Giovanni Gaeta, Author at Aiternalex

About Giovanni Gaeta

Graduated at the Tor Vergata, University of Rome with a thesis on New Technologies and Financial Markets. Since then, I have steadily continued with my education thanks to the opportunities offered by some of the most prestigious universities in the world. Go to profile

Entries by Giovanni Gaeta

The E-Sports Phenomenon

22/02/2024/in Innovation/by Giovanni Gaeta

A Novelty in the Gaming Industry and in Law

In recent years, e-sports have experienced explosive growth, emerging as a driving force in the e-gaming industry. According to the most recent statistics, the number of spectators and participants in e-sports continues to grow significantly, signalling a radical change in entertainment and consumption habits. In this article, we will explore the e-sports phenomenon, analysing current trends and projecting future economic developments, with a special focus on the Italian legislation regulating this rapidly evolving sector.

Diffusion of E-Sports and Future Economic Developments

According to the latest statistics, e-sports are experiencing unprecedented growth in terms of spectators and participants. In 2023, the global number of e-sports spectators was estimated at over 474 million, with further growth expected in the coming years. This phenomenon does not only affect countries traditionally associated with e-sports, but is spreading all over the world, including Italy, where more and more people are becoming passionate about this form of competitive entertainment.

E-sports are not only a form of entertainment, but also a growing economic market. The e-sports sector is expected to grow exponentially in the coming years due to the sponsorship of new players materially involved in the sporting moment, currently untapped ticket sales for events, future TV rights, and revenues from digital media that for the first time are directly involved in service delivery. In addition, the growing popularity of e-sports is prompting more and more companies to invest in this sector, creating economic opportunities for professional players, event organisers and companies related to the gaming industry.

Overview of Italian E-Sports Legislation

There is currently no specific law regulating e-sports in Italy. The biggest problem is obviously the lack of regulatory qualification of e-sports as a competitive ‘sport’ to allow all operators in the sector to benefit from an administrative and tax regulation of their activities. In fact, this absence has the effect of thwarting the attempts of the administrative bodies involved in the management of these activities, such as CONI.

However, there are some existing laws and regulations that have implications for this fast-growing sector.

As far as competitions are concerned, e-sports are currently regulated mainly by Article 3 of Presidential Decree 430/2001 which, in a decidedly extensive manner, regulates all ‘prize operations’, stating that ‘Prize operations[…] advertising events that provide for: a) offers of prizes to all those who purchase or sell a certain quantity of products or services and offer documentation thereof by collecting and delivering a certain number of documentary proofs of purchase, also on magnetic media; b) offers of a gift to all those who purchase or sell a certain product or service.” In fact encompassing within a complex administrative process any type of delivery of prizes in any non-commercial form or gift.

There is also specific legislation with provisions regulating the video game industry in general. For example, the law establishes rules for the marketing and distribution of video games, as well as for the protection of minors from inappropriate content. It is also necessary to mention that e-sports involve the use of copyrighted content, such as video games and streaming of games, which are protected by the Italian law on copyright and intellectual property, which protects the rights of authors and creators of content by laying down rules for their legal use

In addition, the world of e-sports involves many professionals such as players, coaches and event organisers, all of whom are subject to Italian laws on employment relations and contractual matters. Finally, as e-sports often involve the collection and processing of players’ and spectators’ personal data, it is important that e-sports organisations and platforms comply with Italian privacy and data protection laws, such as the GDPR.

Given the ever-evolving nature of e-sports and the related industry, specific laws and regulations are certainly needed to address the unique issues affecting this sector, and Aiternalex is also active in this area to push for regulatory intervention.

AN OVERVIEW OF THE LEGISLATIVE PACKAGE FOR DIGITAL SERVICES

13/12/2023/in Innovation/by Giovanni Gaeta

Following the adoption of the Digital Services Package at first reading by the European Parliament in July 2022, both the Digital Services Act and the Digital Markets Act were adopted by the Council of the European Union, signed by the Presidents of both institutions and published in the Official Journal.

What do these two acts that form the new package for digital services contain? Why was it necessary to adopt them? What are the already expired deadlines of these two acts and what will be next?

