Monthly commercial law update: Top 5 developments in June

Too hot?

Too tired to trawl through last month's legal developments?

Fortunately at Lexis House we have air conditioning and are fizzing with energy. So here are this month’s 'top 5' developments, as extracted from our Lexis®PSL Commercial monthly round-up.

Consumer protection: CMA acts to maintain trust in online reviews and endorsements

The CMA has published a report following its call for information on online reviews and endorsements. The CMA estimates that more than half of UK adults (54%) use online reviews, and that 6% use blogs or video blogs (vlogs) before making purchases.

Most buyers who used reviews and endorsements found that the product or service they bought matched up to their expectations. However, the CMA has also heard about instances of potentially misleading practices, eg:

  • fake reviews being posted onto review sites
  • negative reviews not being published, and
  • businesses paying for endorsements in blogs and other online articles without the payment being made clear to consumers.

In response, the CMA has opened an investigation using its consumer enforcement powers into a number of organisations in connection with the potential non-disclosure of paid endorsements. The CMA is not naming the parties directly involved in its investigation at this early stage of the case.

Other concerns that have been raised with the CMA are being assessed to determine whether enforcement action is warranted.

The CMA has also produced information for businesses explaining what they need to do to help them comply with the law. The Consumer Protection from Unfair Trading Regulations 2008 contain a general prohibition on unfair commercial practices, in particular, misleading and aggressive practices. It is a banned practice to:

  • use editorial content in the media to promote a product where a trader has paid for the promotion without making that clear in the content or by images or sounds clearly identifiable by the consumer, and
  • falsely claim or create the impression that a trader is not acting for purposes relating to their trade, business or profession, or to falsely represent oneself as a consumer.

Contracts: dealing on another's written standard terms

The High Court in University of Wales v London College of Business, has considered when parties may be said to be dealing on the 'written standard terms' of one party under section 3(1) of the Unfair Contracts Terms Act 1977 (UCTA 1977), before considering whether the inclusion in those terms of provisions as to no set-off from payment obligations and limitations on liability for loss of profits were reasonable under UCTA 1977, s 11 and Sch 2.

The judgment highlights that whether or not parties are said to be dealing on the 'written standard terms' of one of them is a question of fact and degree. The fact that the parties may have negotiated does not of itself prevent the concluded agreement being on one party's written standard terms and thus engaging UCTA 1977, s 3.

It also provides a practical illustration as to how UCTA 1977 reasonableness is applied for provisions as to no set-off from payment obligations and limitations on liability for loss of profits (together with a summary of relevant normal principles of contractual construction).

The judgment also provides an example of where a failure to pay invoices on time is sufficient to justify termination of a contract where the contract so provides.

Data protection: new general approach to the Data Protection Regulation

A general approach has been agreed on the European Commission proposal on the proposed Data Protection Regulation (the Regulation).

The agreement includes various points. Firstly, the draft Regulation will establish a single set of rules on data protection across the EU. Unnecessary administrative requirements, such as notification requirements for companies, will be removed.

Further, the right to be forgotten will be reinforced.

Individuals will be better informed if their data is hacked.

A right to data portability will make it easier for users to transfer personal data between service providers.

Companies based outside of Europe will have to apply the same rules when offering services in the EU.

The Regulation also provides for independent national data protection authorities—those authorities will be strengthened to effectively enforce the rules and will be empowered to fine companies that break EU data protection rules.

The Regulation provides for penalties of up to €1 million or up to 2% of the global annual turnover of a company.

The Regulation will establish a 'one-stop shop' for businesses and citizens—companies will only have to deal with one single supervisory authority. Individuals will only have to deal with their home national data protection authority, in their own language, even if their personal data is processed outside their home country.

The first Trilogue meeting between the European Commission, the European Parliament and the European Council took place on June 24. The three institutions intend to agree on a roadmap towards the finalisation of the new Regulation in 2015.

Equality and human rights: ECtHR rules on defamatory comments

We have previously reported that in the case of Delfi AS v Estonia, the European Court of Human Rights (ECtHR) had rejected Estonian Internet news portal Delfi's claim that its rights to freedom of expression were breached by Estonian court rulings that it was liable for its readers' defamatory comments.

The case concerned Delfi's liability for offensive comments that were posted by readers below one of its online news articles.

The ECtHR held that the finding of liability by the Estonian courts was a justified and proportionate restriction on the portal's right to freedom of expression. In particular, because the comments were highly offensive, the portal failed to prevent them from becoming public, profited from their existence, but allowed their authors to remain anonymous and the fine imposed by the Estonian courts was not excessive.

Delfi appealed to the Grand Chamber, which has (by a majority of 15 to 2) upheld the chamber judgment. It effectively took the view that Delfi could have done more, in terms of filtering and moderating, where various clues to the unpleasant nature of the comments existed.

The ECtHR has published a Q&A document on the judgment.

The decision has raised questions about how far service providers need to go to prevent defamatory comments.

Consumer protection: CJEU clarifies the rules on consumer protection on the sale of consumer goods and associated guarantees

The CJEU has confirmed in Faber v Autobedrijf Hazet Ochten BV that any lack of conformity which becomes apparent within six months of the delivery of goods is to be presumed to have existed at the time of delivery. However, to benefit from that relaxation, the consumer must provide evidence of certain facts:

  • firstly, the consumer must allege and provide evidence that the goods sold are not in conformity with the contract in so far as, for example, they do not have the qualities agreed on or are not fit for the purpose which that type of goods is normally expected to have. The consumer is required to prove only that the lack of conformity exists. They are not required to prove the cause of that lack of conformity or to establish that its origin is attributable to the seller.
  • secondly, the consumer must prove that the lack of conformity in question became physically apparent, within six months of delivery of the goods.

Once they have established those facts, the consumer is relieved of the obligation of establishing that the lack of conformity existed at the time of delivery of the goods. The occurrence of that lack of conformity within the short period of six months makes it possible to assume that, although it became apparent only after the delivery of the goods, it already existed 'in embryonic form' in those goods at the time of delivery.

It is therefore for the professional seller to provide, as the case may be, evidence that the lack of conformity did not exist at the time of delivery of the goods, by establishing that the cause or origin of that lack of conformity is to be found in an act or omission which took place after that delivery.

So that's it for this month but don't forget, by entering your name and email address in the box on the right hand side of this page you will receive our larger monthly round-up PDF for free along with other exclusive content courtesy of our new Comet newsletter.

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