliged to make available, Art. 16(4) 2nd sentence also precludes other obstacles to retrieving the content. This is captured by the requirement that retrieval must be ‘without hindrance’ by the trader. There is no further explanation in the Digital Content Directive as to what could constitute a hindrance. It will cover anything a trader does which impedes the ability of the consumer to retrieve the content once it has been made available. One such instance might be where the trader e-mails a link to the consumer to enable retrieval, but the link expires after 24 hours.69

7. Exceptions to obligation under Art. 16(4) The trader’s obligation does not apply to all content other than personal data. As dis- 72 cussed above, a basic limitation is that this content must have been provided or created by the consumer whilst using the digital content or digital service.70 Furthermore, content which falls within the exceptions listed in Art. 16(3)(a)–(c) is 73 excluded from the scope of Art. 16(4) altogether. These exceptions were discussed above.71 Thus, content which has no utility outside the context of the digital content/ service, content which only relates to the consumer’s activity whilst using the digital content/service or content which has been aggregated with other data by the trader and is not easily disaggregated, is not covered by Art. 16(4). In addition, Recital 71 also excludes any content other than personal data where the 74 trader has a right not to disclose certain content in accordance with applicable law. This is not part of the specific exclusion from Art. 16(4) but constitutes a broader obligation which the applicable national law might impose on a trader regarding the way certain content other than personal data is dealt with.

VII. Trader’s right to prevent further use of digital content or digital service Art. 16(5) permits the trader to take steps to prevent any further use of the digital 75 content or the digital service after termination of the contract by the consumer. The effect of terminating the contract for the supply of the digital content or digital service is that the basis on which the consumer is entitled to access and use the digital content or digital service is removed. This entails that the consumer should not attempt to continue to use the digital content or digital service, and Art. 17(1) requires that the consumer refrains from doing so. Art. 16(5) therefore establishes that the trader is entitled to take steps that would make it impossible for the consumer to continue to use the digital content or digital service after termination. Two means by which the trader could prevent further use of the digital content or 76 digital service by the consumer are mentioned in Art. 16(5). However, the words ‘in particular’ make it clear that the specific means of preventing further use mentioned here are not the only permitted ways in which the trader could prevent further use of the digital content or digital service.

This would also be an instance when the consumer should be entitled to make a further request. Above → mn. 37–38. 71 Above → mn. 51 et seq.

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The first possible means of preventing further use is to make the digital content or digital service ‘inaccessible’. In effect, this would prevent the consumer from accessing any of the elements of the digital content or digital service, but it might still allow the consumer to login to the digital content or digital service. This could be important if this ensures that the consumer can retrieve content other than personal data in accordance with Art. 16(4). However, it may be that making the service ‘inaccessible’ could be interpreted much more broadly. At the most extreme, this could mean that the trader could take steps to effect the uninstallation of the digital content from the consumer’s device. 72 However, this could be problematic if this would result in changes made to the consumer’s digital environment. 78 The second method of preventing further use mentioned in Art. 16(5) is to disable the user account of the consumer. The effect of doing so would be that the consumer would no longer be able to access the digital content or digital service at all. This method might be appropriate in the case of digital content or a digital service which has not involved the consumer in providing any personal data or content other than personal data, which would mean that the trader does not have to make either available to the consumer after termination. An example of this could be a video or music streaming service. However, if the consumer has supplied either type of data, the trader will have to ensure that the consumer can still retrieve personal data in accordance with the GDPR and content other than personal data in accordance with Art. 16(4). 77

D. Transposition issues In one sense, the provisions of Art. 16 do not directly touch upon existing areas of national law as this article addresses the special features of contracts involving the supply of digital content and digital services. Few national laws contain any provisions specifically on this. However, the complexity of the transposition will depend on the approach taken by a particular Member State to the transposition of the Digital Content Directive: if its provisions are kept separately and are confined to contracts involving the supply of digital content or digital services, then there would be few wider implications. However, Member States may decide to integrate these rules with the law applicable to consumer contracts generally, at which point it will become necessary to consider whether some of the detailed rules regarding the respective obligations of the consumer and trader should also be applied to other contracts. The new Sale of Goods Directive does not provide as detailed rules on these obligations as the Digital Content Directive,73 but in the interest of consistency, Member States may seek to extend the Digital Content Directive provisions to contracts covered by the Sale of Goods Directive. 80 Beyond this general question, there are more specific issues, such as any value gained from content other than personal data which the trader may continue to use by virtue of Art. 16(3)(a); whether the right of the consumer to request that the trader make available content other than personal data should be subject to a time limit, and whether the trader can delete content made available after a request by the consumer once a period of time has passed. 81 Finally, there are no sanctions envisaged for failure to comply with the obligations under Art. 16. It will be for the Member States to determine what might be appropriate 79

72 Note that a consumer is not obliged under Art. 17(1) to delete the digital content or digital service, although in practice, this might be the easiest way for a consumer to comply with the duty imposed by that Article to refrain from using the digital content or digital service. 73 cf. Art. 13 SGD.

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sanctions in accordance with the general obligation under Art. 21 that there need to be ‘adequate and effective means to ensure compliance’ with the national rules implementing the Digital Content Directive.

Article 17 Obligations of the consumer in the event of termination 1. After the termination of the contract, the consumer shall refrain from using the digital content or digital service and from making it available to third parties. 2. Where the digital content was supplied on a tangible medium, the consumer shall, at the request and at the expense of the trader, return the tangible medium to the trader without undue delay. If the trader decides to request the return of the tangible medium, that request shall be made within 14 days of the day on which the trader is informed of the consumer's decision to terminate the contract. 3. The consumer shall not be liable to pay for any use made of the digital content or digital service in the period, prior to the termination of the contract, during which the digital content or the digital service was not in conformity. Bibliography: Clayes/Vancoillie, ‘Remedies, modification of digital content and right to terminate longterm digital content contracts’ in: Clayes/Terryn (eds), Digital Content and Distance Sales – New developments at EU level (Intersentia 2017), p. 167–232; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final; Spindler, ‘Contract Law and Copyright – Regulatory Challenges and Gap’ in: Schulze/Staudenmayer/Lohsse (eds), Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Nomos 2017), p. 211–228. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. European contract law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Comparative remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Refrain from using digital content or digital service . . . . . . . . . . . . . . . . . . . . . . . . . . II. Refrain from making digital content or digital service available to third party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Return of tangible medium on which content supplied . . . . . . . . . . . . . . . . . . . . . . 1. Duty arises after request by trader . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Time limit for trader to make request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Return of the tangible medium by the consumer . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Return at the trader’s expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Consumer to return tangible medium without undue delay . . . . . . . . . . . . . . IV. Limitation of obligation to pay for use of digital content or digital service . . .

7 9 12 14 17 20 23 26 29 31

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function Art. 17 serves to set out a number of obligations on a consumer after the right to ter- 1 minate the contract for the supply of digital content or a digital service has been exercised in accordance with Art. 14(4) and (6) and Art. 15. Art. 17(1) requires that the consumer stops using the digital content or digital service 2 and not to make either available to third parties. The Art. 17(2) requires that the consumer returns any tangible medium on which digital content may have been supplied to Christian Twigg-Flesner

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the trader if a request to that effect is made by the trader. In addition to these obligations, Art. 17(3) introduces a qualification that a consumer is not liable to pay for any use made, prior to terminating the contract, of the digital content or digital service when it was not in conformity with the contract.

B. Context I. European contract law The introduction of a detailed provision setting out some of the obligations of the consumer after terminating the contract is a new development in European contract law. In the Consumer Sales Directive, the consequences of termination (there termed ‘rescission’) and any obligations on the parties were left to national law. The new Sale of Goods Directive does not go much further; it merely makes explicit the consumer’s obligation to return the goods to the seller following termination of the sales contract. 1 The Sale of Goods Directive only covers the main consequences of the right of termination, particularly the obligation on each party to return to the other party what has been received.2 Any other effects of termination of the sales contract as well as any further obligations on either party following termination are deferred to national law.3 4 The Digital Content Directive is therefore noteworthy for introducing more specific rules regarding the respective obligations of the parties after termination of the contract for the digital content or digital service by the consumer. 5 However, this is not an entirely novel step, because the Consumer Rights Directive already provides for the obligations of a consumer following the exercise of the right of withdrawal, which has a similar effect to termination in bringing the contractual relationship of the parties to an end, although the Consumer Rights Directive requires restitution to the pre-contractual situation. The Consumer Rights Directive requires the consumer to return any goods supplied,4 establishes the consumer’s liability for use of the goods going beyond what is necessary to assess their suitability,5 and requires the consumer to pay a proportionate amount for any service received before exercising the right of withdrawal.6 3

II. Comparative remarks 6

Arts 16–18 address some of the restitutionary obligations of both parties following termination of the contract.7 Generally speaking, the obligation to make restitution of what has been received under the contract prior to termination is found in all the laws of contract of the Member States. As most Member States do not have specific contract law rules regarding the supply of digital content and digital services, the consequences of terminating a contract involving digital content/digital services would be addressed by applying the rules applicable to termination of a contract in general. However, as the conArt. 16(3)(a) SGD. Recital 59 SGD. 3 Recital 60 SGD. 4 Art. 14(1) CRD. 5 Art. 14(2) CRD. 6 Art. 14(3) CRD. 7 cf. Art. III.–3:510 DCFR. 1

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sumer will have been supplied with digital content or a digital service, the notion of restitution may be inadequate as there is nothing that can be returned in the sense normally understood (with the exception of a tangible medium on which digital content may have been supplied),8 so a novel dimension will be added to all the laws of the Member States in this regard.

C. Explanation Art. 17 contains three obligations for a consumer after the right to terminate the 7 contract has been exercised: (i) to refrain from using the digital content or digital service; (ii) to refrain from making the digital content or digital service available to a third party; and (iii) to return any tangible medium on which the digital content was supplied. In addition to these obligations, Art. 17(3) also clarifies that the consumer does not have to pay for using the digital content or digital service in the period before termination when the content or service was not in conformity with the contract. This provision does not create an obligation for a consumer, unlike Art. 17(1) and (2), but it rather restricts the consumer’s obligation to pay for using the digital content or digital service when the content/service was not in conformity with the contract. The opening words of Art. 17(1) (‘after the termination of the contract’) make it clear 8 that these obligations only arise once the termination of the contract has become effective. In discussing Art. 15, it was noted that there is a degree of ambiguity in the Directive as to the moment when the right to terminate the contract has been exercised effectively, flowing from the requirement that the right to terminate has to be exercised by means of a statement to the trader and the suggestion that this implies that the statement must have been received.9 On this basis, the consumer’s obligations in Art. 17 only apply once the consumer has exercised the right to terminate the contract and the trader has received the statement expressing the consumer’s decision to terminate. In consequence, the consumer does not have to comply with the obligations in Art. 17 immediately on making or dispatching the statement required under Art. 15, but only once the statement has been received by the trader. It is not clear how an objection by the trader to the consumer’s decision to terminate the contract would affect the obligations of either party, although it may be assumed that this would have the effect of suspending the consumer’s obligations.

I. Refrain from using digital content or digital service First of all, a consumer is obliged to stop using the digital content or digital service. 9 The use of the word ‘shall’ makes it clear that this is a duty imposed on the consumer. The duty applies once the termination of the contract has become effective. At that point, the license which allowed the consumer to use the digital content or digital service will have lapsed.10 This has the effect of removing any legal right for the consumer to continue using the digital content or digital service. This duty needs to be read in conjunction with the right given to the trader under Art. 16(5) to take steps to prevent further use by the consumer of the digital content or digital service.

Clayes/Vancoillie, p. 203. → Art. 15, mn. 12 et seq. 10 On the interplay between contract law and copyright law, see Spindler, p. 211 et seq.

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This duty is particular to the nature of digital content and digital services. Unlike a contract involving the supply of goods, i.e., physical items, digital content and digital services are not tangible. Digital content is utilised either on the basis of a copy of the digital content installed on the consumer’s device or accessed via the Internet, and digital services are generally also accessed via the Internet, possibly using an app installed on a smartphone or some other device such as a digibox. Irrespective of the precise method of accessing the digital content or digital service, the key feature is that there is nothing that can be returned after terminating the contract (except for a durable medium on which digital content may have been supplied11), so a duty to stop the consumer from continuing to use the digital content or digital service is necessary so as to provide the functional equivalent in the digital context of the duty to return any goods after terminating a sales contract. However, there is neither an obligation on the consumer under the Digital Content Directive to delete the digital content or to uninstall it from the consumer’s device nor is the consumer required to take any other step to make it impossible to continue using the digital content or digital service.12 One might expect that in practice, consumers will take steps to uninstall the digital content or digital service from their devices, but there is no legal duty on them to do so. Moreover, if the consumer acquired the digital content on a tangible medium (such as a music CD) and has transferred files onto a portable device, then the consumer would have to return the tangible medium13 as well as no longer listen to the music on their portable device. 11 However, this duty must be read as being qualified by the consumer’s entitlement under Art. 16(4) 2nd sentence, to retrieve any digital content other than personal data once made available by the trader at the consumer’s request.14 In order to exercise this right, it may be necessary for a consumer to access the digital content or the digital service after termination to retrieve this content, as would be the case with a cloud-storage facility from which the consumer is seeking to retrieve files saved on that facility, for example. 10

II. Refrain from making digital content or digital service available to third party 12

Directly linked to the consumer’s duty not to use the digital content or digital service after terminating the contract is the duty not to make the digital content or digital service available to third parties, either. The meaning of ‘making available’ is potentially broad and can cover matters such as granting access to the digital content or digital service, as well as permitting others to have a copy of the digital content linked to the consumer’s contract with the trader installed on the third party’s device. For example, an online video streaming service may allow the consumer who has concluded the subscription contract with the trader to grant access to this digital service to a number of additional users who will access this service from their own devices. Once the consumer has terminated the subscription contract, the consumer also has to ensure that any additional users to not access this service. Similarly, digital content may have been supplied Below → mn. 14 et seq. Had Art. 13(2)(c) COM(2015) 634 final been adopted, the consumer would have been required to refrain of using the digital content ‘in particular by deleting the digital content or rendering it otherwise unintelligible’. Recital 72 still refers to deletion of digital content/digital service or rendering it otherwise inaccessible, but it is referred to there as one possible way in which the consumer could comply with this obligation. 13 See Art. 17(2), below → mn. 23 et seq. 14 See also Clayes/Vancoillie, p. 208. 11

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to the consumer with a multi-user license permitting the consumer to allow third parties to access or install the digital content from their device and use it on the basis of the consumer’s multi-user license. Following the termination of the contract by the consumer, the consumer’s duty under Art. 17(1) entails that the consumer must ensure that any third parties covered by the multi-user licence do not continue to use the digital content. It must be noted that the Directive does not envisage a specific sanction in circum- 13 stances where the consumer fails to comply with the duties under Art. 17(1). Unless and until there is guidance from the CJEU on this issue, it will be a matter for the Member States to address.

III. Return of tangible medium on which content supplied It was noted in the context of the consumer’s duty to refrain from using the digital 14 content or digital service after termination of the contract that this duty is necessary in the context of digital products because these rarely involved the supply of anything physical or tangible.15 Unlike a contract for the sale of goods, termination of which obliges a consumer to return the goods to the trader, 16 there is generally nothing for the consumer to return when terminating a contract for digital content or digital service. However, some digital content may still be supplied on a tangible medium such as a 15 CD or a USB stick. This tangible medium is something which is physical and therefore capable of being returned to the trader by the consumer. Art. 17(2) therefore imposes a duty on the consumer to return the tangible medium on which the digital content was supplied. This duty only applies to digital content and not to digital services. Furthermore, it 16 only applies where the digital content was supplied on a tangible medium. There is no specific definition of ‘tangible medium’ in the Digital Content Directive, although Recital 20 lists as examples ‘DVDs, CDs, USB sticks and memory cards’.

1. Duty arises after request by trader The duty on the consumer to return the tangible medium is not engaged immediately 17 from the point when termination becomes effective. It only arises once the trader has made a request to the consumer for the return of the tangible medium. If no request is made by the trader, then the consumer is not required to return the tangible medium. The trader effectively activates the duty by requesting the consumer to return the tan- 18 gible medium. This implies that the trader must take the active step of contacting the consumer in order to make this request. Consequently, the inclusion of a term in the contract for the supply of the digital content requiring the return of the tangible medium on which it was supplied should the contract be terminated would not be sufficient to constitute a ‘request’ by the trader. This can be inferred from the use of the word ‘request’, which can be explained as someone asking for something and therefore requires a specific act of communication to constitute such a request. Furthermore, Art. 17(2) 2 nd sentence opens with the words ‘if the trader decides to request …’, further reinforcing the fact that a specific request must be made by the trader after the termination of the contract.

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Above → mn. 9. Art. 13(3)(a) SGD.

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The request has to be made by the trader in such a way that the consumer will be aware that it has been made. There is no specific requirement as to the method by which this request should be made. It should be sufficient for the trader to contact the consumer by the same means by which the consumer made the statement to express the decision to terminate the contract to the trader.17 Equally, contacting the consumer by other means of contact previously provided by the consumer such as an e-mail or a letter sent to the consumer’s home address if provided when concluding the contract should suffice.

2. Time limit for trader to make request The trader has to make his request within 14 days18 of the day on which the trader was informed about the consumer’s decision to terminate the contract. The use of the word ‘informed’ means that the trader must have knowledge of the consumer’s decision, so the statement exercising the right of termination must have reached the trader. It is not clear if this means that the trader must have actually received information about the consumer’s decision, or whether it suffices that the trader ought to have been aware. This question might arise e.g., where the consumer has used an e-mail to inform the trader of his decision to terminate the contract, but this e-mail was sent outside the trader’s business hours. In such a situation, the trader would only become aware of the email once the business has reopened on the next business day and the e-mail has been read. It might then be thought that the time should be triggered at the start of the next business day. This could be a firm rule or it could be just a presumption, with the trader permitted to rebut this presumption if it can be shown that the trader only received the information about the consumer’s decision to terminate the contract at a later point. 21 However, on a literal reading of Art. 17(2), actual knowledge by the trader seems to be required before the time period for requesting the return of the tangible medium commences. Such a reading would be in accordance with the general approach of the Digital Content Directive to balance the interests of consumer and trader respectively. 19 Consumers are protected by having a clear timescale within which they can expect to receive a request for the return of the tangible medium, which means that after this period has expired, they are free to dispose of the tangible medium as they wish. Similarly, the trader’s interests are respected because the period for making the request for the return of the tangible medium to the consumer only commences once the trader knows that the consumer has exercised the right to terminate the contract. Guidance from the CJEU on this issue may be forthcoming eventually. It may be expected that the CJEU will be influenced by the full harmonisation nature of the Digital Content Directive which precludes Member States from having rules which would provide a higher level of consumer protection than envisaged by the Directive, and the fact that the Directive seeks to balance the interests of consumers and traders respectively. 22 A question not addressed in the Digital Content Directive is whether the consumer would be under an obligation to compensate the trader in a different way, should the trader have failed to make the request on time. It seems that this would generally not be appropriate, because the trader had an opportunity to request the return of the tangible 20

Art. 15. The Digital Content Directive does not state so expressly (unlike Recital 41 CRD), but Regulation 1182/71 determining the rules applicable to periods, dates and time limits (OJ L 124, 8.6.1971, p. 1) should apply. Therefore, the 14 days include weekend days and public holidays (Art. 3(3)). 19 cf., by analogy, Recital 68, emphasising the need to balance the interests of consumers and traders where digital content or a digital service is provided over a period of time and not in conformity with the contract for only some of that period. 17

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medium. Such a solution would also ensure an appropriate balance between the interests of trader and consumer.

3. Return of the tangible medium by the consumer Assuming that the trader makes a request for the return of the tangible medium with- 23 in the required 14-day period, the consumer will then be required to return the tangible medium. The Digital Content Directive does not state the method by which the consumer can be required to return the tangible medium to the trader. If the consumer acquired the tangible medium containing the digital content through distance selling means, then returning the item can be done in the same way. Similarly, if the consumer purchased the tangible medium containing the digital content from a physical store, then the consumer can return it by taking it to the same store. If the store is part of a chain of stores, it should also be possible to return the tangible medium to a different branch from the one where the consumer bought the tangible medium in order to return it, at least where the branch is located in the same Member State as the store from which the consumer obtained the tangible medium. It is not clear if the trader can stipulate the means of returning the tangible medium. 24 For example, the trader might state that the tangible medium has to be returned by distance means to a specific address, even when the consumer bought the tangible medium containing the digital content from a physical store. Conversely, a trader with a network of physical stores in the Member State where the consumer is located might ask for the return to one of these stores, despite the fact that the consumer may have bought the tangible medium by distance means. Another situation might be that the item was delivered by a courier chosen by the trader and the trader has stipulated the use of the same courier for the return of the item. It seems that there is not a single answer to this question. It is suggested that a gener- 25 al rule should be that the consumer can return the tangible medium in the same manner in which it was received. Logically, one might equally expect that the trader could require the consumer to return the tangible medium in that way. However, this has to be subject to a qualification that this cannot impose undue burden on a consumer. For example, if the tangible medium containing the digital content was purchased in a physical store which is located 300 km from the consumer’s home, then requiring the consumer to return to that store would place an unduly heavy burden on the consumer, and a return by post or courier should be sufficient. Furthermore, if the consumer is to return the tangible medium by distance means, then the consumer should only be obliged to use the standard postal service rather than any premium service or nominated courier. If the trader wishes the consumer to use a particular service, then it would seem reasonable that the trader either make arrangements for a courier to collect the tangible medium from the consumer’s home, or supply pre-paid packaging for the service specified by the trader. However, the Digital Content Directive is anything but clear on this point, and a ruling from the CJEU on this question might also be required in due course. In resolving this question, it will also be relevant to take into account the requirement that the return by the consumer has to be ‘at the expense of the trader’, which is discussed next.

4. Return at the trader’s expense The return of the item has to be made ‘at the expense of trader’. This means that the 26 consumer should not incur costs as a result of having been asked to return the item by the trader. However, it is not clear what sort of expenses are relevant for the purposes of

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Art. 17(2). In the case of a return by distance means, this is likely to cover the cost of packaging and postage. However, it is unlikely to cover incidental costs such as the cost of travelling to a post office in order to dispatch the item for return. In the case of a direct return of the tangible medium to the store, or branch of the same chain, where it was purchased, it seems unlikely that the trader should be required to cover the consumer’s expenses incurred whilst travelling to the store. 27 A related question is whether the trader is obliged to advance the cost of returning the tangible medium to the consumer, or whether it suffices that the trader reimburses the consumer for any expenses once the returned tangible medium has been received by the trader. On this question, the ruling by the CJEU in Fülla,20 which concerned the meaning of ‘free of charge’ in the context of Art. 3 Consumer Sales Directive, would point towards an answer requiring only reimbursement and not an obligation to advance to the consumer the cost of returning the tangible medium. In Fülla, the CJEU held that a seller of goods was not obliged to advance the sums required for returning goods to the seller in order to bring the goods into conformity with the contract. The Court stressed that maintaining a balance between the interests of trader and consumer meant that the consumer would have to be reimbursed for this cost but that the trader was not obliged to do so before the goods were returned.21 Whilst Fülla was essentially concerned with the exercise of a right by a consumer rather than compliance with a duty imposed on the consumer, it seems likely that the CJEU would reason in an analogous way to require the trader merely to reimburse the consumer for the cost of returning the tangible medium containing the digital content after it has been returned to the trader. As far as such a reimbursement is concerned, it is important to note that Art. 18, which deals with aspects of reimbursement following termination of the contract or requesting a price reduction, is limited to the specific instances where the consumer exercises the right to termination or price reduction, and does not deal with other instances involving a reimbursement by the trader. In this regard, therefore, the requirements for reimbursing the trader are a matter of national law, subject to any future guidance from the CJEU. 28 In practical terms, the trader might make arrangements for collection of the tangible medium from the consumer’s home, e.g., by instructing a courier to collect it, without charge to the consumer. In such a case, the consumer’s obligation to return the item would be fulfilled at the point at which the consumer hands over the tangible medium containing the digital content to the courier.

5. Consumer to return tangible medium without undue delay 29

The consumer’s duty to return the item once requested by the trader has to be fulfilled ‘without undue delay’. This requires the consumer to act in a timely manner, but is not subject to any definite time limit. This can be compared to the trader’s obligation to effect reimbursement of any sums due to the consumer without undue delay and no later than within 14 days under Art. 18(1). The precise timescale within which the consumer has to fulfil this duty is therefore flexible and may depend on a range of factors. For example, a consumer who is unable to take the tangible medium back to a physical store on a weekday would not be delaying the return ‘unduly’ if the consumer waited until a weekend day. For the same reason, it may take a consumer some time to be able to take the tangible medium to a post office to dispatch it back to the trader. One would generally expect the threshold for an undue delay to be higher in the case of a consumer

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than for a trader, not least in light of the fact that there is no 14-day maximum limit for acting, unlike in respect of the trader’s obligation to reimburse the consumer. A final point to note is that the consumer’s duty to return the tangible medium is not 30 subject to the trader having reimbursed the consumer, if relevant, for the price and other sums due under the contract (under Art. 16(1) and 18(1)). The consumer’s duty to return the tangible medium and the trader’s duty to reimburse the consumer are therefore independent duties, and compliance of one party with its duty is not a precondition before the other party has to fulfil its duty.

IV. Limitation of obligation to pay for use of digital content or digital service Art. 17(3) states that the consumer is not liable to pay for any use made of the digital content or digital service prior to termination of the contract, but only in respect of the period when the digital content or digital service was not in conformity. There are a number of observations about Art. 17(3). A general point is that Art. 17(3) does not create an obligation on the consumer as a result of the consumer’s exercise of the right to terminate the contract. Instead, Art. 17(3) limits any potential liability of the consumer to pay for using the digital content or digital service. Further, it concerns a liability of the consumer ‘to pay’, which must relate to payments which the consumer has not yet made, but to which the trader would be entitled. As such, Art. 17(3) complements Art. 16(1). The latter provision already imposes an obligation on the trader to reimburse the consumer for sums paid under the contract. Therefore, Art. 17(3) can only relate to an obligation to pay sums which have already fallen due but with which the consumer has not yet complied. The effect of this provision is that the liability to make any outstanding payments is extinguished insofar as this relates to payments in respect of the period during which the digital content or digital service were not in conformity with the contract. However, the instances when this provision will apply are not clear. Art. 16(1) imposes an obligation on the trader to reimburse the consumer ‘for all sums paid under the contract’, which entails an obligation to return everything which has been received under the contract must be returned. This obligation is qualified where the digital content or digital service is supplied over a period of time and where the non-conformity only affects some of the period of supply, in which case the trader’s obligation to reimburse is restricted to the period of supply when the digital content or digital service was not in conformity. Therefore, in circumstances where there is a supply over a period of time and where the consumer has not already paid for the supply, the effect of Art. 17(3) is to restrict the consumer’s liability to pay for the period during which the digital content or digital service was in conformity with the contract. However, the scope of this provision may be broader that the consumer’s liability to pay the price, and extend to a payment to reflect any use of the digital content or digital service which the consumer had before the content/service was not in conformity with the contract and for which the trader has not received any value. In its terms, Art. 17(3) is not restricted to instances where the consumer has to pay a price for the digital content or digital service. Therefore, it could also apply to those contracts where the consumer agrees to provide personal data.22 Where the termination of the contract by the consumer has the effect of preventing the trader from processing any of the consumer’s 22

cf. → Art. 3 DCD, mn. 46 et seq.

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personal data,23 the trader may seek a financial payment from the consumer for using the digital content or digital service during the period when it was in conformity with the contract. Whether such a claim is permissible would be a matter for national law and the Digital Content Directive does not create a new liability of the consumer to pay for the use of the digital content or the digital service. Rather, it limits the extent of the consumer’s liability to pay where it does exist.

D. Transposition issues 35

As the discussion of Art. 17 has revealed, there are many difficult question of detail which remain unresolved. In particular, there is no indication in Art. 17, nor elsewhere in the Digital Content Directive, as to what the consequences would be if a consumer failed to comply with the duties imposed by this Article. For instance, if a consumer continues to use the digital content or digital service after termination (assuming that this continues to be technically possible), it may be that some kind of sanction would be appropriate, including requiring the consumer to pay for using the digital content or digital service after termination. There might also be instances when a consumer does not return a tangible medium containing the digital content despite a request from the trader to that effect. It will therefore have to be considered, when transposing the Directive, whether supplementary provisions dealing with a failure by a consumer to comply with these duties is required. It will be for the Member States to determine what might be appropriate sanctions in accordance with the general obligation under Art. 21 that there need to be ‘adequate and effective means to ensure compliance’ with the national rules implementing the Digital Content Directive.

Article 18 Time limits and means of reimbursement by the trader 1. Any reimbursement that is owed to the consumer by the trader, pursuant to Article 14(4) and (5) or 16(1), due to a price reduction or termination of the contract shall be carried out without undue delay and, in any event, within 14 days of the date on which the trader is informed of the consumer's decision to invoke the consumer's right for a price reduction or to terminate the contract. 2. The trader shall carry out the reimbursement using the same means of payment as the consumer used to pay for the digital content or digital service, unless the consumer expressly agrees otherwise, and provided that the consumer does not incur any fees as a result of such reimbursement. 3. The trader shall not impose any fee on the consumer in respect of the reimbursement. Bibliography: Commission, ‘DG Justice Guidance Document concerning Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights […]’ (‘CRD Guidance’); Spindler, ‘Contracts for the supply of digital content’ (2016) 12 ERCL 183–217.

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A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. European contract law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Comparative remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 4 5

→ Art. 16 DCD, mn. 24 et seq.

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Time limits and means of reimbursement by the trader C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Reimbursement owed to consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Timescale for reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Reimbursement without undue delay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Reimbursement no later than within 14 days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Return of tangible medium as precondition for reimbursement . . . . . . . . . . IV. Method of reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Same method as used by the consumer for paying . . . . . . . . . . . . . . . . . . . . . . . . 2. Express agreement by the consumer to a different means of payment . . . . V. No fee in respect of reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Fees charged for using a particular means of payment . . . . . . . . . . . . . . . . . . . . 2. Trader must not charge fees for reimbursing consumer . . . . . . . . . . . . . . . . . . . VI. No regulation of consequences of non-compliance . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 6 8 10 13 14 16 18 18 20 25 26 32 33

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function Art. 18(1) stipulates the time limit within which a consumer must receive a reim- 1 bursement of any money paid to the trader. It applies once the consumer has exercised the right to a price reduction or to terminate the contract, which activates the entitlement of the consumer to receive a reimbursement. The time limit is triggered when the trader is informed of the consumer’s decision and is no longer than 14 days, but could be shorter depending on the circumstances of each individual situation. Thus, Art. 18(1) provides clarity to both consumer and trader by ensuring that the consumer does not have to wait for a long time to receive the reimbursement. Art. 18(1) does not determine the quantum of the reimbursement. Art. 14(5) provides the criteria for the amount by which the price paid by the consumer should be reduced, and Art. 16(1) stipulates the reimbursement due to a consumer in the case of termination, distinguishing between situations involving a single supply and continuous supply. Art. 18(2) requires, as a default rule, that the trader should use the same means of 2 payment as was used by the consumer to pay for the digital content or digital service to provide the reimbursement. However, the consumer may agree to receive the reimbursement through an alternative means of payment. The Digital Content Directive permits this on condition that such an alternative does not require the consumer to pay fees for receiving the reimbursement via this alternative method. Finally, Art. 18(3) precludes the trader from levying a fee to the consumer as part of 3 carrying out the reimbursement. This provision also has a consumer protection dimension in that it ensures that the consumer receives the full amount due to him by way of reimbursement.

B. Context I. European contract law As noted in the commentary on Art. 16, the Digital Content Directive not only 4 obliges the trader to reimburse the consumer for sums paid under the contract, but also introduces modalities for this in Art. 18.1 In contrast to the DCD, the SGD provides for a right to terminate the contract due to a non-conformity and obliges the trader to reim1

→ Art. 16 DCD, mn. 7.

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burse the consumer, but leaves it to the Member States to determine the modalities for this. The new Package Travel Directive, however, requires that a refund due to a consumer after termination is provided ‘without undue delay and in any event not later than 14 days after the contract is terminated’.2 A corresponding requirement is found in the Consumer Rights Directive with regard to the trader’s obligation to reimburse the consumer in instances when the consumer has exercised the right of withdrawal (which does not require a lack of conformity).3 Art. 18(1) provides for the same timescale as the Sales of Goods Directive and the Consumer Rights Directive.

II. Comparative remarks 5

Arts 16–18 address some of the restitutionary obligations of both parties following termination of the contract.4 Generally speaking, the obligation to make restitution of what has been received under the contract prior to termination is found in all the laws of contract of the Member States. As most Member States do not have specific contract law rules regarding the supply of digital content and digital services, the consequences of terminating a contract involving digital content/digital services would be addressed by applying the rules applicable to termination of a contract in general. However, as rules on the modalities of reimbursing a consumer similar to those in Art. 18 are already part of national law through the corresponding provisions in the Consumer Rights Directive, Member States will already have rules dealing with the timescale and modalities of reimbursement.

C. Explanation I. System Art. 18 is a supplementary provision which clarifies how the obligation of a trader to reimburse the consumer should be effected. It is relevant once the consumer has established the right to a reduction in the price paid for the digital content or digital service, or once the consumer has exercised the right to terminate in accordance with Art. 15. This Article only applies to reimbursements which may be due as a result of price reduction or termination of the contract for the supply of the digital content or digital service, but not to other instances when a reimbursement may be due to the consumer. 7 The right to a price reduction and the method of calculating the amount by which the price is to be reduced is determined in accordance with Art. 14(4) and (5). The availability of price reduction in accordance with these provisions needs to be established first, and only then does Art. 18 stipulate the timescale within which the reimbursement has to be paid. Similarly, once the consumer has exercised the right to terminate the contract in accordance with Art. 15, the trader is obliged to reimburse the consumer in accordance with Art. 16(1). 6

Art. 11(5) PTD. Art. 13(1) CRD. 4 cf. Art. III.–3:510 DCFR. 2

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II. Reimbursement owed to consumer Art. 18 applies to any reimbursement which is owed to the consumer by the trader, 8 which presupposes that such an entitlement has already been established. This Article therefore only deals with the timescale within which this reimbursement has to be effected, and the means by which this is to be done. A preliminary requirement to engage the right to receive any kind of reimbursement 9 is that the consumer must have paid a price for the digital service or digital content (cf. Art. 14(4) 1st sentence, in respect of price reduction, and Art. 16(1) 1st sentence, in respect of termination). Provided that the consumer did pay a price, then an entitlement to a reimbursement arises in two circumstances: (i) where the consumer is entitled to and has requested a price reduction in accordance with Art. 14(4) and (5); and (ii) where the consumer has exercised the right to terminate the contract in accordance with Art. 14(4) and (6) and Art. 15. In either instance, those provisions are the basis for a consumer’s right to receive a reimbursement and for calculating the amount of the reimbursement which is due to the consumer. Thus, in the case of a price reduction, the reduction should be proportionate to the decrease in the value of the digital content or the digital service as supplied compared to the value the digital content or service would have had without a lack of conformity. Where the consumer has exercised the right to terminate, the consumer is entitled to reimbursement of all sums paid under the contract (Art. 16(1) 1st sentence). For either right, the amount of the reimbursement will be reduced in circumstances where the digital content or the digital service was to be supplied over a period of time, and the non-conformity of the digital content or digital service only affected some of the period during which they were supplied before the right to a price reduction or termination was exercised (see Art. 14(5) 2 nd sentence and Art. 16(1) 2nd sentence). The obligations on the trader under Art. 18 therefore only apply to the reimbursement which is owed to the consumer based on rules regarding the right to a price reduction or the right to terminate the contract.

III. Timescale for reimbursement Once the consumer’s entitlement to receive a reimbursement has been established, 10 Art. 18 determines the timescale within which the trader has to complete the reimbursement. The trigger-point for the time period is the point at which the trader is informed of the consumer’s decision to exercise either right. This suggests that the trader must have knowledge of the consumer’s decision, so the claim for a reduction in the price, or the statement exercising the right of termination, must have reached the trader. It is not clear from Art. 18 if this means that the trader must have actually received information about the consumer’s decision, or whether it suffices that the trader ought to have been aware. This question might arise e.g., where the consumer has used an e-mail to inform the trader of his decision to invoke either remedy but this e-mail was sent outside the trader’s business hours. In such a situation, the trader would only become aware of the email once the business has reopened on the next business day and the e-mail has been read. It might then be thought that the time should be triggered at the start of the next business day. This could be a firm rule or it could be just a presumption, with the trader permitted to rebut this presumption if it can be shown that the trader only received the information about the consumer’s decision to invoke either remedy at a later point. However, on a literal reading of Art. 18(1), it seems that actual knowledge by the 11 trader is required before the time period for effecting the reimbursement commences.

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This interpretation would be in accordance with the general approach of the Digital Content Directive to balance the interests of consumer and trader respectively: 5 consumers are protected by having a clear timescale within which they can expect to receive the reimbursement, and the trader’s interests are respected because the period only commences once the trader knows that the obligation to reimburse the consumer has arisen. If the CJEU were asked for guidance on this issue, it is likely that the court would be influenced by the full harmonisation nature of the Digital Content Directive which precludes Member States from having rules which would provide a higher level of consumer protection than envisaged by the Digital Content Directive, and the fact that the Digital Content Directive seeks to balance the interests of consumers and traders respectively. This could result in an interpretation of Art. 18(1) along the lines of the literal interpretation outlined here. 12 The significance of this issue is that Art. 18(1) uses two criteria to determine the length of the timescale within which the trader has to provide the reimbursement to the consumer: (i) ‘without undue delay’ and (ii) no later than 14-days from the date of termination. These two criteria have also been used in the context of other directives dealing with a trader’s obligation to reimburse the consumer following termination of,6 or withdrawal from,7 the contract. To date, there is no CJEU case-law dealing with the interpretation of either criterion.

1. Reimbursement without undue delay 13

The first criterion is that the reimbursement had to be made ‘without undue delay’. This implies that the trader has to act promptly, but not necessarily immediately. A short delay between receiving information about the consumer’s decision and processing the reimbursement would be acceptable. This might be the case if the trader wishes to verify that the consumer is, indeed, entitled to exercise the right giving rise to the entitlement to a reimbursement and whether the amount of reimbursement claimed is the correct amount due to the consumer. However, the trader is still required to move swiftly and cannot ignore the consumer’s request for a time before considering whether it is justified and effecting the payment. In some situations, the trader may be expected to act within a few days, or even faster. This could be the case where there was a single act of supply and a non-conformity meriting a price reduction or termination becomes apparent very soon afterwards. Indeed, in most instances, the trader should be expected to process the consumer’s reimbursement within a few days of being informed that the consumer has terminated the contract.

2. Reimbursement no later than within 14 days 14

In any event, the second criterion in Art. 18(1) provides a final deadline of 14 days8 from the date on which the trader was informed about the consumer’s decision to invoke a price reduction or termination of the contract. The maximum time it may take a trader to reimburse the consumer is therefore 14 days. However, it is important to note that, within the system of Art. 18(1), the primary obligation on the trader is to reimburse the 5 cf., by analogy, Recital 68, emphasising the need to balance the interests of consumers and traders where digital content or a digital service is provided over a period of time and not in conformity with the contract for only some of that period. 6 Art. 11(5) PTD. 7 Art. 13(1) CRD. 8 The Digital Content Directive does not state so expressly (unlike Recital 41 CRD), but Regulation 1182/71 determining the rules applicable to periods, dates and time limits (OJ L 124, 8.6.1971, p. 1) should apply. Therefore, the 14 days include weekend days and public holidays (Art. 3(3) Regulation 1182/71).

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consumer without undue delay, which would usually mean that this should be done well before the expiry of the 14-day period. The significance of the 14-day limit is therefore to set a maximum permissible period within which a reimbursement has to be completed. It does not constitute the standard period for reimbursing the consumer, and a consumer is generally entitled to receive the reimbursement owed by the trader before 14 days have passed since the trader was informed. However, practically speaking, the 14-day period could become the de facto timescale 15 within which reimbursements will be provided. The advantage of a definite time period is that it provides a degree of certainty for both trader and consumer. Moreover, few consumers are likely to argue that a reimbursement made within the 14-day timescale should have been made sooner so as to have been made ‘without undue delay’. The inherent vagueness of this criterion would make it difficult to allow a consumer to establish successfully that a trader reimbursing the consumer within the 14-day timescale was nevertheless late as the reimbursement had not been made without undue delay.

3. Return of tangible medium as precondition for reimbursement A final point to note is that the trader’s duty to reimburse the consumer within the 16 stipulated timescale is not subject to the consumer having returned, where relevant, the tangible medium containing the digital content (under Art. 17(2)). The trader’s duty to reimburse the consumer and the consumer’s duty to return the tangible medium are therefore independent duties, and compliance by one party with its duty is not a precondition before the other party has to fulfil its duty. However, Member States may provide, in their national law, that the trader can with- 17 hold any reimbursement until the consumer has returned the tangible medium to the trader,9 and those that do so would effectively make the return of the tangible medium a precondition for the trader’s obligation to reimburse the consumer. This may, however, raise a question how the 14-day time limit in Art. 18(1) would work in those Member States which require the return of the tangible medium before the trader has to reimburse the consumer. In view of the full harmonisation nature of the Digital Content Directive, one might tend to assume that any such national rule would still have to retain the 14-day time limit as the deadline by which the trader must have reimbursed the consumer, irrespective of whether the consumer has returned the tangible medium by then. On the other hand, Art. 13(3) CRD permits a trader to withhold reimbursement due following a consumer’s withdrawal from a contract until goods have been returned to the trader or evidence of their dispatch has been provided. The effect of Art. 13(3) CRD therefore has to be that the 14-day time limit in Art. 13(1) CRD is suspended or extended until the trader has received the goods themselves or evidence of their dispatch. 10 It is therefore also possible that any Member State seeking to introduce such a rule in the context of the trader’s obligation under the Art. 18(1) could provide for an extension or suspension of the 14-day period until the consumer has returned the tangible medium or at least provided evidence of its dispatch.

9

Recital 15. Point 6.4.3 CRD Guidance.

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IV. Method of reimbursement 1. Same method as used by the consumer for paying In addition to specifying the timescale for reimbursement determined by Art. 18(1), Art. 18(2) deals with the method of reimbursement. The basic rule here is that the trader has to use the same means of payment as that used by the consumer when paying for the digital content or the digital service. Thus, if the consumer paid for the digital content or digital service by means of a debit card, then the trader must make the reimbursement via the same debit card. If the consumer paid by bank transfer, then the trader must effect a transfer of the amount owed to the consumer into the consumer’s bank account. As the definition of ‘price’ extends to a ‘digital representation of value’,11 the method of reimbursement would be the same digital representation of value. 19 This provision is important because it makes it clear beyond doubt that a consumer cannot be required by the trader to accept alternative means of payment in order to provide the reimbursement. Thus, if a consumer has paid for the digital content or digital service by using a credit card, then the trader is required to reimburse the consumer by crediting the consumer’s credit card account with the amount due to be reimbursed. The trader cannot oblige the consumer to accept a credit on the consumer’s account with the trader, or vouchers which can only be redeemed in future contracts with that trader. The purpose of a reimbursement is to ensure that the consumer receives back the amount due by way of reimbursement and put that sum of money back at the consumer’s free disposal. Allowing the trader to reimburse by other means, such as vouchers, could tie the consumer into a relationship with the trader which the consumer does not want. It could also mean that a consumer who does not redeem vouchers within a certain period of time would lose the value of the vouchers and therefore effectively not be reimbursed at all. 18

2. Express agreement by the consumer to a different means of payment The obligation to use the same means of payment for the reimbursement as was used by the consumer to pay for the digital content or digital service is subject to the proviso that a consumer may expressly agree to an alternative means of reimbursement (Art. 18(2)). Thus, whilst the trader cannot compel the consumer to accept a different means of payment than the one originally used by the consumer, it is possible that the consumer could accept the suggestion by the trader to use an alternative means of payment for the reimbursement. 21 It is necessary to distinguish two scenarios in this regard. First, Art. 18(2) would apply where the trader offers an alternative means of payment to make the reimbursement to the consumer. The consumer has the choice whether to accept this or not. If the consumer declines, then the trader is obliged to use the same method of payment the consumer used.12 22 Secondly, the consumer might request that the trader use an alternative means of payment for the reimbursement but the trader intends the use the means of payment originally used by the consumer. In this instance, the trader could proceed and does not have to use the alternative means of payment requested by the consumer. This can be inferred from the wording of the proviso in Art. 18(2), which, having obliged the trader to use the original means of payment then adds the proviso ‘unless the consumer ex20

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pressly agrees otherwise’. It is phrased in terms of an agreement by the consumer to something. Logically speaking, this suggests that the consumer can agree to a proposal made by the trader to use a different means of payment from that originally used by the consumer. The proviso cannot be read as including a request by the consumer to use an alternative means of payment for the reimbursement. Nor is it possible to read it to cover a mutual agreement between trader and consumer to use an alternative means of payment, which would cover a situation where either trader or consumer had proposed an alternative means of payment. Rather, it is limited to the express agreement by the consumer only. Therefore, a reimbursement has to be made (i) by using the same means of payment 23 as that originally used by the consumer; or (ii) by using an alternative means of payment, proposed by the trader, to which the consumer has expressly agreed. However, the consumer cannot insist on an alternative means of payment for the reimbursement if the trader is not willing to use this. Moreover, where the consumer agrees to an alternative means of payment, this agree- 24 ment has to be ‘express’. This means that the consumer cannot be forced to accept a different means of payment on the basis of a standard term in the contract for the supply of the digital content or digital service, as this is unlikely to amount to an express agreement. Instead, the consumer’s agreement to using the alternative means of payment would have to be obtained immediately before the reimbursement is made.

V. No fee in respect of reimbursement In addition to addressing the timescale for and means of reimbursement, Art. 18 fur- 25 ther seeks to ensure that the consumer does not incur any fees in order to receive a reimbursement. There are two different situations where the requirement that the reimbursement should not result in any fees arises within the context of Art. 18.

1. Fees charged for using a particular means of payment The first is in Art. 18(2), which primarily deals with the means of payment to be used 26 for making the reimbursement to the consumer. As explained above,13 this has to be done using the same means of payment originally used by the consumer for purchasing the digital content or the digital service. The exception to this, already discussed, is where the consumer expressly agrees to an alternative means of payment. The final part of Art. 18(2) adds to this that the requirement to use the same means of 27 payment is subject to the proviso that the consumer would not incur any fees as a result of using that means of payment for the reimbursement. Although this is not clear from the wording of Art. 18(2), the fees referred to in this paragraph must be fees charged by a third party such as a bank or other payment service provider and not the trader itself. This is because Art. 18(3) precludes the trader from charging fees for a reimbursement and therefore addresses this situation separately. However, the precise meaning of the term ‘fee’ is not clear. It could simply cover any 28 charges made to the consumer for the use of a particular means of payment and therefore not be restricted to particular charges. Thus, whilst consumers can no longer be charged a credit or debit card fee by a trader for using these methods for making payment,14 consumers might still incur fees for receiving funds via this route. Other fees 13 14

Above → mn. 22. See e.g., Art. 62(4) Payment Services Directive II.

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which might be incurred by a consumer are fees associated with cross-border fund transfers where this involves a currency conversion (e.g., where a trader based in the Euro-zone sends a reimbursement to a consumer outside the Euro-zone). If the term ‘fee’ covers any charge to a consumer in respect of the reimbursement transaction charged by a third-party, then this proviso would be very broad in its reach, and could potentially make it very difficult for a consumer to receive a reimbursement by any means of payment. As this provision mirrors Art. 13(1) CRD, it is likely that a common approach will be taken in interpreting Art. 18 DCD and Art. 13(1) CRD. As yet, there is no CJEU ruling on this point. DG Justice has suggested that the type of fees referred to here would include bank charges for inbound payments but not any losses caused by currency conversion if the consumer’s bank account is in a different one from that of the trader. 15 29 It is not immediately obvious from the wording of Art. 18(2) whether this proviso applies only to reimbursement using the original means of payment or also to the alternative means of payment to which the consumer has expressly agreed. This difficulty is caused by the way in which Art. 18(2) has been drafted. It first stipulates the basic requirement that the same means of payment must be used, then inserts the exception that the consumer may agree otherwise, and then adds the proviso that the reimbursement must not result in the consumer incurring any fees. The exception is inserted into Art. 18(2) in-between commas, suggesting that the main proviso refers back only to the first part of Art. 18(2) and therefore relates to the use of the original means of payment used by the consumer.16 30 This means that the general obligation to use the same means of payment does not apply if the consumer would incur fees if that means were used by the trader. This, however, raises further questions. First, there is a practical question of whether the trader will always know whether the consumer will be charged a fee if the original means of payment is used for the reimbursement. There is neither an obligation on the trader to check whether the consumer might be charged a fee, nor is there an obligation on the consumer to warn the trader that he might incur a fee if the trader used the original means of payment. Related to this is the second question as to whether a trader who is aware of the fact that a fee would be incurred by the consumer would be obliged to (i) inform the consumer of this; and (ii) offer an alternative means of payment for the reimbursement which would not result in the consumer having to pay a fee. 31 A third question is whether the consequence of the trader using the original means of payment for the reimbursement and the consumer being charged a fee as a result would be that the trader would be obliged to reimburse the consumer for the fees which have been incurred? On the basis that the Directive seeks to maintain a balance between the interests of consumers and traders, a trader cannot be expected to enquire into whether a consumer would incur any fees as a result of using a particular means of payment, but if the trader is aware of such fees and proceeds regardless, then the trader should be expected to reimburse the consumer additionally for the fees incurred. However, this is not addressed in the Digital Content Directive itself.

Point 6.4.3 CRD Guidance. The German version of Art. 18(2) leads to a similar conclusion. Here, the proviso at the end of the sentence refers to an ‘Erstattung’ (the German word for ‘reimbursement’), and the only other point when this term is used in Art. 18(2) is when setting out the requirement to use the same means of payment as used by the consumer for paying for the digital content or digital service. 15

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2. Trader must not charge fees for reimbursing consumer The discussion regarding Art. 18(2) above concerned fees incurred by the consumer 32 in connection with the reimbursement. Art. 18(3) addresses a further situation in which a consumer could potentially be charged a fee: the trader may seek to impose a fee, such as an administration charge, on the consumer for the cost of verifying the consumer’s entitlement to the chosen remedy which triggered the obligation to provide a refund. The effect of Art. 18(3) is to preclude the trader from imposing any kind of fee on the consumer in respect of the reimbursement. In other words, once the amount of the reimbursement has been established in accordance with the relevant provisions in the Directive, the trader must reimburse that amount and must not make any further deductions by way of fee.

VI. No regulation of consequences of non-compliance Despite the fact that Art. 18 lays down a number of precise obligations on the trader 33 with regard to the timescale for reimbursement, the means of payment to be used, and the fact that no fees may be imposed on the consumer, the article is silent as to the consequences where the trader fails to comply with these obligations.17 Art. 21 puts the familiar onus on the Member States to ensure that there is compliance with the requirements of this Directive through ‘adequate and effective means’, but there is nothing further with regard to any sanctions which might be imposed for a failure to comply with Art. 18. This means that there are many issues which will need to be resolved at national level, with the assistance of the CJEU through the preliminary reference procedure under Art. 267 TFEU. However, the experience of the earlier generations of consumer law directives shows that it can take a considerable amount of time before questions start to be referred to the CJEU, and so a considerable degree of uncertainty about the precise scope of Art. 18, any implicit additional duties not mentioned expressly in the Article, and the consequences for non-compliance will persist for some time.

D. Transposition issues As noted at the beginning of this chapter,18 whilst the introduction of EU rules on the 34 timescale and modalities of reimbursing a consumer in the context of remedies for a lack of conformity are new, the rules themselves are already familiar from the Consumer Rights Directive and so should not introduce fresh problems for the Member States when transposing the Digital Content Directive. However, one possible issue which might require some thought when transposing the 35 Directive would arise in respect of those Member States who provide, in their national law, that the trader may withhold any reimbursement until the consumer has returned the tangible medium to the trader.19 As a similar rule is already available in respect of reimbursements made after a consumer has exercised the right of withdrawal under a contract for the supply of goods, it can be expected that most Member States would apply a similar rule also in this context. This would mean that national law could provide that the trader may exceed the time limit stipulated by the Directive, which is fixed at 14 days, if the consumer has not yet returned the tangible medium. Indeed, doing so could See also Spindler, 209. Above → mn. 4. 19 As permitted by Recital 15.

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also be regarded as providing an ‘adequate and effective’ sanction’ for the consumer’s failure to return the tangible medium. However, there is a small possibility that the existence of the 14-day time limit could be interpreted as an absolute limit within the context of the Directive’s system, and therefore curtail the ability of a Member State to provide for such withholding of the reimbursement where the consumer has not returned the tangible medium. 36 More generally, as with other provisions in the Directive, there are no sanctions envisaged for failure to comply with the obligations under Art. 18, leaving it to the Member States to determine what might be appropriate sanctions in accordance with the general obligation under Art. 21 that there need to be ‘adequate and effective means to ensure compliance’ with the national rules implementing the Digital Content Directive.

Article 19 Modification of the digital content or digital service 1. Where the contract provides that the digital content or digital service is to be supplied or made accessible to the consumer over a period of time, the trader may modify the digital content or digital service beyond what is necessary to maintain the digital content or digital service in conformity in accordance with Articles 7 and 8, if the following conditions are met: (a) the contract allows, and provides a valid reason for, such a modification; (b) such a modification is made without additional cost to the consumer; (c) the consumer is informed in a clear and comprehensible manner of the modification; and (d) in the cases referred to in paragraph 2, the consumer is informed reasonably in advance on a durable medium of the features and time of the modification and of the right to terminate the contract in accordance with paragraph 2, or of the possibility to maintain the digital content or digital service without such a modification in accordance with paragraph 4. 2. The consumer shall be entitled to terminate the contract if the modification negatively impacts the consumer’s access to or use of the digital content or digital service, unless such negative impact is only minor. In that case, the consumer shall be entitled to terminate the contract free of charge within 30 days of the receipt of the information or of the time when the digital content or digital service has been modified by the trader, whichever is later. 3. Where the consumer terminates the contract in accordance with paragraph 2 of this Article, Articles 15 to 18 shall apply accordingly. 4. Paragraphs 2 and 3 of this Article shall not apply if the trader has enabled the consumer to maintain without additional cost the digital content or digital service without the modification, and the digital content or digital service remains in conformity. Bibliography: Bach, ‘Neue Richtlinien zum Verbrauchsgüterkauf und zu Verbraucherverträgen über digitale Inhalte’ (2019) 24 NJW 1705–1711; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain aspects concerning contracts for the supply of digital content’ COM(2015) 634 final.

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Modification of the digital content or digital service A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Modifications in relation to the Commission’s Proposal . . . . . . . . . . . . . . . . . . . . . . II. Relationship to the Unfair Terms Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 6 7 8

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Right of the trader to modify the digital content or digital service . . . . . . . . . . . 1. Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Right to terminate the contract by the consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Negative impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Application of Arts 15–18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Exception to the right to terminate the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9 9 9 16 17 17 19 20 21 21 22

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23

A. Function If the digital content or digital services are supplied or made accessible over a period of time (e.g. ‘rental situation’) Art. 19(1) stipulates the right for the trader to modify the digital content or digital service beyond what is necessary to maintain it in conformity with Arts 7 and 8. It serves to protect the trader in his interest to modify the digital content or the digital services as these are easily changeable und normally subject to constant modifications, improvements and updates. In order to confine modifications of digital content or service to such objectives Art. 19(1) contains in (a)–(d) a list of requirements for justified modifications. The provision protects the consumer in his interest to use the digital content or services in accordance with Arts 7 and 8. Art. 19(2) grants the consumer the right to terminate the contract if the modification of the digital content or service turns out not to be beneficial for them because it negatively impacts the access or use of the digital content or digital service. The right of termination is excluded if the modification has only minor impact on the consumer. Art. 19(3) makes clear that in case of termination of the contract by the consumer the provisions regulating the mode and the effects of termination apply pursuant to Art. 19(2). These concern the exercise of the right of termination (Art. 15), the respective obligations of the trader (Art. 16) and consumer (Art. 17) in case of termination, and the time limits and means of reimbursement by the trader (Art. 15). Art. 19(4) contains an exception to Art. 19(2) and (3). The consumer shall be entitled to terminate the contract pursuant to Art. 19(2) with the effects of Art. 19(3), if the trader has enabled the consumer to maintain without additional cost the digital content or service without the modification, and the digital content or digital service remains in conformity. In this case the reasons justifying a right of termination pursuant to Art. 19(2) are no longer valid, since the consumer might ‘opt’ for a version of the digital content or services without modifications.

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3

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Modification of the digital content or digital service

B. Context I. Modifications in relation to the Commission’s Proposal 6

The provision of Art. 19 replaces Art. 15 of the Commission’s Proposal1 and contains major modifications both in terms of function and content. In contrast to Art. 15 of the Commission’s Proposal, which incorporated a mainly subjective approach to conformity and was aimed to limit the trader’s ability to modify the digital content or digital service (‘the supplier may alter … only if ’2), the final Directive and thus Art. 19 follows a primarily objective approach to conformity (see Art. 8).3 Its purpose is to allow modifications of the digital content or digital service which go beyond just maintaining its conformity despite the rather narrow limits implied by the objective approach to conformity. However both provisions – Art. 19 DCD and Art. 15 of the Commission’s Proposal start from the same assumption that due to technological or other reasons the supplier might be compelled to change features of the digital content supplied over a period of time and that these changes are often to the advantage of the consumer as they improve the digital content.4 In contrast to the Commission’s Proposal, Art. 19 now (i) contains additional5 and more precise6 requirements for modifications by the trader, (ii) slightly limits the consumer’s right to terminate the contract7 and (iii) contains an exemption for cases in which the trader has enabled the consumer to maintain the digital content or digital service without the modification and without additional cost8.

II. Relationship to the Unfair Terms Directive 7

Art. 19 considers the requirements raised by the Unfair Terms Directive insofar as the reference in Art. 19(1)(a) to ‘a valid reason’ for the modification provided by the contract resembles No. 1(k) of the Annex to the Unfair Terms Directive. Apart from that, Art. 19 serves as the legal standard (‘Leitbild’) towards which general terms and conditions are to be reviewed in application of Art. 3 Unfair Terms Directive.

III. Conformity 8

Considering the fast-evolving character of digital content and digital services, updates, upgrades or similar modifications may be necessary in order to maintain the conformity of digital content and digital services pursuant to Arts 7 and 8. However, if such modifications go beyond what is necessary to maintain conformity then the digital content and digital services actually might be considered as no longer meeting the requireArt. 15(1) COM(2015) 634 final. ibid. 3 See also ibid, Recital 43. 4 Recital 75 DCD and Recital 43 COM(2015) 634 final. 5 Art. 19(1)(a) (‘and provides a valid reason for’); Art. 19(1)(b) (‘such a modification is made without additional cost to the consumer’); Art. 19(1)(c) (‘the consumer is informed in a clear and comprehensible manner of the modification’); Art. 19(1)(d) (‘the consumer is informed … of the right to terminate the contract’). 6 Art. 19(1)(d) (‘the consumer is informed … of the features and time of the modification’). 7 Art. 19(2) 1 st sentence (‘…if the modification negatively impacts the consumer's access to or use of the digital content or digital service, unless such negative impact is only minor.’). 8 Art. 19(3). 1

2

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Art. 19

ments of conformity. Art. 19 regulates such cases of ‘permitted non-conformity’ by maintaining the contract if the modifications turn out to be advantageous for the consumer. The consumer then basically has to be satisfied with the digital content and services which are (pursuant to Arts 7 and 8) lacking the necessary conformity for the mere reason that they are to the advantage of the consumer. Therefore the consumer is – notwithstanding the exception of Art. 19(2) – not entitled to terminate the contract as he normally would be allowed to according to Art. 13(1).

C. Explanation I. Right of the trader to modify the digital content or digital service 1. Requirements Art. 19(1) contains five cumulative requirements which all have to be met (‘and’). a) Contract over a period of time. A contract is required that provides that the digital content or digital service is to be supplied or made accessible to the consumer over a period of time (e.g. cloud services, ‘lease of software’ or access to social networks). b) Contract allows modification. Pursuant to Art. 19(1)(a) the contract has to allow such a modification and (!) secondly has to provide ‘a valid reason for it’. Both cumulative requirements are necessary for a valid modification pursuant to Art. 19(1)(a). The latter requirement was not part of the Commission’s Proposal and has been added in the final text of the Digital Content Directive in order to comply with No. 1(k) of the Annex to Unfair Terms Directive.9 In many cases, however, the trader might not have anticipated the necessity to regulate such modifications or might have overseen the problem. In such situations it would put an unduly high burden on him if the right to modify the digital content or services would not be granted. Therefore the requirements of Art. 19(1)(a) are met if the nature of the contract provides a sufficient reason for such modifications. Given the frequent improvement of digital content and digital services, in particular by updates, most if not all contracts concerning the supply of digital content or services might meet that requirement. c) No additional cost for the consumer. Pursuant to Art. 19(1)(b) such a modification shall be made without additional cost to the consumer. The contractional obligations between the parties express the specific equivalence of performances the parties agreed upon at the time of conclusion of the contract. If the modification is subject to additional costs the consumer is in danger to be pressed into a new contract to conditions unilaterally set by the trader in a ‘take it or leave it’ manner. If they do not accept the additional costs the only choice remaining is to terminate the contract. d) A clear and comprehensible information of the consumer. According to Art. 19(1)(c), the consumer shall be informed in a clear and comprehensible manner of the modification. Self-determination requires information. The consumer will only be able to decide if he is willing to accept the modification or terminate the contract if he is fully and comprehensibly informed. In contrast to Art. 19(1)(b) the provision does not require that the information is provided on a durable medium. e) Information of the consumer in case of the modification. Art. 19(1)(d) stipulates that, in case that the modification negatively impacts the consumer’s access to or the use of 9

See above, n 7.

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13

14

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Modification of the digital content or digital service

the digital content or service, the consumer has to be informed reasonably in advance on a durable medium of the features and time of the modification and of the right to terminate the contract in accordance with Art. 19(2), or of the possibility to maintain the digital content or digital service without such a modification in accordance with Art. 19(4). The condition that the information is provided on a durable medium is met if the text is provided in written form.

2. Effect 16

If all the requirements pursuant to Art. 19(1) are met then the trader has the right to modify the digital content or digital service in accordance with Arts 7 and 8 without being held liable by the consumer for non- or non-conforming performance.

II. Right to terminate the contract by the consumer 1. Negative impact a) Requirements. The first part of Art. 19(2) 1st sentence requires that the modification negatively impacts the consumer’s access to or use of the digital content or digital service. That could be the case if, for instance, due to improvements in terms of function or performance additional hardware requirements have to be met or if a defective update impedes the use of the digital content or digital service. A negative impact could also be caused by obligation of the consumer to provide additional personal information as a requirement for the further use of the digital content or digital service. In any case, Recital 75 provides a broad spectrum of factors that are to be taken into consideration: nature and purpose of the digital content or digital service as well as quality, functionality, compatibility and other main features which are usual for digital content or digital services of the same type. 18 b) No minor impact. Pursuant to the second part of Art. 19(2) 1st sentence, the negative impact must be more than merely minor. Minor impacts do not fully or predominantly impede the use of the digital content or digital service. They are of negligible effect and mostly concern aesthetic issues or personal preferences. 17

2. Effects 19

If the requirements pursuant to Art. 19(2) 1st sentence are met then the consumer shall be entitled to terminate the contract free of charge within 30 days of the receipt of the information or of the time when the digital content or digital service has been modified by the trader, whichever is later [Art. 19(2) 2nd sentence].

III. Application of Arts 15–18 20

Once the consumer terminates the contract according to Art. 19(2), Arts 15 and 16 automatically apply [Art. 19(3)]. Pursuant to Art. 15, the termination of the contract shall be exercised by means of a statement to the trader expressing the decision to terminate the contract. The respective obligations of trader and consumer are governed by Art. 16–17. The time limits and means of reimbursement by the trader are governed by Art. 18.

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Right of redress

IV. Exception to the right to terminate the contract 1. Requirements Art. 19(4) requires that the trader has enabled the consumer to maintain without ad- 21 ditional cost the digital content or digital service without the modification. That could be by providing the consumer with the existing version of the digital content or digital service while a ‘new version’ is already available. Furthermore, the digital content or digital service has to remain in conformity, which means that it should not be defective in any way.

2. Effect Art. 19(2) and (3) shall not apply if the requirements pursuant to Art. 19(4) are met. 22 Consequently, the consumer shall not be entitled to terminate the contract in case that the modification negatively impacts the consumer’s access to or use of the digital content or digital service; Arts 15–18 will not apply.

D. Transposition issues Pursuant to Art. 19(1), the provision only applies to contracts which provide that the 23 digital content or service is to be supplied or made accessible to the consumer over a period of time; Art. 19 therefore does not apply if the digital content is supplied through one or more individual acts of supply. Since the requirements of the Digital Content Directive are ius cogens so that the trader is not allowed to make any reservations resembling Art. 19 for contracts in which digital content is supplied to consumers through one or more individual acts of supply, the general provisions of the Directive apply. If the modifications go beyond what is necessary to maintain conformity the digital content therefore will become non-conforming pursuant to Arts 7 and 8. In consequence, the consumer shall have the right to terminate the contract according to Art. 13(1). Such result is neither reasonable nor appropriate since it undermines the very purpose the European legislator seeks to achieve with the provision according to Recital 74: to allow such updates, upgrades and similar modifications which are advantageous for the consumer. A suitable remedy in the process of transposition into the law of the Member States 24 is hard to find. An extension of the scope of application of Art. 19 to digital content which is supplied to consumers through one or more individual acts of supply is not possible due to the full harmonising character of the Directive (Art. 4). As legislative remedies fail it is up to the Member States to call upon the ECJ within the preliminary ruling procedure pursuant to Art. 267 TFEU. The ECJ might then test whether the modified version of the digital content would have to be considered non-conforming, if the trader would have supplied the digital content in modified form in the first place.10

Article 20 Right of redress Where the trader is liable to the consumer because of any failure to supply the digital content or digital service, or because of a lack of conformity resulting from an act or 10

In this direction Bach, 1707.

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omission by a person in previous links of the chain of transactions, the trader shall be entitled to pursue remedies against the person or persons liable in the chain of commercial transactions. The person against whom the trader may pursue remedies, and the relevant actions and conditions of exercise, shall be determined by national law. Bibliography: Beale, ‘Conclusion and Performance of Contracts: An Overview’ in: Schulze/Staudenmayer/Lohsse (eds), Contracts for the Supply of Digital Content, Regulatory Challenges and Gaps (Nomos 2017), p. 33–57; Bianca/Grundmann (eds), EU Sales Directive: Commentary (Intersentia 2002); Commission, ‘Proposal for a European Parliament and Council Directive on the sale of consumer goods and associated guarantees’ COM(95) 520 final; Dauner-Lieb/Langen (eds), BGB Kommentar (3 rd edn, Nomos 2016); Dutta, ‘Der europäische Letztverkäuferregress bei grenzüberschreitenden Absatzketten im Binnenmarkt’ (2007) 1 ZHR 79–105; Ebers/Janssen/Meyer, ‘Comparative Report’ in: Ebers/Janssen/Meyer (eds), European Perspectives on Producers’ Liability (Sellier 2009), p. 3–73; Ernst/Gsell, Kaufrechtsrichtlinie und BGB (2000) 33 ZIP 1410–1427; European Law Institute, Statement on the European Commission's Proposed Directive on the Supply of Digital Content to Consumers, COM (2015) 634 final (2016); Grabitz/ Hilf/Nettesheim (eds), Das Recht der Europäischen Union, Vol. IV (40th suppl., C.H. Beck 2009); Grundmann, ‘Generalreferat – Internationalisierung und Reform des deutschen Kaufrechts’ in: Grundmann/ Medicus/Rolland (eds), Europäisches Kaufgewährleistungsrecht (Carl Heymanns 2000) p. 281–321; Illmer/Dastis, ‘Redress in Europe and the Trap under the CESL’ (2013) 2 ERCL 109–142; Jud, ‘Regressrecht des Letztverkäufers’ (2001) 6 ZfRV 201–219; Keirsbilck, ‘Right of Redress’ in: Claeys/Terryn (eds), Digital Content & Distance Sales (Intersentia 2018), p. 265–279; Magnus, ‘Der Regreßanspruch des Letztverkäufers nach der Richtlinie über den Verbrauchsgüterkauf ’ in: Basedow et al (eds), Private Law in the International Arena:From National Conflict Rules Towards Harmonization and Unification – Liber Amicorum Kurt Siehr (TMC Asser 2010), p. 429–444; Metzger, ‘Verträge über digitale Inhalte und digitale Dienstleistungen: Neuer BGB-Vertragstypus oder punktuelle Reform’ (2019) 12 JZ 577–586; Micklitz/Reich/ Rott, Understanding EC Consumer Law (Intersentia 2009); Reich, General Principles of EU Civil Law (Intersentia 2013); Roth, ‘Die Schuldrechtsmodernisierung im Kontext des Europarechts’ in: Ernst/Zimmermann (eds), Zivilrechtswissenschaft und Schuldrechtsreform (Mohr Siebeck 2001), p. 225–256; Spindler, ‘Contract Law and Copyright-Regulatory Challenges and Gaps’ in: Schulze/Staudenmayer/Lohsse (eds), Contracts for the Supply of Digital Content, Regulatory Challenges and Gaps (Nomos 2017), p. 211–227; Staudenmayer, EG Richtlinie 1999/44/EG zur Vereinheitlichung des Kaufgewährleistungsrechts’ in: Grundmann/Medicus/Rolland (eds), Europäisches Kaufgewährleistungsrecht (Carl Heymanns 2000), p. 27–47; Van Dam, European Tort Law (2nd edn, OUP 2013); Weitenberg, Der Begriff der Kausalität in der haftungsrechtlichen Rechtsprechung der Unionsgerichte (Nomos 2014); Wurmnest, Grundzüge eines europäischen Haftungsrechts (Mohr Siebeck 2003). A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Liability to consumer because of any failure to supply or lack of conformity II. Resulting from an act or omission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Person or persons liable in the chain of commercial transaction . . . . . . . . . . . . . IV. Modalities of redress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Non-mandatory right of redress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16 16 21 23 29 31

D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

32

A. Function 1

Art. 20 contains rules on some aspects of the right of redress of the final trader – concluding a contract on the supply of digital content or digital services with the consumer – against previous links in the chain of transactions. If the final trader is liable towards the consumer for a breach of contract (a failure to supply the digital content or digital service or a lack of conformity), but the breach results from an act or omission of an earlier link in the chain of transactions, the trader is ‘entitled to pursue remedies’ against the person or persons liable in the chains of transactions. 322

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Thus, the purpose of the provision is not to protect the consumer but rather the final trader against other traders, i.e. to regulate the legal relationship between the final trader and their supplier, other intermediary persons and the original designer of digital content or digital service, respectively. The provision attempts to prevent the unjust situation where the final trader would be liable towards the consumer, but would not be able to claim recovery from previous persons in the chain of transactions responsible for the breach.1 In this sense, the provision aims to prevent that the link in the chain of contracts responsible for the non-conformity would pass the liability on to another person.2 In principle, the final trader already has contractual remedies against their supplier under national law, and their supplier, in turn, has remedies against the previous supplier etc. (redress along the chain of contracts). However, in some situations these claims along the chain of contracts may be unsuccessful (‘incongruities in liability’).3 For example, the notion of conformity in the B2B contract between the final trader and their supplier is not necessarily the same as the notion of conformity in the contract between the final trader and the consumer, regulated by the Digital Content Directive; the parties in the B2B contract (between the final trader and the supplier or between other links in the chain of contracts) may have excluded or limited the liability; the time limits under national law for the exercise of remedies for claims arising from a B2B contract may be shorter than the time limits for the exercise of the remedies of the consumer against the final trader under the Digital Content Directive; or the rules on burden of proof in B2B contracts under national law may be different from the rules from Art. 12. Furthermore, one of the previous traders or the producer may become insolvent in which case the claimant, along with other creditors, can only recover the ‘usual meagre dividend’ in the liquidation or bankruptcy.4 Art. 20 does not address these issues directly. Indeed, its wording is rather vague. 5 With regard to the key questions of the redress – the person against whom the trader may pursue remedies and the relevant actions and conditions of their exercise – it refers to the law of the Member States. Art. 20 merely defines the goal: to relieve the final supplier of the liability against the consumer for which they are not responsible.6 The details of the right of redress, including the question whether the final supplier should claim redress directly from the producer (direct claim) or from their immediate supplier (redress along the chain of contracts), are in the discretion of the Member States. As Art. 20 was modelled on Art. 4 CSD and the two provisions are not significantly different, the views on the latter are applicable to Art. 20. With regard to Art. 4 CSD it was said that the Consumer Sales Directive only demands the Member States to provide for ‘any kind of redress’7, which could also be understood in the sense that the contractual claims along the chain of B2B contracts existing in national law would suffice and no transposition measures are necessary. However, such an interpretation would hardly have any normative content. The principle of effectiveness of EU law (effet utile) demands that the final trader is entitled to an effective remedy, therefore Art. 4 CSD should 1 See e.g. COM (95) 520 final, 14; Jud, 202; Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 2; Pfeiffer in: Dauner-Lieb/Langen, Verbrauchsgüterkauf, Art. 4, mn. 2, Micklitz/Reich/Rott, mn. 4.19, p. 166. 2 Micklitz/Reich/Rott, p. 165; Staudenmayer, p. 43. 3 See Bridge in: Bianca/Grundmann, Art. 4, mn. 12 et seq.; Ebers/Janssen/Meyer, p. 38; Keirsbilck, p. 273; Magnus, p. 434 et seq.; Illmer/Dastis, 113. 4 Bridge in: Bianca/Grundmann, Art. 4, mn. 17. 5 Ebers/Janssen/Meyer, p. 39. 6 Roth, p. 250. 7 Staudenmayer, p. 42.

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be understood as containing certain minimal requirements for the right of redress, particularly in the light of possible incongruities in liability.8 The views on what constitutes minimal requirements differ. Indeed, Art. 4 CSD raised more questions than it gave answers.9 There is also no case law of the CJEU on the interpretation of the provision. However, the Court emphasised the significance of the right of redress for the protection of financial interests of the final trader in the sense of a counter-balance for their extensive liability for the lack of conformity towards consumers.10 A relatively widespread acceptance nevertheless seems to exist regarding some minimal requirements. Firstly, Art. 4 CSD does not prescribe how the redress should operate; the Member States may choose between the direct claim against the responsible person or the redress up the chain of contracts.11 Secondly, the effet utile does not necessarily mean that the law of the Member States should provide for the right of redress in each and every case of liability of the final trader against the consumer.12 The Consumer Sales Directive therefore accepts some incongruities in liability. For example, it is clear that the claim may be ineffective due to insolvency in the chain of contracts. The Consumer Sales Directive certainly does not aim to establish an ‘insolvency-proof ’ claim of the final trader.13 Also, the final trader and their supplier, or other contract parties along the chain, may limit or exclude the liability.14 An explicit reference to freedom of contract between the seller, the producer, a previous seller or any other intermediary in Recital 9 CSD indicates that the right of redress is not mandatory. It may also be excluded by way of a standard terms clause, subject to judicial review of fairness if such exists in B2B contracts.15 Member States should nevertheless make sure that the time limits of the redress claims are coordinated with the time limits for the liability of the final trader against the consumer.16 However, even in cases where Member States did not adopt any legislative measures at all to transpose Art. 4 CSD or they have adopted some legislative measures but have not adapted the time limits of liability to the time limits in the Consumer Sales Directive, the Commission has not initiated any procedures for breach of EU law.17 This could be interpreted as supporting the view that ‘any kind of redress’ in the law of the Member States meets the requirements of Art. 4 CSD in the view of the Commission.

8 See e.g. Dutta, 81; Ernst/Gsell, 1422; Jud, 203; Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 5; Pfeiffer in: Dauner-Lieb/Langen, Verbrauchsgüterkauf, Art. 4, mn. 9; Roth, p. 250. On the principle of effectiveness in the remedial sense, see e.g. Reich, p 97. 9 Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 3. 10 CJEU, C-65/09 and C-87/09 Weber/Putz EU:C:2011:396, para. 58. 11 Bridge in: Bianca/Grundmann, Art. 4, mn. 29; Dutta, 81; Ebers/Janssen/Meyer, p. 39; Ernst/Gsell, 1423; Magnus in: Grabitz/Hilf, Art. 4 RL 1999/44/EG, mn. 10; Micklitz/Reich/Rott, para. 4.21, p. 166; Pfeiffer in: Dauner-Lieb/Langen, Verbrauchsgüterkauf, Art. 4, mn. 7. 12 Roth, 250. 13 Bridge in: Bianca/Grundmann, Art. 4, mn. 34. 14 ibid., mn. 33; Ernst/Gsell, 1425; Grundmann, 310; Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 7; Micklitz/Reich/Rott, para. 4.22, p. 167; Pfeiffer in: Dauner-Lieb/Langen, Verbrauchsgüterkauf, Art. 4, mn. 10. 15 For a contrary view (only explicit exclusion), see: Micklitz/Reich/Rott, para. 4.22, p. 166. 16 Bridge in: Bianca/Grundmann, Art. 4, mn. 35; Ernst/Gsell, 1423; Jud, 217; Magnus in: Grabitz/Hilf/ Nettesheim, Art. 4 RL 1999/44/EG, mn. 12; Roth, p. 251. 17 For an overview of transposition measures in Europe, see: Ebers/Janssen/Meyer, p. 41 et seq.

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B. Context Art. 20 was modelled after Art. 4 CSD which introduced the right of redress to European contract law. An almost identical provision also exists in Art. 18 SGD. The provision on the right of redress in the Digital Content Directive is essentially the same as in the Consumer Sales Directive. There are, however, also some differences. Apart from some deviations in the wording of the provision and Recitals18 two aspects regarding the context of the provision, i.e. the Directive, should be briefly mentioned. Firstly, the Digital Content Directive does not regulate contracts for the sale of goods, but contracts for the supply of digital content or digital services. The object of the contract is different, as well as its legal nature (which the Digital Content Directive refrains from defining).19 However, as the Consumer Sales Directive – and the Sale of Goods Directive – the Digital Content Directive prescribes the duties and the remedies in an abstract way, independently of the type of contract. The basic approach of the Digital Content Directive regarding the notion of conformity and the remedies of the consumer remains very similar. The fundamental idea behind the right of redress is the same: the digital content or services are passed to the final supplier along the chain of contracts; if the final supplier is liable towards the consumer but is not responsible for the non-conformity or failure to supply, they may take redress against the person responsible in the chain of contracts. Secondly, while the Consumer Sales Directive was a minimum harmonisation directive, the Digital Content Directive aims to achieve full harmonisation (Art. 4), preventing Member States from maintaining or introducing diverging provisions to ensure a different level of consumer protection, even to the benefit of consumers. 20 However, the right of redress remains largely unaffected. It may be debatable whether the right of redress, being a right in a B2B legal relationship, is covered by the principle of full harmonisation. Moreover, the contents of Art. 20 are not definite enough to be able to be fully harmonised as the key decisions on how the right of redress should look like are left to the Member States.

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C. Explanation I. Liability to consumer because of any failure to supply or lack of conformity The first prerequisite of the right of redress is that the final trader was liable to the 16 consumer because of any failure to supply the digital content or digital service or because of a lack of conformity thereof in the sense of the Digital Content Directive. This does not necessarily presuppose that the previous supplier is also liable for breach of contract to the final trader; however, the failure to supply or lack of conformity must have resulted from an act or omission by a person in the previous links of the chains of transactions, for which the final trader is liable to consumer.21 While the Consumer Sales Directive only provided for remedies in case of lack of 17 conformity (repair, replacement, price reduction and rescission) the Digital Content DiBelow → mn. 17, 24 and 26. Recital 12. 20 Art. 4. 21 Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 13; Pfeiffer in: Dauner-Lieb/Langen, Verbrauchsgüterkauf, Art. 4, mn. 3. 18 19

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rective also includes remedies for a failure to supply the digital content or digital service i.e. a claim for performance (supply) and termination.22 18 The requirement of liability means that the consumer had made use of one or more remedies for the failure to supply the digital content or digital service from Art. 11 or for the lack of conformity from Art. 14. 19 Any further remedies available under national law, such as damages, are outside the scope of the Digital Content Directive and thus not covered by the right of redress in Art. 20.23 If, for example, the consumer in case of a failure to supply the digital content or digital service terminates the contract and claims damages, the Digital Content Directive does not require the right of redress to cover the damages claim. The Member States may, however, provide for to right of redress to be broader as they remain free to regulate aspects of general contract law, including the right to damages and (further) consequences of termination.24 20 Liability in the sense of the Digital Content Directive means that the consumer made use of the remedies and the trader responded accordingly because they had to, thereby incurring costs; a mere abstract possibility of a claim or completing the remedies for reasons of good will or amiability while the trader was not required to do so, do not require redress.25

II. Resulting from an act or omission The liability of the final trader to the consumer must be ‘resulting from an act or omission by a person in previous links of the chain of transactions’. This criterion refers to the requirement of causation. It should, in principle, be interpreted in an EU-autonomous way, i.e. independently of the concepts existing in the law of the Member States.26 However, as yet there is no clear concept of causation in EU law.27 The ECJ case law regarding causation relates to the (non-contractual) liability of the Member States for the breach of EU law.28 It is debatable whether it can be transferred directly to Art. 20 without further modifications.29 In principle, the natural causation (conditio sine qua non) serves as a basis, but must supplemented with the (rather unclear) requirement of a ‘direct link’ between the act or omission in breach of EU law and the damage.30 22 A further restriction can be deducted from the purpose of Art. 20: the final trader should not have the right of redress where the failure to supply or the lack of conformity of digital content or digital service is a result of their own act or omission,31 e.g. if they had made statements on particular characteristics of digital content or service leading to their liability for lack of conformity to consumer. 21

Art. 13. Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 13. 24 See Art. 3(10) and Recital 73. 25 Jud, 208; Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 15. 26 Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 16; Pfeiffer in: Dauner-Lieb/Langen, Verbrauchsgüterkauf, Art. 4, mn. 5. 27 Van Dam, p. 321; Wurmnest, p. 176. 28 For an extensive review of EU case law on the issue of causation see Weitenberg. 29 In this sense Pfeiffer in: Dauner-Lieb/Langen, Verbrauchsgüterkauf, Art. 4, mn. 5. 30 Van Dam, p. 322. 31 Bridge in: Bianca/Grundmann, Art. 4, mn. 31 (if the liability arises from the final trader’s voluntary undertaking in the commercial guarantee); Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 17. 22

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Art. 20

Right of redress

III. Person or persons liable in the chain of commercial transaction Art. 20 requires the Member States to ensure that the final trader is entitled to pursue remedies ‘against the person or persons liable in the chain of commercial transactions’. It might seem that the Digital Content Directive requires the final trader to be entitled to pursue remedies against the person liable in the chain of contracts, i.e. the person whose act or omission resulted in liability of the final trader to the consumer. However, the question whether the right of redress should be designed as a direct claim of a final trader against the person liable in the chain of contracts or as a redress claim along the chain of contracts is to be determined by national law (Art. 20 2nd sentence).32 The difference in the wording between Art. 4 2 nd sentence CSD (‘the person or persons’) and Art. 20 2nd sentence DCD (‘the person’), cannot be taken as implying that the Digital Content Directive requires a direct claim against the person responsible.33 The Digital Content Directive requires that the liability to consumer is a result of an act or omission of one of the persons in previous links of the chain of transactions.34 Thus, it is not contrary to the Directive if national law provides for a right of redress of the final trader against the previous trader while another person in the chain of transactions is responsible for the liability of the final trader to consumer.35 The Directive only requires a right of redress against traders (in the chain of commercial transactions); if the last supplier received the digital content or service from a consumer, the right of redress need not exist.36 The notion of ‘commercial’ transactions is to be understood also as excluding the situations where the trader is liable to the consumer for the breach of contract with regard to digital content or digital service composed of or built upon software which was supplied without the payment of a price under a free and open-source license by a person in previous links of the chain of transactions.37 The person against whom the final trader may pursue remedies may be the original designer of the digital content or digital service or another person in the chain of transactions. Under Art. 4 CSD only the suppliers of the finalised product (and not the suppliers of the producer) were considered to be persons in the chain of transactions; however, it was suggested that they could be treated as producers if they supplied a part which – unaltered – formed a part of the final product.38 This view can be supported also with regard to Art. 20. Another issue needs to be addressed with regard to the supply of digital content or digital service. The consumer is not buying goods but digital content, which is usually protected with intellectual property rights. The holder of intellectual property may be the final supplier, but often the holder will be a third person. As a rule, the consumer will acquire the right to use the digital content by entering into a separate ‘End-User-

32 With regard to the approach of the Member States to the transposition of Art. 4 CSD, see: Ebers/ Janssen/Meyer, p. 43; llmer/Dastis, 117. 33 cf. also Recital 78 (‘to ensure that the trader has appropriate right vis-à-vis different persons in the chain of commercial transactions’). 34 See Recital 78; Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 18; Pfeiffer in: Dauner-Lieb/Langen, Verbrauchsgüterkauf, Art. 4, mn. 7. 35 Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 18. 36 ibid., mn. 25. 37 Recital 78. 38 Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 24.

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Right of redress

License-Agreement ‘(EULA) with the rightholder.39 An ‘EULA’ between the third party and the consumer may result in restrictions of consumer’s use of the digital content or digital service which represent a breach of contract for the supply of digital content or digital service between the final trader and the consumer, unless the consumer was specifically informed of such restrictions at the conclusion.40 Apart from any remedies under national law, the consumer is entitled to remedies for the lack of conformity from Art. 14 against the final trader.41 In this case, the final supplier should have a right of redress against the third party – the end-user-licensor.42 Therefore, there may be more than one transaction chain behind a contract for the supply of digital content or digital service between the final trader and the consumer and thus more than one possibility for a redress claim.

IV. Modalities of redress With regard to the person, against whom the trader may pursue remedies, and the relevant actions and conditions of exercise (modalities),43 the Directive refers to the law of the Member States. They are free to determine in particular whether the final trader should have a direct redress claim against the person responsible in the chain of transactions or a (contractual) redress claim along the chain of contracts. In any case, the trader must be entitled to an adequate and effective remedy.44 30 The final trader must be guaranteed at least one redress claim (i.e. against one person in the chain of transactions), but may also be entitled to claims against different people in the chain of commercial transactions. The amount of the claim is also to be determined by national law; however, it can be concluded from the function of Art. 20 that the trader should at least be able to recover the costs incurred with regard to the remedies pursued by the consumer, i.e. bringing the digital content or service into conformity with the contract, price reduction and termination.45 The law of the Member States can also determine the possible defences of the person against whom redress is sought; in principle, it should be able to invoke the final trader’s duty to mitigate loss in the sense of a general principle of EU law.46 29

V. Non-mandatory right of redress 31

The majority view under Art. 4 CSD was that right of redress was non-mandatory, thus the final trader may exclude their right of redress in the contract with their supplier or a contract with other persons against whom redress may be sought under national law.47 Recital 9 CSD contained an explicit reference to freedom of contract between the seller, the producer, a previous seller or any other intermediary. Recital 78 DCD omits the reference to freedom of contract. Nevertheless, the right of redress in Art. 20 has a 39 Beale, p. 37; see also: European Law Institute, 25 available at www.europeanlawinstitute.eu/fileadmin/ user_upload/p_eli/Publications/ELI_Statement_on_DCD.pdf (accessed 15 July 2019); Spindler, p. 217 et seq. 40 See e.g. Metzger, 581 and Recital 53. 41 Art. 10. 42 European Law Institute, 63. 43 Recital 78 last sentence. 44 See Art. 21(1). 45 Magnus in: Grabitz/Hilf/Nettesheim, Art. 4 RL 1999/44/EG, mn. 28. 46 ibid. 47 Above → mn. 9.

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Enforcement

non-mandatory character, too. As the wording of Art. 20 remains very similar to Art. 4 CSD, the change in the recital alone is not a clear enough indicator of the legislator’s intention for a shift towards the limitation of freedom of contract in this area. The general aim of the Digital Content Directive is to protect the consumers and not to eliminate obstacles to redress caused by party agreement; the fact that final trader may limit or exclude their right to redress in the B2B contractual chain, is also not directly connected with consumer protection.48 Furthermore, the preamble to the parallel Sale of Goods Directive, which contains a more or less identical provision on redress (Art. 18 SGD), contains an explicit reference to contractual freedom between the seller and other parties in the chain of contracts. It would be very odd if the right of redress in one of the two directives adopted on the same day and widely coherent would be considered mandatory while the same provision in the other directive would be subject to contrary agreement.

D. Transposition issues Due to the unclear wording of Art. 4 CSD, referral to the national law with regard to 32 key issues of redress and an absence of interpretation of the provision by the CJEU, considerable uncertainty exists as to the transposition of the provision. The same is true for Art. 20 which continues the approach of Art. 4 CSD. The transposition measures with regard to of Art. 4 CSD are very diverging. Some 33 Member States did not adopt any legislative measures for the transposition of the provision as they considered that the existing rights of the final seller against their supplier (or other links in the chain of contracts, in some cases) are enough; in the majority of Member States the redress is possible through a series of actions along the contractual chain until the liability arrives at the party responsible; some of them have chosen to adapt the time limits and other elements of the liability in the chain of contracts to the liability of the final seller to the consumer; some Member States have provided the final seller with a direct claim against the responsible party.49 From the point of view of private international law a direct claim against the person 34 responsible is preferred before the redress along the chain of contracts; in cases where the parties come from different states, the regress along the chain may cause different laws to apply to each individual claim, further complicating the incongruities in liability and increasing the risk, that the liability will remain at the party not responsible for the non-conformity.50

Article 21 Enforcement 1. Member States shall ensure that adequate and effective means exist to ensure compliance with this Directive. 2. The means referred to in paragraph 1 shall include provisions whereby one or more of the following bodies, as determined by national law, may take action under national law before the courts or before the competent administrative bodies to ensure that the national provisions transposing this Directive are applied:

See Bridge in: Bianca/Grundmann, Art. 4, mn. 33. See Ebers/Janssen/Meyer, p. 44 and 47. 50 ibid., p.57; Dutta, 84 et seq. 48

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(a) public bodies or their representatives; (b) consumer organisations having a legitimate interest in protecting consumers; (c) professional organisations having a legitimate interest in acting; (d) not-for-profit bodies, organisations or associations, active in the field of the protection of data subjects' rights and freedoms as defined in Article 80 of Regulation (EU) 2016/679. Bibliography: Arnull, ‘Remedies before national courts’ in: Schütze/Tridimas (eds), Oxford Principles of European Union Law, Vol. 1 (OUP 2018), p. 1011–1039; Grabitz/Hilf/Nettesheim (eds), Das Recht der Europäischen Union, Vol. IV (40th suppl., C.H. Beck 2009); Heermann/Schlingloff (eds), Münchener Kommentar zum Lauterkeitsrecht (2nd edn, C.H. Beck 2014); Howells, ‘Consumer law enforcement and access to justice’ in: Twigg-Flesner (ed.), Research Handbook on EU Consumer and Contract Law (Edward Elgar 2017), p. 406–427; Meller-Hannich, ‘Vollharmonisiertes Verbraucherrecht und Verbraucherrechtsdurchsetzung’ in: Artz/Gsell (eds), Verbrauchervertragsrechts und digitaler Binnenmarkt (Mohr Siebeck 2018), p. 56–68; Micklitz/Reich/Rott/Tonner, European Consumer Law (2nd edn, Intersentia 2014). A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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7

A. Function The provision contains some principles for the enforcement of compliance with the Directive. In line with the principle of procedural autonomy, the enforcement of substantive law of the EU remains largely in the domain of national law.1 The Member States are to provide for means of enforcement; however, such means must be adequate and effective [Art. 21(1)]. 2 Art. 21(2) supplements the individual enforcement of contractual rights with public enforcement and some forms of collective enforcement: the Member States must provide that public bodies, consumer or professional associations, or, with regard to data protection, non-profit organisations from Art. 80 GDPR, may take action before the courts or administrative bodies; the Member States must choose at least one of these options or they can combine them. 1

B. Context 3

Art. 21 continues the approach of the European legislator in several other directives. Apart from its Art. 21(2)(d), which was added with regard to the GDPR, the same provision can be found e.g. in Art. 23(1) and (2) CRD, Art. 11(1)(a) and (b) UCPD, Art. 13(1) and (2) Distance Marketing of Financial Services Directive. However, these directives also contain some other provisions on enforcement such as penalties for infringements 2 or provisions for extrajudicial redress which are absent in the Digital Content Directive. 3 The approach is basically the same as in Art. 7(1) and (2) Unfair Terms Directive. The parallel Sale of Goods Directive contains an almost identical provision in its Art. 19.

1 On the harmonisation of enforcement aspect of consumer law, see Micklitz/Reich/Rott/Tonner, p. 342 et seq.; Howells, p. 406 et seq.; Meller-Hannich, p. 46 et seq. 2 See Art. 24 CRD, Art. 13 UCPD. 3 See Art. 14 Distance Marketing of Financial Services Directive.

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The principle of adequate and effective legal protection in Art. 21(1) was developed 4 by the CJEU and belongs to the general principles of EU law.4 With regard to individual judicial enforcement, the principle is also anchored in Art. 47 CFR. With regard to individual enforcement of consumer rights in cross-border cases, 5 three legislative acts should be briefly mentioned: firstly, the Brussels I Regulation, establishing, under certain conditions (trader is active in the Member State of the consumer’s domicile or directs their activities to this state), additional jurisdiction for claims of the consumer against the trader in the courts of the country of the consumer’s domicile (Arts 17–19). Secondly, the Rome I Regulation, which, with regard to choice of law and under similar conditions as Brussels I Regulation, protects the consumer with the applicability of the law of the member state of the consumer’s habitual residence (Art. 6). Thirdly, the Small Claims Procedure Regulation5 establishes a simplified procedure for small cross-border claims (under 5000 EUR). Art. 21(2) on bodies and associations entitled under national law to take action be- 6 fore the courts or administrative bodies is connected to Injunctions Directive, prescribing minimal standards for entities qualified for actions for an injunction. By virtue of Art. 23(2), the Digital Content Directive is added to the list of directives with regard to which the collective interests of consumers are protected by the actions for injunctions. With regard to cross-border injunctions, the CPC Regulation6 is also a part of the context of Art. 21; Art. 23(1) adds the Digital Content Directive to the list of directives in the Annex to the Regulation.

C. Explanation In principle, Member States are free to establish rules on enforcement of substantive 7 law of the EU. However, the procedural autonomy is not unlimited as national rules on enforcement are subject to principles of equivalence (the rules should not be less favourable than those for similar situations in domestic law) and effectiveness (the rules should not, in practice, make the exercise of rights conferred by the EU law impossible or excessively difficult).7 Apart from the individual enforcement of the contractual rights of the consumers, the 8 Member States are given some options with regard to different forms of collective enforcement by Art. 21(2). Firstly, they may choose between the jurisdiction of a court or an administrative body. Secondly, they appear to have a choice to ensure that either public bodies or their representatives, consumer organisations with legitimate interest in protecting consumers, professional organisations with a legitimate interest in acting or, only with regard to data protection, non-profit bodies in the sense of Art. 80 GDPR, have the right to take actions before courts or administrative bodies. However, the Member States cannot in fact freely decide between these options in the 9 sense that they can choose only one. Firstly, the right of consumer organisations with legitimate interest in protecting consumers to take legal action from Art. 21(2)(b) already exists in the Injunctions Directive; Art. 23(2) adds the Digital Content Directive to

See e.g. Micklitz/Reich/Rott/Tonner, p. 342, 353; see also Arnull, p. 1019 et seq. The Regulation was modified by the Regulation (EU) 2015/2421 (OJ L 341, 24.12.2105, p. 1) and Regulation (EU) 2017/1259 (OJ L 182, 13.17.2017, p. 1). 6 The Regulation is to replace the existing Regulation No. 2007/2004 on Consumer Protection Cooperation on 17 January 2020. On the new Regulation, see e.g. Meller-Hannich, p. 56 et seq. 7 See with regard to Art. 7(1) Unfair Terms Directive, e.g. CJEU, C-483/16 Sziber EU:C:2018:367, para. 35. 4

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Mandatory nature

its list of directives.8 Thus, the Member States are required to ensure that consumer organisations may take action. It is not a matter of choice. The term legitimate interest’ in consumer protection is taken from Art. 3 Injunctions Directive; it means that the consumer organisation, having been properly constituted according to national law, has the right to take action under national law.9 Secondly, the not-for-profit body from Art. 21(2)(d), as defined in Art. 80 GDPR, is meant to enforce only those aspects of the Digital Content Directive which are related to the consumer’s (data subjects’) personal data and not all consumer’s rights under the Directive. Thus, it cannot be substituted by other bodies from Art. 21(2). The Member States can choose, whether they – in addition to (d) and (b) – provide for public bodies or their representatives (a) and/or professional organisations with a legitimate interest in acting (c) to be entitled to take action before courts or competent administrative bodies.

Article 22 Mandatory nature 1. Unless otherwise provided for in this Directive, any contractual term which, to the detriment of the consumer, excludes the application of the national measures transposing this Directive, derogates from them or varies their effects before the failure to supply or the lack of conformity is brought to the trader's attention by the consumer, or before the modification of the digital content or digital service in accordance with Article 19 is brought to the consumer's attention by the trader, shall not be binding on the consumer. 2. This Directive shall not prevent the trader from offering the consumer contractual arrangements that go beyond the protection provided for in this Directive. Bibliography: Bianca/Grundmann (eds), EU Sales Directive: Commentary (Intersentia 2002); Grabitz/ Hilf/Nettesheim (eds), Das Recht der Europäischen Union, Vol. IV (40th suppl., C.H. Beck 2009); Micklitz/ Reich/Rott/Tonner, European Consumer Law (2nd edn, Intersentia 2014); Staudenmayer, EG Richtlinie 1999/44/EG zur Vereinheitlichung des Kaufgewährleistungsrechts’ in: Grundmann/Medicus/Rolland (eds), Europäisches Kaufgewährleistungsrecht (Carl Heymanns 2000), p. 27–47; Wagner, ‘Mandatory Contract Law: Functions and principles in light of the proposal for a Directive on consumer rights’ (2010) 3 Erasmus Law Review 47–70. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Agreements on the notion of conformity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Agreements on liability of the trader, burden of proof, remedies of the consumer and modifications of contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Agreements after the consumer has gained knowledge of the failure of supply or lack of conformity or of the modification . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Agreements non-binding on the consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 5 8 10 11

8 With regard to Injunctions Directive and its relation to provisions on collective enforcement in other consumer directives, see Micklitz/Reich/Rott/Tonner, para. 8.35, p. 385 et seq. 9 For the question, whether the Member States have a margin of discretion with regard to ‘legitimate interest’, see e.g. Pfeifer in: Grabitz/Hilf, Art. 7 RL 93/13/EWG, mn. 17 et seq.; Micklitz in: Heermann/ Schlingloff, Art. 11 UGP-RL, mn. 22.

