What you need to know before buying digital products and your rights if you are unhappy with those products.

Before you buy digital products

Digital products include software and internet downloads or streaming eg, music, games, movies and e-books. Software is classified as goods and other digital products are “intangible goods” under the Consumer Guarantees Act (CGA). The CGA provides you with clear legal rights including the right to repair or replacement of faulty digital products supplied by New Zealand businesses.

When you buy digital products they differ from buying physical goods as they are provided through a licence and often with digital rights management (DRM). DRM means that digital content is managed so they only run on specific players with restricted rights to copy, share and transfer.

Goods and services tax (GST) is payable on digital products from overseas suppliers from 1 October 2016.

What to look out for with digital products

Be aware that some of these issues may occur when you buy digital products:

  • illegal (pirated) copies of digital products
  • faulty digital downloads that don’t work properly
  • limited information about products, technical requirements, terms of use and digital rights management (DRM)
  • unfair contract terms, eg limiting liability if a product does not work
  • limited information on customer helplines and how to complain
  • difficulty in getting a remedy with overseas suppliers
  • online scams. Check our website for common scams.

Before you buy Internet of things (IoT) products

The Internet of Things (IoT) is the name commonly given to products with the capability to connect to the internet, eg the ‘smart’ fridge that tells you when to buy more milk, or internet-connected fitness monitors.

With any emerging technology, regulations take time to catch up with the consumer issues that arise around using new products. Like other digital product purchases, consumers of IoT products can be at risk of privacy and security breaches. Both product developers and product consumers have rights to certain data collected via the use of IoT products but sometimes this is not clearly set out in a product’s terms and conditions. Regardless of terms and conditions consumers still have rights to access and correct any data held by an IoT developer under the Privacy Act 1993.

IoT products differ from other products in their complexity: they are often ‘hybrid’ products, made in collaboration by the product manufacturer and a software partner. Sometimes the product is locked to a single operating system, meaning the owner cannot choose to transfer to a different one that may be cheaper or have better terms and conditions; or the owner is restricted by which add-ons or apps their product can connect to.

What to look out for with IoT products

Be aware that some of these issues may arise when you buy IoT products:

  • your data may be stored indefinitely or shared with other organisations
  • it may be difficult to access, change or delete your data when the product manufacturer/developer is based outside New Zealand
  • your data may not be stored securely and can be open to theft
  • the product you buy might be locked to an operating platform or software provider
  • you may not own the ongoing right to use the software that operates your product
  • it may be difficult to determine who is responsible for providing repairs/refunds for hybrid products.

Your rights

You have rights when you buy digital products from New Zealand businesses under the Consumer Guarantees Act (CGA). Software and licensed digital downloads -games, apps, movies, music and ebooks, come within the legal definition of “intangible goods” supplied by a business under the Consumer Guarantees Act (CGA).

Check the website terms and conditions carefully before you buy digital products from overseas suppliers.

These digital products must meet the consumer guarantees for products. Digital products must:

  • be fit for their normal purpose
  • be safe
  • be durable - last for a reasonable time
  • have no defects
  • be acceptable in look and finish.

If you have a problem with a digital product, you can ask the retailer to get it fixed. If the problem can’t be repaired, you can ask for a replacement or a full refund of the digital product.

Alternately you can keep the product and ask for compensation for any drop in value of the product below what you paid for it.

Tip: Make sure the digital product itself is faulty and not just a problem with your device or internet connection.

Read Faulty products to find out more about your rights.

If you are buying digital products from an overseas retailer then your legal rights depend on their terms and conditions. You agree to these terms and conditions on the website when you complete a purchase online.

It pays to use reputable international retailers and websites who will usually have good customer service if there is an issue.

Read Online shopping to find out more about how to protect yourself and your rights with overseas retailers.

If you buy from a private seller online you may have limited rights, under the Contract and Commercial Law Act (CCLA) to get a full or partial refund or compensation for computer software only. The CCLA defines goods to only include computer software. This doesn’t include streaming and other forms of downloads or on demand services.

Read Private sales and second-hand goods to find out more about your rights.

Before purchasing a digital product, especially a digital product with internet capability (an IoT product), it is important to understand if agreeing to the terms and conditions of sale means your data will be collected, shared and stored. Read the terms and conditions carefully to find out:

  • what data is collected and if it will be shared
  • how long the data will be kept for
  • who will have access to the data, how it will be used or disclosed, and how you go about requesting it be changed or deleted
  • how securely the data is stored, and what happens if the data is hacked
  • what happens with the data when you no longer use the product.

Carefully reading and understanding the terms and conditions you are agreeing to when you buy a product is especially important when your personal data is involved. Do your research before you buy a product, and if you have any questions about how your data will be used or shared, contact the product manufacturer before purchase.

You have rights under the Fair Trading Act (FTA) when you buy digital products that are sold into New Zealand, whether or not the retailer is located here or overseas. Under the FTA, you have protection from:

  • false or misleading representations or statements
  • unsubstantiated claims that have no basis in fact
  • unfair sales practices
  • unfair contract terms, eg paying termination fees to cancel a contract after it automatically renews.

See also:

Copyright in digital content is protected by the Copyright Act(external link). Copyright protects original works including computer programs, music, movies and e-books. Copying all or a substantial part of any digital content without a licence from the copyright owner (eg illegally downloading a movie or music from the internet) is prohibited under the Copyright Act. There are, however, some exceptions where copying is allowed for particular a purpose such as:

  • “time shifting” where you record a television programme for the purpose of making a complaint or to watch it at a more convenient time. This doesn’t apply to “on demand” services
  • “format shifting” where you copy a sound recording onto your different devices.

To find out more about copyright protection read the IPONZ website(external link).

If things go wrong

Contact the retailer first

First try to resolve the dispute directly with the retailer if:

  • you have been misled
  • the digital products are faulty
  • they did not have the right to sell those products.

If you can’t contact them, use the website’s dispute resolution process if this is available.

Place fair and accurate feedback about any problems with the sale on the website so others are aware of any problems.

Read Resolve a problem to find out more.

Next steps

If you are unable to resolve your issue directly with the seller, our Resolve It tool has information to help you take the next steps. These may include going to the Disputes Tribunal or District Court.

Common situations

Faulty digital products

Sandy downloads a movie from a local online retailer onto her computer to watch later. When she tries to watch the movie it keeps having glitches. Sandy is entitled to contact the retailer and ask for the movie to be replaced under the Consumer Guarantees Act. If the retailer refuses or takes too long to do so then Sandy can ask for a refund of her money.

IoT product data usage

Jeremy buys a ‘Smart’ TV and plugs it in, but is asked to agree to a long list of terms and conditions before it will work. He’s also asked to sign in with a Google account. He was unaware this would be necessary and is unhappy. When he calls the retailer to discuss the matter they direct his attention to a notice on the box with a website link that explains how his information will be collected and used. Jeremy can complain to the Privacy Commissioner if he thinks his information is being inappropriately collected, used or disclosed.