Monthly commercial law update: Top 5 developments in November

Monthly commercial law update: Top 5 developments in November

So December is upon us (already?) and what's in store?

Will it be like December 1890 where no sunshine—at all— was recorded in London for the entire month?

I truly hope not.

What is certain is that the office party season is upon us; we'll soon have mince-pie fatigue and by the month's end we'll be champing at the bit to have a few days of downtime.

So before you reach for that second mince-pie and throw yourself into December, why not check out November's commercial law update. It contains details of some of last month's developments, many of which will be playing out with a vengeance  in 2015...

Consumer protection: BIS consults on guidance for Consumer Rights Bill

The Department for Business, Innovation and Skills (BIS) is consulting on guidance on the Consumer Rights Bill, which is expected to enter force on 1 October 2015.

The government says that it is committed to having guidance in place well in advance of that date, to ensure businesses, consumers and enforcers are clear as to what the law means, that they know what is changing and what they need to do.

BIS is testing three pieces of guidance so that it can incorporate comments before it publishes final guidance. The guidance documents are based on the current form of the Bill, which is still completing its passage through parliament, so may change when the final form of the Bill is known. BIS has published draft guidance on unfair contract terms, investigatory powers and guidance for law enforcers on enhanced consumer measures. The consultation ends on 7 December, with results expected on 31 January 2015.

Supply of services: VAT mini one-stop shopping

With effect from 1 January 2015, new place of supply rules for e-services (and of telecommunications and broadcasting services) within the EU come into effect.

From that date, the place of supply of these services will change from the place where the supplier belongs to the place where the customer belongs. This means that an EU business providing any of these services to a private or non-business customer within the EU will be required to account for VAT in the customer's EU country. For example, a Dutch business supplying music downloads to private customers in the UK should currently charge Dutch VAT on those supplies. From 1 January 2015, it would instead need to charge UK VAT.

This will be an additional administrative task for EU businesses, which will have to take account of the VAT rates in each member state where they supply customers with digital services.

To avoid the need for EU businesses to register for VAT in every country in which they have private customers, EU businesses will be allowed to register for the special one stop shop scheme that is currently only available to non-EU businesses. HMRC is referring to this extension of the scheme as a 'mini one stop shop' or MOSS. Registration for the scheme opened on 20 October 2014.

Advertising and marketing: Court of Appeal rules on adwords in Interflora v M&S case

The Court of Appeal has remitted the well-known case of Interflora v Marks and Spencer [2014] All ER (D) 55 (Nov) [2014] EWCA Civ 1403 case back to the High Court for retrial.

The activities of the defendant, Marks and Spencer plc, which gave rise to the proceedings concerned the display on the Internet of their advertisements in response to the entry into the Google search engine by Internet users of search terms consisting of or comprising the word 'interflora' or minor variants of it.

The judge gave judgment for the claimants on their claim for infringement of their national and community registered trade marks for the word 'interflora'. The Court of Appeal allowed the defendant's appeal, holding, among other things, that the judge had wrongly held that the onus lay on the third-party advertiser to show that the use of the sign in context was sufficiently clear.

In addition, the Court of Appeal did not approve of the emphasis that the judge put on 'initial interest confusion'. The Court of Appeal also expressed considerable reservations about the evidence which was accepted at trial as to the crucial issue of 'confusion'.

Consequently, the court considered that the judgment could not stand. However, it decided that it could not decide on the issue of infringement itself, as it had not viewed all the documents and did not hear the oral evidence.

Competition law: Market investigation into banking launched

The Competition and Markets Authority (CMA) has launched an in-depth market investigation into the personal current account and SME retail banking sectors. This confirms the CMA's provisional decision of 18 July 2014. The investigation will be carried out by a Market Reference Group drawn from the CMA's independent members.

The decision follows a consultation to which most respondents agreed that an investigation should be launched. Having considered the responses, the CMA continues to have concerns about the effectiveness of competition in these sectors and has decided to make a market investigation reference.

The CMA's concerns include:

  • low levels of customers shopping around and switching;
  • limited transparency and difficulties for customers in making comparisons between banks, particularly for complex overdraft charges on personal current accounts;
  • continuing barriers to entry and expansion into the sector,
  • limiting the ability of smaller and newer providers to develop their businesses; and
  • very little movement over time in the market shares of the four largest banks which provide over three-quarters of personal and business current accounts.

The CMA has also decided to review the competition undertakings put in place following the Competition Commission's report in 2002 into small and medium enterprise banking to see if they should be varied or terminated. Under section 131 of the Enterprise Act 2002, the CMA may make a market investigation reference to its Chair for the constitution of a Market Reference Group where it has reasonable grounds for suspecting that any feature, or combination of features, of a market in the UK for goods or services, prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the UK or a part of the UK.

Contracts: Keep your friends close and your enemies closer

The claimant (licensor) and the respondent (licensee) in 118 Data Resource Ltd v IDS Data Services [2014] EWHC 3629, [2014] All ER (D) 57 (Nov) operated rival businesses compiling and exploiting databases of UK business contact details.

Despite being competitors, in April 2009 the licensor licensed use of its database to the licensee. The licensor came to suspect that the licensee had breached the terms of the licence agreement. It sought summary judgment for orders based on specific performance to inspect the licensee's premises and records.

The High Court held that the orders sought by the licensor were not justified by the licence agreement.

As Patrick Bourke, member of the Lexis®PSL Commercial team states:

As this case illustrates, the owner, the party with an interest in ensuring that an asset is being used properly, should seek comprehensive rights to inspect the asset and its use. These rights must be tailored to the nature of the asset and they ways in which it can be used and misused. The relevant provision must address what steps the owner may take to safeguard the asset. The location of the asset and the rights of third parties should be also be considered. As is so often the case, a vague generic provision will not do. Even where a court recognises a limited right to fill gaps left by the parties, this case signals to drafters that rights of inspection are terms which the parties must define for themselves. They must not rely on sympathetic judges. These are matters that can go to the heart of the bargain

He goes on to say:

As the judge reflected in his opening, it may be surprising to some that the licensor chose to deal with the licensee at all. Sometimes the only real protection is contracting with the right person so breaches do not arise in the first place. Some parties are not to be trusted. However, breaches are not solely committed by competitors. We must all assume that a counter-party is capable of breaking their promises. Contracts usually involve competing interests in one form or another. Putting the merits of licensing the database to a rival aside, the licensor should have been put on alert that the database was open to abuse  and that the licensee would be secretive as to its use at the very least. This was not reflected in the licensor’s inadequate rights of inspection.

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