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Mandatory nature

A. Function Art. 22 is a key provision guaranteeing the effectiveness of the consumer protection 1 measures in the Digital Content Directive.1 The party autonomy with regard to the level of consumer protection offered by the directives is excluded by the mandatory nature of protective provisions. The provision continues the approach of Art. 7(1) CSD. In the light of the structural imbalance between the traders and consumers, the prevention of exclusion or limitation of consumer rights by way of fairness control of the non-individually negotiated contract terms (Unfair Terms Directive) was considered as not sufficient.2 An agreement excluding or limiting the level of consumer protection granted under 2 the Directive and the national implementing measure is not binding on the consumer [Art. 22(1)]. However, the parties are allowed to make such agreements after the failure to supply or the lack of conformity is brought to the trader’s attention by the consumer or after the modification of the digital content or digital service is brought to the consumer’s attention. When the consumer has knowledge of the breach of contract or the modification of digital content or digital service, an amicable arrangement between the parties is possible.3 The mandatory nature of the Directive is one-sided: only agreements limiting the 3 rights of the consumer are non-binding; Art. 22(2) makes clear that the parties may agree on deviations from the Directive to the benefit of the consumer.

B. Context The mandatory nature is inherent in consumer protection directives of the EU. 4 4 Art. 22 DCD follows the basic approach of Art. 7(1) CSD, but omits the provision on second-hand goods and the provision on preventing choice of applicable law containing a lower level of consumer protection. The Sale of Goods Directive contains essentially the same provision in its Art. 21.

C. Explanation I. Agreements on the notion of conformity The parties are principally free to determine the characteristics of the object of con- 5 tract, i.e. digital content or digital service (subjective requirements for conformity 5). However, they may deviate from the objective requirements for conformity from Art. 8(1) and (2) only if the conditions in Art. 8(5) are met: if the consumer was specifically informed, before or at the time of conclusion of contract, that a particular characteristic of the digital content or digital service was deviating from the objective require1 See Magnus in: Grabitz/Hilf/Nettesheim, Art. 7 RL 1999/44/EG, mn. 1; Stijns/Van Gerven in: Bianca/ Grundmann, Art. 7, mn. 1; see also Recital 22 CSD. 2 Staudenmayer, 44. 3 Magnus in: Grabitz/Hilf/Nettesheim, Art. 7 RL 1999/44/EG, mn. 5; Staudenmayer, 44; Stijns/Van Gerven in: Bianca/Grundmann, Art. 7, mn. 16. 4 Micklitz/Reich/Rott/Tonner, para. 4.32, p. 189. For a critical view of the approach with regard to consumer sales, see e.g. Wagner, 62 et seq. 5 See → Art. 8 DCD.

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Mandatory nature

ments, and accepted the deviation expressly and separately before or at the conclusion of contract.6 6 However, the parties are not allowed to deviate from Art. 8(4)– in contracts providing for a continuous supply of digital content or digital service over a period of time, the consumer, even if specifically informed in advance and consenting expressly and separately, cannot agree that the digital content or service should be in conformity with the contract for a shorter time. Art. 8(6) allows the parties to agree that the digital content or digital service shall not be supplied in the latest version available. 7 If the lack of conformity is a result of third party rights (Art. 10), e.g. the holders of intellectual property rights, the trader is not liable if conditions of Art. 8(5) are met: if the consumer was specifically informed before the conclusion of contract of the deviations from objective requirements for conformity and has expressly and separately accepted the deviation.7 The liability for the lack of conformity may also be excluded if the national law provides for nullity or rescission of the contract.8

II. Agreements on liability of the trader, burden of proof, remedies of the consumer and modifications of contract Any agreement on the time limits of the liability of the trader, burden of proof and remedies of the consumer in case of a failure to supply or a lack of conformity, including the exercise and the consequences of termination, and modifications of contract, which deviates from the provisions of the Directive or varies their effects to the detriment of the consumer, is prohibited and not binding on the consumer. 9 Art. 12(5) regulates a particular situation: the consumer is obliged to cooperate with the trader, to the extent reasonably possible, with regard to technical means available and in the least intrusive ways for the consumer, in ascertaining whether the lack of conformity of the digital content or digital service stems for the consumer’s digital environment. However, if the consumer fails to cooperate and the trader informed the consumer of such requirement in a clear in a comprehensible manner before the conclusion of the contract, the burden of proof with regard to the existence of the lack of conformity at the relevant time is shifted onto the consumer. This is a special rule on the burden of proof, provided by the Directive as a sanction for the breach of cooperation duty, only applicable if the consumer was informed in a transparent way of the cooperation duty before the conclusion of contract. 8

III. Agreements after the consumer has gained knowledge of the failure of supply or lack of conformity or of the modification 10

Art. 22 prohibits agreements in advance from deviating from the level of consumer protection of the national measures transposing the Directive, i.e. before the failure to supply or the lack of conformity is brought to the trader’s attention by the consumer, or before the modification of the digital content or digital service is brought to the consumer’s attention. The purpose of the reference to the moment when the breach of contract is brought to the trader’s attention is to secure that the consumer has knowledge of

→ Art. 8 DCD, mn. 161 et seq. Recital 53. 8 → Art. 10 DCD, mn. 61 et seq. 6 7

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Art. 23

Amendments to Regulation (EU) 2017/2394 and Directive 2009/22/EC

the failure to supply or lack of conformity.9 As the consumer is not bound to use their rights, they can agree on an amicable solution deviating from the Directive, e.g. accept a discount on the price in another contract.10

IV. Agreements non-binding on the consumer The Directive demands that the prohibited agreements deviating from the consumer 11 protection standard are merely ‘non-binding on the consumer’. How this is sanction is implemented in national law is for the Member States to decide. They may, for example, provide that such clauses are null and void, or merely inapplicable or unenforceable against consumers.11

Article 23 Amendments to Regulation (EU) 2017/2394 and Directive 2009/22/EC 1. In the Annex to Regulation (EU) 2017/2394, the following point is added: ‘28. Directive (EU) 2019/770 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the supply of digital content and digital services (OJ L 136, 22.5.2019, p. 1)’. 2. In Annex I to Directive 2009/22/EC, the following point is added: ‘17. Directive (EU) 2019/770 of the European Parliament and of the Council of 20 May 2019 on certain aspects concerning contracts for the supply of digital content and digital services (OJ L 136, 22.5.2019, p. 1)’ Bibliography: Meller-Hannich, ‘Vollharmonisiertes Verbraucherrecht und Verbraucherrechtsdurchsetzung’ in: Artz/Gsell (eds), Verbrauchervertragsrechts und digitaler Binnenmarkt (Mohr Siebeck 2018), p. 56–68; Micklitz/Reich/Rott/Tonner, European Consumer Law (2nd edn, Intersentia 2014). A. Function and context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Amendment to the Consumer Protection Regulation . . . . . . . . . . . . . . . . . . . . . . . . II. Amendment to the Injunctions Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 2 3

A. Function and context The provision, aimed at enforcement of consumer collective interests, adds the Digi- 1 tal Content Directive to the lists of directives and regulations with regard to which the Consumer Protection Cooperation Regulation (2017/2394) provides for cooperation and coordination between national authorities regarding cross-border infringements of consumer collective interests and with regard to which the Injunctions Directive (2009/22/EC) provides for the right of qualified entities to take actions for injunctions. The Sale of Goods Directive contains a parallel provision (Art. 23 SGD).

Magnus in: Grabitz/Hilf/Nettesheim, Art. 7 RL 1999/44/EG, mn. 5. Stijns/Van Gerven in: Bianca/Grundmann, Art. 7, mn. 16. 11 ibid., mn. 54 et seq. 9

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Art. 24

Transposition

B. Explanation I. Amendment to the Consumer Protection Regulation 2

The Consumer Protection Regulation1 lays down conditions under which the national authorities cooperate and coordinate actions with each other and the Commission with regard to protection of consumers’ interests in cases where the trader and the consumers are based in different Member States. The Regulation connects the competent national authorities to be designated by the Member States and the single liaison offices responsible for coordination into a network (CPC network). Within the network, information requests and requests for enforcement measures are exchanged, together with alerts about infringements with a potential to spread to other countries. The new Regulation aims to improve the functioning of the network by granting additional powers to enforcement authorities. Stronger coordinated mechanisms should enable in particular the addressing of widespread infringements. Art. 23 adds this Directive to the long list of regulations and directives representing EU law protecting the consumers’ interests in the Annex to the Regulation.

II. Amendment to the Injunctions Directive 3

The Injunctions Directive contains minimum standards for the right of qualified entities to bring actions seeking cessation or prohibition of infringements and other measures before either courts or administrative authorities in the Member States for the protection of collective interests of consumers with regard to the list of directives and regulations contained in Annex I Injunctions Directive.2 Art. 23(2) adds the Digital Content Directive to this list.

Article 24 Transposition 1. By 1 July 2021 Member States shall adopt and publish the measures necessary to comply with this Directive. They shall immediately inform the Commission thereof. They shall apply those measures from 1 January 2022. When Member States adopt those measures, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. The methods of making such reference shall be laid down by Member States. Member States shall communicate to the Commission the text of the provisions of national law which they adopt in the field covered by this Directive. 2. The provisions of this Directive shall apply to the supply of digital content or digital services which occurs from 1 January 2022 with the exception of Articles 19 and 20 of this Directive which shall only apply to contracts concluded from that date. 1 Repealing the existing Consumer Protection Cooperation Regulation No. 2006/2004 as of 17 January 2020. On the new Regulation, see e.g. Meller-Hannich, p. 56 et seq. 2 With regard to the Injunctions Directive, see Micklitz/Reich/Rott/Tonner, para. 8.33, p. 384 et seq.

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Art. 24

Transposition

Bibliography: Johnston/Unberath, ‘European private law by directives’ in: Twigg-Flesner (ed.), The Cambridge Companion to European Union Private Law (CUP 2010), p. 85–100. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Transposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Information obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Intertemporal provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. General rule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Specific rule for Arts 19 and 20 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 5 9 10 10 11 13

A. Function Art. 24(1) obliges the EU Member States to transpose the Directive into national law 1 and sets the deadline for transposition. In addition, the provision lays down the obligations of the Member States to inform the European Commission of the transposition and to refer to the Directive when publishing their transposition measures. In this way, it not only ensures that the Commission is informed about the transposition of the Directive in the Member States but also that text of the national transposition measures directly shows the basis in EU law. In addition to the period for transposition, Art. 24(1) provides for a second period during which Member States have already adopted the provisions for transposition, but do not yet have to apply them. This additional period of time is intended to enable the persons concerned to familiarise themselves with these new provisions of national law. However, this actually leads to a questionable postponement of the date on which the provisions of the Directive must take effect in the Member States. Art. 24(2) specifies the contracts to which the provisions of the Directive are to apply 2 (intertemporal rule).

B. Context The obligation to transpose and the further obligations for the Member States in 3 Art. 24(1) are identical or similar to the provisions in the final parts of other EU directives. The obligation to transpose is rooted in the legal character of directives, which is based on Art. 288 TFEU. According to this provision, directives are not directly applicable law, but must be transposed by the Member States into their own law.1 When transposing a directive, the Member States are bound by the directive ‘as to the result to be achieved’ (Art. 288 TFEU). The Member States’ scope regarding the implementation of the Digital Content Directive is also limited by Art. 4, which, unless otherwise provided for, prevents Member States from maintaining or introducing more, or less, stringent provisions to ensure a different level of consumer protection (full harmonisation). The provisions of Art. 24(2) supplement the provisions of Art. 3 on the scope of ap- 4 plication of the Directive with regard to the temporal aspect. They have merely been added to the provisions of Art. 24(1) on transposition by the Member States, without having any specific connection with them. The heading ‘Transposition’ therefore refers to Art. 24(1), but does not apply to Art. 24(2). 1

On the use of directives see Johnson/Unberath, p. 85 et seq.

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Transposition

C. Explanation I. Transposition The obligation of the Member States to transpose the Directive comprises the adoption and publication of the measures necessary to comply with this Directive in accordance with Art. 24(1) 1st sentence. This obligation to transpose extends to all relevant provisions in the preceding parts of the Directive and also to Art. 24(2). According to the general standards on the basis of Art. 288 TFEU, the Member States are obliged to achieve the result provided for by the Directive in their national law. However, they are free to choose their means to achieve this result. They may, for example, create a specific new law to transpose it or incorporate the provisions to transpose it into an existing consumer code or into their civil code (in a separate part or spread over several sections and linked to other provisions). In any case, however, according to Art. 4, implementation must take place at the level of full harmonisation, unless exceptionally provided otherwise in the Directive [e.g. Arts 10 and 11(3)2]. 6 In addition, according to the third point of Art. 24(1), the Member States must ensure that the implementing measures contain a reference to the Directive. The Member States may mention this reference in particular in the text of the legal provisions transposing the Directive or in the official publication of the provisions (e.g. by footnotes to the relevant provisions with reference to the underlying Directive). The Digital Content Directive – like other directives – does not prescribe any particular method of reference, but leaves the choice to the Member States. 7 Art. 24(1) specifies the period until 1 July 2021 as the deadline for the adoption and publication of the measures for the implementation of the Directive by the Member States. Member States are free to take the necessary steps to adopt the implementing legislation within this period. However, they must ensure that this process, including official publication, is completed by 1 July 2021. 8 This period must be distinguished from the date from which these measures are to be applied by the Member States (i.e. not just adopted and published, but have entered into force and must be applied by the courts and authorities of the Member State concerned). This date for the application of the transposition provisions is 1 January 2022 (Art. 24(1) 3 rd subpara.). Suppliers of digital content and digital services, consumers and lawyers working in this field will therefore have six months to familiarise themselves with the new national provisions if a Member State exhausts the entire period allowed for adoption and publication and the provisions are then applicable from 1 January 2022. However, Art. 24(1) 3rd subpara. does not preclude Member States from fixing an earlier date for the application of their implementing provisions (although according to the wording of this provision the Member States shall apply those measures from 1 January 2022 – without an addition such as ‘at the latest’). This is already apparent from the general consideration that Member States are not prevented from shaping their law at their discretion before the date fixed by the Directive, and can therefore already introduce the provisions provided for the implementation of the Directive. Accordingly, Recital 83 also uses the phrase ‘as soon as the corresponding national transpositions measures begin to apply’ instead of simply referring to 1 January 2022 to describe the point at which consumers ‘should be able to benefit from their rights under this Directive’. 5

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→ Art. 10 DCD, mn. 61 et seq. → Art. 11 DCD, mn. 37.

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Art. 24

Transposition

II. Information obligations In addition, Art. 24 lays down information obligations of the Member States vis-à- 9 vis the Commission. According to the second sentence of Art. 24(1) 1 st subpara., the Member States are obliged to inform the Commission immediately about the adoption and publication of the implementing measures. Art. 24(1) 4th subpara. also requires Member States to communicate to the Commission the text of the provisions of national law which they adopt in the field of law covered by the Directive (without, however, expressly requiring ‘immediate’ communication). In certain cases, Member States must also explain the relationship between the components of the Directive and the corresponding part of national transposition instruments when notifying their transposition measures.3

III. Intertemporal provisions 1. Overview On the question of which contracts are subject to the Digital Content Directive in 10 terms of time, Art. 24(2) contains a general rule which is applicable to all provisions of the Directive with the exception of Art. 19 and 20, and a special rule with regard to the latter two provisions. Both the general and the specific rule refer to 1 January 2022 as the reference date (i.e. on the date from which the application of the national transposition provisions is prescribed in Art. 24(1) 2nd subpara.). However, this date may be brought forward in a Member State if its legislation provides that its provisions implementing the Directive are to be applied at an earlier date.4

2. General rule The 1 January 2022 concerns the supply of digital content or services and not the 11 conclusion of the contract with regard to the general rule. Irrespective of whether the contract was concluded before or after the 1 January 2022, the only decisive factor is that the supply of digital content or services concerned has occurred at a time when the provisions of the Member States transposing the Directive are applicable (i.e. in accordance with Art. 24(1) 2nd subpara., from 1 January 2022 at the latest). Even if a contract is concluded before the adoption of Digital Content Directive or even before the corresponding Commission Proposal, any such supply of digital content or services falls within the temporal scope of the Directive. This applies equally to contracts of indefinite or fixed duration and also irrespective of whether the contract provides for a supply continuously or through a series of individual acts. It is always only necessary that the supply of digital content or services in question takes place after the deadline for the application of the provisions transposing the Directive.5 With regard to non-performance (Arts 5, 11(1), 13), an extension beyond its wording appears necessary due to the purpose of the provision: in the same way as the supply which occurred from that point on, the supply which is owed from that point on and should occur but is not performed must also be included in the scope of application.

3 Recital 84 and the Joint Political Declaration of 28 September 2011 of Member States and the Commission on explanatory documents noted therein (OJ C 369, 17.12.2011, p. 14). 4 Above → mn. 8. 5 Recital 83.

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Transposition

The Directive thus provides the consumer with the foreseen level of protection, irrespective of when the contractual relationship is established. It therefore imposes obligations and risks on the trader in the case of existing contracts (e.g. concerning the burden of proof) which he may not have foreseen and could not have foreseen when the contract was concluded before the Directive was adopted. In this respect, the provision lays down legal consequences only for the period after the adoption of the Directive, but it thus also covers situations which were ‘put into effect’ before that time (a so-called ‘quasi retroactive effect’6). However, such a retroactive change in the legal situation to the detriment of the supplier of digital content or digital services must in principle be regarded as permissible, because ensuring a balance between the interests of the trader and a high level of consumer protection in the light of new technological and economic developments7 outweighs the preservation of advantages previously obtained by one of the contracting parties. Whether such an unforeseen circumstance can, in extreme cases, constitute a ground for exclusion from the trader’s obligation to perform (e.g. due to a disruption of the basis of the contract) depends, inter alia, on the extent to which the determination of the grounds for exclusion is left to the law of the Member States 8 and will possibly have to be clarified by case law.

3. Specific rule for Arts 19 and 20 In contrast to the general rule for the temporal scope of the Directive, the special rule for Arts 19 and 20 does not refer to the supply but to the conclusion of the contract. This exception results from a compromise in the Council on the controversial question of whether the Digital Content Directive should be applied to contracts concluded before 1 January 2022. The compromise combines the fundamental applicability of the Directive to such contracts concluded earlier (insofar as the provision of digital content or digital service takes place from 1 January 2020) with an exception for Arts 19 and 20. The provisions on the modification of digital content and digital services (Art. 19) and on the right of redress (Art. 20) therefore only apply to contracts concluded from 1 January 2022. However, if Member States set an earlier date for the applicability of their provisions transposing the Directive, they should not be precluded from setting an earlier date for the conclusion of the contract. 9 The time at which the contract was concluded is to be determined by the law of the Member State concerned [Art. 3(10)]. 14 On the basis of a contract concluded prior to the effective date pursuant to Art. 24(2), the trader may not request a modification of the digital content or services pursuant to Art. 19. He is also not entitled to the right of amendment if the provisions transposing the Directive have already entered into force in the Member State concerned or even in all Member States. However, to the extent that the trader is entitled to terminate the contract, he may exercise this right and offer the consumer the conclusion of a new contract to which Art. 19 applies. The trader can neither assert a right to redress against a person in previous links of the chain of transaction pursuant to Art. 20 if the contract was concluded with the consumer before the cut-off date. This leads to a problematic, but obviously intended consequence by the European legislator: the trader is liable in such a contract towards the consumer according to the general rule, if a non-performance [Arts 5, 11(1)] or a lack of conformity [Arts 6 et seq. 11(2) and(3)] occurs after the due date. 13

6 Quasi retroactive effect applies in situations in which new legislation applies ‘to the future consequences of circumstances which arose while previous legislation was in force’. See the explanation by AG Stix-Hackl in CJEU, C-37/02 and C-38/02 Di Lenardo EU:C:2014:38, paras 79 et seq. 7 See Recital 2. 8 → Art. 5 DCD, mn. 33. 9 Above → mn. 8.

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Review

However, due to the special rule for Arts 19 and 20 the trader does not have a right of recourse against the person liable in the chain of commercial transactions. In this respect, it is not clear how the special rule of Art. 24(2) is intended to contribute ‘to ensure a balance between the legitimate interests of consumers and traders’ (as Recital 83 claims). Rather, it favours the former links in the chain of commercial transactions at the expense of the trader as the last link in this chain. There is no convincing reason for such a unilateral burden on the trader and deviation from the principles which the Directive generally follows to balance interests. The rule must therefore be regarded as having failed on this point.

Article 25 Review The Commission shall, not later than 12 June 2024 review the application of this Directive and submit a report to the European Parliament, to the Council and to the European Economic and Social Committee. The report shall examine, inter alia, the case for harmonisation of rules applicable to contracts for the supply of digital content or digital services other than that covered by this Directive, including supplied against advertisements. Bibliography: Council of the European Union, Note from Presidency to Permanent Representatives Committee/Council of 3 December 2018, General approach, 14951/18; Staudenmayer, ‘The Directive on the Sale of Consumer Goods and Associated Guarantees – A Milestone in the European Consumer and Private Law’ (2000) 4 ERPL 547–564; Staudenmayer, ‘The Directives on Digital Contracts – First steps towards the Private Law of the Digital Economy’ (2020) 2 ERPL 219–250. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Review clauses in European contract law directives . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General purpose of review clauses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Development of review clauses in European contract law directives . . . . . . II. Link with Art. 25 SGD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 2 2 7 10

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Review on issues concerning digital content or digital services not covered by the Digital Content Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Review clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Coherent framework for digital content, digital services and goods with digital elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Common issues in both Directives as regards digital content, digital services and goods with digital elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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D. Transposition issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function* Art. 25 includes a review clause in the Digital Content Directive. It obliges the Com- 1 mission to examine, inter alia, the case for further harmonisation of contracts for the supply of digital content or digital services, going beyond what is currently covered by * This commentary expresses only the personal opinions of the author and does not bind in any way the European Commission.

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the Digital Content Directive. It refers in particular, to digital content or digital services supplied against advertisements.

B. Context I. Review clauses in European contract law directives 1. General purpose of review clauses 2

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A significant number of EU legal acts include a review clause in their final provisions. The classical review clause contains a provision requiring the review of the overall application of the respective legal act. It may also refer to specific elements for examination. One can make a distinction between what is called here a ‘simple review clause’ and a ‘qualified review clause’. A simple review requires the Commission to review the general application of the directive at stake and report (normally only once1) to the European institutions about the results of that review. It regularly also contains an obligation to submit a legislative proposal. This obligation is, as a matter of principle2, worded in a way which respects the right of initiative of the Commission. This is generally done with a wording identical or very similar to the one used in Art. 25 SGD, i.e. that the Commission report ‘shall be accompanied, where appropriate3, by a legislative proposal’. A qualified review clause contains, in addition to the elements of a simple review clause, particular requirements with regards to the Commission report; mostly as to specific issues within or outside the scope of the relevant Directive, which the Commission is tasked to examine. Often these specific issues concern points of disagreements where a minority in Council or EP had to make a concession on a particular issue, during legislative negotiations, in order to achieve agreement. For instance, where a particular issue is not regulated at all, not extensively enough or not in a certain way and where it was agreed, as part of the overall compromise, to postpone the treatment of that specific issue and to include consideration of it in a review clause. As to the timing of review clauses, the formal starting point may vary. The deadline is either linked with the entry into force or the end of the transposition period. In substance, however, the latter is always the pertinent one, as only from this moment onwards can any application experience be collected. Regrettably, there are cases where the deadline for the Commission review becomes rather tight. Sometimes the deadline extends only over one year4 or eighteen months.5 Such short deadlines are problematic because it takes some time after the end of the implementation period, taking into account delays in transposition by Member States, to gain clarity about its practical application. For instance, it takes time for final judgments in national case law to come to fruition, particularly those before the highest national courts or in some instances including the results of preliminary rulings by the CJEU.6

1 For examples of a review clause foreseeing several reports in a certain time interval, see Art. 21 ECommerce Directive or Art. 27(2) Consumer Credit Directive. 2 There are exceptions such as Art. 12 Price Indication Directive. 3 Emphasis added by the author. 4 As in Art. 26 1st subpara. 1 PTD for specific points. 5 As in Art. 20 Distance Marketing of Financial Services Directive or Art. 21 E-Commerce Directive. 6 As to the criticism on the deadline for a Commission report, see already Staudenmayer (2000), 563.

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2. Development of review clauses in European contract law directives Like many directives from other sectors of the EU acquis, the European contract law 7 directives also contain review clauses. Chronologically, the first review clause in a European contract law directive7 is con- 8 tained in Art. 9 Unfair Contract Terms Directive. It was a simple review clause creating the review and report obligation within 5 years after the end of the transposition period, without even the mention of a potential resulting Commission proposal. Other examples of simple review clauses are Art. 17 Timeshare Directive and Art. 11 Late Payment Directive. The first qualified review clause in a European contract law directive is included in 9 Art. 12 CSD. It required that within seven years after the publication of the Directive (which corresponded to five and a half years after the transposition period) the Commission to take a particular point into account8. Other examples of qualified review clauses are Art. 20 Distance Marketing of Financial Services Directive, Art. 30 CRD as well as Arts 44 and 45 Mortgage Credit Directive.

II. Link with Art. 25 SGD Art. 25 DCD can only be properly understood if it is read together with Art. 25 SGD. 10 Art. 25 SGD requests the Commission to review, not later than 12 June 2024, the application of the SGD and submit a report to the European institutions. The review should include the provisions on remedies and burden of proof, also with respect to secondhand goods as well as goods sold at public auctions, and the producer’s commercial guarantee of durability. The key element relevant to both Directives is mentioned in the following sentences.9 They state that this report shall assess in particular, whether the application of the Sale of Goods Directive and the Digital Content Directive ensures a consistent and coherent framework for the proper functioning of the internal market with regard to the supply of digital content, digital services and goods with digital elements, in line with principles governing Union policies. This is followed by the usual clause requesting that the report be accompanied, where appropriate, by legislative proposals. These two sentences were introduced at the moment of adoption of the Council Gen- 11 eral Approach in December 2018.10 They create several links with the Digital Content Directive. From a procedural perspective, it is intentional that both review obligations have the same deadline in order that the Commission can cover both in the same report. Secondly, Art. 25 DCD does not contain the usual clause requesting that the report shall be accompanied, where appropriate, by legislative proposals. That clause is included in Art. 25 SGD in relation to the supply of digital content, digital services and goods with digital elements. This provision encompasses already the entire scope of the Digital Content Directive. From a substantive angle, Art. 26 2nd sentence SGD, makes the central element of this joint review exercise those issues related to digital content, digital services and goods with digital elements.

7 Those clauses, like Arts 15 and 17 Distance Selling Directive, in Directives which have been repealed and replaced already, are not mentioned. 8 For details see Staudenmayer (2000), 563 et seq. 9 The corresponding Recital 71 does not add an additional explanation beyond the content of the normative provision. 10 See Council of the European Union.

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C. Explanation I. Review on issues concerning digital content or digital services not covered by the Digital Content Directive 1. Review clause Art. 25 is a qualified review clause. The specific task given to the Commission is however unusually broad as it requires examination of whether and to what extent those contracts for the supply of digital content or digital services that have been excluded from the Digital Content Directive should be covered in a second step. Still, the review clause requests to look at contracts which would, were they not excluded explicitly from the Digital Content Directive’s scope, be qualified as contracts for the supply of digital content or digital services. It does not therefore require examination of issues that are explicitly not regulated by the Digital Content Directive but have been left to national law.11 13 The Commission review deadline of 12 June 2024 is of average length. Since the market for digital content and digital services, as well as goods with digital elements in the Sale of Goods Directive, develops very rapidly, the legislator did not want to extend it beyond the five years foreseen in the Directives. 12

2. Content The most obvious example of an exclusion which would be covered in the review (since this is expressly mentioned in Art. 25) are cases where digital content or digital services are supplied against advertisements. In such cases, the consumer expends time to watch and listen to advertisements simply in order to gain access to digital content or digital services on a website. Whether this is a contract for the supply of digital content or digital services would depend on the circumstances of the case; Recital 25 refers to the more likely scenario, where no contract is concluded. 15 Another obvious example of contracts for the supply of digital content or digital services not covered by the Digital Content Directive are those mentioned in the exceptions in Art. 3(5)12. 16 A relevant category of exclusions from the scope of the Digital Content Directive are contracts for the supply of digital content or digital services between a trader and consumer, where the consumer does not pay a price and the personal data provided by the consumer are processed exclusively for the purpose of supplying the digital content/ service or for the trader to comply with legal requirements.13 17 There are also a number of contracts for the supply of digital content or digital services which are – with good reasons – not covered by the Digital Content Directive because they are outside the scope of persons covered by contracts ‘between consumers and professionals’.14 The potential to extend the application of the rules of this Directive to contracts outside of its scope is mentioned in a general way in Recital 16. The recitals provide also examples for such contracts, e. g. natural or legal persons who are not con14

→ Art. 3 DCD, mn. 147 et seq.; cf. Staudenmayer (2020). → Art. 3 DCD, mn. 91 et seq. 13 Art. 3(1) 2nd subpara. and Recital 25 which also provides an example. Cf. → Art. 3 DCD, mn. 60 et seq. 14 Arts 1, 3 1st subpara., 2 Nos 5 and 6. → Art. 3 DCD, mn. 11 et seq. 11

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sumers (Recital 16), dual-purpose contracts15 (Recital 17), or platform providers that are not traders under the Digital Content Directive16 (Recital 18). Contracts where a tangible movable item incorporates or is interconnected with digi- 18 tal content/a digital service in such a way that the absence of the digital content or the digital service would prevent the goods from performing their functions and such digital content/digital service is provided with the goods under the sales contract [Arts 3(4), 2 No. 3], are excluded from the Digital Content Directive but are covered by the Sale of Goods Directive.17 These will be examined in the report in any case.

II. Coherent framework for digital content, digital services and goods with digital elements 1. General framework There is a visible effort on the part of the legislator to achieve as great as possible a 19 coherence between both Directives. In terms of the chronological order of the legislative works, the Council discussed the Digital Content Directive and largely completed that first. During this discussion on the Digital Content Directive, it was obvious that Member States had in mind the precedent effect of the Digital Content Directive rules on the Sale of Goods Directive. This meant that Member States were paying attention to substantive solutions that could be used for both Directives. The coherence between both texts was improved during the discussion on the Sale of Goods Directive and in the trilogue on both Directives. Where there are substantive differences between both Directives, these mostly correspond to a conscious decision taken by the legislator. However, the aim of the legislator to strive for coherence also manifests itself in the 20 requirement under Art. 25 SGD for the Commission’s review report to assess whether the application of the Sale of Goods Directive and the Digital Content Directive ensures a consistent and coherent framework for the proper functioning of the internal market with regard to the supply of digital content, digital services and goods with digital elements. In addition, Art. 25 SGD requires that the consistent and coherent framework for the 21 proper functioning of the internal market with regard to the supply of digital content, digital services and goods with digital elements is also in line with the principles governing Union policies. This refers to the principles mentioned in Arts 7 et seq. TFEU, which includes among others consistency as such or consumer protection. The aim of the proper functioning of the internal market explicitly mentioned in Art. 25 SGD reflects Art. 26 TFEU.

2. Common issues in both Directives as regards digital content, digital services and goods with digital elements It is interesting to note that Art. 25 SGD mentions digital content, digital services and 22 goods with digital elements as common issues for the report on both Directives. While the first two cover the entire scope of the Digital Content Directive, the last covers only 15 As regards the reasons why dual-purpose contracts should be left outside the scope of the Digital Content Directive → Art. 3 DCD, mn. 23 et seq. 16 This can indeed be understood as a clarification of the legislator, which shows a difference to the interpretation of the Consumer Sales Directive by the ECJ in C-149/15 Wathelet EU:C:2016:840, paras 33 et seq; cf. → Art. 3 DCD, mn. 12 et seq. 17 → Art. 3 DCD, mn. 73 et seq.

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the changes in the Sale of Goods Directive which reflect the needs of the digital economy. 23 This makes it clear what the gist of this joint report on both Directives is. The legislator realised that these Directives constitute the first steps towards a private law of the digital economy.18 As this means that they are part of a bigger, more comprehensive process, it is obviously of key importance to ensure from the outset that this process begins in a consistent manner and pursues the objective of a properly functioning digital single market and other relevant EU principles, such as consumer protection. 24 Part of this overall coverage are in particular those issues where the Directives step on the way towards a private law of the digital economy on largely unchartered legal territory. These are in particular the issue of data as counter-performance 19 and the updates obligation contained for the first time in EU law20 in these Directives.

D. Transposition issues 25

Art. 25 itself does not require implementation by Member States; this obligation falls to the Commission to perform. The Commission has already taken up this task and created an Expert Group composed of Member States’ representatives. 21 This aim of the Expert Group is to provide a forum where the Commission can discuss and exchange with Member States their implementation and application experiences. The idea is that this should cover not only common implementation problems but also issues of the national regulatory environment around and related to the strict implementation in order to prepare the Commission review report for both Directives.

Article 26 Entry into force This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 27 Addressees This Directive is addressed to the Member States.

18 As regards this process and its influence on the legislative process of both Directives, see Staudenmayer (2020), 222 et seq. 19 → Art. 3 DCD, mn. 46 et seq. 20 See →Art. 8 DCD, mn. 110 et seq. 21 https://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupDetail&groupID=367 9&news=1&new_groups=1&month=09&year=2019 (accessed 20 September 2019).

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Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights [as amended by Directive (EU) 2019/2161 of the European Parliament and of the Council of 27 November 2019 as regards the better enforcement and modernisation of Union consumer protection rules] (Text with EEA relevance) The European Parliament and the Council of the European Union, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof, Having regard to the proposal from the European Commission, Having regard to the opinion of the European Economic and Social Committee 1, Having regard to the opinion of the Committee of the Regions2 Acting in accordance with the ordinary legislative procedure3, Whereas: (1) Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises4 and Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts5 lay down a number of contractual rights for consumers. (2) Those Directives have been reviewed in the light of experience with a view to simplifying and updating the applicable rules, removing inconsistencies and closing unwanted gaps in the rules. That review has shown that it is appropriate to replace those two Directives by a single Directive. This Directive should therefore lay down standard rules for the common aspects of distance and offpremises contracts, moving away from the minimum harmonisation approach in the former Directives whilst allowing Member States to maintain or adopt national rules in relation to certain aspects. (3) Article 169(1) and point (a) of Article 169(2) of the Treaty on the Functioning of the European Union (TFEU) provide that the Union is to contribute to the attainment of a high level of consumer protection through the measures adopted pursuant to Article 114 thereof. (4) In accordance with Article 26(2) TFEU, the internal market is to comprise an area without internal frontiers in which the free movement of goods and services and freedom of establishment are ensured. The harmonisation of certain aspects of consumer distance and off-premises contracts is necessary for the promotion of a real consumer internal market striking the right balance between a high level of consumer protection and the competitiveness of enterprises, while ensuring respect for the principle of subsidiarity. (5) The cross-border potential of distance selling, which should be one of the main tangible results of the internal market, is not fully exploited. Compared with OJ C 317, 23.12.2009, p. 54. OJ C 200, 25.8.2009, p. 76. 3 Position of the European Parliament of 23 June 2011 (not yet published in the Official Journal) and decision of the Council of 10 October 2011. 4 OJ L 372, 31.12.1985, p. 31. 5 OJ L 144, 4.6.1997, p. 19. 1

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the significant growth of domestic distance sales over the last few years, the growth in cross-border distance sales has been limited. This discrepancy is particularly significant for Internet sales for which the potential for further growth is high. The cross-border potential of contracts negotiated away from business premises (direct selling) is constrained by a number of factors including the different national consumer protection rules imposed upon the industry. Compared with the growth of domestic direct selling over the last few years, in particular in the services sector, for instance utilities, the number of consumers using this channel for cross-border purchases has remained flat. Responding to increased business opportunities in many Member States, small and mediumsized enterprises (including individual traders) or agents of direct selling companies should be more inclined to seek business opportunities in other Member States, in particular in border regions. Therefore the full harmonisation of consumer information and the right of withdrawal in distance and off-premises contracts will contribute to a high level of consumer protection and a better functioning of the business-to-consumer internal market. Certain disparities create significant internal market barriers affecting traders and consumers. Those disparities increase compliance costs to traders wishing to engage in the cross-border sale of goods or provision of services. Disproportionate fragmentation also undermines consumer confidence in the internal market. Full harmonisation of some key regulatory aspects should considerably increase legal certainty for both consumers and traders. Both consumers and traders should be able to rely on a single regulatory framework based on clearly defined legal concepts regulating certain aspects of business-to-consumer contracts across the Union. The effect of such harmonisation should be to eliminate the barriers stemming from the fragmentation of the rules and to complete the internal market in this area. Those barriers can only be eliminated by establishing uniform rules at Union level. Furthermore consumers should enjoy a high common level of protection across the Union. The regulatory aspects to be harmonised should only concern contracts concluded between traders and consumers. Therefore, this Directive should not affect national law in the area of contracts relating to employment, contracts relating to succession rights, contracts relating to family law and contracts relating to the incorporation and organisation of companies or partnership agreements. This Directive establishes rules on information to be provided for distance contracts, off-premises contracts and contracts other than distance and off-premises contracts. This Directive also regulates the right of withdrawal for distance and off-premises contracts and harmonises certain provisions dealing with the performance and some other aspects of business-to-consumer contracts. This Directive should be without prejudice to Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations (Rome I)6. This Directive should be without prejudice to Union provisions relating to specific sectors, such as medicinal products for human use, medical devices, privacy and electronic communications, patients’ rights in cross-border healthcare, food labelling and the internal market for electricity and natural gas.

OJ L 177, 4.7.2008, p. 6.

Consumer Rights Directive (12) The information requirements provided for in this Directive should complete the information requirements of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market7 and Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’)8. Member States should retain the possibility to impose additional information requirements applicable to service providers established in their territory. (13) Member States should remain competent, in accordance with Union law, to apply the provisions of this Directive to areas not falling within its scope. Member States may therefore maintain or introduce national legislation corresponding to the provisions of this Directive, or certain of its provisions, in relation to contracts that fall outside the scope of this Directive. For instance, Member States may decide to extend the application of the rules of this Directive to legal persons or to natural persons who are not consumers within the meaning of this Directive, such as non-governmental organisations, start-ups or small and medium-sized enterprises. Similarly, Member States may apply the provisions of this Directive to contracts that are not distance contracts within the meaning of this Directive, for example because they are not concluded under an organised distance sales or service-provision scheme. Moreover, Member States may also maintain or introduce national provisions on issues not specifically addressed in this Directive, such as additional rules concerning sales contracts, including in relation to the delivery of goods, or requirements for the provision of information during the existence of a contract. (14) This Directive should not affect national law in the area of contract law for contract law aspects that are not regulated by this Directive. Therefore, this Directive should be without prejudice to national law regulating for instance the conclusion or the validity of a contract (for instance in the case of lack of consent). Similarly, this Directive should not affect national law in relation to the general contractual legal remedies, the rules on public economic order, for instance rules on excessive or extortionate prices, and the rules on unethical legal transactions. (15) This Directive should not harmonise language requirements applicable to consumer contracts. Therefore, Member States may maintain or introduce in their national law language requirements regarding contractual information and contractual terms. (16) This Directive should not affect national laws on legal representation such as the rules relating to the person who is acting in the name of the trader or on his behalf (such as an agent or a trustee). Member States should remain competent in this area. This Directive should apply to all traders, whether public or private. (17) The definition of consumer should cover natural persons who are acting outside their trade, business, craft or profession. However, in the case of dual purpose contracts, where the contract is concluded for purposes partly within and partly outside the person’s trade and the trade purpose is so limited as not to be pre-

7 8

OJ L 376, 27.12.2006, p. 36. OJ L 178, 17.7.2000, p. 1.

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Consumer Rights Directive dominant in the overall context of the contract, that person should also be considered as a consumer. (18) This Directive does not affect the freedom of Member States to define, in conformity with Union law, what they consider to be services of general economic interest, how those services should be organised and financed, in compliance with State aid rules, and which specific obligations they should be subject to. (19) Digital content means data which are produced and supplied in digital form, such as computer programs, applications, games, music, videos or texts, irrespective of whether they are accessed through downloading or streaming, from a tangible medium or through any other means. Contracts for the supply of digital content should fall within the scope of this Directive. If digital content is supplied on a tangible medium, such as a CD or a DVD, it should be considered as goods within the meaning of this Directive. Similarly to contracts for the supply of water, gas or electricity, where they are not put up for sale in a limited volume or set quantity, or of district heating, contracts for digital content which is not supplied on a tangible medium should be classified, for the purpose of this Directive, neither as sales contracts nor as service contracts. For such contracts, the consumer should have a right of withdrawal unless he has consented to the beginning of the performance of the contract during the withdrawal period and has acknowledged that he will consequently lose the right to withdraw from the contract. In addition to the general information requirements, the trader should inform the consumer about the functionality and the relevant interoperability of digital content. The notion of functionality should refer to the ways in which digital content can be used, for instance for the tracking of consumer behaviour; it should also refer to the absence or presence of any technical restrictions such as protection via Digital Rights Management or region coding. The notion of relevant interoperability is meant to describe the information regarding the standard hardware and software environment with which the digital content is compatible, for instance the operating system, the necessary version and certain hardware features. The Commission should examine the need for further harmonisation of provisions in respect of digital content and submit, if necessary, a legislative proposal for addressing this matter. (20) The definition of distance contract should cover all cases where a contract is concluded between the trader and the consumer under an organised distance sales or service-provision scheme, with the exclusive use of one or more means of distance communication (such as mail order, Internet, telephone or fax) up to and including the time at which the contract is concluded. That definition should also cover situations where the consumer visits the business premises merely for the purpose of gathering information about the goods or services and subsequently negotiates and concludes the contract at a distance. By contrast, a contract which is negotiated at the business premises of the trader and finally concluded by means of distance communication should not be considered a distance contract. Neither should a contract initiated by means of distance communication, but finally concluded at the business premises of the trader be considered a distance contract. Similarly, the concept of distance contract should not include reservations made by a consumer through a means of distance communications to request the provision of a service from a professional, such as in the case of a consumer phoning to request an appointment with a hairdresser. The notion of an organised distance sales or service-provision scheme should include those schemes offered by a third party other than 350

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the trader but used by the trader, such as an online platform. It should not, however, cover cases where websites merely offer information on the trader, his goods and/or services and his contact details. An off-premises contract should be defined as a contract concluded with the simultaneous physical presence of the trader and the consumer, in a place which is not the business premises of the trader, for example at the consumer’s home or workplace. In an off-premises context, the consumer may be under potential psychological pressure or may be confronted with an element of surprise, irrespective of whether or not the consumer has solicited the trader’s visit. The definition of an off-premises contract should also include situations where the consumer is personally and individually addressed in an off-premises context but the contract is concluded immediately afterwards on the business premises of the trader or through a means of distance communication. The definition of an off-premises contract should not cover situations in which the trader first comes to the consumer’s home strictly with a view to taking measurements or giving an estimate without any commitment of the consumer and where the contract is then concluded only at a later point in time on the business premises of the trader or via means of distance communication on the basis of the trader’s estimate. In those cases, the contract is not to be considered as having been concluded immediately after the trader has addressed the consumer if the consumer has had time to reflect upon the estimate of the trader before concluding the contract. Purchases made during an excursion organised by the trader during which the products acquired are promoted and offered for sale should be considered as off-premises contracts. Business premises should include premises in whatever form (such as shops, stalls or lorries) which serve as a permanent or usual place of business for the trader. Market stalls and fair stands should be treated as business premises if they fulfil this condition. Retail premises where the trader carries out his activity on a seasonal basis, for instance during the tourist season at a ski or beach resort, should be considered as business premises as the trader carries out his activity in those premises on a usual basis. Spaces accessible to the public, such as streets, shopping malls, beaches, sports facilities and public transport, which the trader uses on an exceptional basis for his business activities as well as private homes or workplaces should not be regarded as business premises. The business premises of a person acting in the name or on behalf of the trader as defined in this Directive should be considered as business premises within the meaning of this Directive. Durable media should enable the consumer to store the information for as long as it is necessary for him to protect his interests stemming from his relationship with the trader. Such media should include in particular paper, USB sticks, CDROMs, DVDs, memory cards or the hard disks of computers as well as e-mails. A public auction implies that traders and consumers attend or are given the possibility to attend the auction in person. The goods or services are offered by the trader to the consumer through a bidding procedure authorised by law in some Member States, to offer goods or services at public sale. The successful bidder is bound to purchase the goods or services. The use of online platforms for auction purposes which are at the disposal of consumers and traders should not be considered as a public auction within the meaning of this Directive. Contracts related to district heating should be covered by this Directive, similarly to the contracts for the supply of water, gas or electricity. District heating 351

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refers to the supply of heat, inter alia, in the form of steam or hot water, from a central source of production through a transmission and distribution system to multiple buildings, for the purpose of heating. Contracts related to the transfer of immovable property or of rights in immovable property or to the creation or acquisition of such immovable property or rights, contracts for the construction of new buildings or the substantial conversion of existing buildings as well as contracts for the rental of accommodation for residential purposes are already subject to a number of specific requirements in national legislation. Those contracts include for instance sales of immovable property still to be developed and hire-purchase. The provisions of this Directive are not appropriate to those contracts, which should be therefore excluded from its scope. A substantial conversion is a conversion comparable to the construction of a new building, for example where only the façade of an old building is retained. Service contracts in particular those related to the construction of annexes to buildings (for example a garage or a veranda) and those related to repair and renovation of buildings other than substantial conversion, should be included in the scope of this Directive, as well as contracts related to the services of a real estate agent and those related to the rental of accommodation for non-residential purposes. Transport services cover passenger transport and transport of goods. Passenger transport should be excluded from the scope of this Directive as it is already subject to other Union legislation or, in the case of public transport and taxis, to regulation at national level. However, the provisions of this Directive protecting consumers against excessive fees for the use of means of payment or against hidden costs should apply also to passenger transport contracts. In relation to transport of goods and car rental which are services, consumers should benefit from the protection afforded by this Directive, with the exception of the right of withdrawal. In order to avoid administrative burden being placed on traders, Member States may decide not to apply this Directive where goods or services of a minor value are sold off-premises. The monetary threshold should be established at a sufficiently low level as to exclude only purchases of small significance. Member States should be allowed to define this value in their national legislation provided that it does not exceed EUR 50. Where two or more contracts with related subjects are concluded at the same time by the consumer, the total cost thereof should be taken into account for the purpose of applying this threshold. Social services have fundamentally distinct features that are reflected in sectorspecific legislation, partially at Union level and partially at national level. Social services include, on the one hand, services for particularly disadvantaged or low income persons as well as services for persons and families in need of assistance in carrying out routine, everyday tasks and, on the other hand, services for all people who have a special need for assistance, support, protection or encouragement in a specific life phase. Social services cover, inter alia, services for children and youth, assistance services for families, single parents and older persons, and services for migrants. Social services cover both short-term and longterm care services, for instance services provided by home care services or provided in assisted living facilities and residential homes or housing (‘nursing homes’). Social services include not only those provided by the State at a national, regional or local level by providers mandated by the State or by charities recognised by the State but also those provided by private operators. The provi-

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sions of this Directive are not appropriate to social services which should be therefore excluded from its scope. Healthcare requires special regulations because of its technical complexity, its importance as a service of general interest as well as its extensive public funding. Healthcare is defined in Directive 2011/24/EU of the European Parliament and of the Council of 9 March 2011 on the application of patients’ rights in cross-border healthcare9 as ‘health services provided by health professionals to patients to assess, maintain or restore their state of health, including the prescription, dispensation and provision of medicinal products and medical devices’. Health professional is defined in that Directive as a doctor of medicine, a nurse responsible for general care, a dental practitioner, a midwife or a pharmacist within the meaning of Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications10 or another professional exercising activities in the healthcare sector which are restricted to a regulated profession as defined in point (a) of Article 3(1) of Directive 2005/36/EC, or a person considered to be a health professional according to the legislation of the Member State of treatment. The provisions of this Directive are not appropriate to healthcare which should be therefore excluded from its scope. Gambling should be excluded from the scope of this Directive. Gambling activities are those which involve wagering at stake with pecuniary value in games of chance, including lotteries, gambling in casinos and betting transactions. Member States should be able to adopt other, including more stringent, consumer protection measures in relation to such activities. The existing Union legislation, inter alia, relating to consumer financial services, package travel and timeshare contains numerous rules on consumer protection. For this reason, this Directive should not apply to contracts in those areas. With regard to financial services, Member States should be encouraged to draw inspiration from existing Union legislation in that area when legislating in areas not regulated at Union level, in such a way that a level playing field for all consumers and all contracts relating to financial services is ensured. The trader should be obliged to inform the consumer in advance of any arrangement resulting in the consumer paying a deposit to the trader, including an arrangement whereby an amount is blocked on the consumer’s credit or debit card. The trader should give the consumer clear and comprehensible information before the consumer is bound by a distance or off-premises contract, a contract other than a distance or an off-premises contract, or any corresponding offer. In providing that information, the trader should take into account the specific needs of consumers who are particularly vulnerable because of their mental, physical or psychological infirmity, age or credulity in a way which the trader could reasonably be expected to foresee. However, taking into account such specific needs should not lead to different levels of consumer protection. The information to be provided by the trader to the consumer should be mandatory and should not be altered. Nevertheless, the contracting parties should be able to expressly agree to change the content of the contract subsequently concluded, for instance the arrangements for delivery.

OJ L 88, 4.4.2011, p. 45. OJ L 255, 30.9.2005, p. 22.

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Consumer Rights Directive (36) In the case of distance contracts, the information requirements should be adapted to take into account the technical constraints of certain media, such as the restrictions on the number of characters on certain mobile telephone screens or the time constraint on television sales spots. In such cases the trader should comply with a minimum set of information requirements and refer the consumer to another source of information, for instance by providing a toll free telephone number or a hypertext link to a webpage of the trader where the relevant information is directly available and easily accessible. As to the requirement to inform the consumer of the cost of returning goods which by their nature cannot normally be returned by post, it will be considered to have been met, for example, if the trader specifies one carrier (for instance the one he assigned for the delivery of the good) and one price concerning the cost of returning the goods. Where the cost of returning the goods cannot reasonably be calculated in advance by the trader, for example because the trader does not offer to arrange for the return of the goods himself, the trader should provide a statement that such a cost will be payable, and that this cost may be high, along with a reasonable estimation of the maximum cost, which could be based on the cost of delivery to the consumer. (37) Since in the case of distance sales, the consumer is not able to see the goods before concluding the contract, he should have a right of withdrawal. For the same reason, the consumer should be allowed to test and inspect the goods he has bought to the extent necessary to establish the nature, characteristics and the functioning of the goods. Concerning off-premises contracts, the consumer should have the right of withdrawal because of the potential surprise element and/or psychological pressure. Withdrawal from the contract should terminate the obligation of the contracting parties to perform the contract. (38) Trading websites should indicate clearly and legibly at the latest at the beginning of the ordering process whether any delivery restrictions apply and which means of payment are accepted. (39) It is important to ensure for distance contracts concluded through websites that the consumer is able to fully read and understand the main elements of the contract before placing his order. To that end, provision should be made in this Directive for those elements to be displayed in the close vicinity of the confirmation requested for placing the order. It is also important to ensure that, in such situations, the consumer is able to determine the moment at which he assumes the obligation to pay the trader. Therefore, the consumer’s attention should specifically be drawn, through an unambiguous formulation, to the fact that placing the order entails the obligation to pay the trader. (40) The current varying lengths of the withdrawal periods both between the Member States and for distance and off-premises contracts cause legal uncertainty and compliance costs. The same withdrawal period should apply to all distance and off-premises contracts. In the case of service contracts, the withdrawal period should expire after 14 days from the conclusion of the contract. In the case of sales contracts, the withdrawal period should expire after 14 days from the day on which the consumer or a third party other than the carrier and indicated by the consumer, acquires physical possession of the goods. In addition the consumer should be able to exercise the right to withdraw before acquiring physical possession of the goods. Where multiple goods are ordered by the consumer in one order but are delivered separately, the withdrawal period should expire after 14 days from the day on which the consumer acquires physical possession of 354

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the last good. Where goods are delivered in multiple lots or pieces, the withdrawal period should expire after 14 days from the day on which the consumer acquires the physical possession of the last lot or piece. In order to ensure legal certainty, it is appropriate that Council Regulation (EEC, Euratom) No 1182/71 of 3 June 1971 determining the rules applicable to periods, dates and time limits11 should apply to the calculation of the periods contained in this Directive. Therefore, all periods contained in this Directive should be understood to be expressed in calendar days. Where a period expressed in days is to be calculated from the moment at which an event occurs or an action takes place, the day during which that event occurs or that action takes place should not be considered as falling within the period in question. The provisions relating to the right of withdrawal should be without prejudice to the Member States’ laws and regulations governing the termination or unenforceability of a contract or the possibility for the consumer to fulfil his contractual obligations before the time determined in the contract. If the trader has not adequately informed the consumer prior to the conclusion of a distance or off-premises contract, the withdrawal period should be extended. However, in order to ensure legal certainty as regards the length of the withdrawal period, a 12-month limitation period should be introduced. Differences in the ways in which the right of withdrawal is exercised in the Member States have caused costs for traders selling cross-border. The introduction of a harmonised model withdrawal form that the consumer may use should simplify the withdrawal process and bring legal certainty. For these reasons, Member States should refrain from adding any presentational requirements to the Union-wide model form relating for example to the font size. However, the consumer should remain free to withdraw in his own words, provided that his statement setting out his decision to withdraw from the contract to the trader is unequivocal. A letter, a telephone call or returning the goods with a clear statement could meet this requirement, but the burden of proof of having withdrawn within the time limits fixed in the Directive should be on the consumer. For this reason, it is in the interest of the consumer to make use of a durable medium when communicating his withdrawal to the trader. As experience shows that many consumers and traders prefer to communicate via the trader’s website, there should be a possibility for the trader to give the consumer the option of filling in a web-based withdrawal form. In this case the trader should provide an acknowledgement of receipt for instance by e-mail without delay. In the event that the consumer withdraws from the contract, the trader should reimburse all payments received from the consumer, including those covering the expenses borne by the trader to deliver goods to the consumer. The reimbursement should not be made by voucher unless the consumer has used vouchers for the initial transaction or has expressly accepted them. If the consumer expressly chooses a certain type of delivery (for instance 24-hour express delivery), although the trader had offered a common and generally acceptable type of delivery which would have incurred lower delivery costs, the consumer should bear the difference in costs between these two types of delivery. Some consumers exercise their right of withdrawal after having used the goods to an extent more than necessary to establish the nature, characteristics and the

OJ L 124, 8.6.1971, p. 1.

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functioning of the goods. In this case the consumer should not lose the right to withdraw but should be liable for any diminished value of the goods. In order to establish the nature, characteristics and functioning of the goods, the consumer should only handle and inspect them in the same manner as he would be allowed to do in a shop. For example, the consumer should only try on a garment and should not be allowed to wear it. Consequently, the consumer should handle and inspect the goods with due care during the withdrawal period. The obligations of the consumer in the event of withdrawal should not discourage the consumer from exercising his right of withdrawal. The consumer should be required to send back the goods not later than 14 days after having informed the trader about his decision to withdraw from the contract. In situations where the trader or the consumer does not fulfil the obligations relating to the exercise of the right of withdrawal, penalties provided for by national legislation in accordance with this Directive should apply as well as contract law provisions. Certain exceptions from the right of withdrawal should exist, both for distance and off-premises contracts. A right of withdrawal could be inappropriate for example given the nature of particular goods or services. That is the case for example with wine supplied a long time after the conclusion of a contract of a speculative nature where the value is dependent on fluctuations in the market (‘vin en primeur’). The right of withdrawal should neither apply to goods made to the consumer’s specifications or which are clearly personalised such as tailormade curtains, nor to the supply of fuel, for example, which is a good, by nature inseparably mixed with other items after delivery. The granting of a right of withdrawal to the consumer could also be inappropriate in the case of certain services where the conclusion of the contract implies the setting aside of capacity which, if a right of withdrawal were exercised, the trader may find difficult to fill. This would for example be the case where reservations are made at hotels or concerning holiday cottages or cultural or sporting events. On the one hand, the consumer should benefit from his right of withdrawal even in case he has asked for the provision of services before the end of the withdrawal period. On the other hand, if the consumer exercises his right of withdrawal, the trader should be assured to be adequately paid for the service he has provided. The calculation of the proportionate amount should be based on the price agreed in the contract unless the consumer demonstrates that that total price is itself disproportionate, in which case the amount to be paid shall be calculated on the basis of the market value of the service provided. The market value should be defined by comparing the price of an equivalent service performed by other traders at the time of the conclusion of the contract. Therefore the consumer should request the performance of services before the end of the withdrawal period by making this request expressly and, in the case of off-premises contracts, on a durable medium. Similarly, the trader should inform the consumer on a durable medium of any obligation to pay the proportionate costs for the services already provided. For contracts having as their object both goods and services, the rules provided for in this Directive on the return of goods should apply to the goods aspects and the compensation regime for services should apply to the services aspects. The main difficulties encountered by consumers and one of the main sources of disputes with traders concern delivery of goods, including goods getting lost or damaged during transport and late or partial delivery. Therefore it is appropri-

Consumer Rights Directive ate to clarify and harmonise the national rules as to when delivery should occur. The place and modalities of delivery and the rules concerning the determination of the conditions for the transfer of the ownership of the goods and the moment at which such transfer takes place, should remain subject to national law and therefore should not be affected by this Directive. The rules on delivery laid down in this Directive should include the possibility for the consumer to allow a third party to acquire on his behalf the physical possession or control of the goods. The consumer should be considered to have control of the goods where he or a third party indicated by the consumer has access to the goods to use them as an owner, or the ability to resell the goods (for example, when he has received the keys or possession of the ownership documents). (52) In the context of sales contracts, the delivery of goods can take place in various ways, either immediately or at a later date. If the parties have not agreed on a specific delivery date, the trader should deliver the goods as soon as possible, but in any event not later than 30 days from the day of the conclusion of the contract. The rules regarding late delivery should also take into account goods to be manufactured or acquired specially for the consumer which cannot be reused by the trader without considerable loss. Therefore, a rule which grants an additional reasonable period of time to the trader in certain circumstances should be provided for in this Directive. When the trader has failed to deliver the goods within the period of time agreed with the consumer, before the consumer can terminate the contract, the consumer should call upon the trader to make the delivery within a reasonable additional period of time and be entitled to terminate the contract if the trader fails to deliver the goods even within that additional period of time. However, this rule should not apply when the trader has refused to deliver the goods in an unequivocal statement. Neither should it apply in certain circumstances where the delivery period is essential such as, for example, in the case of a wedding dress which should be delivered before the wedding. Nor should it apply in circumstances where the consumer informs the trader that delivery on a specified date is essential. For this purpose, the consumer may use the trader’s contact details given in accordance with this Directive. In these specific cases, if the trader fails to deliver the goods on time, the consumer should be entitled to terminate the contract immediately after the expiry of the delivery period initially agreed. This Directive should be without prejudice to national provisions on the way the consumer should notify the trader of his will to terminate the contract. (53) In addition to the consumer’s right to terminate the contract where the trader has failed to fulfil his obligations to deliver the goods in accordance with this Directive, the consumer may, in accordance with the applicable national law, have recourse to other remedies, such as granting the trader an additional period of time for delivery, enforcing the performance of the contract, withholding payment, and seeking damages. (54) In accordance with Article 52(3) of Directive 2007/64/EC of the European Parliament and of the Council of 13 November 2007 on payment services in the internal market12, Member States should be able to prohibit or limit traders’ right to request charges from consumers taking into account the need to encourage competition and promote the use of efficient payment instruments. In any

12

OJ L 319, 5.12.2007, p. 1.

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event, traders should be prohibited from charging consumers fees that exceed the cost borne by the trader for the use of a certain means of payment. Where the goods are dispatched by the trader to the consumer, disputes may arise, in the event of loss or damage, as to the moment at which the transfer of risk takes place. Therefore this Directive should provide that the consumer be protected against any risk of loss of or damage to the goods occurring before he has acquired the physical possession of the goods. The consumer should be protected during a transport arranged or carried out by the trader, even where the consumer has chosen a particular delivery method from a range of options offered by the trader. However, that provision should not apply to contracts where it is up to the consumer to take delivery of the goods himself or to ask a carrier to take delivery. Regarding the moment of the transfer of the risk, a consumer should be considered to have acquired the physical possession of the goods when he has received them. Persons or organisations regarded under national law as having a legitimate interest in protecting consumer contractual rights should be afforded the right to initiate proceedings, either before a court or before an administrative authority which is competent to decide upon complaints or to initiate appropriate legal proceedings. It is necessary that Member States lay down penalties for infringements of this Directive and ensure that they are enforced. The penalties should be effective, proportionate and dissuasive. The consumer should not be deprived of the protection granted by this Directive. Where the law applicable to the contract is that of a third country, Regulation (EC) No 593/2008 should apply, in order to determine whether the consumer retains the protection granted by this Directive. The Commission, following consultation with the Member States and stakeholders, should look into the most appropriate way to ensure that all consumers are made aware of their rights at the point of sale. Since inertia selling, which consists of unsolicited supply of goods or provision of services to consumers, is prohibited by Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-toconsumer commercial practices in the internal market (‘Unfair Commercial Practices Directive’)13 but no contractual remedy is provided therein, it is necessary to introduce in this Directive the contractual remedy of exempting the consumer from the obligation to provide any consideration for such unsolicited supply or provision. Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications)14 already regulates unsolicited communications and provides for a high level of consumer protection. The corresponding provisions on the same issue contained in Directive 97/7/EC are therefore not needed. It is appropriate for the Commission to review this Directive if some barriers to the internal market are identified. In its review, the Commission should pay particular attention to the possibilities granted to Member States to maintain or introduce specific national provisions including in certain areas of Council Di-

OJ L 149, 11.6.2005, p. 22. OJ L 201, 31.7.2002, p. 37.

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(63) (64) (65)

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rective 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts 15 and Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees16. That review could lead to a Commission proposal to amend this Directive; that proposal may include amendments to other consumer protection legislation reflecting the Commission’s Consumer Policy Strategy commitment to review the Union acquis in order to achieve a high, common level of consumer protection. Directives 93/13/EEC and 1999/44/EC should be amended to require Member States to inform the Commission about the adoption of specific national provisions in certain areas. Directives 85/577/EEC and 97/7/EC should be repealed. Since the objective of this Directive, namely, through the achievement of a high level of consumer protection, to contribute to the proper functioning of the internal market, cannot be sufficiently achieved by the Member States and can therefore be better achieved at Union level, the Union may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective. This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union. In accordance with point 34 of the Interinstitutional agreement on better lawmaking17, Member States are encouraged to draw up, for themselves and in the interests of the Union, their own tables, which will, as far as possible, illustrate the correlation between this Directive and the transposition measures, and to make them public,

Have adopted this Directive: …

CHAPTER II CONSUMER INFORMATION FOR CONTRACTS OTHER THAN DISTANCE OR OFF-PREMISES CONTRACTS Article 5 Information requirements for contracts other than distance or off-premises contracts 1. Before the consumer is bound by a contract other than a distance or an offpremises contract, or any corresponding offer, the trader shall provide the consumer with the following information in a clear and comprehensible manner, if that information is not already apparent from the context: (a) the main characteristics of the goods or services, to the extent appropriate to the medium and to the goods or services; OJ L 95, 21.4.1993, p. 29. OJ L 171, 7.7.1999, p. 12. 17 OJ C 321, 31.12.2003, p. 1. 15 16

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(b) the identity of the trader, such as his trading name, the geographical address at which he is established and his telephone number; (c) the total price of the goods or services inclusive of taxes, or where the nature of the goods or services is such that the price cannot reasonably be calculated in advance, the manner in which the price is to be calculated, as well as, where applicable, all additional freight, delivery or postal charges or, where those charges cannot reasonably be calculated in advance, the fact that such additional charges may be payable; (d) where applicable, the arrangements for payment, delivery, performance, the time by which the trader undertakes to deliver the goods or to perform the service, and the trader’s complaint handling policy; (e) in addition to a reminder of the existence of a legal guarantee of conformity for goods digital content and digital services, the existence and the conditions of after-sales services and commercial guarantees, where applicable; (f) the duration of the contract, where applicable, or, if the contract is of indeterminate duration or is to be extended automatically, the conditions for terminating the contract; (g) where applicable, the functionality, including applicable technical protection measures, of goods with digital elements, digital content and digital services; (h) where applicable, any relevant compatibility and interoperability of goods with digital elements, digital content and digital services that the trader is aware of or can reasonably be expected to have been aware of. 2. Paragraph 1 shall also apply to contracts for the supply of water, gas or electricity, where they are not put up for sale in a limited volume or set quantity, of district heating or of digital content which is not supplied on a tangible medium. 3. Member States shall not be required to apply paragraph 1 to contracts which involve day-to-day transactions and which are performed immediately at the time of their conclusion. 4. Member States may adopt or maintain additional pre-contractual information requirements for contracts to which this Article applies. Bibliography: Commission, ‘DG Justice Guidance Document concerning Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights […]’ (‘CRD Guidance’); Commission, ‘Guidance on the Implementation/Application of Directive 2005/29/EC on Unfair Commercial Practices’ (‘UCPD Guidance’) SWD(2016) 163 final; Commission, ‘Study on the application of the Consumer Rights Directive 2011/83/EU’ (May 2017) (‘CRD Study’); Commission, ‘Report from the Commission to the European Parliament and the Council on the application of Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights’ COM(2017) 259 final (‘Commission Report CRD’); Djurovic, ‘The Apple case: the commencement of pan-European battle against unfair commercial practices’ (2013) 9 ERCL 253–266; Helberger/Loos/Guibault/Mak/Pessers, ‘Digital Content Contracts for Consumers’ (2013) 36 JCP 37–57; Loos/Helberger/Guibault/Mak, ‘The Regulation of Digital Content Contracts in the Optional Instrument of Contract Law’ (2011) 19 ERPL 729–758; Narciso, ‘“Gratuitous” Digital Content Contracts’ (2017) 6 EuCML 198–206; Schaub, ‘How to Make the Best of Mandatory Requirements in Consumer Law’ (2017) 25 ERPL 25–44; Vandemaele, Commerciële garanties in de verschillende koopregimes: naar een uniforme regeling (PhD, KU Leuven 2019).

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A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Link with other information requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 4 7

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Information requirements for contracts other than distance or off-premises contracts 1. On-premises contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Sales and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Day-to-day transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Pre-contractual information elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. General requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Specific information to be provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Minimum harmonisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11 12 17 18 18 24 43

D. Reform/Criticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function Art. 5 sets out the information that must be provided by the trader to a consumer 1 before he concludes a contract other than a distance or an off-premises contract. Distance and off-premises contracts are excluded from the scope of this provision as specific pre-contractual information requirements apply as stipulated in Art. 6. Information is still at the core of EU consumer protection.1 Art. 5 must ensure that 2 consumers receive and understand the main elements of the contract before they enter into such contract.2 Providing the consumer with such information should assure that consumers can make an informed choice when concluding a contract. Pre-contractual information on the price and the terms of a contract and the consequences of concluding it is considered of fundamental importance to the consumer.3 The pre-contractual information elements that have to be provided to the consumer 3 are summed up in Art. 5(1). This information must be provided in a clear and comprehensible manner. Art. 5(2) and (3) clarify the scope of Art. 5(1). Art. 5(4) indicates that the Member States may adopt or maintain additional pre-contractual information requirements. Art. 5 is thus a minimum harmonisation provision.

B. Context I. Link with other information requirements Although information requirements are one of the core instruments of EU consumer 4 protection, there was no ‘general’ information obligation in the EC consumer acquis prior to the adoption of the Consumer Rights Directive. Only an indirect information obligation could be inferred from the Unfair Commercial Practices Directive as the omission of material information can be an unfair commercial practice. The Consumer Rights Directive now fills this gap through the general pre-contractual information obligation in Art. 5. Specific information obligations however already existed in a large number of EU 5 instruments which often (partially) overlap with the general information obligation of the Consumer Rights Directive. The Consumer Rights Directive pays some attention to the interaction between these different information requirements. 4 The CRD Guidance

1 See also Art. 169 TFEU where information is mentioned as one of the consumer interests the EU intends to promote. 2 See also Recital 39 as to the aims of Art. 6. 3 CJEU, C-310/15 Deroo-Blanquart EU:C:2016:633, paras 40–41. 4 See Art. 3(2) and Recital 12.

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complements for other EU instruments and explains in detail how the overlapping information requirements of the different instruments can be complied with.5 6 In general, the different EU information obligations apply cumulatively. If there is a conflict, the more specific provision will prevail over the general information obligation of Art. 5.6

II. Sanctions The Consumer Rights Directive provides no specific sanction for the infringement of its Art. 5 but instead leaves this to the Member States. Art. 23(1) requires Member States to ensure that adequate and effective means exist to ensure compliance with the Consumer Rights Directive. Art. 24(1) requires Member States to lay down the rules on penalties applicable to infringements of the national provisions implementing the Directive. The penalties must be effective, proportionate and dissuasive. 8 The enforcement of Art. 5 and the penalties available differ widely in the Member States. An overview of the enforcement authorities and the applicable sanctions in different Member States can be found in the ‘Study on the application of the Consumer Rights Directive’7. 9 In addition, the Consumer Rights Directive, as amended by the Modernisation Directive, now requires Member States to introduce the possibility for their competent authorities to impose fines for certain infringements of the Consumer Rights Directive, 8 more particularly for ‘widespread infringements’ and ‘widespread infringements with a Union dimension’.9 The maximum amount of such fines must be at least 4 % of the annual turnover of the trader in the Member State concerned.10 The Modernisation Directive must be implemented by 28 November 2021 and be applied from 28 May 2022. 11 10 The Modernisation Directive also amends the Unfair Commercial Practices Directive and obliges Member States to ensure the consumer harmed by unfair commercial practices have access to proportionate and effective remedies, including compensation for damage suffered by the consumer, and, where relevant, a price reduction or the termination of the contract.12 As non-compliance with Art. 5 CRD may qualify as a misleading commercial practice in the sense of Art. 6 or Art. 7 UCPD, such remedies can 7

Point 4.2 CRD Guidance. Art. 3(2). 7 CRD Study, 35 et seq. The Study is available online under https://op.europa.eu/en/publication-detail//publication/3874ed40-772d-11e7-b2f2-01aa75ed71a1/language-en/format-PDF (accessed 8 August 2019). 8 Art. 24(3) as amended by Art. 5(13) Modernisation Directive. 9 See Art. 24(3) as amended by Art. 5(13) Modernisation Directive, in conjunction with Art. 21 CPC Regulation 2017/2394. ‘Widespread infringements are: (a) any act or omission contrary to Union laws that protect consumers’ interests that has done, does or is likely to do harm to the collective interests of consumers residing in at least two Member States other than the Member State in which: (i) the act or omission originated or took place; (ii) the trader responsible for the act or omission is established; or (iii) evidence or assets of the trader pertaining to the act or omission are to be found; or (b) any acts or omissions contrary to Union laws that protect consumers interests that have done, do or are likely to do harm to the collective interests of consumers and that have common features, including the same unlawful practice, the same interest being infringed and that are occurring concurrently, committed by the same trader, in at least three Member States’ (Art. 3(4) Consumer Protection Regulation); widespread infringements with a Union dimension are: ‘a widespread infringement that has done, does or is likely to do harm to the collective interests of consumers in at least two-thirds of the Member States, accounting, together, for at least two-thirds of the population of the Union’ (Art. 3(4) Consumer Protection Regulation). 10 Art. 24(3) as amended by Art. 5(13) Modernisation Directive. 11 Art. 7 Modernisation Directive. 12 Art. 11 a UCPD, as inserted by Art. 3(5) Modernisation Directive. 5

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also be relevant for non-compliance with the information requirements of the Consumer Rights Directive.

C. Explanation I. Scope 1. On-premises contracts Art. 5(1) applies to contracts other than distance or off-premises contracts, here- 11 after also referred to as ‘on premises contracts’. Distance contracts are contracts concluded between the trader and the consumer under an organised distance sales or serviceprovision scheme without the simultaneous physical presence of the trader and the consumer, with the exclusive use of one or more means of distance communication up to and including the time at which the contract is concluded.13 Off-premises contracts mainly include contracts concluded between the trader and the consumer in the simultaneous physical presence in a place which is not the business premises of the trader. 14 Business premises include any immovable retail premises where the trader carries out his activity on a permanent basis or any movable retail premises where the trader carries out his activity on a usual basis.15 Overall, Art. 5(1) concerns situations in which the trader and the consumer are simultaneously present in the trader’s business premises and the consumer receives an offer or concludes the contract in the trader’s business premises without having first been addressed individually and personally off-premises.

2. Sales and services Besides the distinction between distance and off-premises contracts and other con- 12 tracts, the Consumer Rights Directive also distinguishes between sales contracts and service contracts. A sales contract is any contract under which the trader transfers or undertakes to transfer the ownership of goods to the consumer, including any contract having as its object both goods and services.16 A service contract is any contract other than a sales contract under which the trader supplies or undertakes to supply a service, including a digital service, to the consumer.17 Whereas the former definitions both referred to a price to be paid, such reference was omitted in the definitions as amended by the Modernisation Directive. A separate treatment is given to contracts for (i) the supply of digital content which 13 is not supplied on a tangible medium (hereafter also ‘online digital content’), (ii) the supply of water, gas or electricity where they are not put up for sale in a limited volume or a set quantity, and (iii) for the supply of district heating [(ii) and (iii) hereafter also Art. 2 No. 7. Art. 2 No. 9(a); in addition the following B2C contracts are considered off premises contracts [Art. 2 No. 9(b)–(d)]: (b) for which an offer was made by the consumer in the same circumstances […]; (c) concluded on the business premises of the trader or through any means of distance communication immediately after the consumer was personally and individually addressed in a place which is not the business premises of the trader in the simultaneous physical presence of the trader and the consumer; or (d) concluded during an excursion organised by the trader with the aim or effect of promoting and selling goods or services to the consumer. 15 Art. 2 No. 9. See for the interpretation of ‘business premises’, CJEU, C-485/17 Verbraucherzentrale Berlin EU:C:2018:642. 16 Art. 2 No. 5, as amended by the Modernisation Directive. 17 Art. 2 No. 6, as amended by the Modernisation Directive. 13 14

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‘public utilities contracts’].18 The Consumer Rights Directive does not qualify these contracts either as sale or service contracts,19 thus avoiding the ongoing qualification discussion in several Member States,20 but provides for specific rules. 14 The former definition of sales contracts and of services contracts gave rise to a discussion about the applicability of the Consumer Rights Directive to digital content contracts for which the consumer did not pay a monetary price, but only provided personal data.21 Looking at the former definitions of ‘sales contract’ and ‘service contract’, which each referred to a price, and to Art. 5(1)(c) [and Art. 6(1)(e)] which requires information to be provided on the ‘price’, Loos and others concluded that the EU legislator did not intend to regulate ‘free’ digital content contracts in the former version of the Consumer Rights Directive. 22 In their view, the payment of a price referred to a payment in money. The Consumer Rights Directive therefore only applied to digital content contracts which required the payment of a monetary price. The CRD Guidance followed this reasoning only for digital content that is supplied on a tangible medium,23 and that is treated as a ‘good’ in the Consumer Rights Directive.24 As online digital content was given a separate treatment by the Consumer Rights Directive and was not qualified as either a service or a sales contract,25 the CRD Guidance submitted that the Directive ‘did apply to contracts for the supply of online digital content even if they do not involve payment’.26 Narciso defended a third position based on the definitions of ‘distance contract’ and ‘off-premises contract’ that do not require the consumer to pay a price.27 Narciso inferred from this wording that ‘free’ digital content contracts could still fall within the scope of this definition so that at least the provisions of the Consumer Rights Directive on distance contracts would apply to digital content in exchange for personal data.28 15 The Modernisation Directive has now ended this discussion and has made clear that the Consumer Rights Directive applies to both online digital content and to digital services provided in exchange for personal data. The Modernisation Directive has amended the definitions of ‘sales contract’ and ‘service contract’ and omitted any reference to price. Furthermore the scope of application of the Consumer Rights Directive was clarified in the amended Art. 3. An attempt was thus made to bring the scope of application of the Consumer Rights Directive in line with the Sale of Goods Directive and the Digital Content Directive.29 According to the amended Art. 3, the Consumer Rights Directive applies to the following contracts: (i) any contract concluded between a trader and a consumer where the consumer undertakes to pay a price;30 (ii) contracts for the supply of public utilities ‘to the extent that these commodities are provided on a contractual basis’;31 (iii) contracts for the supply of online digital content or of a digital service in exRecital 25. See also point 2.1 CRD Guidance. Recital 19. 20 See Helberger/Loos/Guibault/Mak/Pessers, 42–43. 21 Art. 2 No. 11 of the original Consumer Rights Directive defines digital content as ‘data which are produced and supplied in digital form’; see also Recital 19. The Modernisation Directive has now aligned the definition of digital content under Art. 2 No. 11 with the definition of digital content under the Digital Content Directive, see Digital Content Directive → Art. 2 mn. 6 et seq. and Art. 3, mn. 39 et seq. 22 Loos/Helberger/Guibault/Mak, 750–751. 23 Point 2.3 CRD Guidance. 24 Recital 19. 25 ibid. 26 Points 2.3 and 12.1 CRD Guidance. 27 Narciso, 201. 28 ibid. 29 See Art. 3, as amended by the Modernisation Directive. 30 See Art. 3(1), as amended by the Modernisation Directive. 31 ibid. 18 19

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change for the provision of personal data by the consumer, except where the personal data provided by the consumer are exclusively processed for the supplying the digital content or digital service or for allowing the trader to comply with legal obligation.32 As before, gifts or free services are not covered 33, however, when a free trial period is 16 offered that is later automatically converted into to a paid contract, the Consumer Rights Directive would still apply unless the consumer terminates the contract before the trial periods ends.34 In addition, it is now clear that certain contracts ‘for personal data’ are included within the scope of application of the Consumer Rights Directive: namely contracts for online digital content and for digital services. Contracts for ‘offline’ digital content, whereby digital content is provided on a tangible medium, are however only covered by the Consumer Rights Directive if a price is paid by the consumer.

3. Day-to-day transactions Art. 5(3) allows Member States to exclude application of Art. 5(1) to contracts that 17 involve ‘day-to-day transactions and which are performed immediately at the time of their conclusion’. According to the CRD Guidance, an example would be the ‘supply of foodstuffs, beverages or other goods intended for current consumption in the household’.35 Other examples mentioned are: shoe cleaning services provided on the street or cinema tickets if the ticket is bought just before the film is watched. 36

II. Pre-contractual information elements 1. General requirements a) Scope. It is apparent from the formulation of some of the information elements that 18 Art. 5(1) focuses on goods and services [for example (a) the main characteristics of the goods or services… (c) the total price of the goods or services… (emphasis added)]. However, it should also apply to the public utilities and digital content contracts referred to in Art. 5(2).37 The information of Art. 5 does not have to be provided by the trader if ‘it is already 19 apparent from the context’. Information that is obvious from the context does not need to be provided. As the contracts involved are ‘on premises’ contracts, information such as for example the address of a (per definition ‘brick and mortar’) shop; or the characteristics that are apparent from looking at the goods does not need to be given.38 b) Timing. The information needs to be provided to consumers ‘before the conclu- 20 sion of the contract’. The information must be provided before the consumer is bound by the contract. The Consumer Rights Directive does not impose a minimum period

See Art. 3(1 a), as inserted by the Modernisation Directive. Point 2.3 CRD Guidance 34 ibid. 35 Point 4.2.4 CRD Guidance. See also Art. 3(3)(j) which exempts these contracts completely from the Consumer Rights Directive if they are supplied by a trader on frequent and regular rounds to the consumer's home or work place. 36 ibid. 37 Point 4.3.1 CRD Guidance. 38 See also point 4.1.1.2 CRD Guidance and points 2.7, 3.4.4, 3.4.5 and 5.3.1 UCPD Guidance. The same concept of information that is ‘apparent from the context’ is used in the Unfair Commercial Practices Directive. 32

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during which the information should be available to the consumer.39 The information should be considered timely if the consumer has sufficient time to make a decision. 40 21 An overlap exists between the information elements of Art. 5(1) and the information elements required for an invitation to purchase in the Unfair Commercial Practices Directive.41 An invitation to purchase is a broader concept than pre-contractual information and also encompasses the information provided at the marketing stage.42 Under the Unfair Commercial Practices Directive, the next step for the consumer is not necessarily to enter into a contract with the trader.43 Art. 5 only applies in the pre-contractual stage. 22 d) Form. The trader must provide the pre-contractual information in Art. 5(1) in a ‘clear and comprehensible manner’. According to the recitals, this means the trader has to take into account the specific needs of consumers who are particularly vulnerable because of their mental, physical or psychological infirmity, age or credulity in a way which the trader could reasonably be expected to foresee.44 However, this should not lead to different levels of consumer protection.45 23 c) Burden of proof. Whereas Art. 6(9) explicitly imposes the burden of proof with regard to compliance with its information requirements on the trader,46 Art. 5 remains silent with regard to the burden of proof. It has however been argued that it follows from the ECJ’s judgment in Consumer Finance47 that the burden of proof also lies with the trader for the information obligations in Art. 5. Although Consumer Finance concerned the information requirements of the Consumer Credit Directive, the reasoning of the Court in that case can also be applied to Art. 5. The Court relied on the principle of effectiveness and held that compliance with the principles the effectiveness would be undermined if the burden of proving the non-performance of the traders’ pre-contractual obligations lay with the consumer, as the consumer does not have at his disposal the means that enable him to prove that the information was not provided.48 The same argument can be applied with regard to the information requirements of Art. 5.49

2. Specific information to be provided 24

a) Main characteristics. Information must be provided about the main characteristics.50 Not all characteristics necessarily have to be communicated, they only have to be provided ‘to the extent appropriate to the medium and to the goods or services’. The extent of information to be provided may depend on the complexity of the product.51 Also, the medium may be taken into account and the ECJ has held – with regard to a similar information requirement in Art. 7(4)(a) UCPD with regard to invitations to purchase – that ‘it may be sufficient for only certain of a product’s main characteristics to be given and for the trader to refer in addition to its website, on the condition that on that

Schulte-Nölke in: HK-BGB, § 312 d BGB, mn. 3. ibid. 41 Art. 7(4) UCPD. 42 Point 1.4.4 UCPD Guidance. 43 Point 2.7 UCPD Guidance. 44 Recital 34 and Art. 5. 45 Recital 34 and Art. 5. 46 See the comments under → Art. 6 CRD, mn. 23. 47 CJEU, C-449/13 Consumer Finance EU:C:2014:2464. 48 ibid., paras 22–32. 49 Schaub, 42–43. 50 Art. 5(1)(a). 51 Point 4.3.1 CRD Guidance. 39

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site there is essential information on the product’s main characteristics, price and other terms’.52 Restrictive conditions concerning the offer are considered ‘main characteristics’ and need to be clearly communicated.53 The UCPD Guidance54 further points to the problem of incorrect information provided about the storage capacity or memory of certain IT products, such as external hard disks, USB sticks, mobile phones and tablets. According to the UCPD Guidance, the storage capacity or memory should be considered as a main characteristic, so that the trader must provide information on this characteristic in line with Art. 5(1)(a). 55 If incorrect information is provided on these characteristics, the prohibition of Art. 6(1)(b) UCPD will apply if the incorrect information is likely to cause the average consumer to take a transactional decision he would not have taken otherwise.56 b) Identity of trader. Information must also be provided about the identity of the trader.57 This encompasses information about his trading name, the geographical address at which he is established and his telephone number. If the information is apparent from the context, it does not have to be explicitly provided to the consumer. Thus, when the consumer is in the shop, the information about the geographical address of this shop is already apparent from the context.58 As Art. 5 concerns ‘on-premises’ contracts, information on the geographical address does not need to be given explicitly. In case the geographical location is not clear from the context, the CRD Guidance indicates that it should refer to a physical location whereby it is not sufficient to merely refer to the PO Box number.59 According to the CRD Guidance, ‘establishment’ should be understood in the same sense as in the Services Directive, namely as ‘the actual pursuit of an economic activity, […] for an indefinite period and through a stable infrastructure from where the business of providing services is actually carried out.’ 60 It seems to follow from the decision in Amazon, that the trader has to provide a telephone number in case of on-premises contracts and that the trader does not have the choice to provide the consumer with another means of quick communication.61 c) Total price. The consumers must know the total price of the goods and services before the conclusion of the contract.62 The total price includes taxes and, where applicable, additional fright, delivery or postal charges. When the price cannot be calculated in advance, the consumer must be informed about the calculation method applicable. If the additional charges cannot be calculated in advance, it suffices to inform the consumer of the fact that such charges may be payable. The requirement to provide information on the total price can also be found in Art. 7(4)(c) UCPD with regard to invitations to purchase. The Consumer Rights Directive does not provide for an explicit remedy in case the requirement with regard to the total price is infringed. Such a practice may however be a misleading action or omission under the Unfair Commercial Practices Directive. 63 CJEU, C-122/10 Ving Sverige AB EU:C:2011:299, para. 59. Point 4.3.1 CRD Guidance and point 3.4.5 UCPD Guidance. 54 Point 3.3.1 UCPD Guidance. 55 ibid. 56 ibid. 57 Art. 5(1)(b). 58 Point 4.3.2 CRD Guidance. 59 Point 4.3.2.1 CRD Guidance. 60 ibid. 61 CJEU, C-649/17 Amazon EU:C:2019:576, para. 49. 62 Art. 5(1)(c). 63 For examples, see point 3.4.5 UPCD Guidance. 52

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d) Contract execution. The trader has to inform the consumer about the arrangements for executing the contract.64 This encompasses information about payment, delivery, performance, the time by which the trader undertakes to deliver the goods or to perform the service, and the trader’s complaint handling policy. This provision does, however, not entail that the trader necessarily has to indicate a specific calendar date for the delivery or performance.65 The CRD Guidance indicates for sales contracts that the trader does not have to inform the consumer about the time of delivery if he intends to deliver the goods within the default time limit of 30 days as specified in Art. 18.66 The information about these arrangements only has to be provided ‘where applicable’. If the delivery or the performance takes place immediately, the trader is not obliged to provide this information.67 In case digital content or a digital service is supplied, this also means that no information needs to be given if the default rule of supply ‘without undue delay after the conclusion of the contract’ is respected.68 Art. 7(4)(d) UCPD contains a similar information requirement with regard to invitations to purchase. However, it is more limited than Art. 5(1)(d). It only points to the arrangements for payment, delivery, and performance. Moreover, it specifies that this information only has to be provided if the relevant terms depart from the requirement of professional diligence.69 e) Guarantees and after-sales services. The trader must inform the consumer about the guarantees and after-sales services.70 With regard to the legal guarantee, Art. 5 asks for ‘a reminder of the existence of a legal guarantee of conformity for goods, digital content and digital services’. The legal rights of the consumer in case of non-conformity of goods are determined by the Consumer Sales Directive (and the national implementing provisions) and will from 1 January 2022 be determined by the Sale of Goods Directive (and the national implementing provisions). For digital content and digital services, the legal guarantee is determined by the Digital Content Directive. The information obligation of Art. 5 is limited. There is neither an explicit obligation to set out the content of the legal rights of the consumer nor is the trader required to explain the relationship between the legal (for contracts for the sale of goods) and the commercial guarantee.71 According to the CRD Guidance, Art. 5 implies that the seller ‘should specify that, under EU law, he is liable for any lack of conformity that becomes apparent within a minimum of two years from delivery of the goods and that national laws may give the consumer additional rights’.72 The legal guarantee may, in any event not be presented as a distinctive feature of the trader’s offer (Art. 6(1)(g) and point 10 of Annex I UCPD).73 With regard to commercial guarantees and after-sales services; the trader must not only set out the existence of such a guarantee but also the conditions. As it is open to the trader to provide a commercial guarantee or after-sales services (other than obligatory under the legal guarantee), this information must not be given if no commercial guarantee is provided.74 Art. 5(1)(d). Point. 4.3.4.1 CRD Guidance. 66 ibid. 67 ibid. 68 Art. 5(1) DCD. 69 Point. 4.3.4.1 CRD Guidance. 70 Art. 5(1)(e), as amended by the Modernisation Directive. 71 For criticism on the limited scope of these information obligations, see Vandemaele, p. 123 and 678. 72 Point 4.3.5 CRD Guidance. 73 ibid. 74 ibid. 64

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The Consumer Rights Directive has its own definition of ‘commercial guarantee’ in Art. 2 No. 14. This definition is not identical to the definition in the Consumer Sales Directive, which was regrettable. This problem is solved with the Sale of Goods Directive, that has adopted the same definition of ‘commercial guarantee’ as the Consumer Rights Directive.75 The information requirement of Art. 5 complements the (more elaborate) information requirement of Art. 17 SGD. That provision enumerates the information that must be given in the commercial guarantee statement in plain, intelligible language. That information includes inter alia ‘a clear statement that the consumer is entitled by law to remedies from the seller free of charge in the event of a lack of conformity of the goods and that those remedies are not affected by the commercial guarantee’.76 Whereas this guarantee statement must at the latest be provided at the time of delivery of the goods, the information of Art. 5 must be provided before the conclusion of the contract. Art. 17 SGD provides additional protection in that the consumer is also informed of the free nature of his rights under the legal guarantee and of the fact the commercial guarantee cannot affect such rights. Although the information requirements of Art. 5(1)(e) are limited in scope, the consumer is also protected by the Unfair Commercial Practices Directive, as unclear information on the relationship between the commercial and the legal guarantee, may be considered to be a misleading practice or a misleading omission.77 f) Contract duration. The trader must furthermore inform the consumer of the duration of the contract or about the conditions for terminating the contract if the contract is of indeterminate duration or is to be extended automatically.78 Such conditions include any applicable charges for termination and the applicable procedure (notice periods and/or formalities).79 Contrary to Art. 6(1)(p),80 Art. 5 does not expressly require the trader to provide information about the minimum duration of a consumer’s obligations, but as is rightly submitted in the CRD Guidance, such information should also be provided under Art. 5 as this can be considered to be one of the major conditions for terminating the contract.81 g) Digital content. Specifically for digital content, digital services, and goods with digital elements, the trader must give information on ‘the functionality, including applicable technical protection measures’.82 ‘Functionality’ is defined as ‘the ability of the digital content or digital service to perform its functions having regard to its purpose’. 83 The

Art. 2 No. 12 SGD. Art. 17(2)(a) SGD. The other elements to be included are: ‘(b)the name and address of the guarantor; (c) the procedure to be followed by the consumer to obtain the implementation of the commercial guarantee; (d) the designation of the goods to which the commercial guarantee applies; and (e) the terms of the commercial guarantee’. 77 See in this regard the decision of the Italian Competition Authority AGCM PS7256, Come / Apple Prodotti in: Garanzia, Provvedimento no. 23155; Djurovic, 253. 78 Art. 5(1)(f). 79 Point 4.4 CRD Guidance. 80 See the comments under → Art. 6 CRD, mn. 51. 81 Point 4.4 CRD Guidance. 82 Art. 5(1)(g), as replaced by the Modernisation Directive. 83 Art. 2 No. 11, as inserted by the Modernisation Directive. On the definition of ‘functionality’ under Art. 2 No. 11 DCD see the comments under Digital Content Directive → Art. 2, mn. 39 et seq. and under Art. 7, mn. 33 et seq. 75

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CRD Guidance provides a non-exhaustive checklist on information on functionality that must be given, as appropriate to the product.84 42 Specifically for digital content, digital services, and goods with digital elements, the trader should also provide information, where applicable, on ‘relevant compatibility and interoperability […] that the trader is aware of or can reasonably be expected to have been aware of ’.85 Interoperability is ‘the ability of the digital content or digital services to function with hardware or software different from those with which digital content of digital services of the same type are normally used’86. Compatibility is ‘the ability of the digital content or digital services to function with hardware or software with which digital content of digital services of the same type or normally used, without the need to convert the digital content or digital service’.87 The amendments to the Consumer Rights Directive by the Modernisation Directive have aligned the definitions of compatibility and interoperability with the Digital Content Directive.

III. Minimum harmonisation 43

According to Art. 5(4), Member States may still adopt or maintain additional information requirements for on-premises contracts. Art. 5 is thus a minimum harmonisation provision. Such a possibility does not exist with regard to distance and off premises contracts.88

D. Reform/Criticism 44

The Consumer Rights Directive has been the subject of a recent evaluation. 89 A study on the application of the Consumer Rights Directive was published in May 2017 (‘CRD Study’),90 as well as a report from the Commission on the application of the Consumer

84 Point 12.3.1 CRD Guidance: ‘1) The language of the content, and, if different, the language of any instructions included with the content; 2) The method of providing the content: e.g. streaming, online, one-off downloading, access to download for a specified time; 3) For video or audio files: the playing duration of the content; 4) For downloadable files: the file type and size; 5) Whether there is a commitment or no commitment by the trader or a third party to maintain or update the product; 6) Any conditions for using the product not directly linked to interoperability, such as: (a) tracking and/or personalisation; (b) the need for an internet connection to use the product and its technical requirements (such as minimum download and upload speed); (c) the need for other users to have specific software installed (e.g. for communication software), 7) Any limitations on the use of the product: (a) limits on the number of times, or the length of time in which a digital product can be watched, read or used; (b) limits on the reuse of content, for purposes such as private copies; (c) restrictions based on the location of the consumer's device; (d) any functionalities that are conditional on additional purchases, such as paid content, club memberships or additional hardware or software.’. 85 Art. 5(1)(h), as amended by the Modernisation Directive. 86 Art. 2 No. 21, as inserted by the Modernisation Directive, in conjunction with Art. 2 No. 12 DCD. For information on the notion of interoperability under the Digital Content Directive see the comments under Digital Content Directive → Art. 2, mn. 48 et seq. and Digital Content Directive → Art. 7, mn. 36 et seq. 87 Art. 2 No. 19 as inserted by the Modernisation Directive, in conjunction with Art. 2 No. 12 DCD. For information on the notion of compatibility under the Digital Content Directive see the comments under Digital Content Directive → Art. 2, mn. 48 et seq. and Digital Content Directive → Art. 7, mn. 36 et seq. 88 Art. 6(8), see the comments under → Art. 6 CRD, mn 3. 89 For an overview of the evaluation process, see (accessed 29 July 2019). 90 CRD Study available online under https://op.europa.eu/en/publication-detail/-/publication/3874ed4 0-772d-11e7-b2f2-01aa75ed71a1/language-en/format-PDF (accessed 8 August 2019).

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Rights Directive (‘Commission Report CRD).91 This review process eventually led to the Modernisation Directive. One of the points of attention addressed under during the review process, was the 45 possibility for further streamlining of information requirements, in particular of Art. 5 CRD and Art. 7(4) UCPD.92 It was thus acknowledged that certain information requirements of the ‘invitation to purchase’93 overlap with the pre-contractual information requirements of the Consumer Rights Directive and that ’they could be addressed in possible follow-up legislative actions’. The rationalisation of overlapping information requirements by the Modernisation Directive is eventually only limited. Only the requirement to provide information on the trader’s complaint handling policy was deleted in Art. 7(4) UCPD94 The list of information to be provided by Art. 5 was not reduced, although it has been rightly submitted that some of the information requirements seem superfluous for ‘on premises’ contracts.95 Another problematic point identified was the application to digital content in ex- 46 change for personal data.96 The amendments by the Modernisation Directive make clear that the scope of application of the Consumer Rights Directive also includes contracts for online digital content and digital services ‘where the consumer provides or undertakes to provide personal data to the trader’.97 This brings the scope of application of the Consumer Rights Directive more in line with the Digital Content Directive. 98 This alignment is however not complete. A (smaller) discrepancy continues to exist: 47 in case digital content is supplied on a tangible medium which serves exclusively as a carrier of digital content, the payment of a price is required for the contract to fall within the scope of application of the Consumer Rights Directive.99 This is however not the case for the Digital Content Directive: it suffices for that Directive that the consumer provides or undertakes to provide personal data.100 Digital content on a tangible medium provided in return for personal data therefore falls within the scope of application of the Digital Content Directive, but it is excluded from the scope of application of the Consumer Rights Directive.

