UK: UK Consumer Law In The Wake Of The EU Referendum

Last Updated: 15 July 2016
Article by Katie Chandler, Debbie Heywood and Sian Skelton

Consumer protection law in the UK has recently undergone a complete overhaul. As businesses have just got to grips with a raft of new requirements, there is understandable concern that the UK's vote to leave the EU in the recent Referendum, will bring more uncertainty and change.

The first thing to make clear is that, in the short to medium term at least, nothing changes and there is no need to panic. The UK has to continue to follow EU law for now. It is also extremely unlikely that the government will make major changes to local consumer law given the recent introduction of the Consumer Rights Act 2015 (CRA) to deal with rights and remedies in relation to the supply of goods, digital content and services. Finally, a revision of consumer protection law is not likely to be top on the government's list of priorities as it will be otherwise engaged for the foreseeable future.

Consumer protection law does, however, provide an interesting focus for consideration in the wake of the EU Referendum for a number of reasons. The key issue is commercial. While it is extremely unclear what our future relationship with the EU will look like, we will hopefully not simply cease trading with an economic block which currently accounts for 44% of our trade; businesses will want to be able to continue to sell to consumers in the EU. Whatever the arrangement the UK eventually reaches with the EU, there will be no way to sell to EU consumers without complying with a considerable amount of EU law. This is something which non-EU countries have already had to come to terms with and for that reason alone, it is in the UK's interests to keep in line with EU consumer law as far as possible.

Consumer law is also, however, a clear example of a complex area in which we already have a combination of EU and local law. The two most significant changes to UK (strictly speaking English) consumer law over the last two years, have been split between EU law in the form of the EU Consumer Rights Directive, implemented into UK law by the Consumer Contracts Regulations 2013 (CCRs) and locally instigated law in the form of the CRA, which consolidated and updated UK consumer law. Looking at the complexities of what may happen to the consumer law landscape, serves as a useful illustration of the effect of Brexit on other similarly entwined areas of UK and European law.

Current UK consumer law

UK-instigated law

The UK consumer law framework is now dominated by the CRA and other UK-initiated laws. These will not be directly affected by Brexit.

EU-derived law

A lot of EU-derived consumer law will automatically survive even the most complete Brexit. This is because different types of EU law take effect in Member States in different ways. EU Regulations are directly applicable under the Treaty on the Functioning of the European Union which means they apply in Member States without the need for implementing legislation. Conversely, Directives require Member States to draft legislation to transpose them into their own law. This means that the implementing legislation for EU Directives will not fall away automatically post Brexit, but would need to be repealed or replaced if changes are thought necessary. So, for example, the legislation implementing the Consumer Rights Directive (the CCRs) will survive. However, EU Regulations will cease to have effect (unless the EU exit agreement or any trade agreements dictate otherwise). A lot has been made by the Leave campaign about the surfeit of EU law in the UK but that doesn't mean that we necessarily want to get rid of it all. We will need legislation to enact EU Regulations we want to keep into English law.

Having said that, interestingly, even aspects of Regulations may survive. Parts of the EU Online Dispute Resolution Regulation (which requires, among other things, online retailers to reference and include a link to the central EU online dispute resolution portal) have actually been implemented into UK law under the ADR (Amendment) Regulations 2015, which essentially repeat Article 14 of the EU Regulation. This shows that EU Regulations can still be written into English law. Even where they are not, there may be secondary legislation which deals with issues relating to requirements under EU Regulations. In the case of the ADR (Amendment) Regulations, the section copied from the EU Regulation deals with the consumer information requirements around an EU online dispute resolution tool. Will we even have access to it after Brexit? This is a small example of how complex the process of untangling UK and EU law (where desired) will be. It is currently unclear whether any consumer laws would need to be repealed or replaced on Brexit because that will depend to a considerable degree on what form Brexit takes.

Prospective trading models with the EU

We have seen a number of models put forward as alternatives to EU membership, however, these are all based on existing relationships other countries have with the EU, so it is far from certain that one of these will be the end result. There has been no political decision around what sort of an exit we want or when we should exit (although clearly, at least the first part of that is not necessarily within our control).

Brexit-lite

Essentially the question now is whether we retain any sort of access to the European Single Market, and, if so, how much and in return for what? At the 'Brexit-lite' end of the scale is EEA membership. While this may be a popular option for Remainers, it is unlikely to be acceptable (in the present climate) to Brexiteers. EEA membership would allow complete access to the Single Market in return for which, we would pay into the EU budget, be subject to EU law without being able to influence it, and have to accept freedom of movement. In terms of how this would impact business, it would undoubtedly involve the least change from the current position.

WTO

At the other end of the scale, we trigger Article 50 of the Lisbon Treaty, kicking off a two year negotiating period. If no agreement is reached and the negotiating period is not extended by the other 27 EU Member States, the UK will fall out of the EU and will have to trade with the EU under the terms of the World Trade Organisation.

Trade agreements

Somewhere in the middle of these two options is that we exit with trade agreements in place or that the exit agreement strikes a new compromise between free trade and freedom of movement and we retain some sort of access to the Single Market.

All options apart from joining the EEA will involve uncertainty and change for businesses but that is not to say that the consumer law regime will necessarily change greatly. For UK businesses selling to UK consumers, there are unlikely to be significant changes. Those wishing to sell to EU consumers may, however, have a number of issues to contend with even if there is no wholesale revision of EU-derived consumer protection law in the UK on or after exit.