In this short article, we will provide an initial answer to these questions, reserving discussion of the individual acts for later publication on the Aiternalex blog.

Why was it necessary to adopt the DSA of the DMA?

Digital services have a significant impact and are aimed at simplifying our lives. We use them in many aspects of our daily lives and it would be difficult to do without them in both our personal and work lives to communicate, shop, order food, find information, watch films and listen to music. Digital services have also streamlined business practices and greatly expanded the target market even for micro, SME and craft enterprises.

The benefits of digital transformation are obvious and numerous, but they bring with them new paradigms that bring with them new problems. One of the main problems is the trade and exchange of illegal goods, services and content online. Online services are also misused today by algorithmic systems to manipulate the opinion of EU citizens through the dissemination of disinformation or through other illegal practices. The way online platforms deal with these challenges has a huge impact on the lives of individual EU citizens.

In spite of a number of European-level interventions aimed at combating illegal or unfair practices in the digital sector, at the beginning of the second decade of the new millennium we still have significant shortcomings to address. Undoubtedly one of these is the oligopoly of a few large platforms controlling important ecosystems of the digital economy. These have established themselves as true regulators of digital markets, and their rules sometimes result in unfair conditions for companies using their platforms and less choice for consumers.

This is why the Union has adopted a modern legal framework to guarantee the security of the citizens of the Union (as users of digital services).

DSA & DMA

The Digital Services Act or Digital Service Act (hereafter also only ‘DSA’) and the Digital Market Act (hereafter also only ‘DMA’) constitute a single set of regulations applicable throughout the EU which aim to

create a secure digital space for Union citizens, where the fundamental rights of users using digital services are protected, as well as
Establishing a level playing field in competition between digital companies to foster innovation, growth and competitiveness, both in the European single market and globally.

What is meant by Digital Services? To whom are the DSA & DMA addressed? What is the content of the two Acts?

Digital services encompass a broad category of services that can be used online, from simple websites to web-related infrastructure services and online platforms.

The DSA is a comprehensive set of new rules governing the responsibilities of digital services that act as intermediaries within the EU to digitally connect consumers with goods, services and content. In this context, ‘digital services’ refers to online platforms, such as marketplaces and social media.

The DSA establishes clear due diligence obligations for online platforms and other online intermediaries. The law also provides measures to deter rogue traders from reaching consumers. The DSA also provides greater transparency requirements for online platforms regarding decisions on content removal and moderation and advertising.

The DMA, on the other hand, includes rules regulating online platforms referred to as gatekeepers; it aims to make markets in the digital sector fairer and more competitive. To this end, the Digital Markets Act establishes a set of clearly defined objective criteria to identify gatekeepers.

Gatekeepers are large digital platforms that provide so-called basic services, such as online search engines, app stores and messaging services. Gatekeeper platforms are digital platforms with a relevant role in the internal, systemic market that act as a filter between companies and consumers for important digital services. Gatekeepers will be required to comply with the do’s (i.e. obligations) and don’ts (i.e. prohibitions) listed in the DMA.

The DMA is one of the first regulatory instruments to comprehensively regulate the gatekeeper power of the largest digital companies. The DMA complements, but does not change, the EU competition rules, which continue to apply in full.

The Roadmap

The DSA was published in the Official Journal on 27 October 2022 and entered into force on 16 November 2022. The DSA will be directly applicable throughout the EU and will apply from 17 February 2024.

Online platforms were obliged to publish the number of active users by 17 February 2023. The platform or search engine with more than 45 million users (10 per cent of the European population) was designated as a very large online platform or very large online search engine on 25 April 2023 by the Commission:

Very Large Online Platforms:

Alibaba AliExpress
Amazon Store
Apple AppStore
Booking.com
Facebook
Google Play
Google Maps
Google Shopping
Instagram
LinkedIn
Pinterest
Snapchat
TikTok
Twitter
Wikipedia
YouTube
Zalando

Very Large Online Search Engines:

Bing
Google Search.

These entities were given four months to comply with the obligations of the DSA, which included completing and submitting their first annual risk assessment to the Commission.