COM(2017) 259 final. Point 4.3 Commission Report CRD. 93 Art. 7(4) UCPD. 94 See also Recitals 39–40 Modernisation Directive. 95 Schaub, 36. 96 Point 5 Commission Report CRD, see above → mn. 14. 97 See above → mn. 14. 98 Recital 32 Modernisation Directive. 99 This follows from Art. 3(1) and (1 a), as replaced by the Modernisation Directive 100 The Digital Content Directive also applies to a tangible medium which serves exclusively as a carrier of digital content (Art. 3(3) DCD). ‘Payment’ with personal data suffices to fall within the scope of application of this directive that does not distinguish in this regard between online digital content and digital content on a tangible medium (Art. 3(1) DCD). See the comments under Digital Content Directive → Art. 3, mn. 29 et seq. and 67 et seq. 91

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CHAPTER III CONSUMER INFORMATION AND RIGHT OF WITHDRAWAL FOR DISTANCE AND OFF-PREMISES CONTRACTS Article 6 Information requirements for distance or off-premises contracts 1. Before the consumer is bound by a distance or off-premises contract, or any corresponding offer, the trader shall provide the consumer with the following information in a clear and comprehensible manner: (a) the main characteristics of the goods or services, to the extent appropriate to the medium and to the goods or services; (b) the identity of the trader, such as his trading name; (c) the geographical address at which the trader is established as well as the trader’s telephone number and e-mail address; in addition, where the trader provides other means of online communication which guarantee that the consumer can keep any written correspondence, including the date and time of such correspondence, with the trader on a durable medium, the information shall also include details of those other means; all those means of communication provided by the trader shall enable the consumer to contact the trader quickly and communicate with him efficiently; where applicable, the trader shall also provide the geographical address and identity of the trader on whose behalf he is acting; (d) if different from the address provided in accordance with point (c), the geographical address of the place of business of the trader, and, where applicable, that of the trader on whose behalf he is acting, where the consumer can address any complaints; (e) the total price of the goods or services inclusive of taxes, or where the nature of the goods or services is such that the price cannot reasonably be calculated in advance, the manner in which the price is to be calculated, as well as, where applicable, all additional freight, delivery or postal charges and any other costs or, where those charges cannot reasonably be calculated in advance, the fact that such additional charges may be payable. In the case of a contract of indeterminate duration or a contract containing a subscription, the total price shall include the total costs per billing period. Where such contracts are charged at a fixed rate, the total price shall also mean the total monthly costs. Where the total costs cannot be reasonably calculated in advance, the manner in which the price is to be calculated shall be provided; (ea) where applicable, that the price was personalised on the basis of automated decision-making; (f) the cost of using the means of distance communication for the conclusion of the contract where that cost is calculated other than at the basic rate; (g) the arrangements for payment, delivery, performance, the time by which the trader undertakes to deliver the goods or to perform the services and, where applicable, the trader’s complaint handling policy; (h) where a right of withdrawal exists, the conditions, time limit and procedures for exercising that right in accordance with Article 11(1), as well as the model withdrawal form set out in Annex I(B); (i) where applicable, that the consumer will have to bear the cost of returning the goods in case of withdrawal and, for distance contracts, if the goods, by 372

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their nature, cannot normally be returned by post, the cost of returning the goods; (j) that, if the consumer exercises the right of withdrawal after having made a request in accordance with Article 7(3) or Article 8(8), the consumer shall be liable to pay the trader reasonable costs in accordance with Article 14(3); (k) where a right of withdrawal is not provided for in accordance with Article 16, the information that the consumer will not benefit from a right of withdrawal or, where applicable, the circumstances under which the consumer loses his right of withdrawal; (l) a reminder of the existence of a legal guarantee of conformity for goods, digital content and digital services; (m) where applicable, the existence and the conditions of after sale customer assistance, after-sales services and commercial guarantees; (n) the existence of relevant codes of conduct, as defined in point (f) of Article 2 of Directive 2005/29/EC, and how copies of them can be obtained, where applicable; (o) the duration of the contract, where applicable, or, if the contract is of indeterminate duration or is to be extended automatically, the conditions for terminating the contract; (p) where applicable, the minimum duration of the consumer’s obligations under the contract; (q) where applicable, the existence and the conditions of deposits or other financial guarantees to be paid or provided by the consumer at the request of the trader; (r) where applicable, the functionality, including applicable technical protection measures, of goods with digital elements, digital content and digital services; (s) where applicable, any relevant compatibility and interoperability of goods with digital elements, digital content and digital services that the trader is aware of or can reasonably be expected to have been aware of; (t) where applicable, the possibility of having recourse to an out-of-court complaint and redress mechanism, to which the trader is subject, and the methods for having access to it. Paragraph 1 shall also apply to contracts for the supply of water, gas or electricity, where they are not put up for sale in a limited volume or set quantity, of district heating or of digital content which is not supplied on a tangible medium. In the case of a public auction, the information referred to in points (b), (c) and (d) of paragraph 1 may be replaced by the equivalent details for the auctioneer. The information referred to in points (h), (i) and (j) of paragraph 1 may be provided by means of the model instructions on withdrawal set out in Annex I(A). The trader shall have fulfilled the information requirements laid down in points (h), (i) and (j) of paragraph 1 of this Article if the trader has supplied these instructions to the consumer, correctly filled in. The references to the withdrawal period of 14 days in the model instructions on withdrawal set out in Annex I(A) shall be replaced by references to a withdrawal period of 30 days in cases where Member States have adopted rules in accordance with Article 9(1 a). The information referred to in paragraph 1 shall form an integral part of the distance or off-premises contract and shall not be altered unless the contracting parties expressly agree otherwise.

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6. If the trader has not complied with the information requirements on additional charges or other costs as referred to in point (e) of paragraph 1, or on the costs of returning the goods as referred to in point (i) of paragraph 1, the consumer shall not bear those charges or costs. 7. Member States may maintain or introduce in their national law language requirements regarding the contractual information, so as to ensure that such information is easily understood by the consumer. 8. The information requirements laid down in this Directive are in addition to information requirements contained in Directive 2006/123/EC and Directive 2000/31/EC and do not prevent Member States from imposing additional information requirements in accordance with those Directives. Without prejudice to the first subparagraph, if a provision of Directive 2006/123/EC or Directive 2000/31/EC on the content and the manner in which the information is to be provided conflicts with a provision of this Directive, the provision of this Directive shall prevail. 9. As regards compliance with the information requirements laid down in this Chapter, the burden of proof shall be on the trader. Bibliography: Commission, ‘DG Justice Guidance Document concerning Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights […]’ (‘CRD Guidance’); Commission, ‘Guidance on the Implementation/Application of Directive 2005/29/EC on Unfair Commercial Practices’ (‘UCPD Guidance’) SWD(2016) 163 final; Loos, ‘Double Dutch – On the role of the transparency requirement with regard to the language in which standard contract terms for B2C contracts must be drafted’ (2017) 6 EuCML 54–59; Loos, ‘Modernisering van het Europese consumentenrecht: meer vlees op het bot (I)’ (2019) 5–6 NTER; Loos, ‘Modernisering van het Europese consumentenrecht: meer vlees op het bot (II)’ (2019) 7–8 NTER; Loos/Helberger/Guibault/Mak, ‘The Regulation of Digital Content Contracts in the Optional Instrument of Contract Law’ (2011) 19 ERPL 729–758; Narciso, ‘“Gratuitous” Digital Content Contracts’ (2017) 6 EuCML 198–206; Schaub, ‘HvJ EU (C-649/17: Een online handelaar hoeft (nog) geen telefoonnummer te verstrekken’ (2019) 6 TvC; Schulze/Dörner/Ebert et al., Bürgerliches Gesetzbuch: Handkommentar (‘HK-BGB’) (10th edn, Nomos 2019); Terryn, ‘Transparantie en algemene voorwaarden: nood aan hervorming?’ (2017) 1 TPR 13–80. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Distance Selling Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Digital contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Link with other information requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 6 9 11 14

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Distance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Off-premises contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Sales and services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Pre-contractual information elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Specific information to be provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Pre-contractual information is part of the contract, unless otherwise agreed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15 15 16 19 20 21 21 24 55

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premises contract,1 allowing consumers to decide whether they wish to be contractually bound.2 It furthermore seeks to ensure that the use of means of distance communication does not lead to a reduction in the information provided to the consumer3 and that consumers have all information necessary for the proper performance of the contract and for the exercise of their rights, in particular the right of withdrawal.4 When interpreting Art. 6, the ECJ has furthermore held that it is necessary to ensure the right balance between a high level of consumer protection and the competitiveness of undertakings, as is stated in Recital 4, while respecting the undertaking’s freedom to conduct a business, as set out in Art. 16 EU Charter.5 Contrary to Art. 5, the information requirements of Art. 6 are fully harmonised. Full harmonisation for distance contracts was deemed necessary as the growth in cross border distance sales was deemed insufficient.6 Moreover, a single set of rules on consumer information (and the right of withdrawal) for distance and off-premises contracts aims to contribute to a high level of consumer protection and a better functioning of the business-to-consumer internal market.7 A separate treatment of these contracts was furthermore deemed necessary to take into account the constraints of certain media typically used for distance contracts. 8 Whereas Art. 6 mainly regulates the content of the pre-contractual information to be provided for distance contracts, Art. 8 regulates the formal requirements to be respected, both for the pre-contractual information and for the confirmation of the information.

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4 5

B. Context I. Distance Selling Directive Before the adaption of the Consumer Rights Directive, distance contracts were regu- 6 lated by the Distance Selling Directive. The system of protection of this minimum harmonisation directive9 was however similar to that of the Consumer Rights Directive. Some of the case law decided on the basis of the Distance Selling Directive is therefore still relevant and mentioned in the comments. As the Consumer Rights Directive, the Distance Selling Directive laid down informa- 7 tion requirements to prevent that the use of distance communication would lead to a reduction of the information provided to consumers.10 Similar to the Consumer Rights Directive, the Distance Selling Directive both required pre-contractual information as well as post-contractual information in the form of a contract confirmation on a durable medium.11 The consumer was in addition protected by a right of withdrawal lasting a period of seven working days.12

Compare with Recital 39 as to the aims of Art. 6. CJEU, C-649/17 Amazon EU:C:2019:576, para. 44. 3 CJEU, C-430/17Walbusch Walter Busch EU:C:2019:47, para. 36. 4 CJEU, C-649/17 Amazon EU:C:2019:576, para. 43. 5 ibid. para. 44. 6 Recital 39. 7 ibid. 8 Recital 36. 9 Art. 14 Distance Selling Directive. 10 Recital 11 Distance Selling Directive. 11 Art. 5(1) Distance Selling Directive. 12 Art. 6 Distance Selling Directive. 1

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The most important difference lies in the maximum harmonisation character of the Consumer Rights Directive with regard to both the information requirements and the right of withdrawal for distance contracts. The switch from minimum to maximum harmonisation explains the far greater level of detail of its provisions. In addition, the Consumer Rights Directive has tried to cater for new technological developments, such as the rapid development of the digital content market. It attempts to take into account both the possibilities and limitations of certain new technologies, e.g. by providing specific rules for distance contracts closed by a means of distance communication which allows limited space or time to display the information. Further revisions have however proved necessary to keep up with rapid technological developments and were introduced by the Modernisation Directive.13

II. Digital contracts The Consumer Rights Directive regulates the information rights of digital consumers. Its legal predecessors14, such as the Distance Selling Directive, did not contain specific provisions on digital content. Knowing that the vast majority of digital content contracts are non-negotiated distance contracts, the Consumer Rights Directive was certainly a step forward in the protection of digital consumers.15 It was the first legislative instrument to develop rules of digital contracting.16 The amendments introduced by the Modernisation Directive now ensure that the Consumer Rights Directive also explicitly regulates contracts for digital services. Furthermore, the CRD Guidance also puts much focus on the application of the Consumer Rights Directive in general to digital contracts. 17 This guidance is not binding but can be a helpful source in interpreting the Consumer Rights Directive’s provisions in digital contract cases. 10 However, the Consumer Rights Directive is limited to information requirements and does not concern other aspects of the contract. Other aspects, such as conformity and contract modalities, fall within the scope of the Digital Content Directive or Sale of Goods Directive. These two Directives complement the Consumer Rights Directive. 18 9

III. Link with other information requirements The list of information requirements of Art. 6 is meant to be exhaustive. Member States cannot impose any additional information requirements for distance and offpremises contracts.19 12 This does however not mean that distance or off-premises traders will have complied with all European and national requirements when the information required by Art. 6 has been given. 11

See the comments below → mn. 53 et seq. and under → Art. 8 CRD, mn 36 et seq. The Consumer Rights Directive repeals the Doorstep Selling Directive and the Distance Selling Directive and amends the Consumer Sales Directive and the Unfair Terms Directive. 15 Loos/Helberger/Guibault/Mak, 735. 16 Narciso, 201. 17 For example: point 12 CRD Guidance. The document is available online under https://ec.europa.eu/i nfo/sites/info/files/crd_guidance_en_0_updated_0.pdf (accessed 30 July 2019). 18 Recitals 20, 29 and 42 DCD and Recitals 6, 11, 26, 38 and 62 SGD. 19 Art. 4. 13

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The information requirements of Art. 6 are additional to those included in the Ser- 13 vices Directive and the E-Commerce Directive.20 The Consumer Rights Directive furthermore provides that, if a provision of the latter two Directives on the ‘content and the manner in which the information is to be provided’ conflicts with a provision of the Consumer Rights Directive, the provision of the Consumer Rights Directive prevails. 21 Traders will in addition need to comply with stricter information requirements Member States have adopted on the basis of the Services Directive.22

IV. Sanctions The regulation of sanctions for non-compliance with Art. 6 is not completely left to 14 the Member States. In addition to the general requirements of Art. 23(1) obliging Member States to ensure that adequate and effective means exist to ensure compliance with the Consumer Rights Directive and Art. 24 obliging Member States to lay down the rules on penalties and fines applicable to infringements of the national provisions implementing the Directive,23 the Consumer Rights Directive has several specific sanctions for non-compliance with some of the requirements of its Art. 6. These include the prolongation of the withdrawal period by one year,24 an exemption from the obligation to pay for costs or charges25 or for services or public utilities provided.26 These sanctions are mentioned below, where relevant.27

C. Explanation I. Scope Art. 6 applies to distance contracts and off-premises contracts.

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1. Distance contracts Distance contracts are contracts concluded between the trader and the consumer un- 16 der an organised distance sales or service-provision scheme without the simultaneous physical presence of the trader and the consumer, with the exclusive use of one or more means of distance communication up to and including the time at which the contract is concluded.28 The Consumer Rights Directive no longer defines ‘means of distance communication’, 17 but it is clear from the definition of distance contract that this includes all methods of communication that allow the conclusion of a distance contract without the simultane-

20 Art. 6(8). See for a detailed overview of the additional requirements and the subtle differences in the requirements of the different directive, the CRD Guidance, Annex II and point 4.2. 21 Art. 6(8). 22 Art. 22(5) Services Directive and Art. 6(8) CRD. 23 See also the comments under → Art. 5 CRD, mn. 7 et seq. 24 Art. 10(1). 25 Art. 6(6). 26 Art. 14(4)(a)(i). 27 See below → mn. 34, 43–44. 28 Art. 2 No. 7.

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ous presence of the trader and the consumer.29 ‘Mail order, Internet, telephone or fax’ are just some examples.30 18 Only ‘organised’ distance sales or service-provision schemes are covered. However, the trader should not necessarily organise the scheme himself, the scheme may also be organised by a third party other than the trader.31 Contracts concluded between a trader and a consumer through an internet platform organised by a third party are considered distance contracts for the purposes of the Consumer Rights Directive.

2. Off-premises contracts 19

Off-premises contracts include contracts concluded between the trader and the consumer in the simultaneous physical presence in a place which is not the business premises of the trader.32 Business premises include any immovable retail premises where the trader carries out his activity on a permanent basis or any movable retail premises where the trader carries out his activity on a usual basis.33

3. Sales and services 20

Although some of the provisions of Art. 6(1) are formulated framed in terms of sales and services contracts as they refer to ‘goods’ or ‘services’ [for example Art. 6(1)(a)], Art. 6(2) explicitly confirms that it also applies to utilities contracts and to contracts for the supply of online digital content.

II. Pre-contractual information elements 1. Requirements a) Form and timing. The trader must provide the information of Art. 6(1) in a ‘clear and comprehensible manner’ and ‘before the conclusion of the contract’. These requirements are identical to what is required under Art. 5(1).34 Further formal requirements to be complied with are regulated in Art. 7 for off-premises contracts and in Art. 8 for distance contracts. 22 b) Language. The Consumer Rights Directive does not regulate the language in which the information needs to be provided but its Art. 6(7) allows Member States ‘to maintain or introduce language requirements’ so that the contractual information is ‘easily under21

29 See also the definition of Art. 2 No. 4 Distance Selling Directive and the non-exhaustive list in its Annex: ‘Unaddressed printed matter; Addressed printed matter; Standard letter; Press advertising with order form; Catalogue; Telephone with human intervention; Telephone without human intervention (automatic calling machine, audiotext); Radio; Videophone (telephone with screen); Videotex (microcomputer and television screen) with keyboard or touch screen; Electronic mail; Facsimile machine (fax); Television (teleshopping)’. 30 Recital 20. 31 ibid. 32 Art. 2 No. 9(a); in addition the following B2C contracts are considered off premises contracts [Art. 2 No. 9 (b)–(d)]: contracts ‘(b) for which an offer was made by the consumer in the same circumstances […]; (c) concluded on the business premises of the trader or through any means of distance communication immediately after the consumer was personally and individually addressed in a place which is not the business premises of the trader in the simultaneous physical presence of the trader and the consumer; or (d) concluded during an excursion organised by the trader with the aim or effect of promoting and selling goods or services to the consumer’. 33 Art. 2 No. 9, see for the interpretation of ‘business premises’: CJEU, C-485/17 Verbraucherzentrale Berlin EU:C:2018:642. 34 See the comments under → Art. 5 CRD, mn. 20 et seq.

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stood’. This provision leaves a regulatory choice to the Member States and some Member States have indeed adopted specific provisions. An overview of the specific national measures that have been adopted and were reported to the Commission35 is available online.36 These requirements vary from imposing the use of a specific language, or of one of the official languages, to imposing the use of the official language if the marketing was in the official language over imposing the use of the official language if the consumer so requests. Even without specific national language requirements, the choice of language will not be completely free. Both in the legal literature and in the case law,37 it was already held that general terms and conditions cannot be considered to be in ‘plain and intelligible language’,38 if they were given in a different language than the language used in advertising.39 The same reasoning can be applied here, the requirement that the information of Art. 6 must be ‘clear and comprehensible’ [Art. 6(1)] and ‘plain and intelligible’ [Art. 8(1)40] will not be complied with if the information is provided in a different language than the language in which the consumer was approached or in which the negotiation took place.41 c) Burden of proof. The burden of proof of compliance with the information require- 23 ments of Art. 6 lies with the trader.42 The CRD Guidance furthermore specifies that although it is not excluded that a trader may prove he provided the pre-contractual information by other means, his ‘case would clearly become weaker if the required information is missing from the confirmation of the contract on a durable medium’.43 This confirmation document indeed has to include the information of Art. 6(1), unless it was already provided on a durable medium.44

2. Specific information to be provided a) Main characteristics. The trader must provide information about the main charac- 24 teristics of the goods or services, to the extent appropriate to the medium and to the goods or services.45 Not all characteristics necessarily have to be communicated, they only have to be provided ‘to the extent appropriate to the medium and to the goods or services’. The extent of the information to be provided may depend on the complexity of the product.46 Also, the medium can be taken into account and the ECJ has held – with regard to a similar information requirement in Art. 7(4)(a) UCPD with regard to invitations to purchase – ‘it may be sufficient for only certain of a product’s main characteristics to be given and for the trader to refer in addition to its website, on the condition that on that site there is essential information on the product’s main characteristics, price and other terms’.47 Restrictive conditions concerning the offer are considered as ‘main characteristics’ and need to be clearly communicated.48 Art. 29 obliges Member States to inform the Commission. https://ec.europa.eu/info/sites/info/files/overview_regulatory_choices.pdf (accessed 29 July 2019). 37 KG Berlin, 8.4.2016 – 5 U 156/14: (2016) 9 MMR 601, also available under www.vzbv.de/sites/default /files/whatsapp_kg_berlin_urteil.pdf (accessed 29 July 2019); Loos (‘Double Dutch’), 59; Terryn, 13–89. 38 As required by Art. 5 Unfair Terms Directive. 39 KG Berlin, 8.4.2016 – 5 U 156/14: (2016) 9 MMR 601. 40 See the comments under → Art. 8 CRD mn. 8. 41 See in a similar sense: Schulte-Nölke in HK-BGB, § 312 d BGB, mn. 8. 42 Art. 6(9). 43 Point 4.2.7 CRD Guidance. 44 ibid. See also Arts 7 (1)–(2) and 8(7). 45 Art. 6(1)(a). 46 Point 4.3.1 CRD Guidance. 47 CJEU, C-122/10 Ving Sverige AB EU:C:2011:299, para. 59. 48 Point 4.3.1 CRD Guidance; point 3.4.5 UCPD Guidance. 35

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b) Identity of the trader. The trader must also provide information on his identity, such as his trading name49, and contact details50. The geographical address of the place of establishment of the trader should refer to a physical location whereby it is not sufficient to merely refer to the Post Office Box number.51 According to the CRD Guidance, ‘establishment’ should be understood in the same sense as in the Services Directive, namely as ‘the actual pursuit of an economic activity, […] for an indefinite period and through a stable infrastructure from where the business of providing services is actually carried out’.52 If the place of establishment differs from the ‘place of business’, the geographical address of the place of business of the trader must also be given. According to the CRD Guidance, place of business should mean ‘the place where the essential decisions concerning the trader's general management are taken and where the functions of its central administration are carried out’.53 To determine this physical location, the ECJ indicated several factors in Planzer54 which can be taken into consideration, such as: the registered office, the place of its central administration, the place where the directors meet and the place where the general policy of the company is determined.55 The trader is furthermore obliged to provide a telephone number and e-mail address.56 The requirement to provide a fax number was abolished by the Modernisation Directive. Indeed, the use of a fax has become rare and the reference therefore obsolete. 57 ‘This does not imply a fundamental change, as the former Art. 6(1)(c) indicated that such fax number only needed to be provided ‘where available’ and as the ECJ has decided that if traders use a fax number also for other purposes, Art. 6(1)(c) does not oblige them to inform consumers of that number.58 The new provision is however stricter with regard to the obligation to provide a telephone number and an e-mail address.59 The former Art. 6(1)(c) provided that these means of communication also only had to be provided ‘where available’. The former provision had been thus interpreted that it did not entail an unconditional obligation to provide the consumer in all circumstances, with a telephone number, or to put a telephone or fax line in place, or to create a new e-mail address60 and that it allowed traders to provide other means of communication to allow a direct and effective communication, such as e.g. an electronic enquiry template, by means of which consumers can contact traders by means of a website and receive a written response or can be quickly called back, or an instant messaging or a telephone callback system.61 Whereas the proposal for a Modernisation Directive was in line with this jurisprudence of the ECJ and allowed the trader a choice to provide either a phone number or an e-mail address or other means of online communication,62 the text as finally adopted is

Art. 6 (1)(b). Art. 6(1)(b)–(d). 51 Point 4.3.2.1 CRD Guidance. 52 ibid. 53 ibid. 54 CJEU, C-73/06 Planzer EU:C:2007:397. 55 ibid., para. 61; see also point 4.3.2.2 CRD Guidance. 56 Art. 6(1)(c), as replaced by the Modernisation Directive 57 Recital 46 Modernisation Directive. 58 CJEU, C-649/17 Amazon EU :C :2019 :576, para. 51. 59 See Schaub. 60 CJEU, C-649/17 Amazon, C‑649/17, EU:C:2019:576, para. 48. 61 ibid., para. 52. 62 The text of the proposal mentioned: ‘the trader’s telephone number, e-mail address or other means of online communication’, COM (2018) 185. 49 50

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stricter.63 An e-mail address and telephone number must be made available; in addition, it remains possible to provide other means of online communication. Such means must guarantee that the consumer can keep any written correspondence, including the date and time of such correspondence, with the trader on a durable medium, the information shall also include details of those other means.64 This could for example be an online chat-system that allows the consumer to download the conversation as a text file. 65 Furthermore, all those means of communication (telephone, e-mail and, if chosen by 31 the trader, other means of online communication), must enable the consumer to contact the trader quickly and communicate with him efficiently.66 Finally if the trader acts on behalf of another trader, he also must indicate the ad- 32 dress ‘of the trader on whose behalf he is acting, where the consumer can address any complaints’.67 The principal must thus be identified. The obligation is particularly relevant for distance contracts that are often concluded through platforms. Thus, according to the CRD Guidance, when traders provide an online-platform that allows other traders to sell their products, the trader providing the platform should ensure that the traders selling their products are identified.68 This obligation must now be combined with the new information obligation of Art. 6 a, as inserted by the Modernisation Directive that imposes information requirements on online marketplaces that go beyond the obligation to provide the address. Providers of online marketplaces69 must in addition inform consumers whether the third party that offers the goods on their platform is a trader or not.70 They may rely on the declaration of that third party to provide this information.71 So, there is no obligation to control the identity of the trader.72 This is in line with the ECommerce Directive.73 They must also inform the consumer whether he can benefit from Union consumer legislation when concluding the contract and, where the contracts is concluded by a trader, whether it is the platform or the trader who is responsible for ensuring the application of Union consumer rights to the contract.74 Finally, there is a new obligation for online marketplaces to inform consumers of the main parameters that determine the ranking of offers presented to the consumer that has performed a search query on that online marketplace.75 c) Total price. As for on-premises contracts,76 consumers buying at a distance or off- 33 premises must be informed of the total price of the goods or services including taxes. Art. 6(1)(e) however imposes some additional requirements for distance and off-premises contracts in case of contracts of indeterminate duration or involving a subscription. In such case the total cost per billing period and the total monthly cost must also be mentioned. If this cannot be calculated in advance, the trader should at least inform the consumer of the way in which the price is calculated. See Schaub. Art. 6(1)(c), as replaced by the Modernisation Directive. 65 See Loos (‘Modernisering II’). 66 Art. 6(1)(c) as replaced by the Modernisation directive. 67 Art. 6(1)(d). 68 Point 4.3.2.4 CRD Guidance. 69 Defined as: ‘a service provider which allows consumers to conclude online contracts with traders and consumers on the online marketplace’s online interface’, Art. 2 No. 19 CRD, as inserted by the Modernisation Directive. 70 Art. 6a(1)(b) CRD, as inserted by the Modernisation Directive. 71 ibid. 72 Recital 28 Modernisation Directive. 73 More particularly with Art. 15 (1) Directive on electronic commerce. 74 Art. 6a(1)(c) and (d), as inserted by the Modernisation Directive. 75 Art. 6a(1)(a), as inserted by the Modernisation Directive. 76 See Art. 5(1)(c) and the comments under → Art. 5 CRD, mn. 31. 63

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A specific sanction is provided for in case the consumer was not informed of the additional charges or others costs referred to in Art. 6(1)(e): these costs and charges cannot be imposed on the consumer.77 d) Personalised pricing. The Modernisation Directive has inserted a new Art. 6(1)(ea) that requires traders to inform consumers, where applicable, that the price was personalised on the basis of automated decision making. The Consumer Rights Directive does not prohibit traders to personalise the price of their offers for specific consumers or categories of consumers, but consumers should be informed that the price presented to them is the result of automated decision making78 and may be different from the price offered to other consumers or other categories of consumers. Personalised pricing must be distinguished from dynamic pricing, i.e. the process whereby a trader sets flexible prices or adopts prices quickly based on current market demands. This is a practice that is e.g. used in the travel industry. There is thus no obligation to inform consumers that the price offered for an airline ticket may differ according to the number of online queries for a certain flight.79 e) Costs of means of using distance communication. The cost of using the means of distance communication for the conclusion of the contract must be communicated where that cost is calculated other than at the basic rate.80 This information obligation should warn the consumer of the additional costs that may be involved for the use of certain distance means of communication, such as a Premium Rate Services number in case of distance selling by phone.81 f) Contract execution. Information must be provided on the arrangements for execution of the contract (payment, delivery, performance, complaint handling)82. This obligation is identical as for on-premises contracts.83 g) Right of withdrawal. Art. 6(1)(h)–(k) regulate the information that needs to be provided with regard to the right of withdrawal, both when such right exists but also when it does not exist. If a right of withdrawal exists, the trader must set out the conditions, time limit and the procedures for exercising this right by either using the model withdrawal form or by making any other unequivocal statement.84 He must also provide the model withdrawal form provided in Annex I(B).85 He must furthermore inform the consumer that, unless stipulated otherwise, the consumer will bear the costs for returning the goods in case of withdrawal. If, in case of distance contracts, goods are concerned that cannot be returned by post by their nature (e.g. large items of furniture), the cost of returning the goods must be indicated. 86 It is sufficient to indicate one carrier and one price.87 If such costs cannot be reasonably calculated in advance, a statement that such cost will be due and a reasonable estimation of

Art. 6(6). Recital 45 Modernisation Directive. 79 See Recital 45 Modernisation Directive and Loos (‘Modernisering I’). 80 Art. 6(1)(f). 81 Point 4.5.1 CRD Guidance and see the identical requirement in Art. 4(1)(g) Distance Selling Directive. 82 Art. 6(1)(g). 83 Art. 5(1)(d), see the comments under → Art. 5 CRD, mn. 32 et seq. 84 See also Art. 11(1). 85 Art. 6(1)(h). 86 ibid. 87 Recital 36. 77

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the maximum price suffices.88 If this information is not provided, the costs of returning the goods cannot be imposed on the consumer.89 He must also inform the consumer that if he has expressly requested the performance of services or the supply of water, gas or electricity (not put up for sale in a limited volume or set quantity) or if district heating to start during the withdrawal period, he will have to pay reasonable costs to the trader if he then exercises his right of withdrawal.90 The trader may use the standard form of Annex I(A) with model instructions to comply with the information requirements set out above.91 If this form is correctly filled in and supplied to the consumer, the trader will have complied with his information obligations on the right of withdrawal.92 Although there is no obligation to use these model instructions, they aim to facilitate the task of the trader. The sanctions for failure to provide the information on the right of withdrawal are strict: omission of information the conditions, time limit, the procedures for the right of withdrawal and the model withdrawal form93, provokes an extension of the withdrawal period by 12 months.94 If the information is provided during these 12 months, the period of withdrawal lapses 14 days after the day of receipt of the information.95 Failure to provide information on the conditions, time limit, procedures for the right of withdrawal and the model withdrawal form and failure to provide information of the costs the consumer may incur in case of withdrawal when performance has started on his express request, also entails that no costs can been charged to the consumer for the services or public utilities provided during the period for withdrawal.96 In certain situations the consumer does not enjoy a right of withdrawal or may lose this right of withdrawal. The trader is then under an obligation to inform the consumer of the absence of such right or of the conditions under which the consumer loses his right of withdrawal.97 Thus, the trader will for example have to inform the consumer that there is no right of withdrawal when renting a car online.98 He will not need to provide any further information on the rights of withdrawal for these unconditional exceptions to the right of withdrawal.99 In case the consumer only loses his right of withdrawal under certain conditions, those conditions will need to be set out in addition to the ‘standard’ information on the right of withdrawal, i.e. the conditions, time limit, procedures for exercising the right of withdrawal, model withdrawal form etc. [as required by Art. 6(1)(h)–(j)] as the loss of the right of withdrawal will only be conditional.100

ibid. Art. 6(6). 90 Art. 6(1)(j). 91 Art. 6(4). 92 ibid. 93 Art. 6(1)(h). 94 Art. 10(1). 95 That period will only lapse 30 days from the provision of the information in cases where Member States have made use of the (new) possibility to extend the withdrawal period to 30 days for certain offpremises contracts (Art. 10(2), as replaced by the Modernisation Directive, in conjunction with Art. 1 a, as inserted by the Modernisation Directive). 96 Art. 14(4)(a), for digital content: see the comments under → Art. 14 CRD, mn. 6 et seq. 97 Art. 6(1)(k). 98 Art. 16(l). 99 Point 6.2 CRD Guidance. 100 See the comments under → Art. 16 CRD, mn. 9 et seq. 88

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h) Guarantee and after-sales services. The trader must also inform the consumer of the existence of legal guarantee of conformity for goods, digital content, and digital services101; and where applicable, of the existence and the conditions of after sale customer assistance, after-sales services and commercial guarantees.102 We refer to the comments on Art. 5(1)(e) that requires the same information to be given for on-premises contracts.103 Art. 6(1)(m) in addition specifically mentions ‘after sale customer assistance’, but this already seems covered by the wider notion of ‘aftersales services’.104 The information about the after-sales services should in particular explain where the service will be carried out and who bears the cost of transport (if applicable). i) Codes of conduct. The trader must provide information on the existence of relevant codes of conduct, and of how copies can be obtained.105 ‘Code of conduct’ should be understood as ‘an agreement or set of rules not imposed by law, regulation or administrative provision of a Member State which defines the behaviour of traders who undertake to be bound by the code in relation to one or more particular commercial practices or business sectors’.106 j) Contract duration. Information must be provided on the duration of the contract (including the minimum duration of the consumer’s obligation under the contracts and on the conditions to terminate the contract).107 We refer to the comments on Art. 5(1) (f) that requires the same information to be provided for on-premises contracts. 108 k) Deposits or other financial guarantees. The trader must also provide, ‘where applicable’, the existence and the conditions of deposits or other financial guarantees to be paid or provided by the consumer at the request of the trader.109 This information requirement will be relevant in sectors like the car rental sector, where it is typical to ask for a guarantee, often in the form of an amount that is blocked on a credit or debit card.110 l) Digital content, digital services, and goods with digital elements. For digital content, information must furthermore be provided on the functionality, including applicable technical protection measures and on relevant compatibility and interoperability. 111 We refer to the comments on Art. 5(1)(g) and (h) as the same information must be provided for on-premises contracts for digital content, digital services, and goods with digital elements.112 m) Dispute resolution. Finally, where applicable, information must be provided on the possibility of having recourse to an out-of-court complaint and redress mechanism to which the trader is subject and on the methods for having access to such mechanism.113 This requirement overlaps with the information obligation of Art. 13 Directive on Consumer ADR.

Art. 6(1)(l), as replaced by the Modernisation Directive. Art. 6(1)(m). 103 See the comments under → Art. 5 CRD, mn. 34 et seq. 104 Point 4.3.5 CRD Guidance. 105 Art. 6(1)(n). 106 Art. 2(f) UCPD. 107 Art. 6(1)(o) and (p). 108 See the comments under → Art. 5 CRD, mn. 40. 109 Art. 6(1)(q). 110 Recital 33; See also point 4.5.2 CRD Guidance. 111 Art. 6(1)(r) and (s), as replaced by the Modernisation Directive. 112 See the comments under → Art. 5 CRD, mn. 41 et seq. 113 Art. 6(1)(t). 101

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3. Pre-contractual information is part of the contract, unless otherwise agreed According to Art. 6(5), pre-contractual information ‘shall form an integral part of the 55 distance or off-premises contract and shall not be altered unless the contracting parties expressly agree otherwise’. The pre-contractual information should bind the trader and should not be altered,114 unless by express agreement. A provision in the general terms and conditions allowing a trader to derogate from the pre-contractual information provided on the website does not qualify in any event as an ‘express agreement’.115 The precontractual information can furthermore also be taken into account as an element to assess the conformity of the goods delivered or of the digital content or digital service provided.116

Article 8 Formal requirements for distance contracts 1.

With respect to distance contracts, the trader shall give the information provided for in Article 6(1) or make that information available to the consumer in a way appropriate to the means of distance communication used in plain and intelligible language. In so far as that information is provided on a durable medium, it shall be legible. If a distance contract to be concluded by electronic means places the consumer under an obligation to pay, the trader shall make the consumer aware in a clear and prominent manner, and directly before the consumer places his order, of the information provided for in points (a), (e), (o) and (p) of Article 6(1). The trader shall ensure that the consumer, when placing his order, explicitly acknowledges that the order implies an obligation to pay. If placing an order entails activating a button or a similar function, the button or similar function shall be labelled in an easily legible manner only with the words ‘order with obligation to pay’ or a corresponding unambiguous formulation indicating that placing the order entails an obligation to pay the trader. If the trader has not complied with this subparagraph, the consumer shall not be bound by the contract or order. Trading websites shall indicate clearly and legibly at the latest at the beginning of the ordering process whether any delivery restrictions apply and which means of payment are accepted. If the contract is concluded through a means of distance communication which allows limited space or time to display the information, the trader shall provide, on that particular means prior to the conclusion of such a contract, at least the pre-contractual information regarding the main characteristics of the goods or services, the identity of the trader, the total price, the right of withdrawal, the duration of the contract and, if the contract is of indeterminate duration, the conditions for terminating the contract, as referred to, respectively, in points (a), (b), (e), (h) and (o) of Article 6(1) except the model withdrawal form set out in Annex I(B) referred to in point (h). The other information referred to in Article 6(1), including the model withdrawal form, shall be provided by the trader to

2.

3. 4.

Recital 35. Point 4.2.5 CRD Guidance. 116 Recital 42 and Art. 7 DCD and Recital 26 and Art. 6 SGD. 114

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the consumer in an appropriate way in accordance with paragraph 1 of this Article. 5. Without prejudice to paragraph 4, if the trader makes a telephone call to the consumer with a view to concluding a distance contract, he shall, at the beginning of the conversation with the consumer, disclose his identity and, where applicable, the identity of the person on whose behalf he makes that call, and the commercial purpose of the call. 6. Where a distance contract is to be concluded by telephone, Member States may provide that the trader has to confirm the offer to the consumer who is bound only once he has signed the offer or has sent his written consent. Member States may also provide that such confirmations have to be made on a durable medium. 7. The trader shall provide the consumer with the confirmation of the contract concluded, on a durable medium within a reasonable time after the conclusion of the distance contract, and at the latest at the time of the delivery of the goods or before the performance of the service begins. That confirmation shall include: (a) all the information referred to in Article 6(1) unless the trader has already provided that information to the consumer on a durable medium prior to the conclusion of the distance contract; and (b) where applicable, the confirmation of the consumer’s prior express consent and acknowledgment in accordance with point (m) of Article 16. 8. Where a consumer wants the performance of services, or the supply of water, gas or electricity, where they are not put up for sale in a limited volume or set quantity, or of district heating, to begin during the withdrawal period provided for in Article 9(2), and the contract places the consumer under an obligation to pay, the trader shall require that the consumer make an express request and request the consumer to acknowledge that, once the contract has been fully performed by the trader, the consumer will no longer have the right of withdrawal. 9. This Article shall be without prejudice to the provisions on the conclusion of econtracts and the placing of e-orders set out in Articles 9 and 11 of Directive 2000/31/EC. 10. Member States shall not impose any further formal pre-contractual information requirements for the fulfilment of the information obligations laid down in this Directive. Bibliography: Bech Serrat, Selling Tourism Services at a Distance: An Analysis of the EU Consumer Acquis (Springer 2012); Busch, ‘Does the Amazon Dash Button Violate EU Consumer Law? Balancing Consumer Protection and Technological Innovation in the Internet of Things’ (2018) 2 EuCML 78–80; Commission, ‘DG Justice Guidance Document concerning Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights […]’ (‘CRD Guidance’); Commission, ‘Guidance on the Implementation/Application of Directive 2005/29/EC on Unfair Commercial Practices’ (‘UCPD Guidance’) SWD(2016) 163 final; Cravetto/Pasa, ‘The ‘Non-sense’ of Pre-contractual Information Duties in Case of Non-concluded Contracts’ (2011) 19 ERPL 759–785; Loos, ‘Modernisering van het Europese consumentenrecht: meer vlees op het bot (I)’ (2019) 5–6 NTER; Loos, ‘Modernisering van het Europese consumentenrecht: meer vlees op het bot (II)’ (2019) 7–8 NTER; Luzak, ‘Online Disclosure Rules of the Consumer Rights Directive: Protecting Passive or Active Consumers’ (2015) 3 EuCML 79–87; Schulze/Dörner/Ebert et al., Bürgerliches Gesetzbuch: Handkommentar (‘HK-BGB’) (10th edn, Nomos 2019); Sein, ‘Concluding Consumer Contracts via Smart Assistants: Mission Impossible Under European Consumer Law?’ (2018) 5 EuCML 179–188.

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Formal requirements for distance contracts A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Provision of pre-contractual information to consumers . . . . . . . . . . . . . . . . . . . . . . 1. Distance contracts in general . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Specific distance contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Confirmation of the concluded contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Express request of the consumer and acknowledgement of the loss of the right of withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Interplay with E-Commerce Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Full harmonisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 7 7 10 25 30 32 35

D. Reform/Criticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function Art. 8 sets out the formal requirements for distance contracts. Distance contracts 1 are contracts which are concluded with the exclusive use of one or more means of distance communication such as mail order, telephone and Internet.1 This provision aims to ensure that consumers are sufficiently informed to conscientiously choose to conclude the distance contract while taking into account the possible technical restraints associated with these means of distance communication.2 On the one hand, the use of the means of distance communication may not lead to a reduction in information provided to the consumer as this information can be fundamental for his decision to conclude the contract.3 The formalities laid down in Art. 8 are thus a form of consumer protection.4 On the other hand, Art. 8 does not intend to prohibit the use of certain means of communication but merely wants to manage the content of the marketing communication.5 The traders interests are therefore also taken into account which can result in a wider variety of goods and services available for consumers. These aims fit in the Consumer Rights Directive’s broader objective of searching the right balance between a high level of consumer protection and the competitiveness of enterprises.6 To attain these aims, Art. 8 first of all indicates when and how the trader must pro- 2 vide which information to the consumer. Art. 8(1)–(6) regulate the information requirements in the pre-contractual stage. Art. 8(1) applies to all distance contracts while Art. 8(2)–(5) envisage the pre-contractual information requirements for: distance contracts concluded by electronic means which places the consumer under an obligation to pay, trading websites, means of distance communication which allows limited space or time to display the information and telephone calls. Besides pre-contractual information, Art. 8 also requires the trader to provide the consumer with a confirmation of the concluded contract. This confirmation must be in accordance with the requirements set out in Art. 8(7). This confirmation mainly aims to provide the consumer with information on the characteristics of the goods and services and of his rights and duties in a manner that is permanently accessible and available7. See also definition in Recital 20 and Art. 2 No. 7. Recital 36. 3 CJEU, C-430/17 Walbusch Walter Busch EU:C:2019:47, paras 35–36; See also CJEU, C-49/11 Content Services, EU:C:2012:419, para. 35 and CJEU, C-54/17 and C-55/17 Wind Tre EU:C:2018:710, para. 46. 4 See also Cravetto/Pasa, 779. 5 CJEU, C-430/17 Walbusch Walter Busch EU:C:2019:47, paras 42–43. 6 Recitals 4 and 7 and Art. 1. See also CJEU, C-430/17 Walbusch Walter Busch EU:C:2019:47, para. 34. See also the comments under → Art. 6 CRD, mn. 1 et seq. 7 Bech Serrat, p. 81. 1

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The trader not only has to provide information to the consumer but also has to require that the consumer makes an express request in the situations described in Art. 8(8). If the consumer wants the performance of services, or the supply of water, gas or electricity (where they are not put up for sale in a limited volume or set quantity) or of district heating to begin during the withdrawal period, he must make an express request. The duty to pay for the part of the contract that was executed during the period for withdrawal explains why the consumer has to expressly request this service or supply. 8 4 Art. 8(9) points to the interplay of Art. 8 with Arts 9 and 11 E-Commerce Directive. Art. 8(8) is without prejudice to the provisions on the conclusion of e-contracts as and the placing of e-orders as in the E-Commerce Directive. 5 Art. 8(10) indicates the maximum harmonisation character of Art. 8(8). Member States may not impose any further formal pre-contractual information requirements. 3

B. Context 6

See the comments on Art. 6 CRD.9

C. Explanation I. Provision of pre-contractual information to consumers 1. Distance contracts in general Art. 8(1) refers to the information provided for in Art. 6(1). Art. 6(1) contains the information requirements which must be provided to consumers before they are bound by the distance contract. The trader can fulfil this pre-contractual information duty in two ways: he can actively give the consumer the information or he can make the information available for consumers. The information must be provided or be made available in a way appropriate to the means of distance communication used. This more passive form of information provision has been introduced to encourage distance sales. Excessive information requirements in the pre-contractual phase could hamper distance sales.10 8 In any case, the information must be provided in ‘plain and intelligible language’. The Unfair Commercial Practices Directive imposed the same requirement for contractual terms.11 The ECJ has interpreted the latter requirement as meaning that the term should not only be grammatically intelligible to the consumer but the consumer should also be in a position to assess the economic consequences for him which derive from it. 12 The same reasoning can be applied here. Moreover, the information will not be regarded as ‘plain and intelligible’ if the information is given in a different languages than the language used to approach the consumer or during the negotiations.13 9 Art. 8(1) does not require the information to be provided on a durable medium. If the information is provided on a durable medium, it must furthermore be legible. A durable medium is one which enables the consumer to store the information for as long as it is 7

Recital 50. See the comments under → Art. 6 CRD, mn. 6 et seq. 10 See also Schulte-Nölke in: HK-BGB, § 312 d BGB, mn. 4. 11 Art. 4(2) UCPD. 12 CJEU, C-26/13 Kásler EU:C:2014:282. 13 See the comments under → Art. 6 CRD, mn. 22. 8

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necessary for him to protect his interests stemming from his relationship with the trader.14 Examples are paper, USB sticks, CD-ROMs, DVDs, memory cards, hard disks of computers, and e-mails.15 A website, however, is not automatically a durable medium. The ECJ ruled that it could be regarded as a durable medium if the website is accessible for future reference for a period of time adequate for the purposes of information and allows the unchanged reproduction of the information stored.16 Any possibility that the content of the website can be changed unilaterally by the trader must be excluded to qualify a website as a durable medium.17

2. Specific distance contracts a) Contracts concluded by electronic means. Art. 8(2) foresees additional pre-contrac- 10 tual information requirements for distance contracts concluded by electronic means which places the consumer under an obligation to pay. The concept of ‘electronic means’ is, however, not defined by the Consumer Rights Directive. The CRD Guidance tries to clarify this concept and infers its meaning from Recital 39 and the Information Provision Directive18.19 Recital 39 CRD indicates that the pre-contractual obligations laid down in Art. 8(2) are important for distance contracts concluded through websites. The UCPD Guidance also notices that this provision aims to improve the transparency of subscription offers on the Internet.20 ‘Electronic means’ in any event encompasses contracts concluded through websites. The Information Provision Directive furthermore defines ‘services by electronic means’ as services which are sent initially and received at its destination by means of electronic equipment for the processing (including digital compression) and storage of data, and entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means.21 Contracts concluded by ‘electronic means’ in Art. 8(2) can also be interpreted more broadly than only contracts concluded through websites. The CRD Guidance document points, for example, to digital content provided via TV set-top boxes.22 For these distance contracts, the first part of Art. 8(2) requires that the trader has to 11 make the consumer aware of information about the main characteristics, total price, duration of the contract and the minimum duration of the consumer’s obligations.23 This information must be provided to the consumer directly before he places his order. The CRD Guidance clarifies that the information must be provided immediately before plac-

14 As defined in Art. 2 No. 10 as: ‘any instrument which enables the consumer or the trader to store information addressed personally to him in a way accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored’; see also Recital 23; CJEU, C-375/15 BAWAG, EU:C:2017:38 (concerning the Payment Services Directive II), paras 40–52; CJEU, C-42/15 Home Credit Slovakia EU:C:2016:842 (concerning the Consumer Credit Directive), paras 35–37; CJEU, C-49/11 Content Services EU:C:2012:419, paras 38–46. 15 Recital 23 CRD. 16 CJEU, C-375/15 BAWAG, EU:C:2017:38, paras 41–46. 17 ibid. para. 44. 18 The CRD Guidance refers to the Technical Standards and Regulations Directive which has been repealed and replaced by the Information Provision Directive. The CRD Guidance document is available under https://ec.europa.eu/info/sites/info/files/crd_guidance_en_0.pdf (accessed 30 July 2019). 19 Point 5.2.1 CRD Guidance. 20 Point 3.4.6 UCPD Guidance. 21 Art. 1(2) Technical Standards and Regulations Directive and Art. 1(b)(ii) Information Provision Directive (exact same wording). 22 Point 5.2.1 CRD Guidance. 23 The information required by Art. 6(1), (a), (e), (o) and (p).

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ing the order.24 Art. 8 is furthermore ‘without prejudice’ to the E-Commerce Directive 25, which inter alia requires traders to give the consumer the opportunity to check the order prior to placing it.26 Traders can comply with both Directives by providing the information of Art. 8(2) at the moment in which the consumer is asked to verify his order as required by Art. 11(2) E-Commerce Directive.27 Moreover, the information must be provided in a clear and prominent manner. Read together with Recital 39 which indicates that the information must be displayed ‘in the close vicinity of the confirmation for placing the order’, this presentation requirement seems to be stricter than the general requirements under Arts 6(1) and 8(1). 28 The consumer must be able to see and read the information before he places his order without being obliged to navigate away from the page used to place the order.29 Thus, the trader is not allowed to require the consumer to click on a hyperlink in order to see the information. Art. 8(2) does however not discuss in detail how the information elements have to be provided in order to be clear and prominent. If traders want more guidance in this regard, they can use the model for the display of consumer information about online digital product as provided in Annex I CRD Guidance. This model suggests the use of a set of icons for the relevant information categories. The consumer not only has to be aware of this information but also has to explicitly acknowledge that the order implies an obligation to pay. Therefore, the second part of Art. 8(2) requires that if placing an order entails activating a button or a similar function, the trader must ensure that it is clear for consumers that activating this button or similar function implies an obligation to pay. To avoid confusion, the button or similar function must be labelled in an easily legible manner only with the words ‘order with obligation to pay’ or a corresponding unambiguous formulation. If the trader does not comply with this requirement, the consumer shall not be bound by the order or the contract. New technological developments challenge Art. 8(2). Traders have started to market new kinds of ‘electronic means’. Amazon, for example, introduced the ‘Dash Button’ 30 in certain countries in Europe (including Germany) in 2015. The ‘Dash Button’ is a small device which could be placed on any surface in the household, such as close to the refrigerator, washing machine or the toilet. The button was tied to a specific product offered by Amazon which the consumer selects through the Amazon app. The consumer could link the button to, for example, a particular brand of washing powder or toilet paper etc. In pressing the button the consumer automatically ordered the product tied to the button. The German consumer association, however, initiated – and won – legal proceeding against these buttons because these buttons infringe inter alia Art. 8(2). 31 Firstly, the button was not labelled with the words ‘order with obligation to pay’ or a corresponding formulation.32 Busch doubted, however, whether these words are really needed in this case.33 This provision has been introduced to protect consumers against Point 5.2.1 CRD Guidance. Art. 8(9). 26 Art. 11(2) E-Commerce Directive. See the comments under → Art. 11 E-Commerce Directive, mn. 10 et seq. 27 Point 5.2.1 CRD Guidance. See the comments under → Art. 11 E-Commerce Directive, mn. 5 et seq. 28 ibid. 29 ibid. 30 https://www.amazon.com/b?ie=UTF8&node=17729534011 (accessed 25 July 2019). 31 LG Munich, 1.3.2018 – 12 O 730: (2019) 1 MMR 125. As a result, Amazon has since withdrawn the Dash Button. 32 ibid., paras 144 et seq. 33 Busch, 80. 24

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hidden ‘cost traps’. 34 Consumers who have installed the ‘Dash Button’ know that pushing this button will lead to an obligation to pay whereby the explicit use of the words ‘order with obligation to pay’ does no longer seem necessary.35 Secondly, the information required by Art. 8(2) was not provided to the consumer because the button could not display this information.36 The information requirements were only available for consumers via the Amazon app. Amazon argued that this should be sufficient to comply with Art. 8(2). The court did not agree because the consumer does not need the app to order the product once the product is tied to the button.37 The answer of the court would have been different if pressing the ‘Dash Button’ would have as a consequence that the product is placed in the ‘shopping basket’ whereby the consumer needs to go to the app to actually place the order.38 If the electronic means does not have a display, it will be difficult – or even impossible – to comply with Art. 8(2). b) Trading websites. Art. 8(3) concerns trading websites. Since the introduction of the Geo-blocking Regulation, traders can no longer refuse to sell to consumers merely on the basis of their geographical location.39 However, traders are not forced to deliver outside their delivery area.40 Moreover, they remain free to determine the range of payment means they accept.41 Therefore, Art. 8(3) indicates that the trader must inform the consumer about any delivery restrictions and the means of payment which are accepted. 42 This information must be provided to the consumer at the latest at the beginning of the ordering process in a clear and legible manner. c) Limited display of information. Art. 8(4) focuses on distance contracts concluded by a means of distance communication which allows limited space or time to display the information. For these contracts, the information requirements must be adapted to take into account the technical constraints of certain media.43 An example of such a means of distance communication is an SMS.44 To assess whether a means of distance communication allows limited space or time, all the technical features of the trader’s marketing communication will have to be taken into account.45 In Walbusch Walter Busch, the ECJ found that it is necessary to ascertain whether, having regard to the space and time occupied by the communication and the minimum size of the typeface which is appropriate for the average consumer targeted by that communication, all the information set out in Art. 6(1) may objectively be displayed within that communication.46 The choices made by the trader concerned regarding the development and use of the space and time at its disposal as a result of the means of communication which it decided to use are not relevant for the purposes of that communication.47 The CRD Guidance indicates that Art. 8(4) also identifies the information which the trader must provide if he adapts his website to mobile devices with small screens, such as smartphones.48 The trader can limit the information displayed on the user’s screen to the ibid. ibid. 36 LG Munich, 1.3.2018 – 12 O 730: (2019) 1 MMR 125, paras 154 et seq. 37 ibid., paras 154 140, 157 and 159. See also Busch, 80. 38 ibid., para. 140. 39 Art. 4 Geo-blocking Regulation. 40 Recital 28 and Art. 4(1)(a) Geo-blocking Regulation. 41 Recital 32 and Art. 5(1) Geo-blocking Regulation. 42 See also Recital 39. 43 Recital 36. 44 Point 5.2.3 CRD Guidance. 45 CJEU, C-430/17 Walbusch Walter Busch EU:C:2019:47, para. 39. 46 ibid. 47 ibid. 48 Point 5.2.3 CRD Guidance. 34

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required information by Art. 8(4) without obliging the consumer to navigate away from the page being used to place the order.49 The model for the display of consumer information about online digital products in Annex I CRD Guidance shows how the information required by Art. 8(4) could be provided in a smartphone context. The minimum set of information which in these cases of distance communication has to be provided prior to the conclusion of the contract is the information referred to in points (a), (b), (e), (h) and (o) of Art. 6(1). This concerns information about the main characteristics of the goods, the identity of the trader, the total price, the right of withdrawal, the duration of the contract and, if the contract is of indeterminate duration, the conditions for terminating the contract. Information about the minimum duration of the consumer’s obligations under the contract [as indicated in Art. 6(1)(p)] is not explicitly required. This appears illogical as such a minimum period can be considered to be one of the major conditions for terminating a contract of indeterminate duration or an automatically extended contract under Art. 6(1)(o).50 For this reason, the Consumer Rights Directive guidance indicates that in practice the information as referred to in Art. 6(1)(p) should also be covered by Art. 8(4).51 One of the listed information elements is the right of withdrawal. According to Art. 6(1), the consumer must, where a right of withdrawal exists, be informed about the conditions, time limit and procedures for exercising that right in accordance with Art. 11(1), as well as the model withdrawal form set out in Annex I(B). However, in Walbusch Walter Busch the ECJ ruled that the model withdrawal form does not have to be provided in case of a means of distance communication which allows limited space or time to display the information.52 Information about the right of withdrawal per se remains important for consumers because it could influence their decision to conclude the distance contract.53 The model withdrawal form, in contrary, will not influence this decision.54 Moreover, requiring from the trader to provide the consumer with the model withdrawal form could impose on him a disproportionate burden and in some cases – for example, contracts concluded by telephone – even an unsupportable burden.55 The Modernisation Directive has codified this jurisprudence by making this explicit in the amended Art. 8(4). The other information referred to in Art. 6(1) and the model withdrawal form in Art. 6(1)(h) still have to be provided by the trader but he can choose to provide it in another manner.56 Art. 8(4) only requires that this information is provided in accordance with Art. 8(1) and in an appropriate way. This means that the trader can, for example, choose to make the information available via a hyperlink or a toll free telephone number.57 d) Contracts concluded by telephone. The last kind of distance contract for which specific pre-contractual information requirements are laid down in Art. 8(5) and (6) and concern contracts concluded by telephone. These provisions aim to protect consumers in ‘cold-calling’ (i.e. the activity of calling or visiting a possible customer to try to sell

ibid. ibid. 51 ibid. 52 CJEU, C-430/17 Walbusch Walter Busch EU:C:2019:47, para. 46. 53 ibid. 54 ibid. 55 ibid. 56 Once more, the Modernisation Directive has made this explicit for the model withdrawal form. Art. 8(4), as replaced by the Modernisation Directive. 57 Recital 36 CRD and point 5.2.3 CRD Guidance. 49

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them something without being asked by the customer to do so)58 situations. Art. 8(5) stipulates that a trader who calls a consumer with a view to concluding a distance contract must at the beginning of the conversation disclose his identity (and/or the identity of the person on whose behalf he makes the call) and the commercial purpose of the call. This information must be given without prejudice to Art. 8(4). Thus, traders may limit the information provided during the call to the information required in Art. 8(4).59 Art. 8(6) gives the Member States the opportunity to introduce an additional con- 24 sumer protection measure and deviates thereby explicitly from the principle of maximum harmonisation laid down in Art. 4 and Art. 8(10). Art. 8(6) states that Member States may require the trader to confirm the offer to the consumer and that the consumer will only be bound once he has signed the offer or has sent his written consent. Moreover, they may provide that this confirmation has to be made on a durable medium.60

II. Confirmation of the concluded contract Art. 8(7) indicates the information that must be provided to the consumer after conclusion of the contract. The trader must provide the consumer with a confirmation of the contract concluded within a reasonable time after its conclusion and at the latest at the time of the delivery of the goods or before the performance of the service begins. The ultimate deadline for service contracts can be problematic. The performance of services can start after the end of the period in which the consumer can withdraw from the contract. The withdrawal period of 14 days starts the day of the conclusion of the contract61 while the performance of the contract does not necessarily have to start that day. However, the CRD Guidance points to the requirement of ‘a reasonable time after contract conclusion’ and infers from this requirement that the confirmation should be sent early enough to allow the consumer to exercise his right of withdrawal.62 The national court will have to decide on a case-by-case basis whether the trader has respected the reasonable period requirement.63 The distance contract confirmation must include the information referred to in Art. 6(1) unless this information has already been provided by the trader to the consumer on a durable medium prior to the conclusion of the distance contract. Furthermore, in case of online digital content which is not supplied on a tangible medium, the performance may only begin after the consumer’s prior express consent and acknowledgement that he thereby loses his right of withdrawal.64 This prior consent and acknowledgement must, where applicable, also be included in the confirmation. For the supply of public utilities and contracts for digital content no explicit deadline has been determined for the confirmation. The Consumer Rights Directive guidance argues that by way of analogy the rules on service contracts should apply.65 Contracts for digital content are usually immediately (i.e. before the end of the withdrawal period) performed and often confirmed by e-mail. The question is whether this e-mail https://dictionary.cambridge.org/dictionary/english/cold-calling (accessed 25 July 2019). Point 5.3 CRD Guidance. 60 An overview of Member States that made use of this option is available at: https://ec.europa.eu/info/s ites/info/files/overview_regulatory_choices.pdf (accessed 30 July 2019). 61 Art. 9(2)(a). 62 Point 5.4 CRD Guidance. 63 ibid. 64 Art. 16(m). See the comments under → Art. 16 CRD, mn. 6 et seq. 65 Point 5.4 CRD Guidance. 58

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must be received by the consumers before the download or streaming of the digital content or whether it is sufficient that the trader has sent the e-mail before the download or streaming of the digital content.66 The CRD Guidance notes that an answer to this question could be inferred from the use of the term ‘provide’ instead of ‘receive’ in Art. 8(7), as interpreted by the ECJ in Content Services67.68 However, this semantic discussion could be avoided by opting for a pragmatic approach. In order to allow the consumer to choose to download digital content immediately, it should be sufficient that the trader has sent the e-mail before the download.69 29 Art. 8(7) remains silent about the consequences for the contract if the trader did not provide a confirmation and leaves this to the Member States to determine. The Consumer Rights Directive does specify a consequence for the consumer if the trader fails to provide a confirmation. Art. 14(4)(b) indicates that the consumer will in this case bear no costs for the online digital content received or be reimbursed for the amount paid. 70

III. Express request of the consumer and acknowledgement of the loss of the right of withdrawal Art. 8(8) firstly indicates that an express request of the consumer is necessary to start the performance of services, or the supply of water, gas or electricity – where they are not put up for sale in a limited volume or set quantity – or of district heating, to begin during the withdrawal period. For these contracts the withdrawal period starts on the day of the conclusion of the contract. The start of the performance of the mentioned contracts does not mean that the consumer loses his right of withdrawal. However, if he withdraws after the performance of the service or the supply of water, gas, electricity or district heating has started, he will have to adequately pay for the service or supply he has already received.71 This duty to pay is the reason why the consumer has to expressly request this service or supply.72 Art. 8(8)73 secondly indicates that, before starting performance of these contracts during the period for withdrawal, the trader must request the acknowledgement of the consumer that he will lose his rights of withdrawal upon full performance. This amendment of Art. 8(8) by the Modernisation Directive, brings it in line with Art. 16 that provides for an exception to the right of withdrawal for services contracts that have been fully performed on condition that the performance began with the consumer’s prior consent and that he has acknowledged that he would lose his right of withdrawal in that case.74 Art. 8(8) previously only required traders to obtain the consumer’s prior consent but not the consumer’s acknowledgement of loss the right of withdrawal upon full performance. 31 Art. 8(8) – as amended by the Modernisation Directive – in addition makes clear that the trader’s obligation to obtain the prior consent and the acknowledgment of the consumer only applies if the contract places the consumer under an obligation to pay. 30

ibid. CJEU, C-49/11 Content Services EU:C:2012:419, paras 33–35. 68 See also CJEU, C-375/15 BAWAG EU:C:2017:38 (concerning the Payment Services Directive II). Further reading: Luzak, 79–87. 69 Point 5.4 CRD Guidance. 70 Point 12.2 CRD Guidance. 71 Art. 14(3). 72 Recital 50. 73 As replaced by the Modernisation Directive. 74 Recital 42 Modernisation Directive and see Art. 16(1)(a). 66

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IV. Interplay with E-Commerce Directive According to Art. 8(9), Art. 8 is ‘without prejudice’ to the provisions on the conclu- 32 sion of e-contracts set out in Art. 9 E-Commerce Directive and the placing of e-orders set out in Art. 11 E-Commerce Directive. The provisions must be applied cumulatively with the provisions of the Consumer Rights Directive.75 In consumer contracts where the recipient of the information society service (i.e. any 33 service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services)76 places his order through technological means, Art. 11(1) establishes two principles. Firstly, the information society service provider must acknowledge the receipt of the recipient’s order without undue delay and by electronic means. Secondly, the order and acknowledgment of receipt are deemed to be received when the parties to whom they are addressed are able to access them. Provided that the trader acknowledges receipt on a durable medium, the obligation to acknowledge receipt under the E-Commerce Directive could be combined with the obligation to confirm the contract under Art. 8. The information society service provider must also make effective and accessible 34 technical means available to the consumer which allows the consumer to identify and correct input errors before he places his order [Art. 11(2)]. In short, consumers must always be able to verify their offer before placing it.77 This obligation will need to combined with the obligation of Art. 8(2).

V. Full harmonisation Art. 8(10) prohibits Member States to impose any further formal pre-contractual in- 35 formation requirements for the fulfilment of the information obligations laid down in the Consumer Rights Directive. This provision lays in line with the principle of full harmonisation set forth in Art. 4. The full harmonisation in Art. 8(10) is stricter than Art. 6(8) which still allows Member States to impose additional information requirements in accordance with the Services Directive and the E-Commerce Directive.

D. Reform/Criticism The question remains whether the Modernisation Directive has sufficiently mod- 36 ernised the Consumer Rights Directive to keep it in line with the developments in the digital sphere. The Modernisation Directive, has not profoundly adjusted the existing specific formalities for certain distance contracts. The limited amendments by the Modernisation Directive do not seem entirely adapted to future developments in the field of distance communication. Examples which illustrate this lack of future-proofness are Amazon's Dash Buttons78 37 and voice commerce via smart assistants such as Amazon’s ‘Alexa’ and Apple’s ‘Siri’. 79 It is, for example, not clear into which category of Art. 8 voice commerce fits. Voice commerce could fall under different specific distance contracts categories as regulated by See the comments under → Arts 9 and 11 E-Commerce Directive. Art. 2(a) E-Commerce Directive (refers to Art. 1(2) Technical Standards and Regulations Directive as amended by the Information Provision Directive). 77 Point 5.2.1 CRD Guidance. 78 See above → mn. 14 et seq. 79 For further reading, see Sein, 179–188. 75

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Art. 8(2)–(6). It could be regarded as a means of distance communication that allows limited space or time to display the information because it cannot be expected from the smart assistant to spell aloud all the information elements of Art. 6(1) before the consumer can conclude the contract as required by Art. 8(1). It could also be regarded as a distance contract concluded by electronic means which places the consumer under an obligation to pay [Art. 8(2)], or a trading website [Art. 8(3)]. 38 The problem with Art. 8(2) and (3) is that they are both based on the premise that distance contracts are concluded by means enabling legible information.80 The (modernised) Consumer Rights Directive does not sufficiently take into account the possibility of consumer contracts concluded by means of distance communication without a display. It should, however, be clarified whether or not the Consumer Rights Directive excludes display-less means of distance communication in general and. If these means are not excluded in general, it is difficult to predict how the notions of trading websites and legibility will have to be interpreted.81 39 Another manner to include these new forms of distance communication is to reduce the information requirements for goods or services purchased on a regular basis.82 Inspiration could be taken from Art. 1(2) Distance Marketing of Financial Services Directive,83 which indicates that the information duties only apply to the first operation. This information does not have to be repeated in successive contracts of the same nature. The Modernisation Directive does, unfortunately, not include such an exception.

Article 14 Obligations of the consumer in the event of withdrawal […] 2a. In the event of withdrawal from the contract, the consumer shall refrain from using the digital content or digital service and from making it available to third parties. 3. Where a consumer exercises the right of withdrawal after having made a request in accordance with Article 7(3) or Article 8(8), the consumer shall pay to the trader an amount which is in proportion to what has been provided until the time the consumer has informed the trader of the exercise of the right of withdrawal, in comparison with the full coverage of the contract. The proportionate amount to be paid by the consumer to the trader shall be calculated on the basis of the total price agreed in the contract. If the total price is excessive, the proportionate amount shall be calculated on the basis of the market value of what has been provided. 4. The consumer shall bear no cost for: (a) the performance of services or the supply of water, gas or electricity, where they are not put up for sale in a limited volume or set quantity, or of district heating, in full or in part, during the withdrawal period, where:

Busch, 80; Sein, 179. Sein, 179. 82 Busch, 80. 83 ibid.

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the trader has failed to provide information in accordance with points (h) or (j) of Article 6(1); or (ii) the consumer has not expressly requested performance to begin during the withdrawal period in accordance with Article 7(3) and Article 8(8); or (b) the supply, in full or in part, of digital content which is not supplied on a tangible medium where: (i) the consumer has not given his prior express consent to the beginning of the performance before the end of the 14-day or 30-day period referred to in Article 9; (ii) the consumer has not acknowledged that he loses his right of withdrawal when giving his consent; or (iii) the trader has failed to provide confirmation in accordance with Article 7(2) or Article 8(7). […] Bibliography: Commission, ‘DG Justice Guidance Document concerning Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights […]’ (‘CRD Guidance’); Säcker et al. (eds), Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 3 (‘MüKo BGB’) (8 th edn, C.H. Beck 2019). A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Distance Selling Directive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Sanctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 3 4

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5

A. Function Art. 14 sets out in detail the obligations of the consumer when he exercises his right 1 of withdrawal. A right of withdrawal is deemed necessary in case of distance contracts to offset the disadvantage the consumer has as he is not able to see the goods before the conclusion of a contract.1 Such period aims to provide an appropriate time for reflection during which the consumer can examine and test the goods acquired.2 In case of offpremises contracts, the right of withdrawal aims to compensate the disadvantage of the consumer because of the potential surprise element and the potential psychological pressure to conclude the contract.3 Art. 14(1) and (2) set out the obligations of the consumer in case goods have been 2 supplied. Art. 14(2 a) – as inserted by the Modernisation Directive – specifies in more detail the duties of the consumer in case of withdrawal from a contract for digital content or digital services. As digital content or digital services are hard to ‘return’, Art. 14(2 a) prohibits the consumer to further use the digital content or digital service and to make it available to third parties. This is in line with Art. 17 DCD that sets out the obligations of the consumer in case of termination.4 Art. 14(3) and (4) deal with the consequences of withdrawal for the consumer in case of a contract for online digital Recital 37; CJEU, C-430/17 Walbusch Walter Busch EU:C:2019:47, para. 45. ibid. 3 Recital 37. 4 See the comments under Digital Content Directive → Art. 17, mn. 9 et seq. 1

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content or a contract for the supply of public utilities. Art. 14(5) makes clear that there are no other grounds for liability for the consumer in case of withdrawal than those explicitly provided for in the Consumer Rights Directive.

B. Context I. Distance Selling Directive 3

Withdrawal in service contracts is regulated substantially differently under the Consumer Rights Directive than under Distance Selling Directive. Whereas under the Distance Selling Directive the consumer lost his right of withdrawal the moment performance of the service began (with his agreement),5 the Consumer Rights Directive gives the consumer a right to ‘test’ the quality of the service. The consumer maintains the right to withdraw even in case he has asked for performance of the services before the end of the withdrawal period. In case the consumer exercises his right to withdraw, the trader should however be adequately paid for the (part of) the service already provided.6 The calculation of such payment is regulated in Art. 14(3). The consumer will only lose his right of withdrawal if the service has been fully performed during the period for withdrawal.7

II. Sanctions 4

Art. 14(4) provides some exceptions to the obligation for the consumer to pay for a service provided or water, gas, electricity or online digital content supplied in case specific provisions of the Consumer Rights Directive were not complied with. Whereas the Consumer Rights Directive leaves it in general to the Member States to set out the penalties for non-compliance with its implementing provisions,8 the Consumer Rights Directive does provide a number of specific sanctions in case of infringement of specific provisions, including the exemption from the obligation to bear the costs of Art. 14(4).

C. Explanation 5

Art. 14(3) is particularly relevant with regard to digital services that impose an obligation to pay on the consumer. The provision applies if consumer exercises the right of withdrawal despite initially expressly requesting the performance of the (digital) service. The express request to the performance of the service therefore does not deny the consumer the right to withdraw from the contract during the performance of the service. 9 However, the trader should also be assured to receive adequate remuneration for the service he has provided.10 Art. 14(3) therefore serves to balance the rights and interests of both the consumer and trader by allowing the consumer to withdraw from the service contract, even after performance has commenced, but by allowing the trader to claim payment from the consumer in proportion to the service he has provided. Art. 6(3) Distance Selling Directive. Recital 50. 7 Art. 16(a). 8 Art. 24. 9 → Art. 16 CRD, mn. 13 et seq.; Recital 50. 10 Recital 50. 5

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According to Art. 14(4)(a), the consumer shall bear no costs in case of the perfor- 6 mance of services (including digital services) or the supply of water, gas or electricity, where they are not put up for sale in a limited volume or set quantity, or of district heating, in full or in part, during the withdrawal period in case: (i) the trader has failed to provide information about the right of withdrawal (or about the possible costs related to exercising the right of withdrawal after the performance of the service or supply has started);11 or (ii) when the consumer has not expressly requested performance to begin during the withdrawal period.12 Art. 14(4)(b) provides that the consumer shall bear no costs for the supply, in full or 7 in part, of digital content which is not supplied on a tangible medium in case: (i) the consumer has not given his prior express consent to the beginning of the performance before the end of the withdrawal period;13 or (ii) the consumer has not acknowledged that he loses his right of withdrawal when giving his consent;14 or (iii) the trader has failed to provide confirmation of the consumer’s prior express consent and acknowledgement.15 Art. 14(4)(b) is now in line with Art. 16(m) – as replaced by the Modernisation Di- 8 rective. Art. 16(m) provides for an exception to the right of withdrawal for online digital content if performance has begun. If the online digital content is provided in return for personal data, there are no additional conditions for the consumer to lose his right of withdrawal. If the contract for the supply of online digital content places the consumer under an obligation to pay, the consumer will only lose his right of withdrawal if performance begins if: (i) he expressly consented with the start of the performance; (ii) he acknowledged that he would thereby lose his right of withdrawal and (iii) the trader has provided confirmation of all requested information and of the consumer’s prior express consent and acknowledgement. The third condition was previously not included in Art. 16(m) and this led to interpretation and application problems.16 The Modernisation Directive now ensures a parallel between both provisions: the consumer who concluded a (distance or off-premises) contract for online digital content under an obligation to pay, only loses the right of withdrawal when performance begins if the three mentioned conditions are met. If he did not consent with the start of the performance, or did not acknowledge the loss of the right of withdrawal or did not receive the required confirmation, he can still withdraw,17 and in such case, he will have to bear no costs for the online digital content received.18

Article 16 Exceptions from the right of withdrawal Member States shall not provide for the right of withdrawal set out in Articles 9 to 15 in respect of distance and off-premises contracts as regards the following: (a) service contracts after the service has been fully performed but, if the contract places the consumer under an obligation to pay, only if the performance has beArt. 14(4)(a)(i). Art. 14(4)(a)(ii). 13 Art. 14(4)(b)(i). 14 Art. 14(4)(b)(ii). 15 Ibid. 16 See Fritsche in: MüKo BGB, § 357 BGB, mn. 54. 17 Art. 16(m) as replaced by the Modernisation Directive. 18 Art. 14(4)(b). 11 12

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gun with the consumer’s prior express consent and acknowledgement that he will lose his right of withdrawal once the contract has been fully performed by the trader; […] (i) the supply of sealed audio or sealed video recordings or sealed computer software which were unsealed after delivery; […] (m) contracts for the supply of digital content which is not supplied on a tangible medium if the performance has begun and, if the contract places the consumer under an obligation to pay, where: (i) the consumer has provided express prior consent to begin the performance during the right of withdrawal period; (ii) the consumer has provided acknowledgement that he thereby loses his right of withdrawal; and (iii) the trader has provided confirmation in accordance with Article 7(2) or Article 8(7). A. Function and context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Audio, video and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Online digital content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. (Digital) services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function and context Art. 16 enumerates the situations in which consumers either have no right of withdrawal either from the outset or lose the right of withdrawal. Exceptions to the right of withdrawal are deemed necessary when the burden imposed on traders by granting a right of withdrawal is disproportionate. This may, amongst others, be the case if the period of withdrawal would allow consumer to speculate (e.g. lotteries, products with fluctuating prices); if the goods to be returned are difficult or impossible to resell (e.g. personalised goods, goods inseparably mixed with other goods) or when the period for withdrawal may allow the consumer to gain the full benefit of the good or service provided without remuneration for the trader (e.g. magazines). 2 In the case of digital content and digital services, there is a risk of abuse when the consumer has access to the digital content and would subsequently withdraw. There is a risk of copying the content and of full enjoyment of the content (for example watching a film) without compensating the trader. 3 The commentary focuses only on those two exceptions that are relevant for digital content: Art. 16(i), which concerns the supply of sealed audio or sealed video recordings or sealed computer software which were unsealed after delivery, and Art. 16(m), which concerns the supply of digital content which is not supplied on a tangible medium. For (digital) services, Art. 16(a) is the relevant exception. Furthermore, Recital 30 of the Modernisation Directive provides that in case of doubt as to whether the contract is a service contract or a contract for the supply of online digital content, the rules on the right of withdrawal for services should apply. 1

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As the Consumer Rights Directive is a maximum harmonisation directive 1, these 4 exceptions must be implemented by the Member States who cannot provide additional protection to consumers by granting a right of withdrawal in these situations.

B. Explanation I. Audio, video and software Art. 16(i) exempts sealed tangible data carriers from the right of withdrawal if the 5 consumer unseals them. Both audio and video carriers (such as CDs and DVDs)2 and software on a tangible carrier is covered.3 It has been decided by German courts that a mere cellophane wrapping does not qualify as sealed packaging. According to the OLG Hamm, packaging which serves the purpose of sealing must be recognisable as such to the consumer so that mere cellophane wrapping does not fulfil the required test and reflection function.4

II. Online digital content Art. 16 (m) pursues a similar objective as Art. 16(i) for digital content that is not supplied on a tangible medium in that this provision aims to ensure that the consumer has no right to test the digital content during the withdrawal period.5 This differs from the rule with regard to services, where the consumer does enjoy a right to ‘test’ the quality of the services during the period for withdrawal. For online digital content provided in return for personal data, the consumer loses the right of withdrawal when performance begins during the period for withdrawal without further conditions. For online digital content provided in return for a price ('obligation to pay’), the consumer loses the right of withdrawal on the following conditions: (i) performance has begun with the consumer’s prior express consent; (ii) the consumers acknowledges that he thereby loses his right of withdrawal; and ; and (iii) the trader has confirmed the contract, which includes confirmation of the consumer's prior consent to begin performance and acknowledgement of the loss of the right of withdrawal in that case.6 The beginning of performance could be the start of the downloading or streaming of a video or music file. The mere provision of a link that enables the consumer to download the file does not qualify as the start of the performance. The consumer will only lose the right of withdrawal when activating the link.7 According to the CRD Guidance, express consent and acknowledgement should be interpreted by analogy to the rules on express consent of Art. 22 on additional payments

1 Art. 4. The Modernisation Directive however creates additional exceptions to the maximum harmonisation character of the Consumer Rights Directive, including a possibility to derogate from the exceptions to the right of withdrawal of Art. 16(a), (b), (c) and (e), i.a. for contracts concluded during unsolicited visits to a consumer's home, see Art. 16(2) and (3) as inserted by the Modernisation Directive. 2 Point 12.2 CRD Guidance. 3 ibid. 4 OLG Hamm, 30.3.2010 – I-4 U 212/09: (2011) MMR 684. 5 Point 12.2 CRD Guidance. 6 Art. 16(m) as replaced by the Modernisation Directive; see Recital 44 Modernisation Directive. 7 Point 12.2 CRD Guidance.

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for additional services. Positive action is required by the consumer.8 A pre-ticked box would not suffice. Still according to the CRD Guidance, it is also unlikely that the mere acceptance of general terms and conditions would satisfy Art. 16(m). The more elaborate conditions on consent of the General Data Protection Regulation may also inspire to interpret the notion of ‘express’ consent of the Consumer Rights Directive and confirm the CRD Guidance interpretation that the mere acceptance of terms and conditions would not suffice. Art. 7(2) GDPR states that if consent is given ‘in the context of a written declaration which also concerns other matters, the request shall be presented in a manner which is clearly distinguishable from the other matters, in an intelligible and easily accessible form, using clear and plain language’ (emphasis added). 10 The CRD Guidance provides an example of a single statement that can be used to obtain consent and acknowledgement: ‘[…] I hereby consent to immediate performance of the contract and acknowledge that I will lose my right of withdrawal from the contract once the download or streaming of the digital content has begun.’9 The CRD Guidance furthermore confirms that if the consent and acknowledgement is obtained in the terms mentioned, the information about the exception from the right of withdrawal required under Art. 6(1)(k) is given at the same time. This makes it superfluous to provide the information under Art. 6(1)(h), including the model withdrawal form of Annex I (B).10 11 It remains in addition necessary for traders to include in the confirmation of the contract, confirmation of the consent and acknowledgement before the start of the performance.11 12 If the consumer has not given his express consent or has not acknowledged that he loses his right of withdrawal when giving his consent or the required confirmation was omitted,12 the contractual sanction of Art. 14(4)(b) applies.13 This entails that the consumer shall bear no costs for the online digital content supplied. This entitles him either not to pay for the content or to be reimbursed.14

III. (Digital) services According to Art. 16(a), Member States shall not provide for a right to withdrawal for service contracts after the service has been 'fully performed'. Art. 16(a), as amended by the Modernisation Directive, now distinguishes between service contracts that place consumers under an obligation to pay and other service contracts. 14 If the consumer is under an obligation to pay, he will only lose his right of withdrawal upon full performance of the service, if the performance has begun with the consumer’s prior express consent and if he has acknowledged that he will lose his right of withdrawal upon full performance. This amendment brings Art. 16(a) in line with the revised Art. 8(8).15 The duty to pay a proportionate amount in case of withdrawal for partially performed services, is the reason why the consumer has to expressly request for the service to be provided during the period for withdrawal.16 Art. 14(3) determines how 13

Point 12.1 CRD Guidance. Point 12.2 CRD Guidance. 10 ibid. 11 Art. 8(7)(b). 12 Art. 16(m) as replaced by the Modernisation Directive. 13 See the comments under → Art. 14 CRD, mn. 6 et seq. 14 Point 12.2 CRD Guidance. 15 → Art. 8 CRD, mn. 30. 16 Recital 37 Modernisation Directive. 8

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this proportionate amount needs to be calculated. If there is no obligation to pay, the consumer loses his right of withdrawal without further conditions upon full performance and as long as the contract is not fully performed (during the withdrawal period), the consumer can withdraw without any obligation to pay. These provisions also apply to digital services. Thus, the consumer will be able to 15 withdraw from a subscription to a social network or from a subscription for cloud-services even if performance has started during the period for withdrawal. If the contract was against payment, he will need to pay a proportionate amount, based on the total price agreed.17 One-off costs for installation may also be included in the calculation of the compensation.18 If the digital service was provided against personal data, the consumer will be able to withdraw from the subscription during the withdrawal period without further costs. Full performance during the period for withdrawal may thus lead to the loss of the 16 right of withdrawal. Full performance of a contract for (digital) services during the period for withdrawal could, for example, occur in case of a contract for a fixed duration that ends during the period for withdrawal, e.g. the provision of VPN services for a seven-day period. Given the difficulties that may exist to distinguish between contracts for online digi- 17 tal content and contracts for digital services, which may both involve continuous supply over a period of time,19 the different rules for withdrawal are difficult to apply. For digital content, the right for withdrawal can be lost when performance starts, for digital services, the right of withdrawal can only be lost upon full performance during the withdrawal period. In case of doubt on the qualification of the contract, the more consumerfriendly rules on digital services apply.20

Point 6.5.1 CRD Guidance. ibid. 19 Recital 30 Modernisation Directive. 20 ibid.

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Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Articles 47(2), 55 and 95 thereof, Having regard to the proposal from the Commission, Having regard to the opinion of the Economic and Social Committee, Acting in accordance with the procedure laid down in Article 251 of the Treaty, Whereas: (1) The European Union is seeking to forge ever closer links between the States and peoples of Europe, to ensure economic and social progress; in accordance with Article 14(2) of the Treaty, the internal market comprises an area without internal frontiers in which the free movements of goods, services and the freedom of establishment are ensured; the development of information society services within the area without internal frontiers is vital to eliminating the barriers which divide the European peoples. (2) The development of electronic commerce within the information society offers significant employment opportunities in the Community, particularly in small and medium-sized enterprises, and will stimulate economic growth and investment in innovation by European companies, and can also enhance the competitiveness of European industry, provided that everyone has access to the Internet. (3) Community law and the characteristics of the Community legal order are a vital asset to enable European citizens and operators to take full advantage, without consideration of borders, of the opportunities afforded by electronic commerce; this Directive therefore has the purpose of ensuring a high level of Community legal integration in order to establish a real area without internal borders for information society services. (4) It is important to ensure that electronic commerce could fully benefit from the internal market and therefore that, as with Council Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities, a high level of Community integration is achieved. (5) The development of information society services within the Community is hampered by a number of legal obstacles to the proper functioning of the internal market which make less attractive the exercise of the freedom of establishment and the freedom to provide services; these obstacles arise from divergences in legislation and from the legal uncertainty as to which national rules apply to such services; in the absence of coordination and adjustment of legislation in the relevant areas, obstacles might be justified in the light of the case-law of the Court of Justice of the European Communities; legal uncertainty exists with regard to the extent to which Member States may control services originating from another Member State. (6) In the light of Community objectives, of Articles 43 and 49 of the Treaty and of secondary Community law, these obstacles should be eliminated by coordinat-

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ing certain national laws and by clarifying certain legal concepts at Community level to the extent necessary for the proper functioning of the internal market; by dealing only with certain specific matters which give rise to problems for the internal market, this Directive is fully consistent with the need to respect the principle of subsidiarity as set out in Article 5 of the Treaty. In order to ensure legal certainty and consumer confidence, this Directive must lay down a clear and general framework to cover certain legal aspects of electronic commerce in the internal market. The objective of this Directive is to create a legal framework to ensure the free movement of information society services between Member States and not to harmonise the field of criminal law as such. The free movement of information society services can in many cases be a specific reflection in Community law of a more general principle, namely freedom of expression as enshrined in Article 10(1) of the Convention for the Protection of Human Rights and Fundamental Freedoms, which has been ratified by all the Member States; for this reason, directives covering the supply of information society services must ensure that this activity may be engaged in freely in the light of that Article, subject only to the restrictions laid down in paragraph 2 of that Article and in Article 46(1) of the Treaty; this Directive is not intended to affect national fundamental rules and principles relating to freedom of expression. In accordance with the principle of proportionality, the measures provided for in this Directive are strictly limited to the minimum needed to achieve the objective of the proper functioning of the internal market; where action at Community level is necessary, and in order to guarantee an area which is truly without internal frontiers as far as electronic commerce is concerned, the Directive must ensure a high level of protection of objectives of general interest, in particular the protection of minors and human dignity, consumer protection and the protection of public health; according to Article 152 of the Treaty, the protection of public health is an essential component of other Community policies. This Directive is without prejudice to the level of protection for, in particular, public health and consumer interests, as established by Community acts; amongst others, Council Directive 93/13/EEC of 5 April 1993 on unfair terms in consumer contracts and Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the protection of consumers in respect of distance contracts form a vital element for protecting consumers in contractual matters; those Directives also apply in their entirety to information society services; that same Community acquis, which is fully applicable to information society services, also embraces in particular Council Directive 84/450/EEC of 10 September 1984 concerning misleading and comparative advertising, Council Directive 87/102/EEC of 22 December 1986 for the approximation of the laws, regulations and administrative provisions of the Member States concerning consumer credit, Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field, Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours), Directive 98/6/EC of the European Parliament and of the Council of 16 February 1998 on consumer production in the indication of prices of products offered to consumers, Council Directive 92/59/EEC of 29 June 1992 on general product safety, Directive 94/47/EC of the European Parliament and of the Council of 26 October 1994 on the protection of purchasers in respect of certain aspects on contracts relating 405

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to the purchase of the right to use immovable properties on a timeshare basis, Directive 98/27/EC of the European Parliament and of the Council of 19 May 1998 on injunctions for the protection of consumers' interests, Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions concerning liability for defective products, Directive 1999/44/EC of the European Parliament and of the Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees, the future Directive of the European Parliament and of the Council concerning the distance marketing of consumer financial services and Council Directive 92/28/EEC of 31 March 1992 on the advertising of medicinal products; this Directive should be without prejudice to Directive 98/43/EC of the European Parliament and of the Council of 6 July 1998 on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products adopted within the framework of the internal market, or to directives on the protection of public health; this Directive complements information requirements established by the abovementioned Directives and in particular Directive 97/7/EC. It is necessary to exclude certain activities from the scope of this Directive, on the grounds that the freedom to provide services in these fields cannot, at this stage, be guaranteed under the Treaty or existing secondary legislation; excluding these activities does not preclude any instruments which might prove necessary for the proper functioning of the internal market; taxation, particularly value added tax imposed on a large number of the services covered by this Directive, must be excluded form the scope of this Directive. This Directive does not aim to establish rules on fiscal obligations nor does it pre-empt the drawing up of Community instruments concerning fiscal aspects of electronic commerce. The protection of individuals with regard to the processing of personal data is solely governed by Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data and Directive 97/66/EC of the European Parliament and of the Council of 15 December 1997 concerning the processing of personal data and the protection of privacy in the telecommunications sector which are fully applicable to information society services; these Directives already establish a Community legal framework in the field of personal data and therefore it is not necessary to cover this issue in this Directive in order to ensure the smooth functioning of the internal market, in particular the free movement of personal data between Member States; the implementation and application of this Directive should be made in full compliance with the principles relating to the protection of personal data, in particular as regards unsolicited commercial communication and the liability of intermediaries; this Directive cannot prevent the anonymous use of open networks such as the Internet. The confidentiality of communications is guaranteed by Article 5 Directive 97/66/EC; in accordance with that Directive, Member States must prohibit any kind of interception or surveillance of such communications by others than the senders and receivers, except when legally authorised. The exclusion of gambling activities from the scope of application of this Directive covers only games of chance, lotteries and betting transactions, which involve wagering a stake with monetary value; this does not cover promotional

E-Commerce Directive competitions or games where the purpose is to encourage the sale of goods or services and where payments, if they arise, serve only to acquire the promoted goods or services. (17) The definition of information society services already exists in Community law in Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical standards and regulations and of rules on information society services and in Directive 98/84/EC of the European Parliament and of the Council of 20 November 1998 on the legal protection of services based on, or consisting of, conditional access; this definition covers any service normally provided for remuneration, at a distance, by means of electronic equipment for the processing (including digital compression) and storage of data, and at the individual request of a recipient of a service; those services referred to in the indicative list in Annex V to Directive 98/34/EC which do not imply data processing and storage are not covered by this definition. (18) Information society services span a wide range of economic activities which take place on-line; these activities can, in particular, consist of selling goods online; activities such as the delivery of goods as such or the provision of services off-line are not covered; information society services are not solely restricted to services giving rise to on-line contracting but also, in so far as they represent an economic activity, extend to services which are not remunerated by those who receive them, such as those offering on-line information or commercial communications, or those providing tools allowing for search, access and retrieval of data; information society services also include services consisting of the transmission of information via a communication network, in providing access to a communication network or in hosting information provided by a recipient of the service; television broadcasting within the meaning of Directive EEC/89/552 and radio broadcasting are not information society services because they are not provided at individual request; by contrast, services which are transmitted point to point, such as video-on-demand or the provision of commercial communications by electronic mail are information society services; the use of electronic mail or equivalent individual communications for instance by natural persons acting outside their trade, business or profession including their use for the conclusion of contracts between such persons is not an information society service; the contractual relationship between an employee and his employer is not an information society service; activities which by their very nature cannot be carried out at a distance and by electronic means, such as the statutory auditing of company accounts or medical advice requiring the physical examination of a patient are not information society services. (19) The place at which a service provider is established should be determined in conformity with the case-law of the Court of Justice according to which the concept of establishment involves the actual pursuit of an economic activity through a fixed establishment for an indefinite period; this requirement is also fulfilled where a company is constituted for a given period; the place of establishment of a company providing services via an Internet website is not the place at which the technology supporting its website is located or the place at which its website is accessible but the place where it pursues its economic activity; in cases where a provider has several places of establishment it is important to determine from which place of establishment the service concerned is provided; in cases where it is difficult to determine from which of several places of es407

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tablishment a given service is provided, this is the place where the provider has the centre of his activities relating to this particular service. The definition of "recipient of a service" covers all types of usage of information society services, both by persons who provide information on open networks such as the Internet and by persons who seek information on the Internet for private or professional reasons. The scope of the coordinated field is without prejudice to future Community harmonisation relating to information society services and to future legislation adopted at national level in accordance with Community law; the coordinated field covers only requirements relating to on-line activities such as on-line information, on-line advertising, on-line shopping, on-line contracting and does not concern Member States' legal requirements relating to goods such as safety standards, labelling obligations, or liability for goods, or Member States' requirements relating to the delivery or the transport of goods, including the distribution of medicinal products; the coordinated field does not cover the exercise of rights of pre-emption by public authorities concerning certain goods such as works of art. Information society services should be supervised at the source of the activity, in order to ensure an effective protection of public interest objectives; to that end, it is necessary to ensure that the competent authority provides such protection not only for the citizens of its own country but for all Community citizens; in order to improve mutual trust between Member States, it is essential to state clearly this responsibility on the part of the Member State where the services originate; moreover, in order to effectively guarantee freedom to provide services and legal certainty for suppliers and recipients of services, such information society services should in principle be subject to the law of the Member State in which the service provider is established. This Directive neither aims to establish additional rules on private international law relating to conflicts of law nor does it deal with the jurisdiction of Courts; provisions of the applicable law designated by rules of private international law must not restrict the freedom to provide information society services as established in this Directive. In the context of this Directive, notwithstanding the rule on the control at source of information society services, it is legitimate under the conditions established in this Directive for Member States to take measures to restrict the free movement of information society services. National courts, including civil courts, dealing with private law disputes can take measures to derogate from the freedom to provide information society services in conformity with conditions established in this Directive. Member States, in conformity with conditions established in this Directive, may apply their national rules on criminal law and criminal proceedings with a view to taking all investigative and other measures necessary for the detection and prosecution of criminal offences, without there being a need to notify such measures to the Commission. This Directive, together with the future Directive of the European Parliament and of the Council concerning the distance marketing of consumer financial services, contributes to the creating of a legal framework for the on-line provision of financial services; this Directive does not pre-empt future initiatives in the area of financial services in particular with regard to the harmonisation of rules of conduct in this field; the possibility for Member States, established in

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this Directive, under certain circumstances of restricting the freedom to provide information society services in order to protect consumers also covers measures in the area of financial services in particular measures aiming at protecting investors. The Member States' obligation not to subject access to the activity of an information society service provider to prior authorisation does not concern postal services covered by Directive 97/67/EC of the European Parliament and of the Council of 15 December 1997 on common rules for the development of the internal market of Community postal services and the improvement of quality of service consisting of the physical delivery of a printed electronic mail message and does not affect voluntary accreditation systems, in particular for providers of electronic signature certification service. Commercial communications are essential for the financing of information society services and for developing a wide variety of new, charge-free services; in the interests of consumer protection and fair trading, commercial communications, including discounts, promotional offers and promotional competitions or games, must meet a number of transparency requirements; these requirements are without prejudice to Directive 97/7/EC; this Directive should not affect existing Directives on commercial communications, in particular Directive 98/43/EC. The sending of unsolicited commercial communications by electronic mail may be undesirable for consumers and information society service providers and may disrupt the smooth functioning of interactive networks; the question of consent by recipient of certain forms of unsolicited commercial communications is not addressed by this Directive, but has already been addressed, in particular, by Directive 97/7/EC and by Directive 97/66/EC; in Member States which authorise unsolicited commercial communications by electronic mail, the setting up of appropriate industry filtering initiatives should be encouraged and facilitated; in addition it is necessary that in any event unsolicited commercial communities are clearly identifiable as such in order to improve transparency and to facilitate the functioning of such industry initiatives; unsolicited commercial communications by electronic mail should not result in additional communication costs for the recipient. Member States which allow the sending of unsolicited commercial communications by electronic mail without prior consent of the recipient by service providers established in their territory have to ensure that the service providers consult regularly and respect the opt-out registers in which natural persons not wishing to receive such commercial communications can register themselves. In order to remove barriers to the development of cross-border services within the Community which members of the regulated professions might offer on the Internet, it is necessary that compliance be guaranteed at Community level with professional rules aiming, in particular, to protect consumers or public health; codes of conduct at Community level would be the best means of determining the rules on professional ethics applicable to commercial communication; the drawing-up or, where appropriate, the adaptation of such rules should be encouraged without prejudice to the autonomy of professional bodies and associations. This Directive complements Community law and national law relating to regulated professions maintaining a coherent set of applicable rules in this field.

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E-Commerce Directive (34) Each Member State is to amend its legislation containing requirements, and in particular requirements as to form, which are likely to curb the use of contracts by electronic means; the examination of the legislation requiring such adjustment should be systematic and should cover all the necessary stages and acts of the contractual process, including the filing of the contract; the result of this amendment should be to make contracts concluded electronically workable; the legal effect of electronic signatures is dealt with by Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures; the acknowledgement of receipt by a service provider may take the form of the on-line provision of the service paid for. (35) This Directive does not affect Member States' possibility of maintaining or establishing general or specific legal requirements for contracts which can be fulfilled by electronic means, in particular requirements concerning secure electronic signatures. (36) Member States may maintain restrictions for the use of electronic contracts with regard to contracts requiring by law the involvement of courts, public authorities, or professions exercising public authority; this possibility also covers contracts which require the involvement of courts, public authorities, or professions exercising public authority in order to have an effect with regard to third parties as well as contracts requiring by law certification or attestation by a notary. (37) Member States' obligation to remove obstacles to the use of electronic contracts concerns only obstacles resulting from legal requirements and not practical obstacles resulting from the impossibility of using electronic means in certain cases. (38) Member States' obligation to remove obstacles to the use of electronic contracts is to be implemented in conformity with legal requirements for contracts enshrined in Community law. (39) The exceptions to the provisions concerning the contracts concluded exclusively by electronic mail or by equivalent individual communications provided for by this Directive, in relation to information to be provided and the placing of orders, should not enable, as a result, the by-passing of those provisions by providers of information society services. (40) Both existing and emerging disparities in Member States' legislation and caselaw concerning liability of service providers acting as intermediaries prevent the smooth functioning of the internal market, in particular by impairing the development of cross-border services and producing distortions of competition; service providers have a duty to act, under certain circumstances, with a view to preventing or stopping illegal activities; this Directive should constitute the appropriate basis for the development of rapid and reliable procedures for removing and disabling access to illegal information; such mechanisms could be developed on the basis of voluntary agreements between all parties concerned and should be encouraged by Member States; it is in the interest of all parties involved in the provision of information society services to adopt and implement such procedures; the provisions of this Directive relating to liability should not preclude the development and effective operation, by the different interested parties, of technical systems of protection and identification and of technical surveillance instruments made possible by digital technology within the limits laid down by Directives 95/46/EC and 97/66/EC.

