EU Digital Fairness Act unpacked: simplification measures

The public consultation on the Digital Fairness Act will close in a few days on 24 October. Until then, companies, associations, and other stakeholders can share their perspective on the legislative process. As part of the consultation, the European Commission is considering a range of simplification measures.

Digital fairness 'fitness check' 

According to the Commission, its digital fairness "fitness check" identified not only gaps in consumer protection but also opportunities to simplify the digital regulatory environment while strengthening consumer protection. It found that the current legal framework, with legal uncertainty and ambiguity in some areas, not only leads to high compliance costs but also creates barriers in the single market, thereby undermining the EU's competitiveness.

Therefore, the Commission aims to enhance legal clarity and reduce compliance costs for businesses, thereby addressing market fragmentation. These issues are identified as negatively impacting the single market and the level playing field for EU businesses. Simplification measures could remove barriers to the internal market and reduce regulatory fragmentation – which would strengthen the EU's competitiveness.

The consultation emphasises that consumer protection takes priority over improving the single market through simplification measures. The Commission will not consider simplification measures at the expense of consumer protection. The changes up for discussion in the consultation can be divided into those concerning the fundamental simplification of the EU’s digital regulation on the one hand, and specific measures on the other.

Digital regulation simplification

The consultation calls for input on reducing national fragmentation through further harmonisation at EU level and on ensuring greater legal certainty and clarity in key areas. Part of the consideration is the question of which specific areas of the digital market regulation could be further harmonised by the EU. This involves inquiring about harmonisation in dark patterns, addictive designs, specific features in digital products, personalisation practices, social media influencers and digital contracts. 

The regulation in these areas is comprehensive and characterised by a variety of frameworks rather than a single regime. It is therefore hardly surprising that the Commission is calling for reflection on the relationship between the various EU frameworks applicable to the digital field and on whether the stakeholders have clarity regarding their relationship to one another.

Consumer protection measures 

Furthermore, the Commission considers simplifying certain consumer protection measures. This particularly concerns provisions of the Consumer Rights Directive (CRD), such as “rebalancing” the consumer’s right of withdrawal for digital media subscription services (for example, for audio and video streaming) and reducing consumer information requirements in repetitive transactions with the same trader (e.g. in-app purchases). The consideration asks stakeholders whether they deem these measures appropriate.

Digital media subscription services 

The European Commission is considering rebalancing the right of withdrawal for digital media subscription services. This particularly concerns audio and video streaming services and is intended to make the right of withdrawal more sustainable and practical for providers. At the same time, consumers' right to change their minds should remain intact. Stakeholders are asked to give feedback on whether they deem a rebalancing appropriate. The consultation does not specify how such a balance could be achieved.

In principle, streaming services are currently subject to a right of withdrawal. However, there is still no clarity about the applicable withdrawal regime. Earlier this year, the Court of Justice of the EU (CJEU) was presented with the question of whether a video streaming service provides digital content or a digital service. 

Depending on the answer, the withdrawal regime differs significantly. In case of a contract about digital content, under certain conditions consumers can lose their right of withdrawal before the end of the withdrawal period as soon as the performance of the service begins; that is, as soon as they have access to the content. In case of a contract about digital services, however, the right of withdrawal can only cease to exist once the service is fully performed. Subscriptions are usually not fully performed within 14 days after contract conclusion, meaning that in case of digital services, the right of withdrawal continues to exist, and consumers can claim a pro-rata refund. 

If streaming services are considered digital services, this means consumers can withdraw from their streaming subscriptions even after substantial use. This can lead to disproportionate outcomes and an increased risk of abuse of the right of withdrawal from the perspective of streaming providers. 

The CJEU will bring some clarity about the classification of streaming services. However, whether the outcome of this decision will be fair for streaming providers remains to be seen. For now, the consultation offers an opportunity to discuss what would be fair and to prepare potential legislative intervention if considered necessary.

Reducing consumer information requirements 

Another measure under consideration is reducing consumer information obligations for repetitive transactions with the same supplier and automated contracts concluded by consumers using a digital – that is, an artificial intelligence – assistant.

In-app purchases are named as an example of a scenario where this could become relevant. Currently, suppliers must repeatedly provide full information for each individual transaction. In particular, the question arises as to whether purchases made with in-game currency constitute transactions and are subject to the comprehensive information obligations in the CRD. The Consumer Protection Cooperation Network (CPCN) addressed this in its set of key principles on in-game currencies published in March. According to the CPCN, the exchange of in-game currencies against other in-game items is also subject to the extensive information requirements of the CRD. 

Whether or not this interpretation is in line with the currently applicable legal regime remains to be seen. However, against this backdrop, the Commission poses the question of whether the entirety of the information requirements must be provided for each exchange, whether such an approach increases consumer protection, and whether it would be possible to simplify the compliance requirements for in-app purchases while maintaining a high standard of consumer protection.

The reasoning is based on the principle of proportionality but also on the fact that an overload of information can cause consumers to automatically filter out information. An overload of information can ultimately undermine the very purpose of consumer law. Simplifying compliance requirements for in-app purchases and other comparable repetitive transactions could therefore also strengthen consumer protection.

Price reductions for perishable goods 

Moreover, ending the current fragmentation of national rules on price reductions for perishable goods is under consideration as well. Currently, the rules on price reductions for food products are fragmented, since Member States can derogate from the basic principles of the Price Indication Directive (PID) in relation to goods that are liable to deteriorate or expire rapidly. 

However, no exemption from the PID is provided for non-perishable food products. This opens the possibility of differing national regulations for non-perishable and perishable food products. As a simplification measure, the European Commission considers fully exempting all food products regardless of their characteristics. Ultimately, this would end the fragmentation of the law only in a relatively small area. This measure would therefore not significantly reduce the overall fragmentation of digital regulation in the EU.

Consumer information in digital form only

Stakeholders are also asked whether certain information could be provided to consumers exclusively in digital form. Which information obligations this could affect and to what extent this is contemplated are part of the consideration.

Osborne Clarke comment

The consultation combines wide‑ranging considerations about the fragmentation of the digital market regulation in the EU with narrowly defined proposals of specific measures (for example, CRD information requirements and withdrawal rights). How these specific measures might look is also part of the consultation process. Overall, the simplification measures under the Digital Fairness Act remains characterised by uncertainty. It will be interesting to see whether the consultation leads to a more refined and balanced approach.

This is the penultimate Insight in our “Digital Fairness Act unpacked” miniseries that has addressed each key topic of the consultation, including dark patterns, addictive designs, specific features in digital products, personalisation practices, social media influencers and digital contracts.