How Product Liability Changes Will Affect Your Online Business After Brexit

Product liability law exists to better protect consumers from unsafe and defective products. This area of law makes it possible for someone to claim compensation if they are injured by a defective product, or their property is damaged.

When the Brexit transitional period ends in December 2020, significant changes to product liability will come into force. These changes will impact any UK-based business that imports from the EU, or sells to both EU and UK consumers.

This article looks at how the law is changing, and how online retailers can adapt to the post-Brexit legal landscape.

How does product liability law protect businesses and their customers?

Under UK and EU law, an injured consumer can make a claim against the retailer of a defective or unsafe product, if that retailer was negligent.

Consumers can also make a claim against the manufacturer or importer of a defective product, even if the manufacturer or importer was not negligent, under the principle of ‘strict liability’. This strict liability principle is set out in the Consumer Protection Act 1987 (CPA), and ensures that injured customers have a better chance of recovering compensation to fund their recovery.

The Consumer Protection Act 1987

Chris Salmon, Director of Quittance Legal Services, says, “Under the 1987 Act, an injured customer only needs to prove that a product caused their injury. Unlike other types of injury claim, the customer doesn’t need to prove the manufacturer or importer was negligent.”

“The Act protects consumers, and also makes it more likely that a defective product claim will be brought against a manufacturer or importer of a product, not the retailer, as it is not necessary to establish negligence.”

The CPA imposes strict liability on EU-based manufacturers, but also importers of non-EU products into the EU. This means that EU consumers don’t have to identify and pursue a costly claim against a manufacturer on the other side of the world. Instead, consumers have the right to claim compensation from the EU-based importer.

The General Product Safety Regulations 2005

While the CPA provides a mechanism for injured consumers to claim compensation, the General Product Safety Regulations 2005 (GPSR) set out the rules that businesses must follow to ensure products are safe in the first place.

Under GPSR, businesses must take reasonable steps to ensure the products they make, distribute or sell are ‘safe’. A safe product is defined as a product that does not present any risk to consumers, or where the risk is minimised in the case of inherently dangerous products.

The requirement for a product to be safe extends to the packaging the item is supplied with.

What are considered ‘reasonable steps’ will vary depending on the level of risk the product poses. Products must comply with applicable safety legislation, and safety standards.

Businesses must also ensure that the product is safe more generally, considering who could use or be exposed to the product. Could the product be accessible by children, or the elderly? Are there sufficient warnings to highlight potential hazards?

Why are changes required?

Much of the UK’s product safety law is defined by EU regulations, and is written presuming the UK’s membership of the EU gives the UK access to EU trading standards and product safety bodies. After Brexit, the UK loses its access to these bodies and systems, and so new regulations are required to replace these systems, and to instruct business regarding new compliance rules.

The biggest change concerns liability for defective products. Under the CPA, strict liability only applied to the manufacturer or importer of a product into the EU. Strict liability did not apply if you imported to the UK from the EU, or sold products made elsewhere in the EU. The GPSR also defines ‘safe product’ partly in reference to EU standards and safety marks.

How is the law changing?

From January 2021, there will be a regulatory border between the UK and EU, meaning that UK-based sellers and importers of EU-made products can no longer rely on many of the provisions of the CPA and GPSR.

The Product Safety and Metrology Regulations 2019 will enact changes to the CPA and GPSR in January to resolve Brexit-related issues with current product safety law.

The new regulations set out a new product safety framework for UK-based businesses, including a UK-specific replacement for the EU’s CE mark, and a replacement for the Safety Gate product recall system used across the EU.

Under the revised CPA, strict liability now applies to businesses importing products across the new UK-EU border. Prior to this change, an importer of a consumer product from the EU to the UK would not be strictly liable for any defects. From January, these importers will be held liable and could be sued if a defective product caused property damage or injury.

Who will be affected by the changes?

The majority of UK-based businesses that import, distribute or sell consumer products will be affected by the impending changes.

Importing from the EU

Your business will now be affected by the strict liability imposed by the changes. You may need to revise your product liability insurance to reflect this increased exposure to compensation claims. You may need to ensure products display the new UK product safety mark, and otherwise comply with revised safety rules. Once UK safety rules diverge from EU regulations, you will not be able to rely on a foreign manufacturer’s warranties regarding EU compliance.

Importing from outside the EU

If you import products from outside the UK, strict liability will already apply, but your obligations under other parts of the Product Safety and Metrology Regulations may have changed. As with EU importers above, you will now need to ensure products carry UK safety marks and comply with UK safety rules.

Importing to the EU

Whether you manufacture products in the UK, or import from outside the EU and then import into the EU, you will be affected by the changes. You may no longer be affected by the strict liability set out in EU regulations, meaning that EU-based consumers may prefer to take legal action against the EU-based distributor or retailer of your products. However, UK regulations will still impose strict liability if you also sell or distribute within the UK. 

Selling to EU customers

If you ship to both UK and EU customers, you must comply with both sets of regulations. These rules are set to closely align during the initial post-Brexit phase, but may diverge in the future. You will need to fulfill product recall requirements of both UK and EU law, and may also need to ensure your website and sales material reflects differences between the two jurisdictions.

How to prepare for 2021

Probably the most important step is to review your current product liability insurance policy and check that it will provide sufficient protection under the new regime. You should contact your policy provider and discuss your requirements. If you do not have any product liability protection, it is strongly recommended that you arrange some.

No product can be guaranteed as 100% safe for all users, in every situation. Provided you take reasonable steps to warrant the safety of the products you sell, and have adequate insurance protection in place, your business should comfortably weather a product liability claim in the event a customer is injured by a defective product. Crucially, an insurance policy will also ensure that the injured consumer can recover the compensation they need to fund treatment and care costs. 

Even if your online business is not likely to be directly affected by the major changes (either because you sell low-risk, UK-made products, or because your business is supplied by a UK-based importer), now would be a good time to carry out a general safety audit of the products you sell. You could verify your suppliers, check with local trading standards, and review your process for product recall notifications.