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E-Commerce Directive (41) This Directive strikes a balance between the different interests at stake and establishes principles upon which industry agreements and standards can be based. (42) The exemptions from liability established in this Directive cover only cases where the activity of the information society service provider is limited to the technical process of operating and giving access to a communication network over which information made available by third parties is transmitted or temporarily stored, for the sole purpose of making the transmission more efficient; this activity is of a mere technical, automatic and passive nature, which implies that the information society service provider has neither knowledge of nor control over the information which is transmitted or stored. (43) A service provider can benefit from the exemptions for "mere conduit" and for "caching" when he is in no way involved with the information transmitted; this requires among other things that he does not modify the information that he transmits; this requirement does not cover manipulations of a technical nature which take place in the course of the transmission as they do not alter the integrity of the information contained in the transmission. (44) A service provider who deliberately collaborates with one of the recipients of his service in order to undertake illegal acts goes beyond the activities of "mere conduit" or "caching" and as a result cannot benefit from the liability exemptions established for these activities. (45) The limitations of the liability of intermediary service providers established in this Directive do not affect the possibility of injunctions of different kinds; such injunctions can in particular consist of orders by courts or administrative authorities requiring the termination or prevention of any infringement, including the removal of illegal information or the disabling of access to it. (46) In order to benefit from a limitation of liability, the provider of an information society service, consisting of the storage of information, upon obtaining actual knowledge or awareness of illegal activities has to act expeditiously to remove or to disable access to the information concerned; the removal or disabling of access has to be undertaken in the observance of the principle of freedom of expression and of procedures established for this purpose at national level; this Directive does not affect Member States' possibility of establishing specific requirements which must be fulfilled expeditiously prior to the removal or disabling of information. (47) Member States are prevented from imposing a monitoring obligation on service providers only with respect to obligations of a general nature; this does not concern monitoring obligations in a specific case and, in particular, does not affect orders by national authorities in accordance with national legislation. (48) This Directive does not affect the possibility for Member States of requiring service providers, who host information provided by recipients of their service, to apply duties of care, which can reasonably be expected from them and which are specified by national law, in order to detect and prevent certain types of illegal activities. (49) Member States and the Commission are to encourage the drawing-up of codes of conduct; this is not to impair the voluntary nature of such codes and the possibility for interested parties of deciding freely whether to adhere to such codes. (50) It is important that the proposed directive on the harmonisation of certain aspects of copyright and related rights in the information society and this Directive come into force within a similar time scale with a view to establishing a 411

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clear framework of rules relevant to the issue of liability of intermediaries for copyright and relating rights infringements at Community level. Each Member State should be required, where necessary, to amend any legislation which is liable to hamper the use of schemes for the out-of-court settlement of disputes through electronic channels; the result of this amendment must be to make the functioning of such schemes genuinely and effectively possible in law and in practice, even across borders. The effective exercise of the freedoms of the internal market makes it necessary to guarantee victims effective access to means of settling disputes; damage which may arise in connection with information society services is characterised both by its rapidity and by its geographical extent; in view of this specific character and the need to ensure that national authorities do not endanger the mutual confidence which they should have in one another, this Directive requests Member States to ensure that appropriate court actions are available; Member States should examine the need to provide access to judicial procedures by appropriate electronic means. Directive 98/27/EC, which is applicable to information society services, provides a mechanism relating to actions for an injunction aimed at the protection of the collective interests of consumers; this mechanism will contribute to the free movement of information society services by ensuring a high level of consumer protection. The sanctions provided for under this Directive are without prejudice to any other sanction or remedy provided under national law; Member States are not obliged to provide criminal sanctions for infringement of national provisions adopted pursuant to this Directive. This Directive does not affect the law applicable to contractual obligations relating to consumer contracts; accordingly, this Directive cannot have the result of depriving the consumer of the protection afforded to him by the mandatory rules relating to contractual obligations of the law of the Member State in which he has his habitual residence. As regards the derogation contained in this Directive regarding contractual obligations concerning contracts concluded by consumers, those obligations should be interpreted as including information on the essential elements of the content of the contract, including consumer rights, which have a determining influence on the decision to contract. The Court of Justice has consistently held that a Member State retains the right to take measures against a service provider that is established in another Member State but directs all or most of his activity to the territory of the first Member State if the choice of establishment was made with a view to evading the legislation that would have applied to the provider had he been established on the territory of the first Member State. This Directive should not apply to services supplied by service providers established in a third country; in view of the global dimension of electronic commerce, it is, however, appropriate to ensure that the Community rules are consistent with international rules; this Directive is without prejudice to the results of discussions within international organisations (amongst others WTO, OECD, Uncitral) on legal issues. Despite the global nature of electronic communications, coordination of national regulatory measures at European Union level is necessary in order to avoid fragmentation of the internal market, and for the establishment of an ap-

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(61) (62) (63)

(64) (65)

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propriate European regulatory framework; such coordination should also contribute to the establishment of a common and strong negotiating position in international forums. In order to allow the unhampered development of electronic commerce, the legal framework must be clear and simple, predictable and consistent with the rules applicable at international level so that it does not adversely affect the competitiveness of European industry or impede innovation in that sector. If the market is actually to operate by electronic means in the context of globalisation, the European Union and the major non-European areas need to consult each other with a view to making laws and procedures compatible. Cooperation with third countries should be strengthened in the area of electronic commerce, in particular with applicant countries, the developing countries and the European Union's other trading partners. The adoption of this Directive will not prevent the Member States from taking into account the various social, societal and cultural implications which are inherent in the advent of the information society; in particular it should not hinder measures which Member States might adopt in conformity with Community law to achieve social, cultural and democratic goals taking into account their linguistic diversity, national and regional specificities as well as their cultural heritage, and to ensure and maintain public access to the widest possible range of information society services; in any case, the development of the information society is to ensure that Community citizens can have access to the cultural European heritage provided in the digital environment. Electronic communication offers the Member States an excellent means of providing public services in the cultural, educational and linguistic fields. The Council, in its resolution of 19 January 1999 on the consumer dimension of the information society, stressed that the protection of consumers deserved special attention in this field; the Commission will examine the degree to which existing consumer protection rules provide insufficient protection in the context of the information society and will identify, where necessary, the deficiencies of this legislation and those issues which could require additional measures; if need be, the Commission should make specific additional proposals to resolve such deficiencies that will thereby have been identified,

…

Article 5 General information to be provided 1. In addition to other information requirements established by Community law, Member States shall ensure that the service provider shall render easily, directly and permanently accessible to the recipients of the service and competent authorities, at least the following information: (a) the name of the service provider; (b) the geographic address at which the service provider is established; (c) the details of the service provider, including his electronic mail address, which allow him to be contacted rapidly and communicated with in a direct and effective manner;

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(d) where the service provider is registered in a trade or similar public register, the trade register in which the service provider is entered and his registration number, or equivalent means of identification in that register; (e) where the activity is subject to an authorisation scheme, the particulars of the relevant supervisory authority; (f) where the service provider is registered in a trade or similar public register, the trade register in which the service provider is entered and his registration number, or equivalent means of identification in that register; – any professional body or similar institution with which the service provider is registered, – the professional title and the Member State where it has been granted, – a reference to the applicable professional rules in the Member State of establishment and the means to access them; (g) where the service provider undertakes an activity that is subject to VAT, the identification number referred to in Article 22(1) of the sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment. 2. In addition to other information requirements established by Community law, Member States shall at least ensure that, where information society services refer to prices, these are to be indicated clearly and unambiguously and, in particular, must indicate whether they are inclusive of tax and delivery costs. Bibliography: Börner/König, ‘Mobile Bezahldienste – Widersprüchliche und praxisferne Informationspflichten des Fernabsatz- und E-Commerce-Rechts’ (2001) 2 K&R 92; Brownsword, ‘The E-Commerce Directive, Consumer Transactions, and the Digital Single Market: Questions of Regulatory Fitness, Regulatory Disconnection and Rule Redirection’ in: Grundmann (ed.), European Contract Law in the Digital Age (Intersentia 2018), p. 165–204; Hoeren, ‘Vorschlag für eine EU-Richtlinie über E-Commerce. Eine erste kritische Analyse’ (1999) 4 MMR 192; Łętowska, Prawo umów konsumenckich (C.H. Beck 1999); Litwiński, ‘Świadczenie usług drogą elektroniczną’ in: Podrecki (ed.), Prawo Internetu (LexisNexis 2004), p. 166–245; Lodder, ‘Information requirements overload? Assessing disclosure duties under the E-Commerce Directive, Services Directive and Consumer Directive’ in: Savin/Trzaskowski (eds), Research Handbook on EU Internet Law (Edward Elgar 2014), p. 358–382; Lodder, ‘Directive 2000/31/EC’ in: Lodder/ Murray (eds), EU Regulation of E-Commerce (Edward Elgar 2017), p. 15–58; Lorenz, ‘Die Telefonnummer in der Anbieterkennzeichnung’ (2009) 8 VuR 295; Lorenz, ‘Anonymität im Internet? – Zur Abgrenzung von Diensteanbietern und Nutzern’ (2014) 3 VuR 83; Lubasz, Handel elektroniczny. Bariery prawne (LexisNexis 2013); Lubasz/Namysłowska (eds), Świadczenie usług drogą elektroniczną i dostęp warunkowy. Komentarz do ustaw (LexisNexis 2011); Nordhausen, ‘Information Requirements in the E-Commerce Directive and the Proposed Directive on Unfair Commercial Practices’ in: Howells/Janssen/Schulze (eds), Information Rights and Obligations. A Challenge to Party Autonomy and Transactional Fairness (Ashgate 2005), p. 93–114; Spindler/Schuster (eds), Recht der elektronischen Medien (4 th edn, C.H. Beck 2019); Twigg-Flesner, ‘Information Requirements and the Internet’ in: Terryn/Straetmans/Colaert (eds), Landmark Cases of EU Consumer Law (Intersentia 2013), p. 509–522; Vogel, ‘E-Commerce: Directives of the European Union and Implementation in German Law’ in: Campbell (ed.), E-Commerce: Law & Jurisdiction (Kluwer Law International 2002), p. 29–78; Wellbrock, Ein kohärenter Rechtsrahmen für den elektronischen Geschäftsverkehr in Europa (Nomos 2005).

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A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Relation to other information requirements in EU law . . . . . . . . . . . . . . . . . . . . . . . II. Level of harmonisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 6 7

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Personal scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Service provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Recipient of a service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 10 10 22

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General information to be provided 3. Competent authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Material scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Name of the service provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Geographic address of the service provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Details of the service provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Trade register and registration number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Particulars of the relevant supervisory authority . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Information regarding regulated professions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. VAT identification number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9. Tax and delivery costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Methods of providing information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Easy access to information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Direct access to information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Permanent access to information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

24 25 25 27 28 30 36 37 39 44 46 50 50 51 55 58

D. Criticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

59

A. Function* Adopted in the year 2000, the E-Commerce Directive was the first legal act regulating 1 fundamental e-commerce issues at European level, with the aims of stimulating economic growth and investment in innovation by European companies, and enhancing the competitiveness of European industry.1 From the outset it was clear to the EU legislator that the expected development would not take place without increasing confidence in e-commerce.2 Art. 5 serves to contribute to enhancing confidence in e-commerce by subjecting the service provider to a general pre-contractual obligation to provide comprehensive information to recipients of a service. Art. 5(1) contains a list of information to be provided by the service provider to the 2 recipient of the service and stipulates how to ensure access to that information. Art. 5(2) specifies the obligation with regard to how the price of the information society service is to be indicated. The availability of relevant information identifying the service provider protects re- 3 cipients of a service, who are, vis-à-vis the service provider, weaker, potentially less experienced, participants of e-commerce. However, by referring to ‘recipients of a service’3 – and thus the definition in Art. 2(d) – the personal scope of Art. 5 encompasses not only B2C relations but also B2B relations, thus reflecting the need to protect all users of e-commerce by placing recipients-consumers on an equal footing with professional recipients. Such a solution is not surprising for at least two reasons. Firstly, in 2000, the EU legislator’s objective was to develop e-commerce by affording protection to both consumers and professionals. Secondly, in the case of information society services, providing contract certainty first and foremost through clear and comprehensive identification of a service provider is beneficial for other party to the contractual relationship, irrespective of whether they act for private or professional reasons. Nevertheless, the coverage of B2C and B2B relations does not mean that the examination of the compliance with Art. 5 is identical for both situations. Depending on the specific case, the

* Part of the research leading to this commentary was supported by the National Science Centre (Narodowe Centrum Nauki) in Poland on the basis of Decision No. 2018/31/B/HS5/01169. 1 Recital 2. 2 Recital 7. 3 See below → mn. 22–23.

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benchmark is either the average consumer4 or the average non-consumer5. If in a particular case the recipient can be both a consumer and a trader (‘dual use’), then the service provider should take into account the need to protect the weaker party by increasing the protection to the consumer level. This interpretation is supported by the intention of EU legislator not to reduce by the E-Commerce Directive the level of consumer protection offered by consumer legislation, i.e. originally the Distance Selling Directive (now the Consumer Rights Directive).6 4 The transparency of e-commerce, guaranteed by Art. 5, is a response to the anonymity of relations that is a characteristic of the Internet.7 Art. 5 also implements the right to information, understood as the right to be informed, derived from the consumer acquis,8 and extends it to all users of e-commerce by including non-consumers. The possibility to identify the other party to the legal relationship from the perspective of the recipient of a service contributes not only to an informed decision but also enables the proper performance of the contract and the eventual redress. 5 Art. 5 is not the only provision of the E-Commerce Directive which lays down information obligations. The information requirements in Art. 5 are complemented by Art. 6 on commercial communication and Art. 10 on information to be provided when concluding a contract.

B. Context I. Relation to other information requirements in EU law 6

Art. 5 introduces information requirements in addition to other information requirements established by EU law. This means that the service provider is not only obliged to indicate the information required by Art. 5 but also to provide information required by other EU legislation, where applicable, though especially to the provisions of consumer acquis listed in Recital 11,. The legal situation has changed significantly since the E-Commerce Directive was adopted, but the relationship between the Directive and consumer acquis has remained the same: the E-Commerce Directive is without prejudice to the level of protection it sets. At present, the most important piece of legislation regulating traders’ information obligations towards consumers is the Consumer Rights Directive. Further legal acts should be also taken into account, e.g. the Unfair Commercial Practices Directive,9 Consumer Credit Directive, and Package Travel Directive.

II. Level of harmonisation 7

The information catalogue in Art. 5 is non-exhaustive, as indicated by the phrase ‘at least’, which also means that Art. 5 aims at minimum harmonisation. The national legislator may therefore extend the list of information, which means that the specific requirements may vary across the Member States. For instance, Germany requires public limited companies, partnerships limited by shares and companies with limited liability to inRecital 18 UCPD. For details see Namysłowska in: Lubasz/Namysłowska, Art. 9, mn. 5. CJEU, C-112/99 Toshiba EU:C:2001:566, para. 52. 6 Recital 11. 7 Micklitz/Schirmbacher in: Spindler/Schuster, § 5 TMG, mn. 2. 8 Łętowska, p. 159. 9 See Nordhausen, p. 93–114. 4

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dicate if they are in the process of insolvency or liquidation.10 The Act implementing the E-Commerce Directive in Poland added the obligation to provide access to information on specific risks related to the use of the service provided electronically and on the function and purpose of software or data that are not part of the content of the service, entered by the service provider to the ICT system used by the service recipient. 11 Additional obligations imposed on service providers by the national legislator must 8 be proportionate. One should bear in mind that information obligations lead to a conflict between the recipient’s right to information and the interest of the service provider, in particular the freedom to conduct business as stipulated in Art. 16 EU Charter. It is thus necessary to ensure the right balance between the interests of the service provider and the recipient.12 In doing so, for example, a national obligation to provide recipients with a telephone number in order to allow them to contact a service provider is disproportionate, because it imposes an obligation on the trader to put in place a telephone line, which, in particular in the economic context of the functioning of certain undertakings, increases their costs.13 Interpretation of Art. 5 requires consideration of ensuring the right balance between 9 a high level of user protection and the competitiveness of undertakings.14

C. Explanation I. Personal scope 1. Service provider The information obligations laid down in Art. 5 are addressed to a service provider, 10 defined in Art. 2(b) as a natural or legal person who provides an information society service. The definition of a service provider is an autonomous definition. Art. 2(b) only 11 refers to the provision of information society services. The E-Commerce Directive does not lay down additional requirements, in particular registration or notification to a public authority, unless such a requirement results from national legislation. This definition does not require stability or continuity, which are part of the traditional national definitions of a trader.15 Art. 5 therefore applies even to incidental provision of information society services by a trader who primarily sells offline.16 This interpretation is reinforced a contrario by the regulatory approach used in the Distance Selling Directive, which preceded the E-Commerce Directive. Art. 2 No. 1 Distance Selling Directive required in the definition of distance contract an organised distance sales or service-provision scheme. This requirement remains in Art. 2 No. 7 CRD. The only requirement for being a service provider in the meaning of Art. 2(d) is to 12 provide an information society service. An information society service is defined, in § 5(1)(7) TMG (Telemediengesetz – Telemedia Act). Art. 6 Ustawa o świadczeniu usług drogą elektroniczną (2002 Act on Providing Services by Electronic Means). 12 CJEU, C-649/17 Amazon EU EU:C:2019:576, para. 44. 13 In relation to a similar provision of the Consumer Rights Directive, ibid., para. 48. 14 In relation to consumer protection under a similar provision of the Consumer Rights Directive see CJEU, C-430/17 Walbusch Walter Busch EU:C:2019:47, paras 41 and 42; C-649/17 Amazon EU EU:C:2019:576, para. 44. 15 e.g. § 14 BGB (German Civil Code), Art. 43(1) KC (Polish Civil Code). 16 cf. Micklitz/Schirmbacher in: Spindler/Schuster, § 5 TMG, mn. 11. 10

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turn, in Art. 2(a) by reference to the definition in the Technical Standards and Regulations Directive which was repealed by the Information Provision Directive. In accordance with Art. 1(1)(b) Information Provision Directive, information society service covers any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services. a) Remuneration. The definition in Art. 1(1)(b) Information Provision Directive requires remuneration for the information society service. The remuneration does not necessarily have to be paid in every case, but it must be normally associated with the type of services in question. Information society services do not have to be remunerated by the recipients of a service,17 such as those offering online information or commercial communication.18 This interpretation corresponds with the concept of ‘services’ within the meaning of Art. 57 TFEU, which does not require the service to be paid for by those for whom it is performed.19 Therefore, the source of financing is irrelevant. The information society service may be remunerated e.g. by the incomes generated by advertisements posted on a website,20 the costs of the performance of a service for the purposes of advertising the goods sold and services provided which are incorporated in the price of goods and services.21 This approach is consistent with the concept of payment for digital content and digital service adopted in the Digital Content Directive that accepts the provision of personal data as a counter-performance.22 b) Provision at a distance. Providing an information society service at a distance means that the service is provided without the simultaneous presence of the parties, 23 which should be understood as the lack of their simultaneous physical presence ensuring direct contact in a given place at the time of service provision. The decisive factor here is the moment at which the service is provided, not the moment at which the service is ordered, that is the moment at which the contract is concluded, as in the case of distance contracts within the meaning of Art. 2 No. 7 CRD. For this reason, a service such as the provision of Internet access, even if ordered at the point of sale of the service provider personally by the recipient of the service, remains an electronically supplied service. Its provision takes place without the simultaneous presence of the parties. The question arises whether this condition is met if the service provider and the recipient are physically in one place, but the recipient only uses a computer with Internet access made available in that place by the service provider for the provision of the service. In such a case, the decisive element is not so much local but personal connection that is the fact of a direct contact between the parties in order to provide the service or lack thereof. Being in the same place without a direct contact between the parties in order to provide the service does not exclude this method of providing the service from the scope of the ECommerce Directive.24 Annex I Information Provision Directive lists examples of services not covered by the definition ‘services provided at a distance’ such as: (i) medical examinations or treatment at a doctor’s surgery using electronic equipment where the patient is physically present; (ii) consultation of an electronic catalogue in a shop with the customer on site; 17 Recital 18; CJEU, C-291/13 Papasavvas EU:C:2014:2209, para. 28; CJEU, C-484/14 McFadden EU:C:2016:689, para. 41. 18 CJEU, C-339/15 Vanderborght EU:C:2017:335, para. 36. 19 CJEU, C-291/13 Papasavvas EU:C:2014:2209, para. 29 and cited case-law. 20 ibid., para. 30. 21 CJEU, C-484/14 McFadden EU:C:2016:689, para. 42 and cited case-law. 22 Recital 24 DCD. See n 47. 23 Art. 1(1)(b)(i) Information Provision Directive. 24 For details see Lubasz, p. 79.

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(iii) plane ticket reservation at a travel agency in the physical presence of the customer by means of a network of computers; and (iv) electronic games made available in a video arcade where the customer is physically present. c) Electronic means. The concept of an information society service requires its provision by electronic means. ‘By electronic means’ means that the service is sent initially and received at its destination by means of electronic equipment for the processing (including digital compression) and storage of data, and entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means.25 The concept of information society services therefore includes services which consist in the transmission of information through a communication network, the provision of access to a communication network or the hosting of information transmitted by a recipient of services, as well as point-to-point services, in particular the provision of digital content by electronic means, such as video-on-demand services. The definition of ‘electronic means’ implies the lack of material substrate of the information society service, which has far-reaching consequences. While the notion of ‘information society services’ covers a wide range of economic activities which take place online, including contracts for the sale of goods, the delivery of goods falls outside the scope of the E-Commerce Directive.26 Services not provided by electronic means are e.g. (i) services having material content even though provided via electronic devices, i.e. automatic cash or ticket dispensing machines (banknotes, rail tickets) and access to road networks, car parks, etc., charging for use, even if there are electronic devices at the entrance/exit controlling access and/or ensuring correct payment is made; (ii) offline services: distribution of CD-ROMs or software on diskettes; (iii) services which are not provided via electronic processing/ inventory systems, i.e. voice telephony services, telefax/telex services, services provided via voice telephony or fax, telephone/telefax consultation of a doctor, telephone/telefax consultation of a lawyer and telephone/telefax direct marketing.27 d) Individual request. A condition for a service to be an information society service is to provide the service at the individual request of a recipient of services, which means that the service is provided through the transmission of data on individual request. 28 It is the service recipient who decides when, where and what specific content of the service is to be provided. This condition is met in relation to services such as video on demand, sending e-mails and use of social networking sites. Services not provided at the individual request of a recipient are services provided by transmitting data without individual demand for simultaneous reception by an unlimited number of individual receivers (point to multipoint transmission), e.g. television broadcasting services (including near-video on-demand services), covered by Art. 1(1) (e) AVMS Directive, radio broadcasting services and (televised) teletext 29 or unsolicited commercial communication30.

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19

20

21

2. Recipient of a service The addressee of an information society service is the recipient of a service. Pursuant 22 to the definition in Art. 2(d), a recipient of a service means any natural or legal person who, for professional ends or otherwise, uses an information society service, in particuArt. 1(1)(b)(ii) Information Provision Directive. Art. 2(h)(ii); CJEU, C-108/09 Ker-Optika EU:C:2010:725, paras 29 and 30. 27 Annex I Information Provision Directive. 28 Art. 1(1)(b)(iii) Information Provision Directive. 29 Annex I Information Provision Directive. 30 See above → mn. 17 and → Art. 7 E-Commerce Directive, mn. 9. 25

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lar for the purposes of seeking information or making it accessible. The definition of the recipient of a service covers all types of usage of information society services, 31 both by persons who seek information, e.g. users of blogs, online newspaper editions, specialist websites, content applications, and by persons who provide information or content, e.g. users of social networking sites that are content aggregators, users of discussion forums.32 These activities may be carried out for private or professional reasons,33 thus a recipient of the service may be either a trader or a consumer. 23 The recipient of a service is any person actually using the service, regardless of whether or not a contract has been concluded for the provision of services by electronic means. On the contrary, such a distinction is made in the ePrivacy Directive, which distinguishes between ‘user’ (without conclusion of a contract) and ‘subscriber’ (after conclusion of a contract).

3. Competent authorities 24

The information referred to in Art. 5 is also to be made available to the competent authority, i.e. authority in the Member States controlling and supervising the providers of information society services. This is linked to the obligation imposed on Member States in the Internal Market clause [Art. 3(1)], i.e. the obligation to ensure that information society services provided by a service provider established in their territory comply with the national rules applicable in their country and falling within the coordinated field. This provision shall guarantee that, at the source of the service provider’s activities, the public interest and the interests of the market participants are effectively protected by ensuring legal certainty34, including through effective control mechanisms targeted at identified information society service providers, in particular as regards compliance with disclosure requirements.

II. Material scope 1. Overview Art. 5(1) lists information requirements of a service provider to a recipient of a service, regardless of the type of information society service and irrespective of the conclusion of a contract. The minimum level of harmonisation introduced by the E-Commerce Directive may lead to a wider list of information requirements in a Member State.35 In addition, Art. 5(1) sets out how to access the mandatory information. 26 Art. 5(2) provides for a specific regime for the presentation of the price of an information society service. This provision does not establish an obligation to indicate the price, leaving this issue to other EU rules (‘In addition to other information requirements established by Community law’). However, where an information society service is linked to an obligation to pay a price and that price is indicated, Art. 5(2) requires this to be done clearly and unambiguously as well as to indicate whether it includes tax and delivery costs. 25

Recital 20. For more examples see Lorenz (2014), 83. 33 Recital 20. 34 Recital 22. 35 See above → mn. 6. 31

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2. Name of the service provider The obligation in Art. 5(1)(a) to indicate the name of the service provider allows the 27 user to know who provides an information society service. The obligation is imposed on the service provider who may be a natural or legal person [Art. 2(b)]. In the case of natural persons, the surname and at least the first name used have to be indicated. In the case of persons known to the public, e.g. artists, a pseudonym is sufficient, if it allows to identify the service provider by the recipient of a service. Legal persons and unincorporated entities, to which the provisions on legal persons apply, must indicate the correct and complete company name.36

3. Geographic address of the service provider Pursuant to Art. 5(1)(b), the geographic address, at which the service provider is es- 28 tablished, is to be provided. The wording ‘geographic address’ excludes the provision of data other than geographical data, such as a mailbox37 or an Internet address. Therefore, the full address must be provided, including the city with postcode, street with building number and premises number (if applicable). The requirement to indicate the address of the place of establishment is derived from 29 the fact that a normative character has been given to the territorial link between the place of establishment of the service provider and the Member State responsible for their supervision. This was to ensure the freedom to provide these services within the meaning of Art. 56 TFEU, through mutual recognition as a result of the implementation of the internal market clause (country of origin principle) in Art. 3(1) and, consequently, to contribute to the legal certainty for service providers and recipients of services. 38 The same objective is pursued by the definition in Art. 2(c) of ‘established service provider’, which means a provider who effectively pursues an economic activity using a fixed establishment for an indefinite period, whereas the presence and use of the technical means and technologies required to provide the service do not, in themselves, constitute an establishment of the provider. The place at which a service provider is established should be determined in conformity with CJEU case-law according to which this requirement is also fulfilled when a company is constituted for a given period. The place of establishment of a company providing services via an Internet website is not the place at which the technology supporting its website is located or the place at which its website is accessible, but the place where it pursues its economic activity. In cases where a provider has several places of establishment it is important to define from which place of establishment the service concerned is provided. In cases where it is difficult to determine from which of several places of establishment a given service is provided, this is the place where the provider has the centre of his activities relating to this particular service.39

4. Details of the service provider Art. 5(1)(c) prescribes that the service provider gives details which allow him to be 30 contacted rapidly and communicated with in a direct and effective manner. It is the service provider who has to specify which data allow him to be contacted 31 rapidly and communicated with in a direct and effective manner. Art. 5(1)(c) only indiMicklitz/Schirmbacher in: Spindler/Schuster, § 5 TMG, mn. 47. Lodder (2017), section 2.3.2. 38 Recital 22. 39 Recital 19. 36

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cates that the service provider is to supply recipients with his electronic mail address. Due to the use of the word ‘including’, the electronic mail address must be accompanied by at least one additional means of communication.40 The obligation to provide an electronic mail address does not imply that the EU legislator wanted to exclude non-electronic means of communication. Although the objective pursued by the E-Commerce Directive was to promote the development of e-commerce, the EU legislator did not want to isolate e-commerce from the rest of the internal market.41 For this reason, in accordance with Art. 5, non-electronic means of communication may be used in addition to electronic means. The means of communication chosen by the service provider must satisfy the criteria of guaranteeing a rapid contact and be direct and effective. Similar requirements are formulated in Art. 6(1)(c) CRD and were referred to by the ECJ in Amazon EU. 42 According to the Court, the possibility to contact traders quickly and to communicate with them efficiently is of fundamental importance for ensuring and effectively implementing consumer rights and, in particular, the right of withdrawal.43 In interpreting that provision, a right balance must be struck between a high level of consumer protection and the competitiveness of undertakings, without undermining the freedom to conduct a business.44 While Art. 6(1)(c) CRD does not specify the precise nature of the means of communication which must be established by traders, that provision necessarily requires traders to put at the disposal of all consumers a means of communication which allows the latter to contact them quickly and to communicate with them efficiently. 45 This reasoning can be applied to the analysis of Art. 5(1)(c) E-Commerce Directive, subject to the broader personal scope of the E-Commerce Directive in relation to the Consumer Rights Directive. Direct communication does not mean communication in the form of an exchange of words, i.e. dialogue, but communication between service provider and recipient of a service in absence of an intermediary.46 Service providers may provide an electronic enquiry template,47 by means of which users can contact them on a website and receive a written response or can be quickly called back48, except where a recipient of the service, having contacted the provider by electronic means and being deprived of network access, requests the provider to provide a non-electronic means of communication. 49 Methods enabling direct contact are voice mail and call centre. Moreover, they guarantee the availability of information also in case of lack of access to the Internet. 50 However, unlike in Art. 21 CRD, there is no provision in the E-Commerce Directive governing a restriction on the level of charges for telephone calls in excess of the basic tariff. Relevant EU or national legislation regulating specific personal relationships applies. Rapid and effective communication does not mean that the answer to a question must be immediate. Communication is effective if it provides adequate information within a reasonable period of time compatible with the needs or legitimate expecta-

CJEU, C‑298/07 deutsche internet versicherung EU:C:2008:572, para. 17. ibid., para. 38. 42 CJEU, C-649/17 Amazon EU EU:C:2019:576. 43 ibid., para. 41. See also the comments under Consumer Rights Directive → Art, 6, mn. 28 et seq. 44 ibid., para. 44 and by analogy CJEU, C-430/17 Walbusch Walter Busch EU:C:2019:47, paras 41 and 42. 45 CJEU, C-649/17 Amazon EU EU:C:2019:576, para. 46. 46 CJEU, C‑298/07 deutsche internet versicherung EU:C:2008:572, para. 29. 47 Critically Lorenz (2009), 295. 48 CJEU, C-649/17 Amazon EU EU:C:2019:576, para. 52. 49 CJEU, C‑298/07 deutsche internet versicherung EU:C:2008:572, paras 35 and 39. 50 Micklitz/Schirmbacher in: Spindler/Schuster, § 5 TMG, mn. 62. 40

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tions of the recipient.51 The aim of this provision was to ensure that the recipient of a service communicates with the service provider in a smooth manner. The ECJ has held that, an electronic enquiry template may be regarded as offering a direct and effective means of communication, when the service provider answers the question within 30 to 60 minutes.52 Details of the service provider do not need to include a telephone number53, although communication by telephone may be seen as direct and effective communication,54 especially since the telephone is the most widespread means of communication beside communication via e-mail.55

5. Trade register and registration number Pursuant to Art. 5(1)(d), where the service provider is registered in a trade or similar 36 public register, the trade register in which the service provider is entered and his registration number, or equivalent means of identification in that register must be indicated. In the case of cross-border e-commerce the requirement to indicate the register details applies, in accordance with the country of origin principle, to the national register competent for the registered office of the service provider. The disclosure of registers is subject to Directive 2017/1132 relating to certain aspects of company law 56.

6. Particulars of the relevant supervisory authority In accordance with Art. 5(1)(e), the service provider is obliged to indicate the partic- 37 ulars of the relevant supervisory authority. This obligation arises if the activity is subject to an authorisation scheme resulting from national provisions governing the activity in question, the so-called regulated activity. The concept of authorisation covers not only authorisations in the strict sense, but also concessions and other registration requirements in areas of particular importance for the security of the state or citizens or for other important public interests. The E-Commerce Directive does not clarify which data on the relevant supervisory 38 authority must be provided. However, these data enable the recipient of a service to contact the authority. Therefore, the name of the authority and the link to its website is sufficient to comply with the obligation in Art. 5(1)(e).57

7. Information regarding regulated professions As concerns the regulated professions, the service provider shall render the informa- 39 tion about any professional body or similar institution with which the service provider is registered, about the professional title and the Member State where it has been granted, and a reference to the applicable professional rules in the Member State of establishment and the means to access them [Art. 5(1)(f)]. The notion ‘regulated profession’ is defined in Art. 1(g) by reference to definitions in 40 legal acts which have been repealed after the adoption of the E-Commerce Directive. The provision referred to Directive 89/48/EEC58 and Directive 92/51/EEC59, which were CJEU, C‑298/07 deutsche internet versicherung EU:C:2008:572, para. 30. ibid., para. 35. 53 See above → mn. 8. 54 CJEU, C‑298/07 deutsche internet versicherung EU:C:2008:572, para. 28. 55 Lorenz (2009), 297. 56 OJ L 169, 30.6.2017, p. 46. 57 Micklitz/Schirmbacher in: Spindler/Schuster, § 5 TMG, mn. 72. 58 OJ L 19, 24.1.1989, p. 16. 59 OJ L 209, 24.7.1992, p. 25. 51

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subsequently replaced by the Professional Qualifications Directive. The term ‘regulated profession’ is currently defined in Art. 3(1)(a) Professional Qualifications Directive. 60 Pursuant to this definition ‘regulated profession’ means professional activity or group of professional activities, access to which, the pursuit of which, or one of the modes of pursuit of which is subject, directly or indirectly, by virtue of legislative, regulatory or administrative provisions to the possession of specific professional qualifications; in particular, the use of a professional title limited by legislative, regulatory or administrative provisions to holders of a given professional qualification shall constitute a mode of pursuit. Furthermore, in accordance with Art. 3(2), a profession practised by members of associations or organisations from Ireland and the United Kingdom listed in Annex I Professional Qualifications Directive shall be treated as a regulated profession. 41 The obligation to provide a professional body or similar institution with which the service provider is registered applies to the designation of a professional organisation, a professional chamber or professional associations governed by national law for representatives of regulated professions. The determination of the relevant organisations depends on the regulations concerning the professional bodies of regulated professions adopted in national law. 42 In view of the national legal particularities on regulated professions, the professional title must be accompanied by an indication of the Member State of admission to the profession. 43 A reference to the applicable professional rules in the Member State of establishment and the means to access them consists of the provision of access, e.g. in the form of a link, to the relevant page of a professional organisation containing provisions governing the exercise of the profession, relevant for the exercise of the profession internal acts of professional bodies, or finally rules of professional ethics, if such rules are adopted by a given profession.

8. VAT identification number Pursuant to Art. 5(1)(g) where the service provider undertakes an activity that is subject to VAT, he is required to provide a tax identification number. The provision refers to the relevant definition in Directive 77/388/EEC61, which was repealed by the EU VAT Directive. Therefore, the reference to the tax identification number should be made to Art. 214 EU VAT Directive. 45 The requirement protects the tax system rather than the customer or consumer. This illustrates that the E-Commerce Directive does not only protects the interests of those involved directly in e-commerce, i.e. of the service provider and the recipient of a service.62 44

9. Tax and delivery costs 46

Art. 5(2) imposes a requirement on Member States to ensure that, where information society services refer to prices, these are to be indicated clearly and unambiguously and, in particular, indicate whether they are inclusive of tax and delivery costs. The provision explicitly states that it is without prejudice to other EU law. At present, the relevant rules result in particular from the consumer acquis, e.g. the Consumer Rights Directive, Unfair Commercial Practices Directive and the Digital Content Directive. 60 To this definition also refers the general definition of regulated profession in Art. 4 No. 11 Services Directive. 61 OJ L 145, 13.6.1977, p. 1. 62 Micklitz/Schirmbacher in: Spindler/Schuster, § 5 TMG, mn. 85.

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The rule in Art. 5(2) is linked to the remuneration requirement for an information 47 society service set out in its definition in Art. 2(b) Information Provision Directive. 63 The E-Commerce Directive does not contain a definition of price. The Price Indication Directive on price indication may be applied and Art. 2 No. 7 DCD refers to price paid for a digital content or a digital service as money or a digital representation of value, which may include electronic vouchers or e-coupons.64 The method of payment must be obvious to the recipient of a service.65 The indication of the price must be accompanied by information on whether it takes 48 account of applicable taxes and delivery charges. A more extensive requirement for the presentation of price information follows from Art. 6(1)(e) CRD, but it only covers B2C relations.66 The prices are to be indicated clearly and unambiguously. This requirement aims at 49 ensuring awareness of the recipient of a service as regards the fact of payment, the method of payment and the amount that has to be paid, as well as non-price burdens related to the provision of information society services, which the recipient of a service will be obliged to bear. Clearness and unambiguity refer to presentation, location and form, including graphics and the legibility of the relationship between price and provision of the service. This requirement also concerns a clear definition of the moment at which the obligation to pay the price arises, i.e. the action related to the obligation to pay. Art. 8(2) CRD increases this standard in B2C relations and provides that the trader must ensure that the consumer, when placing an order, explicitly acknowledges that the order entails an obligation to pay, e.g. by activating a button or a similar function using the words ‘order with obligation to pay’. A breach of this obligation results in the consumer not being bound by the contract or order.67 Unlike the Consumer Rights Directive, the E-Commerce Directive does not foresee the negative consequences of incorrect application of the requirement in Art. 5(2). The sanction under Art. 6(6) CRD for the trader’s failure to comply with information requirements on additional charges or other costs, in the form of a lack of obligation for the consumer to pay these charges or costs, does not apply in B2B relations, which also fall within the personal scope of the E-Commerce Directive.

III. Methods of providing information 1. Overview Service providers are obliged to provide recipients of a service with easy, direct and 50 permanent access to information specified in Art. 5. Art. 5(1) focuses on the way in which information is made available. However, it neither indicates any specific means of providing information nor does it regulate the way in which information is expressed. This lack of requirements differs from Art. 5(2), according to which when information society services refers to prices, these are to be indicated clearly and unambiguously, and from Art. 10, which requires at the time of conclusion of the contract that the information referred to therein be given clearly, comprehensibly and unambiguously.

See above → mn. 12 et seq. Recital 23 DCD. See Digital Content Directive → Art. 2, mn. 26 et seq. 65 See below → mn. 49. 66 For details see Consumer Rights Directive → Art. 6, mn. 33 et seq. 67 For details see Consumer Rights Directive → Art. 8, mn. 13. 63

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2. Easy access to information The notion of ‘easy access to information’ means that it must be possible to obtain the information without much effort.68 The concept of being easily accessible refers both to the location of information enabling one to become familiar with its content and to the form in which it is made available. The requirement of easy access is met if the information is readily visible without the need to search for it for a long time.69 The way of presentation, taking into account its form, not only in terms of content but also in terms of graphics and functionality, must be transparent and intuitive for the user wishing to consult the information required by Art. 5. The dissemination of information in different places and documents will usually not meet the requirements for easy access. The information duties are fulfilled by including the required information in terms and conditions, which are more and more widespread, provided that their design and form guarantees transparency and the possibility of indexing appropriate content.70 52 Required information may be placed in an appropriate bookmark of the website.71 Easy access can be provided by means of a link to a page containing complete information, however the requirement of easy accessibility also refers to the link itself. For example, links such as ‘Contact’ or ‘About Us’ clearly indicate the information about the service provider.72 Scrolling, characteristic especially for one-page websites, in order to display the basic information on the monitor screen or a link to it, is also, in principle, not contrary to the requirement of easy access to information.73 53 While assessing the provision of information, in particular with regard to its location, it should be noted that the knowledge of an average user, both consumer and trader, on the use of electronic means, has increased significantly. With the development of technology navigating the website to obtain information is no longer a problem, particularly if it has indexing mechanisms to search for content. Accessing content through a search bar on the website is currently the most typical model of information retrieval. From this point of view, the structure of the website or the design of the link becomes secondary, and the clear, intuitive orientation of the user about the way to reach specific content becomes decisive. 54 It is controversial to examine the use of a particular language as an essential element of the requirement of an easy access.74 A user, regardless of whether he is a professional or a consumer, using e.g. a website in a foreign language cannot hide behind the misunderstanding of the content related just to the information obligations. This assessment is not affected by the exclusion of contractual obligations concerning consumer contacts from the country of origin regime and the introduction of language requirements in consumer contracts. It is necessary to distinguish between the requirements of the applicable law and the possibility of becoming familiar with a particular content in such a way as to comply with the requirements of Art. 5. 51

3. Direct access to information 55

Direct access to information means making information available through this communication channel, the same ICT system as the recipient. Satisfying this obligation Lodder (2014), section 3.2.1. For details see Lubasz, p. 192 et seq. 70 cf. Micklitz/Schirmbacher in: Spindler/Schuster, § 5 TMG, mn. 28. 71 LG Erfurt, 11.3.2008 – 1 HK O 28/08. 72 For details see Micklitz/Schirmbacher in:Spindler/Schuster, § 5 TMG, mn. 31–32. 73 cf. ibid., mn. 29. See also Lubasz, p. 192 et seq. 74 ibid., mn. 34–35. 68 69

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consists in e.g. placing relevant information on the service provider’s website, in applications, smart devices or other IoT devices used by the service recipient. When the service recipient uses services online, sending information via e-mail meets the requirement of directness, because there is no change in the ICT system by the service recipient 75. Performing the obligation to provide information directly may be problematic if the service is provided using e.g. SMS or MMS, i.e. means of communication enabling simplified and brief information exchange. Some authors allow in this situation for the possibility for the service provider to provide only the place where or how the recipient of the service can obtain the required information.76 This position can be criticised for two reasons. Firstly, it directly interferes with the requirement of direct access to information. Secondly, it does not ensure fulfilment of the requirement of the same ICT system used by the recipient of the service and by the recipient of the service. However, these considerations are becoming less relevant as a result of technological developments. Switches between ICT systems when using smart devices, smart phones, smart watches etc. are nowadays invisible to the user and can only be problematic if data transmission is not available. The application of the theory excluding the possibility of the use of different systems is therefore limited, and thus the redirection between e.g. an SMS containing a link to a website and this website should not be assessed negatively. The requirement of directness of access does not exclude any actions taken by the re- 56 cipient of the service, in particular consisting in search for information on one of the subpages of the website, bookmarks of mobile applications, or smart devices functions. Otherwise, without the possibility of the use of links or references to information, there could be risk of information overload and confusion of the recipient. The aim of the ECommerce Directive, i.e. to maintain transparency, should be taken into consideration. A high level of protection of service recipients is to serve the development of e-commerce and not to have the opposite effect due to the lack of transparency. The structure of redirections to relevant information may not be complex, causing a 57 multi-stage search for information, and may not interfere with the transparent nature of the redirection. The permitted complexity of a redirection structure has been discussed for many years, 77 though in 2019 the ECJ accepted information to be found after a series of clicks.78

4. Permanent access to information The question regarding the duration of the access to information becomes relevant 58 for the protection of the recipient of a service, in particular for making an informed decision and because of the possible redress, including cross-border redress. Art. 5(1) is limited to stating that information must be available on a permanent basis. It means that the information must be constantly accessible – before and after the legal action is taken, and even when the recipient does not take such action.79 It is therefore not possible to make information available in a transitional form, e.g. in the form of pop-ups, which are usually available during the procedure which leads to concluding a contract80 or to display the information on a website infrequently.81 The recipient of a service must have the opportunity to store the information, in order to be able to assess the information at See Lubasz, p. 195 et seq. Litwiński, p. 196. 77 cf Micklitz/Schirmbacher in: Spindler/Schuster, § 5 TMG, mn. 39. 78 CJEU, C-649/17 Amazon EU EU:C:2019:576, para. 52. 79 Lodder (2017), section 2.3.2. Cf. Wellbrock, p. 92. 80 Lodder (2017), section 2.3.2. 81 Vogel, p. 51. 75 76

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any given moment.82 However, Art. 5(1) does not require that the information itself is not to be changed.83

D. Criticism The E-Commerce Directive was adopted nearly 20 years ago in a different digital reality. Due to the intensive development of technology, the characteristics of e-commerce have changed significantly. Some transactions are still concluded by websites, although websites are designed differently now, which requires changes in their navigation. E-commerce has become increasingly mobile through the shift from desktop to smart devices.84 Moreover, e-commerce takes place via personal digital assistants. This development may affect the interpretation of the requirements of Art. 5, such as the ease and directness of access to information. Big data analysis has made it possible to profile the user and personalise electronic trading, including, among others, personalisation of information received by the user, personalisation of price and personalisation of terms and conditions. At the same time, the information asymmetry between the service provider and the recipient of a service has increased. The EU legislator has already adopted several pieces of legislation relevant to e-commerce,85 leaving the E-Commerce Directive unchanged, although the E-Commerce Directive, including Art. 5, also faces new challenges that were not foreseen by the legislator in 2000. 60 The question arises as to whether the regulatory response to the changing reality is to include Art. 5. To answer this question, it is worth looking first at the initial functions of Art. 5, in particular the protection of users by ensuring transparency and providing basic information, especially on service providers. These functions are still valid and the protection of users by the transparency of trading is now even particularly important in view of the rapid development of e-commerce. The information required by Art. 5 is, and will be, essential for the users. 61 Since this information provided by Art. 5 is still crucial, consideration should be given to the question of the possible extension of the list. In this context, it is worth recalling that the information obligations in Art. 5 have raised many questions and their scope has been subject of heated discussion during the legislative process. For example, criticism was levied on regulated professions to indicate any professional body or similar body with which the service provider is registered and the reference to the applicable professional rules in the Member State of establishment and the means of access to them and, where the service provider exercises an activity which is subject to VAT, the tax identification number. It was argued that the amount of data not only fails to ensure the transparency of the communication, but also has the opposite effect, leading to confusion of the recipient86 It was pointed out that the amount of data and information being transferred considerably increases the traffic load, which is important for the speed of connection and data exchange via mobile phone lines (m-commerce).87 The possible overloading of network with too much information was an additional argument from opponents of the E-Commerce Directive,88 but this argument proved to be unsuccessful due to technological progress in the field of data traffic. As of today, Art. 5 does not sur59

Lodder (2017), section 2.3.2. Cf. Micklitz/Schirmbacher in: Spindler/Schuster, § 5 TMG, mn. 44. Vogel, p. 51. 84 Lodder (2014), section 6. 85 e.g. Geo-blocking Regulation, Digital Content Directive, Online Intermediation Services Regulation. 86 Hoeren, 192. 87 Börner/König, 92. 88 Wellbrock, p. 91. 82

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prise with the amount of information required, even in combination with Arts 6 and 10. This conclusion is only legitimate nowadays as the scope of information obligations imposed on the trader continues to grow, especially towards consumers. Art. 5 thus loses its relevance vis-à-vis consumers, whose right to information is ensured by several pieces of legislation. Since the information obligations are a fundamental feature of consumer acquis, an extension of Art. 5 does not seem necessary, even to recipients who are not consumers. Indeed, the provision in question guarantees the main data on the service provider, thereby increasing the security of a potential transaction. The modification of the existing requirements in Art. 5 does not appear necessary ei- 62 ther. Although the information obligations are far from clear, their fulfilment does not seem to be a challenging task. Only the German Federal Court of Justice (Bundesgerichtshof) has referred a question to the ECJ for a preliminary ruling concerning Art. 5.89 Further guidance can be obtained from judgments concerning other instruments, in particular the Consumer Rights Directive. Moreover, the wording of Art. 5 allows, in general, an interpretation that responds to the current challenges posed by, inter alia, new means of communication or application of artificial intelligence.90 When interpreting Art. 5 it is, however, crucial to take into account the fact that both e-commerce and the use of electronic means are becoming commonplace for the average recipient of a service, with the result that the average recipient is becoming more aware of where and how to search for relevant information. It is also worth noting that some business models are designed exclusively for the electronic environment and it is not reasonable to require them to be supported by a non-electronic means of communication.91 Neither the extension of the catalogue of information nor the revision of the existing 63 requirements is necessary. The amendment of Art. 5 alone will not change the nature of the E-Commerce Directive itself and will not make it fit for current and future challenges.

Section 2 Commercial communications Article 6 Information to be provided In addition to other information requirements established by Community law, Member States shall ensure that commercial communications which are part of, or constitute, an information society service comply at least with the following conditions: (a) the commercial communication shall be clearly identifiable as such; (b) the natural or legal person on whose behalf the commercial communication is made shall be clearly identifiable; (c) promotional offers, such as discounts, premiums and gifts, where permitted in the Member State where the service provider is established, shall be clearly identifiable as such, and the conditions which are to be met to qualify for them shall be easily accessible and be presented clearly and unambiguously; (d) promotional competitions or games, where permitted in the Member State where the service provider is established, shall be clearly identifiable as such,

CJEU, C‑298/07 deutsche internet versicherung EU:C:2008:572. Brownsword, p. 204. 91 Twigg-Flesner, p. 521. 89

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and the conditions for participation shall be easily accessible and be presented clearly and unambiguously. Bibliography: Commission, ‘Commercial Communications in the Internal Market’ COM(96) 192 final; Commission, ‘Report from the Commission to the European Parliament, the Council and the European Economic and Social Committee ‘First Report on the application of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (Directive on electronic commerce)’ COM(2003) 702 final; Gołaczyński (ed.), Ustawa o świadczeniu usług drogą elektroniczną. Komentarz (Wolters Kluwer 2009); Lubasz, Handel elektroniczny. Bariery prawne (LexisNexis 2013); von der Leyen, ‘A Union that strives for more My agenda for Europe’ (September 2019); Lubasz/Namysłowska (eds), Świadczenie usług drogą elektroniczną i dostęp warunkowy. Komentarz do ustaw (LexisNexis 2011); Lodder, ‘Directive 2000/31/EC’ in: Lodder/Murray (eds), EU Regulation of E-Commerce (Edward Elgar 2017), p. 15–58; Nowińska, Zwalczanie nieuczciwej reklamy. Zagadnienia cywilno-prawne (Universitas 2002); Spindler/ Schuster (eds), Recht der elektronischen Medien (4th edn, C.H. Beck 2019). A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Regulatory context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Level of harmonisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 4 6

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Personal scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Service provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Recipient of the service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Material scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Commercial communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Identifiability of commercial communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Scope of information requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 7 7 8 10 10 13 20 23

D. Future development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33

A. Function* Art. 6 is the first provision in Section 2 of the E-Commerce Directive dedicated to commercial communications. Section 2 comprises three provisions: Art. 6 concerning information to be provided by commercial communications; Art. 7 with general rules on unsolicited commercial communication and Art. 8 which lays down rules on commercial communications provided by a member of regulated profession. 2 Art. 6, like Art. 5, fits in with the objective pursued by the E-Commerce Directive, i.e. to reduce information asymmetry,1 particularly, but not exclusively, in B2C relations. The specific aim of Art. 6 is to preserve the transparency of commercial communications2, or, more broadly, to ensure the transparency of commercial activities in e-commerce.3 In the use of commercial communications the EU legislator has recognised the potential for financing information society services and for the development of a wide range of new charge-free services. Nevertheless, a number of transparency requirements have been introduced in Art. 6, without prejudice to those in the Distance Selling Direc1

* Part of the research leading to this commentary was supported by the National Science Centre (Narodowe Centrum Nauki) in Poland on the basis of Decision No. 2018/31/B/HS5/01169. 1 See the comments under → Art. 5 E-Commerce Directive, mn. 4. 2 CJEU, C-236/08–C-238/08 Google France and Google EU:C:2010:159, para. 86; CJEU, C-324/09 L’Oréal v eBay EU:C:2011:474, para. 95. 3 Micklitz/Schirmbacher in: Spindler/Schuster, § 6 TMG, mn. 7.

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tive and Directive 98/43/EC4, in force at the time.5 The E-Commerce Directive is based on the concept of the restriction of the use of commercial communications. It is true that the failure to indicate the commercial purpose of the information may be of benefit to the trader, as seemingly neutral information is better remembered by the public and also reaches those who do not want advertising to reach them.6 However, the recipient must be aware that he is not facing objective information, but commercial communication whose subjective nature is determined by its commercial purpose, to avoid making negative economic decisions. Therefore, Art. 6 aims at the separation of commercial and editorial content.7 Art. 6 covers commercial communication as defined in Art. 2(f),8 which does not dis- 3 tinguish between various forms of communication9 and, unlike e.g. the ePrivacy Directive, does not make its application dependent on a particular addressee or on a specific manner in which the commercial communication is to be provided. It only requires that the commercial communication be part of, or constitute, an information society service. As a result, Art. 6 covers not only point-to-point communication to a specific user, but also non-individualised commercial communication to the general public, presented e.g. as an element of a website.

B. Context I. Regulatory context As in the case of general information requirements in Art. 5(1), also in Art. 6 the EU 4 legislator used the phrase ‘in addition to the other information requirements established by Community law’, which emphasises that the E-Commerce Directive does not contain an exhaustive list of information requirements for commercial communications. The rules on commercial communications in Art. 6 were originally intended to apply 5 without prejudice to those laid down in the Distance Selling Directive and Directive 98/43/EC.10 The former was replaced by the Consumer Rights Directive, the latter – by Directive 2001/37/EC11 and after its annulment12 – by the Tobacco Products Directive. In addition, the minimum information requirements established by Art. 6 are complemented by the provisions of the Unfair Commercial Practice Directive and the Distance Marketing of Consumer Financial Services Directive (Art. 10), the Services Directive

4 Directive 98/43/EC of the European Parliament and of the Council of 6 July 1998 on the approximation of the laws, regulations and administrative provisions of the Member States relating to the advertising and sponsorship of tobacco products OJ L 213, 30.7.1998, p. 9. 5 Recital 29. 6 Nowińska, p. 125 et seq. 7 COM(2003) 702 final, 10. 8 See below → mn. 13 et seq. 9 Namysłowska in: Lubasz/Namysłowska, Art. 9, mn. 3. 10 Recital 29. 11 Directive 2001/37/EC of the European Parliament and of the Council of 5 June 2001 on the approximation of the laws, regulations and administrative provisions of the Member States concerning the manufacture, presentation and sale of tobacco products OJ L 194, 18.7.2001, p. 26. 12 CJEU, C-376/98 Germany v Parliament and Council EU:C:2000:544.

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(Art. 24) and the ePrivacy Directive (Art. 13)13 as well as the General Data Protection Regulation (Arts 12–14). The Misleading and Comparative Advertising Directive and the AVMS Directive (Art. 9) are also relevant for commercial communications.

II. Level of harmonisation 6

The use of the words ‘at least’ leaves no doubt as to the minimum harmonisation standard of Art. 6. Member States may therefore extend information obligations on commercial communications, i.e. the obligation to provide other information, if they consider them necessary for the correct performance of information society services and proportionate from the perspective of the provider’s obligations and the recipient’s rights.14

C. Explanation I. Personal scope 1. Service provider 7

The obligations in Art. 6 are addressed to the service provider, defined in Art. 2(b) as any natural or legal person providing an information society service.15 An information society service may constitute commercial communications in whole or in part as follows from Art. 6.

2. Recipient of the service The provision on commercial communications is not applicable exclusively to consumers. The addressee of a commercial communication is recipient of a service within the meaning of Art. 2(d), i.e. any natural or legal person who, for professional ends or otherwise, uses an information society service, in particular for the purposes of seeking information or making it accessible.16 Consequently, a recipient of a service can be a trader in B2B relations and a consumer in B2C relations. 9 The fact who is the recipient of the commercial communication has an impact on determining compliance with Art. 6. Depending on the recipient in the case in question, the benchmark for the assessment is either the model of an average consumer who is reasonably well-informed and reasonably observant and circumspect, taking into account social, cultural and linguistic factors, as interpreted by the ECJ17 or the model of the average professional18. However, in most cases, the recipient of the same commercial communication may be both a consumer and a non-consumer. Therefore, the safest 8

13 The ePrivacy Directive is to be replaced by a Regulation of the European Parliament and of the Council concerning the respect for private life and the protection of personal data in electronic communications (2017/0003(COD), which is currently being discussed. It is to contain provisions on unsolicited and direct marketing communications to end-users who are natural persons, including on information obligations and identification of communications for direct marketing. 14 See the comments under → Art. 5 E-Commerce Directive, mn. 8. 15 For details on the notion of ‘service provider’ see the comments under →Art. 5 E-Commerce Directive, mn. 10 et seq. and Lubasz, p. 36 et seq. 16 See the comments under → Art. 5 E-Commerce Directive, mn. 22 et seq. 17 Recital 18 UCPD. For details see Namysłowska in: Lubasz/Namysłowska, Art. 9, mn. 5. 18 CJEU, C-112/99 Toshiba EU:C:2001:566, para. 52.

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solution for the service provider is to comply with the requirements set out in Art. 6 by adapting to a higher level of protection, i.e. the model of an average consumer.

II. Material scope 1. Overview Art. 6 does not have a uniform structure. Point (a) refers to all commercial communi- 10 cations and requires their clear identifiability. Points (b)–(d) specify the information obligations in the commercial communication and the manner in which they are communicated, i.e. the indication of the person on whose behalf the commercial communication is made [point (b)], information in the case of promotional offers [point (c)] and promotional competitions or games [point (c)]. An infringement of Art. 6 does not deprive the communication of its commercial 11 character. A communication shall be regarded as a commercial communication if it satisfies the conditions set out in Art. 2(f) and not if it is identifiable in accordance with Art. 6(a) and if it contains the information required by Arts 6(b)–(d).19 The basic problem for a service provider is to reconcile the information obligations 12 under Art. 6 with the specificity of the form in which commercial communications are made available – other methods may be used for commercial information contained e.g. in e-mail, and others for sending SMS. Therefore, the application of Art. 6 should be assessed taking into account the nature of electronic means of communication used to make the commercial communication available. Moreover, Art. 7(3) UCPD serves as an interpretative guideline by providing that where the medium used to communicate the commercial practice imposes limitations of space or time, these limitations and any measures taken by the trader to make the information available to consumers by other means shall be taken into account in deciding whether information has been omitted.20

2. Commercial communication The term ‘commercial communication’ is defined in Art. 2(f). Pursuant to this provi- 13 sion commercial communication means any form of communication designed to promote, directly or indirectly, the goods, services or image of a company, organisation or person pursuing a commercial, industrial or craft activity or exercising a regulated profession. Commercial communication means any information aimed at promotion, i.e. activi- 14 ties aimed at supporting trade. The definition of commercial communication is broadly defined in that it covers any form of promotion, both direct and indirect. Thus, activities such as advertising, direct marketing, sponsorship, sales promotion and public relations can be considered as commercial communication.21 Art. 6 itself states that commercial communications may occur in form of promotional offers, such as discounts, premiums and gifts, as well as in form of promotional competitions or games. Commercial communication is an example of commercial practice as defined in Art. 2(d) UCPD. However, it should be borne in mind that, unlike the Unfair Commercial Practices Directive which is addressed exclusively to B2C relations, Art. 6 covers both B2C and B2B relations.

In relation to Polish law see Kowalik-Bańczyk in: Gołaczyński, Art. 9, p. 101 et seq. See below → mn. 22. 21 COM(96) 192 final, 1. 19 20

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17

18

19

Information to be provided

A commercial communication may be graphic or audible information, including an advertising slogan or trademark, if it has a persuasion function22. Promotion includes both promotion of goods and services and the promotion of the image of a company, organisation or person pursuing a commercial, industrial or craft activity or exercising a regulated profession i.e. the beneficial presentation of the image of a natural person or the reputation of an undertaking. The object of the commercial communication is not relevant, i.e. regular goods and services and not just electronically supplied services may be promoted. The definition of ‘commercial communication’ in Art. 2(f) is technology-neutral. Art. 6 does not refer to a particular way of providing information. By contrast, this is done by Art. 7 with regard to unsolicited commercial communications which may only be sent by electronic mail. However, Art. 6 is limited to information which is transmitted by electronic means as a result of the fact that commercial communication is an information society service.23 Commercial communication within the meaning of the ECommerce Directive may take the form of e-mails, SMS, MMS, instant messaging, commercial information on the website and in mobile applications, smart home devices, IoT etc. An e-mail with the request to consent to the sending of commercial information by electronic means may be assessed as commercial communication, depending on the form and content of such communication. Commercial communication may relate to the activities of a company, organisation or a person pursuing commercial, industrial or craft activities as well as of persons whose right to pursue a profession depends on meeting the requirements set out in separate legal acts, i.e. persons exercising a regulated profession,24 such as advocates, notaries, pharmacists or doctors. Art. 8 introduces a specific provision for regulated professions. Member States shall ensure, in accordance with Art. 8(1) that the use of commercial communications which are part of, or constitute, an information society service provided by a member of a regulated profession is permitted subject to compliance with the professional rules regarding, in particular, the independence, dignity and honour of the profession, professional secrecy and fairness towards clients and other members of the profession. At the same time, under Art. 24 Services Directive Member States are required to remove all total prohibitions on commercial communications by regulated professions. Non-profit-making organisations are not covered by Art. 6.25 Art. 2(f) sets out two exemptions of the notion ‘commercial communication’, i.e. two categories of information that do not constitute commercial communication in themselves. The wording ‘in themselves’ indicates that the exemptions are not absolute and the assessment must be carried out on a case-by-case basis. In accordance with Art. 2(f) (i), information allowing direct access to the activity of the company, organisation or person, in particular a domain name or an electronic-mail address does not constitute a commercial communication.26 In accordance with Art. 2(f)(ii), commercial communications in themselves are not communications relating to the goods, services or image of the company, organisation or person compiled in an independent manner, particularly when this is without monetary payment. These may include links to websites where payNamysłowska in: Lubasz/Namysłowska, Art. 2, mn. 8. For the definition of ‘electronic means’ see the comments under → Art. 5 E-Commerce Directive, mn. 17 et seq. 24 For the definition of regulated profession see Art. 2(g). 25 Lodder, section 2.2.2.6. 26 The ECJ stated that in a specific context the use of a domain name and that of metatags in a website’s metadata may be assessed as advertising and not as commercial communication. See CJEU, C‐657/11 Belgian Electronic Sorting Technology EU:C:2013:516, para. 50. 22

23

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ment for such is not made or price comparison websites, as long as they are independent.27

3. Identifiability of commercial communication In accordance with Art. 6(a), the commercial communication shall be clearly identi- 20 fiable as such. The promotional nature of the information must therefore be clearly recognisable for the recipient. The requirement includes both the necessity to separate the information and to label it as commercial communication. Art. 6 does not specify how this is to be done. Separation of commercial communication consists of separating it from non-commercial content. For example, a commercial communication attached to an e-mail should be separated from the content of a private message and a commercial communication on a website should be distinguished from non-commercial content. The separation may take the form of a graphic or colour cut-off or the use of a different font. Indication of a commercial content may be achieved by a header or side letter which indicate that it is a commercial communication.28 The assessment of whether the commercial communication is clearly identifiable 21 should be based on the benchmark of an average recipient – either average consumer or average trader as according to the model developed by the ECJ.29 Correct application of Art. 6(a) must be examined on a case-by-case basis, since the 22 obligation to separate information from commercial content depends on the overall circumstances. For example, the form of communication may be relevant. Graphic elements in colour may indicate a commercial purpose of information. Similarly, it can be considered that the average recipient knows that an SMS from an unknown sender with a short telephone number usually is advertising. On the other hand, a text-only e-mail does not have to be clearly recognisable as commercial information to the recipient. It cannot be excluded that the lack of an additional text ‘commercial communication’ will not raise doubts as to the promotional nature of the message. The requirement for the labelling of commercial communications applies to each of the communication channels and media used. It is irrelevant whether it is an element of an e-mail, a website (e.g. banner), piece of content in an audio or multimedia message or a product suggestion in a mobile application or within the IoT.30

4. Scope of information requirements a) Person on whose behalf the communication is made. In accordance with Art. 6(b), 23 the commercial communication shall make clearly identifiable the natural or legal person on whose behalf it is disseminated. This requirement strengthens the transparency of commercial activities and makes it possible to distinguish between editorial content and commercial communication. The lack of a similar requirement to indicate the person who directly disseminates the commercial communication causes practical problems, in particular as regards the withdrawal of consent to receive commercial communications or the exercise of the rights of the recipient as a data subject under the GDPR directly towards the sender. The name of the person ordering the dissemination of the commercial communica- 24 tion may be directly indicated by the name, under which the business activity is con-

Lodder, section 2.2.2.6. In relation to Polish law see Namysłowska in: Lubasz/Namysłowska, Art. 9, mn. 5. 29 Recital 18 UCPD. See above → mn. 9. 30 On limitations of space or time see above → mn. 12.

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26

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29

Information to be provided

ducted, or indirectly e.g. by a link to the website of the person ordering the dissemination of the commercial communication. The indication of the person concerned must allow such person to be clearly identified; it must not give rise to doubts on the part of the recipient and must not mislead the recipient. For example, a trademark may be deemed to meet the requirements of the ECommerce Directive if it is identifiable to the recipient as coming from a particular entity. The clear identifiability of the person on whose behalf commercial communications are made excludes any further identification by the recipient. Identity identification should not be associated with more effort on the part of the recipient to search for information than by using a link to a source containing the relevant information.31 Art. 6 will be infringed not only by not indicating the entity on whose behalf the commercial communication is made or unclear identifiability but also by its false indication. Therefore, it is prohibited to send fake e-mails, i.e. e-mails with a false sender’s address, and spoofing, i.e. sending messages with a changed header.32 b) Promotional offers and promotional competitions or games. The permissibility of promotional activities such as promotional offers and promotional competitions or games remains outside the scope of application of the E-Commerce Directive. However, if they are permitted in the Member State where the service provider is established, they must, in accordance with Art. 6(c) (promotional offers) and Art. 6(d) (promotional competitions or games), be clearly identifiable as such, and the conditions which are to be met to qualify for them shall be easily accessible and presented clearly and unambiguously. Promotional offers such as those indicated in point (c), i.e. discounts, premium or gifts include activities supporting the sale of goods or services, in particular those related to the provision of goods or services to the recipient in addition to the performance of a non-monetary benefit, i.e. those related to the acquisition of some right. Promotional activities carried out with the use of promotional competitions or games aim at creating a marketing effect, primarily related to increasing brand, product or service recognition. Promotional activities in the meaning of Art. 6(c) and (d) must be clearly identifiable as such.33 The conditions that are to be met to qualify for the promotional offer and to participate in promotional activities must be easily accessible. The notion ‘easily accessible’ should be interpreted in the same way as in Art. 5(1)34 and therefore relates both to the location of the information which enables to become acquainted with its content and the form in which it is made available35. This includes locating it in a visible place, so that the recipient does not have to search for it for a long time. The use of references (links or redirections) is not excluded and depends on the communication channel or medium used. It is crucial that the use of references does not cause difficulties for users and that relevant information is not divided across various places, documents or materially unrelated bookmarks on websites, applications etc. It should be also taken into account that, for the average recipient of a service, it is nowadays intuitive to search for conditions of promotional offers and participation in competitions or games, in the terms and conditions of these actions. Thus, regardless of the requirements of other legal provisions concerning a specific promotional activity, it is important to make such terms

Micklitz/Schirmbacher in: Spindler/Schuster, § 6 TMG, mn. 61. In relation to Polish law see Kowalik-Bańczyk in: Gołaczyński, Art. 9, p. 103. 33 See above → mn. 20 et seq. 34 See the comments under → Art. 5 E-Commerce Directive, mn. 51 et seq. 35 For details see Lubasz, p. 170. 31

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and conditions easily accessible by clearly indicating where the recipient can find them, read them or even store them, before deciding to participate. The requirement to provide the conditions of promotional offers and promotional 30 competitions or games in a clear and unambiguous manner relates primarily to the content of those conditions and is aimed at ensuring that the recipients understand them correctly. The clarity and unambiguity of the form is relevant only to the extent that it is intended to serve the perception of the conditions. Consequently, those requirements shall be implemented by the formulation of the conditions in clear language, in a comprehensible and not misleading manner, taking into account the perception of the recipient, and shall not be presented in a text that is too small, using a layout of information illegible to the recipient of the service, coding, location difficult to ascertain etc. When formulating this information, the protection of the trust of the recipient prevails over the will or understanding of the sender (in dubio contra proferentem). The sender, as he defines and formulates the conditions, should do so in such a way that it is understood by the recipient in accordance with his intentions. Depending on the nature of the legal relationship, analysed from the perspective of 31 the recipient of the commercial communication being a consumer or a trader, the criteria for assessing the clearness and unambiguity of information presentation vary.36 The examination whether a promotional activity is clearly identifiable as such and 32 whether its conditions are easily accessible and transparently presented is to be carried out at the moment when the recipient receives the information. Art. 6, unlike Art. 5, does not require permanent accessibility. However, information required by Art. 6(c) and 6(d) is to be provided not only as part of the commercial communication but also until the end of the promotional activity, e.g. in order to enable possible claims.

D. Future development Since Art. 6 is technology-neutral and therefore not limited to a specific form of sup- 33 ply or presentation of commercial communication and to B2C or B2B relations, it remains flexible over time. This allows Art. 6 to generally meet the challenges caused by technological development. The location of rules on commercial communication in the E-Commerce Directive is 34 justified by the fact that Art. 6 applies if the commercial communication constitutes an information society service or its part and has a horizontal scope in this respect. One should bear in mind, however, that other obligations concerning promotional content arise from various EU and national legislation relating to restrictions on commercial practices, protection of personal data in personalised advertising, rules governing promotions and games, in particular gambling, and direct marketing communications. Consequently, the variety of provisions causes significant difficulties in the application of commercial communications. Nevertheless, the creation of one comprehensive regulation would probably be an impossible legal task. It is possible that the Digital Services Act, announced in September 2019, 37 will up- 35 grade the rules of commercial communication, although at the moment there are no official documents that could confirm the scope of the planned legislation.

See above → mn. 9. von der Leyen, 13, available under https://ec.europa.eu/commission/sites/beta-political/files/politicalguidelines-next-commission_en.pdf (accessed 11 November 2019). 36

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Article 7 Unsolicited commercial communication 1. In addition to other requirements established by Community law, Member States which permit unsolicited commercial communication by electronic mail shall ensure that such commercial communication by a service provider established in their territory shall be identifiable clearly and unambiguously as such as soon as it is received by the recipient. 2. Without prejudice to Directive 97/7/EC and Directive 97/66/EC, Member States shall take measures to ensure that service providers undertaking unsolicited commercial communications by electronic mail consult regularly and respect the opt-out registers in which natural persons not wishing to receive such commercial communications can register themselves. Bibliography: Commission, ‘Communication on unsolicited commercial communications or “spam’”’ COM(2004) 28 final; Edwards, ‘Canning the Spam and Cutting the Cookies: Consumer Privacy on-line and EU Regulation’ in: Edwards (ed.), The New Legal Framework for E-Commerce in Europe (Hart 2005), p. 31–66; Nordhausen, ‘Information Requirements in the E-Commerce Directive and the Proposed Directive on Unfair Commercial Practices’ in: Howells/Janssen/Schulze (eds), Information Rights and Obligations. A Challenge to Party Autonomy and Transactional Fairness (Ashgate 2005), p. 93–114: Vogel, ‘ECommerce: Directives of the European Union and Implementation in German Law’ in: Campbell (ed.), ECommerce: Law & Jurisdiction (Kluwer Law International 2002), p. 29–78; Wellbrock, Ein kohärenter Rechtsrahmen für den elektronischen Geschäftsverkehr in Europa (Nomos 2005). A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Regulatory context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Level of harmonisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 3 8

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Personal scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Service provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Recipient . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Material scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Unsolicited commercial communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Identification of unsolicited commercial communication . . . . . . . . . . . . . . . . . 4. Opt-out registers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9 9 9 10 12 12 15 17 21

D. Criticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23

A. Function* 1

The interpretation of Art. 7 has changed significantly since the adoption of the ECommerce Directive in 2000. Initially, Art. 7 was aimed the protection of all recipients of e-commerce services – consumers and traders – in relation to unsolicited commercial communications by electronic mail (also known as spam1). In order to prevent negative consequences for recipients and service providers resulting from sending unsolicited commercial communication2, the requirement of its transparent labelling has been formulated in Art. 7(1), as well as the obligation to ensure that service providers regularly * Part of the research leading to this commentary was supported by the National Science Centre (Narodowe Centrum Nauki) in Poland on the basis of Decision No. 2018/31/B/HS5/01169. 1 COM(2004) 28 final, 5. 2 Recital 30. Edwards, p. 31, section B.

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consult opt-out registers (also known as Robinson lists) in which natural persons who do not wish to receive such information can register themselves [Art. 7(2)]. At that time Art. 7 did not interfere with the permissibility of sending unsolicited commercial communications and left this issue outside the scope of the E-Commerce Directive. 3 Therefore, the obligations imposed by Art. 7 applied to Member States that allowed unsolicited commercial communications. However, the personal scope of Art. 7 has been modified by the ePrivacy Directive, in particular Art. 13 thereof, which prohibits unsolicited commercial communications towards consumers.4 Since then, Art. 7 only applies to entities other than natural persons, although the provision itself has not been amended. The E-Commerce Directive must thus be interpreted in the light of Art. 13 ePrivacy Directive irrespective of the wording of Art. 7. The provision serves primarily to maintain the transparency5 of unsolicited com- 2 mercial communication, or more broadly – the transparency of commercial activity in ecommerce. At present, the objective of ensuring transparency only protects legal persons as results from the personal scope of Art. 7.

B. Context I. Regulatory context The E-Commerce Directive was not aimed at the harmonisation of national laws on 3 the transmission of unsolicited commercial communications. The permissibility of this form of marketing activity was left to the discretion of the Member States. This competence of the Member States lasted only until 31 October 2003 – the deadline for transposition of the ePrivacy Directive into national law.6 Contrary to the suggestion made in Art. 7(2) and in Recital 30, the rules governing 4 the permissibility of unsolicited commercial communications by electronic mail did not fall within the material scope of the Distance Selling Directive and the former 1997 Data Protection Directive7. However, in Recital 14, the EU legislator expressed the opinion that the 19958 and 1997 Data Protection Directives, which are fully applicable to information society services, already constitute the EU legal framework in the field of personal data and that for these reasons it is not necessary to cover this issue in the E-Commerce Directive. Consequently, the implementation and application of the E-Commerce Directive should be fully consistent with the principles relating to the protection of personal data, in particular with regard to unsolicited commercial communications. In this context the phrase ‘in addition to other requirements established by Commu- 5 nity law’ does not mean, that the provisions of the 1995 Data Protection Directive, as repealed by the GDPR, and the 1997 Data Protection Directive, as repealed and replaced by the ePrivacy Directive, complement Art. 7. As expressly follows from Art. 1(5)(b), the E-Commerce Directive does not apply to questions relating to information society services covered by the 1995 Data Protection Directive, as repealed by the GDPR, and the 1997 Data Protection Directive, as repealed and replaced by the ePrivacy Directive. Thus, the mechanisms to ensure the transparency of unsolicited commercial communiSee below → mn. 8. See below → mn. 6. 5 Recital 30. 6 See below → mn. 6. 7 OJ L 24, 30.1.1998, p. 1. 8 OJ L 281, 23.11.1995, p. 31. 3

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cations [Art. 7(1)] and the obligation of service providers to consult and respect the optout registers in which natural persons not wishing to receive such commercial communications can register themselves [Art. 7(2)] did not complement the requirements concerning the processing of personal data and the permissibility of sending unsolicited commercial communications. The scope of these provisions differed. 6 The legal framework of the anti-spam rules strictu sensu was only introduced by Art. 13 ePrivacy Directive which resulted in the prohibition of unsolicited commercial communications by making the sending of commercial communications conditional on the prior consent of the recipient. However, the personal scope of application is defined differently than in the E-Commerce Directive, since Art. 13 ePrivacy Directive prohibits the sending of the unsolicited commercial communications to natural persons, irrespective of their status as consumers or as traders. Entities other than natural persons, as it is clear from Art. 13(5) ePrivacy Directive, were left outside the scope of rules 9. This means that Art. 7 applies to legal persons, unless the sending of unsolicited commercial communications to such entities is prohibited in a Member State. 7 The obligations arising under Art. 7 are to be guaranteed by the Member States in whose territory the service provider is established [the country of origin principle in accordance with Art. 3(1)]. That provision may not lead to the conclusion that the permissibility of sending unsolicited commercial communications must be examined in accordance with the country of origin principle. This issue, although not covered by the ECommerce Directive, has been excluded from the application of the internal market clause under Art. 3(3) in conjunction with point 8 of the Annex to the E-Commerce Directive.

II. Level of harmonisation 8

Art. 7 introduces a minimum standard of requirements for sending of unsolicited commercial communication by electronic mail, in so far as this activity is permitted in a Member State, as regards both the labelling obligations [Art. 7(1)] and consulting the opt-out registers [Art. 7(2)]. Since the adoption of the ePrivacy Directive, due to its Art. 13, the broad personal scope of Art. 7 has been limited to legal persons only. From the minimum harmonisation approach follows that if a Member State decides to allow the transmission of unsolicited commercial communications to legal persons, it is entitled to determine other conditions of admissibility than the requirements laid down in Art. 7(1) and (2).

9 However, Member States can extend the opt-in system to communications to legal persons. Member States that had chosen for an opt-out system for business-to-business marketing, including opt-out lists, can continue to do so. Applying a differentiated regime according to the nature of the subscriber to an e-mail service may lead to specific difficulties for senders when it comes to differentiating legal persons from natural persons: COM(2004) 28 final, 13.

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C. Explanation I. Personal scope 1. Service provider Although the sending of unsolicited commercial communications, i.e. without an in- 9 dividual request, cannot be qualified as an information society service,10 the EU legislator refers in Art. 7 to the service provider, defined in Art. 2(b) as a natural or legal person who provides an information society service.11 As a result, there is a regulatory looping of the definitions, leading to an incorrect identification of ‘service provider’ as the addressee of Art. 7, instead of ‘provider’ who is transmitting unsolicited commercial information without the request of the recipient.

2. Recipient The legislative imprecision as regards the use of the term ‘service provider’ in Art. 7 10 does not arise in the case of the person to whom unsolicited commercial communication is addressed, who is described as ‘recipient’ and not as ‘recipient of the service’ in the meaning of Art. 2(d). Omitting the phrase ‘of the service’ may be explained by the fact that unsolicited commercial communication is not an information society service, i.e. it does not cover the relationship between service provider and the recipient of a service. Although both legal and natural person can be recipients, it should be borne in mind 11 that Art. 13 ePrivacy Directive has made Art. 7 E-Commerce Directive inapplicable to natural persons, including consumers.12

II. Material scope 1. Overview Under Art. 7(1), in addition to other requirements established by EU law, Member 12 States which permit unsolicited commercial communication by electronic mail, shall ensure that such commercial communication by a service provider established in their territory is identifiable clearly and unambiguously as such as soon as the recipient receives it. Art. 7(2) specifies that without prejudice to the former 1997 Data Protection Directive, as repealed by the ePrivacy Directive, and the Distance Selling Directive, as repealed by the Consumer Rights Directive, Member States were to take measures to ensure that service providers sending unsolicited commercial communications by electronic mail regularly control and respect the opt-out registers, in which natural persons who do not wish to receive such communications can register themselves. Before the adoption of the E-Commerce Directive, Member States used various ap- 13 proaches to unsolicited commercial communication. For example, the German legislaSee the comments under → Art. 5 E-Commerce Directive, mn. 19. For details on the definition of ‘service provider’ see the comments under → Art. 5 E-Commerce Directive, mn. 10. 12 See above → mn. 6. The ePrivacy Directive is to be replaced by a Regulation of the European Parliament and of the Council concerning the respect for private life and the protection of personal data in electronic communications (2017/0003(COD). The personal scope of the principle is to remain unchanged since the proposed Art. 16 of the Regulation covers in principle, like Art. 13 ePrivacy Directive, the direct marketing of communications to end-users who are natural persons. 10

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tor prohibited unsolicited commercial communications unless the recipient has given his prior consent to the transmission of the commercial communication (opt-in model). In the United Kingdom, on the contrary, the opt-out model was in place.13 In Poland, which was not a Member State at that time, no legislation on unsolicited commercial communication was adopted. 14 The diversity of regulatory methods for the transmission of unsolicited commercial communications was not desirable from the point of view of both service providers and recipients of a service. The fact that the E-Commerce Directive did not lay down rules on the permissibility of unsolicited commercial communications and the exclusion of this issue from the country of origin principle under Art. 3(3) and the Annex to the ECommerce Directive did not support harmonisation objectives. A service provider who wanted to send unsolicited commercial communications to a recipient in another Member State had to determine whether the transmission of such communications was permitted under the law of the recipient Member State, and if so, he had to consult regularly and respect the opt-out registers in which natural persons not wishing to receive such commercial communications can register themselves. It was only in the ePrivacy Directive that the EU legislator decided to prohibit the transmission of unsolicited commercial communications to natural persons. The rules for sending unsolicited commercial communications to recipients who are legal persons are still not regulated at the EU level.

2. Unsolicited commercial communication The term ‘unsolicited commercial communication’ is not defined in the E-Commerce Directive. It follows from the dogmatic and systematic analysis that unsolicited commercial communication is a form of commercial communication without prior consent of a recipient. In turn, the definition of ‘commercial communication’ can be found in Art. 2(f) which clarifies this notion as any form of communication designed to promote, directly or indirectly, the goods, services or image of a company, organisation or person pursuing a commercial, industrial or craft activity or exercising a regulated profession. The definition is technology-neutral, although, given that commercial communication is an information society service, it may be provided only by electronic means. However, the provisions on unsolicited commercial communication in Art. 7 expressly cover one electronic means of communication – electronic mail. 16 The notion of ‘electronic mail’ is not defined either in the E-Commerce Directive or in the other Directives referred to in Art. 7. The definition is laid down in Art. 2(h) ePrivacy Directive which repealed the 1997 Data Protection Directive. Under this provision, electronic mail means any text, voice, sound or image message sent over a public communications network which can be stored in the network or in the recipient’s terminal equipment until it is collected by the recipient. Thus, the concept of electronic mail includes not only e-mail but also sending of messages by other means of electronic communication, i.e. ICT devices and software tools cooperating with them, enabling individual communication at a distance using data transmission between ICT systems,14 e.g. Instant Messengers, applications such as WhatsApp or Skype, as far as recordable communications are concerned, excluding electronic communication for which the simultaneous participation of the sender and the recipient is required, i.e. real-time video calls. However, it seems that the EU legislator referred in the E-Commerce Directive only to 15

13 14

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electronic mail in a strict sense (e-mail) and not to other forms of individualised electronic contact as defined in the ePrivacy Directive.15

3. Identification of unsolicited commercial communication Art. 7(1) requires that unsolicited commercial communication be clearly and unambiguously identifiable as such by the recipient. This obligation arises when it is permitted to send unsolicited commercial communication to legal persons in a Member State. 16 The indication of the unsolicited nature of commercial communication is to allow the recipient to identify the type of commercial communication involved – whether it was ordered or not. This, in turn, makes it possible to verify if the requirements laid down in Art. 6 (solicited commercial communication) or Art. 7 (unsolicited commercial communication) are met. The requirement to indicate clearly and unambiguously the nature and purpose of the communication shall relate to the form and content of the commercial communication. It must be obvious to the recipient that he has received the commercial communication and that it was unsolicited, which may be achieved by means of a header.17 The assessment of clearness and unambiguous should be made taking into account the benchmark of the average recipient being a legal person.18 Compliance with Art. 7(1) is examined at the moment when the recipient receives the information that is at the moment when he could have become acquainted with its content, by storing the information in the terminal equipment.

17

18

19

20

4. Opt-out registers Art. 7(2) introduced the obligation for service providers to regularly check and com- 21 ply with the opt-out registers which is subject to four conditions: (i) sending of unsolicited commercial communications is permitted in the Member State in which the service provider is established; (ii) unsolicited commercial communications are addressed to recipients in a Member State where unsolicited commercial communications are permitted; (iii) unsolicited commercial communications are sent by electronic mail; (iv) the recipients of unsolicited commercial communications are natural persons. The creation of Robinson lists for natural persons has become obsolete. This is due 22 to the requirement for the service provider in Art. 13(1) ePrivacy Directive to obtain prior authorisation to receive a commercial communication, including by electronic mail, and therefore to the introduction of an opt-in model, and not to allow an opt-out model by not mentioning the objection in the Robinson list. However, the regulation of opt-out registers remained for entities other than natural persons and covers cases other than the use of automated systems calling faxes or e-mail for the purposes of direct marketing, including the question of the permissibility of sending commercial communications by electronic mail to natural persons.19 This is confirmed by Recital 45 ePrivacy Directive, according to which the ePrivacy Directive ‘is without prejudice to the arrangements which Member States make to protect the legitimate interests of legal persons with regard to unsolicited communications for direct marketing purposes. Where Member States establish an opt-out register for such communications to legal persons, mostly 15 Recitals 18 and 39 as well as Arts 10(4) and 11(3) refer to ‘electronic mail or equivalent individual communications’ that may support this interpretation. 16 See above → mn. 6. 17 Nordhausen, p. 93–114. 18 See the comments under → Art. 6 E-Commerce Directive, mn. 9. 19 Art. 13(3) ePrivacy Directive read in conjunction with the second sentence of Art. 13(5).

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business users, the provisions of Article 7 of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the internal market (Directive on electronic commerce) are fully applicable’.

D. Criticism 23

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25

26

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The significance of Art. 7 was limited shortly after the adoption of the E-Commerce Directive. Although the personal scope of Art. 7 has been significantly reduced, which affects the application of both paragraphs of Art. 7, its wording has remained unchanged. EU legislation is therefore far from being transparent which should be eliminated for reasons of legal certainty. The problem is not solved by the proposal for a Regulation of the European Parliament and of the Council concerning the respect for private life and the protection of personal data in electronic communications, which would repeal the ePrivacy Directive, which, while recognising the problem of unsolicited commercial communication, is likely to regulate this issue in a similar way as the ePrivacy Directive. Communication to legal persons is to remain outside the scope of the proposed Regulation, unless otherwise decided by Member States. Moreover, the proposed Regulation shall be without prejudice to the application of E-Commerce Directive. Consequently, the objections to Art. 7 remain after the adoption of the Regulation. Art. 7 should be amended. The scope of Art. 7(1) should be clearly limited to unsolicited commercial communication sent to legal persons since spam sent to natural persons is prohibited under the ePrivacy Directive. Art. 7(2) could be deleted or amended to the effect that Robinson lists include not natural persons but only legal persons. However, the option of changing the approach and clearly regulating the ban on sending unsolicited commercial information remains open, not so much in terms of the classification into legal person/natural persons as into B2C/B2B relations. This is particularly important because the position of natural persons, i.e. whether they are selfemployed, employees or representatives of legal persons, is problematic from the perspective of anti-spam regulation. As pointed out by the Commission, applying a differentiated regime according to the nature of the subscriber to an e-mail service may lead to specific difficulties for senders when it comes to differentiating legal persons from natural persons.20 The introduction of a single regime separating B2C and B2B relations through a different approach – an opt-in model in B2C relations and an opt-out model in B2B relations – would facilitate trade and regulatory transparency. This differentiation in the way of protection results from the fact that the need for protection in business relations is less important even in connection with the use of e-mail contact of end-users, who are natural persons. Effective protection of individuals against the intrusion into their private life would still be achieved. In the exercise of the professional or business duties, the protection of privacy should not be at the same level as in the case of consumers, and the possibility of objection, instead of prior consent, seems to be entirely sufficient. It should also be kept in mind that the protection of privacy of natural persons acting as part of their professional activity is subject to the GDPR. Beyond the scope of Art. 7 itself, but in connection with the subject matter, remains the fact that judging by the spam received it usually comes from companies established 20

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Introduction to Arts 10–11 outside the EU.21 Thus, solutions in the E-Commerce Directive for unsolicited commercial communication barely touch the problem.

Introduction to Arts 10–11 Bibliography: Arroyo Amayuelas, ‘Der elektronische Vertragsschluss und die Umsetzung der E-Commerce Richtlinie in Spanien’ (2007) ELF II-101–107; Brownsword, ‘The E-Commerce Directive’ in: Grundmann (ed.), European Contract Law in the Digital Age (Intersentia 2018), p. 166–203; Commission, ‘A European Initiative in Electronic Commerce’ COM(97) 157 final; Commission, ‘Commission Staff Working Document Online services, including e-commerce, in the Single Market […]’ SEC(2011) 1641/2; Commission, ‘First Report on the application of Directive 2000/31/EC of the European Parliament and the Council of 8 June 2000 on Certain Legal Aspects of Information Society Services, in particular Electronic Commerce, in the Internal Market’ COM(2003) 702 final; Hultmark, ‘The E-Commerce Directive and Formation of Contract in a Comparative Perspective’ (2001) 2 GJ advances 1–25; Pearce/Platten, ‘Promoting the Information Society: The EU Directive on Electronic Commerce’ (2000) 4 ELJ 363–378; Riefa, ‘The reform of electronic consumer contracts in Europe: towards an effective legal framework?’ (2009) 14 (2) Lex Electronica. Revue du Centre de Recherche en Droit Public 1–43; Savin, EU Internet Law (Edward Elgar 2017); Sein, ‘Concluding Consumer Contracts via Smart Assistants: Mission Impossible Under European Consumer Law?’ (2018) 7 EuCML 179–188; Van Eecke/Truyens, ‘EU Study on the Legal Analysis of a Single Market for the Information Society. New rules for a New Age? Report Study (SMART 2007/0037)’ (2009).

The E-Commerce Directive, adopted in 2000, aimed to promote the proper function- 1 ing of the internal market and eliminate legal barriers that were jeopardising the development of e-commerce.1 It regulates the activities of information society service providers2 and it encourages the conclusion of contracts for the acquisition and provision of goods and services. Direct and indirect e-commerce are both covered by the Directive, but businesses trading with intangible goods and services, which do not depend on an external factor, such as transport, are the ones that can mostly benefit from ecommerce.3 However, Section 3 of the E-Commerce Directive (‘Contracts concluded by electronic 2 means’) does not lay down rules on the conclusion of contracts. This matter is governed by the legislation of each Member State. The E-Commerce Directive only seeks to attain a relative degree of harmonisation by means of the rules laid down in Arts 10 and 11, which oblige the service provider to give certain information to the recipient of the service and establish some formal prerequisites for the conclusion of contracts. These prerequisites, with the exception of those regarding contract terms [Art. 10(3)], do not apply to contracts concluded exclusively by exchange of electronic mail or by equivalent individual communications [Arts 10(4) and 11(3)]. The transposition of these rules has been uneven4 and sometimes problematic5; although initially it was estimated that businesses were complying in a satisfactory manner,6 later it has been held that the obligations under Arts 10 and 11 are often neglected:

Vogel, p. 52. See COM(97) 157 final, 16–17; Pearce/Platten, 371. See Arts 1, 9. 2 Art. 1(1)(b) Technical Standards and Regulations Directive. These activities do not coincide entirely with the electronic communications services. See Recital 10 and Art. 2 No. 4 Electronic Communications Code Directive. See also Recital 18 E-Commerce Directive. 3 See COM(97) 157 final, 3. For the definition of ‘electronically supplied services’, see Art. 2 No. 1 Geoblocking Regulation. 4 Riefa, 26 et seq. 5 See Arroyo Amayuelas, 101. 6 COM(2003) 702 final, 12; Van Eecke/Truyens, Ch. 7, p. 31. 21 1

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Introduction to Arts 10–11 A recent EU-wide survey carried out by the ECC-Net in 2011 suggests that the obligations under Articles 10 and 11 are often neglected. The survey shows that the online traders fulfilled the obligation to inform the consumer about the process of completing the purchase only in 68 % of consumer purchases. The opportunity to review the details of the order before placing the order was not offered in 11 % of purchases. In 6 % of purchases it was not clear when the final stage was reached, i.e., when the order had been placed. In almost half the purchases (48 %), the purchaser had to actively accept the terms and conditions. As to compliance with the rules in Article 11, 81 % of purchasers received a confirmation order both on screen and by e-mail. In 10 % of purchases, a confirmation of the order was received only by e-mail and in 8 % only on screen. In 1 % of purchases, no confirmation was received.7

When the E-Commerce Directive was adopted, the most common type of e-commerce consisted of accessing a business website by means of a browser, as expressly mentioned in Recital 19. Also, it was – and still is – possible to order goods or services by videoconference or internet telephony (e.g. Skype), as well as thanks to online chat services, or the exchange of emails or text messages, but clearly those are not the mass contract models to which Section 3 of the E-Commerce Directive mainly addresses its rules. 4 Currently, electronic contracts are concluded by means of an array of internet-connected devices, including traditional computers as well as mobile devices. Moreover, a variety of paths leading to the transaction exist, such as online stores, dedicated applications, auctions at online marketplaces8 and other platforms and intermediary services, including social networks.9 In fact, the term ‘website’ has been replaced by the much broader expression ‘online interface’, which means any software, including a website or a part thereof and applications, including mobile applications, which serves to give customers access to goods or services with a view to engaging in a transaction with respect to those goods or services.10 Furthermore, lately automatic contracting by means of virtual assistants or intelligent agents, accessible through online chats (chatbots) or by voice, has gained ground. Examples include Alexa for Amazon Echo’s intelligent speaker or Google Assistant for Google Home; Bixbi, on the Samsung Galaxy S device, or Siri on the iPhone.11 Therefore, if when the E-Commerce Directive was adopted there were already authors who considered the rules in Arts 10 and 11 to be of little use,12 in light of the new ways of acquiring goods and services, the doubts concerning the adequacy of these provisions take on renewed relevance.13 5 Surprisingly, neither the Digital Content Directive,14 nor the Sale of Goods Directive15 includes rules on the conclusion of contracts.16 3

SEC(2011)1641/2, 16. For the definition of ‘online marketplace’, see Art. 3(1)(b) and 4(1)(e) Modernisation Directive that, respectively, insert a point (n) into Art. 2(1) UCDP and a point 17 into Art. 2 CRD, with this definition: ‘[…] a service using software, including a website, part of a website or an application, operated by or on behalf of a trader, which allows consumers to conclude distance contracts with other traders or consumers.’. 9 For the definition of ‘online intermediation services’, see Art. 2 No. 2 Online Intermediation Services Regulation. 10 Art. 2 No. 16 Geo-blocking Regulation; Art. 2 No. 7 Online Intermediation Services Regulation. See also, Recital 25 Modernisation Directive. 11 On voice-enabled smart assistants, see broadly Sein, 179. 12 Hultmark, 12–16; Savin, p. 56. 13 SEC(2011)1641/2, 16. On the radically new context for consumption in which consumer transactions are technologically mediated, see Brownsword, p. 166–203. 14 Recital 12 DCD. 15 Recital 18 SGD. 16 Recital 12 DCD; Recital 18 SGD. Incidentally, the Consumer Rights Directive also does not contain rules on the conclusion of contract (Recital 14). 7

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Article 10 Information to be provided 1. In addition to other information requirements established by Community law, Member States shall ensure, except when otherwise agreed by parties who are not consumers, that at least the following information is given by the service provider clearly, comprehensibly and unambiguously and prior to the order being placed by the recipient of the service: (a) the different technical steps to follow to conclude the contract; (b) whether or not the concluded contract will be filed by the service provider and whether it will be accessible; (c) the technical means for identifying and correcting input errors prior to the placing of the order; (d) the languages offered for the conclusion of the contract. 2. Member States shall ensure that, except when otherwise agreed by parties who are not consumers, the service provider indicates any relevant codes of conduct to which he subscribes and information on how those codes can be consulted electronically. 3. Contract terms and general conditions provided to the recipient must be made available in a way that allows him to store and reproduce them. 4. Paragraphs 1 and 2 shall not apply to contracts concluded exclusively by exchange of electronic mail or by equivalent individual communications. Bibliography: Brownsword, ‘The E-Commerce Directive’ in: Grundmann (ed.), European Contract Law in the Digital Age (Intersentia 2018), p. 166–203; Brunotte, ‘Virtuelle Assistenten-Digitale Helfer in der Kundenkommunikation’ (2017) 33(9) C&R 583–589; Busch, ‘Does the Amazon Dash Button Violate Consumer EU Law? Balancing Consumer Protection and Technological Innovation in the Internet of Things’ (2018) 2 EuCML 78–80; Commission, ‘A European Initiative in Electronic Commerce’ COM(97) 157 final; Commission, ‘Proposal for a European Parliament and Council Directive on certain legal aspects of electronic commerce’ COM(1998) 586; Commission, ‘Commission Staff Working Document Online services, including e-commerce, in the Single Market […]’ SEC(2011) 1641/2; Gsell et al. (eds), Beck-online. Grosskommentar zum Zivilrecht (C.H. Beck: from 1.12.2018); Leeb, ‘Rechtskonformer Vetragschluss mittels DashButton? Innovativer Wocheneinkauf 4.0 auf dem Prüfstand’ (2017) MMR 89–92; Lodder, ‘Directive 2000/31/EC’ in: Lodder/Murray (eds), EU Regulation of E-Commerce (Edward Elgar 2017), p. 15–58; Lodder/Voulon, ‘Intelligent Agents and the Information Requirements of the Directives on Distance Selling and E-Commerce’ (2002) 16 (3) IRLCT 277–287; Martinek/Semler/Flohr (eds), Handbuch des Vertriebrechts (4th edn, C.H. Beck 2016); Rauschenbach, ‘Onlinebestellungen per Knopfdruck – Offene Rechtsfragen zur Verwendung eines Dash Buttons’ (2017) 4 C&R 221–226; Reich/Micklitz, Europäisches Verbraucherrecht (4th edn, Nomos 2003); Research Group on the Existing EC Private Law (Acquis Group), Principles of the Existing Contract Law (Acquis Principles), Contract II: General Provisions, Delivery of Goods, Package Travel and Payment Services (Sellier 2009); Säcker et al. (eds), Münchener Kommentar zum Bürgerlichen Gesetzbuch, Vol. 3 (‘MüKo BGB’) (8th edn, C.H. Beck 2019); Schaub, European Legal Aspects of E-Commerce (Europa Law Publishing 2004); Schulze (ed.), Common European Sales Law (Nomos 2012); Sein, ‘Concluding Consumer Contracts via Smart Assistants: Mission Impossible Under European Consumer Law?’ (2018) EuCML 179–188; Spindler/Schuster (eds), Recht der elektronischen Medien (3rd edn, C.H. Beck 2015); Van Eecke/Truyens, ‘EU Study on the Legal Analysis of a Single Market for the Information Society. New rules for a New Age? Report Study (SMART 2007/0037)’ (2009); Weitzenboeck, ‘Electronic Agents and the Formation of Contracts’ (2001) 9 (3) IJLIT 204–234; Wendehorst, ‘Platform Intermediary Services and Duties under the E-Commerce Directive and the Consumer Rights Directive’ (2016) 1 EuCML 30–33. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Conclusion of contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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II. Filing and accessibility of the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Technical means for identifying and correcting errors . . . . . . . . . . . . . . . . . . . . . . . IV. Contract language . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Codes of conduct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI. Exclusions and derogations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VII. Contract terms and general conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VIII. Individual communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 7 8 12 14 15 21

D. Criticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function 1

Art. 10 places the service provider under a pre-contractual information obligation. Providing the recipient of the service with information on certain technical aspects, and on other matters, increases the transparency of the contractual process thereby increasing trust and confidence, strengthening the contractual perspective of e-commerce, and facilitating the conclusion of contracts by electronic means.

B. Context 2

The rules laid down in Art. 10 apply to mass contracting, not to contracts concluded exclusively by exchange of electronic mail or by equivalent individual communications [cf. Art. 10(4)]. They apply both to B2B and to B2C contracts. In B2C contracts, Art. 10(1) and (2) are mandatory, whilst in B2B contracts, the information duties can be excluded. Albeit with certain variations, the content of Art. 10 is also reproduced in Art. 4:105(3) ACQP, Art. II.–3:105(1) DCFR and Art. 24(3) CESL. Art. 2:204(1) ACQP and Art. II.–3:106(2) DCFR provide rules on the clarity of information, which would correspond to Art. 10(1) E-Commerce Directive.

