NCC refers software companies to OFT

February 21, 2008

New NCC research claims that software rights-holders are shifting the legal burden onto consumers who buy computer programmes, leaving them, say the NCC, with less protection than when they buy a cheap biro. The OFT has been asked to examine the potentially unfair contract terms of 17 firms that NCC has identified in Whose licence is it anyway?

NCC Senior Policy Advocate Carl Belgrove said: ‘Plugging the gaps in consumer legislation is a vital move. Consumers can’t have a clue what they’re signing up to when some terms and conditions run to 10 or more pages. There’s a significant imbalance between the rights of the consumer and the rights of the holder’.’

The shopping survey found what it describes as a widespread lack of clear, upfront and easily accessible information written in plain English. More than half of the 25 products surveyed did not mention on the packaging that the consumer has to sign an end-user licence agreement (EULA) before they can use it. Only four of the companies included a Web link to an online copy of the agreement, and six more included paper copies inside the instruction manual that could only be accessed after opening the pack. On seven products the only option was to read the agreement onscreen. This means that consumers are unable to make informed decisions before they buy a product, yet are being forced to take on an unknown level of legal responsibility.

NCC findings uncovered examples with the potential to mislead consumers. For instance, Cakewalk’s Music Creator 3 onscreen agreement highlights only certain elements important to protect company interests, and fails to give consumers a full summary of the terms.

The NCC is calling for:
•the OFT to examine potentially unfair contract terms identified in the report
•software rights-holders to address consumer concerns
•the European Commission to fill the gaps in the consumer rights and protection framework and put digital contracts and licence agreements into consumer law.

The 17 companies NCC has referred to the OFT for investigation are: Adobe, Microsoft, Apple, Chief Architect, Symantec, Magix, Nero, Corel, Sega, Nova Development, Britannica, Sonic Solutions, Twelve Tone Systems, THQ, GSP,  McAfee, Kaspersky. Examples of potentially unfair terms and conditions highlighted in the survey included the following:
• a clause in Symantec’s Norton 360 anti-virus package gives the provider the right to  suspend services for misuse of the software or suspected failure to comply with the agreement – this could mean a consumer facing a court case before  being able to use the programme again.
• the onscreen agreement for Cakewalk’s Music Creator 3 contains three separate components: the full licence; an undertaking to install the software on one machine only at a time; and an undertaking never to transfer your rights to use the software – this is set out to protect the interests of the provider by highlighting elements that are important to them.
• Kaspersky Anti-Virus 6 had a seal on the CD case with instructions to read an enclosed paper copy of the licence agreement before installing the software.

The Federation Against Software Theft  has welcomed the publication of the report. It states that it has been actively considering the possibility of introducing a common set of licence conditions – or a ‘kite mark’ – that software companies could sign up to for some time.

John Lovelock, Chief Executive of the Federation Against Software Theft, said, ‘Terms and conditions are often perceived as baffling by consumers – in fact research by The Federation indicates that less than a third of users (28%) always read the terms and conditions when installing software, whereas up to 72% of people tick the ‘I agree’ box without taking any notice of exactly what they are agreeing to’.

A proposal put forward by Federation members would see the creation of a common set of conditions providing purchasers with a consistent and transparent agreement. These would cover all the major areas that are common to different products, allowing the vendor to print any exceptions to the terms on the packaging.

‘The NCC is right to highlight an area that may be of concern to some consumers’, said John Lovelock, ‘however we must not overlook the rights of the software companies. We recognise that the industry must be proactive in helping end-users to comply with copyright laws. By combining the strengths of our software publishers and certified resellers we will be able to tackle the issue head on and ensure that the core criteria are established for any software licence. Software users will then have a simple and straightforward set of guidelines setting out exactly what their rights are’.

To read the full report, click here. For Vanessa de Froberville’s recent article ‘Wrap Trap’, click here.
The Introduction to the report reads as follows:

Advances in technology and changes in our everyday habits are making computer software an increasingly important part of consumer life. But when we buy software, exactly what are we buying into? Installation requires the user to agree to nonnegotiable terms set out in a licence agreement – the ‘terms and conditions’. These licence agreements are more like legal mandates than consumer options, raising concerns about the extent to which they favour the producer over the consumer.

We carried out a shopping survey to see how these licence agreements, and the process of agreeing to their terms, worked in practice. Our survey followed a typical consumer journey, from purchase through to installation, of 25 popular software products.

Key findings

We found that there is little clear information available up-front. Of the 25 products we surveyed, 14 did not mention on their packaging that installation requires the user to accept a licence agreement. Many licence agreements are presented in formats that make them hard to read, or that don’t encourage users to read them. Furthermore, if they do read them, jargon makes it harder for consumers to understand their rights and responsibilities.

Many providers have adopted terms which protect their interests to the detriment of end users. This widespread use of potentially unfair terms is a major concern. Our research highlights examples of:

 complex wording and widespread use of legal jargon

 legal uncertainty, with frequent references to legislation in other countries

 immediate contract termination rights for the provider

 the right for the provider to remove services without notice

 ambiguous references to ‘statutory rights’

 restrictions on the transfer of the users’ rights to a third party

 excessive exclusion of liability.

Gaps in the legal framework of consumer rights and responsibilities must be filled. The exclusion of software and digital content from the Consumer Sales and Guarantees Directive is most pressing.

Key recommendations

The National Consumer Council (NCC) recommends that:
providers must supply information about the licence, as well as access to the terms of the agreement, at a stage before a decision to purchase has been made;
providers must ensure that licence agreements are written in plain English and presented in a clear and accessible format;
providers must not shift the legal burden on to the consumer: licence agreements should be relevant to the product and applicable in local law;
providers should take active steps to ensure that terms are not unfair – not wait for regulators to act or the courts to enforce the law;
the Office of Fair Trading (OFT) should examine the potentially unfair contract terms identified in this report;
the OFT should give serious consideration to a market study on the fairness of terms in licence agreements; and
the European Commission should bring forward proposals to extend the Consumer Sales and Sales Guarantees Directives to include digital contracts and licence agreements, through the review of the Consumer Law Acquis.