21 Aug 2018

COT's top four commercial issues - August 2018

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Welcome to this month's edition of the Stephenson Harwood commercial updates.

While we hope our readers are enjoying this in the sunshine by a pool, our team have been busy understanding the increasing role social media influencers are having on our spending habits, as well as a key change for banks seeking guidance on their use of cloud computing.

Enjoy.

Social influencers

We're all aware that our favourite celebrities can be very influential when they endorse a particular product online. The growth in social media platforms has also created a new brand of social media influencers who can command similar influence over their followers. Now the Competition and Markets Authority ("CMA") is looking into whether such endorsements have the potential to mislead consumers if the celebrity or influencer involved did not made it clear that they were paid or rewarded in return for their endorsement.

Consumer protection law requires it to be made clear that a person has been paid or rewarded to promote, review or talk about a product in their social media feed. In particular, the Consumer Protection from Unfair Trading Regulations and the CAP Code ban the use of editorial content in the media to promote a product where a trader has paid or made another type of reward in return for the promotion, if that payment or reward is not made clear in the content, or by images or sounds clearly identifiable to the consumer.

However, in apparent contravention of these rules, the CMA states that it has seen examples of posts by celebrities which may mislead consumers into thinking that the endorsement is the celebrity's own views, rather than being a paid-for promotion. In particular, certain posts appeared to promote or endorse products without clearly stating whether the post had been paid for, or to offer a celebrity’s personal opinion on the benefit of a product without clearly disclosing whether they were being paid by the brand.

The CMA is working closely with the Advertising Standards Authority ("ASA") after the ASA issued a call for evidence to find out more about what types of labels help people to understand when the online content they see, hear and interact with is advertising.

As part of its investigation, the CMA has already written to a range of celebrities and social media influencers asking for more information about their posts and the nature of the business agreements they have in place with brands. It is also asking members of the public who have bought products which were endorsed by celebrities online to participate in a survey about their experiences of such social media posts. When the CMA reports on its findings (which is expected later this year), if it finds practices that break consumer protection law, it can take enforcement action through the courts as an enforcer under Part 8 of the Enterprise Act 2002. Ultimately, it would be for the courts to decide whether a particular term or practice infringes the law.

Businesses using influencer or celebrity endorsements should be aware that they need to be transparent about any rewards they give in return for endorsements. In particular, they may wish to check the contractual arrangements they may have in place with influencers and review any related social media posts for compliance with the transparency requirements. The most important thing to bear in mind is that consumers should not be misled.

Artificial health

An artificial intelligence ("AI") system that can recommend the correct referral decision for over 50 eye diseases as accurately as world-leading experts has been developed by researchers at Moorfields Eye Hospital in collaboration with Google's DeepMind Health.

The computer was asked to give a diagnosis in the cases of 1,000 patients whose clinical outcomes were already known. The system was capable of correctly referring patients with more than 50 different eye diseases for further treatment with 94% accuracy, supposedly matching world-leading eye specialists. Additionally the algorithm did not miss a single urgent case.

Using two types of neural network – mathematical systems for identifying patterns in images– the AI system learnt to identify ten features of eye disease from highly complex optical coherence tomography (known as OCT) scans of patient retinas.

The next stage in the process is to put the AI system through clinical trials and regulatory approval before it can be used in hospitals for patient referrals.

If granted approval, the system will then be available for use across all of Moorfields’ sites for five years in the hope that it will identify patients who need urgent treatment and will reduce delays.

Stricter gambling rules

From 31 October 2018, new rules from the Gambling Commission mean that if gambling companies break advertising rules or breach consumer laws they will face tougher action.

The key changes mean:

  • all marketing of gambling products and services must be undertaken in a socially responsible manner
  • gambling companies must ensure that their marketing communications and advertisements do not amount to or involve misleading actions or misleading omissions
  • consumer law applies to terms in contracts and consumer notices - they must be fair and transparent
  • gambling companies will have to provide better complaints processes, including an eight week deadline for complaints to be resolved
  • it will be easier to take action, including imposing fines, against businesses that breach the advertising rules
  • gambling companies are responsible for the actions of their third parties, including marketing affiliates

On 8 August the Gambling Commission also launched a new research project which will look into whether some gambling products are more harmful than others. Gambling companies will be asked to provide data so it can be used to understand how products and characteristics vary and identify those products associated with harmful play. These new rules and the research project come after the controversial reduction of the maximum permitted stake on fixed odds betting. During the heated debate, which led to the change in the rules, the gambling industry came under fire from MPs and the public for the harm that gambling caused to families and communities. The programme director at the Gambling Commission stated that it is the Gambling Commission's strategy to prevent harm to consumers from the risks that gambling can pose and so it is likely that we will see more initiatives in relation to consumer safety from the Gambling Commission in the near future.

Not a cloud in the sky

The Financial Conduct Authority ("FCA") has recently announced that its guidance for financial service providers who outsource to the cloud will no longer apply to banks, building societies and designated investment firms.

The 2014 guidance set out key requirements for banks and other financial service providers to follow when engaging cloud providers. While the guidance had its limitations, it was useful to understand how the FCA sought to apply the various regulations when outsourcing services to the cloud.

Instead, in its guidance issued in July of this year, the FCA highlighted that the guidance no longer applied to banks, building societies and designated investment firms, who should follow the European Banking Authority's ("EBA") recommendations on outsourcing to cloud service providers.

Many banks and building societies would have created internal policies on using cloud service providers and will have to consider reviewing these policies against the EBA's guidance. Despite both the FCA and the EBA guidance documents containing similar overlapping themes, the EBA guidance is more detailed in certain areas. It is also understood that the EBA is considering further changes to this guidance.

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KEY CONTACT

Dan Holland

Dan Holland
Partner

T:  +44 20 7809 2108 M:  +44 7841 923 656 Email Dan | Vcard Office:  London

Anita Basi

Anita Basi
Associate

T:  +44 20 7809 2193 M:  +44 77 3647 3578 Email Anita | Vcard Office:  London

David Berry

David Berry
Senior associate

T:  +44 20 7809 2269 M:  Email David | Vcard Office:  London

Michelle Gomes

Michelle Gomes
Associate

T:  +44 20 7809 2370 M:  +44 7872 106 630 Email Michelle | Vcard Office:  London

Katie Hewson

Katie Hewson
Associate

T:  +44 20 7809 2374 M:  Email Katie | Vcard Office:  London

Naomi Leach

Naomi Leach
Senior associate

T:  +44 20 7809 2960 M:  +44 7769 143 367 Email Naomi | Vcard Office:  London

Alison Llewellyn

Alison Llewellyn
Associate

T:  +44 20 7809 2278 M:  Email Alison | Vcard Office:  London