C. Explanation If a trader uses an organised distance sales or service-provision scheme offered by a third party other than the trader, such as an online platform,1 it is reasonable to consider that the platform must comply with the duties laid down by Art. 10 (and Art. 11), which are markedly technical in nature.2 The technical information in Art. 10 refers to the infrastructure: the technical steps to follow to conclude the contract, the possibilities concerning filing the contract, the technical means for correcting errors and the languages offered for the conclusion of the contract. The information on the codes of conduct, which affects content, shall always be provided by the trader [Art. 10(3)]. 3 Only the technical information must be provided clearly, comprehensibly and unambiguously;4 the provision does not require it to be provided on a durable medium. 4 There is no provision stating what sanctions apply or what remedies are available as a consequence of the breach of these information duties (Art. 20). Other initiatives go further and include the right of withdrawal as well as granting an action for damages.5 3

Recital 20 CRD. See Wendehorst, 30. Application of Art. 6a(1)(d) CRD, inserted by Art. 4(5) Modernisation Directive entails that the distribution of the obligations related to the contract could be agreed upon between the third party offering the goods, services or digital content and the provider of the online marketplace. 3 Busch in: BeckOGK, § 312 i BGB, mn. 8. 4 Lodder, p. 43; Schaub, p. 66: ‘Easy to understand and not open to misinterpretations’. 5 cf. Art. 4:105(4) ACQP; Art. II.–3:105(3) and (4) DCFR. 1

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I. Conclusion of contract Due to the electronic medium that is being used, the service provider must give in- 5 formation on the technical steps that lead to concluding the contract before the recipient makes or accepts an offer, i.e. ‘prior to the order being placed by the recipient of the service’. This means that the service provider needs to clarify what statements are going to legally bind the recipient. Thus, the service provider must give information as to when the offer is deemed to have been placed and the effects thereof: whether placing the order amounts to an offer (which does not bind the service provider), whether it is considered acceptance (thus concluding the contract) or whether it is merely an invitation to treat (thereby the recipient’s response constitutes an offer, which the service provider could reject). In short, the value and effects of the different possible statements must be made clear to the recipient of the service from the beginning.6

II. Filing and accessibility of the contract Art. 10(1)(b) regulates the service provider’s duty to give information on two matters: 6 whether the contract, if concluded, will be filed, and whether it will be accessible to the recipient of the service (e.g. at an address given by the provider). This duty to inform does not, in any way, oblige the provider to file the contract.7 However, it is obvious that, as technology always renders it possible to file the contract, this is the normal procedure.8 The information duty should also be considered to extend to cases where the provider, once the contact is filed, decides to delete it.9

III. Technical means for identifying and correcting errors Art. 10(1)(c) obliges the service provider to give information on the technical means 7 made available to the recipient for identifying and correcting input errors prior to the placing of the order. This information must include explanations as to how the mechanism works, its exact placing and when the client may use it.10 The instructions on how to correct input errors do not replace the duty to effectively implement the mechanisms that make it possible, as per Art. 11(2). The aim is to prevent the recipient from being bound by an undesired contract (e.g. when the customer mistakenly types ‘22’ instead of ‘2’ when placing the order) and to allow conclusion of the desired contract, and the obligations arising from it to be performed without delay (e.g. facilitating the correction of errors in the payment details or in the shipping address).11

6 Reich/Micklitz, p. 631; Schaub, p. 66–67, 71–72. On Art. 24(3)(a) CESL, Howells/Watson in: Schulze, Art. 24 CESL, mn. 6: ‘Due to the manner in which the contract is concluded, the other party needs to be made aware of the actions that will result in the conclusion of a binding contract.’. 7 Lodder, p. 45; Reich/Micklitz, p. 632. Art. 24(3)(b) CESL is interpreted in identical terms. Howells/ Watson in: Schulze, Art. 24 CESL, mn. 7. 8 Van Eecke/Truyens, Ch. 7, p. 33. 9 Reich/Micklitz, p. 632. 10 ibid., p. 633. 11 Howells/Watson in: Schulze, Art. 24 CESL, mn. 8.

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IV. Contract language Neither the E-Commerce Directive nor the Consumer Rights Directive harmonise the language requirements applicable to the contracts.12 Art. 10(1)(d) aims to prevent the client from being surprised by a contract written in a language different to that used in the commercial communications.13 There may be a number of languages involved: the provider may offer goods or services in the language of the place where it is based and also use another widespread language because it is usual in the medium (such as English on the Internet) and/or depending on the target market (e.g. German, if the recipients are German or Austrian citizens who could rent an apartment at the Spanish seaside). Therefore, it is reasonable that the provider informs the recipient of the language to be used for the contract. However, it is possible that the good or service is offered in one language only. In this case, the information would only be relevant if the language of the contract will differ from the language used to disseminate the content of the information available on the website or for the online shop, or to the language used by the provider to communicate with the recipient,14 although probably this is not a frequent scenario in practice.15 9 The rule does not require the language of the contract to be one of the languages used by the provider on his website, although perhaps it goes without saying. 10 In any event, the information on language issues is less relevant nowadays than it was 20 years ago, thanks to the development of automated translation programmes such as Google Translate or Deepl.com.16 Actually, the existence of such automated translation software will probably lead to service providers offering contracts in different languages more frequently.17 Additionally, it should be noted that when the contractual process is carried out through a voice assistant, it is almost always possible to connect to a foreign version thereof. 11 On the other hand, in machine-to-machine contracts, what matters is that the combination of numbers and letters can be understood by the software used for the contractual process. 8

V. Codes of conduct 12

Art. 10(2) imposes on the service provider the duty to indicate the codes of conduct it adheres to and to provide information on how they can be consulted electronically.18 Other directives also lay down such duty;19 some require the information to be provid12 Recital 63 and Art. 1(6): ‘This Directive does not affect measures taken at Community or national level, in the respect of Community law, in order to promote cultural and linguistic diversity and to ensure the defence of pluralism’; Recital 15 CRD: ‘This Directive should not harmonise language requirements applicable to consumer contracts. Therefore, Member States may maintain or introduce in their national law language requirements regarding contractual information and contractual terms.’ See also Art. 6(7) CRD. 13 Which could amount to an unfair commercial practice, e.g. Annex I, 8 UCPD. 14 Lodder, p. 44; Reich/Micklitz, p. 634. 15 Van Eecke/Truyens, Ch. 7, p. 35. 16 In COM(97) 157 final, 12, the Commission pointed out that ‘multilingualism, including on-line translation, must be supported, in order to make user-friendly electronic commerce services available’. 17 Lodder, p. 44. 18 See also Arts 8(2) and 16. 19 Art. 17 UCPD: ‘Member States shall take appropriate measures to inform consumers of the national law transposing this Directive and shall, where appropriate, encourage traders and code owners to inform consumers of their codes of conduct.’.

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ed in good time before conclusion of the contract.20 Non-binding proposals expressly state that such information is part of the contract terms that the trader must give the other party before the latter is bound by the contract.21 Probably the European legislator believes that providing information on the codes of conduct before the contract is concluded increases consumers’ trust in the business. However, Art. 10(2) neither imposes the obligation to make the contract terms known prior to the contract nor does it expressly exclude providing this information after the placement of the order. 22 Thus it could be held that the information could be given ‘after the conclusion of the contract’. As for the information on how to consult such codes electronically, it suffices to pro- 13 vide the link from where they may be downloaded or display the logo to click on in order to reach the webpage where they are located.23

VI. Exclusions and derogations Pursuant to Art. 10(4), the service provider does not have to give the information re- 14 quired under Art. 10(1)(a)–(d) and Art. 10(2) when contracts are concluded exclusively by exchange of electronic mail or by equivalent individual communications. On the other hand, parties who are not consumers may agree to exclude these rules [Art. 10(1) and (2)].

VII. Contract terms and general conditions Art. 10(3) lays down the service provider’s duty to make the contract and the general 15 terms given to the recipient available in a manner that allows the recipient to store them and reproduce them. The Spanish version only requires the general conditions to be made available in such a way; this is clearly a translation mistake. The rule is essential to protect the other party’s interests in the relationship with the 16 provider. In order to furnish the recipient of the service with proof of the conclusion of the contract and provide access to information on the content thereof, it grants the recipient an actual legal entitlement to obtain the contractual terms from the service provider so that they may be stored and reproduced;24 the coincidence with certain features of the definition of durable medium is obvious.25 The obligation is fulfilled either by sending the contract on paper or on a USB stick, 17 CD-ROM, DVD or memory card, or if it is sent by e-mail so that it can be saved on a hard disk,26 or even by making it available to the client by giving direct access to it without the service provider’s intervention (e.g. making it available to download from the service provider’s website or via Dropbox).27 The recipient must be informed of the

Art. 22(4) in conjunction with Art. 22(3)(d) Services Directive; Art. 6(1)(n) CRD. Acquis Group, p. 197. For B2C contracts only, Art. 13(1)(d) and Art. 16(d) CESL. 22 Schaub, p. 67. 23 Lodder, p. 44; Reich/Micklitz, p. 635; Schaub, p. 67. 24 Reich/Micklitz, p. 636. 25 Art. 2 No. 13 DCD; Art. 2 No. 11 SGD; Art. 2 No. 13 Online Intermediation Services Regulation; Art. 2 No. 10 CRD. See also, Art. 1:306 ACQP, Art. I.–1:106(3) DCFR, Art. 2(f) CESL. 26 Recital 23 CRD. 27 Lodder, p. 45. 20

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provider’s choice prior to concluding the contract [Art. 10(1)(b)]. Reproduction includes the ability to print the contract on paper.28 18 Unlike other initiatives, the E-Commerce Directive does not require that the contract terms are made available prior to concluding the contract,29 but for distance selling other norms address this void.30 19 On the other hand, Art. 10(3) E does not state that the rule applies ‘except when otherwise agreed by parties who are not consumers’, which means that it is mandatory in B2B contracts. This has been criticised;31 certainly, other initiatives do not protect businesses so much.32 However, the logic behind the rule is clear, at least in light of the Online Intermediation Services Regulation, which lays down mandatory rules in B2B contracts, too. 20 Art. 10(3) also applies to contracts concluded exclusively by exchange of electronic mail or by equivalent individual communications.

VIII. Individual communications Art. 10 is designed for online contracting where the service provider addresses an indeterminate number of people by electronic means of communication. This is why the legislator left the door open to not applying the provision (and neither Art. 11) when the contracting process is carried out through individual communications only. The meaning of this expression is not clarified by the Directive, and to date, neither has it been defined by the ECJ. Legal doctrine considers that the individual nature of the medium is relevant, but that it is not the only factor to be taken into account; it would still be necessary to find out whether the exchange of statements takes place as it would by phone or by post. Therefore, communication would not be considered individual if the e-mail received by the recipient of the service redirects to a website or to an online shop’s catalogue. In this scenario, the communication takes place following the design set by the service provider. Moreover, the contract would not be concluded by the exclusive use of individual communication. It seems Art. 10(1) and (2) would not apply to contracts concluded by e-mail or VoIP (Voice Over Internet Protocol), e.g. via Skype, Facetime or WhatsApp calls. 22 The general consensus among scholars is that communication through smart assistants is not equivalent to individual contracting (e.g. by phone).33 Therefore, Art. 10(1) and (2) should apply. On the other hand, the information does not need to be provided in writing, on paper, or on a ‘durable medium’, or be directly readable in intelligible characters; from this point of view, the provision is not, in fact, an obstacle to the develop21

28 SEC(2011)1641/2, 16. ‘Consumers should not only be able to store the contract terms and general conditions, but they must also be able to reproduce (print) them’. See also, Art. 24(4) CESL: ‘[…] reproduction in tangible form.’. 29 See Art. II.–3:105(1)(e) DCFR [‘any contract terms used’] and Art. 4(3)(e) CESL [‘the contract terms’]. 30 On terms and conditions availability for business users at all stages of the commercial relationship, see Art. 3(1)(b) Online Intermediation Services Regulation. See also, Art. 6(1) and (5) CRD. 31 Van Eecke/Truyens, Ch. 7, p. 35. 32 Art. 4:105(1) ACQP. See Acquis Group, p. 196, 197. See also, Art. II.–3:105(1)(e) DCFR (in conjunction with Art. II.–1:102 DCFR); Art. 24(3) CESL (in conjunction with Art. 27 CESL). See Howells/Watson in: Schulze, Art. 24 CESL, mn. 3. 33 Busch in: BeckOGK, § 312 i BGB, mn. 51 and 51.1; Brunotte, 588; Schimbacher in: Spindler/Schuster, § 321 i BGB, mn. 12; Sein, 187–188; Wendehorst in: MüKo BGB, § 312 i BGB, mn. 50. However, see Lodder/Voulon, 285: ‘[…] if an agent is ordering from a website that facilitates the contracting of agents, the website is designed to contract by individual communication’.

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ment of electronic contracting through voice assistants. If this were the case, however, it would suffice to provide information on the service provider’s website and e-mail the contract to the contracting party.34

D. Criticism Not all requirements laid down by Art. 10 seem relevant at present. For instance, it is obvious that the information on whether the provider will file the contract [Art. 10(1) (b)] is an anachronism. It will be filed by default, not just because the technology is in place to do so, but mainly because it proves the conclusion of the contract for the provider. On the other hand, the duty to provide information on the relevant codes of conduct is superfluous when other acquis norms already provide for it. Additionally, both for B2C and for B2B contracts it should be made clear that the business must provide reference to any contract terms used at all stages of the commercial relationship. Some information requirements laid down by Art. 10 may not be useful or adequate when the contractual process does not take place through websites accessed via computers that are connected to the Internet. It is not easy to envisage the application of the provision when the contractual process takes place exclusively through agents that operate automatically. In this case, it is entirely unnecessary to inform the contracting party that is behind the machine of the steps leading to the conclusion of the contract and, of course, the language that machines understand is not the language that the provision has in mind.35 On the other hand, there are situations where the recipient does not even need to complete a form with data; thus, once again, these information requirements would become irrelevant. This is precisely what happened with the novel forms of contract by means of ‘buttons’, the now since withdrawn Amazon Dash-Button being a prominent example.36 However, similar mechanisms may be developed in the future. In the case of the Amazon Dash, probably the information required by Art. 10 should have been provided at a previous stage, when the framework contract was concluded establishing the terms of the order.37 This latter contract is the one that should have been available for the recipient to store and reproduce [Art. 10(3)]. Finally, in light of the fact that browsing websites and downloading applications are being gradually replaced by artificial intelligence and personal virtual assistants, a future revision of the E-Commerce Directive ought to clearly define the concept of individual communications and decide whether it includes contracts concluded automatically, without human intervention, by intelligent electronic agents, which are contracts that undoubtedly fall within the letter and the spirit of the provision, although there is nothing in the E-Commerce Directive that expressly refers to them, 38 and neither are there provisions to this effect in the recently adopted Digital Content Directive.39

Sein, 187. Lodder/Voulon, 285–286; Van Eecke/Truyens, Ch. 7, p. 36–37. 36 On the Dash-Button, see Busch, 78; Leeb, 8; Rauchenbach, 221. 37 Krüger/Peintinger in: Martinek/Semler/Flohr, § 36. Internetvertrieb-Teleshopping, mn. 118–119; Rauschenbach, 224. 38 COM(1998) 586 final, 12, referring to Art. 9: ‘[…] Member States will have to: […] not prevent the use of certain electronic Systems as intelligent electronic agents’. See Lodder, p. 42; Weitzenboeck, 224. 39 Recital 12 DCD. 34 35

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Placing of the order

Article 11 Placing of the order 1. Member States shall ensure, except when otherwise agreed by parties who are not consumers, that in cases where the recipient of the service places his order through technological means, the following principles apply: – the service provider has to acknowledge the receipt of the recipient's order without undue delay and by electronic means, – the order and the acknowledgement of receipt are deemed to be received when the parties to whom they are addressed are able to access them. 2. Member States shall ensure that, except when otherwise agreed by parties who are not consumers, the service provider makes available to the recipient of the service appropriate, effective and accessible technical means allowing him to identify and correct input errors, prior to the placing of the order. 3. Paragraph 1, first indent, and paragraph 2 shall not apply to contracts concluded exclusively by exchange of electronic mail or by equivalent individual communications. Bibliography: Commission, ‘Proposal for a European Parliament and Council Directive on certain legal aspects of electronic commerce’ COM(1998) 586 final; Commission, ‘Artificial Intelligence for Europe’ COM(2018) 237 final; De Miguel Asensio, Derecho privado de internet (5th edn, Civitas 2015); Gsell et al. (eds), Beck-online. Grosskommentar zum Zivilrecht (C.H. Beck: from 1.12.2018); Hultmark, ‘The E-Commerce Directive and Formation of Contract in a Comparative Perspective’ (2001) 2 GJ advances 1–25; Jansen/Zimmermann (eds), Commentaries on European Contract Laws (OUP 2018); Lodder/Voulon, ‘Intelligent Agents and the Information Requirements of the Directives on Distance Selling and E-Commerce’ (2002) 16 (3) IRLCT 277–287; Loos, ‘Machine-to-Machine Contracting in the Age of the Internet of Things’ in: Staudenmayer/Schulze/Lohsse (eds), Contracts for the Supply of Digital Content: Regulatory Challenges and Gaps (Nomos 2017), p. 59–82; Reich/Micklitz, Europäisches Verbraucherrecht (4 th edn, Nomos 2003); Savin, EU Internet Law (Edward Elgar 2017); Schaub, European Legal Aspects of E-Commerce (Europa Law Publishing 2004); Schulze (ed.), Common European Sales Law (Nomos 2012); Spindler/Schuster (eds), Recht der elektronischen Medien (3rd edn, C.H. Beck 2015); Van Eecke/Truyens, ‘EU Study on the Legal Analysis of a Single Market for the Information Society. New rules for a New Age? Report Study (SMART 2007/0037)’ (2009). A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Acknowledgement of receipt of the order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Receipt of the order and of the acknowledgment of receipt . . . . . . . . . . . . . . . . . . III. Technical means to correct input errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Exclusions and derogations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 5 9 10 13

D. Criticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15

A. Function 1

Art. 11 lays down the service provider’s duties when the recipient places an order. The duties to make available mechanisms to correct input errors and to acknowledge receipt of the order contribute to affording legal certainty to the contractual procedure and they increase confidence in e-commerce.

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B. Context Acknowledging receipt of the order is an information duty imposed on the service 2 provider during the formation of the contract. Other problems that may arise during this phase are solved by the duty to make available appropriate, effective and accessible technical means to identify and correct input errors before placing the order; the recipient must have been informed of such means previously [Art. 10(1)(c)]. Albeit with certain variations, the content of Art. 11 is also reproduced in Arts 4:105(2), 4:110(1) and (3) ACQP, Art. II.–3:201(1) and (3), II.–3:202(1) and (4) DCFR, and Art. 24(2) and (5) CESL.

C. Explanation The proposal for an E-Commerce Directive contained rules on the conclusion of 3 contract, because both acceptance and the receipt of such acceptance had to be confirmed in order for the contract to be concluded.1 However, despite vision statements advocating for the elimination of regulatory divergences in this respect,2 the final version of the E-Commerce Directive only provides for when the order is deemed to have been placed and the acknowledgement of receipt thereof.3 Other European private law initiatives regulate this matter, adopting the exchange of offer and acceptance model. 4 The decision to avoid regulating the moment at which the contract is concluded led 4 the European legislator to use neutral terms, such as ‘order’ or ‘placing an order’, so as not to prejudge whether the statement made by the recipient of the goods or services should be deemed an offer (whereby the services provider’s statement constitutes an invitation to treat) or acceptance of the offer (if, by contrast, the offer is made by the provider). However, this has not prevented other later initiatives from replacing expressions such as ‘prior to placing of the order’ [Art. 11(2)] and other similar terms [Art. 10(1) and (1)(c)] by others that, still being neutral, are more correct from a legal point of view, and more understandable (e.g. ‘before the recipient makes or accepts an offer’).5

I. Acknowledgement of receipt of the order Art. 11(1) 1st indent provides that the service provider has to acknowledge the receipt 5 of the recipient's order without undue delay and by electronic means; it does not re-

COM(1998) 586 final, 12, 27. See Hultmark, 14; Lodder, p. 46; Savin, p. 56. COM(1998) 586 final, 12: ‘This major divergence between the national legal systems, linked to the specific nature of the technological context, results in uncertainty in cross-border contractual relations, particularly for consumers and is inimical to the development of the trust which is necessary for electronic commerce (one party may consider, on the basis of his own legal system, that the contract has been concluded, while the other party, on the basis of his national rules, believes that he is not yet bound)’. 3 See Common Position (EC) No 22/2000, adopted by the Council on 28 February 2000 (OJ C 128, 8.5.2000, p. 49). 4 Terryn in: Schulze, Introduction to arts 30–39, mn. 1 et seq. See also, Christandl in: Jansen/Zimmermann, p. 231 et seq; De Miguel Asensio, p. 917–919. 5 cf. Arts 4:105(2) ACQP, Arts II.–3:105(1), II.–3:201(1), II.–3:202(1) DCFR; Art. 24(2), (3), and (5) CESL. 1

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quire that the acknowledgement of receipt is received without undue delay or within a certain time.6 6 Regardless of whether the presentation of products or services on a website is an invitation to treat or an offer, and, therefore, regardless of whether the initiative to conclude a contract comes from the recipient of the service or from the provider, the latter must always confirm receipt of the offer/acceptance immediately by electronic means (e.g. by e-mail). It is not necessary for the service provider to reiterate the content of the other party’s declaration of intent, i.e. to repeat what the recipient has requested; but, of course, it must make clear and identify which communication it acknowledges to have received. This entails, in short, that it must include the date and time of the order. 7 7 This confirmation does not determine the moment at which the contract is concluded, and neither does it prejudge the validity thereof.8 Providing the service paid for online is considered to amount to acknowledgment of receipt of the client’s order, 9 e.g. the provision of digital content online. On the other hand, if the service provider communicates his acceptance of the recipient’s offer this is also conclusive of having received the order. 8 The E-Commerce Directive does not determine sanctions or remedies for non-compliance with the duty to acknowledge receipt, but instead leaves this to the Member States (Art. 20). It has been suggested that while the other party does not receive it, the statement could be withdrawn or the contract, if concluded, could be rescinded. Additionally, it has been held that the service provider would be liable for damages (e.g. those deriving from a second contract entered into by the recipient who believed that the fact of not receiving the acknowledgement of receipt meant that the service provider had not received the offer and, thus, the first contract had not been concluded).10

II. Receipt of the order and of the acknowledgment of receipt 9

The order and the acknowledgement of receipt are deemed to be received when the parties to whom they are addressed are able to access them (Art. 11(1) 2 nd indent). Effective knowledge is unnecessary; the possibility thereof suffices,11 therefore it is enough for the message to have been stored in the device used to receive communications, such as a laptop, a tablet or a smartphone.

III. Technical means to correct input errors 10

The service provider must make available to the recipient of the service appropriate, effective and accessible technical means to correct input errors [Art. 11(2)]. It is possible to comply with this duty in different ways. The usual procedure is that, before the order reaches the service provider, a final recap page displays the data entered by the recipient of the service and allows this party to alter this data before the order is sent to the service

6 But see Art. 4:110(2) ACQP: ‘If the other party does not receive such an acknowledgment or an acceptance without undue delay […]’. Idem, Art. II.–3:202(2) DCFR. 7 Reich/Micklitz, p. 627. 8 De Miguel Asensio, p. 916. But see, Van Eecke/Truyens, Ch. 7, p 35. 9 Recital 34. 10 Lodder, p. 46. See also, Art. 4:110(2) ACQP; Art. II.–3:202(2) DCFR. See Art. 14(3) and (4) UNCITRAL Model Law on Electronic Commerce (1996). 11 Reich/Micklitz, p. 628.

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provider; but the possibility to go back a step and modify the content of the shopping cart should also be accepted.12 The E-Commerce Directive does not lay down sanctions or remedies in case of 11 breach of the duty to make input correction means available, but instead leaves this to the Member States (Art. 20). Other initiatives provide that, if due to this lack of compliance the contract is entered into by mistake, the service provider will be liable for damages, without prejudice to the possible avoidance of the contract.13 Recently, businesses offer the possibility of placing orders that are immediately bind- 12 ing and thus not giving the other party the chance to make changes. It is the case of ‘oneclick buying’. This model does not comply with the requirements of Art. 11(2). 14 Other devices connected to the Internet that allowed a consumer to order favourite products through a press of a button (the example being the Amazon Dash-Button) did not even have a screen where one could see a summary of the order and correct input errors. However, each time an order was placed in this way, Amazon sent a message confirming the receipt thereof and allowed the recipient to change the order or even to cancel it before it entered the shipping process. Here it could be argued that this complied with the requirements of Art. 11(2), however this method of ordering goods from the Internet breaches other provisions of EU consumer law.15 When the contract is concluded by means of voice-activated virtual assistants (e.g. Alexa) there is also the possibility, for a given period of time before the order becomes definitive, to check, confirm data and change or even cancel the order. The client is allowed to correct the chosen items (which will appear in the shopping basket in the client’s personal account or on the Alexa app), and the corrections may be made either by accessing the order on the app or on the website, or again by using the voice-activated virtual assistant.

IV. Exclusions and derogations The acknowledgement of receipt and the revision mechanism do not apply to con- 13 tracts concluded exclusively by electronic mail or by equivalent individual communications [Art. 11(3)]. Therefore, the duty to acknowledge receipt is not excluded when the offer has been made via e-mail, chat, SMS or VoIP calls (‘Voice Over Internet Protocol’ e.g., via Skype, Facetime or WhatsApp) if the other party still needs to complete a form on a website to accept the offer. On the other hand, parties who are not consumers may derogate from these rules 14 [Art. 11(1) and (2)].

D. Criticism In the same line as Art. 10, Art. 11 aims to reinforce trust in e-commerce. However, 15 the framework it provides is incomplete: as well as not establishing the moment at which the contract is concluded, it does not determine the effects of the statement made by one of the parties while this party has not received the acknowledgment of receipt. It is almost certain that, at least in B2B contracts, the parties are allowed to agree that the effects of their statements depend on receiving the acknowledgment of receipt and that the latter will not be deemed to have been sent until it arrives. Schaub, p. 67; Schimbacher in: Spindler/Schuster, § 321 i BGB, mn. 33. Art. 4:110(2) ACQP, Arts II.–3:201(2), II.–7:201 DCFR. 14 Busch in: BeckOGK, § 312 i BGB, mn. 15. 15 See the comments under Art. 8 CRD, mn. 14.

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Introduction to Arts 12–15 In order to facilitate and increase security of online contracts, compliance with Art. 11(1) 1st indent, and Art. 11(2) does not seem impossible – or at least not for the majority of providers. Nevertheless, it is relevant to bear in mind that, for contracts concluded via novel ordering mechanisms, including personal voice assistants, it will be necessary to check the recipient’s user account (and, if applicable, correct errors), which interferes with the continuity of the contracting process.16 17 On the other hand, it is not clear whether the rules included in Art. 11 are useful when the contract is formed exclusively by means of artificial agents. To begin with, they are not necessary if it is held that contracts between machines are carried out via individual communications. But even if the previous hypothesis is rejected, it will not always make sense to programme the software required to comply with the duties laid down by the E-Commerce Directive.17 It is difficult to conceive how a machine could accidentally click a button or a link or write one thing instead of another, or, if it could, how the machine would correct errors by itself.18 If the error cannot be detected because the transaction is automated and it is the consequence of malfunctioning of the messaging software, the general private law remedies should be available. Artificial intelligence must guarantee that the decisions made by the system can be checked or corrected by the person, and that this person can intervene in the contractual process, either by confirming a contract or by authorising a particular contract.19 Additionally, as artificial intelligence advances, different types of information will be required; it will be necessary to guarantee that people know what criteria are used to decide a person’s preferences when an intelligent agent concludes a contract on that person’s behalf.20 16

Introduction to Arts 12–15 Bibliography: Commission, ‘Proposal for a European Parliament and Council Directive on certain legal aspects of electronic commerce’ COM(1998) 586 final; Commission, ‘First Report on the application of Directive 2000/31/EC of the European Parliament and the Council of 8 June 2000 on Certain Legal Aspects of Information Society Services, in particular Electronic Commerce, in the Internal Market’ COM(2003) 702 final; Commission, Study on the Economic Impact of the Electronic Commerce Directive (September 2007) (‘Economic Impact Study’); Commission, ‘Commission Staff Working Document Online services, including e-commerce, in the Single Market […]’ SEC(2011) 1641/2; Commission, ‘Public consultation on the regulatory environment for platforms, online intermediaries, data and cloud computing and the collaborative economy (24 September 2015 to 6 January 2016)’ (‘Public consultation’); Commission, ‘Synopsis report on the contributions to the public consultation on the regulatory environment for data and cloud computing’ (May 2016) (‘Synopsis report’); Commission, ‘Online Platforms and the Digital Single Market. Opportunities and Challenges for Europe’ COM(2016) 288 final; Commission, ‘Staff Working Document Online Platforms accompanying the document Communication on Online Platforms and the Digital Single Market’ SWD(2016)172 final, Commission, ‘Tackling Illegal Content Online. Towards an enhanced responsibility of online platforms’ COM(2017) 555 final; Commission, ‘Recommendation of 1 March 2018 on measures to effectively tackle illegal content’ C(2018) 1177 final; Commission, ‘Flash Eurobarometer Busch in: BeckOGK, § 312 i BGB, mn. 15. Schaub, p. 75. 18 Lodder/Voulon, 285. 19 On Art. II.–3:201 DCFR, Loos, p. 59–82. See COM(2018) 237 final, 16: ‘The large-scale use of AIenabled tools in business-to-consumer transactions needs to be fair, transparent and compliant with consumer legislation. Consumers should receive clear information on the use, features and properties of AIenabled products. Individuals should be able to control the data generated by using these tools and should know whether they are communicating with a machine or another human. In particular, when interacting with an automated system, consideration should be given to when users should be informed on how to reach a human and how to ensure that a system’s decisions can be checked or corrected.’. 20 Transparency duties that are covered by Art. 4(5) Modernisation Directive inserting a new Art. 6 a into the Consumer Rights Directive. See also other transparency requirements in the Online Intermediation Services Regulation. 16 17

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Introduction to Arts 12–15 469, Report Illegal Content Online’ (September 2018) (‘Flash Eurobarometer 469’); Commission, ‘Staff Working Document Impact Assessment Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on preventing the dissemination of terrorist content online’ SWD(2018) 408 final; Commission, ‘Summary Report of the public consultation on measures to further improve the effectiveness of the fight against illegal content online’ (September 2018) (‘Summary report’); Lucchi, ‘Regulations and Control of Communication: the French Online Copyright Infringement Law (HADOPI)’ (2011) 7 MPI IPCL RP 1–28; Nordemann, ‘Liability of Online Service Providers for Copyrighted Content – Regulatory Action Needed?. In-Depth Analysis for the IMCO Committee’ (2018); Peguera, ‘The DMCA Safe Harbors and Their European Counterparts: A Comparative Analysis of Some Common Problems’ (2009) 32 CJLA 481–512; Perset, The Economic and Social Role of Internet Intermediaries’ (2010) OECD Digital Economy Papers No. 171; Savin, ‘EU Regulatory Models for Platforms on the Content Carrier Layers: Convergence and Changing Policy Patterns’ (2018) 7 NJCL 9–37; Spindler, ‘Haftung ohne Ende? Über Stand und Zukunft der Haftung von Providern’ (2018) 1 MMR 48–52; Spindler, ‘Internet Intermediary Liability Reloaded. The New German Act on Responsibility of Social Networks and its (In-) Compatibility with European Law’ (2017) 8 JIPITEC 166–179; Valke/Kuczerawy/ Ombelet, ‘Did the Romans Get It Right? What Delfi, Google, eBay, and UPC TeleKabel Wien Have in Common?’ in: Taddeo/Floridi (eds), The Responsibilities of Online Service Providers (Springer 2017), p. 101–116. A. Internet intermediaries and their roles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Harmonising exemptions from the liability of Internet intermediaries . . . . . . .

3

C. Policy considerations and current reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4

A. Internet intermediaries and their roles Internet intermediary service providers carry out an information society service. 1 As 1 Perset notes ‘Internet intermediaries bring together or facilitate transactions between third parties on the Internet; they give access to, host, transmit and index content, products and services originated by third parties on the Internet or provide Internet-based services to third parties.’2 Such intermediaries usually belong to the business sector, but it is also necessary to include social platforms in this category. 3 Specifically, the following intermediaries can be identified: ‘Internet access and service providers, wired and wireless; data processing and web hosting providers, which often also provide domain name registrars; Internet search engines and portals; E-commerce intermediary systems, where these platforms do not take title to the goods being sold; Internet payment systems; participative networking platforms, which include Internet publishing and broadcasting platforms that do not themselves create or own the content being published or broadcast’4 In the E-Commerce Directive the only activity carried out by these intermediaries 2 which is taken into account is the transmission or storage of third-party content, which are activities that may or may not be developed by different intermediary providers. Specifically: (i) access, which enables the user to connect to the net; it is merely a technical function of information transmission (Art. 12); (ii) automated, intermediary and temporary storage of the transmitted information (Art. 13), in order to reduce the time required to transfer information and prevent Internet congestion due to a high demand for the same content; (iii) permanent storage or hosting of data provided by the Art. 1(1)(b) Technical Standards and Regulations Directive. Perset, 9. 3 CJEU, C-360/10 SABAM EU:C:2012:85, para. 27. With regard to Facebook, see Opinion of AG Szpunar delivered in C-18/18 Glawischnig-Piesczek EU:C:2019:458, para. 30 and CJEU, C-18/18 Glawischnig-Piesczek EU:C:2019:821, para. 22. 4 Perset, 9, 11–14. For a wide-ranging set of activities carried out by online platforms, see COM(2016) 288 final, 2. 1

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Introduction to Arts 12–15 recipient of the service on the provider’s servers, which are connected to the Internet (Art. 14).

B. Harmonising exemptions from the liability of Internet intermediaries 3

The E-Commerce Directive does not establish a specific regulation of the liability of Internet intermediary service providers and neither does it harmonise the different liability regimes existing in the Member States, despite the fact that the patchwork presented by these is an obstacle to the smooth functioning of the Internal Market.5 In the same line as the Digital Millennium Copyright Act in the United States (‘DMCA’),6 the ECommerce Directive only provides for some cases that should never entail such liability, 7 although there are limitations deriving from the duty of care and the knowledge of illegal activities being carried out thanks to the service provided. 8 Additionally, the privilege of liability exemption (‘safe harbour’) is compatible with injunctions.9

C. Policy considerations and current reforms The potential provided by the Internet for illegalities, of whatever nature (civil, administrative or criminal), to be carried out anonymously, massively and daily, paves the way for claims for secondary liability against the provider of intermediary services – unlike the perpetrator who may be anonymous, the provider is always known and can face compensation more easily.10 If the provider wished to avoid such claims, it would have to undertake economic costs that would probably be disproportionate. Moreover, the intermediary’s role as the Internet police would be encouraged, with the associated risk of the provider exercising a censorship that could undermine freedom of expression, especially in social media platforms that host user-generated content, such as opinions (Twitter), videos (YouTube), images (Flickr) or music (SoundCloud) etc. Moreover, other fundamental rights, such as freedom of information, data protection and freedom to conduct business could be compromised. 5 The E-Commerce Directive echoed the obvious social, cultural and economic benefits of the Internet and sought to enhance the development of that industry through the establishment of safe harbours. The Directive struck a balance between the different interests at stake11 (specifically, that of the Internet industry and those of the holders of intellectual property rights, particularly those of copyright holders) that, in general, was 4

Recital 40. DMCA of 28 October 1998, paras 201–203. For a comparison of the two statutes, see Peguera, 481–512. 7 COM(1998) 586 final, 27. 8 Recital 48. 9 Recital 45. See recently, CJEU, C-18/18 Glawischnig-Piesczek EU:C:2019:821, para. 25: ‘It follows that, as the Advocate General stated in point 32 of his Opinion, a host provider may be the addressee of injunctions adopted on the basis of the national law of a Member State, even if it satisfies one of the alternate conditions set out in Article 14(1) of Directive 2000/31, that is to say, even in the event that it is not considered to be liable.’. 10 Nordemann, 6, with further references; Valke/Kuczerawy/Ombelet, p. 102, with further references. 11 Recital 41. 5

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Introduction to Arts 12–15 very positively received,12 despite the detection of some obstacles that have hindered its application.13 Now, nearly 20 years since it was passed, its approach begins to be openly questioned, 6 especially when it comes to regulating the behaviour of giants such as Google or Facebook, which have great economic power and dominate the market. Indeed, despite their indispensable role in the development of communications, there is a perception that safe harbours act as immunity clauses to the detriment of the victims. Some Member States have already tested new actions in order to put an end to piracy (e.g. the French Hadopi Law)14 or offensive content (e.g. the German ‘Network Enforcement Law’, NetzDG) 15 and, in light of the growing relevance of online platforms to the digital economy and the sophistication of filtering techniques, the debate on whether a more proactive role should be required of intermediaries has not been long in coming.16 The outgoing Commission began to rethink the Internet industry’s role and responsibilities and, after a number of studies and public consultations,17 the plan was not to amend the E-Commerce Directive, but rather to address the issue of illegal content, especially in highly sensitive areas, such as copyright, terrorism, hate speech, child pornography or other harmful audio-visual content, by adopting specific legislation and encouraging selfregulatory efforts.18 Therefore the E-Commerce Directive regulatory framework must be complemented 7 with specific legislation for platforms (e.g. e-commerce marketplaces, online software application stores, online social media) and search-engines, the policy of which is no longer ensuring that online intermediation service providers are not liable, but preventing them from undertaking illegal activity.19 Meanwhile, new political guidelines for the next European Commission 2019–2024 8 call for a new Digital Services Act replacing the E-Commerce Directive. According to a leaked document, the plans, as far as they concern these comments, are to expand the activities of mere conduit, caching and hosting to include explicitly other services; to

COM(2003) 702 final, 15. See also, Economic Impact Study 4, 16 et seq. Economic Impact Study 21–22; SEC(2011) 1641/2, 24 et seq. 14 Lucchi, 1–28. The suspension of access to a communication service was abrogated in 2013. Germany has also amended the Telemedia Act (Telemediengesetz – TMG) in order to exclude platforms the business of which includes copyright breach from the privilege (e.g. ‘The Pirate Bay’). See Spindler (‘Haftung ohne Ende?’). 15 Gesetzes zur Verbesserung der Rechtsdurchsetzung in sozialen Netzwerken (Netzwerkdurchsetzungsgesetz – NetzDG), of 1.9.2017. For criticism, Spindler (‘Internet Intermediary Liability’). See also UK Government, ‘Online Harms White Paper’ (April 2019, last updated 26 June 2019). Recently in France, see the ‘Proposition de loi adoptee par l’Assemblée Nationale visant à lutter contre les contenus haineux sur internet of 9 July 2019’. 16 See different contributions in Taddeo/Floridi. 17 See Public consultation, 18–23, at: https://ec.europa.eu/digital-single-market/en/news/public-consult ation-regulatory-environment-platforms-online-intermediaries-data-and-cloud (accessed 14 August 2019). Results are available in the Synopsis report, at: https://ec.europa.eu/digital-single-market/en/news/f ull-report-results-public-consultation-regulatory-environment-platforms-online-intermediaries (accessed 14 August 2019). 18 SWD(2016)172 final, 7–9; COM (2017) 555 final; C(2018) 1177 final. See also, Summary Report and Flash Eurobarometer 469, both at: https://ec.europa.eu/digital-single-market/en/news/summary-report-p ublic-consultation-measures-further-improve-effectiveness-fight-against-illegal (accessed 20 April 2019). On terrorist content online, see SWD(2018) 408 final. 19 Inter alia, Savin. 12

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rewrite rules on liability exemptions; and to require a proactive role of different digital services, in particular online platforms.20

Article 12 “Mere conduit” 1. Where an information society service is provided that consists of the transmission in a communication network of information provided by a recipient of the service, or the provision of access to a communication network, Member States shall ensure that the service provider is not liable for the information transmitted, on condition that the provider: (a) does not initiate the transmission; (b) does not select the receiver of the transmission; and (c) does not select or modify the information contained in the transmission. 2. The acts of transmission and of provision of access referred to in paragraph 1 include the automatic, intermediate and transient storage of the information transmitted in so far as this takes place for the sole purpose of carrying out the transmission in the communication network, and provided that the information is not stored for any period longer than is reasonably necessary for the transmission. 3. This Article shall not affect the possibility for a court or administrative authority, in accordance with Member States' legal systems, of requiring the service provider to terminate or prevent an infringement. Bibliography: Baistrocchi, ‘Liability of Intermediary Service Providers in the EU Directive on Electronic Commerce’ (2003) 19 Santa Clara HTLJ 111–130; Belli/Sappa, ‘The Intermediary Conundrum: CyberRegulators, Cyber-Police or Both?’ (2017) 8 JIPITEC 183–198; Commission, ‘Proposal for a European Parliament and Council Directive on certain legal aspects of electronic commerce’ COM(1998) 586 final; Commission, ‘First Report on the application of Directive 2000/31/EC of the European Parliament and the Council of 8 June 2000 on Certain Legal Aspects of Information Society Services, in particular Electronic Commerce, in the Internal Market’ COM(2003) 702 final; Commission, ‘Commission Staff Working Document Online services, including e-commerce, in the Single Market […]’ SEC(2011) 1641/2; Commission, ‘Proposal for a Regulation of the European Parliament and the Council on preventing the dissemination of terrorism’ COM(2018)640 final; Council of Europe, Recommendation CM/Rec(2018)2 of the Committee of Ministers to Member States on the roles and responsibilities of internet intermediaries (March 2018); European Union Agency for Fundamental Rights, Opinion of the European Union Agency for Fundamental Rights, concerning the Proposal for a Regulation (EU) of the European Parliament and the Council on preventing the dissemination of terrorism content online (COM(2018) 640 final); Frosio, ‘The Death of “No Monitoring Obligations” A Story of Untameable Monsters’ (2017) 8 JIPITEC 199–215; Internet Society, ‘Perspectives on Internet Content Blocking: An Overview’ (March, 2017); Kaléda, ‘The Role of the Principle of Effective Judicial Protection in Relation to Website Blocking Injunctions’ (2017) 8 JIPITEC 216–225; Kuczerawy, ‘Intermediary Liability and the Effective Enjoyment of the Right to Freedom of Expression’ (2017) 8 JIPITEC 226–237; Lodder, ‘Directive 2000/31/EC’ in: Lodder/Murray (eds), EU Regulation of E-Commerce (Edward Elgar 2017); Lodder/Van der Meulen, ‚Evaluation of the Role of Access Providers. Discussion of Dutch Pirate Bay Case Law and Introducing Principles on Directness, Effectiveness, Costs, Relevance, and Time’ (2012) 4 JIPITEC 130–141; Nordemann, ‘Liability of Online Service Providers for Copyrighted Content – Regulatory Action Needed? In-Depth Analysis for the IMCO Committee’ (2018); Peguera, ‘The DMCA Safe Harbors and Their European Counterparts: A Comparative Analysis of Some Common Problems’ (2009) 32 CJLA 481–512; Peguera Poch, La exclusión de respons20 At present there is only a leaked Commission document under: https://netzpolitik.org/2019/leaked-d ocument-eu-commission-mulls-new-law-to-regulate-online-platforms (accessed 17 October 2019). See also, https://euinternetpolicy.wordpress.com/2019/07/30/the-eu-digital-services-act-what-it-is-and-why-i t-shouldnt-happen (accessed 17 October 2019); https://www.inlinepolicy.com/blog/towards-an-enhanced -responsibility-of-online-platforms-the-eu-digital-services-act (accessed 17 October 2019).

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abilidad de los intermediarios de internet (Comares 2007); Riordan, The Liability of Internet Intermediaries (OUP 2016); Savin, EU Internet Law (Edward Elgar 2017); Savola, ‘Proportionality of Website Blocking: Internet Connectivity Providers as Copyright Enforcers’ (2014) 5 JIPITEC 116–138; Spindler, ‘Responsibility and Liability of Internet Intermediaries: Status Quo in the EU and Potential Reforms’ in: Synodinou et al. (eds), EU Internet Law. Regulation and Enforcement (Springer 2017), p. 289–314; Strowel/Ide/ Verhoestraete, ‘La Directive du 8 Juin 2000 sur le Commerce Electronique: un Cadre Juridique pour l’Internet’ (2001) Journal des Tribunaux 133–145; UK DTI, ‘A Guide for Business to the Electronic Commerce (EC Directive) Regulations 2002 (SI 2002/2013)’ (July 2002); Van Eecke/Truyens, ‘EU Study on the Legal Analysis of a Single Market for the Information Society. New rules for a New Age? Report Study (SMART 2007/0037)’ (2009); Van Hoboken, ‘Legal space for innovative ordering: on the need to update selection intermediary liability in the EU’ (2009) 13 IJCLP 1–21; Venturini et al., Terms of Service and Human Rights. An Analysis of Online Platforms Contracts (Revan 2016); Wagner, Global Free Expression – Governing the Boundaries of Internet Content (Springer 2016); Yanguas, Contratos de conexión a Internet, Hosting y Búsqueda (Civitas 2012); Yannopoulos, ‘The Immunity of Internet Intermediaries Reconsidered?’ in: Taddeo/Floridi (eds), The Responsibilities of Online Service Providers (Springer 2017), p. 43–59. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Mere conduit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Concept of ‘intermediaries of access’ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Free Wi-Fi connections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Business models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Liability exemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Manipulations of a technical nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Automatic, intermediate and transient caching . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Knowledge of illegal activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 6 7 8 9 11 12 13 14 16

D. Criticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function Art. 12 exempts providers of ‘mere conduit’ services from liability for damages caused 1 by the transmission of illegal content put into circulation by a third party. The exemption applies to providers who have a purely technical function of transmitting information and to those who provide access to a communication network, such as the Internet. Suppliers of Internet services, such as Internet service providers, network backbone operators, and mobile data gateways, but also operators of virtual private networks (VPN), proxy servers and Domain Name Systems (DNS) servers are covered by the exemption. 1 The rule serves to facilitate the development of the business of these providers, who play a merely passive role and, given the transitory or non-continuous nature of their activities, have no knowledge of, or cannot control the information they transmit. Accordingly, they will lose this privilege when they cease to be neutral or when they deliberately cooperate with one of the recipients of the service (consumer or business) with the aim of committing illegal acts.2

B. Context The different directives comprising the existing regulatory framework for electronic 2 communications networks and services do not alter the rules on the mere conduit safe 1 Riordan, p. 395–396; Van Eecke/Truyens, Ch. 6, p. 7. For the definition of access, see Art. 2 No. 27 Electronic Communications Code Directive. 2 Recitals 42–44.

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harbour.3 According to the Open Internet Access Regulation, mere conduit Internet service providers have to be neutral and treat all traffic equally.4 3 Art. 12 regulates the liability exemption for mere conduit intermediary services, whilst Arts 13–14 regulate the safe harbour for providers of caching and hosting, respectively. However, Art. 12 does not require mere conduit providers to act expeditiously to remove or to disable access to the information.5 4 Art. 12(2) should be read in conjunction with Art. 13, because the purpose pursued by both rules is the same, even though the nature and duration of the storage differ.6 Both rules are related to Art. 5(1) InfoSoc Directive.7 5 Art. 12(3) deals with the possibility of prohibitory injunctions, as do Arts 13(2) and 14(3).8 A legal basis for injunctions is also provided in the InfoSoc Directive9 and Enforcement Directive.10

C. Explanation I. Mere conduit 6

Although the title of Art. 12 E only refers to mere conduit activity, i.e. the transport of information through the network, there is no doubt that providing transfer to communications not only consists of transmitting and planning the route but also of providing the connection. In fact, Art. 12(1) expressly refers to this function. 11

1. Concept of ‘intermediaries of access’ 7

According to the ECJ, a provider of Internet access is considered an intermediary if it provides the user access to the network by means of an IP address and does not provide any other service, such as e-mail, or file sharing services, and it does not exercise any control, either in law or in fact, over the services that the user makes use of. 12

2. Free Wi-Fi connections 8

The ECJ has held that a business providing free Wi-Fi to clients and potential clients for advertising purposes may be considered a mere conduit service provider and, as such, benefit from the exemptions provided by the E-Commerce Directive. 13 Copyright owners could apply for an injunction against the provider to prevent continuation of the

Recitals 30–31 Electronic Communications Code Directive. Art. 3 Open Internet Access Regulation. 5 Baistrocchi, 118. See now, comparing the requirements in Art. 12(1) and in Art. 14(1)(b), CJEU, C-484/14 McFadden EU:C:2016:689, paras 55–65. 6 Lodder, p. 49; Savin, p. 157. 7 See also Recital 33 InfoSoc Directive. See comments to → E-Commerce Directive Art. 13 mn. 2. 8 Recital 45. 9 Art. 8(1) and (3) InfoSoc Directive. 10 Arts 9–11 Enforcement Directive. 11 Lodder/Van der Meulen, 132. 12 CJEU, C-557/07 LSG-Gesellschaft zur Wahrnehmung von Leistungsschutzrechten EU:C:2009:107, paras 29, 47. 13 CJEU, C-484/14 McFadden EU:C:2016:689. 3

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infringement and could claim reimbursement of the costs of giving formal notice and court costs incurred in such an injunction.14

3. Business models Most service providers offer a combination of access and hosting, but sometimes it 9 is not easy to ascertain the activity to which a particular service belongs. In the ECJ SNB-REACT it is not clear how to classify a provider of an IP address rental and registration service allowing the anonymous use of internet domain names.15 Furthermore, whilst in some countries search engines are treated the same as hosting providers, in others they are protected in a similar way to mere conduit providers.16 The justification for the latter lies not in an emphasis on the indexing and storage activity but rather on the publication itself arising from the act of transmission from the search engine to third parties.17 It is also held that search engines cannot be treated like hosting providers because ‘search engines generally do not edit the content they show in the results, are not the source of the information they link to, and are not in the position to remove it from the web’18. Other access providers are those who provide technical facilities to disseminate 10 livestreams.19

II. Liability exemptions The exemption extends to all types of liability, whether civil or criminal.20 However, 11 the providers are required to have maintained a passive role in order for the exemption to apply.21 According to Art. 12(1), a provider can benefit from a liability exemption regime for mere conduit activities if ‘the provider does not initiate the transmission, does not select the receiver of the transmission and does not select or modify the information contained in the transmission’. Therefore, network operators and providers of technical access may only be liable if they cease to be neutral. This may occur by deciding to initiate the transmission (usually, on the Internet it is users who require the information), by selecting the recipients (that is, restricting access to some, but not to others) or by selecting or modifying the transmitted information. Moreover, the latter may be deemed to amount to editorial control:22 it may lead to transforming the original and thus be an infringement of copyright, without prejudice to the fact that it would also violate the integrity of communications, with a clear infringement of the right to secrecy thereof.23 Since the access provider and the user are bound by a contract, there may be

14 ibid., para. 78. However the copyright holder is precluded from claiming compensation and the reimbursement of the costs of giving formal notice or court costs incurred in relation to a claim for compensation (paras 74–75). 15 CJEU, C-521/17 SNB-REACT EU:C: 2018:639, paras 40 et seq. 16 Examples of the former are Spain, Portugal, Hungary; example of the latter: Austria. See references in Metropolitan International Schools Limited v Design Technica Corporation and Others [2009] EWHC 1765 (QB), paras 90, 100–106; Van Hoboken, 8–9. See also, COM(2003) 702 final, 14, n 69. For case-law, see SEC(2011)1641/2, 27. 17 Riordan, p. 397. 18 Concerning the Austrian regulation, Van Hoboken, 9. 19 Nordemann, 14. 20 COM(1998) 586 final, 28; Savin, 155; Strowel et al., 141. 21 Lodder, p. 48; Savin, p. 154. 22 Savin, p. 154–155. 23 Yanguas, p. 254.

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lawful contractual agreements on blocking services, applications and content or on prioritising packets of information.24

1. Manipulations of a technical nature 12

According to Recital 43, the requirement that the service provider does not modify the information ‘does not cover manipulations of a technical nature which take place in the course of the transmission as they do not alter the integrity of the information contained in the transmission’. The E-Commerce Directive does not explain what constitutes ‘manipulations of a technical nature’ and therefore questions have been raised as to whether voluntary activities such as traffic filtering, insertion of advertisements on webpages or textual filtering of chat conversations may be included in that category.25 Be this as it may, it would be logical to consider that a ‘manipulation of a technical nature’ takes place in reducing file size through data compression, because its only function is to reduce the size of a data file, increase the speed and improve the experience of using the content, with no modification thereof.26 It is clear that the fact that this content is fragmented into packets before reaching the recipient, or the routine and automatic addition of header information, also amount to technical manipulations.27 It is also logical to consider that the automatic elimination of viruses and spam for e-mails does not amount to selecting contents and thus is a mere modification of a technical nature.28 Additionally, it makes sense to maintain the access provider’s neutral status in these cases as his voluntarily efforts to tackle spam and malware are not for the benefit of access providers, but for the general interest of users.29 It would be a different matter if such filtering activity were carried out incorrectly and it blocked access to non-damaged files.30

2. Automatic, intermediate and transient caching 13

According to Art. 12(2), the storage of information that is necessary to carry out the transmission is also exempt if it is automatic (through machines), intermediate (during the transmission) and transient (for a limited amount of time).31 It is clear that this provision does not refer to e-mail service providers, as has been sometimes argued. 32 In most instances, the total storage time is measured in milliseconds.33

III. Knowledge of illegal activity 14

Unlike Arts 13 and 14, Art. 12 does not expressly require the intermediary to have no knowledge of the infringing content in order to be exempt of liability. Some authors consider that such knowledge negates compliance with the provision’s objective prerequi24 Peguera Poch, p. 248; Yanguas, p. 271. In general, on the limitations and risks of such terms, Yannopoulos, p. 50; Belli/Sappa, 184–185, 189. In depth, Venturini et al. 25 Van Eecke /Truyens, Ch. 6, p 14. 26 Recital 11 Open Internet Access Regulation. 27 UK DTI, 25, Regulation 17(1): ‘Manipulations of a technical nature that take place in the course of the transmission (eg the automatic adding of headers) […] do not fail this test if they do not alter the integrity of the information contained in the transmission.’. 28 Riordan, p. 396. 29 Lodder/Van der Meulen, 136. 30 Riordan, p. 396; Yanguas, p. 254–25, n 490. 31 COM(1998) 586 final, 28; Lodder, p. 49; Savin, p. 155. 32 References in Peguera Poch, p. 251, n 565. 33 Riordan, p. 395.

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sites,34 but most understand that access providers are not liable even if they are aware of the illegal activity, unless they have actively cooperated with the offender (although in this case they would no longer be intermediaries).35 In fact, they are not liable because knowledge and subsequent control are only possible for hosting providers, since, according to the ECJ in McFadden: The service provided by an Internet website host, which consists in the storage of information, is of a more permanent nature. Accordingly, such a host may obtain knowledge of the illegal character of certain information that it stores at a time subsequent to that when the storage was processed and when it is still capable of taking action to remove or disable access to it;36 However, as regards a communication network access provider, the service of transmitting information that it supplies is not normally continued over any length of time, so that, after having transmitted the information, it no longer has any control over that information. In those circumstances, a communication network access provider, in contrast to an Internet website host, is often not in a position to take action to remove certain information or disable access to it at a later time. 37

Specifically, with regard of a provider of access to a Wi-Fi network, the ECJ stated 15 that ‘Article 12(1) of Directive 2000/31 must be interpreted as meaning that the condition laid down in Article 14(1)(b) of that directive does not apply mutatis mutandis to Article 12(1)’.38 Therefore, it is safe to deduce from Art. 12(3) that the access provider only loses this safe harbour if it does not remove or block the content following a court order or an administrative order, if national law obliges the provider to do so; but not earlier, since there is no duty to monitor or to obtain such knowledge.39

IV. Injunctions Unlike the DMCA, the E-Commerce Directive does not provide for any prerequisites 16 to obtain a court order or an order of the administrative authorities that impedes further infringements.40 By means of the injunction it is possible to demand that certain webpages that drive the Internet traffic are blocked for being dangerous or inappropriate (e.g. because they use p2 p traffic protocols), as well as orders for the filtering of certain content that users put into circulation (e.g. by monitoring the matching of characters that indicate unwanted content, which could lead, for instance, to DNS Blocking). Other measures, that have higher costs and would therefore perhaps be unenforceable for some start-ups, would be the inspection of packets, that is, a more detailed analysis of network traffic (such as DPI-based URL blocking).41 Whilst some Member States have been traditionally reluctant to adopt filtering measures, others have laid down specific proce34 Nordemann, 14: ‘[…] knowledge on the side of the access provider about the infringement may exclude the requirement of Article 12(1) lit. c) E-Commerce Directive that the access providers must not have selected the information transmitted’. 35 Among many others, Strowel et al., 143; Riordan, p. 395–396, 397; but see mn. 12.90 on p. 397; Yanguas, p. 256–260; Spindler, p. 291. See also Twentieth Century Fox and Others v British Telecommunications [2011] EWHC 1981 (Ch), para. 145: ‘a service provider does not lose the protection of Article 12(1) of the E-Commerce Directive even if it has actual knowledge of another person using its service to infringe copyright …’. 36 CJEU, C-484/14 McFadden EU:C:2016:689, para. 62. 37 ibid., para. 63. 38 ibid., para. 65. 39 But see Savin, p. 155. 40 For a comparison, Peguera, 481. 41 On blocking techniques and the limitations thereof, see Riordan, p. 462–473. See also, Internet Society, available at https://www.internetsociety.org/resources/doc/2017/internet-content-blocking/ (accessed 14 August 2019). On the increased use of DPI, Wagner, p. 45–48.

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dures for the blocking of some illegal content only. In addition, blocking orders present diverse degrees of precision in the different places where injunctions are allowed, which could decisively affect the prohibition of a general monitoring.42 17 In the context of intellectual property and copyright related illegalities, Art. 8(3) InfoSoc Directive and Arts 9–11 Enforcement Directive allow rightholders to apply for the adoption of injunctions and injunctive relief; Member States must regulate the conditions and prerequisites thereof. 43 On this topic, the decisions in Scarlet Extended,44 Telekabel,45 and McFadden46 cases have clarified the scope of injunctions against access providers. The ECJ analyses the adequacy of the measures to be adopted, taking into account the need to balance them against the protection of other fundamental rights.47 Specifically, in Scarlet Extended, the ECJ rejects general filtering with PDI techniques. According to the Framework Directive and the Open Internet Access Regulation, any measures liable to restrict those fundamental rights or freedoms are only to be imposed if they are appropriate, proportionate and necessary within a democratic society and if their implementation ensures compliance with EU law and the ECHR.48 As a result, specific safeguards must be implemented, at both substantive and procedural levels (what is blocked, how, for how long) and the latter should include the possibility of judicially challenging the measure adopted ex post.49

D. Criticism It is necessary to clarify whether certain activities that did not exist when the ECommerce Directive was adopted can be included in the definition of Art. 12.50 19 The provision also lacks an explanation as to the technical modifications that do not exclude the protection granted to the service provider. It would be an improvement to clarify that ‘selection’ and ‘modification’ of the information do not include automated technical procedures replying to a command or request from a user or an Internet location tool.51 It is also necessary to settle whether there might be ‘selection’ or ‘editorial control’ when the intermediary voluntarily limits access to certain content that might be seen as illicit or harmful, such as defamatory statements or pornography depicting paedophilia or sexual abuse.52 20 Despite the observations by the ECJ, the unclear wording of Art. 12 and Recital 42 render it difficult to reach a conclusion as to whether knowledge of illegal activity ex18

42 For an overview of blocking injunctions in Europe, Frosio, 203–211; Riordan, p. 504–535; Savola, 122 et seq. 43 Recital 23 Enforcement Directive; Recital 45 and Art. 18 E-Commerce Directive. 44 CJEU, C-70/10 Scarlet Extended EU:C:2011:771. 45 CJEU, C-314/12, Telekabel EU:C:2014:192. 46 CJEU, C-484/14 McFadden EU:C:2016:689,. 47 See comments under → Art. 15 E-Commerce Directive, mn. 7. 48 Recital 13 Open Internet Access Regulation. See also Art. 1(3 a) Framework Directive as amended by Art. 1(1)(b) Directive 2009/140/EC. On this topic, see inter alia Kuczerawy. 49 See Art. 47 EU Charter. See also Council of Ministers, Appendixes 1.5; 2.1.3. Further, Kaléda, 216. But see the Opinion of the European Union Agency for Fundamental Rights, at: https://fra.europa.eu/en/publica tions-and-resources/opinions (accessed 22 April 2019). 50 See SEC(2011)1641/2, 25, 26 et seq. 51 See Peguera Poch, p. 130, n 295, p. 248, referring to comments to 17 USC § 512(a)(3) DMA. Referring only to editorial control, Savin, p. 155. 52 But see Council of Europe, Appendix 1.3.3 II: ‘When intermediaries remove content based on their own terms and conditions of service, this should not be considered a form of control that makes them liable for the third-party content for which they provide access’. On this topic, concerning host providers, see comments under → Art. 14 E-Commerce Directive, mn. 20, 24, 29.

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cludes the protection granted to the intermediary. The contrasting treatment given to different intermediaries may be surprising if one observes the ambiguity surrounding the qualification of search engines as access providers or hosting providers. The Online Intermediation Services Regulation for business users of online intermediation services defines and classifies search engines as intermediaries, 53 but it does not use the same categories as the E-Commerce Directive. As mere access providers, which simply rely on algorithms that use thousands of factors to calculate the relevance of a webpage to the user’s search, they would not be liable if the results produced lead to webpages that incite hatred against certain groups. In such instances they clearly are not press editors and they could not have known that the content of the information is illegal. By contrast, classification as hosting providers would lead to a different solution since these intermediaries are supposed to be able to obtain knowledge of the content, and could be obliged to withdraw the information.

Article 13 “Caching” 1. Where an information society service is provided that consists of the transmission in a communication network of information provided by a recipient of the service, Member States shall ensure that the service provider is not liable for the automatic, intermediate and temporary storage of that information, performed for the sole purpose of making more efficient the information's onward transmission to other recipients of the service upon their request, on condition that: (a) the provider does not modify the information; (b) the provider complies with conditions on access to the information; (c) the provider complies with rules regarding the updating of the information, specified in a manner widely recognised and used by industry; (d) the provider does not interfere with the lawful use of technology, widely recognised and used by industry, to obtain data on the use of the information; and (e) the provider acts expeditiously to remove or to disable access to the information it has stored upon obtaining actual knowledge of the fact that the information at the initial source of the transmission has been removed from the network, or access to it has been disabled, or that a court or an administrative authority has ordered such removal or disablement. 2. This Article shall not affect the possibility for a court or administrative authority, in accordance with Member States' legal systems, of requiring the service provider to terminate or prevent an infringement. Bibliography: Baistrocchi, ‘Liability of Intermediary Service Providers in the EU Directive on Electronic Commerce’ (2003) 19 Santa Clara HTLJ 111–130; Busto Lago, ‘La responsabilidad de los prestadores de servicios de la sociedad de la información’ in: Reglero Campos/Busto Lago (eds), Tratado de Responsabilidad Civil, II, (5 th edn, Aranzadi 2014), p. 597–747; Clemente Meoro, ‘La responsabilidad civil de los prestadores de servicios de la sociedad de la información’ in: Clemente Meoro/Cavanillas Múgica, Responsabili-

53 Art. 2 No. 5 Online Intermediation Services Regulation: ‘“online search engine” means a digital service that allows users to perform searches of, in principle, all websites or websites in a particular language on the basis of a query on any subject in the form of a keyword, voice request, phrase or other input, and returns results in any format in which information related to the requested content can be found.’ The definition of online search engine used in this Regulation is not aligned with the definition used Art. 4(18) NIS Directive, which does not specifically mention voice requests.

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dad civil y contratos en internet (Comares 2003), p. 1–116; Commission, ‘Proposal for a European Parliament and Council Directive on certain legal aspects of electronic commerce’ COM(1998) 586 final; Garrote, El derecho de autor en internet (2nd edn, Comares 2003); Guibault et al., ‘Study on the Implementation and Effect in Member States’ Laws of Directive 2001/29/EC on the Harmonisation of certain Aspects of Copyright and related rights in the Information society’ (2007) Institute for Information Law Research Paper; Laurent, ‘Copiepresse SCRL & alii v. Google Inc.- In its decisions of 5 May 2011, the Brussels Court of Appeal confirms the prohibitory injunction order banning Google News and Google’s “in cache” function’ (2011) 27 CL&SR 542–545; Lodder/Murray (eds), EU Regulation of E-Commerce (Edward Elgar 2017); Nordemann, ‘Liability of Online Service Providers for Copyrighted Content – Regulatory Action Needed? In-Depth Analysis for the IMCO Committee’ (2018); Peguera, ‘Copyright Issues Regarding Google Images and Google Cache’ in: López-Tarruella (ed.), Google and the Law. Empirical Approaches to Legal Aspects of Knowledge-Economic Business Models (Springer/T.M.C Asser Press 2012), p. 169– 202; Peguera Poch, La exclusión de responsabilidad de los intermediarios de internet (Comares 2007); Riordan, The Liability of Internet Intermediaries (OUP 2016); Savin, EU Internet Law (Edward Elgar 2017); Strowel/Ide/Verhoestraete, ‘La Directive du 8 Juin 2000 sur le Commerce Electronique: un Cadre Juridique pour l’Internet’ (2001) Journal des Tribunaux 133–145; Van Eecke/Truyens, ‘EU Study on the Legal Analysis of a Single Market for the Information Society. New rules for a New Age? Report Study (SMART 2007/0037)’ (2009); Verbiest et al., ‘Study on the Liability of Internet Intermediaries, Markt 2006/09/E. Service Contract ETD/2006//IM/E2/69’ (November 2007); Xalabarder, ‘Google News and Copyright’ in: López-Tarruella (ed.), Google and the Law. Empirical Approaches to Legal Aspects of Knowledge-Economic Business Models (Springer/T.M.C Asser Press 2012), p. 113–167. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Transmission and automatic, intermediate and temporary copies . . . . . . . . . . . II. Included and excluded caching services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Prerequisites for liability exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Neutrality and no modification of the information . . . . . . . . . . . . . . . . . . . . . . . 2. Conditions on access to the information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Updating the information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Non-interference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Removal or disabling access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Prohibitory injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 5 6 10 11 12 13 14 15 16 17

D. Criticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

18

A. Function 1

Art. 13 protects providers of automatic, intermediate and temporary storage of the transmitted information. This is known as ‘cache copy’ and it is carried out in order to reduce the time required to transmit the information and to avoid Internet congestion as a result of a high demand for the same content.1 The intermediary provides the information from his own equipment and saves on transport costs from a distant server, which also results in bandwidth saving.2 The privilege applies to proxy servers. It exempts them from liability due to storing copies of illegal information placed on the web by other people, when such copies are made during the transmission of information and the intermediary does not modify the information transmitted.3 Additionally, it exempts

COM(1998) 586 final, 28–29. Peguera Poch, p. 257; Riordan, p. 399. 3 Recital 43. 1

2

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them from liability arising from the unauthorised reproduction of lawful content. It has been said that the liability privilege for caching providers lacks practical importance.4

B. Context Art. 13 fits in well in the context of copyright. The provision confirms the service 2 provider’s exemption of liability for copies made if the stated preconditions are satisfied, as is already provided by Art. 5(1) InfoSoc Directive.5 It is clear that caching is not exploited separately from the transmission carried out by the intermediary6 and this would indicate that it has no independent economic significance.7 Accordingly, such provisional and temporary storage would not be considered as infringing reproduction rights.8 However, this is by no means a settled issue:9 if, in the interests of authors’ rights, this thesis is not accepted, there is no alternative but to understand Art. 13 as exempting liability arising from the infringement of the reproduction right. Such approach would be in the interests of the development of new business models on the Internet. Art. 13(2) is also connected to Arts 12(3) and 14(3) as they each include the possibili- 3 ty of prohibitory injunctions.10

C. Explanation The caching service provider cannot be held liable for automatic, intermediate and 4 temporary storage of information transmitted, as long as the conditions set by Art. 13(1) (a)–(e) are met.

I. Transmission and automatic, intermediate and temporary copies Under Art. 13 the caching activity is not exploited separately to the transmission; this 5 is also proven by Art. 12(2) when it expressly states that the caching service includes transmission of the stored information. However, there are differences between the caching regulated by these two articles: the copy that is necessary to transmit the information in Art. 12 is ephemeral (‘transient copy’) and a guarantee of access to the information by one Internet user only is required, whereas the intermediate copy regulated by Art. 13 is stored for longer (‘temporary copy’) and it responds to the need for increased efficiency of the transmission of information to other Internet users. 11

4 Nordemann, 4, 15: ‘Only in the context of the so-called “Usenet” court decisions found the scenario of caching providers, while others treated Usenet providers as access providers’. Nor has there been much litigation in this area in Spain. Not even the SAP Barcelona 17.9.2008 (ES:APB:2008:13455) considered the safe harbour applicable, although it exempted the service provider from liability. 5 See also Recital 33 InfoSoc Directive. 6 COM(1998) 586 final, 28–29: ‘It does not constitute as such a separate exploitation of the information transmitted’; Lodder, p. 49. 7 On the meaning of the term, see CJEU, C–302/10, Infopaq EU:C:2012:16, paras 47–52. 8 In Spain, adopting this thesis, see SAP Barcelona 17.9.2008 (ES:APB:2008:13455). See also, Busto Lago, p. 654–655. 9 Garrote, p. 320–327, 340–344, 357; Guibault et al., 34, 62. 10 See Recital 45. 11 Lodder, p. 49; Savin, p. 157; Strowel et al., 143.

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II. Included and excluded caching services The typical service Art. 13 provides for is the ‘proxy server’ (also known as ‘system caching’, ‘system server’, ‘proxy caching’), which stores local copies of the webpages the user has accessed.12 Other types of cache memory are excluded, such as the transient copy already mentioned in Art. 12, or copies stored locally in microprocessors or personal computer hard drives that are necessary e.g. to allow the information to be shown on the user’s screen (‘client cache’).13 7 It is unclear whether ‘mirror caching’ (storage through replication in multiple servers) falls within the scope of Art. 13. Some authors advocate for an exclusion, arguing that the storage takes places during long periods of time and that it is neither automatic nor intermediate and, therefore, not necessary ‘for the sole purpose of making more efficient the information's onward transmission’.14However, the Usenet service has been exempt from liability.15 The question has also been raised as to whether other content distribution systems, such as the Domain Name System (DNS), could enjoy the same protection. 16 The discussion also extends to the cache storage that the main search engines (such as Google) provide as part of their service;17 that is, the display of webpages containing copyright protected works whose HTML code is stored in the temporary cache repository called a ‘cache’. In the United States, under the DMCA, courts have held that the same prerequisites as for exemption of proxy caching should apply.18 By contrast, this has not been the case in Spain19 and in Belgium20, under Art. 13 (and the national implementation legislation).21 8 There is no doubt that the Google cache copy is made in a technical manner and automatically. However, it has been a matter of discussion whether it can also be considered temporary, since it is kept for 14 to 20 days or, according to other sources, 30 days. 22 It would be even more difficult to consider that Google caches a page previously requested by the user in the context of a transmission service as per Art. 12. In fact, the copy is not intermediate; instead, it is made and stored by the intermediary (Google), following his own initiative.23 The fact that caching is equivalent to storage and later transmission once the user clicks on the cache hyperlink, was one of the arguments that led the Appeal Court of Brussels to hold in Copiepress that the caching exemption did not apply, as well as considering that Google could not be deemed to play a passive role that would allow Google to be classed a hosting provider.24 6

COM(1998) 586 final, 28. Peguera Poch, p. 254–255; Strowel et al., 143. 14 Baistrocchi, 120, n 47. 15 Nordemann, 15; Van Eecke/Truyen, Ch. 6, 15, with another hypothesis. 16 Van Eecke/Truyens, Ch. 6, 15. 17 On Google Cache, see Peguera, p. 174–176. 18 U.S. District Court Nevada District of 19.1.2006, Field v Google Inc. However, the liability exemption is based, i.a. on the doctrine of fair use. On the case, Peguera, p. 187–190. 19 SAP Barcelona 17.9.2008 (ES:APB:2008:13455), confirmed, on other grounds, by STS 3.4.2012 (ES:TS:2012:3942). 20 Cour d’Appel de Bruxelles (9ème Chambre) 5 May 2011, Google Inc v Copriese at: https://lex.be/fr/doc /be/jurisprudence-bruxelles/cour-d-appel-arret-5-mai-2011-bejc_2011050518_fr (accessed 15 August 2019). 21 See Laurent, 543; Peguera, p. 190–193; Xalabarder, p. 119–121, 159. 22 Seeing no objection to such a classification, the U.S. District Court Nevada District on 19.1.2006 in Field v Google Inc. By contrast, the decision by the Cour d’Appel de Bruxelles (9ème Chambre) 5 May 2011 in Google Inc v Copriese did not consider a 30-day storage to be ‘temporary’. Also, pointing out that the copy does not seem to be temporary but rather permanent, Savin, p. 158. 23 Peguera, p. 199. 24 See Laurent, 543–544, 545. 12

13

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Of course, the non-application of the safe harbour is not necessarily tantamount to 9 asserting the responsibility of the search engine. It would be natural to think that the creator of a webpage wants to disseminate the content throughout the network. Accordingly, it could be held that there is implied consent to the possibility of making such copies if the webpage does not include meta-tags indicating to the search engine that (i) the page should not be indexed; (ii) that cached links to it cannot be made; or (iii) if precautions have not been taken in order to avoid webcrawlers.25 These arguments, upheld at the Barcelona Court of Appeal in 2008, were not successful at the Brussels Court in 2011, which rather took the view that copyright is an exclusive right and that an optin rule should apply.26

III. Prerequisites for liability exemption According to Art. 13(1), the caching provider may benefit from the liability exemp- 10 tion if the following prerequisites are met:

1. Neutrality and no modification of the information Under Art. 13(1)(a) the caching provider must remain neutral and not modify the in- 11 formation. Otherwise, it would not be considered an intermediary.27 The term ‘modification’ should not be given too broad a meaning and because of this it should not include the automatic changes that take place in cached data as part of the technical storage procedure, e.g. adding an expiry time to cached packets, or converting cached files into a different file format.28

2. Conditions on access to the information Art. 13(1)(b) stipulates that the caching provider must comply with conditions on ac- 12 cess to the information; i.e. that the cache copy is available under the same conditions that are required to access the main page. Thus, if a service is paid for, the cached page cannot be available for free; if the access provider stores a copy of a password-protected website, other unauthorised users should not be allowed to access it.29

3. Updating the information Pursuant to Art. 13(1)(c) the caching provider must comply with rules regarding the 13 updating of the information, specified in a manner widely recognised and used by industry. This entails that the information lodged in the memory needs to adapt, at regular intervals, to what at every moment is the original information. This ensures trust in the precision of the copy and thus prevents damage arising either from the fact that the cached information displays lower prices or because it reproduces content that affects third-party rights, which has already been removed at source.30 In any event, it appears that the pages that are stored in cache are those considered to be static, i.e. they are not continuously updated or they do not present results in real time.31 See Peguera, p. 175–176. See Laurent, 545; Xalabarder, p. 156–157. 27 Savin, p. 157. 28 Riordan, p. 399. 29 Lodder, p. 49; Savin, p. 157; Van Eecke/Truyens, Ch. 6, 8, n 35. 30 Lodder, p 50; Strowel et al., 143. 31 Peguera Poch, p. 262. 25 26

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“Caching”

4. Non-interference 14

Art. 13(1)(d) states that the caching provider must not interfere with the lawful use of technology, widely recognised and used by industry, to obtain data on the use of the information. This means that caching of a page must not present obstacles to the normal functioning of the usage statistics, i.e. the tools that measure Internet sales and provide information on how visitors use a site and how they reach it (Google Analytics), which is information of the upmost importance for e-commerce.32

5. Removal or disabling access 15

Finally, Art. 13(1)(e) requires the caching provider to act expeditiously to remove or to disable access to the information it has stored upon obtaining actual knowledge of the fact that the information at the initial source of the transmission has been removed from the network, or access to it has been disabled, or that a court or an administrative authority has ordered such removal or disablement. The privilege of the exemption is lost as a result of maintaining information that has not been updated; this derives directly from not acting with due diligence to remove or block the content. Therefore, it is necessary to establish whether, when and how the caching intermediary is deemed to have learned that the content has been removed or blocked at the original server or that a court or an administrative authority has so ordered. This is a matter that the Directive does not provide for.

6. Scope 16

Apparently, Art. 13(1)(a)–(e) cover all the cases of liability exemption. Nevertheless, if the intermediary stores illegal content in his cache (for instance, if the copied webpage contained unauthorised musical works or child pornography), it would not make sense that the exemption were governed by (b) ‘comply with conditions on access’, (c) ‘comply with rules regarding the updating of information’, or (d) ‘non-interference’. The only sensible reason to exclude any kind of liability would exist if the intermediary had nothing to do with such content and does not modify it (a) and that it acts expeditiously to remove it, or block access to it, as per (e).33

IV. Prohibitory injunctions 17

Art. 13(2) and Recital 45 deal with the possibility of prohibitory injunctions. Although the safe harbour exempts the intermediary from liability due to the cache copy of illegal content that has not yet expired, a court or an administrative authority may order the provider to remove the copy and to refrain from copying it again.34

Clemente Meoro, p. 96; Lodder, p. 50; Savin, p. 157–158. Peguera Poch, p. 267–270; Lodder, p 49: ‘Article 13 is not primarily aimed at illegal information, but rather aims to protect the recipient in different ways’. 34 Riordan, p. 400. 32

33

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D. Criticism If Art. 13 were not designed to apply to technologies other than proxy servers, the development of technology and, specifically, search engines, would require a revision of the norm to allow the safe harbour to apply to other types of cache copies.35 Additionally, the provision is incomplete, insofar as it does not include the exceptions provided by Art. 12 (2) with regard to manipulations of a strictly technical nature in order to exempt copy services from liability. It seems obvious that, for instance, compressing information so that its size is reduced should not be considered a modification of said information, whether it takes place in the context of mere conduit services or in that of caching,36 as is confirmed, on the other hand, by Recital 43, which assumes that a modification is purely technical in nature when the integrity of the information is not altered. Although Art. 13 does not explicitly state it, it should be understood that providers of temporary copy services are liable in the same circumstances as providers of transient copies, since they are both providers of transmission services.37 The liability exemption for proxy caching service providers is dependent on their compliance with the prerequisites laid down in Art. (13)(1)(a)–(e), but the requirements relating to terms of access (b), updates (c), and use of technology to obtain data on the use of the information (d) do not fit in well when copies of illegal content are concerned. And neither would these prerequisites be consistent with the basis of the Directive, which rests on the assumption that the provider must carry out a purely passive function.38 Some interpretation problems may arise due to the reference in Art. 13(1)(c) to uses widely recognised by industry on updating information. For some authors, this provision is a dead letter, because there are no general standards on information updates, but rather uses and practices for specific sectors.39 Indeed, such uses are determined by the webmaster and they will only be binding on the intermediary if they adhere to a standard data communication protocol that is generally accepted in the relevant sector, so as not to cause damage to the cache storage unreasonably.40 However, the greatest criticism that can be made of the norm is directed above all at the Art. 13(1)(e): How can one prove at what moment the caching provider has acquired knowledge of the illegality? Is notice sufficient? What content should it have? How quickly should the intermediary act for his response to be considered ‘expeditious’? The same problems arise from the wording of Art. 14(1)(a)(b).

Article 14 Hosting 1. Where an information society service is provided that consists of the storage of information provided by a recipient of the service, Member States shall ensure that the service provider is not liable for the information stored at the request of a recipient of the service, on condition that: 35 On the need to update the directive with regard to the definition of intermediary activities, see SEC(2011)1641/2, 25, 26 et seq. 36 See Recital 43. See also Riordan, p. 401: ‘Like the mere conduit safe harbour, it excludes liability for passive and technical assistance’. See Recital 11 Open Internet Access Regulation. 37 Clemente Meoro, p. 93. 38 Recitals 42–43. 39 Verbiest, 14. 40 Peguera Poch, p. 263, with reference to 17 U.S.C para. 512(b)(2)(B); Riordan, p. 400.

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19

20

21

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(a) the provider does not have actual knowledge of illegal activity or information and, as regards claims for damages, is not aware of facts or circumstances from which the illegal activity or information is apparent; or (b) the provider, upon obtaining such knowledge or awareness, acts expeditiously to remove or to disable access to the information. 2. Paragraph 1 shall not apply when the recipient of the service is acting under the authority or the control of the provider. 3. This Article shall not affect the possibility for a court or administrative authority, in accordance with Member States' legal systems, of requiring the service provider to terminate or prevent an infringement, nor does it affect the possibility for Member States of establishing procedures governing the removal or disabling of access to information. Bibliography: Baistrocchi, ‘Liability of Intermediary Service Providers in the EU Directive on Electronic Commerce’ (2003) 19 Santa Clara HTLJ 111–130; Barrio, Fundamentos del Derecho de internet (CEPC 2017); Clemente Meoro, ‘La responsabilidad civil de los prestadores de servicios de la sociedad de la información’ in: Clemente Meoro /Cavanillas Múgica (eds), Responsabilidad civil y contratos en internet (Comares 2003), p. 1–116; Commission, ‘Proposal for a European Parliament and Council Directive on certain legal aspects of electronic commerce’ COM(1998) 586 final; Commission, ‘Commission Staff Working Document Online services, including e-commerce, in the Single Market […]’ SEC(2011) 1641/2; Commission, ‘A European Agenda for the Collaborative Economy’ COM(2016) 356 final; Commission, ‘Guidance on the Implementation/Application of Directive 2005/29/EC on Unfair Commercial Practices’ (‘UCPD Guidance’) SWD(2016) 163 final; Commission, ‘Tackling Illegal Content Online. Towards an enhanced responsibility of online platforms’ COM(2017) 555 final; Commission, ‘Proposal for a Regulation of the European Parliament and the Council on preventing the dissemination of terrorism’ COM(2018) 640 final; Commission, ‘Recommendation of 1 March 2018 on measures to effectively tackle illegal content’ C(2018) 1177 final; Commission, ‘Synopsis Report on the Public Consultation on the Regulatory Environment for Platforms, Online Intermediaries and the Collaborative Economy’ (‘Synopsis’) Council of Europe, Comparative Study on Blocking, Filtering and Take-Down of Illegal Internet Content (2017); Council of Europe, Recommendation CM/Rec(2018)2 of the Committee of Ministers to Member States on the roles and responsibilities of internet intermediaries (March 2018); De Miguel Asensio, Derecho privado de internet (5th edn, Civitas 2015); Giovanella, ‘Online Service Providers’ Liability, Copyright Infringement, and Freedom of Expression: Could Europe Learn from Canada?’ in: Taddeo/Floridi (eds), The Responsibilities of Online Service Providers (Springer 2017), p. 221–240; House of Lords, Select Committee on Communications, 2nd Report of Session 2017–2019: ‘Regulating in a digital world’ (printed 26 February and published 9 March 2019), Julià-Barceló/Koelman, ‘Intermediary Liability in the E-Commerce Directive: So far so good, but it’s not enough’ (2000) 16 (4) CL&SR 231–239; Lodder, ‘Directive 2000/31/EC’ in: Lodder/ Murray (eds), EU Regulation of E-Commerce (Edward Elgar 2017); López Richart, ‘Difamación en la web 2.0 y responsabilidad civil de los prestadores de Servicios de alojamiento’ (2012) 26 DPyC 143–201; López Richart, ‘Un nuevo régimen de responsabilidad para las plataformes de almacenamiento de contenidos generados por los usuarios en el mercado único digital’ (2018) 60 Pe.i. revista de propiedad intelectual 67– 126; Nordemann, ‘Liability of Online Service Providers for Copyrighted Content – Regulatory Action Needed? In-Depth Analysis for the IMCO Committee’ (2018); Peguera Poch, La exclusión de responsabilidad de los intermediarios de internet (Comares 2007); Riordan, The Liability of Internet Intermediaries (OUP 2016); Savin, EU Internet Law (Edward Elgar 2017); Sartor, ‘Providers Liability: From the eCommerce Directive to the future. In-Depth Analysis for the IMCO Committee, Directorate General for Internal Policies Policy Department A: Economic and Scientific Policy’ (2017); Spindler, ‘Responsibility and Liability of Internet Intermediaries: Status Quo in the EU and Potential Reforms’ in: Synodinou et al. (eds), EU Internet Law. Regulation and Enforcement (Springer 2017), p. 289–314; Stalla-Bourdillon, ‘Internet Intermediaries as Responsible Actors? Why It is Time to Rethink the E-Commerce Directive as Well’ in: Taddeo/Floridi (eds), The Responsibilities of Online Service Providers (Springer 2017), p. 275–293; Staudegger, ‘Haftungsprivilegierung des Hostproviders oder Medieninhaberschaft – tertium non datur’ (2015) 1 ALJ 46–66; Strowel/Ide/Verhoestraete, ‘La Directive du 8 Juin 2000 sur le Commerce Electronique: un Cadre Juridique pour l’Internet’ (2001) Journal des Tribunaux 133–145; Tescaro, ‘Die zivilrechtliche Haftung von Internet-Providern in Italien: Umsetzung der E-Commerce-Richlinie gegen Tendenzen der Rechtsprechung’ (2014) 5 GPR 270–277; Van Eecke/Truyens, ‘EU Study on the Legal Analysis of a Single Market for the Information Society. New rules for a New Age? Report Study (SMART 2007/0037)’ (2009); Venturini et al., Terms of Service and Human Rights. An Analysis of Online Platforms Contracts (Revan 2016); Verbiest et al., ‘Study on the Liability of Internet Intermediaries, Markt 2006/09/E. Service Contract

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ETD/2006//IM/E2/69’ (November 2007); Yannopoulos, ‘The Immunity of Internet Intermediaries Reconsidered?’ in: Taddeo/Floridi (eds), The Responsibilities of Online Service Providers (Springer 2017), p. 43– 59. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. The boundaries of the concept of hosting provider . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Hosting in a broad sense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Technical, automatic and passive activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Liability exemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Notice-and-take-down procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Limits to the exemption from liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Acting under the relevant control or authority of the provider . . . . . . . . . . . . 2. Injunctions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Duty of care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 4 4 6 10 11 15 19 19 21 22

D. Criticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. The need to adapt the norm to new scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Economic activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Active and passive providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

27 27 28 29

A. Function Art. 14 provides an exemption of liability for hosting activities, which consist of per- 1 manent storage of information, through a contract between the Internet user and the provider. The purpose is to grant the public access to information provided by the recipient of the service and stored on the provider’s servers that are connected to the Internet, at the former’s request.1 Given that those intermediaries cannot be equated to press editors Art. 14 exempts them from any kind of liability if they eliminate the illegal content as soon as they have actual knowledge of illegal activity or information and, as regards claims for damages, as soon as they are aware of facts or circumstances from which the illegal activity or information is apparent. With this aim, the provision sets the basis for Member States to adopt notice-and-take-down mechanisms (procedures to regulate the removal of information [take-down] or the prevention of access to it [block]), which, nonetheless, will never replace court action.2

B. Context Art. 14 grants paramount relevance to the hosting service provider’s responsible be- 2 haviour. The provider will have to adopt technical measures for filtering, blocking and removal of illegal content if a prohibitory injunction so orders; in this respect, there are no differences in comparison to other providers, except perhaps in the type of measures that should be adopted.3 Art. 14 is peculiar as it allows Member States to establish notice-and-take-down and blocking mechanisms. Also, hosting providers, unlike other intermediaries, are subject to duties of care designed to prevent certain activities. 4 With

Savin, p. 158; Strowel et al., 143. COM(1998) 586 final, 29. 3 Arts 12(3), 13(2). See Recital 45. 4 Art. 14(3) and Recital 48. 1

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regard to copyright, Art. 14 does not apply to the provision of online content-sharing services that store a large amount of works and promote piracy.5

C. Explanation 3

The E-Commerce Directive defines hosting as an information society service that consists of the storage of information, provided by a recipient of the service, at the latter’s request.6 Typically, hosting companies provide space on their servers where users can upload webpages and other information on an ongoing basis and it is the user who manages the websites and decides what content to upload.7 However, over time new types of hosting providers have emerged.

I. The boundaries of the concept of hosting provider 1. Hosting in a broad sense Hosting may also include services that do not exclusively consist of providing storage for webpages. Initially, these other services were only e-mail, newsgroup posts or bulletin boards,8 but later other services have been included, such as services that allow the upload of software, graphics, music, or to exchange information online, such as chatrooms, blogs, or video or e-commerce platforms (online shops or marketplaces). Although authors doubt that the reasons that led to the liability exemption of intermediaries in the E-Commerce Directive can be used now in the context of the so-called ‘Web 2.0’, it is clear that the exemption must apply to intermediary service providers who, whilst being in their turn recipients of the hosting service, allow their users to create their own content, at least when the activity can be considered an information society service. Therefore, if there is illegal content on a webpage that provides a service to its users (e.g. a website that hosts a discussion forum), and said content has been uploaded by its users, this intermediary must also be exempt from liability if the conditions required for the exemption to operate are met.9 5 In Spain, in general, third-party comments on a blog, wiki articles or messages on a forum or in a chat have been considered to fall within the scope of the rules on liability exemption for hosting providers.10 However, many courts in Europe have been reluctant to apply the safe harbour to intermediaries who, as well as pure storage, carry out other activities, which, thanks to technical procedures, process and manage information, index it or allow the exchange thereof, or to others that act as online forum operators or online 4

5 Recital 65 and Art. 17(3) DSM Copyright Directive. See also, request for a preliminary ruling from the Bundesgerichtshof (Germany) lodged on 6 November 2018: C-682/18 YouTube OJ C 82, 4.3.2019, p. 2–3; request for a preliminary ruling from the Bundesgerichtshof (Germany) lodged on 6 November 2018: C-683/18 Elesevier OJ C 82, 4.3.2019, p. 4. 6 Recital 18 and Art. 14(1). See also the definition of ‘hosting service provider’ in C(2018) 1177 final, Chapter I, 4(a). 7 Peguera Poch, p. 273. 8 COM(1998) 586 final, 29. 9 Peguera Poch, p. 274–277; Sartor, 27; Staudegger, 46. Contra, Strowel et al., 141. 10 See case law in Peguera Poch, p. 284–285; López Richart, ‘Difamación en la web’, 162–165. With regard to forums, STS 7.1.2013 (ES:TS:2014:68); STS 7.1.2014 (ES:TS:2014:68); SAP Lugo 9.7.2009 (ES:APLU:2009:611). With regard to chats, SAP Barcelona 3.3.2010 (ES:APB:2017:9805); on blogs, see STS 12.12.2013 (ES:TS:2013:6385); SAP A Coruña 18.4.2013 (ES:APC:2013:1298), SAP Madrid 31.12.2012 (ES:APM:2011:2467) and, applying analogy, SAP Las Palmas 5.11.2011 (ES:APGC:2010:2228). The same occurs in Austria, according to Staudegger, 55 et seq., with a criticism.

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auction platforms.11 The matter very specifically affected copyright-protected content uploaded by users to services that allowed online sharing of said content: many of these services, believing they were covered by the safe harbour, did not obtain licenses to carry out their activity. The ECJ has afforded the safe harbour to search engines for their advertisements linking to third-party websites offering products for sale, 12 but not to other providers of links that have been held liable for carrying out direct exploitation of copyright acts13 or for indexing and listing results containing personal data.14

2. Technical, automatic and passive activity According to the ECJ, a search engine and an operator of an online marketplace may 6 benefit from the safe harbour if they meet certain conditions. The prerequisites for the exemption to operate are that the activity carried out by the providers is merely technical, automatic and passive. This further entails that they do not have knowledge of, or control over, the information they transmit or store and that they do not play an active role by optimising the users’ online sales.15 The ECJ avails itself of rather unclear criteria that, ultimately, it is for national judges to define. The mere fact that the service is remunerated does not determine the loss of the safe harbour.16 a) Google France v Vuitton. In Google France v Vuitton, the ECJ decided on the Ad- 7 Words Google service allowing advertisers to select one or more keywords so that, if they coincided with the terms entered by the search-engine user, a promotional link to the advertiser’s webpage would be displayed. This promotional link appeared under the header ‘sponsored links’ and was presented together with a brief advertising message. The links pointed to websites that offered imitation Vuitton products (as Google also allowed the selection of keywords such as ‘imitation’ or ‘copy’) and other competitors’ products. It was a question of deciding whether the trade mark holder’s rights had been infringed and whether Google was exempt from liability. The ECJ considered it been proven that the search engine processes the data entered 8 by advertisers, and that Google controlled the conditions in which the advertisements were displayed; nevertheless, ‘concordance between the keyword selected and the search term entered by an Internet user is not sufficient of itself to justify the view that Google has knowledge of, or control over, the data entered into its system by advertisers and stored in memory on its server.’ By contrast, ‘the role played by the search engine in the drafting of the commercial message that accompanies the advertising link or in the establishment or selection of keywords is relevant.’17 Unfortunately, the ECJ does not answer the question as to what type of conduct would cease to be considered merely technical, automatic and passive, leaving the decision to national courts. In any case, the ECJ did ascertain that the provider of sponsored links would lose the safe harbour if, having obtained knowledge of the unlawful nature of the data or of that advertiser’s activities, it

See SEC(2011) 1641/2, 26–30; Van Eecke/Truyens, Ch. 6, 16–17. CJEU, C-236/08 to C-238/08 Google France v Vuitton EU:C:2010:159. 13 See Nordemann, 22–24; López Richart, ‘Un nuevo régimen de responsabilidad’. See now, Arts 15(1), 17 DSM Copyright Directive. 14 CJEU, C-131/12, Google Spain EU:C:2014:317. 15 CJEU, C-236/08 to C-238/08 Google France v Vuitton EU:C:2010:159, paras 113–120; CJEU, C-324/09 L’Oréal v eBay EU:C:2011:474, paras 112–117. With regard to a provider of an IP address rental and registration service allowing the anonymous use of Internet domain names (which, nevertheless, is not classified as hosting provider by the judgment), see, CJEU, C-521/17 SNB-REACT EU:C: 2018:639, paras 47, 52. 16 CJEU, C-236/08 to C-238/08 Google France v Vuitton EU:C:2010:159, para. 116; CJEU, C-324/09 L’Oréal v eBay EU:C:2011:474, para. 109. See also, Sartor, 27. 17 CJEU, C-236/08 to C-238/08 Google France v Vuitton EU:C:2010:159, paras 117–118. 11

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failed to act expeditiously to remove or to disable access to the data concerned. That is to say, that the provider would be liable for failing to cooperate. 9 b) L’Oréal v eBay. According to the ECJ in L’Oréal v eBay, an intermediary acting as a marketplace operator (eBay) plays an active role that excludes it from the liability exemption, insofar as it offers assistance consisting of, i.a. optimising the presentation of offers for sale or promoting such offers of products – many of which are fake or are sold without the trade-mark holder’s consent. Once again the problem at hand concerned the infringement of the trade mark. The ECJ concluded that eBay did not take a neutral position of simple storage between customer-seller and potential buyers, but rather that it played an active role in the distribution and facilitation of products, which did amount to gaining knowledge of, or control over, the information relating to those offers. The general principle is the same: the online marketplace operator is not liable as long as it does not play an active role that allows it to have knowledge of the illegal act. The degree of knowledge will be determined by the national court. However, it will have to take into account the diligence that would be expected of an economic operator in order to be aware of the fact that the offers for sale are illegal and, thus, it will be necessary to determine whether the provider should have acted fast to remove such content [Art. 14 (1) (b)].18

II. Liability exemption 10

In contrast to an Internet access provider [Art. 12(1)] who, once the information has been transmitted, has no control over it, a hosting service provider supplies permanent storage and therefore, is in a better position to adopt measures and remove illegal content.19 Accordingly, the hosting provider will not be liable if it does not have actual knowledge or awareness of facts from which the illegality is apparent or if, after obtaining such knowledge or awareness, it acts expeditiously to remove or to disable access to the information.

1. Knowledge Art. 14(1)(a) distinguishes between the lack of actual knowledge of the illegal activity or information and the lack of knowledge of the circumstances from which such illegality is apparent.20 The intermediary cannot be criminally liable if it has no actual knowledge of the facts, but is liable for damages if presumed knowledge can be inferred. 12 Of course, requiring actual knowledge of the illegal activity or information is not the same as only demanding that there is some evidence that the facts may be considered illegal. The latter puts much more pressure on intermediaries and could be considered a restriction on freedom of expression and enterprise.21 On the other hand, not all Member States have made distinctions between the aforementioned different levels of knowledge as prerequisites for either civil or criminal liability (Spain is an example),22 and it goes without saying that not all of them use the same criteria to establish when there is 11

CJEU, C-324/09 L’Oréal v eBay EU:C:2011:474, paras 120–124. Lodder, p. 50; Savin, p. 158; CJEU, C-484/14 McFadden EU:C:2016:689, paras 62–63. 20 Van Eecke/Truyens, Ch. 6, 8: ‘Article 14 thus differentiates the level of knowledge, depending on the type of claim asserted against the service provider’. 21 Julià-Barceló/Koelman, 234; Sartor, 25: ‘[…] intermediaries […] may be induced not only to invest more resources in legal assessments, but also to remove any contents that […] might be viewed as illegal by the competent authorities’. Against the requirement of a ‘general knowledge that there might be some infringing content’, Giovanella, p. 231. 22 More examples in Verbiest, 35. 18

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effective knowledge of the illegal activity or information. Sometimes it is understood that there is effective knowledge following a court order or an administrative order (e.g. Italy, Spain);23 on other occasions, when a user has given notice (which is a frequent occurrence in the area of copyright); and, in other cases, when despite the absence of an order or a notification, such actual knowledge can be presumed due to it being manifest that the site harbours illegal information. It is clear that there can be different interpretations of what is ‘manifestly illegal’ in light of the various areas or scenarios in which the issue of infringement arises.24 This is the case, for instance, of offensive comments, which may be the subject of different interpretations.25 In L’Oréal the ECJ decided that in order for the provider of an information society 13 service to be denied entitlement to the exemption from liability provided for in Art. 14, it should have been aware of facts or circumstances on the basis of which a diligent economic operator ought to have identified the illegality in question. According to the ECJ, this includes every situation in which the provider concerned becomes aware, in one way or another, of such facts or circumstances, which may be an investigation undertaken on its own initiative, notice from a third party or the actual apparentness of the illegality.26 However, a notification ‘cannot automatically preclude the exemption from liability provided for in Art. 14, given that notifications of allegedly illegal activities or information may turn out to be insufficiently precise or inadequately substantiated.’ As a general rule, notice is a factor of which the national court ‘must take account when determining, in the light of the information so transmitted to the operator, whether the latter was actually aware of facts or circumstances on the basis of which a diligent economic operator should have identified the illegality.’27 With regard to hyperlinks that point to protected works without the copyright hold- 14 er’s consent, the ECJ has held on many occasions that notice presupposes knowledge, but it has also established a rebuttable presumption of knowledge when such illegal activity is carried out for a profit. It has considered that these cases constitute illegal communications to the public that cannot benefit from the liability exemption, either because the provider infringed the duty of care, since it had learned about the illegality thanks to the notification, or because the provider had actively intervened in making the work available to the public.28 In short, a provider who uses a business model based essentially on copyright infringement is held directly liable.29 Specifically this includes: hyperlinks that lead to protected works accessible from other webpages without the right holder’s consent; multimedia players with pre-installed hyperlinks allowing streaming access to 23 Italy, Art. 16 Legislative Decree n. 700 of 2003 (but see the precisions that are introduced in the document SWD (2018) 408 final, Annex 7, 126); Spain, Art. 16 LSSI, although in practice other means of gaining knowledge are not excluded. See López Richart, ‘Difamación en la web’, 170 et seq.; De Miguel Asensio, p. 262–263. 24 On these matters, together with other issues, see documents SWD(2018) 408 final, Annex 7, 125–126; SEC(2011) 1641 final, 32–36, 43. Previously, Van Eecke/Truyens Ch. 6, 17–18; Verbiest, 36–41. 25 On the importance of context, as well as the nature of the comment, see ECHR, 16.6.2015, Delfi AS v Estonia (Application no. 64569/09) and ECHR, 2.2.2106 Magyar Tartalomszolgaltatok Egyesülete and Index.hu ZRT v Hungary (Application no. 22947/13). 26 In his Opinion delivered C-18/18 Glawischnig-Piesczek EU:C:2019:458, AG Szpunar accepts that a service provider may be ordered to remove information equivalent to the information characterised as illegal when gaining awareness of it as a result of the notification made by the person concerned, third parties (para. 107) or another source [para. 109(3)]. 27 CJEU, C-324/09 L’Oréal v eBay EU:C:2011:474, paras 120–122, 124. 28 CJEU, C-160/15 GS Media BV EU:C:2016:644, paras 49, 51; CJEU, C-527/15, Stichting Brein Jack v Frederik Wullems EU:C:2017:300, paras 34, 49. For access providers, CJEU, C-610/15 Stichting Brein v Ziggo BV EU:C:2017:456, paras 26, 29 36–37. See Nordemann, 22–24. 29 See § 8(1) TMG (Germany); SAP Madrid 4.12.2017 (AC 2017/1593) (Spain).

