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Clifford Chance

Clifford Chance

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Italian Competition Authority deems Google, Apple and Dropbox cloud terms and conditions unlawful

In August 2020, the Italian Competition Authority (Autorità Garante per la concorrenza ed il mercato, the “Authority”) launched various investigations into Google, Apple and Dropbox based on the allegation that the three companies had been engaged in unfair commercial practices, infringed the Italian Consumer Code (which implements, inter alia, Directive 2011/83/ EU, "Consumer Rights Directive") and possibly included unfair terms in their contractual conditions for cloud services. 

The allegations

In particular, the Authority found that both Google and Apple failed to adequately inform users about the data collection and use of data for commercial purposes, stating that this might result in a lack of transparency for users subscribing to and using cloud storage services.

Furthermore, as far as Google Drive is concerned, the Authority object to the sections of the terms and conditions regarding contractual liability, suspension or interruption of access to the services and changes to the terms. The sections in questions were found to violate article 33 of the Consumer Code due to a significant imbalance of consumers' rights and obligations under the contract. More specifically, under Italian law clauses that:

(i) exclude or limit consumers' actions or rights in the event of unfulfillment of the trader's obligations (article 33, para. 2, lit. b);

(ii) provide for a final commitment by the consumer while the performance of the trader is based on a condition to be met exclusively at the trader's discretion (article 33, para. 2, lit d); and/or

(iii) allow the trader to unilaterally modify the terms of the contract without due cause (article 33, para. 2, lit. m)

are presumed to be unfair until proven otherwise.

As for Apple's iCloud, the sections regarding warranty exclusion, backup and changes to the service were found to infringe, once again, article 33, para. 2, lit. b) and m). The ICA has stressed how essential it is in the event of unilateral modifications to the contractual conditions for the trader to inform the consumer in due time of the specific reason justifying the change.

With regard to Dropbox, the Authority found that it failed to provide clear and easily accessible information to users regarding conditions, terms and procedures for withdrawing from the contract and exercising the right to reconsider. Moreover, no liability was taken for versions of the terms translated in languages other than English, with the latter version being the only legally valid one. Such a provision has been declared unfair and unlawful pursuant Italian consumer law.

On this occasion, the ICA chose not to fine the operators but merely ordered them to delete the unfair conditions and publish the corresponding injunctions on their websites.

Conclusions

The success and importance of cloud storage services is undisputed, but this may lead to certain risks in terms of negotiation powers: in this sector, the user typically faces a strictly binary choice – signing up for the service or leaving – and this may result in the user accepting the terms and conditions of the provider even without reading them (sometimes they are not written in Italian, either).

From this perspective, the Authority's scrutiny became one of the most effective deterrents for cloud providers to avoid unfair terms and disproportionate conditions and will help restore the balance between the parties.

Key issues

  • The ICA has deemed some clauses included in cloud contracts unlawful.
  • Paying and non-paying users are to be treated in the same way.
  • Google, Apple and Dropbox have been instructed to publish the order on their websites.
  • Terms and conditions may include pitfalls for users.