The cover article “Minors, Mobiles and the Law” (vol 15, issue 5) in January’s edition presented an interesting and lively discussion of this area but clearly overstated the commercial risk of mobile content distribution with regard to voidable contracts (which is probably what you would expect me to say). This is not to say that there are not important challenges ahead when it comes to mobile content and children, but this is fully recognised and being addressed by the industry (more of which below).
In answer to the author’s own question, “Does it matter?” the answer seems to be “no”. The example used is that of EMI who have built their entire business on voidable contracts and the author acknowledges that this has not really mattered in practice. He then looks at mobile content providers and speculates about a time when minors will place large volumes of orders over their mobiles and seek to cancel those orders, because the overall value would be such that they would be willing to contest this through the courts. However, he does not speculate what value that might be. In the bricks and mortar world, retailers do not refrain from selling reasonably valuable goods to children (how many shops would not sell a CD player to a child for, say, £50 cash, for fear that the child may return and claim the contract is voidable?). Consequently, I do not see why the mobile digital world should be any different (and for reasons explained below regarding cost of distribution, I believe there are significant advantages). If this threshold is something in the order of, say, £50, this is a value that every mobile service or content provider can only dream about at the moment. A good topical example is mobile music download. If mobile service and content providers are even partly as successful as EMI in music distribution, the financial return could be very significant. Yet the author accepts that the value of a CD has not been a sufficient incentive to encourage minors to seek to void contracts.
I have few specific comments below and have used the headings in the article for ease of reference.
Necessaries
I do not think that the law regarding necessaries is as settled as suggested. As far as I am aware, there have not been any cases to come before the courts in recent times (the latest cases cited by Chitty date back to the 1930s). As regards goods “sold and delivered”, s 3 of the Sale of Goods Act 1979 defines necessaries as being “goods suitable to the condition in life of the minor or other person concerned and to his actual requirements at the time of the sale and delivery”. Leaving aside the question of whether or not digital goods are “goods” within the meaning of the SGA (which is itself subject to debate), most digital goods are delivered almost simultaneously with purchase (downloading a full music track or ringtone is a good example) and would, subject to the question of whether they are “goods” at all, likely fall within s 3. So, on the face of the language used in the SGA, I believe it would take a brave judge to claim that ringtones are not “suitable to the condition in life of” a 16-year-old schoolgirl.
Regarding the common-law meaning, Chitty states that this term is not to be confined to matters only as are positively essential to the minor’s personal subsistence or support, although will not likely include matters that are of “comfort and convenience only”. However, Chitty acknowledges that it is a relative term to be construed with reference to the minor’s age and station in life. My inexpert opinion is that, in view the age of applicable case law and the fact that much more recently Parliament has set out an arguably more flexible meaning in the SGA, an interpretation more akin to the SGA would be expected when dealing with items like mobile entertainment content.
It would, of course, be different if the content were not ‘suitable’, eg a subscription by a minor to ‘adult’ entertainment, which would also reflect more closely the current public policy concerns. In this respect, the six mobile operators in the
Mobile phones
There are some assumptions made about the business models used. Broadly, it may help to think about three models. Firstly, mobile service providers provide the communications services (voice, text, picture and video messaging, etc) and also provide value added services and commercial content. Secondly, mobile service providers provide access to third-party value added services and content with whom they have commercial arrangements which usually involve the mobile service provider carrying out billing and revenue collection for the third party. Thirdly, there is the open Internet, where the mobile service provider simply provides access to the Internet (in the same way as an ISP). In the absence of alternative payment methods, users will usually need a credit card to make purchases on the Internet. Each model has a different set of implications for the parties concerned, as discussed below.
Buying from the service provider
Before looking at the implications of these models, there are a few clarifications that should be made. Firstly, the author refers to contract subscriptions as ‘credit arrangements’. While this is just a choice of terminology for convenience, it may be confusing to readers, as it is not a form of credit – if it were, it would need to be regulated as a credit arrangement (which it is not). The mobile industry refers to contracts where customers receive a bill and pay for their subscription and (retrospective) usage as “post-pay” and contracts where customers pay in advance by loading their account as “pre-pay”.
Secondly, the author also declares that there is no subscription agreement with pre-pay. This is certainly not the case with Vodafone (and I believe other providers treat pre-pay subscriptions in the same way as Vodafone). The pre-pay customer is subject to and bound by the terms of the pre-pay subscription agreement when s/he activates the SIM (the terms of use being provided with the package). This is not dissimilar to shrink-wrap or browse-wrap licensing.
Thirdly, the author notes that physical top-up cards have now largely been replaced by what the industry refers to as “e-Top-Up”. The old Top-Up cards used to contain terms and conditions. Whether each purchase of airtime is a separate contract or not is a moot point. The practice of including terms on the card is not determinative; it is simply a case of the mobile service providers making sure that the user has had the opportunity to be informed of the terms of use and covering the possibility that they had not been incorporated at activation (eg if the pre-pay handset and SIM is ‘sold’ to someone else).
The author describes the consequences of a minor placing an order in both the post-pay and pre-pay scenarios.