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works illegally published on the Internet; or exchange of protected files without authorisation from the owner via P2P networks. At present, according to the new DSM Copyright Directive, platforms that allow content-sharing of protected works without authorisation are liable for carrying out illicit acts of communication to the public and they cannot benefit from the exemption under Art. 14(1). However, since online contentsharing service providers give access to content which is not uploaded by them but by their users, the Directive provides for a specific liability mechanism even for cases where no authorisation has been granted, as long as certain conditions are met.30

2. Notice-and-take-down procedures 15

One of the notable shortcomings of the E-Commerce Directive is that it does not include any rules relating to notice-and-take-down procedures, although the Commission reserved the right to regulate them in the future [Art. 21(2)]. Therefore, Art. 14(3) provides that exemption from liability does not affect the possibility of Member States establishing procedures governing the removal or disabling of access to information. Recital 40 and Art. 16 add that the development of rapid and reliable procedures for removing and disabling access to illegal information could be developed on the basis of voluntary agreements between all parties concerned.31 Even though many Member States have adopted a regulation (either sector-specific or horizontal) on notice-andtake-down and blocking procedures,32 not all have and/or not all have adopted a unanimous criterion with regard to the content required of notifications, the time-frame within which the intermediaries should react or the need to foresee a counter-notice in order to argue that the hosted information is legal, as well as the possibility of ex post judicial control.33 On the other hand, self-regulation has led to the majority of take-down procedures to be not the results of agreements between the stakeholders, but rather of each company’s individual policy.34 Thus, there exists the risk that users are not offered sufficient transparency and respect of their fundamental rights (i.a., privacy, data protection, freedom of expression). Indeed, on the one hand, there is a tendency to remove content that is only allegedly illegal, often because it is impossible to ascertain the illicit nature of certain types of activities; on the other hand, it cannot be ignored that the criteria used by providers to determine the reasons why content should be removed are often opaque.35 In practice, this has made it necessary to lay down clauses exonerating from liability claims by the provider of unduly removed or blocked lawful content, and thus freedom of expression has been sacrificed in order to avoid the risk of having to face contractual liability.36 In any event the Commission’s recent Recommendation (EU) 2018/334, on measures to effectively tackle illegal content online, requires notices by afSee Recitals 64–66, Art. 17(1)–(6) DSM Copyright Directive. COM(1998) 586 final, 29; COM(2003) 702 final, 16 et seq. 32 See SEC(2011) 1641/2, 42–43 and Annex II, 137–140; SWD(2018) 408 final, Annex 7, 122–125. 33 On those concerns, totally or partially, see SEC(2011) 1641/2, 43-46; SWD(2018) 408 final, Annex 7, 125–129. See also Annex 8, for self-regulatory efforts. Van Eecke /Truyens, Ch. 6, 19–20; Verbiest, 41–46; Giovanella, p. 232–233; p. 234 et seq., showing the Canadian approach. On the detail required for notifications see in France, Cass. Civ. I, 17.02.2011, Dailymotion; Cass Civ I, 16.2.2011, Amen (see Art. 6 I 5 Loi n° 2004-575 du 21 juin 2004). In Germany, BGH, 17.8.2011 – I ZR 57/09 (‘Stiftparfum’) MMR 2012, 178 (para. 31). In England, Tamiz v Google Inc [2012] EWHC 449 (QB) (para. 59) and The Electronic Commerce (EC Directive) Regulations 2002: Regulation 22 [Notice for the purposes of actual knowledge]. 34 See SEC(2011) 1641/2, 41. 35 Yannopoulos, p. 50, 54–55; Julià-Barceló/Koelman, 233–234. On the problem of collateral censorship, see Sartor, 12 et seq. 36 For guidance as to how platforms should handle restriction of contents in their terms of service, Venturini et al, p. 138 et seq. 30

31

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fected parties to be sufficiently precise and adequately substantiated in order to prevent or correct unintended removal of content which is not illegal.37 Some sector-specific directives already urge Member States to guarantee that online 16 content in areas such as child pornography38 or constituting a public provocation to commit a terrorist offence39 will be promptly removed (or access blocked). This has led to adopting notice-and-take-down procedures, sometimes through national hotlines. However, the European legislation is not precise enough and, therefore, the national regulation is fragmented. The aforementioned Recommendation (EU) 2018/334 proposes a harmonised procedure to remove or block access to illegal content on the Internet; for the time being, it suggests that intermediaries may adopt it voluntarily.40 The Recommendation, which covers all kinds of illegal content, but specifically content connected to terrorism, is directed mainly to the platforms that currently share the market and, in general, it uses very vague terms, because it is based on the assumption that codes of conduct, which in fact would have inspired the Recommendation, exist and provide for detail. To start with, and without prejudice to the specificities that may exist with regard to certain terrorist contents, the document does not establish mandatory rules on the form or on the content of the notifications and it does not require the person giving notice to identify himself. It also establishes that the content provider may contest the decision to remove or disable access to the materials, which is undoubtedly a wise move.41 In fact, the affected content provider may only contest the decision through submit- 17 ting a counter-notice, but this will not be a course of action available where it is manifest that the content in question is illegal and relates to serious criminal offences involving a threat to the life or safety of persons, or when the competent authority so requests based on reasons of public policy and public security. The burden for hosting service providers is obvious insofar as it turns out they are required to judge in light of facts that, in the end, may not be clearly illegal or the criminal nature of which need not be known by the intermediary. The Recommendation seems to avert the risk of error by requiring notifications to be ‘sufficiently precise and well substantiated’ (in short, to clarify why the content is considered illegal) and, above all, by encouraging collaboration between service providers and trusted flaggers, even though it is not clear who they are or why they are trusted, since this will be determined by the conditions established by the company. In the case of trusted flaggers, fast-track procedures should be provided to process notices submitted by them. An additional measure to avoid undue removal of lawful content is for intermediaries to ensure human oversight and verifications in order to guarantee that the measures adopted are proportionate. Also, it is recommended that measures are adopted to prevent the submission of notices and counter-notices in bad faith and other forms of abusive behaviour, which would suggest that some economic sanction should apply. It is emphasised that all these actions should be carried out with due respect to fundamental rights and that in no way do they bar access to other extrajudicial conflict resolution procedures nor, of course, to court actions.42 C(2018) 1177 final, Recital 17, Chapter II, para. 6. Art. 25 Sexual Abuse Directive. See COM(2016) 872 final. 39 Recital 22 and Art. 21 Anti-Terrorism Directive. See further, COM(2018) 640 final, in particular Arts 6, 10, 11. 40 C(2018) 1177 final, Chapter II. 41 On the virtues of the counter-notice and put-back option, see Spindler, p. 306–307, referring to Finland and US legislation (for copyright violations) and case-law in Germany. Also for copyright issues in Canada, Giovanella, p. 237. More than 80 % of the people who responded to the Commission’s public consultation were in favour of that system. See Synopsis, para. 4.3.2, available at https://ec.europa.eu/newsroo m/dae/document.cfm?doc_id=15877 (accessed 30 August 2019). 42 See now Art. 17(9) DSM Copyright Directive. 37

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The existence of a notice-and-take-down procedure clearly provides legal certainty for those involved. However, the holders of infringed rights will have to remain vigilant so that the illegal activity does not occur again. This is why it is sometimes suggested that notice-and-stay-down procedures should be adopted. The Recommendation admits such procedures, as can be deduced by the use of the generic expression ‘notice-and-action’ mechanism. Furthermore, proactive measures to block and ensure that the illegal content is not uploaded again are also encouraged.

III. Limits to the exemption from liability 1. Acting under the relevant control or authority of the provider There is no doubt that the liability regime designed by the Member States would apply if the hosting service provider were, at the same time, the author of the illegal content.43 The same occurs when the third party is acting under the control of the intermediary, for example when a newspaper company has its own server to host content produced by its journalists [Art. 14(2)].44 The reason for this is that such content cannot be treated as if it had been provided by third parties, because it comes from the provider itself; therefore, it would not be acting as an intermediary.45 20 It has been argued that the same happens with user-generated content, if the provider holds the right to edit it (e.g. Wikipedia) and/or if it specifies, in its access terms and conditions, what can be published and what cannot (e.g. Facebook).46 It has also been said that the provider holds control over the user through the forum moderator or newsgroup. 47 However, the preparatory documents for the E-Commerce Directive – which, as is well-known, did not reject the idea of including companies offering hosting on third-party servers as hosting providers – stressed that the control referred to by Art. 14(2) is not to be exercised over the information, but over the acts of the recipient of the service.48 And even if only because in most cases it will be it is impossible to identify these recipients, it is obvious that the control carried out by intermediaries cannot be equated to editorial control. Therefore, it is not admissible to understand that the mere fact that certain websites are moderated by an administrator can be interpreted in the sense that the content is entered at the provider’s initiative, or that the provider selects the content when the only thing it does is remove illegal content.49 Quite the opposite: in such cases the provider should never lose his neutral position.50 Wisely, in Germany a hotel rating portal that disseminates third-party statements has not been considered liable due to the fact of statistically evaluating the user’s data or using a word filter or a follow-up manual control to ensure compliance with the terms of use. The operator of 19

43 Thus, in Spain, with regard to a blog that could infringe the right to honour and a good reputation, see SAP Cádiz 11.6.2013 (ES:APCA:2013:828); Juzgado Central de lo Penal (Central Criminal Court) 26.1.2016 (ES:AN:2016:7). 44 But see ECHR, 16.6.2015, Delfi AS v Estonia (Application no. 64569/09), in favour of the liability when it concerns a professionally-managed Internet news portal, with a comments section for the users, run on a commercial basis. 45 Clemente Meoro, p. 98; Tescaro, 271. 46 Barrio, p. 381. 47 For discussion in national laws, see Verbiest, 47. 48 COM(1998) 586 final, 30: ‘[I]t should be stressed that the relevant control is the control of the recipient’s acts and not the control over the information as such’. But see Baistrocchi, 123: ‘[…] the ISPs may be held liable if they have some form of “control” over the information’. 49 López Richart, ‘Difamación en la web 2.0’, 187–188. But see Savin, p. 162; STS 26.2.2013 (RJ/ 2013/2580). 50 See Recommendation CM/Rec(2018)2, Appendix 1.3.3.

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an Internet rating platform will only be liable when, having received notice of a clear breach of the law, it does not immediately disable access to the relevant information and does not take precautions to ensure that such information will continue to be blocked in the future.51

2. Injunctions Art. 14(3), in accordance with Recital 45, and like Arts 12(3) and 13(2), provides that 21 the exemption of liability is not incompatible with a court order to cease unlawful conduct. The injunction measures that may be taken against access providers could also apply to hosting providers, although measures with a broader scope could also be adopted against the latter, as a result of the duties of care that they are subject to. ECJ judgments L’Oréal, Netlog and Glawischnig-Piesczek deal with injunctions against hosting providers.52

3. Duty of care In order to detect and prevent certain types of illegal activities, Recital 48 allows 22 Member States to impose duties of care on hosting service providers. ‘Duty of care’ is a vague concept, which the E-Commerce Directive does not define; instead the specification of measures that exemplify a duty of care is left to national law. The provider infringes the duty of care when it knew or should have known that the 23 illegal activity was taking place and yet did not act expeditiously to remove or prevent it.53 Although such knowledge may be obtained as a result of investigations undertaken by the provider itself and this suggests that it may/should adopt voluntary and preventive measures in order to not lose the liability exemption, the duty of care should never amount to a duty to monitor around the clock. The effect thereof would be the same as establishing the intermediary’s strict liability, merely because it makes available to the public tools and spaces that facilitate illegal activities.54 Preventive control should not clash with the prohibition of general monitoring provided for in Art. 15; the former should be limited to very specific cases.55 Even if this cannot be deduced from the wording of the E-Commerce Directive, the 24 voluntary assumption of duties of care and the ensuing adoption of reasonable and transparent measures to combat illegality or prevent harm cannot have negative consequences for the service provider.56 This has not always been clear: sometimes, improving measures of detecting infringements has been interpreted as having actual knowledge

BGH, 19.3.2015 – I ZR 94/13: MMR 2015, 726 (‘Hotelbewertungsportal’). See the comments under → Art. 15 E-Commerce Directive. 53 CJEU, C-160/15 GS Media BV EU:C:2016:644, para. 49; CJEU, C-236/08 to C-238/08 Google France v Vuitton EU:C:2010:159, para. 120; CJEU, C-324/09 L’Oréal v eBay EU:C:2011:474, paras 120, 124. 54 See the joint dissenting opinion of Judges Sajó and Tsotsorias in ECHR, 16.6.2015, Delfi AS v Estonia (Application no. 64569/09), para. 51; ECHR, 2.2.2106 Magyar Tartalomszolgaltatok Egyesülete and Index.hu ZRT v Hungary (Application no. 22947/13), para. 83; ECHR, 9.3.2017, Pihl v Sweden (Application no 74742/14), para. 31. See also Opinion of AG Szpunar in CJEU, C-18/18 Glawischnig-Piesczek EU:C:2019:458, paras 36–39, 51. 55 See the comments under → Art. 15 E-Commerce Directive, mn. 5. 56 See House of Lords, Select Committee on Communications, 53–54, 55, where it is suggested that the duty of care approach avoids some of the questions about making platforms liable for the content of others and, in particular, that action against online providers should only be in respect of systemic failures. Moreover, it is recommended the establishment of a regulator in order to control the implementation of the duty of care. 51

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that might end up qualifying the provider as ‘active’.57 The institutional recommendations insist that ‘voluntary action taken to increase trust and to offer a more competitive service should not automatically be taken to mean that the conduct of the collaborative platform is no longer merely technical, automatic and passive’.58 The recent Recommendation (EU) 2018/334, on measures to effectively tackle illegal content online, considers it is essential that any measures are proportionate and subject to effective and appropriate safeguards, but falls short in clarifying the consequences if, despite acting in good faith, providers fail to remove content that turns out to be illegal or disable content that is not unlawful. 25 In general, Member States have encouraged cooperation between intermediaries and the authorities, as well as suggesting that measures to prevent illegality or the repetition thereof (proactive measures) be adopted voluntarily; control systems through codes of conduct are also promoted by the European Commission (e.g. the code of conduct for countering illegal hate speech online59, the MoU on Counterfeit Goods60, the EU Internet Forum61). Self-regulation is limited by the Open Internet Access Regulation, which only allows undertaking voluntary blocking measures when there is a legal basis to do so.62 26 Having established the legality of these practices, determining which measures are relevant and appropriate should be judged on a case-by-case basis. It is difficult to establish a general rule that is valid for any intermediary, regardless of his size or of the activity he carries out. The criteria that should be taken into account include, among others, the risk of the behaviour actually being carried out and the gravity of the damage it would cause; the technology available to the service provider; the economic viability for the company and the manner in which such measures may affect the rights and interests of the recipients of the service (principle of proportionality).63 The techniques to adopt are well known: automated filtering of keywords or infringing content;64 blocking of websites, URLs and clients; human review mechanism; and removal of illegal content by means of notice-and-take/stay-down systems, etc.

D. Criticism I. The need to adapt the norm to new scenarios 27

Some of the activities carried out by intermediaries that are not covered by the ECommerce Directive are specifically protected in Member States. Sometimes national legislation provides an exemption from liability, whereas other times it is case law that 57 See SEC(2011) 1641/2, p 35–36. In particular, LG Hamburg, 5.3.2010 – 324 O 565/08: MMR 2010 433. Claiming for the need to change this approach, i.a, Lodder, p. 51; Sartor, 27; Giovanella, p. 232. 58 See COM(2016) 356 final, 8; COM (2017) 555 final, 10–12, 13; C(2018) 1177 final, Recitals 24–27, Arts 18–20, 36–37. 59 Available at: https://ec.europa.eu/newsroom/just/item-detail.cfm?item_id=54300 accessed 24.4.2019. 60 Available at: https://ec.europa.eu/growth/industry/intellectual-property/enforcement/memorandum -understanding-sale-counterfeit-goods-Internet_en (accessed 24 August 2019). 61 Available at: https://www.eifonline.org/about-us/about-eif.html (accessed 24 April 2019). 62 Art. 3 (3)(a) Open Internet Access Regulation. See Council of Europe, ‘Comparative Study’, 24–26, at: https://edoc.coe.int/en/Internet/7289-pdf-comparative-study-on-blocking-filtering-and-take-down-of-ill egal-Internet-content-.html (accessed 24 August 2019). See also Recommendation CM/Rec(2018)2, Appendix, 1.1.1. 63 Sartor, 29–31. See Art. 3 in COM(2018)640 final. See also Art. 17(6) DSM Copyright Directive. 64 For the pros and cons of filtering see SEC(2011) 1641/2, 50–51.

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treats services such as video-sharing and selling platforms, social networks, p2 p services, blogs or discussion fora in an analogous manner to the privileged intermediaries (usually access or hosting providers). However, the legal categorisation is not always the same.65 The scope and meaning of Art. 14 should be clarified by legislation in order to explain whether the liability exemptions apply in scenarios that go beyond mere hosting. Very specifically, it would be convenient to clarify whether a safe harbour is required for information retrieval tools (search engines) and Wi-Fi hotspots and its application to collaborative economy services, cloud services, content delivery networks, domain name services, etc. This is a general assumption in the leaked document on the Digital Services Act.66

II. Economic activities An information society service is defined as a service provided at a distance for pro- 28 cessing and storing data, at the request of the user and for remuneration.67 This definition includes service providers that carry out an economic activity even if the service they provide is not remunerated by the recipients thereof, as occurs with the supply of information online or commercial communications.68 As a result, those who carry out non-profit activities and are not even financed with advertising – if any are to survive in this manner – (e.g. wikis, personal webpages or personal blogs or Public Administration blogs and websites), would not benefit from the same protection.69 This is unreasonable if it turns out that the privilege is not actually linked to the provider being profit orientated, but to the fact that the intermediary provides the channel of communication to the user.70

65 See e.g. SEC(2011) 1641/2, 26 et seq., in relation to search engine services and hyperlinking. With regard to Usenet, German court decisions are an example of the diverse treatment as caching or access/ hosting providers. See Van Eecke/Truyens, Ch. 6, 15–16; Verbiest, 14, 33–34. For online auctions platforms, mainly eBay, see the examples in Stalla-Bourdillon, p. 280 and further literature there. See the comments under → Art. 12 E-Commerce Directive, mn. 9. 66 At present there is only a leaked Commission document under: https://netzpolitik.org/2019/leaked-d ocument-eu-commission-mulls-new-law-to-regulate-online-platforms (accessed 17 October 2019). See also, https://euinternetpolicy.wordpress.com/2019/07/30/the-eu-digital-services-act-what-it-is-and-why-i t-shouldnt-happen (accessed 17 October 2019); https://www.inlinepolicy.com/blog/towards-an-enhanced -responsibility-of-online-platforms-the-eu-digital-services-act (accessed 17 October 2019). 67 Art. 2(a). The range of activities carried out by information society service providers only partially coincides with those undertaken by ‘electronic communication services’. See Art. 2(c) Framework Directive. 68 See Recital 18. Also, CJEU, C-291/13 Papasavvas EU:C:2014:2209, para. 30: ‘[…] the concept of “information society services” […] covers the provision of online information services for which the service provider is remunerated, not by the recipient, but by income generated by advertisements posted on a website’. See also, CJEU, C-484/14 McFadden EU:C:2016:689, paras 41–42; CJEU, C-339/15 Luc Vanderborght EU:C:2017:335, paras 36–37. 69 Authors argue that the protection must apply by analogy when the service is not provided for profit. See Peguera Poch, p. 218, 274; Van Eecke/Truyens, Ch. 6, 39. This is the case in Austria: § 19(2) E-Commerce-Gesetz: ‘Abs. 1 sowie die §§ 13 bis 18 sind auch auf Anbieter anzuwenden, die unentgeltlich elektronische Dienste bereitstellen’; in France: Art. 6(2) Loi n° 2004-575 du 21 juin 2004 pour la confiance dans l'économie numérique. 70 López Richart, ‘Difamación en la web 2.0’, 160–161; Sartor, 13–14, 27. See Kaschke v Gray [2010] EWHC 690 (QB), para. 43. Additionally, see joint dissenting opinion of Judges Sajó and Tsotsorias in ECHR, 16.6.2015, Delfi AS v Estonia (Application no. 64569/09), paras 44–45.

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III. Active and passive providers In order to exempt the intermediary from liability, Recital 42 leads to a distinction between active providers and passive or neutral providers. In fact, the distinction only refers to mere conduit and caching intermediaries, and it does not seem correct to extend it to hosting providers.71 According to Art. 14(1), Recital 46 would rather apply to the latter. However, the ECJ has considered that the hosting provider plays an active role, and therefore ceases to be neutral, by optimising the presentation of the uploaded works or subject-matter or promoting them.72 The concept is ambiguous, and in contexts other than trade mark infringement, it can prove less easy to determine when the provider plays an active role. As a result, contradictory decisions are possible.73 30 Clinging to the active role to exclude the exemption greatly harms intermediaries such as search engines or participatory platforms, because obviously their function requires a certain amount of activity, i.e. optimising the presentation of content uploaded by users, or carrying out a promotional activity, among others.74 Additionally, no-one would consider that the intermediary who voluntarily adopts measures to filter or block illegal content measures, in order to preserve the users’ interests, is passive. By contrast, it is clear that not taking these measures despite being aware of the illegal activity would make it unviable to argue that the provider has a neutral attitude (because it would be equivalent to considering that the provider contributes to rendering the illegality possible). 31 It would be best to abandon the distinction between ‘active role’ and ‘passive role’ to classify hosting providers and, in any case, establish effective mechanisms that facilitate gaining knowledge of the infringement and to oblige the provider to immediately remove the information or content that is considered illegal, on pain of losing the liability exemption. However, this does not mean that it is not important to analyse the manner in which platforms design their information society services; it is, in order to find out whether, in fact, they act as real hosting intermediaries, as well as to establish relevant indicators to determine whether they have control over, and participate in, the underlying business.75 32 According to the leaked document on the Digital Services Act,76 the concept of ‘active’/’passive’ hosts would be replaced by more appropriate concepts, building rather on notions such as ‘editorial functions’, ‘actual knowledge’ and the ‘degree of control’. The document also reflects plans to introduce an exemption for proactive measures: ‘[…] a binding “Good Samaritan Provision” would encourage and incentivise proactive measures, by clarifying the lack of liability as a result of such measures, on the basis of the notions already included in the Illegal Content Communication’. Binding transparency obligations are foreseen and rules on content moderation shall be introduced, not only 29

71 On the extension, see CJEU, C-236/08 to C-238/08 Google France v Vuitton EU:C:2010:159, paras 113, 116. Contra, Giovanella, p. 231; Riordan, p. 402. See also AG Jääskinen in CJEU, C-324/09 L’Oréal v eBay EU:C:2010:757, paras 140–142, 146. 72 CJEU, C-324/09 L’Oréal v eBay EU:C:2011:474, para. 116. In fact, ‘it is for the referring court to examine whether eBay played a role such as that described in the preceding paragraph in relation to the offers for sale at issue in the case before it’ (para. 117). 73 See examples in SWD(2016) 163 final, 113–114. 74 Sartor, 27. 75 COM(2016) 356 final, 6 et seq. Transparency duties are also imposed on platforms, including the duty to communicate the identity of the vendor. See Art. 4(5) Modernisation Directive inserting a new Art. 6 a in the Consumer Rights Directive. 76 See n 66.

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No general obligation to monitor

for illegal but also for harmful content, and they might be tailored to the types of services.

Article 15 No general obligation to monitor 1. Member States shall not impose a general obligation on providers, when providing the services covered by Articles 12, 13 and 14, to monitor the information which they transmit or store, nor a general obligation actively to seek facts or circumstances indicating illegal activity. 2. Member States may establish obligations for information society service providers promptly to inform the competent public authorities of alleged illegal activities undertaken or information provided by recipients of their service or obligations to communicate to the competent authorities, at their request, information enabling the identification of recipients of their service with whom they have storage agreements. Bibliography: Commission, ‘Commission Staff Working Document Online services, including e-commerce, in the Single Market […]’ SEC(2011) 1641/2; Commission, ‘Proposal for a Regulation of the European Parliament and the Council on preventing the dissemination of terrorism’ COM(2018) 640 final; Commission, ‘Recommendation of 1 March 2018 on measures to effectively tackle illegal content’ C(2018) 1177 final; Council of Europe, Recommendation CM/Rec(2018)2 of the Committee of Ministers to Member States on the roles and responsibilities of internet intermediaries (March 2018); Frosio, ‘The Death of “No Monitoring Obligations” A Story of Untameable Monsters’, (2017) 8 JIPITEC 199–215; Sartor, ‘Providers Liability: From the eCommerce Directive to the future’, In-Depth Analysis for the IMCO Committee, Directorate General for Internal Policies Policy Department A: Economic and Scientific Policy: Brussels (2017); Savin, EU Internet Law (Edward Elgar 2017). Woods, ‘Facebook’s liability for defamatory posts: the CJEU interprets the e-commerce Directive’ (7 October 2019). A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. General and specific obligation to monitor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Scope of the injunction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Communication and disclosure of information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 5 7 11

D. Criticism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12

A. Function Member States are prevented from imposing both a monitoring obligation on service 1 providers with respect to obligations of a general nature and a general obligation actively to seek facts or circumstances indicating illegal activity. Art. 15(1) limits the liability of intermediaries and it plays a relevant role when it comes to determining the scope of injunction claims. Intermediaries are exempted of a burden that might be impossible to comply with or only by incurring costs that might hinder the development of their enterprise (which would infringe freedom to conduct a business); the aim is also to ensure respect for the fundamental rights of Internet users (e.g. freedom of expression, freedom

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of information, privacy).1 However, within certain limits, Member States may impose specific control measures that are stricter.2 2 According to Art. 15(2), Member States may require intermediaries to monitor the information in order to intercept user data.

B. Context The scope of Art. 15 extends to intermediary services that transmit, cache or store. 3 The provision is directed to Member States and, therefore, does not prevent intermediaries, which are free to organise their enterprise as they see fit, from voluntarily applying filters in order to avoid transmission, copy or storage of illegal content. However, filtering and blocking without a legal basis can be seen as a strategy that allows governments to circumvent the prohibition of general monitoring and, at the same time, delegate Internet policing to private operators. This can result in exactly the opposite to the goal of establishing a safe harbour, which is precisely intended to avoid ex ante censorship. The Open Internet Access Regulation only allows undertaking voluntary blocking measures when there is a legal basis to do so.4 4 It is not clear whether the most recent European legislation correctly sets the basis so that such filtering measures can be adopted.5 3

C. Explanation I. General and specific obligation to monitor 5

There is neither a general duty to control the information that users transmit or store nor is there an obligation to search for facts or circumstances that signal that an illegal activity is taking place.6 The Proposal for the E-Commerce Directive allowed judges to impose specific control duties, in conformity with the national legislation, for public security reasons,7 but the only aspect of that rule remaining is the much more generic Recital 47, according to which the prohibition laid down by Art. 15(1) does not concern monitoring obligations in a specific case. Concerning terrorism, for instance, the Commission openly recognises that Art. 15 could be disregarded due to a ‘particularly grave risk imposed by dissemination of terrorist content online’,8 although such decision is 1 Savin, p. 161–162. See CJEU, C-70/10 Scarlet Extended EU:C:2011:771, paras 48, 5–52; CJEU, C-360/10 Netlog EU:C:2012:85, paras 45–52. 2 For online marketplaces see Recitals 28, 29 and Art. 4(5) Modernisation Directive inserting a new Art. 6a(2) into the Consumer Rights Directive. Concerning video-sharing platform services, see Art. 28b(3) and (6) AVMS Directive as inserted by the Revised AVMS Directive. 3 See also Recommendation CM/Rec(2018)2, Appendix, 1.3.5. 4 See the comments under → Art. 14 E-Commerce Directive, mn. 24. 5 See Recital 66, Art. 17(4)(b)(c) and (5)–(8) DSM Copyright Directive. The Republic of Poland seeks the annulment of Art. 17(4)(b) and Art. 17(4)(c), in fine, alleging infringement of the right to freedom of expression and information guaranteed by Art. 11 EU Charter. See the action brought on 24 May 2019 – C-401/19 Poland v Parliament and Council. 6 Savin, p. 162. See also Opinion of AG Szpunar CJEU, C-18/18 Glawischnig-Piesczek EU:C:2019:458, para. 40. 7 COM(1998) 586 final, 47: ‘targeted, temporary surveillance activities required by national judicial authorities in accordance with national legislation to safeguard national security and for the prevention, investigation, detection and prosecution of criminal offences.’. 8 Recital 19 in COM(2018) 640 final.

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controversial.9 Quite the contrary, Art. 17(8) DSM Copyright Directive states that the application of that Article does not give rise to any general obligation of supervision, although, in fact, Art. 17(4)(b)(c) legitimates the filtering of all the content uploaded for possible copyright violations. It might infringe Art. 15 (1) E-Commerce Directive and also ECJ case law. As we will see, in cases of infringements of intellectual property rights, the ECJ does 6 accept orders made to prevent further infringements,10 of the same type and by the same infringer,11 and it adds that such preventative measures may consist of suspending accounts of the infringing users or providing information that contributes to identifying them,12 as well as confirming that other more aggressive measures, such as general and permanent inspection of all the content, are not acceptable.

II. Scope of the injunction The measures adopted must comply with the principle of proportionality and re- 7 spect certain fundamental rights. In Scarlet Extended,13 the ECJ confirmed, as it already had in L’Oréal v eBay,14 that Art. 15(1) prohibits court orders that require the Internet service provider to install a filtering system that obliges it to actively monitor all the data related to every one of his recipients in order to avoid future infringement. Specifically, the ECJ rejected a filtering system in which the Internet service provider: first, it identified, among all his users’ electronic communications, what traffic was P2P; second, it identified, within said traffic, files containing works that copyright holders presumably held rights over; third, it determined which of said files were exchanged illegally, and, fourth, it blocked the file exchanges that it considered illegal. It was held that copyright holders should not be protected to the detriment of freedom to conduct business, the users’ right to protection of their personal data and their freedom to receive or impart information, which are rights safeguarded by Arts 8 and 11 EU Charter. The ECJ mentions the Promusicae judgment15 in order to stress that the protection of the fundamental right to property, to which intellectual property rights are linked, needs to be balanced against the protection of other fundamental rights. In a similar case, the ECJ again confirms that a general filtering system to prevent copyright infringement is disproportionate.16 In Telekabel the need to preserve said balance of rights between content providers, 8 right holders and intermediaries was confirmed.17 However, rather than specifying what concrete measures could be adopted, the ECJ emphasised that the measures should be 9 See the Opinion of the European Union Agency for Fundamental Rights, 39, available at: https://fra.euro pa.eu/en/publications-and-resources/opinions (accessed 22 April 2019). 10 CJEU, C-324/09 L’Oréal v eBay EU:C:2011:474, paras 131, 144; CJEU, C-70/10 Scarlet Extended EU:C:2011:771, para. 31; CJEU, C-360/10 Netlog EU:C:2012:85, para. 29. 11 CJEU, C-324/09 L’Oréal v eBay EU:C:2011:474, para. 141: ‘to bringing to an end infringements of those rights by users of that marketplace, but also to preventing further infringements of that kind’; CJEU, C-494/15 Tommy Hilfiger EU:C:2016:528, para. 34: ‘the intermediary may be forced to take measures which contribute to avoiding new infringements of the same nature by the same market-trader from taking place’. The idea that future infringements should refer to the same trademarks (‘those rights’) is not reflected in the second judgment. 12 CJEU, C-324/09 L’Oréal v eBay EU:C:2011:474, paras 141–142; CJEU, C-484/14 McFadden EU:C:2016:689, para. 96. 13 CJEU, C-70/10 Scarlet Extended EU:C:2011:771, paras 50–54. 14 CJEU, C-324/09 L’Oréal v eBay EU:C:2011:474, para. 139. 15 CJEU, C‑275/06 Promusicae EU:C:2008:54, paras 61–70. 16 CJEU, C-360/10 Netlog EU:C:2012:85, paras 45–52. 17 CJEU, C-314/12 Telekabel EU:C:2014:192, paras 46–47.

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those best adapted to the resources and abilities available to the intermediary and which are compatible with the other obligations and challenges which it will encounter in the exercise of his activity. On the one hand, the ECJ admits that the intermediary will not be required to make unbearable sacrifices, which seems justified in particular because it did not commit the infringement of the fundamental right to intellectual property. On the other hand, the judgment recognises that ‘it is possible that a means of putting a complete end to the infringements of the intellectual property right does not exist or is not in practice achievable, as a result of which some measures taken might be capable of being circumvented in one way or another.’18 It adds that the measures adopted by the addressee of the injunction need to be sufficiently efficient in order to ensure an effective protection of the relevant fundamental right, i.e. they must have the effect of preventing ‘unauthorised access to protected subject-matter or, at least, of making it difficult to achieve and of seriously discouraging Internet users who are using the services of the addressee of that injunction from accessing the subject-matter that has been made available to them in breach of the intellectual property right.’19 9 In McFadden, the ECJ, after reiterating that monitoring all transmitted information is a measure that should be excluded,20 proceeded to reject a complete termination of the Internet connection as an acceptable measure; it held that there are other measures that are less restrictive to the economic activity of providing Internet access and, therefore, it considered that a copyright infringement must not lead to absolutely restricting the freedom to conduct a business.21 The ECJ stated that a measure consisting of password-protecting an Internet connection may dissuade the users of that connection from infringing copyright or related rights, provided that those users are required to reveal their identity in order to obtain the required password and may not therefore act anonymously.22 It considered that the adoption of such a measure does not affect either the freedom to conduct a business of a provider of access to a communications network or the right to freedom of information of the recipients of that service.23 10 In Glawischnig, the ECJ departs from previous case law.24 Concerning defamatory content, the ECJ admits that Art. 15(1) E-Commerce Directive is not violated when a court requires the host provider ‘to block access to the information stored, the content of which is identical to the content previously declared to be illegal, or to remove that information, irrespective of who requested the storage of that information’25. The Court also admits that it is possible to ‘ordering a host provider to remove information which it stores, the content of which is equivalent to the content of information which was previously declared to be unlawful, or to block access to that information, provided that the monitoring of and search for the information concerned by such an injunction are limited to information conveying a message the content of which remains essentially unchanged compared with the content which gave rise to the finding of illegality and containing the elements specified in the injunction, and provided that the differences in the wording of that equivalent content, compared with the wording characterising the information which was previously declared to be illegal, are not such as to require the host provider to carry out an independent assessment of that content’26. The ECJ seems to ibid., paras 49–56, 58, 60. ibid., para. 63. 20 CJEU, C-484/14 McFadden EU:C:2016:689, para. 87. 21 ibid., para. 88. 22 ibid., para. 96. 23 ibid., paras 91, 92, 100. 24 CJEU C-18/18 Glawischnig-Piesczek EU:C:2019:821. 25 ibid., paras 37, 53. 26 ibid., paras 41–47, 53. 18 19

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deliberately ignore that such a search for information necessarily requires the supervision of the stored data of all users. The judgment is also problematic because it does not show guidance as how the similarity or equivalence of contents should be analysed. In addition, the ECJ legitimises the use of automatic filtering techniques that do not take into account the context in which the offensive words are reproduced, but does not seems to accept the possibility of human review. Moreover, the worldwide effect of the blocking and removal order is not precluded within the framework of the relevant international law.27

III. Communication and disclosure of information Art. 15(2) allows Member States to establish obligations for information society ser- 11 vice providers promptly to inform the competent public authorities of alleged illegal activities undertaken or information provided by recipients of their service or obligations to communicate to the competent authorities, at their request, information enabling the identification of recipients of their service with whom they have storage agreements. However, in Promusicae the ECJ confirmed that this provision – like others, in different Directives – does not compel Member States to lay down an obligation to communicate personal data of alleged copyright infringers, in the context of civil proceedings; rather, a balanced assessment of all the fundamental rights at stake is required.28 Now, Commission Recommendation of 1.3.2018 on measures to effectively tackle illegal content online, suggests that Member States should make use of the possibility offered by Art. 15(2) and lay down legal obligations to promptly inform relevant authorities for the purposes of the prevention, investigation, detection or prosecution of criminal offences.29

D. Criticism One of the main deserving criticisms of the E-Commerce Directive is that it lacks 12 clarity on the exact criteria of a specific monitoring obligation, or how the prohibition of general monitoring can be rendered compatible with the hosting providers’ duties of care.30 For this same reason, it is also difficult to define the scope of the injunctions referred to in Art. 15(1). The Glawischnig decision, whose doctrine dealing with defamatory posts in social media platforms might be generalised to other cases, does not help to draw the line. In practice the tendency is to increase preventive monitoring, thanks to the fact that, 13 almost 20 years after the E-Commerce Directive was enacted, technological advances permit the adoption of measures that are both reliable and proportionate for the detection and blocking of illegal content. The European Commission encourages intermediaries to voluntarily control illegal activities and many national judges end up imposing a duty to act according to the technical capacity of large companies in light of the programs already in place (e.g. PhotoDNA, iWatch, Content-ID) or others that they are sometimes obliged to create. It could be argued that the general monitoring prohibition 27 ibid., paras 50–52, 53. For a preliminary assessment of this judgment, see Woods, at: http://eulawanal ysis.blogspot.com/2019/10/facebooks-liability-for-defamatory.html (last accessed: 17 October 2019). 28 CJEU, C‑275/06 Promusicae EU:C:2008:54, paras 59, 61–70. See also CJEU, C-557/07 LSG v Tele 2 EU:C:2009:107, paras 29, 47 and request for a preliminary ruling from the Conseil d’État (France) lodged on 3 August 2018: C-512/18 La Quadrature du Net OJ C 82, 29.10.2018, p. 7–8. 29 C(2018) 1177 final, Recital 28, Chapter II, para. 24. 30 Recitals 47, 48. See SEC(2011) 1641/2, 47.

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is respected as long as the adequate technology exists, as the Glawischnig decision now seems to indicate regarding prevention to reputational harm;31 but it is also fair to understand that Art. 15 loses its purpose if intermediaries are coerced into adopting voluntary and proactive monitoring and filtering in order to avoid liability.32 14 The leaked document on the Digital Services Act seems to validate the approach of the DSM Copyright Directive, but admits that specific provisions governing algorithms for automated technologies should be considered in order to ensure transparency and accountability.33

CJEU C-18/18 Glawischnig-Piesczek EU:C:2019:821, paras 44–47. Se also, Sartor, 26. With strong criticism, Frosio, 203–211. 33 At present there is only a leaked Commission document under: https://netzpolitik.org/2019/leaked-d ocument-eu-commission-mulls-new-law-to-regulate-online-platforms (accessed 17 October 2019). See also, https://euinternetpolicy.wordpress.com/2019/07/30/the-eu-digital-services-act-what-it-is-and-why-i t-shouldnt-happen (accessed 17 October 2019); https://www.inlinepolicy.com/blog/towards-an-enhanced -responsibility-of-online-platforms-the-eu-digital-services-act (accessed 17 October 2019). 31

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Introduction Bibliography: BEUC, ‘Proposal for a Regulation on Ensuring Cross-Border Portability of Content Services: BEUC position’ (March 2016); BITKOM, ‘Stellungnahme: Kommissionsentwurf zur PortabilitätsVerordnung’ (May 2016); Bundesrat, ‘Beschluss des Bundesrates: Vorschlag für eine Verordnung des Europäischen Parlaments und des Rates zur Gewährleistung der grenzüberschreitenden Portabilität von Online-Inhaltediensten im Binnenmarkt’ BR-Drs. 167/16 from 22.4.2016; Bundesverband Interaktive Unterhaltungssoftware (BIU), ‘Stellungnahme zum Vorschlag für eine Verordnung des Europäischen Parlaments und des Rates zur Gewährleistung der grenzüberschreitenden Portabilität von Online- Inhaltediensten im Binnenmarkt (COM(2015) 627 final)’ (February 2016); Commission, ‘A Digital Single Market Strategy for Europe’ COM(2015) 192 final; Commission, ‘Towards a modern, more European copyright framework’ COM(2015) 626; Commission, ‘Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market’ COM(2015) 627 final; Commission, ‘Impact Assessment Accompanying the document Proposal for a Regulation of the European Parliament and of the Council to ensure the cross-border portability of online content services in the internal market’ SWD(2015) 270 final; Commission, ‘Proposal for a Directive of the European Parliament and of the Council amending Directive 2010/13/EU on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services in view of changing market realities’ COM(2016) 287 final; Commission, ‘Proposal for a Directive of the European Parliament and of the Council establishing the European Electronic Communications Code’ COM(2016) 590 final; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on copyright in the Digital Single Market’ COM(2016) 593 final; Commission, ‘Proposal for a Regulation of the European Parliament and of the Council laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes’ COM(2016) 594 final; Commission, ‘Proposal for a Regulation of the European Parliament and of the Council on the cross-border exchange between the Union and third countries of accessible format copies of certain works and other subject-matter protected by copyright and related rights for the benefit of persons who are blind, visually impaired or otherwise print disabled’ COM(2016) 595 final; Commission, ‘Proposal for a Directive of the European Parliament and of the Council on certain permitted uses of works and other subject-matter protected by copyright and related rights for the benefit of persons who are blind, visually impaired or otherwise print disabled and amending Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society’ COM(2016) 596 final; Commission, ‘Impact Assessment on the modernisation of EU copyright rules’ SWD(2016) 301 final; Committee on Legal Affairs (JURI), ‘Report on the proposal for a regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market’ A8-0378/2016; Council, ‘Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market – General approach’ ST-8939/2016; Deutscher Fußball-Bund/ Bundesliga, ‘Stellungnahme des DFB und der DFL zum 2. EU-Urheberrechtspaket’ (October 2016); EDiMA, ‘EDIMA comments on content portability’ (October 2017); European Film Associations, ‘Making Portability Work: Key Principles for the Film and Audiovisual Sector’ (January 2016); German Bar Association, ‘Position Paper of the German Bar Association by the Committee on Intellectual Property on the Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content service in the internal market (COM(2015) 627 final, 9 December 2015)’ (January 2016); Ranke/Glöckler, ‘Grenzüberschreitende Portabilität von Online-Inhaltediensten im Binnenmarkt’ (2017) 6 MMR 378–382; Rauer; Zwischen Binnenmarkt und Wahrung nationaler Identität (Springer 2003); Verbraucherzentrale Bundesverband, ‘Grenzüberschreitende Nutzung von digitalen Inhalten erleichtern’ (June 2016). A. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Digital Single Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Historical background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Digital inadequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. The concept . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Copyright reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Related initiatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Copyright regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Protected works . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Territorial nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Introduction to Portability Regulation III. Wider copyright-related field . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Audiovisual media . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Telecommunications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Data protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Factual connection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Licensing structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34 35 39 43 46 46 48 51

B. Legislative objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Portability Impact Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

57 59 68

C. Legislative construct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Legal fiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Legal background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Legal example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

70 71 73 77

D. Legislative process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 I. Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 II. Commission’s position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 III. Council’s position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 IV. Parliament’s position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 E. Perception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

A. General I. Digital Single Market 1

The Portability Regulation is embedded into the Digital Single Market Strategy, a comprehensive reform to make the EU fit for the digital age.

1. Historical background Today, we find the EU’s goal to establish a ‘single’ or ‘internal’ market in Art. 26 TFEU: ‘The internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties’. 3 However, the principle of a single economic market within the European Union is by no means new. Already the very first agreement, the Treaty establishing the European Coal and Steel Community, which entered into force on 23 July 1952, rested on the idea of fostering interdependence by cross-border trade. Five years later, in 1957, the Treaties of Rome established the European Economic Community (EEC) and the European Atomic Energy Community (Euratom) implementing the so-called ‘Schuman Plan’, a concept of merging domestic economic markets into something bigger in Western Europe. From 1957 onwards, one could read in Art. 2 EEC that it was the Community’s aim, by establishing a so-called ‘common market’ and by progressively approximating the economic policies of Member States, ‘to promote throughout the Community a harmonious development of economic activities, a continuous and balanced expansion, an increased stability, an accelerated raising of the standard of living and closer relations between its Member States’. Therefore, it is fair to say that the idea of one economic area within Europe, lacking any domestic borders or hurdles for trade, is as old as the EU and its predecessor organisations themselves. 4 This fact is most visibly depicted in a ruling handed down by the ECJ as early as in 1982 in which the judges emphasise the underlying objective of the EEC being the estab2

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Introduction to Portability Regulation lishment of a common market.1 They continue that such market must rest on the elimination of ‘all obstacles to intra-community trade in order to merge the national markets into a single market bringing about conditions as close as possible those of a genuine market’. Obviously, these remarks need to be understood against the background of a then purely analogue world, yet the principles remain the same.2 Whereas the subsequent decades witnessed changes to the means of communication and trade, or rather complemented to also include digital ways of exchange and interaction, the economic criteria of a single market have not. Historically, the development of the common market was driven by the CJEU and its 5 countless decisions on the four freedoms of the Community: free movement of goods, free movement of capital, the freedom to establish and provide services, and free movement of persons. Two further pillars were and remain the rules on the harmonisation of the domestic laws as well as the rules establishing common conditions for competition in Europe. Again, the judgments handed down by the CJEU played an important role in the achievements that were made over time to avoid neglecting the developments around the extension and conversion of the Community into today’s European Union.

2. Digital inadequacy The Internet by nature is a structure without domestic borders. It is a network that is 6 technically not receptive of border controls in the classic sense. It is about the exchange of content and data between connected servers and the communication amongst those using the network. The notion of territoriality is nothing inherent to the Internet. Rather, the limitations truly inherent to the overall system are processor capacity, transfer rate and storage volume – each being of technical nature rather than a matter of nationality, ethnic origin or place of residence. Thus, one would think the Internet is of an individual nature from the outset. However, when looking behind the scenes it becomes quite apparent that the Internet 7 is by no means the place of borderless trade across the world. The term most significantly expressing the shortcoming is ‘geo-blocking’ – a technical method to deny a user with a certain IP address access a specific website. To be clear, the mere fact that access is excluded may not be deemed illegal or unjustified per se. There are good reasons why a website may only be accessed from certain countries. For instance, if the content made available on that website, e.g. a TV show, a movie or a musician’s latest album, has only been licensed by the provider for a specific territorial area. However, many access and use restrictions in the online world are not due to such legitimate reasons. In consequence, taking stock of the circumstances of today’s digital communication 8 and trade, one must note that, of course, the four freedoms and the harmonisation of domestic laws within the EU has brought down both tariff and non-tariff trade barriers from which also e-commerce benefits. Still, the ease of cross-border trade via the Internet has shone very clear light on the deficiencies that exist and thereby highlighted the inadequacy of EU’s Single Market in the digital sector.

3. The concept When Jean-Claude Juncker assumed the role as the new President of the European 9 Commission in July 2014, he instantly announced ambitious legislative steps aiming at establishing a truly existing single market throughout the Union, also in the online 1 2

CJEU, C-15/81 Schul EU:C:1982:135, para. 33. See a more detailed analysis in Rauer, p. 235 et seq.

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Introduction to Portability Regulation world.3 A comprehensive Digital Single Market Strategy was published less than one year later, in May 2015.4 10 In short, this strategy is supported by three pillars: (i) better access for consumers and businesses to digital goods and services across Europe, (ii) creating the right conditions and a level playing field for digital networks and innovative services to flourish and (iii) maximising the growth potential of the digital economy. These pillars are divided into more specific legislative areas of initiative. Overall, the Commission sought to focus on 16 individual initiatives in order to bring about a Digital Single Market. The initiatives include legislative proposals in various fields of law, including cross-border e-commerce, enforcement of consumer rules, parcel delivery, ending unjustified geo-blocking, overhauling the EU’s VAT rules and telecommunication laws, reviewing rules on audiovisual media and on personal data, and introducing new standards for better digital interoperability. 11 Taking into account that over 70 % of the content made available on the Internet at least potentially qualifies as copyright protected work, it did not come as a surprise that the EU Commission also gave room to a quite substantial copyright reform when announcing its Digital Single Market Strategy. Various legislative proposals introduced over time as part of this strategy focus or at least feature a link to copyright and the way works are protected, licensed, amortised and managed online.

4. Copyright reform Prior to announcing any copyright legislation, the Commission carried out several fairly comprehensive public consultations on how to best modernise the EU’s copyright rules.5 Those consultations focussed on copyright and various neighbouring areas such as on reforms of the Satellite and Cable Directive 93/83/EEC (SatCab Directive) and the AVMS Directive 2010/13/EU. The findings later became the foundation and source for the Commission’s Impact Assessment on the modernisation of EU copyright rules (Copyright Impact Assessment) which was published on 14 September 2016.6 13 Even earlier, on 9 December 2015, the Commission presented what became known as the ‘First Copyright Package’ of the Digital Single Market Strategy. This package consisted of the communication ‘Towards a modern, more European copyright framework’7 and a first legislative draft for the Regulation on the portability of online content services (Portability Regulation)8. Notably, the aforementioned communication revealed the Commission’s wider plan regarding the reform of EU’s copyright law(s). It defined four areas of action: (i) ensuring wider access to content across the EU, (ii) adapting exceptions to digital and cross-border environments, (iii) achieving a well-functioning marketplace and (iv) providing an effective and balanced enforcement system. The Commission organised these propositions into short- and mid-term goals, and into a long-term vision. 14 The draft Portability Regulation is notable as it indicates a swift act by the Commission that would bring about appreciable benefits for the average consumer of online services. Although its scope of application was narrow, the draft Portability Regulation was 12

3 Available under https://ec.europa.eu/commission/sites/beta-political/files/juncker-political-guidelines -speech_en.pdf (accessed 27 August 2019). 4 COM(2015) 192 final. 5 For information see http://europa.eu/rapid/press-release_IP-13-1213_en.htm (accessed 27 August 2019). 6 SWD(2016) 301 final. 7 COM(2015) 626 final. 8 COM(2015) 627 final.

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Introduction to Portability Regulation meant to pave the way to a more comprehensive reform of Europe’s copyright legislation. Until that point, the Directive 2001/29/EC on the harmonisation of certain aspects of copyright and related rights in the information society (InfoSoc Directive) formed the framework of European copyright. In contrast, however, the Commission did not choose a directive as the legislative vehicle, but rather favoured a directly applicably regulation as the means to regulate portability of online content services. The Commission explained its decision by highlighting the fundamental importance of safeguarding adequate legal certainty on the scope and content of the legislation. Any legislative discretion at national level was deemed counter-productive given the clear aim and perspective of the initiative and thus a Regulation was preferred. The Commission’s clear long-term vision was and remains ‘one where authors and 15 performers, the creative industries, users and all those concerned by copyright are subject to the very same rules, irrespective of where they are in the EU’ 9. The Portability Regulation is meant to be one cornerstone in this endeavour. To be fair, what sounds like the description of a fully harmonised copyright law within the Union, is in practice still shaped by a range of selected number of copyright related areas in which the European legislator has introduced more or less detailed provisions. The new Directive (EU) 2019/790 of 17 April 2019 on copyright and related rights in the Digital Single Market (DSM Copyright Directive) is the best example. The Directive focuses on various specific aspects ranging from new limitations and exceptions for text and data mining to new negotiation mechanisms safeguarding fair participation of authors and performers and to stricter rules on liability for certain Internet providers. However, a uniform and clear definition of the subject matter of copyright protection is still to come. Here, we still rely on the case-by-case approach of the CJEU in order to understand the meaning of ‘copyright’ within the EU. The long-term vision referred to above therefore may not be misunderstood as a holistic approach when looking at the current copyright reform as made part of the Digital Single Market Strategy. Some commentators regret this as a missed opportunity.10 However, upon reflection of the lengthy debates and substantial difficulties to get the DSM Copyright Directive enacted, one must ask whether the Union is at present ready for a holistic reform of European copyright. As already anticipated, the First Copyright Package was followed by a second which 16 was announced on 14 September 2016. This second package covered in total four legislative proposals: (i) the draft DSM Copyright Directive11, (ii) a further draft for a Regulation on laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes12, a draft for (iii) a directive13 and (iv) a Regulation14 to implement the Marrakesh Treaty to Facilitate Access to Published Works for Persons Who Are Blind, Visually Impaired or Otherwise Print Disabled15. In the light of the aforementioned initiatives, one should draw a fine conceptual line 17 between cross-border portability of online content and cross-border access to such content.16 Portability focuses on access to subscribed content, i.e. a subscriber is already entitled to avail themselves of the service, but only in a particular territory. In contrast, COM(2015) 626 final, 12. Also Ranke/Glöckler, 381. 11 COM(2016) 593 final. 12 COM(2016) 594 final. 13 COM(2016) 596 final. 14 COM(2016) 595 final. 15 Available under http://www.wipo.int/wipolex/en/treaties/text.jsp?file_id=301019 (accessed 27 August 2019). 16 Recital 12. 9

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Introduction to Portability Regulation access to content is to be understood in the context of gaining access for the first time without any underlying subscription. Both can be relevant in the wider sense of bringing about a truly existing Digital Single Market. However, the scope of the Portability Regulation is limited to the first aspect. It rests on the idea of ‘travelling with your online content’.

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In order to adequately position the Portability Regulation in the wider scope of the legislative initiatives, one needs to briefly consider other legislation surrounding the Regulation. First and foremost, the framework for audiovisual media services is also under review in the context of the Digital Single Market Strategy. The Commission presented the first draft Directive amending the AVMS Directive 2010/13/EU. 17 After the Council agreed on a General Approach on 23 May 2017, the trilogue began between the Commission, the Parliament and the Commission. It ended with the adoption of the Revised AVMS Directive 2018/1808 on 6 November 2018. The key elements of the reform are the inclusion of video-sharing platforms and social media services in the scope of the directive and the application of the same rules to TV broadcasting as well as to on-demand services. On-demand services will also have to ensure that 30 % of their catalogues include European works. Furthermore, there will be more flexible rules on audiovisual commercial communications in combination with more stringent conditions on alcohol and cigarette advertisement. Geo-blocking was and ever will remain an issue when it comes to creating a Digital Single Market within the EU. However, geo-blocking might be very well justified depending on the exact circumstances. For instance, technical measures preventing certain cross-border access to content may safeguard that the licensee remains within territorial scope of the license when offering their online service. Obtaining national licenses is still common practice. None of the legislative initiatives put forward by the European legislator aims at pushing through a mandatory pan-European licensing concept. Accordingly, the new Geo-blocking Regulation explicitly bans unjustified geo-blocking and related forms of discrimination. The new law applies since December 2018. The Geo-blocking Regulation, however, does not apply to copyright-protected content. Art. 1(5) explicitly carves out ‘copyright and neighbouring rights, notably the rules provided for in Directive 2001/29/EC of the European Parliament and of the Council’. Instead, the focus lies on the e-commerce end of geo-blocking and redirection practices by traders. Further to mention is the Revised SatCab Directive 2019/789. It serves the core purpose of facilitating online transmissions of broadcasting organisations and retransmissions of television and radio programmes. In result, copyright-protected content will become available across borders on easier terms. The so-called ‘country of origin’ principle known for many years in the context of satellite and cable transmissions will be partly introduced also to the Internet. Moreover, mandatory collective rights management shall facilitate the clearing of rights allowing for services reaching the wider scope of the Digital Single Market. Finally, one needs to relate to the changes in the telecommunication sector. Telecommunication companies enable access and use of copyright-protected content by providing broadband networks supporting high-speed Internet access and are therefore of great relevance for the practical implementation of the Portability Regulation. Also, 17

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Introduction to Portability Regulation on 14 September 2016, the Commission presented a so-called ‘Connectivity Package’ which included a series of legislative initiatives.18 The key objectives include the coverage of high quality Internet connectivity across all Member States. As a pre-condition to actually access and use digital content while travelling, the 24 European legislator enacted the Open Internet Access Regulation. This Regulation has applied since 15 June 2017.

II. Copyright regime In essence, the Portability Regulation concerns the legalisation of the use of sub- 25 scribed online services providing access to copyright-protected content in situations where the subscriber is outside the territory in which their right of use applies. Accordingly, the Regulation builds on the existing copyright law with regard to the definition and scope of the protected work. The same is true for the exceptions and limitations as well as the rules for exploiting and licensing the work. Thus, from a pure dogmatic and methodological angle, there are no new patterns introduced to the underlying principles of copyright. Even the legal fiction regarding the place of consumption is by no means a new vehicle. Therefore, any systematic analysis must start with the present copyright regime.

1. Protected works Given that the Portability Regulation builds on the copyright regime already existing 26 within the EU, the first question to be answered is whether there is such thing like a ‘European copyright’. Traditionally, copyright has been a purely national matter and is fair to conclude that this is still the case today. Literally all Member States have their own copyright legislation and established rules on what constitutes a copyright protected work. Of course, even prior to Europe’s endeavours to harmonise copyright law as part of the creating of a Single Market, international treaties existed. Probably the most known and most influential agreement is the Revised Berne Convention for the Protection of Literary and Artistic Works of 1886 (Berne Convention). However, the principles set out in this Convention primarily aim at safeguarding that authors from one country enjoy in another country the same protection that country is granting to its own nationals (Principle of national treatment).19 Further principles are those of ‘automatic’ protection without any formal requirements to be met and ‘independent’ protection without the need to prove equivalent protection in the country of origin of the work.20 The harmonisation brought about by the enactment of the InfoSoc Directive on 27 22 May 2001 and its implementation into national law was the first of its kind for the Member States.21 Still, copyright is no fully harmonised area of law. As already indicated above, the InfoSoc Directive does not contain a definition of what may be considered a ‘work’ in a copyright sense.22 Of course, the CJEU has to some extent filled this gap by 18 For information see http://europa.eu/rapid/press-release_IP-16-3008_en.htm (accessed 27 August 2019). 19 Art. 5(3) Berne Convention. 20 Art. 5(2) Berne Convention. 21 Further pieces of legislation followed such as the Directive 2006/115/EC of 12 December 2006 on rental right and lending right and on certain rights related to copyright in the field of intellectual property (OJ L 376, 27.12.2006, p. 28), or the Directive 2009/24/EC of 23 April 2009 on the legal protection of computer programs (OJ L 111, 5.5.2009, p. 16). 22 Neither does the new DSM Copyright Directive.

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Introduction to Portability Regulation handing down quite a number of decisions on the subject. In Infopaq I23 the judges ruled that a linguistic work may consist of as little as eleven words, in BSA24 they emphasised the criterion of originality and in FAPL25 it was specified that such originality is measured in terms of whether the author’s own intellectual creation is reflected in the work. Similar language was used also in Painer26 and Football Dacato27. Most recently, the CJEU confirmed its view by pointing out that a copyright work requires originality ‘in the sense that it is its author’s own intellectual creation’.28 28 Given the lack of a statutory definition, in particular the UK struggled for many years with this approach. Traditionally, common law countries apply the so-called ‘skill, labour and judgment’ test in order to determine whether a work may enjoy protection. After Brexit, this domestic view might happen to prevail again. However, it is too early to say what direction the UK will head for. In any case, an answer will be needed to the question how to deal with creative works generated in the course of the deployment of artificial intelligence (AI). 29 For the remainder of the Member States it can be noted that, due to the CJEU, there is a great overlap as to what criteria are to be applied in the course of the determination of a copyright work. Still, in consideration of the case-by-case approach judges have to take, the lack of a statutory definition of the term ‘work’ may cause ambiguity and legal uncertainty. This may affect the practical application of the Portability Regulation.

2. Territorial nature Despite the legislative harmonisation and the guidance rendered by the CJEU, the nature of copyright remains national. Protection stems from the domestic copyright legislation. Those are to be applied within their territorial boundaries. Accordingly, Art. 5(3) Berne Convention and the principle of national treatment set out therein are still of relevance. 31 There is neither a uniform global nor a fully consistent European copyright. Looking specifically at the InfoSoc Directive, one must note that beyond the lack of a statutory definition of a copyright work, the limitations and exceptions set out in its Art. 5(3) are not mandatory in nature. Member States may choose whether or not to implement them. Only if the domestic legislator goes ahead with transposing a certain provision into national law, this transposition must be consistent with the specifications and objectives of EU law. 32 The CJEU has emphasised the territorial nature of copyright on multiple occasions. 29 This nature is most visibly mirrored in the territoriality of licensing. Copyright owners grant licenses for a certain territory, if not strictly on a country-by-country basis, then at least on regional level following language barriers. The current copyright reform does not challenge these principles and traditions. Mandatory pan-European licensing is not on the Commission’s current agenda. There is, of course, the endeavour to encourage and allow for multi-territorial licensing. However, the first step taken by the European legislator to break up purely domestic licensing was and still is limited to the exploitation of musical works. In 2014, the Directive (EU) 2014/26 on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for 30

CJEU, C-5/08 Infopaq EU:C:2009:465. CJEU, C-393/09 BSA EU:C:2010:816. 25 CJEU, C-403/08 FAPL EU:C:2011:631. 26 CJEU, C-145/10 Painer EU:C:2011:798. 27 CJEU, C-604/10 Football Dacato EU:C:2012:115. 28 CJEU, C-310/17 Levola Hengelo EU:C:2018:899. 29 For instance, CJEU, C-192/04 Lagadere EU:C:2005:475; CJEU, C-5/11 Donner EU:C:2012:370. 23

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Introduction to Portability Regulation online use in the internal market (Collective Rights Management Directive) was enacted.30 However, the Portability Regulation does create a statutory exception to the principle 33 of territoriality of copyright. This exception is limited to already licensed content which shall, within the Digital Single Market, become portable across borders and thereby across contractually-defined license boundaries.

III. Wider copyright-related field In the context of the Portability Regulation one must not focus on the core copyright 34 regime alone. The content subject to the Regulation in practice predominantly stems from the audiovisual media sector. Today’s most popular subscriptions relate to sports events such as football leagues and other tournaments, media entertainment including movies, series and episodes, gaming events and similar digital content. Therefore, the full picture only emerges if the review also includes the legal regimes governing those services.

1. Audiovisual media The sector of audiovisual media services was first harmonised on EU-wide level by 35 the Directive 89/552/EEC of 3 October 1989 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities (TV Directive).31 Almost 20 years later, in 2007, the TV Directive was modernised in response to the new means of distributing and broadcasting audiovisual content, notably on-demand services complementing the traditional linear channels (Revised TV Directive32). In Recital 7 of the Revised TV Directive, the legislator gives a concise explanation why the reform was needed. Reference is made to the legal uncertainty and a non-level playing-field existing in Europe in respect to legal governing of the then emerging on-demand audiovisual media services. Only three years later, on 10 March 2010, the AVMS Directive was enacted. It was 36 intended to impose legal measures upon on-demand audiovisual media services that were of even stricter or more detailed nature than those which were required to transpose the Revised TV Directive.33 The scope of this Directive went far beyond linear and non-linear TV programmes. Its provisions governed audiovisual commercial communication in general, notably with a focus on the protection of minors, and protection against the incitement to hatred. The Revised AVMS Directive came into force on 14 November 2018 as part of the 37 Commissions Digital Single Market Strategy. It amends the first AVMS Directive in multiple ways. Core elements of the reform are safeguarding media pluralism and cultural diversity, protection of consumers and particularly minors, and combating racial and religious hatred. In addition, the promotion of European works, both in linear and in ondemand audiovisual media services, is emphasised. Once implemented in domestic law,

OJ L 84, 20.3.2014, p. 72. OJ L 298, 17.10.1989, p. 23. 32 Directive 2007/65/EC amending Council Directive 89/552/EEC on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the pursuit of television broadcasting activities. 33 See Recital 17 AVMS Directive. 30 31

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Introduction to Portability Regulation providers of on-demand audiovisual media services must secure at least a 30 % share of European works in their catalogues and must ensure prominence of those works.34. 38 Overall, the legislator aims at bringing closer together the regulatory regime for linear and non-linear media. The changes have to be implemented by the Member States on or before 19 September 2020.

2. Telecommunications The regulatory framework governing the telecom sector is predominantly focussed on competition law. Due to the cross-border character of communication, the initial approaches towards a European harmonisation can be traced back to the late 1980 s. The first true milestone, however, was the full liberalisation of the telecommunication infrastructure within the EU in 1998. This liberalisation set the base for the European regulatory framework for electronic communications known today. It is made up of five directives: the so-called Framework Directive, the Authorisation Directive, the Access Directive, the Universal Service Directive, and the ePrivacy Directive. The framework was adopted as a package in 2002. 40 The three basic principles of the regulatory framework are (i) to establish and maintain competition between the operators through market surveillance, (ii) to foster innovation, and (iii) to adequately protect consumers’ rights. The package was comprehensively amended in 2009 by way of two new directives.35 Those primarily served the purpose of taking account of the rapid technical development in the telecom sector. In addition, the EU legislator established the Body of European Regulators for Electronic Communications (BEREC), a forum for the national regulatory authorities, as well as a consultation body for the EU institutions.36 41 The regulatory framework is yet again under thorough review as part of the Commission’s Digital Single Market Strategy.37 The amendments, which will affect both the traditional providers of electronic communications services and the ‘over the top’ (OTT) operators, will feature in the new ‘European Electronic Communications Code’ (EECC).38 42 Service providers governed by the new Portability Regulation will be required to work with and to use services provided by telecommunication service providers. Thus, they will be affected by the regulatory changes in this sector as professional customers. 39

See Art. 1(18) Revised AVMS Directive amending Art. 13 AVMS Directive. Directive 2009/140/EC of the European Parliament and of the Council of 25 November 2009 amending Directives 2002/21/EC on a common regulatory framework for electronic communications networks and services, 2002/19/EC on access to, and interconnection of, electronic communications networks and associated facilities, and 2002/20/EC on the authorisation of electronic communications networks and services (OJ L 337, 18.12.2009); Directive 2009/136/EC of the European Parliament and of the Council of 25 November 2009 amending Directive 2002/22/EC on universal service and users’ rights relating to electronic communications networks and services, Directive 2002/58/EC concerning the processing of personal data and the protection of privacy in the electronic communications sector and Regulation (EC) No 2006/2004 on cooperation between national authorities responsible for the enforcement of consumer protection laws (OJ L 337, 18.12.2009, p. 11). 36 Regulation (EC) No 1211/2009 of the European Parliament and of the Council of 25 November 2009 establishing the Body of European Regulators for Electronic Communications (BEREC) and the Office (OJ L 337, 18.12.2009, p. 1). 37 COM(2016) 590 final. 38 Regulation (EU) 2018/1971 of the European Parliament and of the Council of 11 December 2018 establishing the Body of European Regulators for Electronic Communications (BEREC) and the Agency for Support for BEREC (BEREC Office), amending Regulation (EU) 2015/2120 and repealing Regulation (EC) No 1211/2009 (OJ L 321, 17.12.2018, p. 1). 34

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Introduction to Portability Regulation 3. Data protection The adequate protection and diligent processing of personal data has gained enor- 43 mous importance particularly over the last decade – not just within certain Member States but also on European level. The General Data Protection Regulation (GDPR) entered into force on 25 May 2018 and it would not be an exaggeration to state that it was the most recognised legislative change in the entire year. Private enterprises as well as data protection authorities tried to prepare for and cope with the new provisions but, at least initially, struggled to safeguard compliance from day one on. Meanwhile, the hysterics have decreased and many companies have found their way of dealing with the new obligations. In essence, the GDPR introduced certain new and mandatory rules on how to collect, 44 process and eventually erase personal data within the EU and to some extent also beyond the EU. New transparency obligations were carved out, data subjects were furnished with new rights (e.g. the right to access and the right to be forgotten) and more robust and threatening sanctions for violations came into force. Against this background, it did not come as a surprise that privacy aspects happened 45 to play an important role in the course of the legislative process relating to the Portability Regulation. Given that the travel-with-your-content privilege ought to be introduced on a mere temporary basis, the monitoring of such a temporary stay abroad was a central question. Collecting and analysing the personal data of the subscriber appeared inevitable. However, it seemed disproportionate and excessive to build personal motion profiles for the purpose of examining whether a subscriber travelled abroad for a longer period than the intended scope of the Portability Regulation would allow. Therefore, other ways of safeguarding compliance needed to be explored in order not to run counter to European privacy law. All in all, another illustrative example of the need to consider the interdependencies within the broader legal framework when analysing the Portability Regulation.

IV. Factual connection 1. Content The Portability Regulation is not limited to certain kinds of content.39 It covers all 46 different types of copyright-protected content that can be provided online. The Regulation therefore applies to audiovisual content such as movies, series, TV shows or news programmes. It further includes images, music, e-books, newspapers, (scientific) magazines and computer games. Even though sport events as a whole are not protected40, they may be protected un- 47 der national law. Still, the scope of the Regulation also covers transmissions from broadcasting organisations and hereby includes in particular the transmission of sport events.

2. Services The Portability Regulation affects primarily providers of online content services and 48 their customers. Online content services increased immensely during the last decade 41 and can usually be qualified as one of the following: (i) transactional services where the Unlike the Collective Rights Management Directive. CJEU, C-403/08 FAPL EU:C:2011:631, para. 98. 41 SWD(2015)270 final, 4. 39

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Introduction to Portability Regulation consumer rents or buys a digital copy of a work and pays per transaction, and (ii) subscription services where the consumer enters into a long-term contractual relationship with the online content service provider and may access and use an unlimited amount of the works offered.42 Whereas subscription services mainly use streaming technologies, transactional services offer download options. However, also transactional services increasingly rely on streaming and cloud-based technologies and vice versa. The Portability Regulation does not distinguish between different sorts of online content service providers. By using technology-neutral terms, the legislator ensured that also new technologies that go beyond streaming and downloading technologies will be covered by the Regulation. 49 The Regulation further covers service providers with paid-content as well as service providers with free content. Free online content service providers, on the one hand, are often public broadcasters. On the other hand, there are many private platforms or other websites that offer the access and use of copyright protected content without the payment of money.43 50 The industry also benefits enormously from the increasing options to access and use online content. Online content is often accessed and used not only from a computer but also from a smartphone, a tablet or an e-reader.

3. Licensing structure In order to provide content lawfully, the online content service provider needs to conclude licensing agreements with the rightholders. The online content service providers produce and commission their own content only in some cases.44 It is rather uncommon that the author directly licenses certain rights to the online content service provider. Instead, there are several ‘intermediaries’ that form the licensing chain, depending on the industry.45 Those intermediaries – distributors, sales agents or aggregators – usually mean a reduction of the revenue generated by the content. However, they may also be beneficial when it comes to negotiating with online content service providers in the different Member States or when it comes to marketing. The options for intermediaries to earn money are either a flat-fee or a revenue-sharing system. 52 The first intermediary in the audiovisual sector is the producer who obtains the relevant rights in the work. In the following, the producer usually grants an exclusive license to a distributor or service provider for each Member State or a certain territory. The distributor then licenses the content to traditional broadcasting organisations or online content service providers. This licensing process for audiovisual media content is characterised by territorial licenses – usually a Member State as a territory. It is for this reason that online content service providers for audiovisual content mostly did not offer portability of their licensed content to customers travelling outside of the territory: the costs for licenses for each Member State would require a disproportionately high investment.46 53 Historically, the licensing agreements in the music industry have been similar and were also mainly based on territorial licenses. However, this practice has changed – in particular, since the Collective Rights Management Directive was approved. The Directive had to be implemented by the Member States by April 2016 and led to the common 51

ibid., 7. Such as YouTube or private broadcasting media libraries. 44 For instance Netflix and Amazon Prime. 45 For more details: SWD(2015) 270 final, 13. 46 ibid., 14. 42 43

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Introduction to Portability Regulation practice of multi-territorial licenses. Furthermore, several collecting societies from Germany, the UK and Sweden initiated the licensing hub ICE.47 Collecting societies and music publishers usually serve as intermediaries in the licensing chain for online music. Even though, the self-publishing of e-books increases constantly, e-books are usually 54 distributed via traditional publishers with a pan-European license. The publishers then license the rights to e-books to retailers or online content service providers. As e-books, online video games are distributed via publishers, but usually without 55 any territorial restrictions.48 However, there is a trend towards game developers who publish games themselves and towards game publishers who develop games themselves. The transmissions of broadcasts relate primarily to sport events. They are mostly li- 56 censed on a pure territorial basis due financial considerations. Therefore, portability of such content was rare, just as it was the case with audiovisual content.

B. Legislative objective The Portability Regulation pursues a fairly straightforward legislative objective. With- 57 in the European single market, people shall be able to access and enjoy services they have subscribed to also when being temporarily abroad in another Member State. Due to the territorial nature49 of copyright, subscriptions tend to be limited to a specific country. As a consequence, when crossing a border one usually also leaves the territory in which the subscription is valid. Consequently, the user is cut-off from the subscribed service and the respective digital content previously purchased or rented in their home Member State. This clearly perceivable limitation obviously runs counter to the idea of a Digital Sin- 58 gle Market. Accordingly, the European Commission took the initiative of reviewing the matter. This was done by an initial evaluation of the market and online content services offered. This assessment formed the basis for the Portability Impact Assessment 50 which was published on 9 December 2015 alongside the Draft Portability Regulation.

I. Portability Impact Assessment The Commission’s findings begin with a well-known fact. With growing access to the 59 Internet digital has become, for many, the main way to enjoy content such as music, games, films or sport and a means to participate in society. For instance, in 2014, 25 million users across 14 Member States subscribed to a video-on-demand service. 51 Figures have grown substantially ever since. Further services booked online relate to e-books, egaming and the streaming of live events. All have in common that the content made available is primarily licensed and distributed on a purely domestic level, i.e. in national silos. In consideration of the growing economic importance of online content services, the 60 Commission concludes that the problems with cross-border portability were specific and therefore necessitated a specific solution.52 As a matter of fact, focus is placed on services giving access over the Internet to content such as films, music, e-books or games For information see https://www.iceservices.com/company/about/ (accessed 27 August 2019). SWD(2015) 270 final, 16. 49 See above → mn. 30 et seq. 50 SWD(2015) 270 final. 51 For this and further statistics see ibid., 4. 52 ibid., 22. 47

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Introduction to Portability Regulation as well as to radio and TV programmes.53 Obviously, this type of content is most likely to involve copyright-protected elements which inevitably calls for the legislative initiative to build on the existing copyright law(s), finding solutions to revolve the existing limitations to cross-border access. Of course, not all online content is subject to copyright protection. Sports events, for example, do not qualify as a copyright work.54 The attempt to furnish organisers of sports events with their own neighbouring right, which was pursued in the course of legislative process leading to the DSM Copyright Directive, could not secure a majority and thus was dropped in the trilogue negotiations. 55 The status quo as set by the CJEU therefore remains unchanged. 61 However, broadcasting organisations can certainly invoke their rights vested in the individual broadcasts of such sporting events. More importantly, the genuine sports broadcasting rights, i.e. the right to transmit the captured event, are of high value. Those rights are commonly licensed exclusively on a national basis. In essence, the subscriber wishing to follow his favourite sports team or player thus faces the same phenomenon when crossing a border.56 62 Accordingly, the Commission’s outspoken objective is to meet subscribers’ needs effectively by safeguarding cross-border portability of online content services to complement the various other initiatives gradually breaking down the existing barriers to the functioning of a true Digital Single Market. The Portability Impact Assessment refers to three basic options to achieve this objective. The alternatives to interfere with the principle of territoriality by means of a legislative draft were (i) to publish general guidance focussing on encouraging rightholders to allow portability of online content services, (ii) to adopt a directive aimed towards the Member States facilitating portability of online content services, or (iii) to draft legislation ensuring, not merely facilitating, portability of digital content by means of a directly applicable regulation. 63 The Commission conducted a detailed analysis of the various options described above, particularly with regard to the effectiveness of the legislative measure, efficiency and coherence. The presumable impact upon consumers, the content industry and the service providers is thoroughly examined. In particular, the contemporary licensing practices are assessed and the question is raised how those need to change in order to comply with the legislative portability objective. The predicted costs are balanced against the overall benefits of consumers becoming able to travel with their digital content throughout the Union. It is estimated that approximately 5.7 % of European consumers would potentially be ‘portable users’ of online subscription services which could reach approximately 14 % by 2020.57 In the face of these numbers, services providers would be required to make technical amendments to their existing geo-blocking mechanisms limiting the territorial access to the subscribed services. The Portability Impact Assessment highlights that such exercise would not require the acquisition of new technology and would therefore result in no or just marginal administrative costs. The measure would not require service providers to use any authentication tools but would leave this matter to arrangements between holders of relevant rights and service providers. 58 The administrative burden of checking the Member State of residence also finds mention, but was deemed manageable. In conclusion, the Commission deems the costs directly linked to

ibid., 4. CJEU, C-403/08 FAPL EU:C:2011:631, para. 98. 55 See Art. 12 a of the draft put forward by the Committee on Legal Affairs (JURI). 56 SWD(2015) 270 final, 5. 57 ibid., 38. 58 ibid., 39. 53 54

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Introduction to Portability Regulation the legislative intervention as not significant. It takes the position that those costs could be absorbed in the routine software maintenance costs of the service providers. Literally the same conclusion is drawn with regard to costs indirectly related to legislation demanding cross-border portability. In this respect, the Portability Impact Assessment refers to potential costs of renegotiation of contracts between rightholders and service providers on the one hand and between service providers and consumers on the other. The option eventually favoured by the Commission, however, is argued not to bring about such necessity, at least as regards the relationship between rightholders and service providers. 59 Also, the potential costs for expanded content delivery related to the use of network infrastructure in the country of travel or destination are deemed comparably moderate. The Commission points to the fact that the preferred option would not set legal requirements with regard to the quality of the service delivered outside the Member State of residence of the subscriber. In terms of coherence with other EU policies, the Portability Impact Assessment particularly touches upon cultural diversity. Cross-border portability of online content services is argued not to have any impact on the production and offer of diverse cultural content. Notably, indirect substitution effects are not to be expected to occur. On the contrary, the Commission predicts a development of enhanced access to cultural content. Moreover, the Commission broaches the issue of fundamental rights. Specific reference is made to intellectual property (copyright) and the freedom to conduct a business, as recognised in Arts 16 and 17 EU Charter. The restriction of the latter freedom is argued to be of limited impact and weight. The obligation to offer cross-border portability as well as the rendering unenforceable of any contractual provisions contrary to this obligation are to be deemed be justified in light of the objective of ensuring cross-border portability of online content services for European consumers.60 Finally, it is stated that the Commission’s suggested legislative initiative would not have any impact on third countries and trade or on the environment. Also, the EU’s and the Member States’ international obligations would remain untouched.61

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II. Conclusion The Commission’s conclusion from the Portability Impact Assessment is that there is 68 an urgent need for binding European legislation, i.e. a Portability Regulation, safeguarding the ultimate achievement of the legislative objective being cross-border portability of online content subscribed to in a Member State of the EU. The core element of such legislation is to be formed by a legal fiction as to the territory of access to and use of the digital content. Accessing a subscribed online content service whilst travelling within the EU’s Single Market shall thus become legally permissible and factually possible. Ultimately, the Commission aims for an increase the number of subscription-based 69 and transaction-based online content services that are portable across borders, and equally an increase in the number of consumers using such new feature of the online content services. In that way, the Portability Regulation contributes to bringing about a truly existing Digital Single Market.

59 ibid., 41. The Commission points to the mechanism of the legal fiction allowing for the subscriber’s access to and use of the service being deemed to happen in the Member State of the subscription. 60 ibid., 45. 61 ibid., 48.

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C. Legislative construct 70

As mentioned above,62 the legal construct and mechanism deployed by the European legislator in this case is a so-called legal fiction. A certain act is purposely assumed to have happened in a different location than it actually did. At first glance, this must appear awkward and arbitrary. The law should apply to the true facts rather than artificially rearranging what is happening out there. However, such view might fall slightly short of the rationale behind such legal fictions.

I. Legal fiction The actual provision holding the legal fiction is Art. 4. Therein, we can read that for the purpose of the Portability Regulation the provision of an online content service to a subscriber who is temporarily present in a Member State, as well as the access to and the use of that service by the subscriber shall be deemed to occur solely in the subscriber’s Member State of residence. The stipulation is quite straightforward and does not give rise to many questions. There are three actions to be distinguished from one another, one of which is carried out by the service provider (providing) whilst the other two actions (accessing and using) relate to the subscriber. All are fictionally relocated and deemed to take place in the country the subscriber has obtained the service subscription for. 72 This fiction leads to all relevant acts being brought back within the territory for which the underlying subscription has been granted. In other – copyright related – words, the making available of the content, any act of reproduction in the course of the online delivery as well as its consumption are fictionally removed from the territory. 71

II. Legal background Unsurprisingly the territorial nature of copyright forms the legal background calling for such fiction. As outlined above,63 copyright falls primarily in the domestic domain. Even in light of the harmonisation we have seen in the copyright field over time, that the intellectual protection of works within the EU’s Single Market basically still rests upon the principle of national treatment as introduced by the Berne Convention. There is neither a legal provision at EU level establishing a single and uniform European copyright nor is there any mandatory demand for pan-European exploitation, enforcement or licensing. Of course, rightholders may bundle and package their copyright and grant rights of use for more than one country. However, this is by all means due to private autonomy and author’s discretion. Therefore, any legal assessment and analysis must depart from domestic base. The initial premise must be that the exploitation rights exist within and are primarily licensed against the background of the respective national jurisdiction. 74 This legal background is evidently reflected in the way online content services have been offered and licensed ever since they came into existence. Subscriptions are commonly marketed on domestic level.64 There are Italian subscriptions, Spanish subscrip73

See above → mn. 68. See above → mn. 30. 64 See the European legislator’s attempt to break up this phenomenon in the music industry by enacting the Collective Rights Management Directive. 62

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Introduction to Portability Regulation tions and Swedish subscriptions, as the case may be. Pan-European licenses are by all means exceptional. Effectively, the European landscape is pluralistic to the extent that even Member States with the same native language – for instance Austria and Germany – are still perceived and treated as separate markets when it comes down to offering online content services. This is partly due to the respective consumers showing interest in different content, e.g. the Austrian Bundesliga versus the German Bundesliga. However, even if interests are aligned, rightholders as well as service providers regularly prefer and go for territorial licenses simply because obtaining pan-European rights would involve an enormous investment both in the rights themselves and in the distribution throughout Europe; the risks involved are thus deemed too high and substantial. In consequence, the aspired Digital Single Market rather looks like a patchwork rug 75 when it comes to ownership of rights and licenses. Travelling with online content and accessing such content from various stages of the journey would therefore, in worst case, necessitate authorisation from an abundance of different rightholders offering the respective online content service in the respective Member State of travel. Paving the ground for a true Digital Single Market on the basis of such a multitude of bilateral licenses is evidently impracticable. It is therefore only reasonable to explore other ways of solving the problem. Given that the cross-border travel and therefore the use of the online content service 76 in a different territory is the source of the problem, it is only logical and consistent to try and also tie the solution to the territoriality of the action. A legal fiction could indeed resolve the issue of lacking authorisation. This is the case both for the service provider granting access to the content and the subscriber accessing and using the content. Accordingly, the Commission put a fair amount of emphasis on balancing the pros and cons of such legal fiction.65

III. Legal example The concept of legal fiction is by no means new or an invention of the European leg- 77 islator. Statements that are revoked after time are to be deemed unspoken in first place. Contracts that are contested for cause with ex tunc effect are to be treated as if the agreement had never been entered into. Goods and services exchanged under such a contract are to be returned and redeemed to full extent. Even in the context of copyright and territoriality, Art. 4 is not the first use case of a 78 legal fiction. The SatCab Directive holds a very similar mechanism. According to Art. 1(2)(b) SatCab Directive, the act of communication to the public by satellite occurs solely in the Member State where, under the control and responsibility of the broadcasting organisation, the programme-carrying signals are introduced into an uninterrupted chain of communication leading to the satellite and down towards the earth. Obviously, the signal being sent down from a satellite does not exclusively hit the territory of the Member State where they have previously been introduced into the upstream chain. The conical downstream inevitably leads to recipients outside that territory being able to capture the signal and to benefit from the content broadcasted via that satellite. Still, the law applies the legal fiction of those recipients receiving the signals within the authorised territory. In some way, the fictional dimension of Art. 4 is even more limited than the one in- 79 troduced by Art. 1(2)(b) SatCab Directive some 25 years ago. For, the latter provision allows for a wider group of users enjoying lawful access to the service and content, where65

SWD(2015) 270 final, 26 et seq.

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Introduction to Portability Regulation as Art. 4 Portability Regulation remains within the boundaries of already existing subscriptions. At personal level, there are no additional beneficiaries. Rather, the already existing subscribers enjoy more discretion as to where within the EU they access and consume the digital content. 80 However, there are also differences to be mentioned. Art. 1(2)(b) SatCab Directive came into existence in response to a technical problem that could not be resolved by technical means. Art. 4 Portability Regulation is the answer to a political objective. The European legislator wishes to foster the development of a Digital Single Market and therefore wants to allow subscribers to online content services to access their subscribed content from abroad. Thus, whilst the legal constructs are very similar, the underlying problems are of different character and nature.

D. Legislative process I. Summary The legislative process can be described as fairly concise and expeditious. Within little more than two years, the European institutions converted the first draft into the final text of the regulation. The European Commission published its initial draft of a Portability Regulation on 9 December 2015.66 The Council considered the draft and agreed on a so-called general approach on 18 May 2016.67 82 At parliamentary level, the Committee of Legal Affairs (JURI) took the initial lead in considering the Commission’s draft. MEP Jean-Marie Cavada was appointed as rapporteur in March 2016. Eventually, JURI summarised its remarks and suggestions in a final report published on 9 December 2016.68 Another five months later, on 18 May 2017, the Parliament adopted the report in consideration of the Council’s general approach. 83 Subsequently, the Council approved the Parliament’s position on 8 June 2017. The final text was signed by the President of the Parliament and the President of the Council on 14 June 2017 followed by its publication in the Official Journal of the European Union. Accordingly, the Portability Regulation entered into force on 1 April 2018. 81

II. Commission’s position The Commission based its proposal on Art. 114 TFEU. This Article confers on the European Union the power to adopt measures which have as their object the establishment and functioning of the internal market. Therefore, the legislative initiative – as so many – is linked to the creation of a single economic market across all Member States as envisaged in Art. 26(2) TFEU. 85 The choice of legislative instrument is within the Commission’s due discretion. Professional and reasonable judgment is to be exercised in this course. In the present case, the Commission went for a directly applicable regulation right from the outset. It was argued that this instrument would be the best to achieve the objective of ensuring the portability of online content across the EU mainly because it would allow uniform appli84

COM(2015) 627 final. Available under http://data.consilium.europa.eu/doc/document/ST-8939-2016-INIT/en/pdf (accessed 27 August 2019). 68 Available under http://www.europarl.europa.eu/doceo/document/A-8-2016-0378_EN.html?redirect# title1 (accessed 27 August 2019). 66

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Introduction to Portability Regulation cation of the portability rules and would thus guarantee that rightholders and online service providers from different Member States are subject to the exact same rules as soon as the new legislation takes effect.69 This assessment is certainly true. Regulations undoubtedly allow for a higher level of harmonisation. Nevertheless, one should note that in the context of copyright, the Portability Regulation is the first occasion the European legislator has chosen this instrument. Previously, directives were the preferred legal vehicle. This was the case back in 2001 when the InfoSoc Directive was enacted, and it is also the instrument relied upon in the course of the latest revision of the subject, i.e. the DSM Copyright Directive. As a rule of thumb, the more complex and embracive the regulated matter, the less likely it is that the Member States are willing to agree on a directly applicable regulation. Compromises can be reached more easily if Member States still feel the comfort of having the chance to take their own legislative measures implementing a directive. Given that the Portability Regulation relates to a very specific and ring-fenced subject, the Commission prioritised a regulation believing that a political majority could be reached amongst the Council and Parliament. The outcome has proven the Commission right. The mechanism of a legal fiction has been at the heart of the Portability Regulation right from the beginning (Art. 4). The Commission refers to a ‘mechanism establishing the localisation of the service for purposes of portability’. It emphasises that (i) the provision of, (ii) the access to and (iii) the use of the service by a subscriber shall be deemed to occur solely in the Member State of the subscriber’s residence. This place was meant to be defined as the Member State where the subscriber is ‘habitually residing’ [Art. 2(c)]. In result, all acts relevant under copyright law shall fictionally take place in the territory of subscription. The Commission’s intention was, in essence, to cover two types of online content services. Those are (i) services directly or indirectly offered for payment of money, and (ii) free-of-charge services if the subscriber’s Member State of residence happens to be verified by the service provider anyway.70 The rationale behind such distinction is the avoidance of disproportionate costs for those providers who would need to invest in additional procedural measures for the first-time verification of the subscriber’s Member State of residence. With chargeable services, the assumption is that this information is obtained in the course of the registration process. The Commission further clarified that online services not forming an audiovisual media service within the meaning of the AVMS Directive and using digital content in a merely ancillary manner should not be covered by the Portability Regulation. Specific reference is made to graphical elements or music used as background for other offerings such as the online sale of goods. Free portability was always intended to be granted merely on a temporary basis.71 However, the initial draft gave little insight into the meaning of this concept. Art. 2(d) defined ‘temporarily present’ as a presence of a subscriber in a Member State other than the Member State of residence. Information about a maximum or average duration of the stay abroad was absent both in the provision itself and elsewhere in the proposal. Consequently, very little is found in respect to any verification or monitoring of the subscriber’s extra-territorial access and use of the online content – only Recital 23 contains some rudimentary remarks. Service providers shall make use of effective means in order to verify that the online content service is provided in conformity with the Portability Regulation. Those means need to be reasonable and may not go beyond what is See COM(2015) 627 final, 4. See ibid., 8. 71 See ibid., 7. 69

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Introduction to Portability Regulation necessary in order to achieve this purpose. The Commission sets out examples of the necessary technical and organisational measures including the sampling of IP addresses (instead of constant monitoring of location). As regards data privacy, the proposal simply refers to the need to comply with the applicable laws, notably the Data Protection Directive 95/46/EC and the ePrivacy Directive.72 This considerable brevity gave rise to quite some discussion throughout the legislative process and beyond. 92 In contrast, the Commission’s proposal was very clear in setting out that the service provider shall not be required to takes any measures to ensure the quality of delivery of the service outside the Member State of residence of the subscriber. 73 The subscriber must accept the quality available throughout their travel and at the place of destination. 93 Overall, the feedback to the proposal as put forward by the Commission on 9 December 2015 was quite positive from consumers, though rather mixed from service providers. In particular, the mechanism of a legal fiction was criticised as well as the lack of a clear definition what ‘temporary’ should mean in the context of the Portability Regulation. Moreover, several responses pointed to the risk of abuse due to the lack of adequate monitoring and verification.74

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The Council debated the Portability Regulation primarily under the presidency of The Netherlands. On 14 December 2015, the proposal was first part of the agenda. In January 2016, the European Committee of the Regions as well as European Economic and Social Committee were duly consulted in procedural compliance with the process set out in Art. 114 TFEU. The first committee published its opinion on 8 April 2016, 75 the latter did so on 27 April 2016.76 The focus during the discussions was directed at mainly two aspects: (i) the definition of ‘temporarily present in a Member State’, and (ii) the verification of the Member State of residence as well as the waiver to carry out such verification. In consideration of this verification obligation serving the purpose of protecting the interests of rightholders, the Council emphasised that these rightholders should be allowed to waive and opt out of such verification.77 In essence, the Council suggested a new Art. 3 a dealing specifically with free-ofcharge services. Service providers offering this type of service may opt for complying with the Portability Regulation. If they do so, they must inform their subscribers accordingly. Moreover, a new Art. 3 b was put forward, inter alia holding a catalogue of ten individual verification means to be used in order to verify the subscriber’s Member State of residence. Unless the Member State of residence can be sufficiently established on the basis of a single verification means, the provider shall rely on a combination of such means.78 In the same way as the Commission, also the Council makes clear that neither the country of travel nor the destination country may be monitored. The risk of abuse of the 72 See Art. 6 of the proposal. The reference to the Data Protection Directive 95/46/EC must be read as if the GDPR had been referred to (Art. 94(2) GDPR). 73 See COM(2015) 627 final, 4. 74 See below → mn. 106 et seq. 75 OJ C 240, 1.7.2016, p. 72. 76 OJ C 264, 20.7.2016, p. 86. 77 Committee on Legal Affairs (JURI), 3. 78 ibid., 22 [Art. 3b(2)].

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Introduction to Portability Regulation freedom to travel with the subscribed online content as granted by the Portability Regulation shall be countered by checking the country of residence, nothing else. Finally, the Council also underlined that the field of taxation is to be excluded from 99 the scope of the Portability Regulation.79 The Council’s General Approach does however lack a clear indication as to what the 100 term ‘temporary’ shall mean in the context of the Portability Regulation. As already in respect of the Commission’s initial proposal, this omission triggered yet again fairly substantial criticism from a wide range of stakeholders.80 The lack of a clear definition was seen as the source for undue legal uncertainty.

IV. Parliament’s position The Parliament received the Commission’s proposal on 9 December 2015. MEP JeanMarie Cavada was appointed as rapporteur on 14 March 2016. On 12 May 2015, JURI officially assumed the role as lead committee. Associated committees were CULT and IMCO. In a unanimous vote of 22 to 0, the JURI adopted its final report on 29 November 2016. The plenary session followed on 9 December 2016. In essence, the Parliament suggested numerous additions and amendments to the Commission’s proposal which aimed at clarifying certain aspects without changing the overall concept of the proposal. In particular, the changes proposed to the list of recitals can be characterised as purely explanatory. Most of the amendments reflected the Council’s General Approach and thus there was no outspoken controversy between the two institutions. Notably, with respect to the criterion of temporary travelling abroad, no specific timeframe was put forward. Rather, one could read that the concept of temporary presence ‘should be proportionate to the objective’ of the Portability Regulation, namely to provide the cross-border portability of online content services to subscribers residing temporarily in another Member State of the Union while habitually residing in their Member State of residence. This is obviously of little substance when struggling with the determination of a specific period in time. The only additional guidance to be drawn from the report is that temporary presence in another Member State could be for leisure, business or study purposes.81 The Parliament finally adopted JURI’s report on 18 May 2017. The parliamentary report was subsequently approved by the Council on 8 June 2017. The date of publication in the Official Journal of the European Union was 30 June 2017. The Portability Regulation was initially meant to enter into force on 20 March 2018, but actually did so only on 1 April 2018.

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E. Perception The public perception of the Commission’s proposal as well as of the Council’s and 105 the Parliament’s positions may be best described as a mixture of support and criticism.

See ibid., 19 [Art. 1(2)]. See below → mn. 106 et seq. 81 See also the Committee on Legal Affairs (JURI), 40.

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Introduction to Portability Regulation Notably, the lack of a clear definition of the term ‘temporary’ gave rise to concern for most stakeholders.82 According to critics, the term may be interpreted extensively and therefore may cover not only a stay of weeks and months but even years, thus leading to potential abuse of the new portability right. The argument was heard that only a specific time limit laid down by the legislator, e.g. 30 days, could solve this problem. Other stakeholders, however, especially consumer associations, expressed their wish for a flexible time limit.83 107 The discussion relating to the term ‘temporary’ was accompanied by questions raised in respect of the expression ‘habitual residence’ used in the initial draft regulation. Later, it was replaced by ‘Member State of residence’.84 In essence, both terms serve to mark the anchor point for the subscription of the service and thereby for travel with the digital content. Whilst it always was and still is common ground that the Portability Regulation must hold and rest upon such anchor point, the questions of defining and, more importantly, verifying and separating the residential territory from the territories of travel, caused much controversy. 108 Despite the controversial discussion around the verification process, the importance of such process was never in jeopardy. This is mainly due to the necessity of verification derived naturally from the territorial concept of copyright.85 Still, notably the online content service providers put forward concerns as regards the financial as well as operational efforts involved in an effective verification scheme.86 Particularly smaller enterprises saw obstacles to market entry. However, criticism also came from a different angle. Consumer associations expressed their fear that overly rigid verification means could result in extensive collection of personal data.87 Motion profiling was the gloomy picture painted to the wall. The privacy element in the Portability Regulation soon became much more prominent in the public discussion than the Commission had initially thought. 109 Regarding the scope of the Regulation, free-of-charge services and how to deal with them were also in debate right from the beginning. Most stakeholders argued in favour of including those providers in order to ensure broad access to online content for subscribers while being abroad.88 For instance, the Federation of German Consumer Organisations (Verbraucherzentrale Bundesverband) argued that general cross-border access to online content services offered for free should be improved on the same basis as fee106

82 Bundesverband Interaktive Unterhaltungssoftware, available under https://www.game.de/positionen/st ellungnahme-des-biu-zum-vorschlag-fuer-eine-verordnung-des-europaeischen-parlaments-und-des-rate s-zur-gewaehrleistung-der-grenzueberschreitenden-portabilitaet-von-online-inhaltediensten-im-binnen mar/ (accessed 27 August 2019); Bundesrat, 3–4, German Bar Association, available under https://anwaltve rein.de/de/newsroom/sn-5-2016-zur-portabilitaet-von-online-inhaltediensten-im-eu-binnenmarkt, 11 (accessed 27 August 2019). 83 EDiMA, available under http://edima-eu.org/library/edima-comments-on-portability-of-online-cont ent/; Verbraucherzentrale Bundesverband, available under: https://www.vzbv.de/sites/default/files/portabili taet_vzbv_stellungnahme_16-06-01.pdf (accessed 27 August 2019). 84 European Film Associations, available under http://www.europa-distribution.org/assets/AV-sector-po sition-paper-on-portability-proposal.pdf (accessed 27 August 2019). 85 See for instance, Deutscher Fußball-Bund/Bundesliga, available under https://www.bmjv.de/SharedDo cs/Gesetzgebungsverfahren/Stellungnahmen/2016/Downloads/10282016_Stellungnahme_DFB_DFL_EU -Urheber rechtsreform.pdf?_blob=publicationFile&v=2 (accessed 27 August 2019). 86 BITKOM, available under https://www.bitkom.org/Bitkom/Publikationen/Stellungnahme-Kommissi onsentwurf-zur-Portabilitaets-Verordnung.html (accessed 27 August 2019). 87 For instance, BEUC (European Consumer Organisation): http://www.beuc.eu/publications/beuc-x-20 16-022_are_proposal_for_a_regulation_on_ensuring_cross-border_portability_of_content_services.pdf (accessed 27 August 2019); Verbraucherzentrale Bundesverband. 88 See n 92.