On 12 October 2022, the DMA was published in the Official Journal and entered into force on 1 November 2022. By 3 July 2023, the companies had to provide the Commission with information on their number of users, so the Commission, on 6 September, designated 6 companies as gatekeepers pursuant to Article 3 of the aforementioned regulation. These are

Alphabet
Amazon
Apple
ByteDance
Meta
Microsoft.

Gatekeepers will have until March 2024 to ensure compliance with the obligations of the DMA.

What does it mean to be a start-up today?

12/07/2023/in Innovation/by Giovanni Gaeta

Basic Elements

What it means to be a start-up today is certainly a simple question, but one that needs a very articulate answer.

It certainly does not mean having a lot of free time and sleeping soundly, and it certainly does not mean being relegated to unpleasant, underpaid work.

Doing start-ups today has undoubtedly become easier than yesterday, if by start-ups we mean that circle of entrepreneurial activities in their initial phase, whose social object is linked to the sphere of innovation; and, today, doing innovation is easier thanks to the proliferation of public funds, VCs and business angels. Unfortunately, in Italy, we are still a long way from solving the problem of access to credit for this type of entrepreneurship, partly due to the malpractice of some investors in asking little and expecting much (too much) from founders.

In addition to significantly improved access to credit, there has also been a small improvement in the supply of services for start-ups. This is due to the joint action of several incubators and private companies whose services have been improved and tailored to the specific needs of innovative entrepreneurship in its early years.

Beyond the ecosystem that only partly qualifies what it means to be a start-up today, these few lines are meant to give an answer to what are the basic elements needed to create the alchemy of a start-up, postponing in-depth studies on specific subjects related to this topic to other posts on this blog.

The idea

Certainly, in order to even remotely think about a start-up, it is necessary to have an idea. Having an idea does not mean having an intuition. An intuition is “a simple, instantaneous, synoptic cognitive act; it therefore designates a form of immediate knowledge, as opposed to any knowledge of a discursive nature”; whereas an idea is a much more complex term that must be declined within the sector it falls into and, in its broadest and most generic meaning, constitutes the representation of an object in the mind: the notion that the mind receives of a real or imaginary thing, the fruit of its own consciousness.

An idea is something more complex than intuition, it develops from it but constitutes a more evolved state where the intuition is filtered and elaborated on the basis of one’s knowledge and skills, coming out modified and, therefore, improved from its initial state.

Sometimes it is necessary to wait months before an intuition is transformed into an idea, as the elaboration process is repeated cyclically, sometimes enriching it with the contribution of the first embryonic elements of the ‘team’ that we will see later.

Skills

Needless to say, in order for the process of transforming an intuition into an idea to bear fruit, it is necessary to have the necessary skills for the sector one wishes to approach. It will almost certainly be necessary to go into the technical aspects of the chosen sector in greater depth, by virtue of any protocols specific to the topic one wishes to address, in order to prevent them from constituting an obstacle to the development of the business model.

Studying and working on the subject are certainly preliminaries to setting up a start-up, however, it is practically impossible to cover all the specific skills needed for each element related to the business model, and it is here that the need for the next fundamental element, the ‘team’, emerges.

The team

The team sees its value manifesting itself already in the very early stages of a start-up’s development but, in reality, it has only begun its relationship with the start-up because it will be instrumental in every single stage of its development.

Choosing team members is very difficult and there are various schools that more or less agree on the subject; we will therefore avoid going into too much detail by pausing only for a moment to mention one element without which, apart from schools, it is certainly not possible to form a team: trust.

Between team members, it is necessary to go beyond mere respect, there must be trust so that everyone is able to express their value to the fullest, individually and as a team member.

The team is the flywheel of the idea, it amplifies the scope of knowledge and expertise from which the idea is filtered, which emerges from this process greatly enriched and ready to be timetabled in its various stages of design and development, the roadmap.

The Roadmap

Fundamental from the very first moments following the definition of an idea is the creation of a checklist of actions necessary for the progression in the design and development of the idea and the scheduling of each action.

The roadmap plays a pivotal role in relation to the distribution of the various actions, as it also constitutes a connecting element in the event that an action requires the intervention of different actors than originally planned or, in the event that several actions converge for a subsequent joint phase. Needless to say, it is necessary to respect the timeframes set in the roadmap and their eventual re-scheduling in the event of unforeseen and/or unexpected events.

