Here’s what online retailers need to know about the UK product safety reform
In this article, Rob Rees, Divisional Director at Markel Direct, breaks down the proposals made in the UK product safety review and gives guidance on what online retailers can do to safeguard themselves against potential disruption caused by the reform.
The UK’s appetite for buying online is the highest in Europe, with more than a quarter of retail sales now made through the internet.
Whilst this presents an opportunity for small businesses to grow, it’s not without its challenges. Particularly when it comes to ensuring the quality and safety of products sourced from overseas suppliers – especially electrical items. So much so that, last month, the London Fire Brigade reported that e-bikes have become the capital’s fastest growing fire trend, with cheap batteries bought online being to blame for a growing number of blazes.
To address this issue around product safety, in August 2023, the government published its proposals for reform of the UK product safety regime with the aim to stop unsafe items from making their way to UK buyers from online retailers.
What is being proposed in the UK product safety review?
The reform aims to introduce steps which ensure that products bought online are as safe as those bought on the high street.
Some of the proposed steps include:
- Online marketplaces (such as Amazon and eBay) would have duties to cooperate with enforcement authorities to provide information and take appropriate actions if products are unsafe or non-compliant. An additional duty could be that marketplaces must have a compliance function established in the UK which is responsible for ensuring appropriate policies, processes and systems are in place to address the availability of unsafe products.
- Online marketplaces would also be responsible for collecting (and taking reasonable steps to verify) information about third-party sellers for high-risk products. This would involve carrying out targeted monitoring and scrutiny of relevant product listings with a view to addressing listings that reasonably look like they could be advertising non-compliant or unsafe products. As well as consulting sources such as the UK Government Product Recalls and Alerts page, using this information to monitor their marketplaces for products which reasonably look to be an identical or very similar product, and when required, taking appropriate action.
- For higher risk products, increase consumer-facing information on online product listings to support informed purchasing decisions. This information required on listings might include:
- warnings to consumers
- a clear and prominent indication of whether the product has been listed by a third-party seller (alongside additional information, such as the name and contact address of the seller)
- details of what checks (if any) have been carried out on the product or seller
- key product safety information which is already on the product, its packaging or its accompanying documents.
The government has not yet confirmed which products will be deemed higher risk, but electrical equipment, cosmetics, toys, gas appliances and safety equipment will likely be in scope.
- Mandatory incident reporting in the UK for product-related incidents, predominantly those resulting in deaths, injuries requiring an overnight stay in hospital, or fires.
What could the new legislation mean for online retailers?
1. New, or stricter, insurance requirements from online marketplaces
Selling platforms, such as Amazon, already require some sellers to hold a minimum level of insurance cover. However, as online marketplaces are expected to bear increased accountability for the sale of safe products under the regime, they may introduce stricter insurance requirements for sellers, which could include additional insurance cover or higher limits of cover. This would enable online marketplaces to mitigate their risk, as it would enable them to pursue the seller through legal channels in the event of a claim by a consumer.
2. Stricter requirements for selling high risk items
The legislation aims to introduce new measures to determine the safety of a product being sold. This will mean that the requirements for selling high risk items will get stricter and therefore the possibility of having these products removed for non-compliance will be higher too.
It is being proposed that the legislation moves more radically towards a different cross-cutting framework categorising products by hazards and risk levels, with requirements applying according to risk level. This means that if an online retailer sells high risk items, they will need to ensure their listings meet the compliance requirements to be available for purchase.
3. A reduction in non-compliant, overseas sellers
Online marketplaces bring in a lot of products sold by third-party sellers, many of which are based overseas. This type of seller usually can offer items at a lower price which makes the listings attractive to UK consumers over the local retailers. However, as there is often no responsible economic operator in the UK, it makes any investigation and corrective action difficult when an unsafe product is sold or causes an issue. This results in the re-listing of dangerous products time and time again.
The proposal looks to reduce this number of non-compliant overseas sellers to not only improve safety, but also to make the market fairer by lessening the number of sellers who are undercutting price. One way this could be addressed, according to the proposal, is to ensure online marketplaces are duty-bound to have a compliance function established in the UK.
Four things online retailers can do to prepare for the UK product safety reform
Here are some actionable steps that you can take to help safeguard your online retail business from the proposed changes and ensure as little disruption as possible to your livelihood.
1. Make sure product listings are detailed with safety in mind
Usually, only basic safety information is needed for an online product listing as more information can often be found on the product packaging itself. The proposal suggests that all safety information for high-risk items should be included in the product listings.
To prepare for this, be sure to update any high-risk product listing descriptions with the full safety information. Any information that would support informed purchasing decisions will give the item a better chance of meeting compliance requirements.
Information to include in the online product listing could be:
- Key product safety information which is already on the product, packaging, or accompanying documents, such as age limits, storage instructions and advice on use.
- Warnings to consumers about the potential risks a product has, such as being a choking hazard or overheating.
2. Complete a detailed audit of suppliers and/ or products
If you’re a third-party seller of products then getting ahead of this legislation is the best way to reduce the impact it will have on your retail business. Conducting a detailed audit of the suppliers of the products you sell and/or the products themselves is the safest way of ensuring that any products that could be deemed as “high risk” meet the UK safety requirements already in place.
Pay attention to the Government recall website and take extra care to check any products similar to those that have been recalled. Have a system in place for recalls – this will make it easier in the future if there’s a recall on any of the products you sell.
3. Have the right insurance in place
If the worst happens and a product you have sold causes harm or damage, without public and product liability insurance in place, you could be left paying thousands in legal and compensation costs, out of your own pocket.. Product liability insurance provides coverage for tangible products that you sell, manufacture, or distribute. This coverage comes into play when a customer makes a claim due to injury or damage caused by these products.
Some online marketplaces make this insurance arequirement for sellers using their platform. For example, Amazon (as of October 2023) requires a limit of at least £400,000 on its UK website for public liability and products liability insurance if you sell more than £4,000 worth of goods through ‘Fulfilled by Amazon’, as stated on their Seller Central Hub.
4. Check your policy to make sure it includes an indemnity to selling platforms
If applicable to your business model, make sure that your insurance policy includes a provision that names the selling platform (like Amazon) as a co-insured, or includes an indemnity to selling platform clause.
If selling on Amazon, then it is in their seller’s agreement that your insurance policy names Amazon as an additional insured party. However, it's important to bare in mind that this type of cover is not typically included in standard insurance policies. If this is the case, individuals or businesses may need to request that this specific provision is included in their insurance terms to ensure they are following Amazon's terms and conditions. At Markel Direct, our product liability insurance for online retailers includes an indemnity to selling platforms as standard.
The proposed changes to the UK product safety regime will be a positive step for those buying online and establishing trust with online retailers. That being said, it does mean that more effort will be required by retailers to prevent their business from being negatively impacted. The sooner this happens, the better. The consultation for this proposal closed October 24th 2023. The next stage involves the consideration of all responses from the feedback period before publishing the Government Response.
For more information and advice on insurance options as an online retailer, click here.
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