UK: COT's Top Four Commercial Issues - January 2018

Happy 2018 to you all.

Our first update of the year sees certain regulators taking an active role in managing markets and trading practices, with a useful reminder of a rather large change in law fast approaching.

Grab yourself a hot beverage and enjoy.

FCA encouraging a switch

The Financial Conduct Authority ("FCA") has published new rules to require providers of personal and business current accounts to make information about their services available to customers. The new rules seek to promote competition by enabling customers to make meaningful comparisons between service providers and to choose a bank most suited to their needs. The hope is that this would incentivise banks to improve their service offering.

Under the new rules, firms will have to publish information related to the following aspects of service:

• clear information about the account opening process and information about how long it takes to open an account and gain access to specified services;
• time taken to replace a lost, stolen or stopped debit card;
• time taken to organise third-party access to an account under power of attorney;
• identifying how and when various services can be accessed and whether 24-hour help is available for certain matters; and
• information about the number of major operational matters that firms have reported to the FCA.

Current account providers will have to publish information on when and how services and helplines are available and numbers of operational and security incidents from 15 August 2018.

The rest of the information, including details on how long it takes to open an account and replace a debit card, has to be published from February 2019.

New rules of dating

The Competition and Markets Authority (the "CMA") has opened an investigation into suspected breaches of consumer protection law by an online dating operator. The CMA is concerned about potential unfair contract terms and unfair commercial practices including, amongst other things, cancellation and variation of contract terms. While the CMA has not reached a final view on its investigation, a brief recap of the CMA guidance in relation to variation and cancellation is helpful to understand the basis of the CMA's investigation and whether the terms are likely to fall foul of the Consumer Protection from Unfair Trading Regulations 2008, the Consumer Contract Regulations 2013, and the Consumer Rights Act 2015.

The CMA considers that terms are always likely to be considered unfair if they seek to exclude the consumer's rights under contract law to the advantage of the trader. A basic right of this kind is to receive, in many cases, a refund of prepayments made under a contract which does not go ahead, or which ends before any significant benefit is enjoyed by the consumer. A term which makes any substantial prepayment entirely non-refundable, whatever the circumstances, potentially allows the trader to make an unjustified windfall gain. Therefore any terms on online dating sites which state that memberships, which have been paid fully upfront and which are subsequently cancelled by consumers, are completely non-refundable may be found to be unfair.

The CMA guidance states that a right for one party to alter the terms of the contract after it has been agreed, regardless of the consent of the other party is under strong suspicion of unfairness. A right of variation is likely to be at risk of being considered unfair depending on:

• the breadth: the extent of the changes that it allows, and particularly changes that are exclusively in the interest of the trader;
• its transparency: how far it can result in changes that are unexpected to and unforeseeable by the consumer; and
• the vulnerability of the consumer: in particular whether consumers can realistically escape the impact of the changes by cancelling the contract.

If a term could be used to force the customer to accept unanticipated costs or penalties, new requirements, or reduced benefits, it is likely to be considered to be unfair. A variation clause however is more likely to be found fair if it is narrow in effect, so that it cannot be used as the discretion of the trader to change the balance of advantage under the contract to the consumer's detriment. Therefore any terms on online dating sites which reserve the right to modify the agreement at any time and such modifications are exclusively in the interest of the dating company may be found to be unfair.

The CMA is expected to provide an update in early 2018.

Geo-blocking and discrimination

Online sellers to customers across Europe should take note that a new European Regulation is in the pipeline that will ban within the internal market the unjustified blocking of consumers' and companies' access to their websites based on the consumers' location. This so called "geo-blocking" is considered to be a discriminatory practice that prevents online customers from accessing and purchasing products or services from a website based in another member state. Limiting it is intended to remove barriers to e-commerce within the internal market and allow wider shopping around for better deals from other countries and to prevent discrimination for customers relating to their nationality.

According to the Council of the European Union, its agreement last month with the European Parliament means that geo-blocking will be limited in order to allow for access to prices, sales or payment conditions when buying products and services in another EU country. In relation to the purchases of goods and services online, traders will not be allowed to block or limit customers' access by reason of their nationality. Sellers must also give a clear explanation if customers are blocked or redirected to a different website.

There will be some limits to the scope of the new regulation. Certain services will be excluded from its scope – e.g. where the main feature is the selling of access to copyright protected content in an intangible form, such as music streaming services, e-books, online games and software. However, this may change in future, subject to a review by the European Commission. Other services such as financial, audio-visual, transport, healthcare and social services will also be excluded.

It is worth noting that price differentiation will not be prohibited, so traders will still be free to offer different prices, and to target certain groups of customers in specific territories. Moreover, traders will not be obliged to deliver goods to customers to member states where they do not already offer delivery.

The draft regulation is intended to be endorsed in 2018 and will be applicable nine months after its publication in the EU Official Journal following its official adoption. It remains to be seen what position the UK will take on adopting this and other measures that are introduced after its decision to leave the EU, but note that the legislation may well be passed before the UK has officially (Br)exited.

Touting for tickets

Last month there was good news for anyone who has experienced the emotional rollercoaster of trying to get tickets for an unmissable gig, only to find out that tickets became sold out in 15 minutes. The CMA announced that it will take enforcement action against secondary ticketing websites suspected of breaching consumer protection law.

Following a compliance review of secondary ticketing websites in June 2016, the CMA launched its investigation into suspected breaches of consumer protection law in the online secondary tickets market last December. Since then, the CMA reports that some sites have already made changes to its selling practices. However, the CMA wants to ensure that all sites comply with the law and that customers are better informed about the tickets they are buying - a welcome move for anyone concerned that they might turn up to a concert only to find someone else sat in their seat. Although the CMA has said that it has not yet reached a final view on whether the practices it is concerned about breach consumer protection law, the CMA has reported that the following steps should be put in place to reduce the likelihood of the CMA prioritising enforcement action:

• it should be made clear if there are restrictions on using a resold ticket that could result in buyers being denied access to an event;
• arrangements for consumers to exchange, return or resell tickets should be put in place to allow original ticket buyers to recoup or mitigate any financial loss if they are unable to use the ticket;
• full refunds should be issued to any buyer whose ticket is made void;
• people should be informed about who they are buying the ticket from, e.g. if they are buying from a business or an event organiser and can therefore benefit from their legal rights; and
• buyers need to be told where exactly in a venue they will be seated.

The CMA has also broadened the scope of its original investigation to include the following practices, which it has learnt about in the course of its investigation:

• pressure selling, and whether claims that tickets are in high demand or otherwise of limited availability create a misleading impression or encourage customers to rush into making a buying decision;
• difficulties for customers in getting their money back under a website's guarantee;
• speculative selling, where business advertise tickets for sale which they do not yet own and therefore may not be able to supply; and
• concerns about whether the organisers of some sporting events have sold tickets as a primary seller directly through a secondary ticket website, without making this clear to customers.

The CMA has said that it will gather and assess evidence on these additional issues before deciding on whether further enforcement action is required. The CMA will also be working with event organisers to help them avoid being challenged for using unfair terms to restrict the resale of their tickets.

Handy hints - GDPR ready

Without wanting to step on our data protection colleagues' toes, this is a careful reminder that the new General Data Protection Regulations will be coming into force on 25 May 2018. While some clients are already conducting audits of their agreements, it is also worth ensuring that any new contracts you are entering into contain the correct data provisions to comply with the new requirements. In many cases this is likely to be more nuanced than simply updating the definition of "Data Protection Legislation" or relying on a sweeper clause e.g. "as such statutes are amended, updated or replaced from time to time".

As always the Stephenson Harwood commercial team will be happy to help.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.