Brexit is affecting almost every aspect of life in the UK. As the UK’s post-Brexit plans and regulations are refined, many less-obvious changes, like product regulations, are slipping under the mainstream media’s radar.
Product safety law should be one area of concern for many online retailers that import and sell products to and from the European Union. Once the formal transition period ends in December 2020, many UK businesses will find themselves newly exposed to liability for defective products they sell or import.
How do product liability regulations affect my ecommerce business?
The current rules on product safety are defined by two main pieces of legislation, Consumer Protection Act 1987 (CPA) and the General Product Safety Regulations 2005 (GPSR).
The CPA and GPSR impose a range of duties on manufacturers, importers, distributors and retailers regarding product safety:
- Products must be safe to use, and must be safe more generally, with regard to any ‘reasonably foreseeable’ situation
- Warnings on potentially hazardous products must be clear and comprehensive
- Products must conform to applicable safety standards and regulations
If a member of the public is injured or their property is damaged by a defective product, the legislation also imposes strict liability on the manufacturer or importer of that product into the EU. Strict liability makes it easier for consumers to make a claim against an importer or manufacturer, even if the company was unaware of the defect and they carried out appropriate safety checks.
Retailers that sell EU products within the EU are not currently affected by this strict liability (unless the products are ‘own brand’). However, post-Brexit regulations are about to significantly change which businesses in the supply chain are exposed to defective product claims.
How are the product liability rules changing post-Brexit?
The impact of the biggest change may not be obvious, but it is fundamental. With the new border between the UK and the European Union, strict liability for defective products now applies to businesses importing and selling across that border.
Chris Salmon, Director of Quittance said, ”Before Brexit, if you imported from an EU-based supplier or manufacturer into the UK, you would not be affected by the strict liability rules. You still could be sued for selling a defective product, but the injured person would have to prove you were negligent.”
“Under the changes, importing into the UK from the EU means that an injured claimant could take legal action against your business without needing to prove negligence. The same may be true if you continue to sell from the UK to EU customers.”
The increased exposure to product liability could make it easier for an injured claimant to win a defective product claim against your business. Many online retailers will need to update their product liability insurance to ensure their business remains protected from the financial impact of such a claim.
When are the rules changing?
The new rules are coming into force on 1st January 2021.
However, there will be a transitional period to accommodate the switchover from the EU’s CE safety mark to the UK’s new safety mark. The details of the UK’s new product recall mechanism are also still being finalised, so retailers should consider following the guidance of EU bodies regarding product recalls until the UK system is fully operational.
Although the practical details of what is considered a ‘safe’ product will not change on day one, retailers should expect the UK’s rules to diverge from the EU’s in the future.
How can I protect my retail business?
Now is a very good time to audit your exposure to product liability issues. One way to approach this audit is to break down your exposure into three areas:
- Auditing suppliers
- Auditing the products you sell
- Auditing your business’s compliance more generally
How do I audit my suppliers?
When auditing your suppliers, the key points to consider include:
- Are they a legitimate business?
- Where are they located?
- Where are their products made or imported from?
Carry out a credit check.
Under the product safety regulations, you are not expected to carry out a forensic examination of every aspect of your suppliers’ businesses. You just need to carry out “reasonable” checks. This may include whether they are certified by applicable industry bodies or regulators.
What is considered “reasonable” will depend on the likely consequences of a product defect. Pharmaceuticals are likely to be more harmful than homewares, and so an online pharmacy is held to stricter standards than a site selling soft furnishings.
Credit checks are commonly used by suppliers to assess the stability of a retailer. A credit check is also a useful tool for retailers to assess suppliers. A credit check alone won’t tell you whether a supplier’s products are safe, but it will give you valuable intel about the history of the company and its directors. Is the credit check consistent with what you’ve been told about the company? Where is the company formally registered?
Where are your suppliers based?
Once the law changes in January 2021, your exposure to liability may be affected by the location of your suppliers.
If your suppliers are based in the EU, and you sell their products to the UK market, you will be caught by the changes and will now be held liable for defective products. Likewise, if your suppliers are UK-based and you sell to both UK and EU customers, you would now be liable under EU regulations.
In either case, you should carefully consider your liability for defective products and update your business insurance to account for any increased exposure.
If you do import or sell products across the new UK-EU border, you will also need to ensure you stay up to date about any regulatory changes in both jurisdictions.
Auditing the safety of your products.
The level of detail you will need to apply to a product safety audit will depend on the level of likely harm.
Unless specific regulations or standards say otherwise, an inherently less-dangerous product, like a pillow case or book, will require fewer checks than a power tool or chemical cleaning product.
As a starting point, you could consider the following:
- Who could foreseeably access the product, and what would happen if they did? – For example, domestic bleach should have a child-proof cap because it is foreseeable that a child could get at the product left in a cupboard, and there is a risk of serious harm if they opened the bottle.
- Is the product safe and fit for its intended use? – For example, is a thermometer sold for baby baths actually waterproof? Is a hairdryer’s voltage compatible with the target market?
- Are safety warnings and hazards clearly marked, on the packaging, in the instructions and on the product itself? For example, does a car seat have a maximum height and weight printed on it?
You should consider contacting your local trading standards office, or a suitable industry body, for specific guidance regarding product safety.
Auditing your business’s product safety duties.
Aside from auditing your suppliers and products, you should also assess your business in more general safety terms:
- Do you have suitable product recall processes? Are you subscribed to suitable recall notices, and do you have sufficient contact information for customers to pass on recall information? Is your system compliant with GDPR data protection rules?
- Does your website comply with specific sales restrictions, e.g. age restrictions for knives or alcohol? UK and EU rules will continue to diverge in future – does your website identify a customer’s location and amend legal restrictions appropriately?
- Are you compliant with sector-specific rules? Do you need a specific licence or certification to sell certain products?
- Is your business liability insurance still fit for purpose? You should check what is covered by your current policy, and may need to upgrade your cover if your liability has increased under the post-Brexit changes.
As above, organisations like Trading Standards will be able to provide you with more specific advice regarding product safety compliance.
Staying up to date.
The rules are still in flux. Although we know what the most impactful changes will be in January 2021, there are still unknowns. In particular, the new regime for UK-specific product safety recalls is yet to be announced.
More generally, now that the UK is unfettered from EU regulations, many businesses will need to stay up to date regarding two sets of safety rules. A trade agreement may restrict major differences between the UK and EU’s safety rules, but there is still the potential for retailers to be caught out.
To give yourself the best chance of protecting your business and your customers from avoidable harm, you should check product safety rules on a regular basis, and plan for additional audits as required. If you regularly change suppliers or product lines, or sell more-hazardous products, you may need more regular checks.