Double Jeopardy for Retailers at the Aisle End

The Food (Promotion and Placement) (England) Regulations 2021 (the Regulations) have now completed their journey through Parliament. They will come into force in October 2022. This time period contrasts starkly with the 18 months retailers said they would need to prepare properly for their implementation.

Enforcement of the Regulations

The effect of the Regulations is to empower Food Authorities (effectively environmental health enforcement officers operating out of local Councils) to issue retailers with Improvement Notices in any circumstances where the Food Authority “has reasonable grounds for believing that a person is failing to comply with the Regulations”. A retailer may be issued with an Improvement Notice if they fail to comply with the restrictions on the promotion of “specified foods and drinks” in terms of their price or placement in a store or if they are suspected of having breached relevant restrictions on the online promotion of such foods. A pre-packaged food or drink will be “specified” if it is not explicitly excluded from the scope of the Regulations and is assessed as being “High in Fat, Sugar or Salt” (HFSS) by the Nutrient Profiling Model, which was developed by the Food Standards Agency and determines a score above which a food or drink will be identified as HFSS.

Regulation 9 imposes a mandatory obligation on Food Authorities to “enforce and execute” the Regulations within their area. The Regulations will primarily function by way of these Improvement Notices, issued to retailers, specifying their alleged breach of the Regulations and the steps required, in the enforcement officer’s opinion, in order to secure future compliance. If a retailer fails to comply with the measures identified in the Improvement Notice, it commits a criminal offence pursuant to Regulation 11.

Local guidance and the consequence of fragmented enforcement

Pursuant to Regulations 13 and 14, each Food Authority is obliged to publish guidance containing information concerning the proposed use of fixed monetary penalties by that Food Authority to compel compliance with the Regulations and thereafter to publish reports from time to time reporting on the enforcement action taken by them.

However, Regulation 13 provides no detail as to the substance of the guidance to be published by each Food Authority. There is merely a minimum obligation to specify the circumstances in which a fixed monetary penalty of GBP2,500 is likely to be imposed under the Regulations by that Authority as well as the circumstances in which such a penalty will not be imposed by it; the amount of the penalty; how liability for the penalty may be discharged; the effect of discharge; and a person’s right to make representations and objections as well as their rights of appeal.

The lack of substantive oversight of local guidance renders it unclear what discretion or latitude each Food Authority will have as to the substance of the guidance they will actually produce. Taken at face value this requirement for entirely localised guidance could be a recipe for a patchwork of different approaches to regulatory enforcement of price and location promotion across the country. This begs the question as to how such seemingly localised enforcement will work in practice especially as there is no geographic limitation on Improvement Notices so that one local authority could presumably impose what would, in effect be a national ban on a particular promotion so that any non-compliance, wherever it takes place in the country, could then lead to a prosecution. Other uncertainties include the time period for retailers to comply with an Improvement Notice; the framework for information sharing between Food Authorities; and publication (or otherwise) of Improvement Notices. In the context of major retailers doing national deals with manufacturers to list and promote their products, this is a highly unsatisfactory position.

Further, whilst there is an obligation on the part of Food Authorities to consult stakeholders before publishing any such guidance under the Regulations, there is no clarity as to where or when such guidance will, in reality, be published in draft and then consulted upon and, crucially, whether this exercise will have been completed before the Regulations are due to take formal effect, both legally and in practice. It is genuinely bizarre that the Regulations appear to contemplate a myriad of localised consultations on the same issue(s) presumably forcing major retailers (and note, not the smaller local retailers who are exempt from the Regulations by virtue of the arbitrary threshold of having fewer than 50 employees) to engage repeatedly on the same issues with different authorities who may make different decisions on how to address certain issues.

