Digital contract rules in plain language

Blogs January 29, 2016

Business Legal Agreements

The situation: You are on a city break in central Europe and an unexpected storm ruins your holiday plans. Free Wi-Fi however awaits at the hotel and you can pass time comfortably with the help of Netflix and Spotify. You open the service, but the available content is different. A foreign online store has the product you want, but who feels confident buying from a foreign online store? The product might never be delivered. As a taxpayer of a net contributor state, you start to question the advantages of the European Union. Meanwhile, your phone has silently changed from the hotel’s mediocre Wi-Fi network to a mobile data network, insidiously increasing your bill through roaming charges…

This situation is not going to happen again. In October, the European Parliament voted to abolish mobile roaming charges within the EU by summer 2017, and from April 2016 the additional cost of text messages, calls and data usage will be reduced. In the future, a mobile operator can charge an increased rate only if it shows that it cannot cover the expenses incurred from providing roaming services. For example, this change allows mobile users travelling abroad to surf the internet for the same price as back home in Finland. It is therefore time to take Finnish socialising culture abroad; at last we can fulfil ourselves by sternly staring at our phones across Europe without fear of additional costs! But what if a service you have paid for at home does not include the same content when travelling abroad? You accidentally left your headphones in the hold baggage and now you have to watch the shows you like with Dutch subtitles; not to mention the fact that when you get to the airport, you can no longer find the show you were in the middle of watching from the online service. Fortunately, these problems are also being addressed.

The Commission has proposed a regulation on content transferability across digital content providers, enabling consumers to enjoy the online services they have paid for while abroad. In other words, if you have paid for streaming services in Finland, you should at least have access to the content available in Finland on that service. This regulation is expected to come into force in 2017. The aim is to ensure consumers have the opportunity to get their money’s worth, but at the same time the change enhances the position of copyright holders. Illegal streaming and downloading of pirated content will decrease as legal content becomes more widely available.

However, everything has not yet been resolved. The online sale of goods is bogged down across Europe, as thus far consumers have primarily only trusted online stores in their own countries. The European consumer market is vast and demand for online goods exists, but businesses are not ceasing the opportunity to expand their online sales due to uncertainty about the applicability of foreign legislation. It feels safer to buy from your own country, as the rules are familiar and you won’t have to undergo an expensive and lengthy dispute abroad. Over half of the businesses that responded to the Commission’s survey expressed interest in cross-border online sales, but only if a common set of e-commerce rules applied to all EU countries.

In May this year, the Commission published the Digital Single Market strategy, which aims (you guessed it) to improve sales in the digital market within the EU. There is a need for such a strategy: even though goods and services can be purchased mainly duty-free within the EU, only 12% of traders and 15% of consumers chose to engage in cross-border online sales. In Finland, 32% of retailers sell online, while only 5% sell to consumers outside of Finland.

In implementing this strategy, the Commission has now made two proposals on digital contract rules, which concern the online sale of digital content (e.g., streaming services) and goods.

In the case of digital services, the supplier will be liable for product defects and there will be no time limit to this liability because digital products do not wear in the same way as physical products do. The burden of providing proof will be reversed, so that the consumer is no longer responsible for demonstrating that a defect existed, instead it will up to the supplier to prove that the product was without fault.

The rules that apply to the online sale of goods are also changing. The proof of burden will also be reversed in relation to goods; currently in Finland a consumer can request that a defective product is repaired within six months of purchase without having to provide proof of defect at the time of delivery, but in the future this time period will be two years. In addition, the obligation to apply for a refund within a reasonable time period will be removed, so refund claims can be made without a time limit.

On the surface, these changes appear unfavourable to businesses, but the online sale of products holds huge potential for Finnish companies. Thanks to harmonised rules, negotiations about country specific terms will become unnecessary, and the number of interested buyers from other countries is estimated at over 70 million. Finnish businesses have always had to fight tooth and nail for international visibility. Strengthening consumer protection thus becomes beneficial to companies. Finns should change their attitudes more towards positive thinking and look to European consumer markets.