It is easy to see how the roadmap is not a rigid document but, rather, an extremely fluid one that must be able to adapt to unforeseen events, slowdowns and pivots, right down to the various branches that the idea might take and that might not converge on a single business model.

Advisors

The last basic element in the creation of a start-up is the Advisors. Advisors have the function of guiding the action of the founders and that of the team in general; they differ from the latter in that their competences are fundamental but at the margins of the development of the core business; they constitute a conditio sine qua non for its setup but are extraneous to the process of providing the service or selling the good.

The rationale for the need for their presence is obvious, as are the immediate benefits that start-ups reap when they are able to include professional advisors in their network for each of the basic needs of a start-up: legal, fiscal, financial, project, technical.

Making start-ups today

To be able to do start-ups today, these elements are extremely crucial: The idea, The skills, The team, The roadmap and The advisors. Without these essential elements, it is difficult if not impossible under normal market conditions to make it through the initial stages that characterise the life of a start-up.

Once these elements have been aggregated, after taking the first steps in the development of the core business, it will be possible to proceed with a financing round of the start-up, i.e. its pre-seed. This eventuality is excluded in the event that the start-up plans to pursue the initial stages of design and development of the core business with its own economic means or through possible financiers who have entered at the only previous moment, i.e., those of validation of the idea.

Legal aspects of digital contracts, E-Commerce (Part Two)

19/04/2023/in Corporate/by Giovanni Gaeta

Last week we briefly framed the eCommerce phenomenon and delved into where, how and when a digital contract is deemed to have been concluded.

Among the legal problems addressed last week in connection with digital contracts, one fairly complex problem was deliberately left out for which a separate discussion was necessary, namely, which law is applicable to digital contracts.

WHAT IS THE LAW APPLICABLE TO DIGITAL CONTRACTS?

On the subject of eCommerce, it is necessary in this respect to refer to a variety of regulatory sources, including the Rome Convention and the Rome I Regulation.

The Rome Convention of 1980 on the law applicable to contractual obligations is a convention of private international law that entered into force in Italy on 1 April 1991, following ratification by Law No. 975 of 18 December 1984.

It is in force in all countries of the European Union but has a universal character, as it applies even when the law to which its principles refer is not the law of a contracting state.

Over the years, the ratification of the Convention was followed by the adoption of Regulation (EC) No. 593/2008, known as the ‘Rome I Regulation’, which had the effect, within the European Union, of disapplying the Convention to contracts entered into on or after 17 December 2009.

THE ROME CONVENTION AND DIGITAL CONTRACTS

Assuming that the eCommerce relationships of which we speak are characterised by an international component of the parties involved, for the purpose of identifying the law applicable to international contracts, the Convention indicates three criteria:

the autonomy of the parties;
that of proximity,
that of conservation

The main criterion, party autonomy

The main connecting factor established by the Convention is certainly the will of the parties 1. The autonomy of the parties in choosing which law is applicable to the contract (“choice of law”) is an absolute principle that may also legitimise the use of systems of law that have no connection with the essential elements of the contract or the application of different systems of law to different parts of the contract (“depecage”).

The choice of law is considered to be a legal transaction and may be either expressly deliberated or tacitly identified through the interpretation of the content of the contract or the circumstances surrounding its conclusion. This choice is always modifiable by agreement of the parties but the modification will not produce effects in relation to the possible invalidity of the contract or in relation to possible prejudice to the acquired rights of third parties.

Very relevant to the application of the convention to eCommerce is the regulation in relation to contracts concluded with consumers 2 who may not be deprived of the protection granted to them by the mandatory provisions of the law of the country in which they habitually reside.

Specifically:

if the conclusion of the contract was preceded in the country of the consumer’s habitual residence by a specific proposal or advertising and if the consumer performed in the same country the acts necessary for the conclusion of the contract, or
if the other party or its representative received the consumer’s order in the country of residence, or
if the contract is a sale of goods and the consumer has travelled from his country of residence to a foreign country and placed the order there, provided that the journey was organised by the seller to induce the consumer to conclude a sale;

the law of the country in which the consumer has his habitual residence shall apply.

