Checklist for New Digital Consumer Services Act
By Jeppe Songe-Møller, William Eitrem
As we have previously reported, the EU Directive 2019/770 on certain aspects concerning contracts for the supply of digital content and digital services has been adapted in the Norwegian Digital Consumer Services Act ("NDCSA"). The law will enter into force on 1 January 2023.
The NDCSA fills an important gap in consumer protection legislation, given the substantial number of digital services on the market. The law regulates the contractual relationship between the consumer and the service provider. The Norwegian Consumer Supervisory Authority ("Forbrukertilsynet") and the Norwegian Market Council ("Markedsrådet") are empowered to supervise compliance.
Many of the provisions are codifications of existing legal rules, based on different pieces of legislation or customary law. However, some of the provisions introduce new obligations or change existing ones substantially. Thus, we have compiled a checklist of important provisions any company delivering digital content or services should review to verify compliance.
NDCSA introduces payment with personal data to Norwegian law. The new legislation draws a line between content/services that are paid for with money, and content/services which are "paid for" with the consumer offering personal data. If you provide content or services in exchange for personal data, you should be aware this distinction, e.g. there are special rules regarding cancellation when personal data has been used as payment.
- Will my B2C content or services need to comply?
The law applies to any provider offering "digital services or digital content", e.g. distribution of computer programs and applications, streaming of audio and video, publishing of e-publications, video games or any services which enables storing, accessing and processing of data. Most electronic content and electronic services delivered to consumers, online or physically, will need to comply. Exceptions are gambling services, financial services and electronic communication services.
- Do I need to provide the consumer with security updates?
When necessary to maintain the quality, integrity, and security of the service, the provider is obligated to inform and provide consumers with updates, including security patches. The consumer may explicitly accept not to receive updates when entering into the agreement. Service providers should decide whether to update their policies and agreements accordingly.
- Can I still reject consumer claims not submitted within reasonable time?
The term "reasonable time" has been the standard phrase to describe the expiration of claims based on the passing of time. However, in the NDCSA, the term has been replaced with "general rules of passivity". We recommend changing the language in agreements so that expiration of claims refer to "general rules of passivity", not "reasonable time".
- How do I design a compliant fee adjustment mechanism in the agreement?
A provider can only make changes in the online subscription fee if stated in the agreement. The consumer shall also be informed about the price increase a reasonable time in advance. In addition, the consumer shall be informed about the right to cancel the agreement if the price increase is higher than the consumer price index and that price increases cannot occur during predefined binding periods.
- What about other payment conditions; can I freely define a right to payment in the agreement?
A consumer is not bound by an obligation to pay at a predetermined point in time regardless of whether the service is provided on time. In other words, the agreement cannot specify that the consumer has an unconditional obligation to pay. Accordingly, such clauses must be removed.
- How should I regulate termination of an online subscription service?
The law introduces certain new obligations applicable to providers of online subscription services. First, an ongoing subscription service cannot have a binding period of more than six months. In special cases, the period can be extended to twelve months. Further, any binding period is only permitted if the advantage the consumer attains through binding is "in relation to" the length of said period. This would usually imply a reduction in monthly fees for the relevant binding period or receiving access to additional functionality at a lower rate.
Second, if the consumer cancels the agreement during the binding period, the provider can demand compensation only if the agreement contains a clause affording the supplier "reasonable standard compensation", provided that the compensation amount is in "relation to the advantage the consumer attained by the binding period". We expect that many providers of subscription services that offer binding periods will need to amend their agreements to include the new requirements.
Third, the consumer must be given the opportunity to cancel the subscription using the same means of communication that the consumer used to enter into the agreement, as well as any other "suitable" means of communication used by the provider in its business. The consumer shall be able to cancel the agreement in a "simple manner", implying an intelligible and easily accessible online customer journey, using clear and plain language.
Fourth, when a subscription is active, the provider is obligated to, every sixth month at a minimum, inform the consumer that the subscription is active, and that the consumer is entitled to cancel the agreement. Failure to provide such notice will entitle the consumer to cancel the agreement without cost. This is also an area where we expect that many providers of subscription services need to change its practices, e.g. in order to avoid unwanted cancellations.
Fifth, and last, if the consumer does not pay the subscription fee for a period of six months, the provider shall consider the agreement cancelled. If the parties have agreed upon a binding period, the cancellation shall have effect after said period has expired. The consumer, however, shall have the possibility to avoid cancellation by notifying the provider that the non-payment shall not be regarded as termination.
- Take steps to comply
We recommend that service providers update agreements, policies, and online customer journeys in order to comply with the new law, maintain customer loyalty and reduce customer churn.
In particular, service providers should consider whether amendments to contractual terms and conditions are required in order to give effect to the new consumer rights.
We are happy to assist with any aspect of the Norwegian Digital Consumer Services Act, including drafting and amending agreements, reviewing updated practices to verify compliance, and advising as regards personal data. Our specialist lawyers have market leading competence in areas key to digital consumer contracts, intellectual property, licensing, e-commerce and personal data protection.