The law behind… shopping

Shopping is more than just an enjoyable way of spending an afternoon – it’s an activity covered by sale of goods legislation, advertising codes and stringent product liability requirements. Lawyer 2B asked the experts to explain consumers’ rights and protections

Advertising high street products

Advertising in the UK must comply with the UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing and the UK Code of Broadcast Advertising, which are together known as the “Advertising Codes”. Advertising campaigns must also comply with a range of laws that can impact on different types of advertising, from consumer protection and privacy laws to legislation which is specific to certain sectors of industry. The Advertising Codes are administered by the Advertising Standards Authority (ASA), which is the UK’s advertising regulator.

Buster the Boxer
A trampolining dog.

A lot of the rules within the Advertising Codes mirror the requirements set out in the Consumer Protection from Unfair Trading Regulations 2008, which broadly prohibit misleading advertising. In addition to controlling misleading advertising, the Advertising Codes also deal with other issues, such as advertising that has the potential to harm or offend consumers, the control of promotional marketing (which covers competitions and prize draws), sales promotions and the regulation of more specific and tightly-regulated areas such as alcohol, food products and advertising to children.

In terms of remit, the Advertising Codes cover most types of advertising formats, including on TV, radio, online, advertising through smartphones, magazine and newspaper ads, direct mail and leaflets and brochures. This means that the Advertising Codes will apply to most of the ads you see for high street products. The Advertising Codes have rules that govern the content, placement and format of ads. For instance, it is a requirement under the Advertising Codes that all ads must be clearly identifiable as such to consumers.

While what constitutes an ad can often be obvious in certain media (for instance TV and cinema ads), this requirement has caused problems recently with newer forms of advertising methods. For example, for brands publishing “native ads” on sites such as BuzzFeed, consumers cannot always so easily identify when content is an ad and so content must be clearly labelled as being an ad, rather than being a part of the editorial content an individual is reading, if this is the case. Ads on social media also face similar problems, particularly when celebrities are endorsing a product but fail to make the commercial nature of their communication and their relationship with an advertiser clear using appropriate hashtags (#ad or #spon, in case you were wondering).

In terms of recent developments, the Tobacco Products Directive (2014/40/EU) was implemented across Europe in May, which introduced tighter restrictions on the way in which e-cigarettes can be advertised. This forced the UK to ban ads with the aim or direct or indirect effect of promoting e-cigarettes and e-liquids. This, along with the recent ban on distinctive packaging for tobacco products has really hit the tobacco market hard in response to European-wide concerns.

However, post-Brexit there have now been calls throughout the industry (notably from the Advertising Association) for the government to reverse such bans relating to public health issues and instead focus on collaborating with the industry to achieve better health outcomes. Lobbying and public consultation can often play a key role in how UK advertising laws and regulations are revised and updated over time.

Jude King, associate, Osborne Clarke

Product liability

Sometimes, a bad review on the internet just isn’t enough. So what are your rights when a product you have purchased is faulty?

In October 2015, the Consumer Rights Act 2015 reformed key areas of consumer law, strengthening and simplifying your rights and extending the rules to cover digital content. The new rules apply to you if you buy something as a ‘consumer’, giving you rights against someone who sells you something through the course of his or her business.

If the product causes damage, you can claim against the trader if the product is not as safe as you would reasonably expect from the price, description and relevant circumstances. This includes damage to a computer caused by digital content. You can require the trader to repair the damage or get appropriate compensation. However, you won’t generally receive iphonecompensation just for disappointment or distress that the product is faulty.

If the product is not of the quality you would reasonably expect, ie, not free from defects, unsafe, etc, then you can reject it within 30 days and receive a refund even if no damage has been caused. If the fault is obvious, such as a TV not turning on, the trader must agree to provide the refund.  For up to six months after purchase, you are entitled to require a repair or replacement of the product and, if that isn’t possible, you will usually be able to get a full refund.

If you opt for repair or replacement, the trader must arrange this in a reasonable time without causing you too much inconvenience. They also have to bear the costs, including things like postage and materials. If you change your mind about wanting a repair or replacement, you will need to give the trader a reasonable period to carry out your original request before you can say you would prefer another remedy.  After six months has lapsed, any refund can be reduced to reflect the use you had of the product.