Future EU developments

At the moment, the UK has one of the most advanced consumer protection regimes in Europe which brings with it consumer confidence. The CRA brought in new rules around digital content which the EU is only now catching up with. As part of the Digital Single Market strategy, aimed at reducing barriers to cross-border sales, the EU has proposed two draft Directives (remember, these would require implementing legislation in Member States). The first is on certain aspects concerning consumer contracts for the supply of digital content (Digital Content Directive) and the second deals with certain aspects concerning consumer contracts for the online and other distance sales of goods (Online Goods Directive).

While the introduction of harmonised rules in these situations across the EU makes sense, these Directives are unlikely to be welcomed by the UK whatever form Brexit takes, because while some of the rules proposed by the Commission are broadly in line with the CRA, others are not.

Digital Content Directive

In terms of the Digital Content Directive, even the definition of "digital content", which was taken from the Consumer Rights Directive, is different to the one used in the CRA. The supply of non-essential personal data is treated in more or less the same way as financial consideration for digital content in the new draft Directive but not in the CRA which is particularly relevant as much of the CRA applies only to paid-for digital content. This, therefore, looks likely to extend the scope of the regime significantly in the EU and will affect a broad range of businesses (although there is a certain lack of clarity to the provisions).

There is a presumption that digital content is to be supplied immediately after conclusion of the contract, whereas under UK law (derived from the Consumer Rights Directive), the consumer must explicitly request immediate supply and acknowledge that they will lose their cooling off period as a result. While the two provisions are not mutually incompatible, they do appear to be pulling in different directions.

Crucially, the rules on burden of proof are different. Under the CRA, the digital content is only presumed not to have conformed to the contract on point of delivery, for a period of six months after supply. Under the draft Directive, this presumption applies permanently. There is also a statutory termination right which does not exist under the CRA. In addition, under UK law, remedies may only be claimed up to six years from supply. Under the draft Directive, there is no time limit.

Online Goods Directive

The draft Online Goods Directive on the online and distance sale of goods is going to cause similar issues in the UK if adopted in its current form. While the remedies available are similar, there is no short term right to reject as under the CRA. Instead, the consumer moves straight to repair or replacement and can only terminate if repair or replacement is unsuccessful. And again, the burden of proof rules are different.

Both these Directives require Member States to implement equivalent provisions of a standard which must be no higher and no lower than those in the Directives.

Of course, it is a long way from initial publication to enactment and these drafts may well change significantly, but crucially, we are now unlikely to be involved in their negotiation. If we become a member of the EEA, we will be required to implement the Directives if they are adopted in the EU. If we do not, then we will have a choice: we will either have to amend the CRA to come in line with EU requirements, or we will be looking at two parallel regimes and increasing divergence between the UK and the EU.

Related areas

There are a number of areas which UK businesses trading with EU consumers will need to keep a close eye on beyond consumer protection. These include:

  • Data protection – the EU recently passed the new General Data Protection Directive which will apply from 25 May 2018 (at which point we are likely to still be an EU Member State). The UK's Information Commissioner has made it clear that the UK will need to maintain a regime which provides equivalent protection to that in the EU if it wants to continue to receive personal data from the EEA. Similarly to consumer protection, it will be very difficult to trade with EU consumers if we do not comply with EU law in this area. See here for more about the impact of Brexit on data protection;
  • Product liability – prior to the EU Referendum, the government said that it had no plans to change product liability requirements and we can presume this view is likely to continue. The European product liability regime is embedded in UK law through the implementation of the Consumer Protection Act 1987 which imposes strict liability on manufacturers in respect of damage caused by defective goods. Regulations relating to product safety and product recalls have afforded consumers with a significant level of protection and manufacturers in the UK have long been used to complying with these rules – moving away from this regime would be a big task. However, the issue comes if the EU changes or adds to its product liability laws going forward and we are not an EEA member. At this point, the government will have a choice – either implement the EU laws anyway, or leave it up to businesses to decide whether or not to do so. This could cause a problem if rules conflict. However, there is no immediate likelihood of this happening and we would hope that future governments will take a pragmatic approach particularly given the importance of maintaining access to the EU market and EU consumer confidence in UK manufactured goods;
  • Governing law and jurisdiction – under current law, EU consumers have the right to take action against traders in their local courts. In addition, any mandatory local applicable laws will apply in the event of such disputes. This is likely to continue on Brexit, however, if over time EU consumer law starts to diverge from UK consumer law, defending claims in local courts may be more expensive as a result.
  • Marketing and advertising – there is less harmonisation in Member States in this area than in areas like data protection and businesses are probably used to having to take local considerations into account already.

What next?

Given the pace of events, all bets are currently off on what the future holds but UK businesses trading with EU consumers can gain comfort from the fact that there will be no immediate changes. Businesses should:

  • keep calm and carry on by making sure you are fully compliant with the current regime;
  • keep a close eye on EU consumer law developments – there should be no assumption that these will not apply to you;
  • watch developments in other relevant areas, for example, data protection and product liability;
  • remember that EU consumers already have the right to bring actions in their home courts and that mandatory local laws may already apply. The potential difference post Brexit is that there could be more local laws to override English law and costs of defending actions in the EU may be higher than at present.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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