Legal update on changes affecting sales and marketing 2014

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The following is a quick guide to some of these key legal and regulatory changes and more guidance is available in Essential Law for Marketers.

Direct marketing and e-commerce practices

A radical shake up in this area is already underway as the Information Commissioner’s Office (ICO) has signaled a number of important changes that effectively erode the reliance by marketers on an ‘opt-out’ as a strategy for driving direct marketing (DM) and e-commerce activities that may have been prevalent in 2013. 

In addition, renewals and win-back strategies – where a customer has cancelled a subscription to a service – will also need to be changed as a result of the EU Data Protection Directive expected to come into force post-May 2014 European Elections.

Defamation Act 2013

This comes into effect on 1 January and has been heralded as a piece of legislation that swings the pendulum in favour of freedom of expression with a number of changes that impact statements made online and provides more protection to website operators and other online intermediaries.

Under the 2013 Act, web site operators now have a new defence where they can show that they didn’t post a defamatory statement on the website.

However, as with most laws there are exceptions to this rule and this defence won’t succeed in certain circumstances:

(1) claimant can show it wasn’t possible to identify the individual who posted the defamatory statement that would enable an action to be brought; and

(2) notice was given to the web site operator of the complaint in question and the operator fails to respond to that notice in accordance with the provisions of the Defamation (Operators of Websites) Regulations 2013, that also come into force on 1 January.

In the latter situation, the website operator needs to act within 48 hours of receiving a complaint by notifying the poster of the statement or if this isn’t’ possible, to remove the statement within this 48-hour time-frame. Some commentators feel this places an onerous administrative burden on website operators and leave a legal question mark over the situation where the poster of the comment is anonymous.

From a practical perspective, the following steps should be taken in order to minimise the possibility of a successful legal action being taken against a website operator that could result in substantial damages being awarded: implement an efficient complaints system:

(1) review internal policies to provide guidance to employees when a debate or expression of opinion crosses the line and is deemed to be defamatory;

(2) add a ‘report abuse’ button to the website; introduce a ‘traffic light’ system for assessing the nature of a complaint that’s been received and corresponding scale of target reaction given the severity of the nature of the complaint;

(3) in the terms and conditions (T&Cs) to which every website user signs up to must contain a clear definition of an ‘offending post’ and an explanation that, if the Operator receives a legitimate complaint of an offending post and on the complainant’s request, the post may be removed;

(4) also in the T&Cs should be clear, ‘acceptable use’ policies, removing rights of user generated content (UGC) and adding a ‘disclaimer’ to the website stating that the website operator isn’t involved in the creation of the content posted; and

(5) have an ‘opt in’ check box that users need to use to accept the T&Cs of posting material onto the website.

Nuisance telemarketing calls

In January, the Department for Culture, Media and Sport (DCMS) is expected to publish its proposals on tackling nuisance telemarketing calls. These proposals are expected to give more statutory powers to the ICO and regulator Ofcom for taking action against rogue marketers who conduct such activities.

The Government has expressly recognised the call by the ICO for a change in the law to enable it to issue fines against companies that make 100s rather than 1000s of nuisance cold calls as such companies currently fall outside of fines regime.

The intention is to make it harder for the cowboys to continue to run such scams, penalise persistent offenders that flout measures such as the Telephone Preference Service (TPS) and at the same time improve the perception of telemarketing as a legitimate sales and marketing activity when it’s conducted on a consensual basis.

The Unsolicited Telephone Communications Bill 2014 has implications for companies that carry out any sales and marketing in the UK by telephone or text messaging irrespective of whether that company is UK-based or not.

Office of Fair Trading is scrapped and Financial Conduct Authority assumes responsibility for regulating sales and marketing of pay-day loans

From the 1 April, the Office of Fair Trading (OFT) will cease to exist and a new regime for the regulation of consumer credit products under the gaze of the Financial Conduct Authority (FCA) comes into force.

The new watchdog has been given sharper teeth as the Government has indicated it wants to get tougher on sales and marketing practices such as those for popular pay-day loans where there’s a high risk of consumer harm.

The FCA will have more of a focus on advertising and promotion of retail financial services than the OFT and the former Financial Services Authority (FSA) that tended to act more like a statutory back-up for the ASA.

For example, the FCA is expected to introduce new rules requiring payday lenders to carry ‘health warnings’ across all advertising.

Other measures are also expected to include stricter market entry criteria for those wanting to offer consumer credit products such as pay-day loans; appointment of suitably qualified individuals within such organisations to regulate sales and marketing activities and tougher legal redress for consumers when things go wrong.

The FCA will operate an interim regime for regulation of consumer credit 1 April 2014 – 1 April 2016 in order to give companies time to adjust to these and other changes in the regulation of the market.

