The Retailer Winter Edition 2022

THE RE TA I L ER

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TRICKY TRANSITIONS

Michelle Headridge Partner Addleshaw Goddard

David Young Partner Addleshaw Goddard

a re businesses ready for the upcoming divergence in UK / European trade regulation? Two years on fromBritain’s departure from the EU and the rules and regulations governing the waywe trade in the UK and internationallymay be about to change. As part of its Brexit deal, the British government agreed to a temporary moratorium on any sig nificant divergence from European legislation to allowUK businesses time to adjust. During 2022, and into 2023, we can expect to see where divergence may occur. There are a number of industry and government consultations ongoing and due to report in 2022, many of which will have big implications for British retailers and consumer industries. From food standards, allergenwarning standards and digital commerce rules, all the way to legally substantiating environmental claims and the arrival of a plastic tax, businesses are facing a tricky transition this year. To help filter out the noise, we have identified some key milestones and emerging risks to watch out for.

1. Food standards and allergen warnings Food and farming contributes £120 billion to the UK economy annually and supports 4.3 million jobs right across the nation, according to figures published in December by the Food and Drink Federation. One of its success stories is exports, with UK agri-food and drink sales overseas reaching nearly £24 billion in 2019. The pandemic has curbed exports since but so too have more onerous border control rules, along with global supply chain issues and a shortage of lorry drivers. Between January and the end of September last year exports fell £2.7 billion, a drop the FDF blamed mainly on a 24 per cent fall in exports to EU member states. This said, exports to non EU countries rose last year, with UK sales to China, Japan and Singapore among thosewith the strongest rise in demand. The UK Government will not wish to rock this boat in choppy seas, especially in the context of economic recovery as the UK looks to be an early emerger from the pandemic. It is therefore unlikely to deviate from regulation aligned with European laws in the short-term at least. However, food regulation is one area where in time the UK may wish to be more bespoke. The so-called ‘Natasha’s Law’ requiring pre packed for direct sale foods to provide a full list of ingredients and clear allergen labelling came into force on 1 October 2021. The two year lead-in enabled food businesses directly affected to engineer the necessary changes to comply and by the due date manywere already meeting the new requirements. In December the Food Standards Agency opened a consultation to gather views from businesses and consumers on the use of pre cautionary allergen labelling (“PAL”), often written as “may contain” or “not suitable for” on food packaging. Adecision on the acceptable wording is due later this year and, if it diverges from European wording significantly, could prove a headache for food retailers supplying pre-packaged food to the EU. Current intelli gence suggests that the UK is trying to lead a “keep it simple” approach.

2. Aligning ecommerce regulation with physical retailer rules Amid growing concern among international governments over the domination of global digital markets by a few large incumbents, a number of countries are reviewing competition rules for digital firms. The US is consulting on its own policy changes and last year the European Commission confirmed new rules for digital contracts which took effect from 1 January. These aim to create “clearer rights for consumers when accessing digital content and digital services” by strengthening retailer disclosure standards and providing cooling off periods for certain services. Meanwhile in the UK the Competition and Markets Authority established its Digital Markets Unit late last year and is consult ing on rules to improve digital competition, including a proposal to introduce a code of conduct that the larger digital firms must comply with. Similar reviews are being considered in Germany, Australia, Japan and South Korea. Given the lack of geographical boundaries in ecommerce, aligning international legislation will be key if it is to function effectively. 3. Plastic tax From1April 2022 a new taxwill apply to plastic packaging manufactured in or imported into the UKwhich does not contain at least 30 per cent recycled plastic. This will be applied at a rate of £200 per metric tonne of plastic packaging. This follows the EU’s existing plastic levywhich is taxed at a uniform call rate of €0.80 per kilogram (equivalent to €800 per tonne) and applies to theweight of plastic packagingwaste that is not recycled. For British manufacturers caught by both rules and British retailers importing plastic-pack aged goods from outside the UK, the different approaches will require significant and pains taking attention to detail in order to adhere to each set of regulations in tandem.

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Between January and the end of September last year exports fell £2.7 billion, a drop the FDF blamed mainly on a 24 per cent fall in exports to EU member states.”