This rule does not apply in the case of contracts of carriage and contracts for the provision of services where the services owed to the consumer are to be provided exclusively in a country other than that in which he or she is habitually resident, except in the case of contracts providing for combined transport and accommodation services for an overall price.

The residual criteria

To the extent that the law governing the contract has not been chosen, the contract is governed by the law of the country with which it is most closely connected. However, if a part of the contract is severable from the rest and has a closer connection with another country, the law of that other country may exceptionally apply to that part of the contract.

In this regard, it is presumed that the contract is most closely connected with the country in which the party who is to render the performance characterising the contract has, at the time of the conclusion of the contract, its habitual residence or, in the case of a company, association or legal person, its central administration. In contracts involving consideration for services, the characterising nature of services involving the payment of sums of money is excluded.

Furthermore, where the subject matter of the contract is a right in rem in immovable property or the right to use immovable property, the contract shall be presumed to be most closely connected with the country in which the property is situated and, in the case of a contract for the carriage of goods, it shall be presumed to be most closely connected with the country in which the carrier has its principal place of business at the time of the conclusion of the contract if that country is the same as that in which the place of loading or unloading or the principal place of business of the shipper is situated.

Under the preservation criterion, the contract is to be considered fully valid if it satisfies the formal requirements of the law governing its substance or, alternatively, the law of the place where it was concluded.

DIGITAL CONTRACTS UNDER REGULATION (EC) NO 593/2008

As specified above, the ‘Rome I Regulation’ has had the effect within the European Union of disapplying the Convention to contracts entered into on or after 17 December 2009.

While reaffirming the centrality and priority of the parties’ choice of applicable law 3 , the Regulation determined the merely residual nature of the criterion requiring reference to the law of the country with which the contract is most closely connected, setting specific criteria for the various types of contract identified. Hence:

a contract for the sale of goods is governed by the law of the country in which the seller has his habitual residence;
the contract for the provision of services is governed by the law of the country in which the service provider has his habitual residence;
a contract having as its object a right in rem in immovable property or a lease of immovable property is governed by the law of the country in which the property is situated;
However, the letting of a property concluded for temporary private use for a period of no more than six consecutive months is governed by the law of the country in which the owner has his habitual residence, provided that the tenant is a natural person and has his habitual residence in the same country;
the franchise contract is governed by the law of the country in which the franchisee has its habitual residence;
the distribution contract is governed by the law of the country in which the distributor has his habitual residence;
the contract for the sale of goods at auction is governed by the law of the country in which the auction takes place, if that place can be determined;
a contract concluded in a multilateral system that enables or facilitates the matching of multiple third-party buying and selling interests in financial instruments, as regulated by Directive 2004/39/EC 4.

Very special rules are laid down for contracts of carriage since the parties may choose as the law applicable to the contract of carriage of passengers only the law of the country in which: a) the passenger has his habitual residence; b) or the carrier has his habitual residence; c) or the carrier has its central administration; d) or the place of departure is situated; e) or the place of destination is situated.

Furthermore, to the extent that the law applicable to the contract of carriage has not been chosen:

the law applicable to the contract of carriage of goods is that of the country of habitual residence of the carrier, provided that the place of receipt or delivery or the habitual residence of the sender is also situated in that country;
the law applicable to a contract of carriage of passengers is that of the country of habitual residence of the passenger, provided that the place of departure or destination is situated in that country.

In any event, if these conditions are not met, the law of the country in which the carrier is habitually resident shall apply.

Notes:

Art. 3, Law 18/12/1984 n° 975

Art. 5, Law, 18/12/1984 n° 975

Art. 3, Regulation (EC) No 593/2008

Art. 4, Regulation (EC) No 593/2008

Legal aspects of Digital Contracts, E-commerce (Part One)

12/04/2023/in Corporate, Corporate/by Giovanni Gaeta

ECOMMERCE, A BRIEF INTRODUCTION

eCommerce certainly needs no introduction due to its ever-increasing popularity; in 2022, product eCommerce continued its run, albeit at a slower pace (+8%) than in 2021 (+18% over 2020), reaching EUR 33.2 billion. Online purchases of services, on the other hand, completed their recovery path (+59%) and reached EUR 14.9 billion (1) .

