The Digital Content Directive and the Sale of Goods Directive: when to apply which?

To provide seamless cooperation between consumers buying digital solutions and the companies offering them, you need a common set of ground rules. That is why on 20 May 2019 the European Parliament adopted Directive (EU) 2019/770 on certain aspects concerning contracts for the supply of digital content and digital services (the "Digital Content Directive" or "DCD") and Directive (EU) 2019/771 concerning contracts for the sale of goods, amending Regulation (EU) 2017/2394 and Directive 2009/22/EC, and repealing Directive 1999/44/EC (the "Sale of Goods Directive" or "SGD").

Although the subject-matter of both directives is essentially the same – conformity of goods, digital content or digital services with the contract, remedies in the event of a lack of such conformity, modalities for the exercise remedies – the directives are complementary and do not overlap.

To properly understand and distinguish the scope of each directive's applicability, it is important to know a few definitions used, such as:

• digital content, meaning data which are produced and supplied in digital form;
• digital service, meaning a service that allows the consumer to create, process, store or access data in digital form or a service that allows the sharing of or any other interaction with data in digital form uploaded or created by the consumer or other users of the same service;
• goods with digital elements, meaning any tangible movable items that incorporate or are inter-connected with digital content or a digital service in such a way that the absence of that digital content or digital service would prevent the goods from performing their functions.

"Although the subject-matter of both directives is essentially the same – conformity of goods, digital content or digital services with the contract, remedies in the event of a lack of such conformity, modalities for the exercise remedies – the directives are complementary and do not overlap."

The Digital Content Directive

The purpose of the Digital Content Directive is to contribute to the proper functioning of the internal market while providing for a high level of consumer protection, by laying down common rules on certain requirements concerning contracts between vendors and consumers for the supply of digital content or digital services. The DCD applies to any contract where the vendor supplies or undertakes to supply digital content or a digital service to the consumer and the consumer pays or undertakes to pay a price. For example, the DCD covers computer programs, applications, video files, audio files, music files, digital games, e-books or other e-publications, and also digital services which allow the creation, processing, accessing or storage of data in digital form, including software-as-a-service, such as video and audio sharing and other file hosting, word processing or games offered in the cloud computing environment and social media.

What is interesting is that the DCD applies only to contracts where the consumer agreed to pay a price (and that is why, e.g. software offered under a free and open-source licence is not covered by it), but the price may not necessarily mean "money". The DCD also applies where the vendor supplies or undertakes to supply digital content or a digital service to the consumer, and the consumer provides or undertakes to provide personal data to the vendor, except where the personal data provided by the consumer are exclusively processed by the vendor for the purpose of supplying the digital content or digital service in accordance with the DCD or for allowing the vendor to comply with legal requirements to which the vendor is subject, and the vendor does not process those data for any other purpose. The issue of personal data as a currency will definitely be subject to additional debates, especially with respect to its compliance with the GDPR-related restrictions.

The DCD applies only to contracts where an actual digital service is rendered. For example, if a translator provides a translating service which in its nature is not digital, the DCD does not apply even if the result of the service (the translation itself) is provided in the form of an e-mail.

The Sale of Goods Directive

On the other hand, the Sale of Goods Directive vaguely mentions that it is applicable "to sales contracts between a consumer and a seller". Additionally, it should apply to digital content or digital services which are incorporated in or interconnected with goods, and are provided with the goods under the sales contract, irrespective of whether such digital content or digital service is supplied by the seller or by a third party. In case of doubt as to whether the supply of incorporated or interconnected digital content or an incorporated or interconnected digital service forms part of the sales contract, the digital content or digital service will be presumed to be covered by the sales contract.

For example, the SGD applies to the sale of any kind of "smart" equipment, such as a smartphone, smart TV (advertised as having access to certain applications) or smart watch. Digital content can be pre-installed upon the conclusion of the sales contract or, where that contract so provides, can be installed subsequently. Once such installation is provided for in the contract, it will be covered by the SGD.

Distinction between the directives' scopes

Alternatively, if a consumer expressly agrees to buy a smartphone without a specific operating system and purchases the system separately from a third party, the supply of the separately bought operating system does not form part of the main sales contract and, as such, does not fall within the scope of the SGD. Similarly, if the consumer buys a car with no GPS and subsequently purchases one from a third (or even the same) party, those will also form two separate contracts, one within the scope of the SGD and the other within the scope of the DCD.

Once implemented into national law, the distinction between scopes of application may become more visible and easier to understand as more and more cases are tackled.

author: Daria Rutecka