Alcohol sponsorship

Drinks industry self-regulator The Portman Group will launch the first UK-wide Sponsorship Code that will come into effect on 31 January.

Although the Code is separate from the Code of Practice on Naming, Packaging and Promotions, it’s consistent with existing measures that prevent any type of promotion that may appeal to those under the age of 18 years-old as well as being in alignment with the BCAP and CAP Codes as set down by the Advertising Standards Authority (ASA).

A major difference will now be the requirement of brand owners to promote responsible drinking and/or support community activities as part of an overall sponsorship programme.

Sale of cigarettes and e-cigarettes at point of purchase

The Government is likely to introduce early 2014 new regulations forcing tobacco manufacturers and those of electronic e-cigarettes to provide plain packaging of these products, based on a study into the effect of plain packaging on smoking levels that’s due to be published end of March 2014.

Separately, the ASA is consulting on the advertising and promotion of e-cigarettes that have been exploiting a loophole by running radio commercials on independent radio stations like XFM in London to persuade consumers of the ’safer’ way to get a nicotine ‘hit’. Currently, the CAP and BCAP Codes don’t regulate e-cigarettes so clarification as to the position of the marketing of these products is expected early 2014.

These measures come in the wake of the Government’s move to regulate nicotine-containing products as medicines in line with proposed revisions to the EU Tobacco Products Directive (2001/37/EC) and as a result will bring e-cigarettes and other nicotine delivery systems within the scope of medical regulations and the pharmaceutical trademark regime.

New Consumer Bill of Rights 2014

As discussed in Essential Law for Marketers, the Government has signalled its intention to merge all existing UK consumer protection laws and regulations together with the requirements of the finalised EU Consumer Rights Directive into a single new Consumer Bill of Rights.

The Consumer Rights Bill sets out a framework that consolidates in one place consumer rights covering contracts for products and services, digital content and the law on unfair terms in consumer contracts.

In the UK, there are 12 existing laws and regulations relating to consumer protection which the Government has said are complex and confusing and not in the best interests of consumers and business.

The Consumer Bill of Rights is intended to repeal and replace a number of pieces of key consumer protection legislation including:

(1) Consumer Protection (Distance Selling) Regulations;

(2) Unfair Terms in Consumer Contracts Regulations 1999;

(3) Misrepresentation Act 1967;

(4) Sales of Goods Act 1979;

(5) Sale of Supply of Goods and Services Act 1994;

(6) Supply of Goods (Implied Terms) Act 1973; and

(7) Unfair Contract Terms Act 1977.

Changes to current legal protections available to consumers will represent “the biggest overhaul of consumer law for decades” according to the Government.

In practical terms, it could mean that Trading Standards can operate over local authority boundaries that they can’t do at present, and provide enforcement agencies sharper teeth to prosecute marketers that habitually flout the new law.

These changes will require a radical readjustment to the many ways that businesses operate at the point of sale. In particular, technology, media and telecoms businesses that provide software and entertainment products to consumers to be downloaded at the time of sale will need to be aware of that the changes that will be required.

Marketers operating in Europe should take the opportunity to review their sales and marketing practices, both online and offline to ensure that they will be compliant when the new legislation comes in to force.

Class actions brought by consumer groups could become more common

In 2013, the European Commission published its recommendations on common principles for collective actions in the EU that invited Member States to adopt collective redress mechanisms including injunctions and damages for breaches in EU laws.

This requires consumer groups to have been identified before a claim can be brought and each member of that group to have ‘opted-in’ to bring a class action to court.

The result is that UK courts could see a rise in class actions and this is likely to accelerate once the Consumer Bill of Rights also becomes law.

Counterfeit marketers face new EU-wide laws

On 1 January a new EU-wide Customs Enforcement Regulation comes into force in the UK that aims to increase cross-border protection against the traffic in counterfeit goods, including pharmaceuticals, between Member States or into the EU.

The Regulation implements a more simplified procedure for dealing with suspected counterfeit goods in the absence of a court order across all 28 Member States and in certain circumstances allows brand owners to apply for certain small consignments of fake products to be dealt with automatically by Customs Officers ex officio.

The responsibility of civil litigation claimants to pursue alternative dispute resolution (ADR)

The courts increasingly want parties to resolve their contractual disputes without resorting to the courts and instead use ADR.

In October 2013, the Court of Appeal delivered a judgment that strongly reiterated its support for the role of ADR in civil litigation and confirmed that a party’s silence in the face of a serious invitation to mediate will, as a general rule, be considered unreasonable and will warrant a costs sanction even if there are reasonable grounds to expressly refuse the proposal.

Ardi Kolah is author of Essential Law for Marketers (published by Kogan Page). Order your copy here and get a 30% discount.

Front cover for Essential Law for Marketers Second Edition

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