Already in its communication of 15 April 1997, the European Commission had realised its scope and had anticipated the times by attempting to frame it by stating that “electronic commerce has as its object the conduct of business by electronic means. It is based on the electronic processing and transmission of information, including text, sound and video-images. Electronic commerce encompasses many different activities, such as buying and selling goods and services electronically, online distribution of digital content, electronic funds transfer, electronic stock exchange trading, electronic bills of lading, tendering and auctioning, collaborative design and planning, online selection of suppliers, direct marketing of goods and services to consumers, and after-sales service’(2) .

The true innovative scope of eCommerce lies in its enabling technology, the web, which was created with the aim of breaking down barriers between people. Among the barriers that the web has had the merit of breaking down are those related to the nationality of customers for businesses; through eCommerce, it is possible to exponentially expand the potential audience of buyers while continuing to work from one’s desk.

ECOMMERCE, LEGAL FRAMEWORK

It has been evident for a long time that this new technology and the ensuing eCommerce phenomenon needed new rules that could better adapt to the dematerialisation of commerce, which is (more or less rapidly) shifting from physical to virtual spaces.

From a purely legal point of view, the dematerialisation of commercial spaces is relevant for several contractual profiles, including:

consent formation (e.g. fully automated consent acquisition through forms);
performance of the contract (e.g. purchase of computer software via download);
Method of payment of the price (e.g. payment by connection to your third-party payment service account. Entering debit/credit card identification data).

These new paradigms have made it necessary for the legal interpretation of the eCommerce phenomenon to attempt to adapt concepts typical of civil law in the area of contracts

WHERE, HOW AND WHEN IS A DIGITAL CONTRACT CONSIDERED CONCLUDED?

Assuming that a contract is concluded at the time when the offeror has knowledge of the other party’s acceptance; that the acceptance must reach the offeror within the time limit set by the offeror; and that where the offeror requires a particular form for acceptance, the acceptance has no effect if it is given in a different form (3) ; we understand at once that the application of these principles requires certain differentiations.

The first major difference relates to the manner in which the parties decide to enter into the contract, distinguishing it into

sale via eMail;
sale via eShop (eCommerce portal).

In the first case, the typical scheme of the presumption of knowledge is deemed applicable, whereby the proposal, acceptance, revocation thereof and any other statement addressed to a given person for the above-mentioned purposes are deemed to be known by that person at the time they reach the addressee’s address, unless the addressee proves that it was unreasonably impossible for him to have knowledge thereof. From the application of this principle, therefore, the extreme usefulness of PEC (certified electronic mail), the use of which has found its way into the legislation of several states for years, has become evident(4).

In the second case, on the other hand, we may consider applicable the typical scheme of the public offer which, if it contains the essential particulars of the contract for the conclusion of which it is intended, counts as a contractual proposal, unless the circumstances of the case or commercial usage indicate otherwise. According to that scheme, the revocation of the offer, if made in the same or equivalent form as the offer, is effective vis-à-vis all, even those who had not been informed of it (5).

In relation to the place of conclusion of eCommerce contracts, the dematerialisation that characterises this peculiar type of contract produces considerable difficulties of interpretation, so much so that there is no single thesis on the matter

According to a first thesis, the contract would be concluded at the place where the offeror downloaded the e-mail containing the acceptance, but this thesis is strongly criticised because it would generate more doubts than certainties in relation to the extreme portability of the instruments through which the exchange of e-mails is possible.

Criticism of the previous thesis, in order to support regions of legal certainty, has led to a second thesis according to which the place of conclusion of the contract must be identified in the place where the service provider containing the proposer’s mailbox is located. However, even this thesis does not produce results that can be considered decisive since, again by virtue of the dematerialisation of the medium in question and the extreme portability of data that characterises the web, it is quite possible that the ‘region’ where the service is ‘hosted’ is not easily identifiable.

For these reasons, a third thesis has emerged that would solve the problem of the place of conclusion of the eCommerce contract by disassociating itself from the relationship with the medium used for its conclusion in order to refer to parameters whose certainty is decidedly solid. According to this thesis, the place of conclusion of the contract would be the place where the business or professional activity of the recipient of the acceptance is based, regardless of the place where the computer or site used is located.

