Brexit and product liability law – What online retailers need to know

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For decades, many areas of UK law have been obliged to comply with European

 regulations. In a matter of weeks, this obligation ends. With the UK’s exit from the EU set to complete on 31 December 2020, a large body of new or replacement legislation will come into force, as Chris Salmon, Co-founder of Quittance Legal Services explains.

Thanks for joining us on The Scale Up Chris, it’s good to have you. We’re all trying to make sense of the Brexit minefield and second-guessing the changes that may impact businesses. Can you shed some light on what online retailers need to be preparing for?

Much of the initial legislation concerns the UK’s new regulatory relationship with the EU, with trade being a key focus. Every online retailer will be affected by the imminent changes, so they should take steps to ensure their business complies with the new regime.

Changes to product liability law will particularly impact online retailers importing from the EU, but every UK eCommerce business should consider how their business is affected by new rules concerning product safety and recalls.

Pre-Brexit, a retailer’s legal duty to customers was defined by two key pieces of legislation; the Consumer Protection Act 1987, and the General Product Safety Regulations 2005. The common law principle of negligence is an additional source of product liability law. These laws ensured that customers who are injured by a defective product have a route to seek compensation.

The key pieces of product safety law apply to all retailers, from international megacorps like Amazon, to sellers on Etsy and first-time dropshippers.

So what specific amendments, if any, will be made to regulations?

The Consumer Protection Act 1987 (CPA) implemented an EU directive that introduced the principle of strict liability to defective product injury claims. This strict liability means that if someone is hurt by a defective product, they can claim compensation without having to prove the manufacturer or supplier was negligent.

The CPA imposes liability on any business importing into the EU. An injured person can therefore seek damages from the importer, rather than trying to take legal action against a manufacturer outside the EU, which could be a costly and difficult process.

If you are importing products from outside the EU for sale to UK consumers, the CPA applies to your business. B2B sales are not generally covered by the CPA.

Then there’s the General Product Safety Regulations 2005 (GPSR). The GPSR requires that all products sold in the UK are safe to use. “Safe to use” is broadly defined, and will depend on the nature of the product. In most cases, the product must be safe not only for its intended use but also for whatever it could be foreseeably used for.

To comply with GPSR, you must take reasonable steps to ensure the products you sell are safe to use.

What is considered “reasonable” will depend on the product and the level of risk.

Are there any products this wouldn’t apply to?

Products that are unlikely to cause serious harm, such as birthday cards, will require a lower standard of due diligence. That said, there are hazards associated with even seemingly low-risk products, such as clothing – Is it made of flammable material? Are the packing materials non-toxic and child-safe?

It is a criminal offence to breach the GPSR safety rules, and penalties can include statutory fines and imprisonment.

When will the changes come into effect?

The CPA and GPSR will both be amended when the Product Safety and Metrology Regulations 2019 come into force at the end of December 2020.

The new regulations are intended to fill in regulatory gaps in product safety rules once the UK leaves the EU. The regulations also mean a fundamental change for any online retailer that imports products from the EU.

From January, the CPA strict liability rules will apply to anyone importing into the UK from the EU. Retailers will need to make sure that the products they import are safe to use, and they will not be able to rely on an EU supplier’s safety checks.

Importers must display their name and address on products supplied to the UK market.

The GPSR is also being amended in line with the CPA changes, so GPSR safety rules apply to any business importing into the UK.

Under the revised GPSR rules, what processes should retailers have in place?

  • Retailers should be notified of recall notices from their non-UK distributors and manufacturers
  • They should conduct safety testing (where it is reasonable to do so)
  • They should notify consumers and UK retailers and distributors of product risks and defects

Would it be fair to say we’ll see an increase in liability claims post-Brexit?

That’s right. The impending changes represent a fundamental shift in who can be held liable for injuries or property damage caused by a defective product. Before January 2021, strict liability for damage would apply to only the EU-based manufacturer or importer into the EU. Importers into the UK from the EU and UK distributors of EU products were not liable.

From January, many more UK-based businesses will be liable for defective products imported from abroad.

You should check with your product liability insurance provider that your current policy is fit for purpose, and if not, amend it.

Premiums may increase as a result of this increased exposure to liability, and new policies may require retailers and importers to take additional steps to assess the safety of products.

Defective product injury claims can be costly for a business, in terms of money, time and stress. Injuries that leave permanent, life-altering symptoms can result in damages of over £100,000, and some claims can take years to resolve. The Quittance compensation calculator gives an idea of the level of general damages a potential claimant could receive for a given injury.

When considering the right level of cover, you should assess the likely risks created by the products you sell, and who could also be affected (such as a buyer’s children, other family, or members of the public).

How will product recalls be affected by Brexit?

Under the old rules, EU-wide product recalls were handled by the Rapid Alert System (Rapex). Rapex allowed countries to share defective product information, and to recall unsafe products.

Under the new rules, the UK will no longer be directly involved in Rapex information-sharing and recalls. UK-based importers and distributors will no longer need to automatically adhere to Rapex recalls and alerts. A product recalled in the EU can still be legally sold in the UK.

The UK will be setting up a Rapex-like alert mechanism, although the details on this new system are incomplete. Even once a Rapex replacement exists, UK businesses should still consider following EU safety notices, as information sharing may be delayed as the new process rolls out.

For those online brands who sell to the EU, are there any specific checks they should be carrying out?

UK-based online retailers will also have to ensure they continue to comply with EU regulations regarding product safety if they plan to sell to EU customers.

Although EU and UK regulations regarding product safety are likely to remain consistent in most cases, there is no guarantee this will continue indefinitely. If you plan to sell in both UK and EU markets, you will need to understand whether your business is considered an “importer” under EU law, and what additional product liability exposure this creates.

When selling to the EU, you must also check:

  • whether the products you sell are legal in the EU
  • whether there are restrictions on sales (e.g. age limits)
  • whether additional product safety information must be included when you market your products.

On product information and labelling, will there be changes to CE marking?

Products sold to consumers in the EU must have a “CE mark”. The CE mark indicates the product complies with applicable health and safety rules. Although CE marks remain valid for products sold in the UK during the transition period, the CE mark will soon be replaced by the “UKCA mark”.

The UKCA mark, or UK Conformity Assessed mark, will replace the CE mark for applicable products sold in the UK. Many lower-risk products still only require “self-certification”, but this may change as the details of the UK-EU trade agreement crystalise and the UK’s safety standards regime develops after Brexit.

How can eCommerce businesses protect themselves and their customers in light of all of the possible outcomes?

The Brexit-induced changes are significant, and all online retailers based in the UK should consider where and how they source their products. Even if everything your business sells is manufactured in the UK, now would be a good time to reassess your protocols for testing and check the safety of the products you sell, to ensure you comply with the new regulations.

You should also consider labelling and marketing materials to ensure product descriptions are accurate and include suitable warnings and safety notices.

Finally, reviewing your product liability insurance policy will also help if the worst should happen and a defective product you sold causes injury. Insurance will protect your business from the financial consequences of an injury claim and, crucially, will ensure that an injured customer can recover the full compensation they need to fund their recovery.