Original URL: http://www.theregister.co.uk/2010/04/19/sony_firmware_compensation/

Sony's PS3 firmware update shows how retailers can be exposed

No compensation from manufacturers

By OUT-LAW.COM

Posted in Games, 19th April 2010 14:05 GMT

Retailers face payouts to consumers that they will not be able to reclaim from manufacturers when software updates disable products' functions, an expert has warned.

Consumer law protects the buyers of goods if their functions change, but retailers generally cannot pass those claims on to the device makers who made the change, according to Richard Parkinson, a technology lawyer with Pinsent Masons, the law firm behind OUT-LAW.COM.

Sony has said that it will not compensate retailers who refund customers because of a firmware update to its PlayStation3. The change prevents the machine from using alternative operating systems, which it was previously able to do. Some owners installed the Linux operating system, allowing them to use their consoles as desktop computers as well as games machines.

Press reports indicate that one consumer received a refund for his console from online retailer Amazon. Sony itself has said that it will not reimburse retailers who do so. The company told reporters that the machine's main function was as a gaming console, and that an ability to run the Linux operating system is not explicitly mentioned on its packaging. Others have claimed, though, that a feature called "Install Other OS" was listed in Sony's promotional material.

The ability of a manufacturer to alter products over the internet is relatively new and not covered by the Act.

"If Sony is essentially changing the product after it was delivered and disabling some of its promoted functionality, it is no longer as described and fit for purpose," he said. "The legislation was certainly not designed for upgrades being carried out remotely that affect the product after delivery."

Parkinson believes that the law is in the consumer's favour, though. "The Sale Of Goods Act says that if you sell something by description it's got to match that description and it's got to be fit for purpose," he said. "If the box or promotional material says it does something, that has got to be one of the fit for purpose elements."

Parkinson said the Unfair Terms in Consumer Contracts Regulations 1999 could also apply if Sony seek to rely on the clause within its licence terms which allows it to vary the software. "If Sony is changing the terms of the services it bundles with the hardware to the detriment of consumers, this could be seen as an unfair term under these Regulations that would render that term void," he said.

The Regulations list examples of terms likely to be considered as unfair. These include "enabling the seller or supplier to alter unilaterally without a valid reason any characteristic of the product or service to be provided".

Retailers, then, will have to pay out full or partial refunds, depending on how long a consumer has had a product. But they are unlikely to be able to force the makers of the goods whose software update caused the problem to compensate them.

"The retailer has a contract with its supplier, the distributor of the product or the overall manufacturer, so he has to look at that contract" said Parkinson. "Because this is a business to business contract you are able to exclude warranties for fitness of purpose or description, so these are very often excluded and warranties and remedies are limited."

"In any event you would have to query how many retailers will go up against a supplier with the might of someone like Sony when they are likely to be reliant on its goodwill in the future," said Parkinson.

Though that places them at risk, Parkinson said that retailers will be used to such situations. "Retailers already take risks, such as with defective products that are outside the guarantee period," he said. "Some even negotiate to buy goods with fewer rights of recourse against the supplier to get a cheaper price."

There are other laws that could apply to the changing of goods after the sale, but are unlikely to in this instance, said Parkinson. Though some users will feel that the ability to use other operating systems is desirable, it is not a vital part of using a PlayStation3 for the average consumer, he said.

But if manufacturers did change major elements of goods after the fact they themselves could run into trouble, he said.

"The Consumer Protection From Unfair Trading Regulations have a criminal sanction for unfair practices," he said. "It can be unfair to say something about a product's characteristics that is untrue, but that's got to affect the buying decision of the 'average' consumer, so wouldn't really apply in the PlayStation3 case."

"In any event, the retailer in those circumstances has a defence that the acts of the supplier are outside their control," said Parkinson. "The consumer has no specific rights to bring an action under the Regulations, but Trading Standards could do it and try to enforce criminal sanctions against the manufacturer."

Retailers could try to change their contracts with manufacturers so that they could recoup payouts to consumers, but Parkinson doubted whether many would have the influence to take on major electronics makers.

"Ideally you would seek to include a provision in your contract stating that you would be able to have recourse if the supplier did something of this nature that led to you having consumer complaints against you," he said. "But I would query whether or not many retailers would have sufficient power to make that stick and get it into the contract."

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