Welcome to the June 2020 edition of our Retail & Consumer monthly news round-up.
This newsletter focuses on key news and updates for retail and consumer-facing businesses around the world, including our latest briefings on the COVID-19 pandemic and its impact on the sector.
You can find all our COVID-19-related updates for retail and consumer businesses on our dedicated In Focus page here.
Please get in touch, or visit our webpage for more information about Bird & Bird's Retail & Consumer Group.
In this newsletter:
UK Government guidance urges contractual parties to act responsibly and fairly in the national interest to support the response to COVID-19
On 7 May 2020 the UK Government published a note setting out guidance and recommendations urging parties who have active contractual arrangements which are materially affected by COVID-19 to act responsibly and fairly in performing and enforcing their contracts. For many businesses in the Retail & Consumer sector the question of what is the post-COVID ‘new normal’ and how they get there will depend, to some extent, on how existing contractual arrangements play out. The guidance could prove valuable in finding a commercial, rather than legal path, out of the current crisis and into the future.
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Crisis driven changes to trading activity
Businesses grappling with the broad range issues brought about by the pandemic will be conserving cash wherever possible. In the UK, they may have taken advantage of the Job Retention Scheme to continue paying staff or applied for one of the COVID-19 support loans or grants offered by the government. They may also have taken advantage of VAT deferral arrangements. However, businesses will also want to maximise the benefit of any trading losses they realise to mitigate their corporation tax liabilities.
Many businesses have diversified in order to stay afloat. The media is full of stories of the local pub which has become a grocery delivery service, the brewery making hand sanitiser and the clothes manufacturer making PPE. In addition, there are tales of restaurants crowdfunding income to enable them to cook and donate meals to the NHS.
In response to the new offerings by businesses across the UK as they adapt to COVID-19 restrictions, HMRC has updated one of its manuals, focusing on the implications of changes to trading activities arising as a result of the current pandemic. Although HMRC has tried to take a business-friendly approach during the pandemic, there may be unintended tax consequences of the strategies that businesses have adopted to survive.
Considering consumers: top tips for consumer law compliance
Consumers are increasingly aware of – and vocal about – their rights. That’s why it’s important to get your interactions with them right from the outset, not only to ensure that you’re complying with the law but also to demonstrate to your customers that you value them and are aware of and respect their rights.
Two important ways in which you’ll interact with customers, existing and prospective, is through your marketing activities and your terms and conditions.
New Italian legislation on ambush marketing
On 13 May 2020, the Italian law converting Law Decree no. 16 of 11 March 2020, containing "Urgent provisions for the organization and holding of the Winter Olympic and Paralympic Games Milan Cortina 2026 and the ATP Turin 2021 - 2025 finals, as well as on the prohibition of parasitic activities" ("Law Decree 16/2020") came into force, introducing a general regulation of the so-called ambush marketing.
The provisions of Law Decree 16/2020 - although currently relevant and urgent in view of the important sporting events that will take place in Italy in the coming years (in particular, the Olympic and Paralympic Winter Games Milan-Cortina 2026 and the ATP Tennis Finals Turin 2021-2025) - provide for a structural regulation of ambush marketing, applicable in general to any sporting event or exhibition of national or international importance.
We provide a brief overview of ambush marketing in Italy and a summary of the main related provisions introduced by Law Decree 16/2020.
Geo-Blocking Regulation: stumbling block or building block towards the Digital Single Market?
The Geo-Blocking Regulation is one of many proposals by the European Commission that aim to facilitate the Digital Single Market strategy. The DSM-strategy was proposed and implemented to bring down barriers, unlock online opportunities and further the creation of a true single market to allow EU customers to freely purchase goods and services cross-border. According to the Commission, the creation of the DSM would lead to €11 billion in savings for consumers when shopping online.
An interesting question is whether the Geo-blocking Regulation is indeed a building block towards the Digital Single Market – or not.
Internal investigations: what to do when there is a suspicion that an employee is infringing Competition Law
A company can be held liable for anticompetitive behaviors of its employees, irrespectively of whether it authorized or not such behaviors. This exposes the company to high fines, expensive damages claims and significant reputational costs.
In some jurisdictions, employees (usually, legal representatives of the company but also officers and directors) can be held liable for the infringements and face administrative fines or even criminal sanctions (including prison). But this does not exclude the company’s own liability which is normally grounded in the lack of appropriate surveillance of the employees (culpa in vigilando).
In this context, the implementation of robust compliance policies and appropriate protocols to avoid anticompetitive behaviors is essential to minimize the economical and reputational risks associated with the infringement of competition rules. But when policies to prevent infringements fail, compliance requires a plan to quickly and effectively detect, investigate and react to such infringements.
The Dutch Franchise Act passed the Upper House of Parliament
On 30 June 2020, the Upper House of Parliament voted in favour of the new Franchise Act, meaning it has now passed the entire legislative process. The Franchise Act provides rules to strengthen the position of franchisees and regulates aspects of all phases of the franchise relationship, i.e. prior to, during and after the franchise agreement. The act covers, inter alia, exchange of information, mutual consultation obligations, goodwill and non-compete clauses.
