What are the 8 key legal changes ahead for retailers in 2023?

RPC's Retail Compass explores impact of regulatory reforms, rising ESG concerns and fast-evolving AI technology in difficult economic conditions.

Regulatory reforms post-Brexit, greater emphasis on green credentials and the fast-evolving landscape of Artificial Intelligence (AI) technology are just some of the key legal changes facing retailers and consumer brands in 2023 against a challenging economic backdrop, reveals the latest edition of Retail Compass from international law firm RPC.

The report draws on the market insights of experienced RPC lawyers with extensive knowledge of the international retail and consumer sector and considers what steps industry leaders might consider in light of legal, regulatory and policy changes ahead.

Highlights include:

1. Brexit Bonfire: Will consumer and employee rights change under the Retained EU Law (Revocation and Reform) Bill?

• The sunset clause in the Bill will enable Retained EU Law in the UK to be repealed automatically on 31 December 2023. It will impact at least 2,400 regulations across 21 Government departments and could affect how UK businesses operate in the retail sector.
• Among the legislation affected are the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCRs), which significantly contribute to the UK’s consumer protection framework. It is currently unclear as to whether the Government will restate these rights through domestic law.
• Employment laws and rights could also be affected, including secondary legislation adopted from the EU, such as the Working Time Regulations, the Transfer of Undertakings (Protection of Employment) Regulations and Agency Workers Regulations.

2. Manufacturers beware: AI and product liability

• In 2023 the EU will introduce new directives in relation to product liability and AI.
• If adopted in its current form, the Product Liability Directive (PLD) will replace the term "producer" with "manufacturer" to include providers of software, digital services and online marketplaces which could increase the number of retailers having to comply. It will also make manufacturers liable for defects caused as a result of changes made to products already on the market, such as software updates or machine learning and it will introduce strict product liability claims for defective products that cause "loss or corruption of data".
• Meanwhile the directive on non-contractual civil liability rules to AI will make it easier to pursue claims in relation to a harmful AI system and could potentially increase the litigation risk for companies that design and/or deploy AI within their products.

3. Cheers! Deposit Return Scheme set to go live in Scotland

• Initially set to launch this summer but now delayed until March 2024, the Deposit Return will first launch in Scotland, with England, Wales and Northern Ireland following in 2025. The scheme is designed to reduce environmental pollution from drinks containers.
• Consumers pay a small deposit when buying a drink in a single-use container and will receive the deposit back when they return the empty bottle/can. Retailers and producers will be required to ensure that a deposit is paid on such containers.
• The scheme could have cost, production and labelling implications, and with the introduction of the scheme in Scotland before the rest of the UK, it could result in trade and competition issues as well.

4. Green goals: Sustainability reporting requirements

• The Corporate Sustainability Reporting Directive (CSRD) came into force on 5 January 2023. It will require certain EU and non-EU companies to report on a wide range of sustainability matters in line with detailed EU Sustainability Reporting Standards (ESRS). Those are currently being drafted and are expected to be finalised in June 2023.
• Under the CSRD, in-scope companies will need to report on a range of sustainability matters (such as climate change, pollution, waste and biodiversity loss), with these requirements being phased in from 1 January 2024.  
• This is part of a broader package of regulatory initiatives in the EU which will apply to certain companies operating in, or trading with, the EU. Even where businesses are not directly in-scope of the CSRD, there are significant benefits of tracking and reporting sustainability information.
• Retailers and consumer brands (particularly those in 'high impact' sectors such as food/beverages and textiles), will need to check whether the CSRD applies to them (or any of their subsidiaries) and review the draft ESRS standards now to prepare for compliance, as embedding the necessary processes may take time.