Clearly, this creates potential scope for needless red tape and very real legal and operational uncertainty for retailers, coupled with the risk that there may be material differences in the way in which the Regulations will in reality be enforced from region to region resulting in substantive discrepancies in the application of the law in this context. The potential for confusion and unnecessary commercial disruption is exacerbated by the fact that major retailers and manufacturers normally enter into annual agreements which plan out well in advance when different products will be subject to in-store promotion and what the manufacturer will pay to the retailer for the promotion and/or offer by way of a price discount on its products. Most manufacturers have multiple agreements with different retailers across each year scheduling such promotional activity. This reality creates a difficult situation where Retailer A is served with an Improvement Notice in respect of a particular product and the manufacturer has a promotion in relation to the same product with Retailer B starting in ten days’ time. It appears the only satisfactory resolution is, and there is a real risk that, both manufacturers and retailers will have to take action to withdraw those other promotions, thus forcing them into breach of contract despite the fact that they may dispute the basis of the Improvement Notice and the resultant commercial disruption and loss may be very material.

Access to increased enforcement powers through the back door

The legal threat to manufacturers and retailers here is very real. Even though this has not been flagged by Government in any way, Food Authorities may well argue that if a manufacturer or retailer is alleged to have incorrectly represented that a product is not HFSS that two other offences under the Food Safety Act 1990 (the Act) will have been committed. The first is that if a product is explicitly or impliedly described as not being HFSS but an enforcement officer alleges that it is then logically the food in question will not be “of the nature or substance or quality demanded by the purchaser” for the purposes of Section 14 of the Act and the same, the Food Authorities may argue, would appear to be true of section 15 in the context of the offence of “falsely describing or presenting” food. It follows that if this is right enforcement officers will have a far more direct and immediately draconian line of attack to enforce the Regulations if they choose to take it. In which case, if a Food Authority in the South West serves an Improvement Notice on a store in relation to an allegedly HFSS product what is to stop a Food Authority in the North East who is aware of the notice simply going straight to a prosecution under either sections 14 or 15 of the Act if the relevant product is still being promoted in their area?

Faulty defences

Regulation 16 imports into the Regulations certain key provisions from the Act. In this case, that will include Section 20 (offences due to the fault of another person); and Section 21 (the defence of due diligence) amended to include not just a reference to the “sale or intended sale” of a product but also the “promotion or presentation” of such a product in breach of Regulation 11. The purpose behind these provisions in this context is presumably to provide retailers who sell or promote a product in breach of the Regulations with a mechanism to avoid liability by pointing the finger to those down the chain of supply to the manufacturer or other intermediary more directly responsible for the alleged default. Permitting retailers to rely on the Section 20 and Section 21 of the Act therefore clearly suggests an intention on the part of the Government to allow retailers to mitigate their exposure to the harshest impacts of the Regulations. However, it appears that little thought has been given as to how this might or might not operate in practice and currently it is very hard to see how in reality retailers will be protected or what provision in any future guidance to be issued by enforcement authorities will give them comfort that they will be protected to some degree in this regard. The apparent flaw in this approach is that under Regulation 11 of the Regulations, a person only “commits an offence if they fail to comply with an Improvement Notice served under Regulation 10”. It follows that the offence is not that the product being promoted or sold was incorrectly characterised as not being HFSS in the first place, but that the Retailer has failed to comply with an Improvement Notice. In practice, therefore, it will only be the Retailer who is served with the Improvement Notice and if they continue to promote or sell a product in the manner that gave rise to the Improvement Notice, they will then be solely responsible for the offence under Regulation 11, and, any question of whether or not the manufacturer claimed that their product was not HFSS or was otherwise at fault, does not appear in any true causational sense to be relevant to the retailer’s offence of breaching the Improvement Notice.

The same surely applies to the question of the due diligence defence. If an Improvement Notice has been served on the retailer it is very difficult to see precisely what due diligence they could realistically undertake that would genuinely protect them from a prosecution if they then failed to comply with the Improvement Notice. The reality is that they would be effectively between a “rock” and a “hard place” in terms of the opinion of the enforcement officer from the Food Authority and any prior or even subsequent assurance of the manufacturer that their product was not genuinely HFSS. The position would be wholly binary and it is entirely unclear what time would be permitted to the retailer or manufacturer to clarify and resolve matters sensibly without a regulatory gun to their heads.

