Clarifications on Withdrawal Right Expected in German Consumer Law

Written on 20 Feb 2017

Since the implementation of the EU Consumer Rights Directive in 2014, Consumers across the EU have a new statutory withdrawal right in contracts for the purchase of „digital content“. Unlike in other types of agreements, it is possible for content providers to obtain a waiver of this right prior to delivering the content – but some crucial details are not yet very clear. Some initial case law suggests that operators of mobile and online games need to very carefully structure their purchase processes if they want to invoke a consumer’s waiver under German law – and consumer groups are ever vigilant and keen to take legal action against any breaches.

1 What Is “Digital Content”

The first issue is whether digital currencies such as “gold”, “coins” or “credits” within online or mobile games are indeed “digital content” for the purpose of EU consumer law. Only if they are does the withdrawal right waiver scheme apply in the first place.

In a case decided by the Regional Court of Karlsruhe, a consumer group had challenged an online game company’s position that in-game currency was “digital content”, arguing that it was just a part of the overall service and not really “content”, because it was ultimately only a number stored on the company’s servers for each player.

The court however sided with the games company and ruled that the definition of “digital content” in the EU legislation was sufficiently broad to include any kind of data, however communicated to the consumer, even if this was not a download. Therefore, virtual currency in the court’s opinion is “digital content” and a withdrawal right waiver generally possible.

2 Formal Waiver Requirements

However, the court imposed an extremely strict formal – one might even say impractically formalistic – regime to obtain a valid waiver:

According to the court, the withdrawal right cannot be waived before it is created. From this statement, the court deduces that the user’s informed consent to the waiver needs to be declared by a separate action after the purchase agreement has been concluded.

In other words: The court would want online games providers to implement two buttons for players to click (or tap) before the virtual currency is credited to the player’s account. First, the player would tap a “purchase” button, and then they would see a second screen asking for the withdrawal right waiver.

This reasoning is extremely surprising. While it is true that a waiver of a right that does not exist makes no sense, the court ignores the possibility of making legally binding declarations intended to produce their effects not instantaneously, but only after a certain time period, or when certain conditions have been met.

The online games provider has appealed the decision, and the case is currently before the Higher Regional Court of Karlsruhe, where a new judgment can be expected in 2017.

3 Outlook

The structure suggested by the court in Karlsruhe is of course toxic to conversion rates. We may expect some clarification this year as to whether the heavy formalities imposed by the Regional Court of Karlsruhe are actually necessary. We will report on the outcome of the appeal.

In the meantime, it is important to note that some form of user consent during the purchase process – e.g. as an extra checkbox or very conspicuous wording above any “purchase” button – is required at any rate for a valid withdrawal right waiver. It is not sufficient to include according language in a EULA or T&C document.

Also, it pays to remember that when addressing the German market, T&C must be available in German language and governed by German law; in almost all cases, this also requires a legal review of the terms to make them compliant with Germany’s particularly strict rules on standard terms for B2C contracts.