The Consumer & Retail sector has seen some significant new trends in the last few years. In part these have been driven by changes in consumer behavior following the pandemic, including the ever increasing volume of online shopping and relevance of social networks and online communities, and then more recently by macro-economic uncertainty impacting on the sector as a whole. The increased global focus on ESG issues also continues to have an important impact on the sector. We briefly examine here five recent trends and their legal implications.
Sustainability and ESG
Consumer companies across different sub-sectors of the industry are heavily focused on consumer's wishes for a healthier lifestyle and purchasing products that are more sustainable or have been produced more sustainably, which requires consumer goods companies to improve the sustainability of their products themselves, their production processes and supply chain. This touches on nearly every sub-sector of the industry, but those most affected include Food & Beverage, Home Care/Household Goods, Beauty Care, Fashion, Luxury Goods, Lifestyle & Sports and Consumer Electronics. The entire industry is also focused on reducing waste, encouraging reuse/resale and improving the circular economy. This is a particular focus for luxury goods and the fashion and lifestyle industry, where re-commerce and the recirculation and resale of high-end quality used goods is becoming more mainstream.
Both consumers and regulators are demanding far greater transparency over sustainability issues and, consequently, extended producer responsibility (EPR) regulations are being introduced. For example in Germany the Supply Chain Diligence Act. There is also an increased focus from US regulators (such as the Federal Trade Commission) on the antitrust compliance aspects of ESG collaborations and unfair trading practices. In the same vein, especially European antitrust agencies are debating the right approach to allow for more sustainability-focused collaborations between competitors, while at the same time being clear that a "green label" does not make anti-competitive practices lawful.
Companies also need to take care to avoid allegations of "greenwashing", being the process of conveying a false impression or misleading information about how a company's products are environmentally sound. This could lead to risks of litigation, class actions and reputational damage – the volume of investigations and litigation in this space is skyrocketing.
Retailers continue to innovate and to use new technologies in order to attract more customers and provide an enhanced consumer journey and shopping experience, ultimately with the goal of creating more brand loyalty. This includes new marketing methods such as augmented reality, virtual try-ons, the metaverse at large, the use of paid influencers and digital transformation to provide novel shopping solutions. There is also a greater emphasis on using technology to drive scalability of personalized products and to improve the overall shopping experience.
These new technologies come with a host of potential legal considerations, including data privacy and cybersecurity, ownership and protection of IP rights and in some cases antitrust issues. For a detailed analysis on the use of new technologies in the industry and the key legal issues arising from this, see our longer tech newsflash.
Retailers are expanding the range of options available to consumers for frictionless shopping, being the ability to walk into a store, select what you want and leave, with payment being automatically processed. This began life with self-service tills and contactless payments and has developed into self-scanning handheld devices, phone apps and now facial recognition. A detailed analysis of the technologies in use and the legal issues surrounding them can also be found in our tech newsflash mentioned above. These include issues around data security, privacy, discrimination and bias. There is even potential for unfair trading/antitrust issues when personalized pricing models are adopted.
Retailers are also working closely with Fintech companies and open-banking payment providers to make it easier for customers to pay. This includes buy-now-pay-later options, which are being subjected to greater levels of scrutiny by regulators. The metaverse as a selling platform will also give rise to legal issues around payments (especially if crypto currency or crypto assets are used), as well as matters such as taxation, IP use and data security.
Online businesses and brick-and-mortar sellers are converging into multi-channel players in order to compete for customers and for greater market share. Old-world physical retailers continue to reinvent themselves with enhanced online stores and selling platforms. Physical and digital retail are no longer separate lines of business. Consumer goods manufacturers (particularly those in Consumer Electronics and Fashion, Luxury and Lifestyle) that have traditionally almost exclusively relied on retailers to market their products are increasingly selling directly to consumers via their own online stores or third-party platforms, in competition with their final retail distributors. This creates potential antitrust issues given the dual relationship between manufacturers and retailers that now compete directly for sales to consumers, issues that have been addressed to some extent in the new EU rules on distribution agreements. As a commercial matter, managing conversion and conflicts between own-retail and omni-channel models is a growing challenge for consumer goods companies.
Consumer electronics and the Internet of Things
The IoT (internet of things) is the interconnection via the internet of computing devices embedded in everyday objects, enabling them to send and receive data. The IoT continues to expand in the retail space. This includes connected cars and electric vehicles, consumer electronics including devices like smart watches, security devices like home alarms, cameras and doorbells and smart appliances like fridges and dishwashers. From a legal perspective the sale and use of these goods gives rise to a number of potential issues, including consumer protection, data privacy and cybersecurity and IP protections.
The Key Takeaways
As per the above, technologies and consumer behaviors are constantly evolving, raising a host of novel legal issues that companies and the legal community need to keep up. Advisors are increasingly asked to assist in developing new business models with respect to which the entirety of the legal issues arising may not be obvious from the outset. A holistic approach, both from a practice area/subject matter and geographic coverage perspective is key for a proper legal set-up.