Kate Pert, solicitor, DAC Beachcroft

Store Cards 

From a data protection perspective, the growing use of store cards and the legal issues that surround them mirror those seen in many other developing consumer technologies. As with Internet of Things devices or tailored websites that use a suite of cookies to deliver functionality, the more information that a consumer hands over to the retailer, the more useful that retailer can make their offering to the consumer. Holding a range of store cards for your favourite shops is obviously a useful way of saving time and ensuring you gain access to bespoke, targeted offers.  

Retailers need to be mindful of the data protection implications of collating such large amounts of data from shoppers, however. The risks fall into two categories: those associated with breach of regulatory obligations and those that have a wider reputational impact – particularly as consumers become more privacy-savvy and the awareness of cybersecurity issues develop. 

Taking the regulatory obligation point further; a key compliance issue will be the mechanism by which retailers make available the necessary information to shoppers at the point of initial data collection (to explain who they are, the type of data they will be collecting, the means by which that data will be processed by them after collection and any consents sought for future, unsolicited electronic marketing, etc.). 

While that might be easier in an online context (when links to privacy policies can be easily embedded into webpage forms and the use of tick boxes can signify acknowledgement that such information has been delivered), it can be trickier if individuals are signing up for these types of cards in store. It is important to identify a method for delivering the information to the shopper in a way that does not detract from the retail experience but which allows the retailer to be confident that it has discharged these requirements (and which allows it to record and evidence that compliance).

Regulatory obligations do not cease, of course, at the point of data collection – retailers (as with all other businesses that collect and process personal data) need to be fully up-to-speed with the requirements that govern how and where they can utilise data collected – and the point at which it must be deleted.

While those requirements are in play at the moment (in the UK, they are priTesco, Clubcard, keysncipally set out in the Data Protection Act 1998) and regulators currently have significant sanctions at their disposal in respect of non-compliance, the complexity of the requirements and the financial implications for getting it wrong are only set to increase when the General Data Protection Regulation comes into force in May 2018.

Andrew Dunlop, partner, Burges Salmon

Online Shopping

As the CMA cracks down on manufacturers and suppliers restricting retailers’ online sales activities, those active in online markets need to think carefully about competition law compliance. 

Given the internet’s ever increasing importance as a sales channel, the online sector has been under close review by competition authorities for some time. The CMA’s view is that online markets help consumers identify and compare competitive offers – they improve consumer choice.  Ensuring that these online markets work well for consumers, appears set to remain a priority for UK (and EU) competition authorities. 

UK and EU competition law prohibit agreements and concerted practices that prevent, restrict or distort competition.  The most well-known form of prohibited agreement is the ‘classic’ price-fixing arrangement between competitors.  However, it is also prohibited for companies in a vertical relationship (such as between a manufacturer and a retailer) to enter into price-fixing arrangements (known as ‘resale price maintenance’ (RPM)), or impose other unjustified restrictions of competition between retailers.  Although selective distribution systems may contain some restrictions, they do not get round all the problems

Where a supplier restricts the ability of a retailer to set the prices at which it will resell the supplier’s products, for example by requiring the retailer to sell at a specified price, prohibiting discounts or fixing the maximum level of discount, then this will generally infringe competition law.  Similarly, other restrictions of competition that go beyond the minimum necessary to achieve positive efficiencies, in particular restrictions on passive sales (including over the internet) may raise competition law risks.

The CMA has recently undertaken a number of investigations into suspected RPM involving online retailers, and following on from those investigations has issued an open letter with specific guidance to suppliers and retailers on this subject.  The authorities in Germany and France have also taken action against similar restrictions involving adidas and Asics, and the European Commission is in the middle of a two year review of ecommerce, with conclusions expected mid-2017.

Given the consequences of competition law infringements (including fines of up to 10% of turnover, director disqualification, actions for damages and general reputational harm – not to mention to the management time and adviser costs to business of being investigated), it is important that companies (whether manufacturer, wholesaler, or retailer) ensure that their distribution arrangements are compatible with competition law and allow retailers to set their own prices both online and offline.

Noel Beale, partner, Burges Salmon