5. Cutlery cull: England to ban single use plastics 

• Single-use plastic plates, trays, bowls, cutlery, balloon sticks and certain types of polystyrene cups and food containers (including those made from bio-based, biodegradable, or compostable plastic) will be banned in England from October 2023. 
• A similar ban was put in place in Scotland in 2021 and comparable changes are due to come into effect in Wales in late 2023. 
• Selling single-use plastic products to individuals will be prohibited for all businesses including retailers, takeaways, food vendors and the hospitality industry. Those that do not comply may face civil sanctions such as financial penalties and stop notices.
• Businesses should encourage customers to utilise their own reusable items (such as coffee cups) and begin to explore alternative sustainable packaging.
• The Government has indicated other products may be covered by future legislation such as wet wipes, tobacco filters and sachets. 

6. Zero is hero: Mandatory requirements introduced for transition plans

• At COP26, the Government announced plans to make the UK the world’s first net zero aligned financial centre. To achieve this, listed companies and financial firms will be mandated to publish transition plans to net zero, which will be introduced by the end of this year.
• The transition plans will supplement existing climate-related financial disclosure requirements brought in three years ago.
• Transition plans will show investors how an organisation will reach net zero by 2050 across the organisation's operations and value chains. The HM Treasury set up the Transition Plan Taskforce (TPT) to make sure that these are the 'gold standard', leaving no room for greenwashing.

7. Clampdown on illegal dumping of "recyclable" waste

• From 2024, Extended Producer Responsibility (EPR) will be implemented to reduce hard-to-recycle packaging entering the market. All packaging must be labelled recycle/do not recycle as appropriate by 31 March 2026, a cross-party committee is demanding a blanket ban on plastic waste exports by 2027.
• The new legislation is being introduced in response to industry concerns that packaging certification is open to fraud in Packaging Export Recovery Notes (PERN) and Packaging Recovery Notes (PRN), credits purchased and submitted by companies to indicate compliance with The Producer Responsibility Obligations (Packaging Waste) Regulations 2007.
• Under the changes, producers will have to report on the amount/type of packaging placed on the market, report on packaging information and labelling and pay the costs of managing household packaging waste.

8. CMA power boost: Digital Markets, Competition and Consumers (DMCC) Bill

• Hot off the press, the Digital Markets, Competition and Consumers (DMCC) Bill is designed to promote growth in the UK economy by ensuring free competition among businesses. It will also strengthen the Competition and Market Authority's (CMA) powers to crack down on unfair practices.
• For example, it is proposed that the CMA can take action against using fake reviews, subscription traps and pressure selling. The regulatory body will also have the power to decide when consumer law has been broken, rather than have to take each case to court, and impose fines on businesses of up to 10% of global turnover.
• The Bill also proposes greater powers for the CMA to identify and stop unlawful anticompetitive conduct more quickly and updated merger and fine thresholds to make it easier for the body to take action against mergers which harm UK consumers and businesses.

Jeremy Drew, Partner and Co-head of Retail and Consumer at RPC, says: “Retailers and consumer brands are facing the implementation of large changes and increased regulatory scrutiny at a time when many are concerned about the current economic conditions. Being forewarned about the changes ahead will mean they are better prepared to navigate potential turbulence."

Partner Karen Hendy, Co-head of Retail and Consumer, adds: "Retailers and consumer brands need to keep one step ahead as legislation continues to evolve amid rapidly-changing technology. We are entering a new world that will bring both opportunities and challenges."

Ciara Cullen, Partner, and Head of Food and Drink, said: "Environmental sustainability will continue to be a hot topic in 2023 with the ban on single use plastics, extended producer responsibilities and Deposit Return Schemes on the horizon. Coupled with the introduction of the Corporate Sustainability Reporting Directive and a whole raft of consumer protection legislation reforms including proposed amendments to the EU's Unfair Commercial Practices Directive, a new EU Green Claims Directive, and the Digital Markets, Competition and Consumer Bill, retail and consumer brands are being asked to place far more emphasis on their environmental responsibilities while avoiding the risks associated with "greenwashing"."

For more insights and to read the full report click here.