Monthly commercial law update: Top 5 developments in July

Yes folks it really is August. Summer’s short lease is nearing its end.

For those of you who are still in the office (and not on a beach somewhere hot and exotic), why not take five minutes out and read about this month’s top 5 commercial law developments, as chosen by the team at Comet.

Advertising and marketing: product placement

Businesses are increasingly asking, against the background of their growing popularity, what are the restrictions on product placement and native advertising?

As a general rule, the product must ‘fit in’ with the programme and not the other way around.

It is clear that there has been a decline in viewers watching scheduled television with commercial breaks, as many now favour ‘on demand’ viewing, digital recording or Internet streaming.

This trend has been instrumental in the growth of product placement.

Also, consumer-savvy customers are becoming increasingly defensive to overt and traditional forms of advertising—product placement has become more prevalent, possibly as a result of this.

Lawyers typically need to look at three main areas in this area:

  • control—the extent of the advertiser’s control over how, when and where the product appears needs to be set out very early in negotiations and in clear terms in the contract
  • exit route—as many product placement agreements are ongoing, the advertiser needs a quick and clean exit route if it is not satisfied with the exposure the programme/film producers are giving it or if events give rise to an adverse association (eg the programme for whatever reason attracting negative publicity), and
  • price—the price the advertiser pays will need to reflect the amount of control they are granted, expected viewing numbers, category exclusivity, repeats and brand/programme compatibility.

Constitutional law: BIS issues report on balance of competencies in consumer and competition law policy

The Department for Business and Skills has published its report on the balance of competencies between the EU and the UK on consumer law and competition law, following a consultation in 2013. It is one of 32 reports being produced as part of the Balance of Competencies Review and is taking forward the Coalition commitment to examine the balance of competencies between the UK and the EU.

The report concludes that the evidence suggests that having EU competence on competition and state aid does further the UK’s national interest.

On consumer policy, the argument is more nuanced. The balance of opinion is that EU-driven consumer policy is a benefit, primarily because it is a factor in making the Single Market work effectively.

However, in this area there are more doubts about the way in which EU legislation is made, including whether it is sufficiently well thought through on inception, or robustly implemented after agreement. There was a sense among stakeholders that with the creation of legislation such as the Unfair Commercial Practices Directive and the Consumer Rights Directive, significant new EU action to protect consumers was not necessary. Instead, there should be more emphasis on ensuring that existing rules were enforced and applied correctly across the Single Market to remove remaining distortions and barriers to cross-border commerce.

Data protection: government enacts emergency legislation on data retention

In April 2014 the Court of Justice of the European Union (CJEU) declared (in the Digital Rights Ireland and Seitlinger case that the 2006 Data Retention Directive was invalid.

The CJEU held that current collection practices by telecommunications companies, taken as a whole, could provide very precise information on the private lives of the persons whose data are retained. Collecting such information interfered in a serious way with the fundamental rights to respect for private life and to the protection of personal data.

The CJEU also held that there were insufficient safeguards against the risk of abuse and against any unlawful access and use of data including outside of the EU. The retention of data should genuinely be for reasons such as the fight against serious crime or terrorism.

It also found that the provisions relating to data retention periods were unlawful in that it did provide for a sophisticated enough mechanism to determine what time period should apply.

The invalidation of the directive created a great deal of uncertainty as to what the telecommunications industry is obliged to do under the implementing legislation in the UK: the Data Retention (EC Directive) Regulations 2009.

Accordingly, the government, with cross-party agreement, enacted the Data Retention and Investigatory Powers Act 2014 which controversially received Royal Assent on 17 July 2014 after passing all stages of parliament in less than a week.

It has been reported that a legal challenge is already likely in connection with this Act: two members of Parliament are mounting a judicial review action with Liberty. Reportedly, Liberty is to argue that the new legislation is incompatible with art 8 of the European Convention on Human Rights, which includes the right to respect for private and family life, and art 7 of the European charter of fundamental rights—respect for private and family life and protection of personal data.

Insurance: Insurance Bill

The government has introduced the Insurance Bill to Parliament, which will support the growth of Britain’s insurance industry and help customers by updating the 100 year-old rules governing contracts between businesses and insurers.

The new Bill introduces a more modern legal regime which aims to benefit both insurers and their business customers by increasing transparency and certainty over the rules that govern contracts between them and reducing the number of legal disputes over time.

The Bill is the product of recommendations made to the government by the Law Commission and the Scottish Law Commission following eight years of consultation with businesses and insurers. HM Treasury informally consulted on the Bill in June 2014.

The reforms contained in the Insurance Bill cover three main areas:

  • disclosure and misrepresentation in business and other non-consumer insurance contracts: the Bill amends the duty on business policyholders to disclose risk information to insurers before entering into an insurance contract, introducing a duty of 'fair presentation' of the risk. It also provides the insurer with a number of proportionate remedies for breach of the duty of fair presentation
  • warranties: the Bill abolishes 'basis of the contract' clauses, which have the effect of converting pre-contractual information supplied to insurers into warranties without further discussion. It also provides that the insurer’s liability should be suspended, rather than discharged, in the event of a breach of warranty, meaning insurance coverage is restored after a breach of warranty has been remedies
  • insurers’ remedies for fraudulent claims: the Bill provides the insurer with clear, robust remedies when a policyholder submits a fraudulent claim

Sale and supply of goods and services: late payments

A study by Sage Pay has estimated that SMEs are owed £55bn in outstanding invoices at any time, with one in five owed over £30,000. This deprives the SMEs of much need cash flow, and de facto means that larger companies are being funded by SME suppliers in the same amount

For the larger businesses the sums have been simple—delaying payment for 90 days equates to 90 days’ free credit. A bank would not offer these terms, nor would other large suppliers who might insist on prompt cash without fear of damaging a relationship with an important customer.

The Small Business and Enterprise and Employment Bill aims to prevent larger companies bullying SMEs (companies with a turnover of under £25m). It seeks to impose an obligation on large companies to report on their payment practices. This obligation will apply to contracts for goods, services and intellectual property whenever these are supplied by an SME.

The detail of the reporting obligation and how it will work in practice will depend on regulations issued by the Secretary of State.

 

So, that's it for now. To receive all of the developments highlighted in our monthly round-up for free along with other exclusive content courtesy of our new Comet newsletter feel free to enter your name and email address in the box on the right hand side of this page. In the meantime if you have any thoughts on the above developments, do let us know below.

 

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