The European Parliament and the Council adopted the digital contracts directive in May 2019, and Member States have two years to implement the directive in their national law. The new rules will then begin to apply all around EU by the end of 2021. In Finland, the Government has recently drafted and presented the statute to the Parliament and the legislation is due to enter into force on 1 January 2022.
The new rules have been anticipated and will provide solutions to current issues regarding digital content and consumer protection. Although the Consumer Rights Directive has harmonised certain rules for the supply of digital content, there are no specific EU rules to protect consumers against non-conforming digital content. Currently, the Member States are depending on their own legislation in cases related to supply of digital content, and most Member States lack specific national legislation.
What will change?
According to the EU, the new directive will harmonise key consumer contract law rules across the EU, which ensures a high level of consumer protection as well as increases legal certainty for consumer and traders. Harmonised rules will reduce costs for traders and encourage them to expand around the EU area. The directive will affect digital content and digital services, which include vast range of products, such as videos, music files, software, live streaming events and social media. Problems often associated with digital content include e.g. that software stops working or music downloaded will not play on the intended device.
Until now, protection only existed for tangible goods at EU level. The new directive gives consumers the right to a remedy when the digital content or service is faulty, regardless of whether they paid for it or not. The fact that many digital services are supplied in a way that the consumer does not pay money but provides personal data to the trader has also been addressed in the directive. The directive therefore ensures that even though personal data cannot be considered as a commodity, consumers using such business models should also be entitled to contractual remedies.
The notion of functionality should be understood to refer to the ways in digital content or service can be used. Traders may agree with consumers to provide updates and features as they become available. The conformity should therefore be assessed also in relation to whether the digital content or service is updated in the manner stipulated in the contract.
The directive lays out objective requirements for conformity. Conformity should be assessed by considering the purpose for which similar digital content of service would normally be used. It should also have the qualities and performance features which are normal for digital content of the same type and which consumers can reasonably expect, given the nature of the content or service, taking into account any public statements on the specific characteristics of the digital content or service made by the trader.
In order to ensure flexibility, both parties should be able to deviate from the objective requirements for conformity. Such deviations should however only be possible if the consumer has been specifically informed about them and the consumer accepts them separately.
The impact on video gaming
The directive will likely affect a large number of businesses in the gaming industry as well as advertisement of the gaming products. Below are some examples and scenarios that you might need to consider after the directive enters into force.
Day 1 patches and early access
Many game developers, who are subject to tight schedules and deadlines, publish their games unfinished and try to patch things up by releasing a ‘Day 1 patch’ update immediately after the release. By doing this the developers gain more time to work on their product. However, according to the new directive, the goods have to be in conformity both with what is agreed and what the consumer could reasonably expect. The directive states that the digital content or 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, 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.
Thus, if the day 1 patch does not fix the problem and the game is not functioning as it was expected, it does not meet the requirement set by the directive. This gives the consumer the right to obtain price reduction or even terminate the contract.
Recent infamous cases which have caused outrage among gamers, No Man’s Sky and Cyberpunk, were released unfinished, even though they were sold as fully developed games with full price. In the future, the directive would require companies to label such unfinished games as for example early access versions to prevent misleading customers.
Not living up to the advertised qualities and features
Public statements made by video game companies, and especially statements made in advertising, can be considered a requirement for conformity which the game has to fulfil. Increased risk is included in e.g. game trailers showing certain graphics or other technical features which are then withdrawn from the final version, or announcing availability on certain platforms but withdrawing it later.
In addition, demo versions of games might provide a different impression on how the game might look like or work. The directive explicitly states that the digital content or service has to comply with any trial version or preview made available prior to the conclusion of the contract.
Generally, video games companies don’t want to keep updating their old games and reserve the right to cease a game’s support at some point in the terms of service. However, the Digital Content Directive sets out that the consumer must be supplied with updates necessary to keep the digital content or digital service in conformity for the period of time that the consumer may reasonably expect.
This applies for both a single act of supply and a series of individual acts of supply. Thus ceasing a game’s support too early can pose as a risk under the Digital Content Directive, especially if the support is terminated during the time period of a season pass.
Broad territorial scope and applicability
After the Directive has been implemented into the national legislation of EU Member States, the new rules apply to foreign companies as well. Contracts concluded with a consumer are governed by the law of the consumer’s habitual residence, if the game company pursues its commercial or professional activities in that country or by any means directs those activities to said country.
Directive cannot be excluded through TOS
In addition, the Directive is mandatory legislation, meaning that gaming companies cannot avoid the legislation with their own contract terms or terms of service. Contractual terms which exclude the application of the Directive’s regulations do not bind the consumer.
The new Directive should be implemented in the Member States by the end of this year, so when planning your game publications or marketing campaigns for next year, remember to take the new rules into account.
If you need help with complying with the new legislation, we are here to help! Contact us to get started!
Markus Myhrberg, Partner, [email protected], tel. +358 40 505 5343
Anni Kaarento, Legal Trainee, [email protected]