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UK not 'fundamentally opposed' to extending consumer rights to trade of data for digital content, new report says

The UK government has "no fundamental objection" to consumer rights being extended in cases where consumers trade their personal data for access to 'free' digital content, according to a new report.26 Feb 2016

However, the UK government remains concerned about the effect there could be on businesses of doing so, UK minister for skills Nick Bowles has said in comments published in a recent report by the European Scrutiny Committee at the UK parliament.

The Committee's report reflected on legislative proposals published by the European Commission in December 2015 on contracts for the supply of digital content which, if introduced, would give consumers new rights of remedy and redress in relation to digital content supplied to them that is faulty or which otherwise fails to conform to sellers' descriptions.

Contracts for the supply of digital content that see consumers exchange money or "actively provide" a "counter-performance" such as personal data in return for access to that content would be subject to the planned new EU rules. This differs to the position under the UK's Consumer Rights Act where most of the rights and remedies provided for do not apply where consumers exchange personal data in return for access to digital content.

Bowles said: "The proposal seeks to include 'free' digital content, that is, content which is provided in return, not for money but for the agreement to provide access to the consumer's personal and other data… We have no fundamental objection to this (in the Consumer Rights Act 2015 we provided for the option to extend the UK regime to 'free' content in the event that there is sufficient evidence of consumer detriment)."

"However, we do need to ensure that the conditions under which consumer agreement is provided are clear and that the obligations and remedies proposed are proportionate and do not unduly inhibit this often low margin but very innovative business model," the minister said.

Bowles' comments expand on the position the UK government outlined in January when it opened a consultation on the EU proposal. At that time the UK government admitted that it would have to update the UK's Consumer Rights Act if the EU plans on digital content were introduced as currently drafted.

In its consultation paper the UK government questioned whether it would be proportionate for consumer rights to be extended to cases where personal data is exchanged in return for access to digital content and took issue with some of the wording of the Commission's proposals.

"The concept of the consumer 'actively providing' access to data by way of payment for free content is not clear," the UK government said. "For example would it require a positive action on the part of the consumer, or does it imply more than a consumer simply agreeing to make their data available?"

"An extension to free services may mean that the obligations and remedies proposed in the event of failure to comply with the contract are not proportionate in the circumstances. It is possible these might unduly inhibit this often low margin but very innovative business model. We do however note that financial remedies would not apply to free content," it said.

The UK's Competition and Markets Authority (CMA) has also published its response to the EU proposals. It said that it consumers "should obtain similar protections to those available when purchasing digital content with money" when exchanging data for digital content (11-page / 315KB PDF). However, it said how the rights and remedies are accounted for in practice "will need careful consideration" to ensure "there is the correct balance of rights as between businesses and consumers".

"We accept that business models may 'monetise' data on the basis of low margins, but in our view that is not a justification for not granting rights to consumers but, rather, for ensuring that the remedy for non-conformance is fair and proportionate," the CMA said.

The regulator said that its review of the commercial use of consumer data last year "found that the exchange of data for services produced many benefits for businesses, consumers and the economy" but also "identified concerns with lack of trust".

"If consumers are not granted rights when exchanging data for services, there is little incentive for businesses to improve their services or for suppliers to compete on the basis of the quality of services in exchange for data," the CMA said. "We note that under the proposals the digital content must primarily conform to what was promised in the contract and in the absence of this to various criteria which include taking into account whether the digital content was supplied for a price or for data. It is unclear how this will work in practice."

The CMA said that consumers can "reasonably expect higher priced goods to be of a higher quality" under the terms of the Consumer Rights Act and that that principle "may equally translate to the purchase of digital content". However, it said there is a challenge in determining what value to attribute to data and therefore what quality standards consumers can expect to be met.

"When the form of payment is data rather than money, the 'value' of the data may be difficult to assess given that the value of data is a fluid value depending on various factors (the same data may be more valuable, for example, to one trader than to another and may depend on other data available to the trader)," the CMA said. "So how is the value of data assessed? A practical example may be the case of an app which is 'purchased' for, say, £1, £5 or through data exchange: if the contract is silent, how does one assess against what standard the digital content should be assessed?"

The CMA said that it would be "desirable" for the EU proposals to be updated to clarify when a consumer can be said to 'actively provide' a counterparty to the supply of digital content.

"We would be wary of an overly mechanistic approach to what constitutes 'active' in this context: consumers must do more than simply, say, 'click' a button," the CMA said. "They should be informed of the consequences of their actions."