POSTPONEMENT

In this first part, we briefly framed the eCommerce phenomenon and delved into where, how and when a digital contract is considered concluded. In next week’s in-depth analysis of the legal aspects of digital contracts we will take a closer look at which law is applicable to digital contracts, trying to provide all the necessary coordinates to orient oneself in this dimension.

Notes:

https://www.osservatori.net/it/ricerche/comunicati-stampa/ecommerce-acquisti-online-crescita

Community Communication (European Union) 16-04-1997, No COM(97)157

Art. 1326 C.C.

Art. 1335 C.C.

Art. 1336 C.C.

RIGHT OF WITHDRAWAL AND SALE OF NFT

08/02/2023/in Innovation/by Giovanni Gaeta

The Case

Porsche’s recent NFT collection made a lot of noise. In the ToS at the time of minting there was a point that allowed users to obtain the right of withdrawal within 14 days of the release of the collection, whatever the new ‘floor price’ after minting.

What is the right of withdrawal?

The right of withdrawal, commonly referred to as the ‘right to a rethink’, is one of the most important rights given to the consumer by the Consumer Code.

The right of withdrawal allows the consumer to change his mind about the purchase made outside the seller’s business premises, freeing himself from the contract concluded without giving any reason within 14 days after the purchase. In this case, the consumer may return the goods and obtain a refund of the amount paid.

What is the reference legislation for the right of withdrawal applicable to the sale of NFT?

In Europe, the matter is regulated by the Consumer Rights Directive 2011/83/EU. Directive 2011/83/EU replaces the Distance Selling Directive (97/7/EC) and the Doorstep Selling Directive (85/577/EEC) by harmonising the rules on contracts between consumers and sellers.

Updated with Directive (EU) 2019/2161, it is a regime applicable to a wide range of contracts concluded between professionals and consumers, in particular sales contracts, service contracts, contracts for online digital content and contracts for the supply of water, gas, electricity and district heating; it covers both contracts concluded in shops and those concluded off-premises (e.g. at the consumer’s home) or at a distance (e.g. online).

The update made by Directive (EU) 2019/2161 extended the scope to contracts under which the professional provides or undertakes to provide digital services or digital content to the consumer, and the consumer provides or undertakes to provide personal data. The legislation establishes, inter alia, a number of information obligations for professionals. In particular, they must, before concluding a contract, provide consumers, in plain and intelligible language, with information such as:

the identity and contact details of the professional
the main characteristics of the product; and
the applicable terms and conditions, including payment terms, delivery times, the
performance, duration of the contract and conditions of withdrawal.

Finally, online sellers are required to inform consumers whether they are a professional or a non-professional, advising them that EU consumer protection rules do not apply to contracts concluded with non-professionals.

Directive 2011/83/EU includes a comprehensive set of provisions on withdrawal, under which, inter alia, consumers may withdraw from distance selling contracts within 14 days of the delivery of the goods or the conclusion of the service contract, with certain exceptions, without any explanation or cost; if the consumer is not made aware of his or her rights, the withdrawal period is extended to 12 months.

Europe is not the only community that has adopted strongly protective rules for the weaker contracting party, many countries such as the United Kingdom, for example, have adopted legislation that provides the same or very similar protection.

Which companies are obliged to apply the right of withdrawal?

Article 3(4) of Directive 2011/83/EU defines the objective scope of the regulation by referring to ‘any contract’ concluded between a professional and a consumer.

Therefore, even projects that are based outside the European Union as well as other countries (e.g. the United Kingdom) may still be subject to the consumer laws (of the United Kingdom) and of the European Union and states with similar regulations when selling goods or services to consumers in these states. This is because the scope of these laws includes any company that offers goods or services to consumers in states that offer this protection, regardless of where the company is located.

This means that international companies selling to consumers, e.g. from the UK and EU, must comply with UK and EU consumer laws. Failure to comply with these laws can result in penalties for the company, including fines and legal action.

Can the right of withdrawal be excluded?

