Currently, it is unclear whether there will be a no-deal Brexit. The UK Parliament has legislated against it and there are two appeals to the Supreme Court on the legality of the Government’s advice on the prorogation of Parliament pending. However, the Prime Minister of the moment will still need to seek an extension of the Article 50 deadline from the European Commission and all the remaining 27 member states need to agree to it. Mr Johnson may also succeed in agreeing revised terms for the UK's withdrawal from the EU with the EU and passing this through Parliament; in such a case, the UK will likely remain subject to EU law for a transitional period of several years following Brexit.
It is therefore important to keep one eye firmly on new EU legislation coming down the line as part of the EU’s digital single market (DSM) strategy, announced in May 2015, comprising a number of directives and regulations aimed at improving access for customers and businesses to digital goods and services EU-wide, creating an environment of innovation and maximising the growth of the digital economy. Some directives and regulations are already in effect, such as the Portability Regulation, but many will need to be implemented within the next two years – such as the revised AVMS Directive (covered above) and the revised Cable and Satellite, or “Cabsat”, Directive (covered in a previous alert). Other directives and regulations are currently being drafted and negotiated, such as the proposed Digital Services Act.
In this two-part client alert, we provide an overview of some of the key DSM strategy directives and regulations which the UK may well need to transpose, depending on the outcome of the Brexit process. Part 2 covers the sister Digital Content Directive and Online Sale of Goods Directive, as well as the proposed Digital Services Act, which is aimed at imposing sanctions on internet giants.
Digital Content Directive
The UK will need to implement the Digital Content Directive (formally, Directive 2019/770) by 1 January 2022 if it remains subject to EU law on that date.
The directive introduces high levels of protection for consumers that pay for digital content (e.g., music and online videos, computer programs, applications, and video and audio files) and digital services (e.g., software-as-a-service, including video and audio file sharing; services allowing for data sharing, such as Facebook and YouTube; and durable media, such as DVDs, used exclusively to carry digital content). Article 14 establishes that, where there is a failure to conform with a product’s objective or subjective requirements (e.g., music videos which do not play sound adequately), the consumer shall be entitled to have the digital content or service fixed, or “brought into conformity”, within a reasonable amount of time, free of charge and without significant inconvenience to the consumer. If this does not occur, or cannot occur (for example, fixing the defect would be impossible, or circumstances are clear that the trader cannot or will not do so), the customer can elect to:
- receive a proportionate price reduction (potentially reaching full reimbursement); or
- if the lack of conformity is “not minor” (the burden of proof of which is to be borne by the trader), terminate the contract.
Notably, the directive also applies where customers provide personal data in exchange for content or services, leading to suggestions that traders may be able to take advantage of this supply to process personal data without pursuing the specific bases for processing under GDPR. However, Article 3 of the directive states that the directive is without prejudice to the provisions of GDPR, and that, in the case of a conflict between the provisions of the directive and existing EU law on the protection of personal data, the latter should prevail. As such, the directive will not allow data controllers to process data unlawfully, and data controllers will need to ensure they rely on a proper legal ground for processing.
Online Sale of Goods Directive
The Online Sale of Goods Directive (formally, Directive 2019/771) will likewise need to be implemented by the UK by 1 January 2022 if it remains subject to EU law on this date. This directive applies to all goods, including products with a digital element (including any interface used to download, such as mobile phones with app accessibility, and tech accessories such as ‘smart watches’), and so has the potential to have an impact on a wide variety of applications and interfaces used to access media. The directive and the Digital Content Directive were jointly announced as they are designed to complement each other.
Article 10 states that sellers accept liability for any lack of conformity which exists when goods are delivered and becomes apparent within two years from when the customer receives the goods (or, in the case of a contract providing for a continuous supply of digital content, for any longer period of time during which the content or service is to be supplied). Article 11, meanwhile, states that the burden of proof for any lack of conformity which becomes apparent within one year of delivery shall fall upon the seller, unless proved otherwise.
Member states also have the power to introduce longer timeframes (although they can only extend the Article 11 period from one to two years). Whether goods do not conform with their objective or subjective requirements is to be determined under Articles 6 (covering subjective requirements), 7 (covering objective requirements) and 8 (covering the incorrect installation of goods).
Recital 30 specifies that “conformity” includes ensuring goods with digital elements are appropriately upgraded – for example, ensuring interfaces used to download music are sufficiently upgraded to retain compatibility with music streaming systems – so that the customer can “use such goods in line with their intended purpose”. Recital 30 clarifies that this should include security updates.
Digital Services Act
In July 2019, the European Commission announced new legislation aimed at imposing sanctions on technology giants, including significant fines if mandatory ‘notice and take down’ orders in respect of illegal content on sites are not removed. With the draft act due to be unveiled at the end of 2020, concrete details as to its content are unclear, but Commission officials have commented that any such draft will likely equip the Commission with sweeping legal powers to regulate hate speech, illegal content and political advertising.
The draft is designed to supersede the existing e-Commerce Directive (Directive 2000/31/EC), which contains few rules in respect of the tech sector. According to EU officials, all parts of the tech sector, including ISPs, social media platforms and internet search giants, may be captured by the act, and an EU-wide regulator may be proposed (regulation previously having been the preserve of member states).
With legal experts viewing this legislation, and in particular the concept of a centralised regulator, as a surprisingly bold move likely to “cause a lot of waves”, it will be interesting to see how far the final act (if successful) resembles current proposals – particularly given the more divided European Parliament in the current term (2019-2024), in which the combined coalition of the two largest political groups lacks a majority and by which the current Commission president was only narrowly elected – in addition to whether the UK would be ultimately required to transpose this act.
Conclusions
All DSM measures will affect the legal framework governing the digital sector in some way, with some – such as the Digital Services Act – having the potential to bring about significant change. With the timing and ultimate type of Brexit being particularly uncertain, it remains possible that the UK will be required to transpose several of these measures depending on the terms of any Brexit deal, whether the UK leaves in a no-deal scenario, or whether the UK ultimately stays in the EU.
Client Alert 2019-216