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Introduction to Portability Regulation based offerings.89 However, in light of the set of new obligations coming with the Regulation, the question of reasonableness was rightfully raised.90 Usually, online content services provided without payment of money do not have a registration process in place by which other online content service providers, who function only against payment, already obtain information about the subscriber’s Member State of residence. Therefore, it soon was argued that portability of online content should be voluntary for those services. The rightholders expressed their fear that the new Regulation could lead to a decrease 110 in revenue. They called for an adjustment of existing licensing agreements and emphasised the expected difficulties in reaching fair terms in such exercise. 91 In this context, the risk of contractual circumvention and prevention of service portability was discussed. The need for adequate enforcement and clear liability was advocated.92 Finally, the six-month deadline for implementation was criticised as being too 111 short.93 Instead, a 12- or 24-month period was put forward in order to allow for an adequate period of time for adjusting the technical and contractual service landscape.

89 Verbraucherzentrale Bundesverband, available under: https://www.vzbv.de/pressemitteilung/streamin g-digitale-grenzen-abschaffen (accessed 27 August 2019). 90 EDiMA; BT Group. 91 Bundesverband Interaktive Unterhaltungssoftware. 92 Verbraucherzentrale Bundesverband. 93 For instance, Bundesrat, 4; BITKOM, 5 BT Group; European Film Associations.

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Regulation (EU) 2017/1128 of the European Parliament and of the Council of 14 June 2017 on cross-border portability of online content services in the internal market (Text with EEA relevance) The European Parliament and the Council of the European Union, Having regard to the Treaty on the Functioning of the European Union, and in particular Article 114 thereof, Having regard to the proposal from the European Commission, After transmission of the draft legislative act to the national parliaments, Having regard to the opinion of the European Economic and Social Committee 1, Having regard to the opinion of the Committee of the Regions2 Acting in accordance with the ordinary legislative procedure3, Whereas: (1) Seamless access throughout the Union to online content services that are lawfully provided to consumers in their Member State of residence is important for the smooth functioning of the internal market and for the effective application of the principles of free movement of persons and services. Since the internal market comprises an area without internal borders relying, inter alia, on the free movement of persons and services, it is necessary to ensure that consumers can use portable online content services which offer access to content such as music, games, films, entertainment programmes or sports events, not only in their Member State of residence but also when they are temporarily present in another Member State for purposes such as leisure, travel, business trips or learning mobility. Therefore, barriers that hamper access to and use of such online content services in such cases should be eliminated. (2) The technological developments that have led to a proliferation of portable devices such as laptops, tablets and smartphones are increasingly facilitating the use of online content services by providing access to them regardless of the location of consumers. There is a rapidly growing demand on the part of consumers for access to content and innovative online services not only in their Member State of residence but also when they are temporarily present in another Member State. (3) Consumers increasingly enter into contractual arrangements with service providers for the provision of online content services. However, consumers that are temporarily present in a Member State other than their Member State of residence often cannot continue to access and use the online content services that they have lawfully acquired the right to access and use in their Member State of residence. (4) There are a number of barriers which hinder the provision of online content services to consumers temporarily present in a Member State other than their Member State of residence. Certain online services include content such as music, games, films or entertainment programmes which are protected by copyright or related rights under Union law. At present, the barriers to cross-border portability of online content services differ from one sector to another. The barOJ C 264, 20.7.2016, p. 86. OJ C 240, 1.7.2016, p. 72. 3 Position of the European Parliament of 18 May 2017 (not yet published in the Official Journal) and decision of the Council of 8 June 2017. 1

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Portability Regulation (2017/1128) riers stem from the fact that the rights for the transmission of content protected by copyright or related rights, such as audiovisual works, are often licensed on a territorial basis, as well as from the fact that providers of online content services might choose to serve specific markets only. (5) The same applies to content, such as sports events, which is not protected by copyright or related rights under Union law but which could be protected by copyright or related rights under national law or by virtue of other specific national legislation and which is often also licensed by the organisers of such events or offered by providers of online content services on a territorial basis. Transmissions of such content by broadcasting organisations are protected by related rights which have been harmonised at Union level. Moreover, transmissions of such content often include copyright-protected elements such as music, opening or closing video sequences or graphics. Also, certain aspects of transmissions of such content, specifically those relating to broadcasting events of major importance for society as well as to short news reports on events of high interest to the public, have been harmonised by Directive 2010/13/EU of the European Parliament and of the Council4. Finally, audiovisual media services within the meaning of Directive 2010/13/EU include services which provide access to content such as sports events, news or current affairs. (6) Increasingly, online content services are marketed in a package in which content which is not protected by copyright or related rights is not separable from content which is protected by copyright or related rights without substantially lessening the value of the service provided to consumers. This is especially the case with premium content such as sports events or other events of significant interest to consumers. In order to enable providers of online content services to provide to consumers full access to their online content services when consumers are temporarily present in a Member State other than their Member State of residence, it is indispensable that this Regulation also covers such content used by online content services and therefore that it applies to audiovisual media services within the meaning of Directive 2010/13/EU as well as to transmissions of broadcasting organisations in their entirety. (7) The rights in works protected by copyright and in subject-matter protected by related rights (‘works and other protected subject-matter’) are harmonised, inter alia, in Directives 96/9/EC5, 2001/29/EC6, 2006/115/EC7 and 2009/24/EC8 of the European Parliament and of the Council. The provisions of international agreements in the area of copyright and related rights concluded by the Union in particular the Agreement on Trade-Related Aspects of Intellectual Property Rights annexed as Annex 1C to the Agreement establishing the World Trade Or4 Directive 2010/13/EU of the European Parliament and of the Council of 10 March 2010 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (Audiovisual Media Services Directive) OJ L 95, 15.4.2010, p. 1. 5 Directive 96/9/EC of the European Parliament and of the Council of 11 March 1996 on the legal protection of databases OJ L 77, 27.3.1996, p. 20. 6 Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society OJ L 167, 22.6.2001, p. 10. 7 Directive 2006/115/EC of the European Parliament and of the Council of 12 December 2006 on rental right and lending right and on certain rights related to copyright in the field of intellectual property OJ L 376, 27.12.2006, p. 28. 8 Directive 2009/24/EC of the European Parliament and of the Council of 23 April 2009 on the legal protection of computer programs OJ L 111, 5.5.2009, p. 16.

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ganization of 15 April 1994, the WIPO Copyright Treaty of 20 December 1996, and the WIPO Performances and Phonograms Treaty of 20 December 1996, as amended, form an integral part of the Union legal order. Union law should, insofar as is possible, be interpreted in a manner that is consistent with international law. It is essential that providers of online content services that make use of works or other protected subject-matter, such as books, audiovisual works, recorded music or broadcasts have the right to use such content for the relevant territories. The transmission by providers of online content services of content that is protected by copyright or related rights requires the authorisation of the relevant rightholders, such as authors, performers, producers or broadcasting organisations, regarding the content included in the transmission. This is equally true when such transmission takes place for the purpose of allowing a consumer to carry out a download in order to use an online content service. The acquisition of a licence for relevant rights is not always possible, in particular when rights in content are licensed on an exclusive basis. In order to ensure that territorial exclusivity is effectively complied with, providers of online content services often undertake, in their licence contracts with rightholders, including broadcasting organisations or events organisers, to prevent their subscribers from accessing and using their services outside the territory for which the providers hold the licence. Such contractual restrictions imposed on providers require them to take measures such as disallowing access to their services from internet protocol (IP) addresses located outside the territory concerned. Therefore, one of the obstacles to the cross-border portability of online content services is to be found in the contracts concluded between the providers of online content services and their subscribers, which reflect the territorial restriction clauses included in contracts concluded between those providers and the rightholders. The case law of the Court of Justice of the European Union should be taken into account when balancing the objective of protecting intellectual property rights with the fundamental freedoms guaranteed by the Treaty on the Functioning of the European Union (TFEU). Therefore, the objective of this Regulation is to adapt the harmonised legal framework on copyright and related rights and to provide a common approach to the provision of online content services to subscribers temporarily present in a Member State other than their Member State of residence by removing barriers to cross-border portability of online content services which are lawfully provided. This Regulation should ensure cross-border portability of online content services in all sectors concerned and hence provide consumers with an additional means of accessing online content lawfully, without affecting the high level of protection guaranteed by copyright and related rights in the Union, without changing the existing licensing models, such as territorial licensing, and without affecting the existing financing mechanisms. The concept of crossborder portability of online content services should be distinguished from that of cross-border access by consumers to online content services provided in a Member State other than their Member State of residence, which is not covered by this Regulation. Given the Union instruments that exist in the field of taxation, it is necessary to exclude the field of taxation from the scope of this Regulation. Therefore, this

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Regulation should not affect the application of any provision related to taxation. This Regulation defines several concepts necessary for its application, including the Member State of residence. The Member State of residence should be determined taking into account the objectives of this Regulation and the necessity to ensure its uniform application in the Union. The definition of the Member State of residence implies that the subscriber has his or her actual and stable residence in that Member State. A provider of an online content service who has verified the Member State of residence in accordance with this Regulation should be allowed to assume, for the purposes of this Regulation, that the Member State of residence as verified is the only Member State of residence of the subscriber. Providers should not be obliged to verify whether their subscribers are also subscribers to an online content service in another Member State. This Regulation should apply to online content services that providers, after having obtained the relevant rights from rightholders in a given territory, provide to their subscribers on the basis of a contract, by any means including streaming, downloading, through applications or any other technique which allows use of that content. For the purposes of this Regulation, the term contract should be regarded as covering any agreement between a provider and a subscriber, including any arrangement by which the subscriber accepts the provider’s terms and conditions for the provision of online content services, whether against payment of money or without such payment. A registration to receive content alerts or a mere acceptance of HTML cookies should not be regarded as a contract for the provision of online content services for the purposes of this Regulation. An online service which is not an audiovisual media service within the meaning of Directive 2010/13/EU and which uses works, other protected subject-matter or transmissions of broadcasting organisations in a merely ancillary manner should not be covered by this Regulation. Such services include websites that use works or other protected subject-matter only in an ancillary manner such as graphical elements or music used as background, where the main purpose of such websites is, for example, the sale of goods. This Regulation should apply only to online content services which subscribers can effectively access and use in their Member State of residence without being limited to a specific location, as it is not appropriate to require providers of online content services that do not offer portable online content services in the Member State of residence of a subscriber to do so across borders. This Regulation should apply to online content services which are provided against payment of money. Providers of such services are in a position to verify the Member State of residence of their subscribers. The right to use an online content service should be regarded as acquired against payment of money, whether such payment is made directly to the provider of the online content service, or to another party such as a provider offering a package combining an electronic communications service and an online content service operated by another provider. For the purposes of this Regulation, the payment of a mandatory fee for public broadcasting services should not be regarded as a payment of money for an online content service. Providers of online content services should not subject their subscribers to any additional charges for the provision of cross-border portability of online content services in accordance with this Regulation. It is possible however that sub521

Portability Regulation (2017/1128) scribers, in order to access and use online content services in Member States other than their Member State of residence, could be subject to fees payable to operators of electronic communications networks used to access such services. (20) Providers of online content services which are provided without payment of money generally do not verify the Member State of residence of their subscribers. The inclusion of such online content services in the scope of this Regulation would involve a major change to the way those services are delivered and involve disproportionate costs. However, the exclusion of those services from the scope of this Regulation would mean that providers of those services would not be able to take advantage of the legal mechanism which is provided for in this Regulation and which enables providers of online content services to offer cross-border portability of such services, even when they decide to invest in means that allow them to verify their subscribers’ Member State of residence. Accordingly, providers of online content services which are provided without payment of money should be able to opt to be included in the scope of this Regulation provided that they comply with the requirements on the verification of the Member State of residence of their subscribers. If such providers exercise that option, they should comply with the same obligations as imposed under this Regulation upon the providers of online content services which are provided against payment of money. Furthermore, they should inform the subscribers, the relevant holders of copyright and related rights and the relevant holders of any other rights in the content of the online content service of their decision to exercise that option in a timely manner. Such information could be provided on the provider’s website. (21) In order to ensure the cross-border portability of online content services, it is necessary to require providers of online content services covered by this Regulation to enable subscribers to use such services in the Member State in which they are temporarily present in the same manner as in their Member State of residence. Subscribers should have access to online content services offering the same content on the same range and number of devices, for the same number of users and with the same range of functionalities as those offered in their Member State of residence. It is essential that the obligation to provide cross-border portability of online content services be mandatory and therefore the parties should not be able to exclude it, derogate from it or vary its effect. Any action by a provider which would prevent subscribers from accessing or using the service while temporarily present in a Member State other than their Member State of residence, for example restrictions to the functionalities of the service or to the quality of its delivery should be considered to be a circumvention of the obligation to provide cross-border portability of online content services and therefore contrary to this Regulation. (22) Requiring that the delivery of online content services to subscribers temporarily present in a Member State other than their Member State of residence be of the same quality as in the Member State of residence could result in high costs for providers of online content services and thus ultimately for subscribers. Therefore, it is not appropriate for this Regulation to require that providers ensure a quality of delivery of such services that would be beyond the quality available via the local online access chosen by a subscriber while temporarily present in another Member State. In such cases the provider should not be liable if the quality of delivery of the service is lower. Nevertheless, if the provider expressly guarantees a certain quality of delivery to subscribers while temporarily present 522

Portability Regulation (2017/1128) in another Member State, it should be bound by that guarantee. The provider, on the basis of the information in its possession, should provide its subscribers in advance with information concerning the quality of delivery of an online content service in Member States other than their Member State of residence, in particular the fact that the quality of delivery could differ from that applicable in their Member State of residence. The provider should not be under an obligation to actively seek information on the quality of delivery of a service in Member States other than the subscriber’s Member State of residence. The relevant information could be provided on the provider’s website. (23) In order to ensure that providers of online content services covered by this Regulation comply with the obligation to provide cross-border portability of their services, without acquiring the relevant rights in another Member State, it is necessary to stipulate that those providers should always be entitled to provide such services to subscribers when they are temporarily present in a Member State other than their Member State of residence. This should be achieved by establishing that the provision of, access to and use of such online content services should be deemed to occur in the subscriber’s Member State of residence. This legal mechanism should apply for the sole purpose of ensuring the cross-border portability of online content services. An online content service should be considered to be provided lawfully if both the service and the content are provided in a lawful manner in the Member State of residence. This Regulation, and in particular the legal mechanism by which the provision of, access to and use of an online content service are deemed to occur in the subscriber’s Member State of residence, does not prevent a provider from enabling the subscriber to additionally access and use the content lawfully offered by the provider in the Member State where the subscriber is temporarily present. (24) For the licensing of copyright or related rights, the legal mechanism laid down in this Regulation means that relevant acts of reproduction, communication to the public and making available of works and other protected subject-matter, as well as the acts of extraction or re-utilization in relation to databases protected by sui generis rights, which occur when the service is provided to subscribers when they are temporarily present in a Member State other than their Member State of residence, should be deemed to occur in the subscribers’ Member State of residence. Providers of online content services covered by this Regulation, therefore, should be deemed to carry out such acts on the basis of the respective authorisations from the rightholders concerned for the Member State of residence of their subscribers. Whenever providers have the right to carry out acts of communication to the public or reproduction in their subscribers’ Member State of residence on the basis of an authorisation from the rightholders concerned, subscribers who are temporarily present in a Member State other than their Member State of residence should be able to access and use the service and where necessary carry out any relevant acts of reproduction, such as downloading, which they would be entitled to do in their Member State of residence. The provision of an online content service by providers to subscribers temporarily present in a Member State other than their Member State of residence and the access to and use of the service by such subscribers in accordance with this Regulation should not constitute a breach of copyright or related rights or any other rights relevant for the provision of, access to and use of the online content service.

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Portability Regulation (2017/1128) (25) Providers of online content services covered by this Regulation should not be liable for the breach of any contractual provisions that are contrary to the obligation to enable their subscribers to use such services in the Member State in which they are temporarily present. Therefore, clauses in contracts designed to prohibit or limit the cross-border portability of such online content services should be unenforceable. The providers and holders of rights relevant for the provision of online content services should not be allowed to circumvent the application of this Regulation by choosing the law of a third country as the law applicable to contracts between them. The same should apply to contracts concluded between providers and subscribers. (26) This Regulation should enable subscribers to enjoy online content services to which they have subscribed in their Member State of residence when they are temporarily present in another Member State. Subscribers should be eligible for cross-border portability of online content services only if they reside in a Member State of the Union. Therefore, this Regulation should oblige providers of online content services to make use of reasonable, proportionate and effective means in order to verify the Member State of residence of their subscribers. To that end, providers should use the means of verification listed in this Regulation. This does not preclude agreement between providers and rightholders on those means of verification within the limits of this Regulation. The objective of the list is to provide legal certainty as to the means of verification to be used by providers as well as to limit interference with subscribers’ privacy. In each case, account should be taken of the effectiveness and proportionality of a particular means of verification in a given Member State and for a given type of online content service. Unless the subscriber’s Member State of residence can be verified with sufficient certainty on the basis of a single means of verification, providers should rely on two means of verification. In cases where the provider has reasonable doubts concerning the subscriber’s Member State of residence, the provider should be able to repeat the verification of the subscriber’s Member State of residence. The provider should implement the necessary technical and organisational measures required under applicable data protection rules for the processing of personal data collected for the purpose of verification of the subscriber’s Member State of residence under this Regulation. Examples of such measures include providing transparent information to the individuals about the methods used for, and the purpose of, the verification, and appropriate security measures. (27) In order to verify the subscriber’s Member State of residence, the provider of an online content service should rely, if possible, on information which is in the provider’s possession, such as billing information. As regards contracts concluded prior to the date of application of this Regulation and as regards the verification carried out upon renewal of a contract, the provider should be allowed to request the subscriber to provide the information necessary to verify the subscriber’s Member State of residence only when it cannot be determined on the basis of information which is already in the provider’s possession.

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Portability Regulation (2017/1128) (28) IP address checks performed under this Regulation should be conducted in accordance with Directives 95/46/EC9 and 2002/58/EC10 of the European Parliament and of the Council. In addition, for the purpose of verification of the subscriber’s Member State of residence what matters is not the precise location of the subscriber, but rather the Member State in which the subscriber is accessing the service. Accordingly, data on the subscriber’s precise location or any other personal data should neither be collected nor processed for that purpose. Where the provider has reasonable doubts concerning the subscriber’s Member State of residence and carries out an IP address check to verify the Member State of residence, the sole purpose of such checks should be to establish whether the subscriber is accessing or using the online content service within or outside the Member State of residence. Therefore, in such cases, the data resulting from the checking of IP addresses should only be collected in binary format and in compliance with applicable data protection rules. The provider should not exceed that level of detail. (29) A holder of copyright, related rights, or any other rights in the content of an online content service should remain able to exercise contractual freedom to authorise such content to be provided, accessed and used under this Regulation without verification of the Member State of residence. This can be particularly relevant in sectors such as music and e-books. Each rightholder should be able to take such decisions freely when entering into contracts with providers of online content services. Contracts between providers and rightholders should not restrict the possibility for rightholders to withdraw such authorisation subject to giving reasonable notice to the provider. The authorisation given by an individual rightholder does not as such release the provider from the obligation to verify the subscriber’s Member State of residence. It is only in cases where all the holders of copyright, related rights or any other rights in the content used by the provider decide to authorise their content to be provided, accessed and used without verification of the subscriber’s Member State of residence that the obligation to verify should not apply, and the contract between the provider and the subscriber for the provision of an online content service should be used to determine the latter’s Member State of residence. All other aspects of this Regulation should remain applicable in such cases. (30) This Regulation respects fundamental rights and observes the principles recognised in the Charter of Fundamental Rights of the European Union (‘Charter’). Accordingly, this Regulation should be interpreted and applied in accordance with those rights and principles, in particular the right to respect for private and family life, the right to protection of personal data, the right to freedom of expression, the freedom to conduct a business and the right to property, including intellectual property. Any processing of personal data under this Regulation should respect fundamental rights, including the right to respect for private and family life and the right to protection of personal data under Articles 7 and 9 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data OJ L 281, 23.11.1995, p. 31. Directive 95/46/EC is repealed and replaced, with effect from 25 May 2018, by Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data, and repealing Directive 95/46/EC (General Data Protection Regulation) OJ L 119, 4.5.2016, p. 1. 10 Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications) OJ L 201, 31.7.2002, p. 37.

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Portability Regulation (2017/1128) 8 of the Charter, and it is essential that such processing be in compliance with Directives 95/46/EC and 2002/58/EC. In particular, providers of online content services should ensure that any processing of personal data under this Regulation is necessary, reasonable and proportionate in order to achieve the relevant purpose. Where authentication of a subscriber is sufficient in order to provide the service, identification of the subscriber should not be required. Data collected pursuant to this Regulation for the purposes of verification of the Member State of residence should not be stored by the provider longer than necessary to complete such verification. Such data should be immediately and irreversibly destroyed after the verification is completed. However, this is without prejudice to the storage of data which was collected for another legitimate purpose, subject to applicable data protection rules, including rules concerning the storage of that data. (31) Contracts under which content is licensed are usually concluded for a relatively long duration. Consequently, and in order to ensure that all consumers residing in the Union can enjoy cross-border portability of online content services on an equal basis in time and without any undue delay, this Regulation should also apply to contracts concluded and rights acquired before the date of its application if those contracts and rights are relevant for the cross-border portability of an online content service provided after that date. Such application of this Regulation is also necessary in order to ensure a level playing field for providers of online content services covered by this Regulation operating in the internal market, particularly for SMEs, by enabling providers that concluded contracts with rightholders for a long duration to offer cross-border portability to their subscribers, independently of the provider’s ability to renegotiate such contracts. Moreover, such application of this Regulation should ensure that when providers make arrangements necessary for the cross-border portability of their services, they will be able to offer such portability with regard to the entirety of their online content. This should also apply to providers of online content services that offer packages combining electronic communications services and online content services. Finally, such application of this Regulation should also allow rightholders not to have to renegotiate their existing licensing contracts in order to enable providers to offer cross-border portability of their services. (32) Accordingly, since this Regulation will apply to some contracts concluded and rights acquired before the date of its application, it is also appropriate to provide for a reasonable period between the date of entry into force of this Regulation and the date of its application, so as to allow rightholders and providers of online content services covered by this Regulation to make the arrangements necessary to adapt to the new situation, as well as to allow providers to amend the terms of use of their services. Changes to the terms of use of online content services offered in packages combining an electronic communications service and an online content service that are made strictly in order to comply with the requirements of this Regulation should not trigger for subscribers any right under national laws transposing the regulatory framework for electronic communications networks and services to withdraw from contracts for the provision of such electronic communications services. (33) This Regulation is aimed at improving competitiveness by fostering innovation in online content services and attracting more consumers. This Regulation should not affect the application of the rules of competition, and in particular

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Articles 101 and 102 TFEU. The rules provided for in this Regulation should not be used to restrict competition in a manner contrary to the TFEU. (34) This Regulation should not affect the application of Directive 2014/26/EU of the European Parliament and of the Council11 and in particular Title III thereof. This Regulation is consistent with the objective of facilitating the lawful access to content, which is protected by copyright or related rights, as well as services linked thereto. (35) In order to achieve the objective of ensuring cross-border portability of online content services in the Union, it is appropriate to adopt a regulation, which is directly applicable in Member States. This is necessary in order to guarantee a uniform application of the cross-border portability rules across Member States and their entry into force at the same time with regard to all online content services. Only a regulation ensures the degree of legal certainty which is necessary in order to enable consumers to fully benefit from cross-border portability across the Union. (36) Since the objective of this Regulation, namely the adaptation of the legal framework so that cross-border portability of online content services is provided in the Union, cannot be sufficiently achieved by the Member States but can rather, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union. In accordance with the principle of proportionality as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective. In particular, this Regulation does not substantially affect the way the rights are licensed and does not oblige rightholders and providers to renegotiate contracts. Moreover, this Regulation does not require that providers take measures to ensure the quality of delivery of online content services outside the Member State of residence of the subscribers. Finally, this Regulation does not apply to providers that offer online content services without payment of money and who do not exercise the option to enable the cross-border portability of their services. Therefore, it does not impose any disproportionate costs, Have adopted this Regulation:

Article 1 Subject matter and scope 1. This Regulation introduces a common approach in the Union to the cross-border portability of online content services, by ensuring that subscribers to portable online content services which are lawfully provided in their Member State of residence can access and use those services when temporarily present in a Member State other than their Member State of residence. 2. This Regulation shall not apply to the field of taxation. Bibliography: Dauses/Ludwigs (eds), Handbuch des EU-Wirtschaftsrechts (46th suppl., C.H. Beck 2019); Eginger, ‘Die neue Portabilitätsverordnung’ (2017) 10 ZUM 698–712; Fromme/Nordemann (eds), Urheberrecht (12th edn, Kohlhammer 2018); Kraft, ‘Die Portabilitätsverordnung aus der Sicht eines Rundfunkver11 Directive 2014/26/EU of the European Parliament and of the Council of 26 February 2014 on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online use in the internal market OJ L 84, 20.3.2014, p. 72.

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anstalters’ (2017) 10 ZUM 720–726; Peifer, ‘Please Take Your Personal Belongings With You – Portabilität und Zugang als Paradigmen für Verträge über digitale Güter’ (2017) 1 AfP 8–13; Potacs, ‘Effet utile als Auslegungsgrundsatz’ (2009) 4 EuR 465–487; Roos, ‘Grenzenloses Streaming?’ (2017) 3 MMR 147–152; Spiegel, ‘Ich packe meinen Koffer und nehme mit… meine Online-Inhalte’ in: Taeger (ed.), Smart World – Smart Law? (OlWIR 2016), p. 693–707. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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B. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Subject-matter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Excluding the field of taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Incorporation into the EEA Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Applicability to non-European scenarios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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A. Function In line with the general structure of EU legislation, Art. 1 lays down the general subject matter and scope of the Regulation. The legislator initially outlines the aim to ensure cross-border portability of online content services within the EU. Unlike other Regulations which outline several objectives at the outset, the Portability Regulation serves the very concise and clear-cut goal depicted in Art. 1(1). Subscribers to portable online content services shall be able to access and use those services when temporarily present in a Member State other than their Member State of residence. In consequence, Art. 1(1) greatly resembles Arts 3 and 6 which establish the obligation for online content service providers to ensure cross-border portability. 2 Art. 1 does not contain a specific obligation or right and thereby lacks independent regulatory content1, yet its significance for the following provisions ought not to be underestimated. European courts as well as the courts in the Member States usually give considerable weight to the expressed goal and purpose of the legislation. Therefore, Art. 1 will gain its appreciation in the course of the four traditional interpretation methods applied by European courts: (i) the literal interpretation, (ii) the systematic interpretation, (iii) the historic interpretation and (iv) the purposive (teleological) interpretation.2 3 The language actually used in the legislation forms the starting point for any interpretation. Based on the provision’s wording, the systematic setting is to be analysed. The legislator’s intentions are to be explored on the basis of the documents available in respect to the legislative process. From the CJEU’s settled case law, however, it can be drawn that the teleological interpretation is ranked above all others enjoying particular weight.3 The objectives laid down in the recitals and opening articles give guidance in this respect. In GS Media, the CJEU pointed out that with respect to terms open for interpretation, ‘its meaning and its scope must be determined in light of the objectives pursued by that directive and of the context in which the provision being interpreted is set’.4 The systematic and teleological interpretation may – as the case may be – lead to a teleological reduction or a more extensive understanding of the provision. 4 Specifically in an EU-context, it must be taken into account that the European Union aims at achieving harmonisation across particular areas of law across the Member States.5 Terms and provisions used in European legislation are thus to be interpreted in1

Engels/Nordemann in: Fromm/Nordemann, Article 1, mn. 1. Pieper in: Dauses/Ludwigs, B. I., mn. 7 et seq. 3 CJEU, C-466/12 Svensson EU:C:2014:76; CJEU, C-160/15 GS Media EU:C:2016:644. 4 CJEU, C-160/15 GS Media EU:C:2016:644. 5 Pieper in: Dauses/Ludwigs, B. I., mn. 60 et seq. 1

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dependently and autonomously from the national context. Moreover, any interpretation must be considered the so-called principle of effet utile.6 Therefore, European legislation is to be applied in a manner which accommodates the goals the EU is striving to achieve.

B. Explanation I. Subject-matter Art. 1(1) lays down the common approach of cross-border portability within the 5 European Union. The subject matter will become relevant in two different scenarios. 7 First, the provision will be consulted when operational provisions of the Regulation, 6 notably Arts 3 and 6, are construed and applied.8 Secondly, Art. 1(1) gives additional guidance whether a contractual provision runs counter to the Regulation. According to Art. 7 such contractual provision shall be unenforceable. Therefore, Art. 7 and Art. 1 will commonly be read together. The main areas of application are Video-On-Demand services and the transmis- 7 sions of live performances and sport events. In general, the Portability Regulation will show its impact in all areas where territorial licensing is still predominant – audiovisual media is the core example in this respect. Pricing is a substantial aspect here as there is a fear that the additional financial expenses regarding the implementation of the Regulation might eventually cause increased subscription fees for consumers.9 However, in the light of fairly competitive market, prices may not be expected to increase immediately and/or substantially.10 Instead, a negative consequence may theoretically be a decline of the willingness to grant licenses for the European market.11 However, this is unlikely in light of the size and structure of today’s market(s) within the EU.12

II. Excluding the field of taxation The Regulation does not apply to the field of taxation and, therefore, has no impact 8 on any taxing policies within the Member States. In general, Member States have only relinquished sovereignty over taxation policies in limited and specific areas. Therefore, only dedicated tax legislation may regulate the way in which the Member States or the EU as a whole may apply taxes to goods and/or services.13 Still, there will be occasions where taxation becomes an issue under the new Regulation. For instance, in the context of online content service providers that are based on a transaction model it might be unclear whether taxes have to be paid in the Member State of access and use of the content or in the Member State of residence.14 In those situations, the general rules on taxation of the provision and utilisation of digital services must be applied.

Potacs, 465. Eginger, 699. 8 Kraft, 721. 9 Spiegel, 700. 10 Roos, 151. 11 ibid. 12 Peifer, 13. 13 Recital 13. 14 Engels/Nordemann in: Fromm/Nordemann, Article 1, mn. 2. 6

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III. Incorporation into the EEA Agreement 9

The Regulation refers primarily to the Member States of the European Union. However, it also indicates that the text is of relevance for the European Economic Area (EEA), too, and thus for Norway, Liechtenstein and Iceland. The Joint Committee Decision (JCD) incorporating the act into the EEA Agreement was adopted on 6 July 2018; the provisions have since taken formal effect in the entire area of EEA. 15

IV. Applicability to non-European scenarios The Regulation is silent on the scope regarding scenarios involving non-European parties. Due to the use of the expression ‘Member State of residence’, the Regulation only covers consumers residing in an EU Member State. Therefore, one could ask whether online content service providers having their principal place of business (and all other offices) outside the EU are included in the scope of the Regulation. The answer to this question is a clear yes. Conceptually, the Regulation is not linked to or dependent on the provider operating its service from within the EU. It is the service as such and its utilisation by a consumer within the EU that is of relevance. Offering such services does not require a European office of agency. Accordingly, any service provider offering a service captured by the Regulation must adhere to its provisions.16 11 Moreover, the Regulation shall also apply irrespective of the law applicable to contracts concluded between providers of online content services and holders of copyright or related rights or those holding any other rights in the content of online content services, or to contracts concluded between such providers and their subscribers. Details are set out in Art. 7(2). 10

Article 2 Definitions For the purposes of this Regulation, the following definitions apply: (1) ‘subscriber’ means any consumer who, on the basis of a contract for the provision of an online content service with a provider whether against payment of money or without such payment, is entitled to access and use such service in the Member State of residence; (2) ‘consumer’ means any natural person who, in contracts covered by this Regulation, is acting for purposes which are outside that person’s trade, business, craft or profession; (3) ‘Member State of residence’ means the Member State, determined on the basis of Article 5, where the subscriber has his or her actual and stable residence; (4) ‘temporarily present in a Member State’ means being present in a Member State other than the Member State of residence for a limited period of time; (5) ‘online content service’ means a service as defined in Articles 56 and 57 TFEU that a provider lawfully provides to subscribers in their Member State of residence on agreed terms and online, which is portable and which is:

15 16

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For an overview see http://www.efta.int/eea-lex/32017R1128 (accessed on 24 September 2019). See also Engels/Nordemann in: Fromm/Nordemann, Einl., mn. 6.

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(i)

an audiovisual media service as defined in point (a) of Article 1 of Directive 2010/13/EU, or (ii) a service the main feature of which is the provision of access to, and the use of, works, other protected subject-matter or transmissions of broadcasting organisations, whether in a linear or an on-demand manner; (6) ‘portable’ means a feature of an online content service whereby subscribers can effectively access and use the online content service in their Member State of residence without being limited to a specific location. Bibliography: Brost, ‘Der lange Schatten von »Murphy« – droht das Ende der Exklusivität nationaler Urheberrechtslizenzen?’ (2016) 8/9 ZUM 689–699; Bundesrat, ‘Beschluss des Bundesrates: Vorschlag für eine Verordnung des Europäischen Parlaments und des Rates zur Gewährleistung der grenzüberschreitenden Portabilität von Online-Inhaltediensten im Binnenmarkt’ BR-Drs. 167/16 from 22.4.2016; Commission, ‘Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market’ COM(2015) 627 final; Commission, ‘Proposal for a Regulation of the European Parliament and of the Council addressing geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC’ COM(2016) 289 final; Commission, ‘Impact Assessment Accompanying the document Proposal for a Regulation of the European Parliament and of the Council to ensure the cross-border portability of online content services in the internal market’ SWD(2015) 270 final; Committee on Legal Affairs (JURI), ‘Draft Report on the proposal for a regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market’ PR\1098581EN; Committee on Legal Affairs (JURI), ‘Report on the proposal for a regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market’ A8-0378/2016; Council, ‘Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market – General approach’ ST-8939/2016; Dreier/Schulze, Urheberrechtsgesetz (6 th edn, C.H. Beck 2018); Eginger, ‘Die neue Portabilitätsverordnung’ (2017) 10 ZUM 698–712; Fromme/Nordemann (eds), Urheberrecht (12 th edn, Kohlhammer 2018); Ehle/Werner, ‘Online-Inhalte auf Europareise’ (2016) 4 C&R 376–381; Fromme/Nordemann (eds), Urheberrecht (12th edn, Kohlhammer 2018); German Bar Association, ‘Position Paper of the German Bar Association by the Committee on Intellectual Property on the Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content service in the internal market (COM(2015) 627 final, 9 December 2015)’ (January 2016); Grandjean, ‘Portabilität von Inhalten in Europa – Herausforderungen für die Filmwirtschaft’ (2017) 10 ZUM 727–732; Heyde, ‘Die Portabilitätsverordnung – Auswirkungen auf die Lizenzverträge’ (2017) 10 ZUM 712–720; Kraft, ‘Die Portabilitätsverordnung aus der Sicht eines Rundfunkveranstalters’ (2017) 10 ZUM 720–726; Martiny, ‘Nationale Sperrfristen, territoriale Lizenzen und das Streaming im digitalen Binnenmarkt der EU’ (2018) 11 ZUM 772–781; Peifer, ‘Please Take Your Personal Belongings With You – Portabilität und Zugang als Paradigmen für Verträge über digitale Güter’ (2017) 1 AfP 8–13; Ranke/Glöckler, ‘Grenzüberschreitende Portabilität von Online-Inhaltediensten im Binnenmarkt’ (2017) 6 MMR 378–382; Roos, ‘Grenzenloses Streaming?’ (2017) 3 MMR 147–152; Spiegel, ‘Ich packe meinen Koffer und nehme mit… meine OnlineInhalte’ in: Taeger (ed.), Smart World – Smart Law? (OlWIR 2016), p. 693–707; Spindler, ‘Die Modernisierung des europäischen Urheberrechts’ (2016) 2 C&R 73–81; Strowel, ‘From content portability to data portability: when regulation overlaps with competition law and restrictions can be justified by intellectual property’ (2016) 2 CLPD 63–70; Synodiniou, ‘EU Portability Regulation: In-depth Analysis of the Proposal’ (August 2016); Walter, ‘Der Vorschlag der EU- Kommission für eine Portabilitätsverordnung vom 9.12.2015’ (2016) MR-Int 191–195. A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1

B. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Subscriber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Meaning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Meaning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2 2 2 8 9 10 10 13 14

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Definitions III. Member State of residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Meaning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Temporarily present . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Meaning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. Online content service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Meaning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . VI. Portable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Meaning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Relevance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15 15 22 24 26 26 36 39 40 40 50 51 52 52 54 55

A. Function 1

The definitions set out in Art. 2 provide the terminological basis of the Regulation. Accordingly, fundamental importance is attached to the correct understanding of the terms and their definitions. The six definitions given in Art. 2 represent a combination of terms that have been used in other EU legislation before and terms being introduced to EU law for the first time. The spectrum of sources that help to interpret the terms therefore differs.

B. Explanation I. Subscriber 1. Meaning According to Art. 2 No. 1, the term ‘subscriber’ relates to any consumer (as defined in Art. 2 No. 2) who, on the basis of a contract for the provision of an online content service with a provider whether against payment of money or without such payment, is entitled to access and use such service in the Member State of residence. Apparently, the provision must be read in close connection with the definition of an online content service laid down in Art. 2 No. 5. An inclusive assessment is required. 3 The term contract is to be interpreted in a wide and embracive way. It covers all situations in which the subscriber accepts the provider’s terms and conditions for the provision of online content services. However, there are limitations. For instance, registering an e-mail address for receiving mere news alerts is not sufficient. The same is true for the general acceptance of cookies on a website.1 Under normal circumstances, merely visiting a website does not constitute the conclusion of contractual relationship in the sense of the Regulation.2 However, a contract can of course be entered into by way of implicit behaviour. There is no need for an express or written document.3 4 Notably, the subscriber may enter into a contractual relationship with providers irrespective of the question whether the service at issue is offered against the payment of 2

Recital 15. See also Engels/Nordemann in: Fromm/Nordemann, Article 2, mn. 2. 3 See also Peifer, 13. 1

2

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money or for free. The latter category includes in particular public broadcasters collecting broadcasting fees. Also, free-of-charge services such as YouTube or Flickr are generally covered. The subscriber accepts the provider’s terms and conditions whilst making use of the respective services. The term subscriber needs to be distinguished from the more general term ‘user’. 5 Whilst the subscriber is the person who actually enters into the service contract, the user is the person who takes benefit of the supplied service by way of utilising the service and its content. Often, a person will be both, subscriber and user. However, the range of users is typically wider depending on whom the subscriber allows access to the subscribed service. Occasionally, providers limit the number of users specifically. Also, the number of devices to be used under the subscription may be limited. Notably, Art. 3(1) refers to ‘the same number of users’. This illustrates that one sub- 6 scription may allow access to the service for more than one user. Accordingly, the terms of the contract determine the scope of use permitted. The concept of ‘subscriber’ as set out in Art. 2 No. 1, however, does not pay tribute to 7 a particular and very typical use of online research databases. Research and educational institutions such as universities belong to the core group of subscribers to such databases. Researchers, scholars and students are the end users of the services supplied. The institution serves as an intermediary offering access to its staff and enrolled students, who do not turn into subscribers thereby. Still, they are the ones who might travel abroad for an excursion or study trip. The Portability Regulation should allow for such travellers to take the subscribed online content with them. Therefore, the term ‘subscriber’ should be interpreted and applied in a broad sense, at least if the end user and their access to the service is equivalent to such activity of a consumer. Whilst staff members of a research institute or university may not qualify as such an equivalent user, students may very well do.

2. Relevance The term ‘subscriber’ is a core concept of the Regulation. The personal scope of the 8 Regulation is closely tied to this expression. Only subscribers may rely upon the rights granted in the Regulation. The service providers’ obligations pursuant to Arts 3 and 6 are drafted in a way empowering the subscriber, not the user.

3. History The Commission had initially proposed a narrower definition of the ‘subscriber’. It 9 only included services offered and provided against the payment of money or, if offered free of charge, situations in which the provider took record of the subscriber’s Member State of residence anyway. No provider of a free-of-charge service should be required to implement verification measures due to the new Regulation. This was reflected already in the definition of the term ‘subscriber’.4

II. Consumer 1. Meaning The term ‘consumer’ is defined in accordance with earlier EU legislation as any nat- 10 ural person who is acting for purposes which are outside that person’s trade, business, 4

Expressly disfavored by Synodiniou, 19; but see Committee on Legal Affairs (JURI), ‘Report’, Recital 17.

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craft or profession.5 The same language has been used by the EU legislator in the new Geo-blocking Regulation.6 The consistent definition of the term allows for application of the settled CJEU case law.7 Accordingly, a consumer is defined in distinction to a trader or other business person. A consumer is always a natural person. It is irrelevant whether the person acts as an employee or as a self-employed person. However, if the purpose for acting is predominantly related to any business, the person is not considered a consumer under the Regulation. 11 In general, the Regulation shall ensure portability of online content for purposes such as leisure, travel or learning mobility.8 In this context, however, the application of the Regulation is not excluded for someone who is travelling for business purposes, yet accesses the content not for business purposes.9 The reason for this is that, even when travelling for business reasons, the traveller shall enjoy the freedom of accessing a subscribed service in their private capacity.10 12 The Regulation itself is not clear with regard to the point of time deemed significant to determine whether the subscriber acts in business or private capacity. It could either be the time of the conclusion of the contract11 between the subscriber and the provider, or the time of actual access and use of the online content by the subscriber. In principle, the more convincing arguments speak in favour of the latter. It is the manner and circumstances in which the service is used that are decisive. However, the underlying contract may not be neglected when considering the nature in which the service is used. 12 Frequently, service providers offer a range of different subscriptions; 13 some allow for business use, others are limited to private use. If a business tariff has been booked, a rebuttable presumption must apply that the service is used for business purposes. It is for the subscriber to argue and prove that the service was used, exceptionally, for private purposes only.

2. Relevance 13

The correct understanding of the term ‘consumer’ is primarily relevant for the interpretation and application of the term ‘subscriber’. Only a consumer can be a subscriber within the meaning of Art. 2 No. 2.

3. History 14

The definition was presented by the Commission in the first draft and was adopted unchanged. This was mainly due to the fact that the definition rests upon the previous legislation and case-law in the field of consumer protection within the EU.

For instance, Arts 2 No. 1, 4(1)(a) CRD; Art. 2(b) ADR Directive; COM(2016) 289 final. See Art. 2 No. 12 Geo-blocking Regulation. 7 For instance: CJEU, C-541/99 and C-542/99 Cape Snc/Idealservice Srl and Idealservice MN RE Sas/ OMAI Sr EU:C:2001:625. 8 Recital 1. 9 ibid. 10 Opposite view: Walter, 193. 11 Argued by Engels/Nordemann in: Fromm/Nordemann, Article 2, mn. 4. 12 See also ibid. 13 See e.g. Sky. 5

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III. Member State of residence 1. Meaning The definition of the term ‘Member State of residence’ in Art. 2 No. 3 is closely related to the means of verification set out in Art. 5. In principle, it is the Member State where the subscriber has their actual and stable residence. The latter is to be determined and verified by applying not more than two of the criteria listed in Art. 5(1)(a)–(k). One might think that it is a rather odd construction or even a circular argument to base the underlying definition on a numerus clausus of verification means. And indeed, defining a legal term and limiting the criteria determining the application and interpretation of the respective term usually takes place on different levels. The reason for Art. 2 No. 3 mixing up the layers is twofold. Firstly, the legislator wanted to avoid any ambiguity in the understanding of this fundamental term. Recital 14 emphasises that a uniform application of the term throughout the entire EU must be ensured. Also, it was the explicit aim to furnish the service providers with adequate legal certainty as to how the Member State of residence can be verified.14 Accordingly, Recital 14 speaks of an implication (‘implies’) that the subscriber has their actual and stable residence in country verified by the means set out in the Regulation. The legislator thus chose the vehicle of a statutory assumption to safeguard the aimed-at legal certainty.15 The second reason for the close relation between the definition in Art. 2 No. 3 and the verification criteria in Art. 5(1) is that the specific means of verification were in debate up until the advanced stages of the legislative process. From the very beginning, there was a broad consensus that the territorial element, i.e. the Member State of residence, would be at the heart of the entire Regulation and that a clear and straightforward definition was needed. Thus, there was an initial definition already in the very first draft.16 However, this first draft did not feature any specific guidance as to how this Member State ought to be verified. Nonetheless, in the course of the legislative process the debate soon went into the direction of safeguarding a concise and stringent application involving the verification of either the Member State of residence or the countries of travel or temporary stay, respectively. This discussion – quite rightly –manifested systematically in a provision separate from the actual definition in Art. 2 No. 3. In the end, the reference to Art. 5 was integrated in the Commission’s initial proposal. It is noteworthy that the term ‘place of residence’ has already gained relevance in a number of earlier European legislation.17 For example, in the Social Security Coordination Regulation 2004 the term is used in order to distinguish between the competent Member State and the Member State where the individual resides. An explicit definition is, however, not provided in that Regulation. Instead, the European Commission went ahead and published a glossary giving explanation how certain terms used in the Social Security Coordination Regulation 2004 are to be understood.18 Accordingly, ‘place of residence’ shall be the country of habitual residence, the home country, in other words, the place where the centre of interest is. Further reference is made to Art. 11 of the Im-

Roos, 150. See also Engels/Nordemann in: Fromm/Nordemann, Article 2, mn. 4. 16 Art. 2(c) of the Commission’s draft (COM(2015) 627 final) initially referred to ‘habitually residing’ instead of ‘actual and stable residence’. The Article also lacked any reference to the verification clause. 17 Ehle/Werner, 376–377; Peifer, 12. 18 Available under http://ec.europa.eu/social/main.jsp?catId=857&langId=en&intPageId=984 (accessed 29 August 2019). 14 15

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16

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plementing Regulation (EC) No. 987/200919, which – like Art. 5 Portability Regulation – contains a list of ‘elements for determining residence’. The list includes, inter alia, the duration and continuity of presence on the territory and a person’s situation, such as the nature and the specific characteristics of any activity pursued, in particular the place where such activity is habitually pursued, the stability of the activity, and the duration of any work contract. 19 The above shows that there is no one definite and overriding definition of ‘Member State of residence’. Different European laws define the term differently. Hence, the meaning of a specific expression may not be taken out of its context and simply adopted. Rather, each term must be interpreted and applied in its specific context. In the present case, this means that an autonomous and independent approach based on the criteria set out in Art. 5(1)(a)–(k) of the Regulation is required. In particular, the teleological interpretation must be in accordance with the Regulation’s goals.20 20 Undoubtedly, one cannot simply rely on the place of subscription or the terms of the contractual agreement between the service provider and the subscriber. Otherwise, the door would be opened to the unwanted phenomenon of ‘license-shopping’.21 21 Finally, each subscriber can only have one Member State of residence irrespective of the number of countries they spend a substantial amount of time in and regardless of the number of countries in which this person is domiciled. This is a direct consequence of the statutory assumption laid down in Recital 14 and Arts 2 No. 3 and 5(1).22

2. Relevance As indicated in the above section, the term ‘Member State of residence’ is most crucial for the interpretation and application of the entire Regulation. Recital 12 depicts the underlying relevance of the term by defining the Portability Regulation’s core objective relying on exactly this term. The legislator aimed at adapting ‘the harmonised legal framework on copyright and related rights and to provide a common approach to the provision of online content services to subscribers temporarily present in a Member State other than their Member State of residence by removing barriers to cross-border portability of online content services which are lawfully provided.’ 23 It is to be noted that the Regulation generally implies that the online content service at issue can be lawfully accessed and used by the subscriber in their Member State of residence. In other words, the legislator’s focus was on extending the benefit of a subscription initially obtained for the Member State of residence when being temporarily abroad. In result, any determination of what is meant by ‘abroad’ and what might be understood as ‘temporarily’ has inevitably its point of departure at the Member State of residence. 22

3. History 24

The term ‘Member State of residence’ was already a core element of the Commission’s first draft [Art. 2(c)].23 However, the expression was mainly dependent on where a person was ‘habitually residing’. This was later changed to the place of ‘actual and stable residence’. Moreover, the initial wording did not refer to any kind of verification means. 19 Regulation (EC) No. 987/2009 of 16 September 2009 laying down the procedure for implementing Regulation (EC) No 883/2004 on the coordination of social security systems OJ L 284, 30.10.2009, p. 1. 20 See also Ehle/Werner, 376–377; Peifer, 12. 21 Peifer, 12. 22 Roos, 150. 23 COM(2015) 627 final.

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The simple reason for this is that the Commission’s first draft did not contain any provision resembling Art. 5(1) of the final Regulation. Rather, Art. 5(2) of the draft referred generally to ‘effective means in order to verify that the online content service is provided in conformity with Article 3(1)’.24 The term ‘habitually residing’ was not defined in the Commission’s draft. Given that 25 it was not only removed from the Regulation but the concept of Art. 2 No. 3 was also changed fundamentally, no guidance can be drawn as to how the current wording of the Article is to be understood. The same is true for proposals brought up in the course of the legislative debate. For instance, the JURI committee suggested a definition relating to the Member State the subscriber regularly returns to over time. 25 However, such approach was hardly suitable to generate the required level of legal certainty and therefore could not find a majority in the end.26

IV. Temporarily present 1. Meaning According to Art. 2 No. 4, the term ‘temporarily present’ means being present in a Member State other than the Member State of residence for a limited period of time. This definition is as correct as unhelpful in determining how long this limited period of time might be and what might no longer be deemed ‘temporarily present’. The Regulation contains a total of 24 references to this concept. It is always used as an established term without any guidance as to how it should be interpreted. Even the recitals, which often give guidance in regard to the interpretation of specific terms used in the Regulation, do not give any clear-cut indication. Unsurprisingly, the debate as to how this period should be calculated ran through the entire legislative process. The criticism was voiced from the publication of the Commission’s first draft onwards.27 Most remarkably, the legislator maintained its initial position not to lay down a specific number of days, weeks or months. In the light of the public discussion, it is to be presumed that the Commission, the Parliament and the Council quite intentionally left open the period of time can still be deemed ‘temporary’. Obviously, the main argument in favour of a statutory definition holding a specified period of time was and is the legal certainty created by such specification. However, a strict number of days, weeks or months might be too restrictive given that circumstances of a non-permanent stay abroad may vary. Taking into account that certain situations might call for more flexibility, the proposal of a defined maximum period was advocated.28 Still, the Regulation does not feature such time limit. Art. 2 No. 4 cannot be read as containing any particular ceiling.29 Of course, there is one rather implicit limitation. If the stay abroad turns into a quasipermanent presence outside the Member State of residence, the subscriber will at a cer24 Art. 3(1) of the draft held the service provider’s general obligation to enable cross-border portability of online content services, COM(2015) 627 final, 17. 25 Committee on Legal Affairs (JURI) (‘Draft Report’), Amendment 26; Committee on Legal Affairs (JURI) (‘Report’), Amendment 16. 26 Ranke/Glöckler, 380; Roos, 149. 27 Bundestag, 3–4; Dreier in: Dreier/Schulze, Article 2, mn. 5; German Bar Association, 11, available under https://anwaltverein.de/de/newsroom/sn-5-2016-zur-portabilitaet-von-online-inhaltediensten-im-eubinnenmarkt (accessed 28 August 2019); Roos, 149; Spiegel, 701 et seq. 28 Ranke/Glöckler, 380; Roos, 149. 29 Also arguing against such understanding: Martiny, 780; Engels/Nordemann in: Fromm/Nordemann, Article 2, mn. 6.

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tain point no longer be residing in the (former) Member State of residence within the meaning of the criteria set out in Art. 5(1).30 However, taking into account that merely two out of the eleven – quite diverse – criteria set out in Art. 5(1)(a)–(k) need to be fulfilled, it becomes quite clear that even this limitation cannot be determined by way of a specific number of days, weeks or months. The list of criteria calls for a case-by-case approach. Notably, Art. 2 No. 4 does not, contrary to Art. 2 No. 3, refer to the verification clause in Art. 5. The service provider is thus not obliged to check or re-check whether the subscriber is still abroad on temporary basis.31 Insofar, there is no additional risk of liability at the provider’s end. However, upon reasonable doubts about the subscriber’s Member State of residence the service provider is obliged to repeat the verification process in accordance with Art. 5(2). This can be accomplished by verifying the subscriber’s IP address.32 Apparently, such repeated exercise may trigger doubts as to the temporary nature of the subscriber’s travel or stay abroad. Still, the threshold to be measured against is the Member State of residence, not the temporary presence outside such Member State. At least, some guidance may be drawn from Recital 1. There, reference is made to activities for the purpose of leisure, travel, business trips and learning mobility. A limited period of time may therefore cover a holiday of two weeks per year, several business trips throughout a year and even a semester abroad.33 There is no limitation in number as regards individual trips. Even if one were to add up the days spent abroad over time, still no specific maximum period would apply. Those arguing in favour of an extended understanding of ‘temporarily present’ in a Member State other than the Member State of residence find most comfort and support in the reference to ‘learning mobility’. Students attending classes and lectures in schools and at universities usually do this for an entire school year or at least a certain number of semesters or trimesters respectively. Consequently, if studying abroad, the learning mobility takes pupils and students away from home for months or even years. This example underlines that relying on a strict and broadly established period of time would be the wrong way to go. There is a contextual element in the determination of whether a particular stay abroad may still be deemed temporary or not. It is not the pure length of the presence outside the Member State of residence, it is a matter of comprehensive judgment. In the same way as mentioned above in relation to the term ‘Member State of residence’ one should be cautious not to adopt definitions set out in other legislation.34 Again, reference can be made to the use of ‘temporary residence’ in the Social Security Coordination Regulation 2004. The Commission understands this term as ‘a period during which you are staying in a place other than the one where you usually live and you do not move your ‘centre of interest’ there’.35 Notably, neither the Regulation itself nor the Commission’s glossary suggest any particular limitation in time. Also, there are other occasions where European legislation links legal consequences to specific periods in time. For instance, the provisions on the freedom of movement and residence allow Member States to require the registration of a new residence after a

Heyde, 718–719. Engels/Nordemann in: Fromm/Nordemann, Article 2, mn. 6. 32 See Art. 5(1)(k). 33 Peifer, 11–12; Grandjean, 731 with reference to Grünberger; Eginger, 703; Critical: Spindler, 75. 34 See above → mn. 16 et seq. Similar: Ranke/Glöckler, 380. 35 See FAQ on social security coordination, available under http://ec.europa.eu/social/main.jsp?catId=8 57&langID=en&intPageId= 984 (accessed 29 August 2019). 30 31

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grace period of three months.36 Tax laws tend to allow for six months until registration obligations must be fulfilled.37 However, those periods have no greater indicative value and weight than any other unrelated legislation. In addition, service providers are not assigned the task to define by means of contrac- 35 tual provisions what ‘temporarily present’ means; overly restrictive clauses are to be deemed void and unenforceable. Art. 7(1) is very clear in this context: any ‘contractual provisions […], which are contrary to this Regulation, including those which prohibit cross-border portability of online content services or limit such portability to a specific time period, shall be unenforceable.’ Of course, due to the lack of a straightforward statutory definition, it will be service providers who will, by means of their standard terms and conditions, fill the gap and define what they deem appropriate in terms of a temporary stay abroad. For instance, the pay-tv provider Sky set the threshold at 37 days per stay.38 In addition, Sky requires the subscribers to log in to the system from the Member State of residence at least once in-between the journeys. The German Media Association (Verband Privater Medien; VAUNET) suggested 45 days as a fixed limit. 39 This shows that the industry is yet to find a harmonised way to implement the Portability Regulation in practice. Presumably, legal certainty will only grow over time with courts being asked to hand down decisions clarifying the meaning of expression. However, this will inevitably again require a case-by-case approach.

2. Relevance In principle, the definition of a ‘temporary presence outside the Member State of resi- 36 dence’ underpins the entire Regulation. The legislator’s aim to allow for subscribers to an online service travelling with their content is expressly limited to non-permanent stays abroad. Justifying perpetual access and use of services involving copyright protected works would have destroyed the generally undisputed principle of territorial licensing of content. This clearly has not been the legislative goal. Limiting the scope of the Portability Regulation to temporary presences abroad is therefore the backbone of the overall legislative initiative. In result, no one is actually questioning the concept of temporary presence. It is the 37 widely-accepted distinction between lawful and unlawful access to and use of the subscribed content. Therefore, one has to distinguish between the importance of a well-established criterion as such and the clear and unambiguous understanding thereof. As outlined above, the latter is still to be achieved in the course of the application of the Regulation in practice. The legislator has not given the statutory guidance many have hoped for and advocated in favour of. Initially, both subscribers and service providers suffer as a result. Whereas service providers run the risk that their contract terms are successfully challenged in court as being contrary to the Regulation, subscribers run the risk that their legal challenge is unsuccessful. No single subscriber will be inclined to be the first mover here due to the potentially expensive lawsuit. Therefore, it will be for consumer associations to initiate a model lawsuit aiming for some guidance on the matter. In summary, the lack of a precise definition is not an insurmountable mischief. 38 Rather, it is the normal course of action and the court’s general task to bring new legisla36 Art. 8 of Directive 2004/38/EC of the European Parliament and of the Council of 29 April 2004 on the right of citizens of the Union and their family members to move and reside freely within the territory of the Member States (OJ L 158, 30.4.2004, p. 77). 37 For further details, see Dreier in: Dreier/Schulze, Article 2, mn. 5. 38 See https://www.sky.com/help/articles/streaming-sky-content-in-the-eu (accessed 29 August 2019). 39 Grandjean, 731 with reference to Löhr.

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tion to life and to add greater legal certainty to statutory terms defined only at more general level. Accordingly, the term ‘temporarily present’ will remain of essential importance for both the overall concept and individual application of the Portability Regulation.

3. History 39

As already indicated, the expression ‘temporarily present’ was already part of the Commission’s initial draft.40 Art. 2(d) of the draft stated that the term ‘means a presence of a subscriber in a Member State other than the Member State of residence’. 41 Alternative definitions, such as ‘transient presence’42 or a ‘non-permanent presence’43, were suggested over the course of the legislative process. Regardless of the exact wording, the main focus of the debate was on how to determine the temporary nature of the expression. In this context, the three legislative institutions were in agreement that a statutory time limit would run counter to the overall goal of the Regulation.44 At one point, the European Parliament even proposed to amend Recital 2 in order to explicitly state the legislator’s intention allow for a flexible determination in consideration of and proportionate to the objective of the Regulation. Eventually, this proposal was not reflected in the final wording. Therefore, it is fair to say that despite the massive debate, the legislative history of the expression has been fairly stable.

V. Online content service 1. Meaning The term ‘online content service’ is defined in Art. 2 No. 5. It relates to a service within the meaning of Arts 56 and 57 TFEU that a provider lawfully provides to subscribers in their Member State of residence on agreed terms and online, which is portable. It can be either (i) an audiovisual media service as defined in Art. 1(1)(a) AVMS Directive, or (ii) a service the main feature of which is the provision of access to, and the use of, works, other protected subject matter or transmissions of broadcasting organisations, whether in a linear or an on-demand manner. 41 The Regulation only applies to providers that lawfully provide access and use of online content. Thus, the provider requires the rightholder’s consent to give access to the content or must be able to rely on statutory permission.45 Services that are illegal, such as for instance platforms allowing for unauthorised sharing of content, do not fall within the scope of the Regulation. 42 The online content service must be provided to subscribers (as defined in Art. 2 No. 1) on agreed terms.46 Neither Art. 2 nor the recitals elaborate whether the contractual basis must be considered a subscription. From a general everyday understanding, a subscription requires an arrangement to receive a service on a regular basis by paying in advance.47 However, the term should be defined in a wider context. The Commission outlined in the early Impact Assessment the two main kinds of online content services: 40

See above → mn. 27. COM(2015) 627 final. 42 Committee on Legal Affairs (JURI) (‘Draft Report’), Amendment 27. 43 Committee on Legal Affairs (JURI) (‘Report’), Amendment 36. 44 ibid, ‘Report’, 40; Council, 2. 45 See Art. 5(3) InfoSoc Directive 2001/29. 46 See Art. 2 No. 1. 47 Oxford Dictionary, https://en.oxforddictionaries.com/definition/subscription. 40

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transactional and subscription services.48 Whereas transactional services include the purchase and rental of online content, subscription services cover all long-term contractual relationships. However, such distinction did not make its way into the final Regulation for good reason: it does not allow for a meaningful separation in the context of portability. Even though transactional services are more likely to be portable, it cannot be excluded that the rightholders or the providers may insist on territorial restrictions. In one of the latest fact sheets from 27 March 2018, the Commission still describes the rental of online content as one of the sample problems that the Regulation will solve.49 Besides, the term ‘online content service’ needs to be interpreted in light of the Regulation’s overall purpose. The cross-border portability of online content services would be severely restricted if transactional services were generally excluded. For instance, purchase and rental are the main distribution methods in the e-book and music industry. The terms ‘subscriber’ and ‘subscription’ therefore need to be understood in a broad sense, and so must the term ‘online content service’.50 Against the above background, services are covered regardless whether a downloaded copy of the content is accessible through a digital locker or whether content is made available through cloud-based technology.51 The interpretation of the term needs to be technology-neutral. Also, the size of an online content service does not matter. SMEs fall under the Regulation as well as large companies. The requirement of a contractual relationship may further be questioned in the area of public broadcasting organisations that offer free online media libraries without any kind of pro-active registration but against an administrative fee. Those services are to be considered as an online content service if they fulfil the criteria of Arts 56 and 57 TFEU. However, only providers who offer their services online are covered. Other transmissions channels such as cable or satellite are therefore excluded.52 The service can either be a service as defined in Art. 1(1)(a) AVMS Directive as amended by Art. 1(1)(a) Revised AVMS Directive. Accordingly, ‘a service as defined by Articles 56 and 57 of the Treaty on the Functioning of the European Union, where the principal purpose of the service or a dissociable section thereof is devoted to providing programmes, under the editorial responsibility of a media service provider, to the general public, in order to inform, entertain or educate, by means of electronic communications networks within the meaning of point (a) of Article 2 of Directive 2002/21/EC; such an audiovisual media service is either a television broadcast as defined in point (e) of this paragraph or an on-demand audiovisual media service as defined in point (g) of this paragraph’. Those services cover in particular services by broadcasting organisations, Video-On-Demand and TV streaming services. With regard to the definition laid down in the Revised AVMS Directive, CJEU case law needs to be considered, too.53 Services with the main feature of providing access and use to protected content or transmissions of broadcasting organisations, whether linear or on-demand, also fall within the definition. This aspect comes into play whenever the online content service does not already fall under the definition of the Revised AVMS Directive. It covers all sorts of copyright-protected content such as literary works, video games, online sports, software, databases etc. Even though electronic versions of newspapers and magazines SWD(2015) 270 final,7. See http://europa.eu/rapid/press-release_MEMO-18-2601_en.htm (accessed 29 August 2019). 50 See also Engels/Nordemann in Fromm/Nordemann, Article 2, mn. 2; Similar: Grandjean, 732 with reference to Kraft and Melichar; Kraft, 725. 51 Opposing opinion: Strowel, p. 66. 52 Kraft, 722. 53 For instance: CJEU, C-347/14 New Media Online EU:C:2015:708. 48 49

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are explicitly excluded from the scope of the Revised AVMS Directive 54, they are covered by the definition of an online content service as long as it is the service’s main feature to provide e-papers and magazines online. Furthermore, the services that provide other protected subject-matter and explicitly lists transmissions of broadcasting organisations are also covered. Therefore, also live broadcasts of concerts, sport events or news may be covered. The right to transmissions of sport events has not yet been harmonised within the EU. However, it is explicitly recognised in some Member States as neighbouring rights.55 The right becomes of great relevance in connection with premium sport events. The term ‘providing access and use’ occurs throughout the Regulation yet is not defined.56 47 The main feature, however, must be distinguished from any merely ancillary features. Thus, a service which primarily focusses on the sale of goods but uses copyrightprotected elements such as graphics in a merely ancillary manner in the background is not covered by the Regulation.57 There are some grey areas in which ancillary features are not easily distinguished from main features. This applies in particular with respect to providers that offer several services: the subscriber has one account but can access several different services including Video-On-Demand, Music-On-Demand and special sales offers.58 In this case, it is recommended to consider the services separately.59 48 Moreover, the term ‘online content service’ covers all services, irrespective of whether the services are for free or paid for. This broad approach results from the definition of the subscriber pursuant to Art. 2 No. 1. A distinction between services against or without payment of money becomes relevant with respect to Arts 3 and 6 which determine whether providers are under the obligation to ensure portability or whether they have an option.60 49 The access and use of online research databases is also to be noted.61 These products clearly form online content services. Research and educational institutions such as schools and universities belong to the core group of subscribers to such databases. Scholars and students are the end users. The institution serves as an intermediary offering access either at its premises or from remote via VPN connection. Still, the only subscriber is the institution, which is of course not a consumer as required in Art. 2 No. 1, and which is not travelling. Whether travelling staff and enrolled students may benefit from the Portability Regulation vastly depends on whether the access and use of the content may be deemed equivalent to a travelling consumer.

2. Relevance 50

The Portability Regulation concerns access to online content services. The term is pre-defined and the Regulation thus builds on common ground. There is no new element added to the concept. Therefore, the interpretation and application of the expression settles on existing precedent.

Recital 28 Revised AVMS Directive. Brost, 690. 56 See the comments under → Art. 3 Portability Regulation, mn. 24 et seq. 57 Recital 16. 58 For instance Amazon Prime. 59 See also Dreier in: Dreier/Schulze, Article 2, mn. 6; Spindler, 75. 60 See Arts 3(1) and 6(1). 61 See the comments regarding the term subscriber’, above → mn. 7. 54

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3. History The term ‘online content service’ was not subject to any substantial changes in the 51 course of the legislative process. The Commission first added a distinction between paid and free-of-charge services. Services free of charge would only be considered an online content service in light of the Regulation as long as the Member State of residence by the subscriber was verified. Even though the Parliament generally approved the proposed wording and suggested slight amendments, the Council did not adopt the amendment. The reason for this was the introduction of the option for free-of-charge services to optin to portability with a suggested Art. 3A. The option became part of the final Regulation. Therefore, a distinction within the definition of the online content service became obsolete.

VI. Portable 1. Meaning An online content service is ‘portable’ when it has a feature that enables subscribers to 52 effectively access and use the online content service in their Member State of residence without being limited to a specific location. Features that allow access from anywhere within the Member State of residence include, in particular, streaming and downloading. Even though the term appears to be technology-neutral, its scope is limited to all transmission channels that are online due to the referral to online content services. 62 Accordingly, this does not cover transmissions via traditional channels such as satellite or cable transmissions or terrestrial broadcasting.63 However, within online transmissions, the expression ‘portable’ covers all different kinds of features. Online content service providers that offer services which are not portable cannot be 53 required offer their services cross-border.64 Services that may be offered via the Internet but are not portable in light of the Regulation include closed networks such as IPTV and transmissions via set-top boxes.65 Although the subscriber is able to access and use digital content, the set-top box itself is limited to the place of the installation. This also explains why the place of the installation of a set top box is listed Art. 5(1)(c) as a means of verification.

2. Relevance The need for portability of the service is an underlying principle of the Portability 54 Regulation. Given that the provisions relate to online content services that are portable by nature, the definition of ‘portable’ is unlikely to cause any discussion or debate.

3. History The definition was presented by the Commission in the first draft and was adopted 55 unchanged.

Kraft, 721. ibid., 722. 64 Recital 17. 65 Engels/Nordemann in: Fromm/Nordemann, Article 2, mn. 9; Kraft, 722. 62

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Obligation to enable cross-border portability of online content services

Article 3 Obligation to enable cross-border portability of online content services 1. The provider of an online content service provided against payment of money shall enable a subscriber who is temporarily present in a Member State to access and use the online content service in the same manner as in the Member State of residence, including by providing access to the same content, on the same range and number of devices, for the same number of users and with the same range of functionalities. 2. The provider shall not impose any additional charges on the subscriber for the access to and the use of the online content service pursuant to paragraph 1. 3. The obligation set out in paragraph 1 shall not extend to any quality requirements applicable to the delivery of an online content service that the provider is subject to when providing that service in the Member State of residence, unless otherwise expressly agreed between the provider and the subscriber. The provider shall not take any action to reduce the quality of delivery of the online content service when providing the online content service in accordance with paragraph 1. 4. The provider shall, on the basis of the information in its possession, provide the subscriber with information concerning the quality of delivery of the online content service provided in accordance with paragraph 1. The information shall be provided to the subscriber prior to providing the online content service in accordance with paragraph 1 and by means which are adequate and proportionate. Bibliography: BITKOM, ‘Stellungnahme: Kommissionsentwurf zur Portabilitäts-Verordnung’ (May 2016); Brost, ‘Der lange Schatten von »Murphy« – droht das Ende der Exklusivität nationaler Urheberrechtslizenzen?’ (2016) 8/9 ZUM 689–699; Commission, ‘Impact Assessment Accompanying the document Proposal for a Regulation of the European Parliament and of the Council to ensure the cross-border portability of online content services in the internal market’ SWD(2015) 270 final; Dreier/Schulze, Urheberrechtsgesetz (6th edn, C.H. Beck 2018); Eginger, ‘Die neue Portabilitätsverordnung’ (2017) 10 ZUM 698–712; Ehle/Werner, ‘Online-Inhalte auf Europareise’ (2016) 4 C&R 376–381; Fromme/Nordemann (eds), Urheberrecht (12th edn, Kohlhammer 2018); German Bar Association, ‘Position Paper of the German Bar Association by the Committee on Intellectual Property on the Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content service in the internal market (COM(2015) 627 final, 9 December 2015)’ (January 2016); Kraft, ‘Die Portabilitätsverordnung aus der Sicht eines Rundfunkveranstalters’ (2017) 10 ZUM 720–726; Peifer, ‘Please Take Your Personal Belongings With You – Portabilität und Zugang als Paradigmen für Verträge über digitale Güter’ (2017) 1 AfP 8–13; Ranke/Glöckler, ‘Grenzüberschreitende Portabilität von Online-Inhaltediensten im Binnenmarkt’ (2017) 6 MMR 378–382; Roos, ‘Grenzenloses Streaming?’ (2017) 3 MMR 147–152; Spiegel, ‘Ich packe meinen Koffer und nehme mit… meine Online-Inhalte’ in: Taeger (ed.), Smart World – Smart Law? (OlWIR 2016), p. 693–707; Synodiniou, ‘EU Portability Regulation: In-depth Analysis of the Proposal’ (August 2016); Walter, ‘Der Vorschlag der EU- Kommission für eine Portabilitätsverordnung vom 9.12.2015’ (2016) MR-Int 191–195.

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A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Addressee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Right, obligation or exception . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2 2 3 7

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Relation to other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Relation to other laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Obligation to enable cross-border portability of online content services C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Obligation to provide portability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Online content service providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Providing services against payment of money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Subscriber . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Temporarily present . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Member State of residence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6. Enabling access and use of the online service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7. Same manner as in the Member State of residence . . . . . . . . . . . . . . . . . . . . . . . . II. No imposition of additional charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Quality requirements applicable to the delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Quality requirements applicable to the delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. No affirmative actions to reduce the quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Information obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15 15 15 16 21 22 23 24 29 36 37 37 43 46

C. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50

A. Function I. Goal Art. 3 renders portability of online content for certain online content service 1 providers mandatory. Portability first and foremost benefits the subscriber of online content services. At the same time, the providers’ online content service becomes more attractive. Before the Regulation was enacted, many subscribers were unable to access the services once they travelled outside the territory of subscription. This was due to the territoriality of copyright, whereby licenses and therefore subscriptions are typically only offered domestically. The best examples are audiovisual media and sports broadcasts. Obtaining the relevant right for the entire EU was either impossible or too costintensive compared to the calculated revenue. The Portability Regulation is a first step to overcome this phenomenon in a very specific and dedicated niche.

II. Structure 1. Addressee Structurally, Art. 3 addresses all providers who offer online content services against 2 payment of money. Online content services are defined in Art. 2 No. 5. Due to the distinction between paid services and services free of charge, one has to read Art. 3 in conjunction with Art. 6, which deals with services provided without the payment of money.

2. Right, obligation or exception It is clear from the wording of Art. 3(1) that the legislator intended the provision to be 3 mandatory: service providers ‘shall enable’ subscribers being temporarily abroad. Structurally, it is to be analysed whether Art. 3(1) is indeed a mere obligation1 – as per the short title – or whether the provision furnishes the subscriber with a right2 to demand

1 2

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access to a subscribed service outside their Member State of residence. Some also view Art. 3 as a general exception to copyright similar to Art. 5(3) InfoSoc Directive. 3 4 The wording itself supports an imposition of an obligation upon the service provider rather than affording the subscriber with an enforceable right. There are a variety of arguments to this effect. Firstly, the legislator has not put the subscriber in the focus, which easily could have been accomplished by way of a wording such as ‘subscriber is entitled to’. Secondly, when looking at Art. 7(1) it seems that the legislator had in mind an obligation rather than an individually enforceable right: contractual provisions running counter to the Portability Regulation may not be enforced by the service provider. 4 Thirdly, Recital 26 is drafted very carefully and defensive in this context. Subscribers ‘should be eligible for cross-border portability of online content services’ when they reside in a Member State of the Union. Therefore, the better arguments speak against an intention to afford the subscriber a statutory right to access and use the service abroad. 5 Nevertheless, there are means allowing the subscriber to enforce compliance with Art. 3(1). Those provisions in the subscription agreement or terms and conditions that deal with the territorial scope of the subscription may be challenged if their wording does not reflect the provider’s obligation under Art. 3(1). Once implemented in the contract terms, the subscriber can rely on and demand access to and use of the service when being temporarily outside the Member State of residence. This claim is of contractual nature and not purely statutory.5 6 Those who see the Portability Regulation as a limitation to copyright similar to the exception and limitations set out in Art. 5(3) InfoSoc Directive6 are also quite right. In effect, rightholders cannot enforce their copyright versus subscribers who, whilst being temporarily abroad, access and use the subscribed content extra-territorially. This is the intended result of the legal fiction set out in Art. 4. Therefore, the actual limitation does not derive from Art. 3(1) but from Art. 4. What needs to be noted is that even when accepting a structural similarity with Art. 5(3) InfoSoc Directive there is no room for applying the three-step test set out in Art. 5(5) InfoSoc Directive. By choosing the vehicle of a legal fiction, the legislator already built in the respective balancing of interest and reasonableness test.

3. Structure 7

Art. 3 is divided into four subsections. The first subsection lays down the general obligation to ensure cross-border portability to subscribers who are temporarily present in a Member State other than their Member State of residence. The second subsection clarifies that there shall be no additional charges imposed on subscribers for the use of cross-border portability. The third subsection is a balanced restriction to the service provider’s general obligation in the first subsection: the quality requirements applicable to the delivery do not need to be the same when the subscriber accesses and uses online content. Finally, the fourth subsection contains an obligation for online content service provider to inform their subscribers about the quality of delivery.

3 German Bar Association, 14, available under https://anwaltverein.de/de/newsroom/sn-5-2016-zur-por tabilitaet-von-online-inhaltediensten-im-eu-binnenmarkt (accessed 28 August 2019); Synodiniou, 13 et seq.; Walter, 195. 4 Engels/Nordemann in: Fromm/Nordemann, Article 3, mn. 11. 5 ibid. 6 German Bar Association, 14; Synodiniou, 13 et seq.; Walter, 195.

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B. Context I. Relation to other provisions Art. 3 is the ‘heart’ of the Regulation insofar as it holds the fundamental imperative to 8 safeguard portability of subscribed online content. It is therefore closely connected with Art. 4, the legal fiction. Without Art. 4, Art. 3 would require online content service providers to obtain licenses for all EU Member States, which would be a significant burden. Art. 3 builds on the definitions set out in Art. 2. The counterpart of Art. 3 for online content services provided without the payment of 9 money is Art. 6 which mainly refers to the obligations laid down in Art. 3.

II. Relation to other laws Art. 3 interferes with the exploitation rights of copyright holders laid down in Arts 2– 10 4 InfoSoc Directive and other rights introduced by the Member States, in particular covering rights for transmissions of broadcasts. Moreover, the provision interferes with general contract law. Service providers are obliged to amend their terms and conditions in order to duly reflect the obligation set out in Art. 3(1).

III. History The overall mandatory nature of Art. 3 was not touched upon during the legislative process. The only substantial change came about due to the inclusion of free-of-charge services. Art. 3 now only applies to online content services provided against payment of money. The further changes made over the course of the legislative process were due to the need of further specification. In particular, it was clarified that the online content must, in principle, be provided in the exact same manner as in the Member State of residence. The matter of quality of delivery was debated quite heavily. This discussion is reflected in Art. 3(3). A particularly contentious issue concerned the concept of Art. 3(1) and whether the obligation represents a substantial interference with the contractual freedom of rightholders to limit the territorial distribution of their works and take away the possibility to obtain fair remuneration for their works. In contrast to certain copyright exceptions deriving from Art. 5(3) InfoSoc Directive or the SatCab Directive, the Portability Regulation interferes with exploitation rights without awarding any compensation to the rightholder. However, in an overall assessment and balancing of interests, it must be deemed appropriate to limit the copyright by way of a legal fiction without compensating the rightholder. The limitation is rather moderate and restricted to a very specific context.7 Obviously, the situation would be different if the term ‘temporarily present’ were undermined by an overly extensive and thereby disproportionate interpretation. Therefore, it is essential to also consider the rightholder’s position and lack of statutory compensation when interpreting and applying Art. 2 No. 4. Other controversial issues included the risk of increased subscription fees to the detriment of consumers as well as the phenomenon that rightholders are discouraged 7

Similar: Brost, 698–699; Peifer, 13.

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from entering into domestic licensing agreements.8 Looking at those issues in further detail, neither of the two scenarios is likely to occur.9 Pricing is the result of balancing multiple factors. Increased fees are generally accepted only if an added value is on offer that other competitors cannot deliver. A general statutory obligation that is to be fulfilled by all players in the market is therefore unlikely to materialise in higher prices provided that the technical and structural implementation does not involve overly extensive costs. The service providers do, of course, have to make monetary investments – e.g. amending their terms and conditions or safeguarding the technical delivery outside the Member State of residence. However, those investments are predominantly one-off and fairly reasonable size. Also, it must be doubted that the Portability Regulation will drive rightholders away from domestic licensing. The scope and impact of the Regulation must be deemed too limited in order to change a long-standing practice. The domestic markets will therefore remain of individual importance.10

C. Explanation I. Obligation to provide portability 1. Online content service providers 15

Art. 3(1) addresses all providers of online content services that are paid for by means of money from the subscribers. Online content services are defined in Art. 2 No. 5 and include providers for all sorts of online content as far as it is protected by copyright, a related right or a transmission of a broadcasting organisations.11 The services may be provided either in a linear or in an on-demand manner, and by any technological means, such as streaming or downloading. Thus, also live-streams are covered.

2. Providing services against payment of money Art. 3(1) covers only providers that offer online content services against payment of money. In cases of an online content service provider that offers several services, including one which falls under the Regulation for an all-inclusive fee, it can be concluded that the fee is also supposed to cover the online content service (as well as the additional services).12 17 Payment of money does not include the mandatory payment of public broadcasting fees (e.g. ‘television license’ in the UK or the ‘Rundfunkbeitrag’ in Germany) even though it is objectively the payment of money.13 By expressly using the term money and by assuming that the payment needs to be made by the subscriber, the scope of Art. 3(1) does not cover any services that provide online content embedded in advertisement, against the provision of personal data or any other means that may be used to generate revenue (e.g. bitcoin mining). Interestingly, the Digital Content Directive equates the payment of money in exchange for digital content with the ‘payment’ of data provided by the customers. The different treatment in the Portability Regulation, however, resonates when taking into account one of the main lines of reasoning for Art. 6(1). By offering an on16

Spiegel, 700. Of the same opinion is for instance Roos, 151. 10 Peifer, 13. 11 See the comments under → Art. 2 Portability Regulation, mn. 40 et seq. 12 Engels/Nordemann in: Fromm/Nordemann, Article 3, mn. 4. 13 Recital 18.

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line content service in return for payment of money, the providers need to collect the payment information anyway, which can also be used as verification means. Thus, the burden on those providers to comply with the verification process is relatively low. Online content services who collect other data e.g. for purposes of targeted advertisement do not necessarily use data which can be used to verify the subscriber’s Member State of residence. The obligation to collect further information would be disproportionate in light of the business models. Recital 18 explains that the obligation covers services, irrespective of whether they are 18 directly or indirectly paid for. From this wording, it can be concluded that direct payment includes all cases in which the subscriber pays a subscription fee to the online content service provider who is the contractual partner. By including indirect payments for online content services, the legislator broadened the scope of Art. 3(1). Indirect payments are common if online content services are offered through a package by another provider who itself enters into a contract with a subscriber. Such packages may in particular include electronic communication services.14 The legislator hereby ensured that online content service providers may not circumvent the portability obligation by merely offering their services as part of a package through another provider. It remains the question whether it was necessary to expressly include indirect payments since the provider that offers the package to the subscriber can already be considered an online content service provider. In some scenarios it is not as simple to distinguish between services provided against 19 or without the payment of money. Many online content service providers offer free trial versions. Even though the trial version is not paid for, it is recommended to consider the online content service provider’s business model as a whole. If the major focus lies on paid-for services, the online content service provider should be obliged to ensure portability, including subscribers of free trial versions. The same uncertainties apply in situations in which the provider offers free registrations for access and use of online content but offers additional features or content against payment at a later stage. This business model exists in particular in the area of video-games (e.g. ‘in-game purchases’) but can be found in other industries as well.15 The providers who offer online content services for free and against payment of money, should be considered uniformly.16 Otherwise, it becomes highly difficult for the online content service providers to distinguish between the subscribers who can rely on the Portability Regulation or not. From a copyright perspective, providing access relates to acts of reproduction, com- 20 munications to the public and making available of works as well as acts of extraction or re-utilisation in relation to databases.17

3. Subscriber The subscriber is defined in Art. 2 No. 1 and relates to any consumer who, on the ba- 21 sis of a contract for the provision of an online content service with a provider whether against payment of money or without such payment, is entitled to access and use such service in the Member State of residence.18

For instances Telekom Entertain packages that include Sky. YouTube Red, Spotify. 16 In-depth analysis, p. 18. 17 Recital 24; for further details see → Art. 4 Portability Regulation, mn. 11. 18 See the comments under → Art. 2 Portability Regulation, mn. 2 et seq. 14

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4. Temporarily present 22

‘Temporarily present’ under the Regulation means being present in a Member State other than the Member State of residence for a limited period of time, as defined in Art. 2 No. 4. There is no fixed time limit. All cases need to be evaluated on a case-bycase analysis.19

5. Member State of residence 23

The Member State of residence is defined in Art. 2 No. 3 and refers to the Member State, determined on the basis of Art. 5, where the subscriber has their actual and stable residence.20

6. Enabling access and use of the online service The online content service provider is obliged to enable access and use of the online content service to its subscribers. The Regulation does not define the terms ‘access’ and ‘use’. While distinguishing both from each other, it must be assumed that ‘access’ relates to the process of actually starting the application, whereas ‘use’ is to be understood as availing oneself of the digital content offered via the online content service. 25 The mere access to the service is not necessarily an act relevant in the context of copyright and the exploitation thereof. It is a necessary intermediate stage in order to allow the subscriber to avail themselves of the subscribed content. One could therefore argue that the legislator could have restricted itself to mentioning only the use of the online content service. However, Art. 3(1) InfoSoc Directive defines the term ‘making available to the public’ in reference to a situation where ‘members of the public may access [the works] from a place and at a time individually chosen by them’. Therefore, giving access to a work by means of digital technology can very well form an act relevant under copyright law.21 Moreover, the CJEU has constantly broadened the notion and understanding of the term ‘making available to the public’. Reference can be made to the decisions filmspeler22 and The Pirate Bay23. Thus, from the service provider’s perspective as well as for the sake of legal certainty, it must be appreciated that Art. 3(1) mentions access to and use of the service. 26 From a practical point of view, explicitly mentioning the access to the service is rewarding: service providers usually safeguard the due limitation of their service to the territory of subscription by implementing technical means of access control. The Internet as such is borderless. It is a network by nature and therefore characterised by countless links and connections across the globe. Pro-active geo-blocking is therefore the technical method of choice to trace and depict the territorial scope of a license. Obliging the online content service provider to give access to the subscribed service also outside the Member State of residence therefore means lifting the access barrier in place. 27 The term ‘use’ finds no mention in Arts 2–4 InfoSoc Directive, which contain definitions of the rightholder’s copyrights. The rightholder is furnished with an exclusive reproduction right, a right of communication to the public of works and right of making available to the public other subject-matter, and a distribution right, but no monopoly to use the work. Also, other legislation such as the SatCab Directive contains specific rights 24

See the comments under → Art. 2 Portability Regulation, mn. 26 et seq. See the comments under → Art. 2 Portability Regulation, mn. 15 et seq. 21 See CJEU, C-466/12 Svensson EU:C:2014:76. 22 CJEU, C-527/15 filmspeler EU:C:2017:300. 23 CJEU, C-610/15 The Pirate Bay EU:C:2017:456. 19

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such as the broadcasting right.24 Taking a closer look, this is perfectly consistent and coherent as not every ‘use’ of a work forms an act relevant under copyright law. For instance, reading a book is certainly one way of making use of that book. Still, the reading does not translate into the exploitation of a work and is thus of no use within the meaning of EU copyright law. In the context of Art. 3(1), the term ‘use’ is to be understood as going beyond the ex- 28 ploitation or exercising of specific rights granted to the rightholder under EU copyright law. Various recitals refer to the use of the service.25 Recital 18 makes explicit reference to the ‘right to use an online content service’. In addition, Art. 1 refers to the use of online content services. Therefore, the obligation to safeguard the use of the service when temporarily present in a Member State other than the Member State of residence embraces all uses contractually agreed upon between the service provider and the subscriber. The terms and conditions of the service agreement is the decisive measure. This also includes all uses of the content made available as part of the online content service. Recital 15 is perfectly clear in this respect. The Portability Regulation shall apply to online content services that providers, after having obtained the relevant rights from rightholders in a given territory, provide to their subscribers on the basis of a contract, by any means including streaming, downloading, through applications or any other technique which allows use of that content. Thus, the term ‘use’ also embraces the exercise of rights granted under copyright law, however, only within the scope of the subscription.26

7. Same manner as in the Member State of residence a) General. The online content service provider needs to ensure that the subscriber 29 who is temporarily abroad can still access and use the online content in the same manner as in the Member State of residence. Art. 3(1) gives several examples of ‘manner’: (i) access to the same content, (ii) on the same range and number of devices, (iii) for the same number of users and (iv) with the same range of functionalities. This list is not exhaustive. In light of the overall goal to effectively ensure the cross-border portability within the EU, the term ‘manner’ may not be interpreted too narrowly. In the same way as described above in regard to the expression ‘use’,27 in the end it is the contractual scope of the subscription that provides the decisive guidance. The only exception is laid down in Art. 3(3) relating to quality requirements. Of course, Art. 3(1) does not prevent online content service providers from offering 30 additional features for subscribers travelling abroad. However, in doing so they cannot rely on the stipulations of the Regulation. Notably, the legal fiction and thereby the limitation of the rightholders’ position only applies within the scope of the subscription as obtained for the Member State of residence. Therefore, add-on services require separate justification, i.e. a respective license if copyright is concerned. There is already an example of such occasion. Prior to the enactment of the Portabili- 31 ty Regulation, German Netflix users temporarily present in Spain were able to access and use online content usually only available to Spanish subscribers. When the Regulation entered into force, Netflix chose to only offer the ‘home content’ to subscribers. Once Netflix assumes that the subscriber’s presence is not merely temporarily, the subscriber may not have access to any online content. Art. 2 SatCab Directive. Recitals 1, 2, 3, 9, 18, 19, 21, 23, 24, 25, 32. 26 See also Engels/Nordemann in: Fromm/Nordemann, Article 3, mn. 5. 27 See above → mn. 28. 24

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b) Same content. The first example given in Art. 3(1) is more or less self-explanatory. The subscribed content must be made available also to subscribers temporarily present in a Member State other than the Member State of residence. According to Recital 1, this includes particularly music, games, films, entertainment programmes and sports events. The content must be offered in the same language(s) the subscriber may choose in their Member State of residence. 33 c) Same range and number of devices. Cross-border portability must be provided for the same range and for the same number of devices. Devices include, in particular, computers, tablets and smartphones. Further, it is irrelevant whether the content is accessed via a browser or a (mobile) application or by way of a web application or a desktop client.28 Any limitation on the number of devices agreed for the Member State of residence is also to be applied abroad. Otherwise, neither the service provider nor the subscriber could rely upon the legal fiction set out in Art. 4. In other words, any additional device beyond the agreed number would require a separate license from the rightholder. 34 d) Same number of users. What is true for the number of devices is also true for the number of individual users. If the subscription relates to a certain number of total or concurrent users, this limitation equally applies when the subscriber is temporarily present abroad. However, the travelling subscriber may allow individuals permanently living in another Member State to use the service if this use is within the agreed number of users and if the use occurs in conjunction with the subscribers travel. For instance, joint gaming is permissible if one of the players can rightfully rely upon a subscription compliant with the Portability Regulation. 35 e) Same range of functionalities. The online content service must be provided with the same range of functionalities as in the Member State of residence. The term ‘functionalities’ is the broadest term listed in Art. 3(1). It is not defined in the Portability Regulation but in Art. 2 No. 11 DCD, which was adopted about two years after the Portability Regulation.29 Hereafter, the term covers the ability of the digital content or digital service to perform its functions having regard to its purpose. Despite the fact that the Digital Content Directive does not refer to the Portability Regulation, the definition may still be applicable due to the purpose of coherency in EU law. In light of online content services, functionalities may therefore cover a variety of characteristics such as all individual features of the service, menu options, language and subtitle choices. 32

II. No imposition of additional charges 36

According to Art. 3(2), there shall be no additional charges for a subscriber for the relying on cross-border portability. This means that the service provider must expand the technical possibility to access and use the subscribed service in accordance with the Portability Regulation without requesting any monetary or equivalent ‘travel fee’. Of course, such statutory ban does not prevent providers from generally increasing the subscription fee as part of their overall pricing strategy.30

Kraft, 721. See the comments under Digital Content Directive → Art. 2 mn. 39 et seq. and Digital Content Directive → Art. 7, mn. 35. 30 Also Dreier in: Dreier/Schulze, Article 3, mn. 2; Engels/Nordemann in: Fromm/Nordemann, Article 3, mn. 8. 28

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III. Quality requirements applicable to the delivery 1. Quality requirements applicable to the delivery According to Art. 3(3), the general obligation to ensure cross-border portability in the same manner as in the Member State of residence does not cover any quality requirements applicable to the delivery that the provider is subject to in the Member State of residence. However, the service provider and the subscriber may agree otherwise on contractual basis. Thus, Art. 3(3) constitutes dispositive, non-mandatory law. Art. 3(3) includes all technical aspects of the actual delivery process. Therefore, it covers mainly bandwidth and data speed. However, the term is to be understood more broadly as covering all aspects deriving from a possibly poor or instable connection that reflect upon the subscriber’s perception of the subscribed service. This can be the possibility to remain seamlessly connected, to access and store content within the service or to rely upon the full set of functionalities online. However, any shortcoming not caused by technical means of delivery remains outside the scope of Art. 3(3). This particularly relates to the functionalities falling under Art. 3(1) which are to be offered also outside the Member State of residence. The provision takes into consideration that the delivery of an online content service relies upon the infrastructure, i.e. the content delivery network (CDN) 31, available in the area of travel or destination. Thus the delivery of the content depends on the network connecting the server on which the content is stored and the point of delivery to the subscriber. The multitude of Internet exchange points (IXP) affects the rooting speed and thereby the travel of the data packages through the net. Speed can be enhanced by storing content in a decentralised way using servers operated by the CDN provider around the globe. Only very few online content providers operate their own global server network.32 Therefore, relying upon third-party storage is a general cost factor. With the quality exception in Art. 3(3), the legislator seeks to free the content service providers from the pressure to invest in the expansion of their storage network beyond the Member State of residence.33 Such effect is deemed not appropriate.34 The dispositive nature of Art. 3(3) is emphasised in Recital 22. Despite the statutory freedom not to offer the service at the same level of quality, those service providers expressly guaranteeing a certain quality of delivery to subscribers while temporarily present in another Member State should be bound by that guarantee. One can thus conclude that any contractual assurance as to the quality of delivery outside the Member State of residence must be definite and cannot be assumed. It was further argued that Art. 3(3) could limit the risk that the provisions of the Regulation are misused.35 Potentially poorer quality could lead to subscribers choosing to obtain a new subscription in their new Member State of residence – instead of trying to pretend to stay temporarily in the Member State. However, it must be doubted that service providers see low quality delivery of their services as a method to avoid misuse of the travel-with-your-content principle: the subscriber will be disappointed and annoyed regardless of whether the law allows for accepting poor condition of delivery. Their discomfort will in one way or another impact on the relationship between the subscriber

SWD(2015) 270 final, 81 et seq. For instance, Netflix operates its own CDN. 33 See SWD(2015) 270 final, 83. 34 See Recital 22. 35 Peifer, 13. 31

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and the service provider. Therefore, it remains the latter’s economic interest to safeguard at least adequate connectivity and speed. 42 Art. 3(3) does also not contradict Arts 7 and 8 Digital Content Directive which require the trader to supply services according to the contractually agreed quality and according to the quality a consumer may reasonably expect. In light of Art. 3(1) Portability Regulation, the quality of the online content services, however, must be understood as the ‘manner’ of the service including its functionalities. Due to Art. 3(3) Portability Regulation, the quality of the service must be distinguished from the quality of delivery which is not be covered by Arts 7 and 8 Digital Content Directive. Thus, a poorer quality of delivery does not affect the quality of the online content services. The trader may still supply the consumer with digital services of quality.

2. No affirmative actions to reduce the quality Whilst online content service providers are not under the obligation to safeguard equal quality of delivery, they may not take affirmative actions to reduce such quality either. By adding the second sentence to Art. 3(3), the legislator made sure that providers do not factually circumvent the portability obligation by reducing the quality to a level where the average subscriber would not choose to access and use the service abroad. 44 Affirmative actions include any measures that explicitly target the quality of delivery for subscribers when they are relying upon portability of the online content service. This excludes decisions impacting the quality of delivery in general, i.e. measures relating to the access and use of the service regardless in which territory the subscriber is at the relevant time. 45 The European Parliament proposed an obligation for the service provider to guarantee the travelling subscriber at least the same quality of delivery available to the domestic subscribers. However, the proposed minimum level was not adopted. Thus, the residential subscriber and the travelling subscriber may (theoretically) face differing levels of quality despite sitting right next to each other. Although this might seem unreasonable at first glance, one must not forget that these two subscribers also access different content under their respective subscriptions, e.g. German versus French programmes or Spanish versus Italian. 43

IV. Information obligation According to Art. 3(4), online content service providers shall inform their subscribers about the quality of delivery of the online content provided for a subscriber who is temporarily in another Member State. 47 The obligation to inform the subscribers about the quality of delivery is limited to the information that is already in possession of the online content service provider. Therefore, providers do not need to gather additional information regarding the quality of delivery. The legislator apparently aims at a balanced approach recognising both the subscriber’s legitimate interest in gaining information on the conditions when travelling abroad and the need to shield the service provider from cost-intensive research on quality parameters outside the Member State of residence. 48 Due to the fact that service providers cannot and are not obliged to safeguard a certain quality of delivery, it is questionable whether they will maintain any such information at all. Even if the provider operates the service also in the Member State of travel or destination, the domestic level of quality might differ from the level offered to the travelling subscriber. Accordingly, voices were raised calling for this provision to be re46

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moved.36 In practice, we see mainly the general statement that the quality of delivery may not equal the level of quality in the Member State of residence.37 The means by which the online content service provider needs to inform the sub- 49 scriber need to be adequate and proportionate. Pursuant to Recital 22, the information ought to be provided on the service provider’s website. However, the information could equally be shared by way of e-mail or other means.

C. Enforcement The enforcement of the obligation to ensure cross-border portability in accordance with Art. 3 depends on how this provision is viewed in terms of its statutory nature. As mentioned before, there are differing views.38 Some argue in favour of a pure obligation39 addressing the relevant service providers, others see an own statutory right 40 granted to the subscriber and again others emphasise the character of a limitation 41 to copyright. The better arguments can be put forward in respect to a mere obligation. 42 The wording of Art. 3(1) clearly addresses the service provider by referring to an obligation imposed on him. Art. 7(1) renders contractual provisions unenforceable if they run counter to the Portability Regulation. In addition, Recital 26 only refers to subscribers being ‘eligible’ for cross-border portability of online content services. This is less than a statutory right. The Portability Regulation does not contain any specific provisions on how the compliance obligation could be ensured.43 In particular, there is no dedicated set of sanctions making sure that service providers become active and expand their services in order to give effect to the Regulation. Privacy law demonstrates the extent to which a system of significant sanctions can be effective in terms of compliance. The fines and penalties set out in Arts 77 et seq. GDPR have substantially increased the attention companies pay to the protection of personal data. The fact that even six months after the Portability Regulation entered into force many subscribers could not effectively travel with their subscribed content was proven by a number of surveys. According to a German consumer protection association, not less than 49 % of the interviewed consumers stated that they experienced issues when trying to access and use their services from outside the Member State of residence.44 This figure confirms the overall perception that the service provider only gradually took action in order to comply with Art. 3(1). This renders the aspect of enforcement even more important. However, it is for the Member States and the domestic laws to provide effective means of enforcement. Accordingly, one has to look into the various national jurisdictions within Europe to assess the enforceability of the obligation set out in Art. 3(1). As a general perception, it must be noted that it is, in first place, the subscriber who is in charge of asserting claims on the basis of their subscription. If the service provider has 36 BITKOM, 4 available under https://www.bitkom.org/sites/default/files/file/import/20160523-Bitkom -Stellungnahme-zur-Portabilitaetsverordnung.pdf (accessed 27 August 2019). 37 Engels/Nordemann in: Fromm/Nordemann, Article 3, mn. 7. 38 See above → mn. 3 et seq. 39 Ranke/Glöckler, 379 et seq.; Roos, 148–149. 40 Eginger, 705; Peifer, 12; Roos, 151. 41 German Bar Association, 14, available under; Synodiniou, 13 et seq.; Walter, 195. 42 See above → mn. 4. 43 Specifically criticised by the German Bar Association, 5. 44 See https://www.marktwaechter.de/pressemeldung/geoblocking-weiterhin-probleme-beim-streamin g-im-eu-ausland (accessed 29 August 2019).