There is a casuistry which, in certain specific cases, allows the exclusion of the right of withdrawal. For example, for the matter identified here, Article 16 of Directive 2011/83/EU letter M), tells us that “Member States shall not provide for a right of withdrawal in respect of distance and off-premises contracts relating to […] the supply of digital content on a non-material medium if the performance has begun with the consumer’s prior express consent and his acknowledgement that he would lose his right of withdrawal. This is a very specific provision that, if interpreted correctly, would allow the professional to avoid heavily negative consequences for the economy of the project by remaining within a perimeter of legal compliance.

When is the EU representative required under the GDPR?

14/12/2022/in Privacy/by Giovanni Gaeta

Perhaps not everyone is aware that Article 27 of the GDPR requires the appointment of a European representative to companies located outside the EU and carrying out data processing activities of European citizens.

In brief, the representative’s role is to act as a point of contact between the data controller, located outside the territory of the EU, and national data protection authorities and data subjects.

As an obligation imposed only on non-European companies, it is not surprising that, within the European Union, this regulatory imposition had never been given particular importance.

Nonetheless, companies that fail to comply with this requirement can often face large fines.

Inside this article we try to answer some of the most frequently asked questions about the EU representative.

What is the role of an EU representative under the GDPR?

The role of an EU representative under the General Data Protection Regulation (GDPR) is to act as a point of contact for EU data protection authorities and individuals whose personal data is processed by the non-EU based organization that the representative is representing. Although the representative is not responsible for the organisation’s compliance with the GDPR and may still be required to cooperate with and assist the DPAs in carrying out their tasks. This includes responding to inquiries from individuals whose personal data is processed by the organization and providing information to data protection authorities when requested. The EU representative is also responsible for ensuring that the organization keeps records of its processing activities, and for making those records available to data protection authorities upon request.

Should my company appoint an EU representative?

Whether a company is required to appoint an EU representative under the General Data Protection Regulation (GDPR) depends on several factors. The GDPR requires non-EU based organizations that:

offer goods or services to individuals in the EU, or
that monitor the behavior of individuals in the EU,

to appoint an EU representative if they do not have a physical presence in the EU.

According to the EDPB guidelines (guideline 3/2018), there are several factors that need to be considered in order to determine whether a company is offering its goods or services to individuals in a particular territory within the EU. Some of these factors are:

using the languages of a specific region or offering payments in the currency of that region;
using Google, Facebook or TikTok ads to target a specific market, or any other marketing activity directed at customers in that market;
the use of top-level domains in that market;
offering delivery of goods to individuals in the European region.

Furthermore it is important to note that the GDPR applies to organisations of all sizes, so even if your company is small, you may still be required to appoint an EU representative. It is always best to consult with a legal advisor to determine whether your company is required to appoint an EU representative.

What happens if I do not appoint an EU representative under the GDPR?

If a non-EU based organization that is required to appoint an EU representative under the General Data Protection Regulation (GDPR) does not do so, it may be subject to penalties and fines. The GDPR provides for a range of administrative fines, including fines of up to 20 million euros or 4% of the organization’s global annual revenue, whichever is greater, for violations of certain provisions of the GDPR. Failing to appoint an EU representative when required to do so could be considered a violation of the GDPR, and could result in the organization being fined. Additionally, EU data protection authorities may take other enforcement actions against the organization, such as requiring it to appoint an EU representative or suspending or prohibiting the processing of personal data. It is important for non-EU organizations to comply with the GDPR and appoint an EU representative if required to do so.

How to appoint an EU representative?

To appoint an EU representative under the General Data Protection Regulation (GDPR), your company can take the following steps:

Identify an individual or organization based in the European Union (EU) that is willing and able to act as your company’s EU representative.
Have the EU representative sign a written mandate that outlines the scope of their responsibilities and the duration of their appointment.
Keep a copy of the mandate on file, along with any other relevant documents, such as proof of the EU representative’s identity and location.
Make the contact information for your company’s EU representative available on your website and in your privacy policy, and provide it to any individuals or data protection authorities who request it.

It is important to note that the EU representative must be based in the EU and must be easily accessible to individuals and data protection authorities. The representative must also be able to communicate in the language(s) used by the individuals and authorities with whom they will be interacting. It is also important to ensure that the EU representative is able to fulfill their responsibilities under the GDPR and is familiar with the organization’s processing activities. You may wish to consult with a legal advisor to ensure that your company’s appointment of an EU representative complies with the GDPR.