Advising the European Parliament on how to ‘Update the Unfair Contract Terms Directive for Digital Services’

The European Parliament commissioned a study on the effectiveness of the current consumer protection framework against unfair contract terms of digital service providers. Professor Joasia Luzak (Centre for European Legal Studies) together with Professor Marco Loos (University of Amsterdam, the Netherlands) took on this important task.

The current European Unfair Contract Terms Directive has been adopted in 1993, which means that its suitability to address the risks that the digital environment poses to consumers has been questioned many times. Prof. Luzak and prof. Loos have conducted a study evaluating specific terms of such digital service providers as Google, Facebook, Twitter and Dropbox in 2015, at the request of the European Consumer Organisation (BEUC). At the time, various national consumer organisations, which are members of the BEUC, were raising legal claims against these big digital service providers, amongst others for drafting unfair contract terms. In an academic article published upon completion of this study (‘Wanted: a Bigger Stick. On Unfair Terms in Consumer Contracts with Online Service Providers’ (2016) 39 Journal of Consumer Policy 63-90) the authors have identified six categories of potentially unfair contract terms (‘unilateral changes of contractual terms’, ‘unilateral changes of service itself’, ‘unilateral termination of contract by digital service provider’, ‘liability exclusions and limitations’, ‘international jurisdiction clauses’, ‘choice-of-law clauses’). Since then French courts found some of the terms of these digital service providers to be indeed unfair (see e.g. TGI de Paris judgment of 9 April 2019 against Facebook, TGI de Paris judgment of 12 February 2019 against Google, and TGI de Paris judgment of 7 August 2018 against Twitter).

In 2020 the European policymakers decided to take a closer look at the impact that digital service providers have on consumer protection and the market. This resulted in the European Commission presenting in December 2020 two proposals: for a Regulation on a Single Market for Digital Services (Digital Services Act), and for a Regulation on Digital markets act (Digital Markets Act). The Digital Services Act aims to introduce new consumer rights and new obligations for digital service providers that would address the imbalance of power in the digital environment. However, this draft regulation does not (yet) attempt to tackle the potential unfairness of terms and conditions offered by digital service providers. The European Parliament found it necessary to question the suitability of the current framework and asked experts for their advice.

In the study, Prof. Luzak and Prof. Loos first present various categories of terms that are commonly used by digital service providers, which could lead to the finding of unfairness. The categories of terms are much more numerous in comparison with their previous article, as they have now identified 11 such categories. One of the new categories of analysed terms are terms on copyright of digital service providers, e.g. terms giving them gratuitous license for user-generated content (in their analysis, they could benefit from the expertise of a fellow Exeter-colleague, Dr Mathilde Pavis, who has published on this topic). Further, they discuss the problems of ensuring online transparency of terms and conditions, as well as the uncertainty of sanctions that could be awarded if the term is found to be unfair.

Overall, the study does not consider the current framework to be effective in protecting consumers in their dealings with digital service providers. The main recommendation is to identify specific terms that should be fully prohibited from use (blacklisted) or which could be presumed to be unfair (greylisted), which would place the burden of proof on the digital service provider to determine why such terms in given circumstances were not unfair. For example, they recommend that the terms on gratuitous license for user-generated content are placed on the grey list and are presumed unfair, unless the digital service provider proves that they have been brought specifically to the consumer’s attention at the moment of conclusion of the contract and have been individually, separately and explicitly accepted by the consumer.

If you want to read more, you may find the study published on the European Parliament’s website.