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not yet amended their terms and conditions, the subscriber may challenge the relevant contractual provisions dealing with the territorial scope of use as unenforceable in the sense of Art. 7(1). If the subscription already reflects the obligation set out in Art. 3(1) and the service is nevertheless inaccessible abroad, then a claim for breach of contract is available.45 In this context, the subscriber could assert claims for due contractual performance as well as for damages.46 The UK legislator even introduced a special cause of action for breach of duty in case the service provider does take adequate steps to allow for portability of online content.47 According to s 4 Portability of Online Content Services Regulations 2018, a breach of an obligation by a provider to comply with Article 3(1), Article 3(3) or Article 9(2) of the Regulation is a breach of a duty owed by that provider to a subscriber. Where the subscriber suffers loss or damage due to such a breach by the provider, that loss or damage is actionable by the subscriber against that provider. 54 Moreover, as Art. 3(1) aims at the regulation of the relevant market sector, particular jurisdictions allow consumer protection associations to bring action against a service provider for non-compliance with Art. 3(1).48 In Germany, for instance, the relevant provision is set out in § 3 a UWG (Gesetz gegen den unlauteren Wettbewerb – Act Against Unfair Competition). Service providers who do not give effect to such market regulation can be challenged in court both by competitors and associations acting in the interest of consumers.49

Article 4 Localisation of the provision of, access to and use of online content services The provision of an online content service under this Regulation to a subscriber who is temporarily present in a Member State, as well as the access to and the use of that service by the subscriber, shall be deemed to occur solely in the subscriber’s Member State of residence. Bibliography: Bundesverband Interaktive Unterhaltungssoftware (BIU), ‘Stellungnahme zum Vorschlag für eine Verordnung des Europäischen Parlaments und des Rates zur Gewährleistung der grenzüberschreitenden Portabilität von Online- Inhaltediensten im Binnenmarkt (COM(2015) 627 final)’ (February 2016); Fromme/Nordemann (eds), Urheberrecht (12th edn, Kohlhammer 2018). A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 4

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Relation to other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Relation to other laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5 5 6 8

Engels/Nordemann in: Fromm/Nordemann, Article 3, mn. 11; similar: German Bar Association, 5. Roos, 151. 47 The Portability of Online Content Services Regulations 2018, Statutory Instrument No. 249/2018. 48 Ehle/Werner, 378; Roos, 151; on the condition that a systematic violation takes place: Eginger, 700; Engels/Nordemann in: Fromm/Nordemann, Article 3, mn. 10. 49 Engels/Nordemann in: Fromm/Nordemann, Article 3, mn. 10. 45

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Localisation of the provision of, access to and use of online content services C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Provision of an online content service to a subscriber . . . . . . . . . . . . . . . . . . . . . . . . II. Access to an online content service by the subscriber . . . . . . . . . . . . . . . . . . . . . . . . III. Use of an online content service by the subscriber . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Legal fiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10 10 12 14 16

A. Function I. Goal Art. 4 is the ‘conceptual heart’ of the Portability Regulation. It contains the legal fic- 1 tion safeguarding the overall embedding of the Regulation into the wider concept of copyright, notably the territorial nature of copyright. The provision and its aim are quite straightforward. There are three actions to be distinguished from each other, one of which is carried out by the service provider (making available) whilst the other two actions (accessing and using) relate to the subscriber. All of them are fictionally relocated and deemed to take place in the country for which the subscriber has obtained the service subscription. The legal fiction leads to all relevant acts being fictionally brought back within the 2 territory for which the underlying subscription has been granted. Thereby, the obvious infringement of proprietary copyright position in the territory of actual provision, access and consumption is avoided. With Art. 4, the legislator recognises that the main obstacle to portability of online 3 content is the territoriality principle combined with the modern practice of segmented licensing. In some industries, such as the music industry, multi-territorial licensing is already established due to practices and regulatory improvement.1 However, in other industries, country-by-country licensing is still the common practice. This applies in particular to the audiovisual media sector. This phenomenon is now overridden by the Portability Regulation, at least, with respect to temporary absence from the Member State of residence. This is the main goal and purpose of Art. 4.

II. Structure Art. 4 is structured as an exception and limitation to the rightholder’s copyright. 4 Both the service provider and the subscriber can rebut any motion put forward by the rightholder asserting a claim for unauthorised use of the protected content. The legal fiction relocates such use to the territory of the subscription. This is the case for the act of making available the content to the subscriber as well as for the subscriber’s access and use of the content.

B. Context I. Relation to other provisions Art. 4 is to be read in close connection with Art. 3(1) and Art. 6(1). Whereas the latter 5 provisions relate to the contractual relationship between the subscriber and the online 1

For instance via the Collective Rights Management Directive.

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content service provider, Art. 4 refers to the relationship between the online content service provider and the rightholder. The service provider could not be legally obliged to offer a service inherently contradictive to the copyright holder’s rightful position in the territory of consumption. Therefore, Art. 4 forms the natural reverse side and counterpart of the legislator’s aim to allow subscribers to travel with their online subscriptions.

II. Relation to other laws The legal fiction in Art. 4 relates first and foremost to Arts 2–4 of the InfoSoc Directive in which the copyright holder’s exploitation rights are defined. The provision, in essence, complements the catalogue of exceptions and limitations set out in Art. 5 InfoSoc Directive. 7 Furthermore, it is worth mentioning that a similar legal fiction was already established in Art. 1(2)(b) SatCab Directive applying to traditional means of broadcasting. The Revised SatCab Directive also builds on such legal fiction.2 It was enacted to simplify the clearing process for broadcasters as well as for operators of retransmission services. Online services that can be considered ancillary to the actual broadcasts are now equally subject to the country of origin principle. The vehicle is yet again a legal fiction relocating the act of use. 6

III. History The overall concept of a legal fiction is not new. Art. 4 copies this approach from Art. 1(2)(b) SatCab Directive forming the backbone of the country of origin principle. The current manifestation of the concept was part of the very first considerations made by the Commission. Initially, the Commission thought about listing the already existing legislation that would be affected by the new law. Although this idea was dropped at an early stage, the legal fiction as now set out in Art. 4 was not subject to any substantial changes in the course of the legislative process. 9 The differences compared to the prior legal fiction seen in the context of the country of origin principle are particularly noteworthy. In contrast to the SatCab Directive, the copyright-relevant actions are not deemed to occur in the Member State where the online content service provider has his principal place of business, but where the consumer resides. Another difference lies in the remuneration. According to Recital 17 SatCab Directive, the parties should take into account all aspects of the broadcast, such as the actual audience, the potential audience and the language version when considering the license fee. The Portability Regulation does not provide a similar provision or recital. This is likely due to the fact that the first SatCab Directive actually extended the audience, whereas the Portability Regulation merely allows the same audience to access and use the online content at another Member State. 8

2 Directive (EU) 2019/789 laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes, and amending Council Directive 93/83/EEC (OJ L 130, 17.5.2019, p. 82).

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Art. 4

C. Explanation I. Provision of an online content service to a subscriber The first element of Art. 4 is the legal fiction regarding the provision of an online 10 content service to a subscriber who is temporarily present in a Member State. The term ‘subscriber’ is defined in Art. 2 No. 1),3 the term ‘temporarily present’ in Art. 2 No. 4,4 and the term ‘online content service’ is explained in Art. 2 No. 55. The notion ‘providing’ is not explicitly defined in the Regulation. However, Recital 24 clarifies that the legal fiction relates to the reproduction of a 11 work as well as to its communication and making available to the public. Also covered are acts of extraction or re-utilisation in relation to databases protected by sui generis rights, which occur when the service is provided to subscribers. Thus, the notion of ‘providing’ is rather broad. In fact, all acts forming an exploitation of copyright works and other protected subject-matter are included as long as they form an intrinsic link in the chain of action allowing the subscriber to consume the service at issue.

II. Access to an online content service by the subscriber The subscriber’s access to the service is the natural reverse side of the coin. There is 12 no specific exploitation right of access set out in Arts 2–4 InfoSoc Directive. The pure consumption of a work, e.g. the reading of a book, does not require the author’s or rightholder’s authorisation. However, services provided over the Internet and aiming at making available copyright protected works usually involve acts of digital reproduction. This is notably the case where content is streamed or downloaded. Therefore, the term ‘access’ as used in Art. 4 is to be understood as covering the reproduction of the work at issue. Accordingly, Recital 24 explains that subscribers who are temporarily present in a Member State other than their Member State of residence ‘should be able to access and use the service and where necessary carry out any relevant acts of reproduction, such as downloading, which they would be entitled to do in their Member State of residence’. Notable in this context is the legislator’s intention to limit the scope of legitimate ac- 13 tions to those acts of reproduction that are indeed necessary. However, this test of necessity must not be interpreted in an exuberant way. Art. 4 does not aim at limiting the service providers’ discretion how to build and structure their services by any means. The technical processes of the online content service and the inherent acts of reproduction remain untouched. Therefore, the expression ‘where necessary’ as used in Recital 24 relates to the existing service as offered in the Member State of Residence. All acts of reproduction relating to the provision of the service are legitimised by the legal fiction set out in Art. 4. On the contrary, any exuberant reproduction may not be carried out and justified on the basis of the Portability Regulation.

III. Use of an online content service by the subscriber The subscriber may not only access the online content service but the subsequent use 14 of the service is also justified under Art. 4. In the same way as there is no specific exSee the comments under → Art. 2 Portability Regulation, mn. 2 et seq. See the comments under → Art. 2 Portability Regulation, mn. 26 et seq. 5 See the comments under → Art. 2 Portability Regulation, mn. 40 et seq. 3

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ploitation right of access set out in Arts 2–4 InfoSoc Directive, there is neither a dedicated right of use. However, the same considerations made in relation to the term ‘access’ are equally persuasive in respect to the expression ‘use’. It involves, in first place, any type of reproduction inherent to the consuming of the respective service. 15 This conclusion is confirmed by a closer look at how the term ‘use’ is applied throughout the Regulation. Basically, the pair of ‘access and use’ can be found as a consistent and unitary expression throughout the entire Regulation. Notably, Recitals 3, 19, 23 and 24 refer to both terms as one combined expression. The same is true for Arts 1–4 and 6. Therefore, reference can be made to the remarks relating to the subscriber’s access to the service.

IV. Legal fiction The copyright relevant acts are deemed to occur solely in the subscriber’s Member State of residence. This is the legal fiction the legislator deploys as the core element of the Portability Regulation. 17 The legal fiction extends to all relevant areas of law and is not limited to pure copyright.6 Notably, the service provider is not obliged to examine the domestic rules on age verification (‘age-gating’) or other measures aiming at the protection of minors. 7 Insofar as the provision of the online content service falls under the scope of the Regulation and as long as all conditions are fulfilled, the service is only required to be compliant with the national laws of the user’s Member State. A differing view would jeopardise the core aim of the Portability Regulation. 16

Article 5 Verification of the Member State of residence 1. At the conclusion and upon the renewal of a contract for the provision of an online content service provided against payment of money, the provider shall verify the Member State of residence of the subscriber by using not more than two of the following means of verification and shall ensure that the means used are reasonable, proportionate and effective: (a) an identity card, electronic means of identification, in particular those falling under the electronic identification schemes notified in accordance with Regulation (EU) No 910/2014 of the European Parliament and of the Council (1), or any other valid identity document confirming the subscriber’s Member State of residence; (b) payment details such as the bank account or credit or debit card number of the subscriber; (c) the place of installation of a set top box, a decoder or a similar device used for supply of services to the subscriber; See also Engels/Nordemann in: Fromm/Nordemann, Article 4, mn. 4. Sceptical: Bundesverband Interaktive Unterhaltungssoftware, available under https://www.game.de/posi tionen/stellungnahme-des-biu-zum-vorschlag-fuer-eine-verordnung-des-europaeischen-parlaments-und -des-rates-zur-gewaehrleistung-der-grenzueberschreitenden-portabilitaet-von-online-inhaltediensten-im -binnenmar/ (accessed 27 August 2019). 1 Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC OJ L 257, 28.8.2014, p. 73. 6

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2.

3.

4.

5.

Art. 5

(d) the payment by the subscriber of a licence fee for other services provided in the Member State, such as public service broadcasting; (e) an internet or telephone service supply contract or any similar type of contract linking the subscriber to the Member State; (f) registration on local electoral rolls, if the information concerned is publicly available; (g) payment of local taxes, if the information concerned is publicly available; (h) a utility bill of the subscriber linking the subscriber to the Member State; (i) the billing address or the postal address of the subscriber; (j) a declaration by the subscriber confirming the subscriber’s address in the Member State; (k) an internet protocol (IP) address check, to identify the Member State where the subscriber accesses the online content service. The means of verification under points (i) to (k) shall only be used in combination with one of the means of verification under points (a) to (h), unless the postal address under point (i) is included in a publicly available official register. If the provider has reasonable doubts about the subscriber’s Member State of residence in the course of the duration of the contract for the provision of an online content service, the provider may repeat the verification of the Member State of residence of the subscriber, in accordance with paragraph 1. In such a case, however, the means of verification under point (k) may be used as a sole means. Data resulting from the use of the means of verification under point (k) shall be collected in binary format only. The provider shall be entitled to request the subscriber to provide the information necessary to determine the subscriber’s Member State of residence in accordance with paragraphs 1 and 2. If the subscriber fails to provide that information, and as a result the provider is unable to verify the subscriber’s Member State of residence, the provider shall not, on the basis of this Regulation, enable the subscriber to access or use the online content service when the subscriber is temporarily present in a Member State. The holders of copyright or related rights or those holding any other rights in the content of an online content service may authorise the provision of, access to and use of their content under this Regulation without verification of the Member State of residence. In such cases, the contract between the provider and the subscriber for the provision of an online content service shall be sufficient to determine the subscriber’s Member State of residence. The holders of copyright or related rights or those holding any other rights in the content of an online content service shall be entitled to withdraw the authorisation given pursuant to the first subparagraph subject to giving reasonable notice to the provider. The contract between the provider and the holders of copyright or related rights or those holding any other rights in the content of an online content service shall not restrict the possibility for such holders of rights to withdraw the authorisation referred to in paragraph 4.

Bibliography: BEUC, ‘Proposal for a Regulation on Ensuring Cross-Border Portability of Content Services: BEUC position’ (March 2016); BITKOM, ‘Stellungnahme: Kommissionsentwurf zur PortabilitätsVerordnung’ (May 2016); Commission, ‘Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market’ COM(2015) 627 final; Commission, ‘Impact Assessment Accompanying the document Proposal for a Regulation of the European Parliament and of the Council to ensure the cross-border portability of online

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content services in the internal market’ SWD(2015) 270 final; Committee on Legal Affairs (JURI), ‘Draft Report on the proposal for a regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market’ PR\1098581EN; Council, ‘Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market – General approach’ ST-8939/2016; Dreier/Schulze, Urheberrechtsgesetz (6th edn, C.H. Beck 2018); Eginger, ‘Die neue Portabilitätsverordnung’ (2017) 10 ZUM 698–712; Fromme/Nordemann (eds), Urheberrecht (12th edn, Kohlhammer 2018); Grandjean, ‘Portabilität von Inhalten in Europa – Herausforderungen für die Filmwirtschaft’ (2017) 10 ZUM 727– 732; Heyde, ‘Die Portabilitätsverordnung – Auswirkungen auf die Lizenzverträge’ (2017) 10 ZUM 712– 720; Martiny, ‘Nationale Sperrfristen, territoriale Lizenzen und das Streaming im digitalen Binnenmarkt der EU’ (2018) 11 ZUM 772–781; Peifer, ‘Please Take Your Personal Belongings With You – Portabilität und Zugang als Paradigmen für Verträge über digitale Güter’ (2017) 1 AfP 8–13; Ranke/Glöckler, ‘Grenzüberschreitende Portabilität von Online-Inhaltediensten im Binnenmarkt’ (2017) 6 MMR 378–382; Roos, ‘Grenzenloses Streaming?’ (2017) 3 MMR 147–152; Verbraucherzentrale Bundesverband, ‘Grenzüberschreitende Nutzung von digitalen Inhalten erleichtern’ (June 2016). A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 5

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Relation to other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Relation to other laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8 8 9 11

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Verification means . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Conclusion and renewal of subscription . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Provision against payment of money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Means of verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Repetition of the verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Reasonable doubts about the Member State of residence . . . . . . . . . . . . . . . . . 2. In the course of the duration of the contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Repetition of the verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Sole means: IP address check . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Collection in binary form only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Unusual verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Entitlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Failure of verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. Authorisation without verification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Rightholder’s discretion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Authorisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Content of contract . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4. Withdrawal of authorisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. Reasonable notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . V. No contractual restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14 14 14 17 18 43 43 47 50 52 53 54 55 58 59 59 60 62 63 64 65

D. Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Art. 5 sets out an orderly verification process seeking to determine the subscriber’s Member State of residence. The provision aims to protect the rightholders against any type of misuse of the Portability Regulation.2 However, it equally aims at rendering legal

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certainty for service providers and subscribers. Thus, its protective nature relates to all core stakeholders. The provision applies only to online content services provided against payment of 2 money; free-of-charge services are not covered. However, providers of such services may choose to offer a travel-with-your-content option in accordance with Art. 6. In such case, the verification requirements also apply. Therefore, the legislator’s goal is to implement a statutory verification system for all instances of extra-territorial access and use of an online content service. The legislator has shaped and defined a certain number of criteria that shall, in com- 3 bination of not more than two of the listed mechanisms, allow for adequate verification of the subscriber’s Member State of residence. The overall goal of Art. 5 is twofold. 3 First, the service provider shall be furnished with adequate legal certainty.4 He is equipped with a clear set of actions he shall take at a certain point in time, i.e. principally at the conclusion and upon the renewal of the subscription. Apparently, the legislator aimed for a pragmatic, easily comprehensible and easy to implement verification system. In addition, the means of verification need to affordable.5 This approach is based on the general understanding that there is no sole method to verify the Member State of residence. The downside of providing a list of criteria to choose from is the phenomenon of a somewhat ‘uneven’ landscape: very different criteria may lead to the ultimate determination of what shall be deemed the subscriber’s Member State of residence. Furthermore, the chosen criteria can lead to varying results. However, the legislator intentionally provided the service providers with a wider selection of verification criteria to choose from. Notably, Art. 5(1) prohibits the application of more than two criteria. Therefore, it was the legislative goal to allow for some flexibility.6 The second and equally important intention is to protect the subscriber’s privacy. 4 Whereas the general necessity of adequate verification was never in jeopardy, the specific design was subject to heavy debate.7 The temporary nature of the travel or stay abroad certainly needs to be verified and such verification inevitably involves the collection and processing of personal data Obviously, any type of motion profiling would be disproportionate. Therefore, the Member State of temporary presence could not be chosen as the decisive factor. Accordingly, the focus had to shift towards the Member State of residence. Still, the principle of data economy and minimisation of personal data equally applies to the verification of such Member State.8 The legislator therefore takes due account of the subscriber’s privacy interests by not only defining the means of verification but also limiting their application to ‘not more than two of the following means of verification’. In addition, the time and occasion of verification are clearly defined.

See Recital 26. Engels/Nordemann in: Fromm/Nordemann, Article 5, mn. 1. 5 BITKOM, available under https://www.bitkom.org/Bitkom/Publikationen/Stellungnahme-Kommissio nsentwurf-zur-Portabilitaets-Verordnung.html (accessed 27 August 2019). 6 Dreier in: Dreier/Schulze, Article 5, mn. 2. 7 See BEUC (European Consumer Organisation): http://www.beuc.eu/publications/beuc-x-2016-022_are _proposal_for_a_regulation_on_ensuring_cross-border_portability_of_content_services.pdf (accessed 27 August 2019); Verbraucherzentrale Bundesverband: https://www.vzbv.de/sites/default/files/portabilitaet_vz bv_stellungnahme_16-06-01.pdf (accessed 27 August 2019). 8 Engels/Nordemann in: Fromm/Nordemann, Article 5, mn. 1. 3

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II. Structure Art. 5(1) is drafted as a straightforward verification request. The mandatory nature of the provision is evident. The service provider is the obliged addressee. The list of verification means forms the ‘tool box’ to choose from. Also, clear guidance is provided as to when the verification shall be carried out. The service provider is neither obliged nor has he the right to engage in additional verification routines. 6 The service provider’s obligations as set out in Art. 5(1) and (2) are complemented by an explicit entitlement to request from the subscriber the necessary information and data allowing the verification requested by the Portability Regulation. Thus, the reverse side of the service provider’s verification task is the subscriber’s obligation to cooperate. In case of the absence of such cooperation the service provider is exempted from the overall obligation to offer the travel-with-your-content option to the respective subscriber. Structure-wise, Art. 5(3) is therefore a limitation and exception to Art. 3(1). 7 Finally, Art. 5(4) and (5) give room for contractual arrangements between rightholders and online content service providers. The principle of freedom of contract and the general right of the authors and other rightholders to dispose of their proprietary position are the basis for these subsections. 5

B. Context I. Relation to other provisions 8

Art. 5 is closely related to Art. 3(1) and Art. 6(1) since the verification of the Member State of residence is crucial for their application. Furthermore, Art. 5 is to be seen in conjunction with Art. 8. The verification of the Member State of residence requires the processing of personal data. Accordingly, data protection principles are to be adhered to.

II. Relation to other laws The verification system as set out in Art. 5 intervenes with a variety of other laws. Depending on which verification means are chosen, banking laws, tax laws or IT laws may be of relevance. In addition, privacy laws are to be considered since all verification criteria involve the processing of personal data. 10 In general, Art. 5(1) and (2) serve as justification for collecting and assessing the relevant information. 9

III. History 11

Initially, the Commission did not intend to implement any explicit verification process as part of the Portability Regulation. Instead, it was envisaged to build on authentication tools the rightholders and providers agree upon bilaterally.9 In general, the Commission’s initial proposal said little on any verification of the subscriber’s extra-territorial access and use of the online content. Recital 23 held some rudimentary remarks. As re-

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gards data privacy, the proposal simply referred to the need to comply with the Data Protection Directive 95/46/EC and the ePrivacy Directive.10 The actual reason for this rudimentary coverage is that the Commission’s initial pro- 12 posal did not define the concept of temporary presence in a Member State other than the Member State of residence.11 Without a clear picture what to verify in first place, the derivative verification system could not gain substantial attention. Eventually, both the Parliament and the Council introduced the concept of a statutory 13 verification system. The specific means of verification were debated on the basis of varied opinions. Particular focus was put on the criterion of checking IP addresses. Also, differing views were advocated as to whether the service provider and the rightholder should be allowed to negotiate further verification means or whether the statutory list should be exhaustive.

C. Explanation I. Verification means 1. Conclusion and renewal of subscription As a basic rule, the online content service provider must verify the subscriber’s Mem- 14 ber State of residence at the conclusion and upon renewal of the contract. The conclusion relates to the commencement of the initial term of the subscription. Therefore, the successful verification can be seen as a precondition for the travel-with-your-content option to be offered. Moreover, the verification process has to be undergone again at the occasion of each 15 renewal of the initial or any subsequent term. Obviously, there are different ways to renew a contractual term beyond the initially-agreed period. The parties may agree that the subscription is renewed automatically, by way of unilateral declaration or mutual agreement. Regardless of the chosen contractual mechanism, Art. 5(1) calls for a repeated verification whenever and however the previous term comes to an end and a new term commences.12 Art. 9(2) complements the above renewal routine in respect of subscriptions that were 16 concluded before 21 May 2018. Service providers were obliged to run the verification process on or before that date in order to be allowed to offer the online content service in compliance with the Portability Regulation.

2. Provision against payment of money As mentioned above, the Portability Regulation primarily aims at online content ser- 17 vices that are offered against the payment of money.13 Providers offering free-of-charge services may choose to become subject to the Regulation, but they are not obliged to. In consequence, Art. 5(1) explicitly refers to the condition that the service is offered against the payment of money. For further details see the comments to Art. 3(1). 14

10 See Art. 6 in COM(2015) 627 final. The reference to Directives 95/46/EC must be read as if the GDPR had been referred to (Art. 94(2) GDPR). 11 See ibid., 7. 12 Engels/Nordemann in: Fromm/Nordemann, Article 5, mn. 3. 13 See above → mn. 2. 14 See the comments under → Art. 3 Portability Regulation, mn. 16 et seq.

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3. Means of verification 18

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a) General. Art. 5(1) lists a total of eleven criteria that may be used in order to verify the subscriber’s Member State of residence. It is for the service provider to choose the criterion or criteria he wishes to rely upon. The subscriber is not entitled to ask for a specific means of verification to be used.15 From the wording ‘two of the following means of verification’ it follows that the list is exhaustive. Thus, online content service providers have no right or discretion to rely on verification means outside the statutory catalogue set out in Art. 5. The exhaustive character of the list developed over time. For instance, the first JURI draft proposed a wording which allowed rightholders and providers to agree on other verification means.16 This concept, however, did not make its way into the final Regulation. The legislator first considered allowing ‘a combination of two’.17 In light of the principle of minimisation of data collection, the final Regulation now requires maximum of two verification means.18 In practice, this means that the service provider will have to implement a routine based on one specific criterion, e.g. payment details such as the bank account or credit or debit card number of the subscriber. 19 If the verification is successful, no further checking is needed. Recital 26 is fairly instructive in this context. One can read that unless the subscriber’s Member State of residence can be verified with sufficient certainty on the basis of a single means of verification, providers should rely on two means of verification. This understanding also matches the aforementioned principle of minimisation of data collection as emphasised, inter alia, in Art. 8(1). There are voices taking the position that amongst the eleven means of verification there are certain criteria which by nature are more suitable than others in terms of data minimisation. Notably, the payment details referred to in Art. 5(1)(b) are usually available without any additional act of data collection if the service is offered for money.20 However, bank accounts are not necessarily located where the account holder has his residence. Therefore, this criterion on its own might not deliver the legal certainty sought by the whole verification process. Nevertheless, it is advisable to generally favour those criteria that do not require the service provider to demand additional personal data from the subscriber. The legislator divided the means into two categories: (a)–(h) and (i)–(k). The first category includes means that may be used as single means as long as they provide sufficient certainty about the subscriber’s Member State of residence. The second category covers three criteria that the legislator considered less instructive. Therefore, those criteria may be used only in combination with a criterion from the first category. One could argue that the means (a)–(h) should rather be used than the means (i)–(k). 21 What is quite apparent is the fact that the latter criteria are to be dealt with cautiously. Address data may be chosen in a way camouflaging the true setting. This is the case for both analogue and digital addresses. With this fact in consideration, it makes sense to ask for another more reliable criterion to be chosen in combination with e.g. the postal or IP address. Given that the Regulation allows the application of a maximum of two verification criteria, one has to look at scenarios where those two means of verification lead to amDreier in: Dreier/Schulze, Article 5, mn. 2. Committee on Legal Affairs (JURI), Articles 3(b), 2(h). 17 ibid., 29. 18 Otherwise, data protection issues may arise: cf. Peifer, 12. 19 Roos, 150. 20 Engels/Nordemann in: Fromm/Nordemann, Article 5, mn. 6. 21 Heyde, 717. 15

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biguous results. It would be to the detriment of both the subscriber and the service provider if such outcome would automatically ban the service provider from considering a third criterion from the list in Art. 5(1). After all, the limitation in number aims at protecting the subscriber’s privacy. Therefore, some commentators argue in favour of a third means of verification becoming available if the first two are contradictive.22 However, the wording in Art. 5(1) is very clear and does not leave much room for interpretation. Also, it is quite obvious that applying two criteria may lead to differing results of which neither enjoys priority or greater authoritative weight. Thus, it is rather unlikely that the legislator accidentally missed out on such scenario. The better arguments therefore speak for not allowing the examination of a third criterion. This result is also backed by the scope of entitlement set out in Art. 5(3). The service provider may only ask for information that is necessary to perform the verification process defined in Art. 5(1) and (2). Due to the straightforward restriction to the maximum of two criteria the subscriber’s right to information ends where two means of verification have been satisfied information-wise. Against that background, we recommend informing the subscriber about the contradictive outcome of the initial verification process and obtaining explicit consent in respect to any further criterion chosen from the list. Such process generates the required transparency, in particular as it cannot be taken for granted that any such third criterion would clarify the situation definitively. Art. 5(1) does not preclude agreements rightholders and service providers may enter into in order to jointly determine which criteria shall be used. The only condition is that the contractual parties remain within the permitted framework of the catalogue set out in Art. 5(1).23 Therefore, rightholders and service providers cannot agree on a mandatory third criterion to be used. Such contractual stipulation would be unenforceable [Art. 7(1)].24 Such possibility may, however, lose its charm for the service provider if various rightholders prefer different criteria: the service provider has a natural interest in establishing a consistent verification process relying on the same criteria throughout the entire subscriber portfolio.25 In any case, the restrictions on contractual arrangements set out in Art. 7(1) are to be adhered to.26 b) Means (a)–(h). The following means may be used as single means as long as they provide sufficient certainty about the subscriber’s Member State of residence: The first means of verification includes all valid identity documents that reveal the Member State of residence. Notably, it is not the subscriber’s nationality that is decisive. Instead, the focus lies on residential information. In Germany, a registration certificate which can be issued upon request is therefore equally sufficiently authoritative;27 German driver’s licenses, contrastingly, do not include the current address of the subscriber. Besides traditional ID documents, electronic means of identification may be used as well. This applies in particular to all electronic means that were introduced by the eIDAS Regulation. However, due to the free movement of workers within the EU, there is a risk that a subscriber has the citizenship of a Member State but lives and works permanently (or even for a short period which is too long to be considered a temporary presence) in another Member State.

Engels/Nordemann in: Fromm/Nordemann, Article 5, mn. 7; Eginger, 702–703. Recital 26. 24 Engels/Nordemann in: Fromm/Nordemann, Article 5, mn. 12. 25 Kraft, 724. 26 Heyde, 716–717. 27 Engels/Nordemann in: Fromm/Nordemann, Article 5, mn. 5. 22

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Payment details are likely to become the most used verification means. It includes in particular the bank account or the credit or debit card number of the subscriber. Such personal information is required anyway by all paid-for online content service providers falling under Art. 3(1). Thus, the financial and administrative burden is low. The online content service providers need to exercise caution regarding the name of the bank account holder since there is the risk that a third person may pay for the subscription and hereby bypass the verification process. Problems may arise if a subscriber would like to pay with a foreign credit/debit card or bank account. Online content service providers who offer services that involve an act of installation of hard- or software at the subscriber’s premises may rely upon that place of installation. The legislator does not give any examples of devices. However, set top boxes, receivers or decoders may serve as suitable indications in this context. Providers of set top boxes that work only with an Internet connection use the IP address to check the subscriber’s place from where content is accessed. This procedure rather relates to Art. 5(1) (k) as the IP address is the decisive element in this context. Since the technologies involving receiver, IPTV and other devices are developing rapidly and the devices may vary in their operating mode, Art. 5(1)(c) rightly covers also similar devices. Another criterion to verify the subscriber’s Member State of residence is a proof for the payment of a license fee for other services provided in the Member State. By merely referring to services, the legislator covers not only online content services but all kinds of services which require a license. An explicit example is the payment for public service broadcasting, which is usually mandatory. Since the wording is very broad, Art. 5(1)(d) also covers the payment for the license for another online content service. A subscriber could therefore refer to another online content service provider who himself had to perform the verification process. Online content service providers may also use an Internet or telephone service supply contract that links the subscriber to the Member State. Contracts for Internet access with Internet service providers (e.g. DSL, Cable etc.) as well as telephone contracts will usually link someone to an address in a Member State and will therefore suffice. With regard to telephone contracts, it needs to be considered that also prepaid contracts qualify as a service supply contract. However, it can be questioned whether a prepaid telephone contract actually links someone to a Member State since an address commonly is not needed despite the identification requirement applicable in many Member States. A similar question is also whether the mere indication of a telephone number is sufficient in light of the wording ‘telephone service supply contract’. The issue is whether the legislator aimed at information within the contracts such as an address or whether the mere fact that a consumer possesses a certain telephone number is enough to verify the Member State of residence. In the end a telephone number is always connected to a national dialling code and it could be easily verified by sending a code that needs to be entered before the registration is completed. On the other hand, since roaming within the EU was abolished, it may be more attractive for consumers to obtain a phone number of another Member State than their Member State of residence due to lower costs. Contracts that are similar to internet and telephone service supply contracts are covered as well. A similar contract may be the service supply contract for app-store purchases. 28 Another verification criterion is the registration on local electoral rolls under the condition that they are publicly available. It is rather unlikely that online content service provider will rely on the registration on local electoral rolls since many online content service providers are operating in more than one Member State and they would need a 28

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verification system that takes into account the different rules on the availability of electoral rolls in various Member States. For instance, in Germany, electoral rolls are not easily available to the public. Usually, they become available only for a couple of days before the election and only for information concerning oneself.29 Regarding payment of local taxes as a means of verification, the information must be publicly available. Just as the registration on local electoral rolls, this may be a realistic option in some Member States. For instance, tax returns in Sweden are all publicly available. In many other Member States, the payment of taxes is not available to the public and therefore not useful regarding the verification of the subscriber’s Member State of residence. Utility bills can be used as well to verify the Member State of residence. Just as internet or telephone service supply contract, the utility bill must link the subscriber to the Member State of residence. This criterion is satisfied if the bill shows an address within a Member State which is not merely the billing address but the place where the services are performed. Utilities include electricity, gas, water, and sewage. Under broad understanding it would also cover telephone and Internet bills. However, those are already covered by Art. 5(1)(e). c) Means (i)–(k). The following means can only be used in combination with one of the means of Art. 5(1)(a)–(h). The subscriber’s billing or postal address may also be used in order to verify the Member State of residence. The address can either be publicly available in official registers. It can also be indicated by the subscriber. In order to set this verification mean from Art. 5(1)(j) – the declaration by the subscriber – the billing or postal address should not be a mere assertion. Instead, the address should be actually used as a billing or general postal address. The easiest verification means for the subscriber is to confirm his Member State of residence in a declaration. Even though, the wording does not require formalities, the declaration should be in writing due to evidence issues. The risk of a wrong declaration, however, is high since there is no control mechanism involved. Still, since the legislator decided to include this means, it is legitimate to use in combination with another verification means. The IP address check was likely one of the most debated issues and the entire Recital 28 covers the performance of IP address checks. By carrying out an IP address check, the provider receives data which allows him to locate the place from where the subscriber is accessing the online content service. Each time a subscriber accesses the online content services (usually via a log in procedure) via a device, a request for the content is sent from the device to the provider’s server. At the same time, the IP address of such device is sent with the request in order to let the server know where to send the content. All IP addresses belong to various Internet service providers (ISPs) and therefore provide information on the country/region in which the online content is accessed. Checking IP addresses remains a typical means by online content service providers which is carried out not only at the conclusion and the renewal of subscription contracts. It is the only valid mechanism to ensure that subscribers are only accessing online content in areas for which the providers have a license for or where they may rely on the Portability Regulation.30 Thus, in order to prevent subscribers from ‘taking’ online content with them for a temporary stay outside the EU Member States and therefore outside the scope of the Regulation, the provider will continue to use geo-blocking methods. However, the IP ad29 30

§§ 20, 21 Bundeswahlordnung. See also Eginger, 704; Heyde, 715.

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dress check carried out for the purpose of the Regulation shall not result in a precise tracking. For the purpose of the Regulation, the only information that is necessary is the Member State from where the online content service is accessed. 31 For instance, Netflix allows users to check their streaming activity for the last months and locates the region/ federal state of the Member State. At the same time, IP address checks can often be circumvented by using VPN technologies. That is probably why such checks cannot be used as a single verification means. d) Reasonable, proportionate and effective. According to Art. 5(1), the means used shall be reasonable, proportionate and effective. Since Art. 5(1) lays down an exhaustive list of means, it is clear that the three basic principles need to be applied to the listed means. Thus, even though the legislator already limited the options for providers, the legislator makes sure that online content service provider cannot merely apply one or two of the means but must be in line with three undefined legal terms. First, the means shall be reasonable. In practice, this criterion will be satisfied if means are chosen from the list set out in Art. 5(1) and there is compliance with the principle of data minimisation. The choice of criterion remains within the service provider’s discretion.32 Secondly, the means shall be proportionate. The providers may consider their own business model and use means that are less burdensome than others. On the other side, it would not be proportionate to request new information from the subscriber if the provider is already in possession of adequate information. This applies in particular regarding contracts that have been concluded prior of the application of the Regulation.33 The same applies to the renewal of contracts. Thirdly, the means must be effective. The respective threshold is set out in Recital 26. The verification process must provide a level of ‘sufficient certainty’. It is for the service provider to achieve such level of confidence. If he is too trusting, he might assume liability if the outcome may be proven to be wrong.

II. Repetition of the verification 1. Reasonable doubts about the Member State of residence Where reasonable doubts exist, the online content service provider may repeat the verification process in accordance with Art. 5(2). Whereas the provision says ‘may’, one must rather read ‘shall’ repeat the verification of the Member State of residence of the subscriber as the temporary nature of the subscriber’s travel or stay abroad is the core anchor point of the entire Regulation. Therefore, if the service provider has reason to jeopardise this element to be given in respect to a specific subscriber, he is bound to run a check. 44 On the other hand, the verification process put in place by the legislator protects the privacy interests of the subscriber. Therefore, the service provider may not engage in repeating the verification process arbitrarily without any reasonable ground. Therefore, even though Art. 5(2) does not require the service provider to disclose any particular reason, he should consider diligently when to again undertake a verification process. The processing of the subscriber’s personal data in such case will then only be justified in the sense of Art. 6 (1)(c) (compliance with a legal obligation) and/or Art. 6 (1)(f) (le43

Recital 28. Engels/Nordemann in: Fromm/Nordemann, Article 5, mn. 5. 33 Recital 27.

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gitimate interests) GDPR.34 In any case, it is recommendable to document the decision as well as the underlying reasons. There is no limitation as to what might cause suspicion. For instance, if an entry in 45 an official register was used to verify the subscriber’s Member State of residence in first place and this entry has now changed to the knowledge of the service provider, such scenario could spark doubts. The subscriber’s access to the service from abroad can as such not be deemed a reasonable cause for doubt as it is the inherent aim of the Portability Regulation to allow for such access. Taking into consideration that there is no definite time limit when the nature of the travel or stay in a Member State other than the Member State of residence ceases to be temporary, the subscriber cannot be asked to repeat the verification at a certain point in time.35 The time aspect may be looked at as part of an overall assessment and balance of interests, but the provider may not ground a verification routine simply on access data showing that the subscriber used the service from abroad for a period of X. Rather, the service provider could place an internal reminder at a certain point in time asking for a wider review of the subscription as such more comprehensive consideration may give rise to reasonable doubts calling for a repeated verification. It can be assumed that especially rightholders have an interest in agreeing with the 46 online content service provider on a routine verification process. However, such contractual stipulation would be unenforceable according to Art. 7(1).36 What could be agreed upon are criteria determining when doubts shall be deemed reasonably substantial. However, such agreement would still need to stand the objective test of reasonableness.37

2. In the course of the duration of the contract Art. 5(2) cannot justify a verification process before the conclusion of the contractual 47 agreement forming the subscription. Therefore, even if the service provider remains with doubts after having tried to verify the subscriber’s Member State of residence using two of the criteria set out in Art. 5(1), the checking of a third criterion cannot be justified by reference to Art. 5(2). Rather, the justification of such third criterion is still to be considered in the context of Art. 5(1).38 Since the subscriber’s Member State of residence must be verified at the conclusion of 48 the contract, it is rather unlikely that reasonable doubts can arise during the first couple of months of the agreed term. However, there is no strict rule to this. If there are indications that the subscriber secured the online service intentionally just before relocating to another Member State, then reasonable doubts may occur also very soon after the conclusion of the contract. In the case of doubts arising retrospectively after the subscription has come to an 49 end, Art. 5(2) may not serve as an obligation or justification for the service provider to repeat the verification process.

3. Repetition of the verification The provider may repeat the verification if he has reasonable doubts about the sub- 50 scriber’s Member State of residence. The repetition of the verification must, in principle, Engels/Nordemann in: Fromm/Nordemann, Article 8, mn. 6; Martiny, 780. Ranke/Glöckler, 380 seem to suggest a three-month period, which cannot find support. 36 Engels/Nordemann in: Fromm/Nordemann, Article 5, mn. 12. 37 Heyde, 717. 38 See our critical remarks in this respect, above → mn. 18 et seq.

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be pursuant to Art. 5(1). However, the list of verification means is reduced to Art. 5(1) (k) only, namely to checking the subscriber’s IP address. 51 According to the wording of Art. 5(2), there is no obligation to actually carry out a repetition of the verification, though it is possible to include such obligation in the contract. The rightholders and online content service providers should therefore agree on certain criteria for determining reasonable doubts and that if those criteria are fulfilled, the provider must repeat the verification. Such an agreement would also not be unenforceable pursuant to Art. 7(1) since it is not contrary to the Regulation: it does not immediately limit portability for the subscribers. On the contrary, the repetition of the verification serves the effective enforcement of the Regulation and avoids any abuse of the portability provisions. Furthermore, the subscribers have the possibility to allow the IP address check and therefore prove their Member State of residence.

4. Sole means: IP address check 52

The restriction to verification by means of checking the IP address benefits both the service provider and the subscriber. Repeated verification shall not extend to a ‘full check’ as required in the course of the entering into a contractual subscription. Verifying the access to the service by reviewing the IP address is easily performed and does not require extensive effort. Also, the scope and nature of data is limited. Moreover, the applicable privacy laws are to be obeyed.39

5. Collection in binary form only 53

The data resulting from the IP address checks may only be collected in binary format. Data in binary format can only be read by machines such as computers. According to Recital 28, the sole purpose of the IP address check shall be to verify whether the subscriber accesses and uses the online content within or outside of the Member State of residence that was determined before. The level of detail shall not be exceeded by other measures.40

III. Unusual verification 54

Art. 5(3) contains both a justification to demand certain information from the subscriber and a limitation and exception to Art. 3(1) in case of the relevant information not being provided to the service provider.

1. Entitlement The first part of Art. 5(3) lays down the explicit right of online content service providers to request the information necessary to determine the subscriber’s Member State of residence.41 By referring to Art. 5(1) and (2), the legislator ensured that the right does not exceed the scope of necessity. The need-to-know principle is to be applied. 56 Since the list of verification means in Art. 5(1) is exhaustive, the information necessary must fall within the catalogue of verification means. Even within that limitation, the service provider may not ask for more information needed to satisfy the maximum of two criteria listed in Art. 5(1).42 55

Recital 28. ibid. 41 Dreier in: Dreier/Schulze, Article 5, mn. 4. 42 See our critical remarks in this respect, above → mn. 18 et seq.

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Some approve the service provider’s right to rely on other available means of verifica- 57 tion if the subscriber withholds the requested information.43 Such case might very well occur as service providers will commonly possess information about the subscriber exceeding the maximum of two means of verification set out in Art. 5(1). The question is whether such information may be used for the purpose of verification. It may be assumed that it is within the legitimate interest of the service provider to make such use of the personal data available. Art. 6(1)(f) GDPR could therefore potentially serve as justification. However, there might be a reason why the subscriber withholds the respective information. Therefore, the balancing of interests is still required in order to assess whether data on file might be used despite of the service provider’s explicit request for data has been denied. Art. 6(1)(a) and (f) GDPR will serve as justification in cases where the former is explicitly or implicitly asked by the latter to use the data on file rather than to demand additional data from the subscriber.

2. Failure of verification If the verification of the Member State of residence fails, the service provider is not 58 obliged to render the service as demanded of him by virtue of Art. 3(1). However, the service provider is not required to terminate the contract with the subscriber. He only is exempted from granting access to the service in a Member State other than the Member State of residence. This requires the technical possibility and capacity to deny cross-border portability of the online content on an individual basis.44

IV. Authorisation without verification 1. Rightholder’s discretion According to Art. 5(4), all holders of copyright or related rights as well as holders of 59 any other rights in the content of online content services have the right to authorise content portability without the verification of the subscriber’s Member State of residence. This therefore covers all types of rightholders, either authors – but more likely the intermediaries who obtained licenses – but also broadcasting organisations.

2. Authorisation Rightholders may authorise the provision of, access to and use of their content with- 60 out the need to carry out a verification process. Even though Art. 5(3) does not require any formalities, it is recommended that the authorisation is duly documented. Throughout the legislative process, the waiver clause was introduced in order to al- 61 low rightholders their own decision whether or not to ask for the administrative effort of individual verification.45

3. Content of contract Instead of carrying out a verification for each subscriber, the online content service 62 provider may rely solely on the contract between the provider and the subscriber. Practically, the provider is free to determine the Member State of residence or allow the subscriber to declare a Member State of residence. No further verification takes place. Engels/Nordemann in: Fromm/Nordemann, Article 5, mn. 5. Dreier in: Dreier/Schulze, Article 5, mn. 4. 45 See for instance, Council, 3.

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4. Withdrawal of authorisation 63

The rightholder is entitled to withdraw the authorisation at any time and for any reason. Art. 5(5) is important in this context as it states that there must be no restrictions regarding the possibility to withdraw.

5. Reasonable notice 64

The rightholder must give the provider a reasonable notice when he withdraws his authorisation. The notice may be given in writing or orally. Rightholders shall allow providers sufficient time to implement a verification system. There is a no specific time frame for the providers to verify the subscriber’s Member State of residence. However, in light of the two-month provision for providers who offer their online content services for free, at least two months shall be considered reasonable.46

V. No contractual restrictions According to Art. 5(5), there shall be no restriction on the possibility to withdraw the authorisation to provide portability without verification of the subscriber’s Member State of residence. Here the legislator ensured that rightholders retain their power to determine the details of the verification process even if the authorisations pursuant to Art. 5(4) were given beforehand.47 This will be particularly helpful for situations in which the negotiation powers at the beginning of the contract were divided unequally. Restrictions on the possibility to withdraw include any provisions that allow the withdrawal only after a specific period of time, for a certain number of reasons or in specific form. Since the rightholder’s interests in the verification process are the aim of Art. 5(5), the term restrictions shall be interpreted broadly. It shall therefore further cover any contractual provision that connects a disadvantageous consequence to the rightholder’s decision to withdraw. In particular, the right to withdraw should not be restricted by the online service provider’s right to cancel the licensing agreement.48 66 From a structural point of view, Art. 5(5) could have been placed better in Art. 5(4) which states the entitlement to withdraw the authorisation. 65

D. Enforcement As regards the enforcement of Art. 5, one has to look at the various subsections separately as each subsection focuses on protecting differing interests. Art. 5(1) and (2) protect primarily the subscriber against excessive use of his personal data for verification purposes. Therefore, he can rely on the list of verification criteria when asserting a claim under GDPR challenging an act of verification carried out by the service provider.49 68 The subscriber can also take legal actions against excessive terms and conditions underlying the subscription he wishes to obtain. According to Art. 7(1), any contractual provision, which is contrary to the Portability Regulation, shall be unenforceable. This includes any violation of the restrictions on verification set out in Art. 5. Terms and conditions that are not compliant to applicable law can be challenged by way of a motion for declaratory judgment. 67

Art. 9(2). Engels/Nordemann in: Fromm/Nordemann, Article 5, mn. 10. 48 Dreier in: Dreier/Schulze, Article 5, mn. 6. 49 Roos, 151. 46

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Cross-border portability of online content services provided without payment of money

In contrast, rightholders may assert claims if the service provider is not carrying out 69 any verification at all or fails to diligently fulfil his obligations under Art. 5(1) and (2). They may seek preliminary injunctive relief for the time until an orderly verification has taken place.50 From the service provider’s perspective, Art. 5 is rather of a defensive nature. If he 70 complies with the stipulations set out therein, he cannot be held liable for neither having provided extraterritorial access [Art. 5(1) and (2)] nor for having denied such access and use [Art. (3)].

Article 6 Cross-border portability of online content services provided without payment of money 1. The provider of an online content service provided without payment of money may decide to enable its subscribers who are temporarily present in a Member State to access and use the online content service on condition that the provider verifies the subscriber’s Member State of residence in accordance with this Regulation. 2. The provider shall inform its subscribers, the relevant holders of copyright and related rights and the relevant holders of any other rights in the content of the online content service of its decision to provide the online content service in accordance with paragraph 1, prior to providing that service. The information shall be provided by means which are adequate and proportionate. 3. This Regulation shall apply to providers that provide an online content service in accordance with paragraph 1. Bibliography: Commission, ‘Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market’ COM(2015) 627 final; Dreier/Schulze, Urheberrechtsgesetz (6th edn, C.H. Beck 2018); Fromme/Nordemann (eds), Urheberrecht (12th edn, Kohlhammer 2018); Heyde, ‘Die Portabilitätsverordnung – Auswirkungen auf die Lizenzverträge’ (2017) 10 ZUM 712–720; Kraft, ‘Die Portabilitätsverordnung aus der Sicht eines Rundfunkveranstalters’ (2017) 10 ZUM 720–726; Roos, ‘Grenzenloses Streaming?’ (2017) 3 MMR 147–152.

50

A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 3

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Relation to other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Relation to other laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 4 5 6

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. The option for services provided without the payment of money . . . . . . . . . . . . 1. Free-of-charge services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Verification obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Information obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Inform subscribers and rightholders about the decision to enable portability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Timing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Adequate and proportional means . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Applicability of the entire Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7 7 7 11 13 14 14 15 16 17

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A. Function I. Goal The European legislator intentionally decided to distinguish between providers who offer an online content service against payment of money and those who do not charge their subscribers a subscription fee. However, the latter may choose to become subject to the Portability Regulation. Affording this option was a purely regulatory decision. Obviously, the legislator did not want to burden those service providers, who offer their services free of charge, with the financial and administrative burdens the Regulation inevitably brings with it.1 2 Therefore, the overall aim of Art. 6 is quite obvious. Looking at the general aim to build a digital single market within Europe, it is beneficial to implement the travel-withyour-content principle also at the level of free-of-charge services. However, without the revenue of a paid-for service, the effort of making sure that the service may be accessed and used also abroad whilst travelling or staying there on a temporary basis is likely to be unreasonable. The same is true for the implementation of a diligent verification scheme. Accordingly, Art. 6(1) allows service providers, who offer their services not against payment of money, to make their choice whether or not to bring their service under the regime of the Portability Regulation. 1

II. Structure 3

Art. 6 is structured in three subsections whereby the Art. 6(1) outlines the option for eligible free-of-charge providers. Art. 6(2) and (3) only apply if the provider opts in for portability and verifies the subscriber’s Member State of residence. Further, Art. 6(2) stipulates an obligation according to which providers who opt in have to inform their subscribers and the respective rightholders about their decision. Art. 6(3) is of particular importance. Once the service provider has declared his opt-in, he is bound to adhere to the entire Portability Regulation in the same way as if he offered his service against the payment of money.

B. Context I. Relation to other provisions 4

Art. 6 opens the door to the application of the Regulation to free-of-charge services. Therefore, the provision is to be seen in direct relation to the entire set of articles forming the Portability Regulation. Thus, the core element of Art. 6 is the application of the Regulation to the level of services offered without the payment of money. Notably Art. 6(1) has no function beyond that application. It is complemented by the information obligation set out in Art. 6(2) and the normative statement that the Regulation is applicable set out in Art. 6(3).

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Art. 6

II. Relation to other laws Reference can be made to Art. 3: once a provider of a free-of-charge service has opted 5 in, Art. 3 becomes the core provision allowing and demanding the provision of the online content service outside the subscriber’s Member State of residence.

III. History The Commission’s first draft2 in 2015 did not draw a distinction between providers 6 who offer their services against payment of money and those who do not. Instead, the Commission aimed at obliging all kinds of online content service providers to ensure portability only if those providers offering a free-of-charge service verify the subscriber’s Member State of residence anyway. During the legislative process, both the Council and the Parliament argued in favour of the distinction now embedded in Art. 6. Eventually, it was agreed to favour a structure allowing service providers offering a free-of-charge service to choose.

C. Explanation I. The option for services provided without the payment of money 1. Free-of-charge services Art. 6(1) applies to online content services provided without payment of money. The notion ‘online content service’ is defined in Art. 2 No. 5.3 Amongst others, it covers all online services with the main features of providing access to and use of all kinds of works, other protected subject matter and transmissions of broadcasting organisations, irrespective of whether they are available in a linear or non-linear manner. Thus, the definition is very broad and it not only covers video streaming services but for instance also services which provide online photos, software or e-books. The application of Art. 6(1) is subject to the provision of the online content service without payment of money; Art. 6(1) can therefore be seen in contrast to Art. 3(1), which requires such payment.4 Funding by way of commercial advertising or public funds does not jeopardise the free-of-charge nature of a service.5 Public broadcasters usually deliver their content by means of traditional transmission methods such as cable or satellite. Such content is, however, neither online nor portable and therefore does not fall under the Regulation. Still, online media libraries offered by public broadcasting organisations have been increasing significantly over the course of the last decade. Private broadcasting organisations do not fall under the scope of Art. 6(1) but under Art. 3(1) as long as they require a subscription fee for their online content service. The scope of online content services provided without payment of money further depends on the interpretation of the requirement of a contractual relationship between the subscriber and the provider.6 If the acceptance of terms and conditions is sufficient to COM(2015) 627 final. See the comments under Art. 2 Portability Regulation, mn. 40 et seq. 4 See for more details for the differentiation, Art. 3(1). 5 Engels/Nordemann in: Fromm/Nordemann, Article 6, mn. 2. 6 See Art. 2 No. 5. 2

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8

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constitute the contract, a great variety of online content services are able to decide whether they would like to offer portability to their subscriber. Still, the condition that verification has to take place will likely prevent most online content services to extend their services to portability.

2. Option Providers who provide their services without payment of money may freely decide whether they would like to enable portability for their subscribers and therefore benefit from the Regulation. However, the obligation to verify the Member State of residence still remains.7 Therefore, only service providers who are willing to implement such process will actually qualify as potential beneficiaries of the Regulation. 12 In general, service providers will need to carefully consider whether to opt-in. The cost element is not to be neglected.8 Thus, it has to be seen whether providers will make use of the option set out in Art. 6. 11

3. Verification obligation 13

As mentioned before, the implementation of a verification process is the precondition for choosing to become subject to the Portability Regulation. The upside has therefore a clear downside given that most free-of-charge services may be accessed and used without a registration procedure. In result, those service providers possess rather little information about those Internet users allowing for the determination or verification of the Member State of residence. Of course, tracking mechanisms may be and are widely used to gain such information. However, the collection and storage of those details depends on the user’s consent.9

II. Information obligation 1. Inform subscribers and rightholders about the decision to enable portability 14

The information obligation set out in Art. 6(2) covers both subscribers as well as rightholders. Providers are only obliged to inform their subscribers and rightholders about their general decision to opt in.10 There is no need to render any further information.

2. Timing 15

The information must be provided in advance to the online content service provider actually providing his service beyond the territorial boundaries of the subscription.

3. Adequate and proportional means 16

The information has to be communicated by adequate and proportionate means. Similar to the information obligation laid down in Art. 3(4), the information can be pro-

Dreier in: Dreier/Schulze, Article 6, mn. 1. Roos, 150. 9 Please be referred to the discussion about the legitimacy of cookies and other tracking tools and the debate concerning the ePrivacy Regulation in this context. 10 Engels/Nordemann in: Fromm/Nordemann, Article 6, mn. 5. 7

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vided as a notice on the website.11 Other means such as an e-mail, however, can be used as long as they are adequate and proportionate. In this respect, Art. 6(2) does not distinguish between the types of addressees. Subscribers and rightholders may be notified by the same means.12 However, for the sake of adequate documentation and legal certainty, bilateral communication, e.g. by way of e-mail, is recommended.13

III. Applicability of the entire Regulation The Regulation applies to all providers offering their online content service free of 17 charge, who opt-in and thereby take benefit of the Portability Regulation. In consequence, the full set of provisions becomes applicable including, in particular, Art. 7(1). Accordingly, all contract terms that are contrary to the Regulation are to be deemed unenforceable. Contracts that are concluded between a rightholder and a provider that offers free online content services after and (likely before) the provider decides to enable portability must therefore not contain any limitations on portability.14 The rightholder should also not be burdened with (negative) consequences to a decision regarding the enabling of portability. This aspect is, however, not clarified within the Regulation.

Article 7 Contractual provisions 1. Any contractual provisions, including those between providers of online content services and holders of copyright or related rights or those holding any other rights in the content of online content services, as well as those between such providers and their subscribers, which are contrary to this Regulation, including those which prohibit cross-border portability of online content services or limit such portability to a specific time period, shall be unenforceable. 2. This Regulation shall apply irrespective of the law applicable to contracts concluded between providers of online content services and holders of copyright or related rights or those holding any other rights in the content of online content services, or to contracts concluded between such providers and their subscribers. Bibliography: Commission, ‘Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content services in the internal market’ COM(2015) 627 final; Dreier/Schulze, Urheberrechtsgesetz (6th edn, C.H. Beck 2018); Eginger, ‘Die neue Portabilitätsverordnung’ (2017) 10 ZUM 698–712; Ehle/Werner, ‘Online-Inhalte auf Europareise’ (2016) 4 C&R 376–381; Fromme/Nordemann (eds), Urheberrecht (12th edn, Kohlhammer 2018); German Bar Association, ‘Position Paper of the German Bar Association by the Committee on Intellectual Property on the Proposal for a Regulation of the European Parliament and of the Council on ensuring the cross-border portability of online content service in the internal market (COM(2015) 627 final, 9 December 2015)’ (January 2016); Grandjean, ‘Portabilität von Inhalten in Europa – Herausforderungen für die Filmwirtschaft’ (2017) 10 ZUM 727–732; Heyde, ‘Die Portabilitätsverordnung – Auswirkungen auf die Lizenzverträge’ (2017) 10 ZUM 712–720; Kraft, ‘Die Portabilitätsverordnung aus der Sicht eines Rundfunkveranstalters’ (2017) 10 ZUM 720–726; Loewenheim (ed.), Handbuch des Urheberrechts (2 nd edn, C.H. Beck 2010); Ranke/Glöckler, ‘Grenzüberschreitende Portabilität von Online-Inhaltediensten im Binnenmarkt’ (2017) 6 MMR 378–382; Roos, ‘Grenzenloses Streaming?’ (2017) 3 MMR 147–152.

Recital 20; see also Dreier in: Dreier/Schulze, Article 6, mn. 2. Kraft, 725–726. 13 Engels/Nordemann in: Fromm/Nordemann, Article 6, mn. 6. 14 Heyde, 719. 11

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Contractual provisions A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Relation to other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Relation to other laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 3 4 5

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Contrary contractual provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. Any contractual provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. Contrary to the Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. Unenforceable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Irrespective of the law applicable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 6 6 7 14 15

A. Function I. Goal 1

Art. 7 aims at preventing and banning any contractual agreement that might jeopardise the intended effect of the Portability Regulation. The provision therefore renders and safeguards the necessary legal certainty required for the success of the Regulation. 1

II. Structure 2

In order to achieve the above goal, Art. 7 is structured as overriding mandatory provision pursuant to Art. 9 Rome I Regulation.2 In this context, Art. 7(1) stipulates that contractual provisions not being compliant with the Portability Regulation cannot be enforced. Art. 7(2) complements this by stating that the Regulation shall have priority irrespective of which national law is generally applicable.

B. Context I. Relation to other provisions 3

Art. 7(1) contains the underlying principle that parties to an agreement relating to online content services may not contract out of the Portability Regulation. Therefore, the provision safeguards the effective application of all relevant articles of the Regulation. It is the assurance that the legislative goal is actually achieved. Accordingly, all provisions of the Regulation are to be read in the light of shelter provided by Art. 7.

II. Relation to other laws 4

As already outlined above, Art. 7 forms an overriding mandatory provision pursuant to Art. 9 Rome I Regulation.3 Therefore, Art. 7 is to be read as a restriction to any law governing the conclusion, execution and performance of contractual agreements. Eginger, 698. Engels/Nordemann in: Fromm/Nordemann, Article 7, mn. 9; Heyde, 714. 3 Engels/Nordemann in: Fromm/Nordemann, Article 7, mn. 9; Heyde, 714.

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III. History The essence of Art. 7 equals the initial Art. 5 of the first draft by the Commission. 4 5 The provision remained fairly untouched in the further course of the legislative process. This does not come as a surprise given that Art. 7 forms the ‘backbone’ of the Regulation as regards effective application of the relevant provisions.

C. Explanation I. Contrary contractual provisions 1. Any contractual provision Art. 7(1) refers to contractual provisions being contrary to the Portability Regulation. 6 There is no limitation as to who is party to such contract. The circumstances mentioned in Art. 7(1) are of mere illustrative nature.5 The examples given are (i) licensing agreements between the online content service provider and holders of copyright or related right or those holding any other rights in the content of the Regulation, and (ii) subscriptions subscribers have obtained from their respective online content service providers. However, any other type of contractual arrangement falls equally within the scope of application of Art. 7(1). The explicitly named agreements do not form an exhaustive enumeration.6

2. Contrary to the Regulation Art. 7(1) relates only to contractual provisions that are ‘contrary’ to the Portability 7 Regulation. Again, the legislator provides examples to illustrate the meaning of ‘contrary’ to the Regulation. Notably, contractual provisions which prohibit cross-border portability of online content services or limit such portability to a specific time period are to be deemed unenforceable. The first example is of broader scope as it deals with prohibition. The reference to 8 cross-border portability is to be understood as any type of contractual arrangement making it impossible for the subscriber to access or use the service whilst temporarily travelling or staying in a Member State other than the Member State of residence. Literally, this relates to almost all subscriptions entered into prior to the enactment of the Portability Regulation. Since cross-border portability of online content was commonly excluded from the subscription and technical measures, the so-called, geo-blocking, safeguarded that no extraterritorial access and use of the content was possible. According to Art. 9(1), those subscriptions do fall within the scope of application of the Regulation. As regards free-of charge services, any prohibition of cross-border portability must 9 be deemed ‘contrary’ to the Regulation from the moment the service provider opts in and thereby brings his service under the regime of the Regulation.7 Engels and Nordemann are correct in their view that Art. 7(1) covers also arrangements that could prevent service providers from taking the choice offered in Art. 6 of the Regulation in first COM(2015) 627 final. Kraft, 726; Roos, 151. 6 Engels/Nordemann in: Fromm/Nordemann, Article 7, mn. 3. 7 Ranke/Glöckler, 381.

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place.8 Art. 7(1) needs to be interpreted in the widest sense possible and with a clear focus on the actual effect in practice. The second statutory example is narrower in its scope but equally important. Contractual provisions which limit cross-border portability to a specific time period are to be deemed ‘contrary’ to the Regulation. Here, the legislator wishes to safeguard that no overly short periods are defined on contractual basis limiting the scope of application of the Regulation in undue manner.9 The Portability Regulation intentionally lacks a statutory definition of ‘temporary present’. Therefore, neither the rightholders nor the service provider shall have the discretion to determine such period by way of contractual means. Some authors nevertheless argue in favour of the possibility to contractually agree on a certain period of time that ‘usually’ constitutes a temporary presence in a Member State other than the Member State of residence.10 Such contractual provisions need to be reviewed critically. As mentioned before, the legislator intentionally refrained from including a statutory definition. The main reason for such reluctance is the fact that a temporary presence defines itself in consideration of various factors of which the time aspect is only one. And even latter can vary from case to case. Therefore, any contractual provision setting a timeframe may only be of indicative nature. In other words, the contract must allow for an embracive and holistic consideration of all relevant aspects. If the respective clause cannot be interpreted in such way, it must be deemed unenforceable. There are other limitations that may not be agreed upon by means of contractual provisions. Notably, the parties to a contract cannot constrain the service in terms of scope, features or quality. Whilst the service provider is not obliged to guarantee the same quality as in the Member State of residence,11 he may not take active steps to lower such quality standard. This would be contrary to the Regulation as set out in Art. 7(1). The same is true for additional charges demanded for cross-border portability. Art. 3(2) rules out such additional fees. However, the service provider is may very well generally increase the subscription fee as part of his overall pricing strategy.12 After all, the crossborder portability increases the value of the offered service. What is equally compliant with the Regulation is the contractual shaping and substantiating of the verification process set out in Art. 5.13 However, the parties to a contract cannot effectively agree on a process that is contrary to the legislative framework set out in Art. 5. For instance, a contractual provision referring to verification means that are not mentioned in Art. 5(1) would be unenforceable. Also, the maximum of two verification means cannot be enlarged by contractual agreement.14 Whether contractual provisions generally demanding a two-step verification must be deemed unenforceable, is questionable.15 Art. 5(1) speaks of a maximum of two criteria being used. However, adopting a two-step verification process as the general standard should be deemed legitimate unless the first criterion already leads to a perfectly clear and undisputable answer. However, this seems to be a rather theoretical scenario as no one criterion renders an answer beyond doubt. In practice, two means of verification may therefore be agreed upon in a contract. Engels/Nordemann in: Fromm/Nordemann, Article 7, mn. 4. Dreier in: Dreier/Schulze, Article 7, mn. 1. 10 Ehle/Werner, 378; Heyde, 716; Roos, 151; see also Grandjean, 731. 11 Art. 3(3). 12 Dreier in: Dreier/Schulze, Article 3, mn. 2; Engels/Nordemann in: Fromm/Nordemann, Article 3, mn. 8. 13 Heyde, 716. 14 Recital 26; see also Art. 5(1). 15 In favour of such interpretation Heyde, 716–717. 8

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3. Unenforceable Contractual provisions that are contrary to the Regulation are unenforceable, not 14 void. The contracting parties are unable to rely on the respective provisions. One might argue that the legislator should have called such contractual provision void.16 However, given the clear wording, it is obvious that the legislator wanted the contract as such to remain in force and applicable, only with the exemption of the provision(s) contrary to the Regulation. Therefore, one has to apply a distinguishing and segmenting view.

II. Irrespective of the law applicable In order to prevent further circumventions of the Regulation, the legislator included 15 Art. 7(2) according to which the Regulation applies to contracts, irrespective of the law applicable to that contract. Whereas, under consumer contracts the choice of law is generally restricted,17 other scenarios allow for more discretion.18 For instance, an American rightholder could agree with an online content service provider operating in the EU on US law thereby trying to evade the application of the Portability Regulation.19 Art. 7(2) aims at preventing undue circumvention. 20 In this respect, Art. 7(2) forms an overriding mandatory provision pursuant to Art. 9 Rome I Regulation.21 If, however, a court in a non-EU country has to decide over the applicable law, it is unlikely that the court will consider EU law since they are not bound to European overriding mandatory provisions.22 The law governing copyright issues that are not considered contractual law cannot be 16 freely determined by the parties. Instead, the principle of lex loci protectionis applies. Therefore, the law of the country applies where the protection is claimed.23 The legal fiction laid down in Art. 4 can be considered copyright law, whereas the other provisions are likely to be considered (copyright) contract law.24

Article 8 Protection of personal data 1. The processing of personal data carried out within the framework of this Regulation including, in particular, for the purposes of verification of the subscriber’s Member State of residence under Article 5, shall be carried out in compliance with Directives 95/46/EC and 2002/58/EC. In particular, the use of the means of verification in accordance with Article 5 and any processing of personal data under this Regulation, shall be limited to what is necessary and proportionate in order to achieve its purpose.

16 Requested by German Bar Association, 11, available under https://anwaltverein.de/de/newsroom/sn5-2016-zur-portabilitaet-von-online-inhaltediensten-im-eu-binnenmarkt (accessed 28 August 2019). 17 Art. 6 Rome I Regulation. 18 Art. 3(1) Rome I Regulation; for subscription contracts involving consumers different laws rules apply. 19 Dreier in: Dreier/Schulze, Article 7, mn. 2. 20 Ranke/Glöckler, 381. 21 Engels/Nordemann in: Fromm/Nordemann, Article 7, mn. 9; Heyde, 714. 22 Ehle/Werner, 381; Heyde, 714. 23 Walter in: Loewenheim, § 58, mn. 24–25. 24 Ehle/Werner, 380.

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Art. 8

Protection of personal data

2. Data collected pursuant to Article 5 shall be used solely for the purpose of verifying the subscriber’s Member State of residence. They shall not be communicated, transferred, shared, licensed or otherwise transmitted or disclosed to holders of copyright or related rights or to those holding any other rights in the content of online content services, or to any other third parties. 3. Data collected pursuant to Article 5 shall not be stored by the provider of an online content service longer than necessary to complete a verification of a subscriber’s Member State of residence pursuant to Article 5(1) or (2). On completion of each verification, the data shall be immediately and irreversibly destroyed. Bibliography: Dreier/Schulze, Urheberrechtsgesetz (6th edn, C.H. Beck 2018). A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 2

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Relation to other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Relation to other laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 3 4 5

C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Compliance with data protection laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Use of collected data and third parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. Art. 8(3): Destruction of data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6 6 8 10

A. Function I. Goal 1

Since the verification process involves personal data of subscribers, Art. 8 aims at emphasising the application of European data protection laws. Furthermore, it lays down some specific rules on how to deal with the information obtained by consumers.

II. Structure 2

Art. 8 is structured in three subsections. Whereas Art. 8(1) has a rather clarifying effect on the applicability of EU data protection law, in particularly their limits, and relates to the processing of personal data, Art. 8(2) and (3) specify the handling of data resulting from the verification of the subscriber’s Member State of residence pursuant to Art. 5.

B. Context I. Relation to other provisions 3

Art. 8 is closely connected to Art. 5 and the outlined verification means and process.

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Protection of personal data

II. Relation to other laws The two EU laws that relate to Art. 8 are first and foremost the General Data Protec- 4 tion Regulation (which repealed the Data Protection Directive1) and the ePrivacy Directive.

III. History The Commission first introduced the data protection provision which was less de- 5 tailed and merely referred to the necessary compliance with the European data protection rules. The Council and the Parliament mainly agreed with the Commission’s draft. However, during the trilogue, the three institutions paid more attention to the concerns of subscribers that online content service providers would collect and store too much sensitive personal data. In the end, Art. 8 became more detailed and includes specific provisions on how to deal with personal data.

C. Explanation I. Compliance with data protection laws Since online content service providers collect, process and store personal data of sub- 6 scribers pursuant to the Regulation’s obligations, the actions need to comply with the European data protection rules. Art. 8(1) clarifies this issue – even though the application of data protection rules would apply anyway.2 Art. 8(1) refers in particular to the former Data Protection Directive 95/46/EEC 7 which was repealed by the GDPR. Hereafter, the online content service providers need a lawful basis for the processing of the subscriber’s data. Regarding the verification process, the basis is Art. 5(3). In compliance with the GDPR, Art. 8 rightly emphasises that the use and the processing of personal data is limited strictly to the purpose of the verification of the subscriber’s Member State of residence. Therefore, providers may not rely on Art. 5(3) to request or store information that goes beyond the purpose. This applies in particular to IP addresses that may only be stored in binary format. The second reference is made to the ePrivacy Directive which introduced rules for collecting and processing of personal data in the electronic communications sector.

II. Use of collected data and third parties The first part of Art. 8(2) is similar to Art. 8(1) and clarifies that data collected may 8 only be used in order to achieve the purpose of verification pursuant to Art. 5. As a deviation from the GDPR, data collected shall not be communicated, trans- 9 ferred, shared, licensed or otherwise transmitted or disclosed to third parties. Third parties include the rightholders who may have an interest in controlling the effectiveness of the means. Instead, online content service providers shall store the data collected on their own servers and cannot rely on third-party processors. 1 Directive 95/46/EC on the protection of individuals with regard to the processing of personal data (PII (US)) and on the free movement of such data. 2 Dreier in: Dreier/Schulze, Article 8, mn. 1.

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Art. 9

Application to existing contracts and rights acquired

III. Art. 8(3): Destruction of data Art. 8(3) lays down the foundational rules for the erasure of personal data collected. The providers need to immediately and irreversibly destroy the data collected when the data is not necessary anymore for the completion of the verification of the subscriber’s Member State of residence. 11 The Regulation does not indicate when exactly data is no longer required for the completion of the verification – probably because online content service provider may choose their own verification processes. By referring to the verification, the legislator demonstrated its aim to limit the storage of personal data for a short time. Thus, the completion of the subscription contract would be too late. 12 Art. 8(3) only covers the data collected pursuant to Art. 5. Thus, data that was collected for another purpose such as payment information may be stored longer.3 Art. 8(3) applies to the first verification of subscribers as well as the repetition of the verification pursuant to Art. 5(2). Since the binary format can be converted into a format that can be read by humans and is therefore reversible, it also needs to be destroyed. 10

Article 9 Application to existing contracts and rights acquired 1. This Regulation shall apply also to contracts concluded and rights acquired before the date of its application if they are relevant for the provision of, access to and use of an online content service, in accordance with Articles 3 and 6, after that date. 2. By 21 May 2018, the provider of an online content service provided against payment of money shall verify, in accordance with this Regulation, the Member State of residence of those subscribers who concluded contracts for the provision of the online content service before that date. Within two months of the date upon which the provider of an online content service provided without payment of money first provides the service in accordance with Article 6, the provider shall verify, in accordance with this Regulation, the Member State of residence of those subscribers who concluded contracts for the provision of the online content service before that date. Bibliography: Bundesrat, ‘Beschluss des Bundesrates: Vorschlag für eine Verordnung des Europäischen Parlaments und des Rates zur Gewährleistung der grenzüberschreitenden Portabilität von Online-Inhaltediensten im Binnenmarkt’ BR-Drs. 167/16 from 22.4.2016 Dreier/Schulze, Urheberrechtsgesetz (6 th edn, C.H. Beck 2018); Spiegel, ‘Ich packe meinen Koffer und nehme mit … meine Online-Inhalte’ in: Taeger (ed.), Smart World – Smart Law? (OlWIR 2016), p. 693–707.

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A. Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Goal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 1 3

B. Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Relation to other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Relation to other laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III. History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4 4 5 6

Recital 30; see also Dreier in: Dreier/Schulze, Article 8, mn. 3.

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Art. 9

Application to existing contracts and rights acquired C. Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I. Existing contracts and rights acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II. Online content storage services against payment of money . . . . . . . . . . . . . . . . . . III. Online content storage services without payment of money . . . . . . . . . . . . . . . . .

7 7 10 12

A. Function I. Goal By adding Art. 9 to the Regulation the legislator made sure that cross-border porta- 1 bility of online content becomes real for all subscribers of online content services, irrespective of the date when the contract with the subscriber was made or when the licensing agreement was concluded. The Regulation therefore has a retroactive effect on subscription contracts and licensing agreements concluded before the date of the Regulation’s application. The legislator thus took into account the relatively long term of contract in the area of licensing agreements.1 At the same time, existing online content service providers shall not have any advantages over new businesses that do not yet have any subscribers. Instead a level playing field shall be created. Finally, providers shall be able to offer portability for their entire content without the need to renegotiate. In order to allow online content service providers some time to implement the verifi- 2 cation process after the Regulation’s date of application on 1 April 2018, the legislator determined two deadlines for the completion of the verification of existing subscribers: (i) a deadline for providers falling under Art. 3(1) and (ii) the ones who have the option pursuant to Art. 6(1).

II. Structure Art. 9(1) clarifies that the Regulation applies not only to contracts concluded after the 3 Regulation came into force but also to existing contracts. Art. 9(2) contains specific deadlines for the obligatory verification process. In doing so, the legislator distinguishes between the implementation of the Regulation by providers who fall under Art. 3(1) and those who fall under Art. 6(1).

B. Context I. Relation to other provisions Art. 9(1) extends the scope of the entire Regulation to all contracts concluded before 4 the date of its application.

II. Relation to other laws In first place, Art. 9(1) interferes with general contract law. The provision safeguards 5 the retrospective effect of the Portability Regulation as intended by the legislator. The practical effect is that already concluded contractual agreements will need to be adapted 1

Recital 31.

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Art. 9

Application to existing contracts and rights acquired

if they are incompliant with the new law. This seems reasonable in the light of the typical term of license contracts being relatively long. As set out in Recital 31, ensuring that all consumers residing in the Union can enjoy cross-border portability of online content services on an equal basis in time and without any undue delay calls for the Regulation being applied to contracts concluded and rights acquired before the date of its application.2

III. History 6

Art. 9(1) was already part of the initial draft by the Commission in almost the identical wording and the provision was supported by the Council as well as the Parliament. Art. 9(2) was added during the legislation process in accordance with the introduction of the rules on the verification process.

C. Explanation I. Existing contracts and rights acquired Art. 9(1) covers not only all contracts that have been concluded between the subscriber and the provider. Its scope also includes the acquisition of rights. Both types of contracts are covered on the condition that they are relevant for the provision of, access to and use of an online content service. It is striking that Art. 9(1) does not refer to agreements between the parties defined in Art. 2 but instead points to their relevance for actions related to online content services. In practice, this will cover all agreements that involve the subscribers, online content service providers and rightholders. Due to the broad wording, Art. 9(1) further includes agreements that were concluded between rightholders and intermediaries who eventually sublicense to the online content service providers if the subject matter of the contract relates to the provision of, the access to or the use of online content services.3 8 Regarding the application of the Regulation to existing contracts, it is worth mentioning that, regarding the verification process of subscribers, providers shall rely on information that is already in their possession.4 The provider may obtain further data in light of the verification only if the information in their possession does not provide sufficient certainty. 9 One may argue in favour of a violation of the prohibition of retroactivity.5 However, hereby it needs to be taken into account that Art. 9(1) interferes with contracts that are ongoing and not yet terminated. 7

II. Online content storage services against payment of money 10

Even though one may argue that the date of application was chosen quite tight, the legislator considered it appropriate to allow online content service providers falling under Art. 3(1) to have completed the verification process for existing subscriber within Engels/Nordemann in: Fromm/Nordemann, Article 9, mn. 3. Dreier in: Dreier/Schulze, Article 9, mn. 2. 4 Recital 27. 5 Bundesrat, 5; Spiegel, 705. 2

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Art. 11

Final provisions

two months after the date of the Regulation’s application, 2 June 2018.6 Hereby, it stands out that Art. 9(2) explicitly refers to the subscribers who they concluded agreements with before that date. According to this, the subscribers who entered into a contract after the date of application must have been verified from 1. April 2018. The verification pursuant to Art. 9(2) shall be performed in accordance with the 11 Regulation, particularly Art. 5.

III. Online content storage services without payment of money Art. 9(2) rightly distinguishes providers who offer their online content service with- 12 out payment of money from the providers covered by Art. 3(1). Since they have the option to choose whether they fall under the Regulation, they do not have a fixed deadline. However, from the date upon which the provider enables portability for its subscribers for the first time and hereby exercise the option, the provider shall verify its existing subscribers within two months.

Article 10 Review By 21 March 2021, and as required thereafter, the Commission shall assess the application of this Regulation in the light of legal, technological and economic developments, and submit to the European Parliament and to the Council a report thereon. The report referred to in the first paragraph shall include, inter alia, an assessment of the application of the verification means of the Member State of residence referred to in Article 5, taking into account newly developed technologies, industry standards and practices, and, if necessary, consider the need for a review. The report shall pay special attention to the impact of this Regulation on SMEs and the protection of personal data. The Commission’s report shall be accompanied, if appropriate, by a legislative proposal.

Article 11 Final provisions 1. This Regulation shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union. 2. It shall apply from 20 March 2018.

6

Recital 32.

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Index Bold numbers refer to articles, normal ones to margin numbers. A = Digital Content Directive, B = Consumer Rights Directive, C = E-Commerce Directive, D = Portability Regulation. Acceptance A 13 56 – obligation A 8 40 Accessibility – conformity A 8 46, 53, 54 Accessories – conformity A 7 47, 49, 8 72, 74 – definition A 8 72, 73 Advertising A 3 89 Algorithms C 15 14 Aliud A 11 11, 14 12, 15 Artificial intelligence A 2 43; C 11 17 Automatic contracting C Intro 10–11 4, 10 26, 11 17 Big data A 3 46, 47 Bundle contract A 3 80, 86, 115 et seq., 14 11 – termination A 3 122, 127 Burden of proof A 1 23, 4 11 – consumer A 12 4 – continuous supply A 12 3, 19, 20 – digital environment A 9 13, 62 et seq. – discharge A 12 21 – failure to supply A 12 10 – pre-contractual information B 5 23, 6 23 – presumption A 12 15, 18 et seq. – termination A 14 70 – third party rights A 10 17, 65, 66 – trader A 12 11 Business premises – definition B 5 11 Causation A 9 39, 40, 41, 56, 10 40, 20 21 CESL A Intro 13 – burden of proof A 12 8 – conformity A 6 9, 10, 11, 19, 7 3 et seq., 8 7, 9 – liability A 11 5 – third party rights A 10 9 CISG – conformity A 6 6, 7, 8 8 – liability A 11 6 – remedies A 13 9 – third party rights A 10 8 Commercial communications C 6 1 et seq., 11 – definition C 6 13 et seq. – exceptions C 6 19 – identifiability C 6 20 – scope C 6 18 Common European Sales Law See CESL Compatibility – conformity A 8 46, 47 – definition A 2 48 et seq., 7 33 et seq., 8 19, 49, 51 – pre-contractual information B 5 42, 6 53

Conformity – accessibility See Accessibility – accessories See Accessories – aliud A 7 26, 27 – approach A Intro 18 – average consumer See Consumer – compatibility See Compatibility – consumer specifications A 7 47 – continuity A 8 46, 55 – copyright A 6 25, 42 – customer assistance A 7 52 – description A 7 24 et seq., 8 4 – functionality See Functionality – installation See Installation – instructions See Instructions – interoperability See Interoperability – interruption A 8 102 – modifications A 19 8 – packaging A 8 83 – period of supply A 7 40 – pre-contractual information A 7 10 et seq. – public statements See Public statements – purpose A 7 42 et seq., 8 16 et seq. – quality A 7 32, 8 36, 41 et seq. – quantity A 7 28 et seq., 8 37 et seq. – regulatory standards A 8 24 et seq. – security A 8 46, 56 – service level agreements A 7 13 – technical standards A 8 31 et seq. – third party rights A 6 41 – threshold A 14 55 – trial version A 8 84 et seq. – update See Update – version A 8 59, 98 et seq. – waiver See Waiver Consumer – average A 8 18, 21, 22, 54; C 6 9, 21 – burden of proof See Burden of proof – cooperation A 9 66, 12 12, 29, 30 – definition A 2 23 et seq., 3 9, 23 et seq., 4 12, 5 11 – dual use A 2 25, 3 23 et seq. – expectations A 8 58, 60, 61, 80, 93, 94, 96, 155, 10 6, 41, 43, 11 27 Consumer Sales Directive – conformity A 6 5 et seq., 19, 7 3 et seq., 8 3, 8 – liability A 11 4 – redress A 20 6 et seq. – third party rights A 10 8 Content – illegal See Illegal content – user-generated C 14 20 Contract – bundle See Bundle contract – definition A 3 27

591

Index – interpretation See Interpretation – language C 10 8 et seq. – legal nature A 1 29, 3 28 – long-term A 11 8, 33 Contract term – control A 6 33, 7 16, 17, 8 175 – transparency A 3 82, 8 175 et seq. – unfair A 3 123 Copyright D Intro 73 – audiovisual media D Intro 34 et seq. – Berne Convention D Intro 26 – conformity A 6 25, 42 – copies A 8 29, 30 – digital content A 10 1 et seq. – DSM Copyright Directive D Intro 15, 85 – injunction C 12 8, 17 – liability C 13 2 – reform D Intro 12 et seq. – territoriality A 10 47; D Intro 30 et seq., 3 1, 6, 4 3, 7 16 – work D Intro 27 et seq. Counter-performance – advertising A 3 89 – data A 3 53 et seq., 59 Cure – costs A 14 25 et seq. – frustrated expenditure A 14 77 – impossibility A 14 30 et seq., 45 – inconvenience A 14 29 – method A 14 20 – place A 14 78 – proportionality A 14 36 et seq., 45 – time A 14 21 et seq. Damages A 1 21, 28, 39, 121, 3 150, 5 35, 36, 10 64, 13 59 et seq., 14 5, 79 et seq., 20 19 Data – big See Big data – consent A 3 64, 142 – exception A 3 60 – exceptions to use A 16 41 et seq. – meta A 3 56, 58 – non-personal A 16 2 – other A 2 33, 3 50, 16 37, 50 – personal A 2 31, 32, 3 49, 108, 8 44, 16 2, 14, 24 et seq. – processing A 3 60, 61, 140, 16 30 et seq. – provision A 3 51, 57 – refraining from use A 16 39, 40 – restitution A 16 5, 14, 24 et seq. – retrieval A 16 58 et seq., 17 11 – withdrawal of consent A 15 18, 16 32 et seq. Defect – hidden A 1 30, 3 155, 156, 6 16, 14 76 Delivery A 3 72 Digital content – access method A 3 45 – beta version A 6 26, 8 63 – conformity A 16 16, 18 – consumer specifications A 3 35 et seq. – contract See Digital content contract

592

– copies A 8 29, 30 – copyright A 10 1 et seq. – definition A 2 6 et seq., 3 40 et seq.; B 5 46 – deterioration A 11 38 – embedded See Goods with digital elements – free B 5 14, 46, 47 – license A 10 19 – place of use A 10 49 – pre-contractual information B 6 9 – prevention of further use A 16 75 et seq. – refraining from use A 16 55, 56, 17 9 et seq. – right of withdrawal See Right of withdrawal – tangible medium See Tangible medium – television A 3 110, 111 – transfer of A 10 7 – trial version See Conformity Digital content contract – confirmation B 8 27, 28 – contract type B 5 13 – features A 3 29 et seq. Digital environment – burden of proof A 9 13, 63 et seq. – cloud A 9 22 – cooperation A 9 66, 12 12, 29, 30 – definition A 2 35 et seq., 9 18 et seq. – incompatibility A 12 22, 24, 27 – joint liability A 9 23 Digital representation of value A 2 8, 27 et seq., 3 32, 105, 16 14 Digital Rights Management A 2 45 et seq., 7 35, 8 53 Digital service – access method A 3 45 – definition A 2 9 et seq., 3 40, 41, 44, 45; B 5 14, 15 – interruption A 14 14 – prevention of further use A 16 75 et seq. – refraining from use A 16 55, 56, 17 9 et seq. – right of withdrawal B 14 5, 6, 16 13 et seq. – trial version See Conformity Digital Services Act C 8; 6 35, 14 27, 32, 15 14 Digital Single Market Strategy A Intro 5, 32, 1 7 et seq.; D Intro 1, 9, 10 – copyright D Intro 12 et seq. – telecommunications D Intro 41 Distance contract – definition B 5 11, 6 16 et seq. Durable medium A 8 163 – definition A 2 56 et seq. Electronic Communications Code A 3 96, 98, 99, 124 et seq. Electronic means B 8 10; C 5 17 et seq. Enforcement – collective A 21 8 – consumer organisations A 21 9 – cross-border A 21 5, 6 Fees – administration A 18 32

Index – definition A 18 28 – reimbursement A 18 26 – third party A 18 27 Force majeure A 1 32, 6 16, 17, 13 46 Functionality – conformity A 8 46 – definition A 2 39 et seq., 7 34 et seq., 8 49, 50 – information A 9 9; B 5 41, 6 53 Geo-blocking A 10 44; D Intro 7, 20, 21, 3 26 Goods with digital elements A Intro 16, 17, 3 4, 73 et seq. – definition A 2 12 et seq. Hardware A 2 35, 9 19 Harmonisation – full A Intro 11, 1 19, 21, 3 1, 4 1 et seq., 6 12 et seq., 12 32 – minimum A Intro 11, 4 2, 5 – optional A Intro 12 Hosting – definition C 14 3 et seq. – services A 2 37 Illegal content C 6, 7; 12 1, 11, 14, 20, 13 1, 22, 14 12, 15 5, 11 Illegality A 3 152 Implementation A 1 35, 4 7, 8 – gold plating A 1 34 Impossibility A 13 46, 49, 50 – consequences A 13 52 – cure See Cure – delayed supply A 13 51, 52 Information – functionality A 9 9 – interoperability A 9 9 – technical requirements A 12 25, 26 – updates A 8 125, 127, 128 Information society service – definition C 5 12 Input errors B 8 34; C 10 7, 11 1, 10 et seq. Installation A 2 20, 9 29 – conformity A 7 49, 51 – failure by consumer A 8 147 et seq. – instructions A 9 4; See Instructions – updates A 8 118 Instructions – conformity A 7 48, 50, 8 75 et seq., 9 4, 11 – erroneous A 9 55 – incomplete A 9 53 – installation A 8 76, 9 4 et seq. – integration A 8 76, 9 8, 47 et seq., 11 41 – language A 8 80, 9 54 – missing A 9 55 – standard of correctness A 9 52 Integration A 6 40 – act A 9 30 – by consumer A 9 47 et seq. – by trader A 9 42 et seq.

– definition A 2 18 et seq., 9 14, 24 et seq. – incorporation A 9 25, 27 – incorrect A 9 32 et seq., 11 40, 41 – instructions See Instructions – liability A 11 17 – linking A 9 26 – multiple A 9 31 – non-conformity A 9 35 et seq. – remedies A 9 61 – scope A 9 28 Intellectual property rights – redress A 20 28 Intermediary C 1; 12 7, 14 1, 9 – conduit C 12 3 – liability C 4; 15 1 Interoperability B 5 42 – conformity A 7 33, 8 47, 48 – definition A 2 50 et seq., 7 34, 36, 38, 8 19, 9 14 – information A 9 9; B 6 53 Interpretation A 1 3, 20, 36, 4 7 – contract A 3 83, 7 15 Invitation to purchase B 5 21 Liability – fault A 10 55, 13 21 – joint A 9 23 – non-conformity A 11 15 et seq. – non-performance A 11 9 et seq. – payment A 17 31 et seq. – period A 11 20 et seq. – third party A 3 88 – time A 11 16 – update A 11 18 License A 3 86, 87; D Intro 51, 74, 3 1 – EULA A 10 2, 45 et seq. – intermediary D Intro 51, 52 – means of verification D 5 30 – segmented D 4 3 – territorial D Intro 52 et seq. Limitation period A 11 28, 37, 14 16 – third party rights A 10 54 Modification A 24 13, 14 – conformity A 19 8 – cost of A 19 13 – exception to termination A 19 21 – information A 19 14, 15 – reason A 19 11, 12 – termination A 19 17 et seq. Monitoring D Intro 91, 93, 98 Multiple use A 9 31 Network connection A 2 35, 9 21 Non-conformity – cooperation A 9 13 – instructions See Instructions – notification A 1 24 – third party rights A 10 16 – time A 9 57, 58

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Index Non-performance A 5 5 – remedy A 5 2, 17, 18, 11 14 Notification – non-conformity A 1 24 Offer – confirmation B 8 24 Off-premises contract – definition B 5 11, 6 19 Online content service – access D 3 24 et seq., 4 12, 15 – additional charges D 3 36 – database D 2 49 – definition D 2 40 et seq. – free D Intro 49, 88, 96, 109, 2 48, 7 9, 9 12 – illegal D 2 41 – information D 3 46 et seq., 6 14 – obligation D 3 50, 51, 52, 53, 54 – paid D Intro 49, 88, 2 48, 3 16 et seq., 5 2, 9 10, 11 – personal data D 3 17 – providing D 4 11 – quality D 3 37 et seq. – use D 3 27, 28, 4 14, 15 On-premises contract – definition B 5 11 Operating system A 2 38, 16 18 Performance – breach A 5 2, 17, 18 – criteria A 5 4 – delayed A 6 16 – duration A 5 22 – impediment A 1 31, 32, 5 31, 33, 13 46 – made accessible A 5 27 – made available A 5 27 – right to demand A 13 9 et seq. – system A 5 6 – third party A 5 28 – time A 5 3 – withholding A 1 33, 5 32, 13 53, 14 85 Personal data – erasure D 8 10 – remuneration D 3 17 – verification D 5 44, 57, 8 7, 8, 11, 12 – verification mechanism D 5 4 Platform A 2 22, 3 10, 19, 22, 8 173 – Regulation A Intro 9 Portability – authorisation D 5 59 et seq. – consumer D 2 10 et seq. – content D Intro 46 – data protection D Intro 45 – exception to territoriality D Intro 33 – impact assessment D Intro 58 et seq. – legal fiction D Intro 68 et seq., 77 et seq., 87, 3 6, 4 1 et seq., 16, 17, 7 16 – license See License – monitoring See Monitoring – obligation D 3 1, 3, 4 – online content D Intro 50

594

– online content service See Online content service – portable D 2 52 et seq. – residence D 2 15 et seq., 5 43 – scope D 1 7 – services D Intro 48 – subscriber D 2 2 et seq., 42, 3 4 – subscription fee D 3 14 – taxation D 1 8 – telecommunications D Intro 42 – temporarily present D Intro 90, 93 et seq., 2 26 et seq., 3 22 – territoriality D Intro 76 – verification See Verification Pre-contractual information C 5 1, 10 1 – burden of proof See Burden of proof – codes of conduct B 6 50 – communication costs B 6 36 – conformity A 7 10, 11, 12 – contract duration B 5 40, 6 51 – deposits B 6 52 – digital content B 5 41, 42 – dispute resolution B 6 54 – enforcement B 5 8 – execution of contract B 5 32, 33, 6 37 – formal requirements B 5 3, 6 22, 8; C 6 30 – guarantee B 5 35 et seq., 6 48, 49 – identity B 5 27 et seq., 6 25 et seq. – language B 6 22, 8 8; C 5 54 – level of harmonisation B 5 3, 6 3, 8, 8 5, 35; C 5 7, 6 6 – main characteristics B 5 24 et seq., 6 24 – online marketplace B 6 32 – price B 5 31, 6 33 et seq. – right of withdrawal B 6 38 et seq., 8 21 – sanctions B 5 7, 6 14, 43, 44; C 10 4 Price A 3 31, 32, 33 – definition A 2 26 et seq. – personalised B 6 35 – reimbursement A 16 7 et seq., 19 et seq., 18 8 et seq. Price reduction A 14 47, 59, 60, 18 7 – calculation A 14 61 et seq. – exercise A 14 64 – reimbursement A 14 65 – requirements A 14 44 et seq. Private international law A 13 6, 7, 8 Public performance A 3 109 Public statements A 8 6, 64 et seq. Redress – intellectual property rights A 20 28 – right A Intro 23, 1 30, 8 123, 24 13, 14 Remedies A 13 63 – cure See Cure – damages See Damages – incorrect integration A 9 61 – price reduction See Price reduction – rejection A 13 54, 55 – specific performance A 11 14 – termination See Termination

Index – third party See Third party rights – withholding performance A 13 53 Review clause – deadline A 25 6, 11, 13 – qualified A 25 5, 9 – simple A 25 4 Right of withdrawal – consent See Data – digital content B 14 2, 7, 8, 16 7 et seq. – digital service B 14 5, 6, 16 13 et seq. – exceptions B 8 30, 16 – pre-contractual information B 6 38 et seq., 8 21 – relation to termination A 14 8, 15 4 Robinson lists C 7 1, 22 Rome I Regulation A 13 6, 7, 21 5; D 7 2, 4 Safe harbour Intro to Arts 12-15; C Intro 3, 12 2, 3, 15, 13 9, 14 8 Sales contract – definition B 5 12, 6 20 Scope – digital content contract See Digital content contract – personal A 1 11, 3 2, 8 et seq. – substantive A 1 12, 3 27, 28 Search engines C 13 18, 14 5 Services – definition B 5 12, 6 20 – electronic communication A 3 94 et seq. – financial A 3 104 – gambling A 3 102, 103 – healthcare A 3 100, 101 – number-independent-interpersonal A 3 98 – professional A 3 92 – provider C 5 10 et seq. – public A 3 112 et seq. Software – definition A 2 35, 9 20 – free and open source A 3 106 et seq. Standardisation Regulation A 8 33, 34 Subscriber – residence D Intro 87 Supply A 5 5, 13 et seq., 16 16 et seq. – burden of proof A 12 10 – continuous A 11 8, 15, 31, 12 3, 19, 20, 33, 14 16, 16 15 – definition A 11 12, 12 15 – failure A 13 15 et seq. – obligation A 6 3 – single A 14 16 – termination A 15 19 – time A 11 19, 34 – undue delay A 5 20; B 5 32 Tangible medium A 3 67 et seq., 11 9, 13 13, 14 10 – definition A 2 59, 5 12, 8 73 – return A 17 14 et seq., 18 16, 17

Termination – bundle contract A 3 122, 127 – burden of proof A 14 70 – conditions A 13 19 et seq. – consequences A 17 7, 8 – consumer's obligations A 17 7, 8 – data protection A 16 2, 5, 24, 27, 30, 33, 35, 36, 37, 39 – definition A 14 66 – effectiveness A 15 12 et seq. – effects A 14 75, 19 20 – exercise A 13 44, 47 et seq., 14 71 – formal requirements A 15 6, 8 – immediate A 13 31 et seq., 57 – legal consequences A 13 45 – long-term contract A 3 99, 153 – non-conformity threshold A 14 67, 68 – partial A 14 72, 73, 74 – reason A 15 11 – relation to withdrawal A 15 4 – requirements A 14 44 et seq. – statement A 15 7 et seq. Third party – fees A 18 27 – rights See Third party rights Third party rights A 11 39 – burden of proof A 10 17, 65, 66 – causation A 10 40 – counterclaim A 10 34 – exercise A 10 36 et seq. – liability A 11 17 – nullity A 10 61 et seq. – remedies A 10 58 et seq. – rescission A 10 61 et seq. – restrictive effect A 10 35 – Sale of Goods Directive A 10 10 – scope A 10 22 et seq. – third party A 10 28 et seq. – transfer of risk A 10 51 – violation A 10 31 et seq. Time – additional A 13 26 et seq. – specific A 13 35 et seq. Trader – definition A 2 21, 22, 3 9 et seq. – intermediaries A 3 12 et seq. – liability See Liability – platform See Platform – redress See Redress – right to cure A 14 3 Transfer of risk A 10 51 et seq. Transposition A 24 5 – deadline A 24 7, 8 – quasi retroactive effect A 24 12 Updates A Intro 21, 7 51, 56, 8 110 et seq., 14 12, 16 16 – conformity A 7 53 et seq. – failure to provide A 13 17, 18 – information obligation A 8 125, 127, 128 – installation See Installation

595

Index – – – – – – – –

liability A 11 18 modification A 7 56, 57 non-conformity A 9 58 presumption of conformity A 12 31 remedies A 8 115, 122 security A 7 54, 8 116, 117 third party A 8 119 et seq. upgrade A 7 55

Verification D Intro 91, 93, 95, 96, 108, 2 17, 9 11 – age D 4 17 – contract D 5 31, 7 13 – data minimisation D 5 21, 40 – declaration D 5 37 – effective D 5 42 – electoral roll D 5 32 – failure D 5 58 – free-of-charge services D 6 13 – identity documents D 5 27 – IP address D 5 38, 52 – license fee D 5 30

596

– mechanisms D 5 3, 4 – payment details D 5 28 – personal data D 5 4, 44, 57, 8 7 et seq. – place of installation D 5 29 – postal address D 5 36 – proportionate D 5 41 – reasonable D 5 40 – reasonable doubts D 5 48 et seq. – repetition D 5 43, 44 et seq., 50 et seq. – tax payment D 5 33 – time of D 5 14 et seq. – utility bills D 5 34 Virtual currencies A 2 27 et seq., 3 33, 34 Voice assistance A 2 44 Voice commerce B 8 37; C Intro 10–11 4, 10 22, 26, 11 12 Waiver A 8 153, 154 – agreement A 8 168 et seq. – control A 8 175 et seq. – knowledge A 8 162 et seq.