Post-pay scenario
In the post-pay scenario, where a minor is merely a user (with an adult subscriber), the author concludes that as between the mobile service provider and the adult subscriber the law regarding the capacity of minors is irrelevant (as the contract will be with an adult). He then contrasts this with the position as between the mobile content provider and the minor, stating that the minor can avoid the contract for content, unless it is for necessaries. I do not believe that this necessarily follows (no pun intended). The author acknowledges earlier in the article that the use of a credit card by a minor is a matter for the adult owner of the card, ie that essentially any purchase made by the minor using the card is done on the adult’s behalf. I would contend that the position with a post-pay subscription is the same where the minor orders content through the mobile service provider’s portal, ie as far as the mobile service provider and content provider (if different) are aware, they are receiving an order from the subscriber and it is the subscriber that is bound to pay. In such transactions, the user is not required to provide identification information (therefore identifying themselves as a separate person to the subscriber). In Internet type transactions (ie the third model described above), where the content provider has no commercial relationship with the mobile service provider, the mobile content provider will need to obtain payment directly from the user. As with traditional e-commerce, the payment method is usually the credit card (there often being no method to formally identify the user other than the details on the card) and we are then back to the analysis the author gave previously about credit card transactions.
Pre-pay scenario
Regarding the pre-pay scenario, clearly the purchaser of content is the pre-pay subscriber, and if a pre-pay subscriber is a minor, and if the transaction is not for necessaries, then the pre-pay subscriber may seek to avoid the contract. However, the pre-pay subscriber will have ‘paid’ for the content and it will therefore be for the minor to seek a re-credit of this sum. In practice, if a worried parent were to phone the customer care service of a reputable mobile service or content provider over the purchase of large volumes of ringtones, the mobile service or content provider is likely to deal with this as a customer care issue. If the subscriber’s account is to be re-credited, the mobile service or content provider will simply need to have arrangements with its content partners to ensure that this is appropriately accounted for. Even if they were not prepared to re-credit the subscriber’s account, the customer would have to be prepared to challenge this (which would involve a cost far exceeding that at issue) and the chance of success in such an untested area (at least, it appears, for the last 75 years or so) will often be far from clear.
And this brings me to the point reserved above regarding the cost of distribution. In the digital environment, the marginal cost of distribution is considerably lower than for physical distribution. Consequently, handling customer complaints about misuse by minors or faulty downloads, etc, can be handled with far lower cost consequences to the partners in the value chain (contrast with physical goods distribution). The risk to the mobile service and content providers is not in providing refunds to genuinely aggrieved customers (or their parents), but the risk of large-scale fraud and piracy. Mobile service providers have sophisticated means of dealing with fraud (telecommunications fraud has a long history) and any attempt by mobile customers to gain unlawful advantage would be spotted and addressed. Where a fraudulent claim is suspected, it would still be for the fraudster to challenge a refusal by the mobile service provider to pay a refund, which they would be very unlikely to do (and if they did, they would be unlikely to succeed if found to be fraudulent).
Finally, there is the question of whether the ability of a minor to avoid a contract is affected by the fact that goods cannot be returned or have otherwise been consumed. I do not agree that a mobile music track, wallpaper or ringtone can be returned “unsullied”, as the author suggests. Digital content can’t be ‘returned’ at all and, for content not protected by digital rights management, the content owner has little practical means of being able to ensure or verify that the content has been erased. The fact that digital content has been enjoyed, even for a short period of time, arguably sullies it somewhat (certainly in the eyes of the content owners). As for the fact that the minor has enjoyed the benefit of the content, would there be a case for restitution?
Vodafone’s responsibility to parents and families
While I do not believe the commercial risk of voidable contracts is as significant as suggested, advanced mobile services and content, and the use of mobile services by young people, present a number of challenges to the industry. In recognition of this, Vodafone offers Content Control on its network to prevent those under the age of 18 accessing content only suitable for those over 18. Further, in recognition that there are other concerns about young people’s use of mobile services, Vodafone provides information to parents on responsible mobile usage: “Staying In Touch: A Parents Guide To Mobile Phones (available at: http://www.vodafone.co.uk/download/CSR%20Parent%20guide.pdf).
Stephen Deadman is Senior Solicitor in the Vodafone Group Legal Department: stephen.deadman@vodafone.com.
Robin Bynoe responds
Stephen Deadman’s comments are helpful, particularly as they illuminate the approach and the priorities adopted by the service providers themselves. It is not surprising if there are differences of emphasis between us. Perhaps I may return to just a couple of the points.
The first is the definition of ‘necessaries’. Since the wording of Section 3 of the Sale of Goods Act, 1979 has not, I believe, been litigated, we can all have our views whether a judge would regard a ringtone as ‘necessary’ to a sixteen-year-old schoolgirl. My view is that if a ringtone is necessary there is precious little that isn’t.
Secondly, there was my question, ‘Does it matter?’. Stephen Deadman’s answer is ‘No’. We both agree that the issue is most unlikely to bring the industry crashing down. My answer to my own question is more cautious than his, for two reasons. The first is that it is possible, as described in my article, to imagine circumstances, no doubt unlikely, in which it might bring the industry crashing down. The second, and more important, is that it is unsatisfactory in principle if we have industries (and the mobile industry is only one of many) that are dependent on trading that is outside the scope of conventional commercial law, for reasons that derive from attitudes to children that are no longer shared by anyone. It is particularly unsatisfactory when Scots law, as so often, seems to have a ready solution.