At the last minute at the Lower House stage, a major amendment was included in the draft act and this has also been accepted. As a result, the act now entails important and fundamental changes in international practice, as franchisees established in the Netherlands can invoke the protection of the act, regardless of the choice of law in the franchise agreement. Contract clauses contrary to the act will not be enforceable or may even be void. However, franchise agreements subject to Dutch law as concluded with franchisees outside of the Netherlands, may deviate from the act.
Franchise agreements, both purely domestic as well as international should be reviewed and, where required, amended for compliance with this new legislation. The act will come into force on 1 January 2021 and franchise agreements will have to comply from that date. In respect of franchise agreements concluded before 1 January 2021, the statutory provisions on goodwill, non-competition and interim changes to the franchise formula will enter into force on 1 January 2023.
Please see here for our previous update on the act.
Saudi Arabia franchise law update
Saudi Arabia has now issued its Ministerial Decision No. 00594/1441 on the approval of the Implementing Regulation for the Commercial Franchise Law (‘Implementing Regulations’), which gives guidance and clarity surrounding the commercial franchise law which came into operation in April 2020.
Under Article 8 of the Implementing Regulations, there are terms and conditions that shall be included in the franchise agreement. These are additional to those already required under Article 11 of the Commercial Franchise Law and it is recommended that franchisors should ensure their franchise agreements incorporate these terms and conditions.
Trade marks: shapes necessary for technical result or giving substantial value
The European Court of Justice (ECJ) has ruled on the interpretation of the Trade Marks Directive (2008/95/EC) (2008 Directive) and the grounds for refusal or invalidity in relation to signs that consist exclusively of the shape of goods that are necessary to get a technical result or the shape that gives substantial value to the goods.
Technology drives opportunity in the Spanish hotel sector
The hotel sector is one of the hardest hit by the COVID-19 crisis in Spain. The temporary shutdown of hotels and the consequent collapse of hotel occupancy during the lockdown have given way to a scenario with asymmetric phases and limitations of geographical mobility and certain restrictions on foreign tourism. This will be followed by a situation of generalized fear of infection for many tourists, which is expected to persist even after the de-escalation plan has been finalized.
Given this situation and the challenge of ensuring the sustainability of the business through the renegotiation (voluntary or imposed) of the conditions under which hotel properties are currently occupied by operators, it is advisable not to overlook another of the challenges faced by the major hotel chains: as part of the "anti COVID-19" measures plan, the automation of processes and the implementation of rigorous health, safety and hygiene standards and protocols in hotels.
We partner with Welltodo Global on digital events
As the first law firm to connect the dots and recognise Wellness as a standalone market, we work closely with Welltodo Global and partner with them on their industry-leading events. Having hosted Welltodo events, including the Founder Series, Trends Forum and annual Summit, at our London office over the last four years, we continue to partner with Welltodo as they take their events online during lockdown.
The new digital events hosted via Zoom include a key note presentations, panel discussions and Q&As with successful entrepreneurs, the opportunity to join a private online closed group to connect with forward thinking individuals in the Wellness industry and a complimentary 15 minute consultation with the Bird & Bird Wellness team following the event, as well as a digital goody bag.
We've reached a huge international range of participants following the switch to digital, and over recent events welcomed hundreds of entrepreneurs, founders and industry leaders from: South Africa, India, Portugal, France, Saudi Arabia, East and West Coast of the USA, Germany, Abu Dhabi, Spain, Panama, Israel, Mexico, UAE and New Zealand.
These powerful & focussed digital events allow Wellness brands to continue to access industry expertise and networking opportunities when they cannot meet face to face. The international interest of these events demonstrates the incredible potential of this industry across the globe.
Click here to find out when the next digital events will take place and buy tickets. You can also find out more about Bird & Bird's Wellness expertise and get in touch with our team via our webpage.
Our Hotels & Leisure team co-hosts a webinar for over 680 industry professionals across the world
We recently collaborated with HVS and EP Business in Hospitality to host an international hotel conference on “The Road Out of Lockdown – Unlocking the Potential”, with over 680 industry professionals from across the world attending online.
The event discussed the challenges facing the industry and was supported by a strong cast of 18 senior industry experts as speakers, panellists and moderators. A link to a video of the whole event can be found here.
Head of Hotels & Leisure, Karen Friebe, commented: “Inevitably there may be staff cuts, but you have to balance this with the level of service you offer,” adding that the implementation of social distancing in a hotel was likely to prove challenging along with ensuring that any new protocols are implemented effectively. “I think there’s going to be a greater use of technology, which we are already seeing in countries that have re-opened for business, such as China,” she said, adding that hotels were likely to be run with a lot less social interaction with their customers, which opened up a whole new dilemma for the hospitality sector and the concept of service in a service-led industry.
Following strong feedback and requests for further discussion, we reconvened the panel to look deeper into some of the key questions of this moment:Can hotels once again become destinations in F&B? Will new services emerge? Will more hotels have ghost kitchens? How hard will it be to re-engage teams? The recorded panel discussion can be accessed here.
We will be hosting another webinar at 10am BST on Wednesday 8 July with EP Magazine and HVS as well as AlixPartners on how to plan for financing re-opening, including cash flow scenario planning, working capital considerations and funding options. Please click here to RSVP.