In a nutshell therefore, it appears that it is only when a retailer fails to comply with an Improvement Notice and the Food Authority decides to prosecute, that the retailer can run either of the above defences in the Regulations. And whilst (applying the Code for Crown Prosecutors) the Food Authority should be less inclined to proceed to prosecution when a retailer has a reasonable prospect at establishing a defence, it is unclear whether and if so, at what point, a retailer would be formally enabled to make representations as to its innocence prior to any charging decision (such as an interview under caution). Going to trial is a risky business - a retailer who pleads not guilty and who in the meantime continues to do what the Improvement Notice effectively requires them not to, runs the risk of a much larger fine, if convicted.

If on the other hand, a retailer who fails to comply with an Improvement Notice is issued with a fixed penalty notice, that retailer enjoys the right to a formal appeal process. What that process will look like is also unclear (and will be the subject of local guidance) but one would presume that the grounds of any appeal should include wording to the effect of the two defences in the Regulations, although this is by no means certain. Furthermore, one would expect provision in the appeal process for the Improvement Notice and fixed penalty notice to be suspended until determination of the appeal. Again, whether or not this approach is adopted will be a matter of local guidance.

All of the above leads to a great deal of uncertainty and a considerable risk of inconsistency in the enforcement of the Regulations in the future.

This potentially draconian effect of the Regulations is further compounded by the fact that as English law stands, it is wholly contrary to public policy that an individual who is found liable for any regulatory or criminal offence should be able to seek an indemnity from a third party for that sanction. It follows that any attempt by a retailer effectively to flow through the liability for breaching the Regulations (i.e. the fine) to their suppliers on a contractual basis would be wholly unenforceable in practice. This means that the sole remedy open to them would in effect be to cease trading with the relevant manufacturer and thus ultimately diminish the range of products offered to the public by their business which is commercially self-defeating.

In any event, the risk to retailers presented by the Regulations is significant since many products are imported directly from Europe, or from further afield, from manufacturers who consequently have no real understanding or expectation of the need to understand the Regulations and the measurement of HFSS, and who will, in practice, be entirely immune from prosecution, so that the sole regulatory burden of responding to an Improvement Notice must fall on the Retailer or original importer of products into the UK. This burden could be especially onerous for those online retailers and websites that specialise in selling products from other countries, as clearly such retailers will be solely and exclusively responsible for the compliance of their businesses with the Regulations. Some may have fewer than 50 employees so, solely because they fall below the arbitrary cut off point specified as exempted from the Regulations, can do what they like with impunity, but others will definitely be caught. This is arguably highly ironic as the chances in reality of the average English child having their obesity risk increased by the way a website specialising in retailing French food products for ex-pat French people living and working in the UK (especially if such material is in whole or in part in French) must be non-existent.

Improper extension of statutory powers

It truly is worrying that the Regulations, as they stand, impose such an arbitrary and draconian regulatory structure. The enforcement provisions in the Act were created because they were intended to address situations where there was an immediate threat to human health or safety from food that was unfit in some way. The need to combat obesity is not undermined by the point that if a consumer has the opportunity to buy certain potentially HFSS products on promotion for a few weeks longer than might otherwise would have been the case whilst the HFSS status of a product is resolved, no one is likely to die or even suffer material injury or adverse health impacts in that interim. The effects of HFSS foods are cumulative over a material period of time. It follows that a proportionate regulatory regime that recognised that reality before defaulting to prosecution would make far more sense.

Conclusion

As demonstrated, the restrictions on price, location and promotion of foods is a regulatory regime riddled with problems. Retailers will bear the brunt of the prospect of harsh penalties in a haphazard environment with little by way of coordination, consistency or fairness; all of this uncertainty compounded by the current rush on the part of Government to implement the Regulations with minimal delay regardless of whether anyone in industry will actually be ready for them or not.