Terms of Service image

Too often, online services draft their "Terms of Service" (TOS) agreements in ways that are one-sided and overreaching. In Europe, however, regulators are beginning to step in to protect consumers. In late November, the U.K.'s Office of Fair Trading (or OFT) announced that Apple, Inc. agreed to change the terms and conditions for its popular iTunes online music store in the United Kingdom. In particular, according to the statement from the OFT, the changes make the iTunes terms "clear, fair and easy to understand," and, more importantly, give consumers "clear and accurate information about their [] rights in case things go wrong." The OFT took action following a similar intervention by the Norwegian Consumer Council.

In the U.S., by contrast, there has been little regulatory attention paid to protecting consumers from overreaching TOS agreements. Thanks to a history of deference to "freedom of contract" in the U.S., along with a dearth of consumer protection laws that apply to online services, U.S. consumers often lack adequate protections from unfair "terms and conditions."

On this point, a comparison of the new U.K. iTunes TOS ("U.K. Terms") and the original U.S. iTunes TOS ("U.S. Terms") on which they were based is illuminating. While the majority of the language in the both versions is identical, the differences between them are important, and illustrate that service providers can make things more fair for consumers, if they are forced to do so.

For example, as with many TOS agreements, the iTunes U.S. Terms purport to allow Apple to terminate any part of the service, including access to any music or other content available through iTunes, at any time without warning. The U.K. Terms step back from that extreme position. In particular, the U.K. Terms do not allow Apple to affect a user's access to content already purchased. Furthermore, before terminating a user's access to iTunes, the U.K. Terms require there at least be "strong grounds," rather than mere "suspicion," to believe the user has violated the agreement, and also obligates iTunes to provide notice of any planned modification, suspension, or termination to the extent possible. In other words, the U.K. Terms provide customers at least some guidance as to the grounds for termination, rather than leave them to worry their access to iTunes can be terminated at any moment for any reason.

Another area where the new U.K. Terms make progress is in placing restrictions on Apple's ability to modify terms for existing customers. Many TOS agreements, including the iTunes U.S. Terms, claim the right to modify terms unilaterally, at any time, and without notice to the customer. It is refreshing to see the U.K. Terms require notice of the new terms before they become effective, as well as an opportunity to reject the changes without affecting purchases already made. The UK approach makes much more sense than the U.S. Terms' insistence on allowing Apple to act unilaterally without notice. And the fact that Apple can do it for customers in the UK means they can and should do it for customers elsewhere.

The new U.K. Terms also depart from the common abusive practice of trying to completely insulate the service provider from any and all liability to customers whatsoever, regardless of fault. The U.S. Terms, for example, include repeated pronouncements that the service is not guaranteed to work and that the service provider will not be liable for damages caused by defects in the product, use of the service, or even by actions taken by the service provider. In contrast, the U.K. Terms promise to provide the service "with reasonable care and skill." The U.K. Terms also go out of their way to say that Apple cannot disclaim liability for fraud or harm that results from its own negligence, which seems like common sense. In addition, rather than make a broad declaration that Apple can never be liable for anything, the U.K. Terms present specific instances where Apple will not be liable.

Interestingly, the U.K. Terms and U.S. Terms also appear to take different approaches regarding what you get when you buy from the iTunes Store. The U.S. Terms repeatedly refer to the acquisition music or movies through the store as "purchases." At the same time, however, the terms impose on the "purchaser" a set of "Usage Rules"—such as deciding how many and what devices the content may play on—that muddy the waters about the nature of your ownership. By contrast, the U.K. Terms state that the iTunes store provides only a "license for digital content." Also, the U.K. Terms tend to emphasize iTunes as a "Service," while the U.S. Terms speak in reference to the "Products" acquired through it (suggesting that you own your downloads the same way you own a music CD).

The pro-consumer elements of the U.K. Terms demonstrate that service providers can provide more fairness to customers in their TOS agreements without destroying their bottom line. This underscores that most overreaching provisions in TOS agreements today are the product, not of business necessity, but of overzealous anti-customer lawyering. Hopefully, as regulators around the world begin stepping in on behalf of consumers, we may start seeing progress toward a more reasonable standard TOS agreement.

Related Issues