What's the issue?
An important consideration of supply disruption during the COVID-19 pandemic is the potential impact on consumer rights, particularly given the increase in consumers purchasing digital products, such as new games, e-books and TV subscription services.
Other issues highlighted by the crisis which impact consumers include pressure selling and misleading terms and adverts, together with inflated prices on certain consumer items like hand sanitiser and face masks.
What's the development?
Regulators and businesses have been taking steps to protect consumers. The CMA has launched a taskforce to tackle negative impacts within its remit of the COVID-19 outbreak. For example, it will scrutinise market developments to identify harmful sales and pricing practices as quickly as possible and take enforcement action where there is evidence that firms may have breached competition or consumer protection law.
On 4 April 2020, the CMA also launched an online service through which businesses and consumers can report COVID-19 related unfair practices. Individuals can submit various details, including reporting on unfair prices for products or services, misleading claims and problems with the cancellation, refund or exchange of products or services.
The Advertising Standards Authority (ASA) has announced changes to its regulatory approach during the pandemic. It has said it will apply a "lightness of touch" in some areas, knowing when to prefer an advisory rather than an investigatory approach, and "an uncompromising stance on companies or individuals seeking to use advertising to exploit the circumstances for their own gain", including where adverts seek to exploit people's health-related anxieties or difficult financial or employment circumstances. The ASA has also issued advice specifically to the online gambling industry, warning that it is the focus of particular scrutiny.
Similar to the CMA, the ASA has launched a reporting tool for misleading or irresponsible ads, and has already taken action to ban ads for facemasks which claimed to protect people from the virus in contradiction of Public Health England advice.
The tech giants have also been responding to the challenge of combating online disinformation. Twitter, Facebook, YouTube, Google and WhatsApp are among those who have taken steps. For example, Twitter has introduced a pop-up directing users to credible national medical sites and removing inappropriate and opportunistic advertisements relating to the virus. Facebook is also taking steps to direct people searching for information on the virus to credible sites, to take down content "debunked" by credible experts, and has banned advertisements for products which claim to prevent or cure COVID-19. WhatsApp has introduced measures to prevent mass forwarding.
The EU's Rapid Alert System which monitors serious cases of disinformation has been used to share knowledge on fake news relating to the virus with other Member States and the G7. The system was launched in March last year and this is the first time it has been used.
The COVID-19 outbreak is also testing the efficacy of the European Commission's voluntary Code of Practice on online disinformation and signatories which include Google, Facebook, Microsoft and Twitter, have been meeting with the EC and explaining what they are doing to tackle coronavirus-related online fake news which, in some cases, goes beyond actions required under their normal misinformation policies.
What does this mean for you?
While the COVID-19 crisis does not bring changes to consumer protection rules, it does bring them into sharper focus and regulators will be quick to act against any blatant breaches so issues to consider include:
- Be careful to avoid making any misleading statements about the products and/or services you offer and adopting any aggressive sales tactics – particularly those that may be seen as exploiting individuals' current financial circumstances and health-related worries. Pay particular attention to avoid undermining public health advice, or misjudging public and minority group sensitivities.
- Do not undermine the principles of fair competition or irresponsibly take advantage of current retail conditions (for example by unnecessarily or artificially inflating prices).
- Safeguard against any unfair contract terms (for example, charging excessive early termination charges or having unreasonable cancellation, returns and refunds policies). Businesses should review and update consumer contracts and ensure they pass the 'fairness' test set out in the Consumer Protection Act 2015. An unfair term in a consumer contract is not binding on the consumer.
- Are you still complying with all sustainability claims? This point is particularly relevant to the luxury retail sector, where goods are often manufactured in China. If your goods are marketed as "made from 100% sustainable cotton" for example, this standard must be maintained even if your manufacturing process is disrupted.
- Can you substitute certain items or components? This may be possible where there are no specific statements made about the particular component or where an express term in the contract makes it clear that an item might be substituted.
- Consumers are entitled to certain remedies (including a full refund within 30 days of delivery and a repair or replacement within a "reasonable time") where a product was not of "satisfactory quality", "fit for purchase" or not as described at the date of purchase. You may be unable to provide a repair or replacement due to depleted inventory levels or staff shortages. While consumer rights will continue to apply, it is possible that there may be scope for greater flexibility over what is considered a “reasonable time”. This will clearly depend on context but it could see periods which would normally be counted in a matter of weeks, extending to months.
- Online sales are subject to a 14 day 'cooling-off period' under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. There are certain exemptions to this right, for example, for perishables and personalised goods. You may find it increasingly difficult to monitor and deal with cancellation requests due to a reduced workforce so communication with consumers will be paramount. They are much less likely to complain or be unhappy with your customer service if you are open with them.
In essence, consumer protection rules remain unchanged but context may be critical as to how they are applied during this period, especially given that more consumers than usual are likely to be regarded as vulnerable at this time.
