EU Commission announces DSM proposals on portability of online content and copyright rules

On December 9, 2015, the European Commission (the Commission) announced two important steps forward in its digital single market (DSM) initiative, a regulation to ensure online portability of digital content and services and a directive to harmonize EU contract rules on the sale of digital content and goods online.

It is not clear how quickly these measures will be agreed, but Commissioner Oettinger aims for online portability to become effective in mid-2017, together with the end of roaming charges. These measures will have a significant impact not only for European consumers, but also for the wide array of businesses that offer goods or services, including digital content and services, online.

The Commission’s proposal for a regulation on cross-border portability of online content (the Online Portability Regulation) is intended to ensure that subscribers can use online content and services in any Member State. The Commission also published a Communication on a modern, more European copyright framework and confirmed plans to widen access to content across the EU; to work on key exceptions to EU copyright, including for data mining; to ensure that online content is appropriately remunerated, including looking at the role of news aggregation services; and to fight piracy.

The Commission also published a Communication and adopted two draft directives to harmonize EU contract rules to facilitate online sales. The first concerns the supply of digital content (the Content Directive) and the other covers the online sale of goods (the Goods Directive; together with the Content Directive, the Online Contracts Directives). The Online Contracts Directives would create a single set of rules with the aim of helping businesses expand their activities to foreign markets while increasing consumer trust and encouraging EU consumers to increase their cross-border purchases.

The new measures, while important in their own right, should not be seen in isolation. The DSM initiative, which was announced in May 2015, includes 16 specific proposals and is linked to ongoing initiatives of a number of directorates-general. For example, the Content Directive will arguably go a long way to resolving the concerns over geo-blocking that prompted the Directorate-General for Competition’s ongoing e-commerce sector inquiry and pay-TV investigations. The Content Directive’s provisions on consumer contracts in exchange for personal data will also have a significant impact on the protection of personal data in the EU.

This briefing summarizes the Commission’s proposals for an Online Portability Regulation and the Online Contracts Directives. For more information on the Commission’s DSM initiative, see here and here.

As noted, the Online Portability Regulation aims to remove barriers to portability of online services and content within the EU. The regulation would be effective six months after publication of the final version without the need for implementation by Member States.

Following a consultation in 2013-2014 in which the Commission considered several options to achieve this objective, and extensive consultations, the Commission propose to ensure portability by introducing a rule into EU law that the provision, access and use of an online content service in a cross-border portability mode would be deemed to occur in the consumer's Member State of residence, so that providers could not limit subscribers’ access to and use of such services based on the location of use within the EU. The Online Portability Regulation would also impose an obligation on providers of online content services to ensure cross-border portability of such services and establish that any provisions in contracts limiting cross-border portability are unenforceable.

The Online Portability Regulation would apply to "subscribers," defined as consumers who, on the basis of a contract for the provision of an online content service, may access and use such service in the Member State of their residence. Thus, the new rules would not apply to business users.

An "online content service" would be covered when: (i) the service is lawfully provided online in the Member State of residence; (ii) the service is provided on a portable basis; and (iii) the service is an audiovisual media service or a service whose main feature is the provision of access to works, other subject matter or transmissions of broadcasting organisations.

The regulation would distinguish between two scenarios: (i) services provided (directly or indirectly) for payment of money and (ii) services provided without payment of money provided that the subscriber's Member State of residence is verified by the service provider. In other words, if a subscriber receives a free online content service, the provider will only be obliged to enable the subscriber to enjoy cross-border portability if the provider verifies the subscriber's Member State of residence. Thus, if a consumer accepts the terms and conditions of a free online content service without registering on a website (so the provider does not verify her Member State of residence), the service provider will not be obliged to provide cross-border portability for the service.

Online service providers would be obliged to enable subscribers to use online content services while subscribers are temporarily present in another Member State, with the same content, on the same range and number of devices and with the same range of functionalities as offered in the Member State of residence. Providers would not be obligated to ensure the same quality of service outside the Member State of residence, unless otherwise agreed, but they would have to inform subscribers about the quality of the online content service when accessed and used outside the Member State of residence.

The Commission notes that differences in national contract laws constitute a significant obstacle for cross-border sales. The Commission believes harmonized rules would significantly increase cross-border sales by both businesses and consumers. Unlike the Online Portability Regulation, the Online Contracts Directives would have to be implemented into Member State law.

The Content Directive

The Content Directive would harmonize contract rules in four main areas: suppliers’ liability for defects; reversal of the burden of proof; consumers’ rights to end contracts; and consumers’ rights in relation to contracts established in exchange for data. More specifically:

• If digital content is defective, the consumer could ask for a remedy with no time limit, since digital content is not subject to wear and tear.
• If digital content is defective, it will not be up to the consumer to prove that the defect existed at the time of supply, but rather for the supplier to prove that this is not the case.
• Consumers will have the right to terminate long-term contracts and contracts to which suppliers make major changes.
• Where consumers obtain digital content or a service in exchange for their personal data, suppliers would have to stop using the personal data if the contract is ended.

The Goods Directive

Similarly, the Goods Directive would harmonize Member State contract rules in three main areas: reversal of the burden of proof for two years; eliminating consumers’ duty to notify sellers of defects; treatment of minor defects; and rights in connection with purchases of second-hand goods. More specifically:

• The time period during which a consumer asking for a remedy for a defective product does not have to prove that the defect existed at the time of delivery will be extended to two years throughout the EU.
• Consumers will not lose their rights if they do not inform the seller of a defect within a certain period of time, as is currently the case in some Member States.
• If a seller is unable or fails to repair or replace a defective product, consumers will have the right to terminate the contract and be reimbursed, even in the case of minor defects.
• For second-hand goods purchased online, consumers will have two years to exercise their rights, as is the case with new goods.