1st July 2024

CTSI calls for new tax on online giants

Next government must ‘boost consumer protection funding and reform online selling laws’, says CTSI.

By JTS Staff
Journal of Trading Standards' in-house team
For too long, online shopping has been something of a gamble for consumers, with a flood of unsafe and illegal goods being listed alongside compliant and legitimate products

A new CTSI report calls for the introduction of a windfall tax on online marketplaces to help fund consumer protection measures. The report was informed by evidence-gathering sessions held by the All Party Parliamentary Group (APPG) on Consumer Protection, for which CTSI serves as secretariat.

According to the ‘Mind the Gap Between the Chain and the Platform’ report, consumers are being put at risk by dangerous products sold by third-party sellers on online marketplaces. It highlights that outdated legislation designed for bricks-and-mortar retailers is ‘not fit for purpose in the digital age’, and calls for updated laws that are more relevant to contemporary shopping habits.

Among the report’s recommendations are the introduction of a windfall tax or levy on online marketplaces to fund and support consumer protection regulation and enforcement by Local Authority Trading Standards services; clear legal duties for online marketplaces and other online platforms in line with those set out in the Online Safety Act 2023; and new rules to make online marketplaces and other platforms responsible for the legal compliance of products sold by third-party sellers on their platforms.

CTSI is also calling for increased, ring-fenced funding for Local Authority Trading Standards services to support enforcement activities at UK ports and borders; better coordination and intelligence-sharing between regulatory bodies and Trading Standards at UK ports and borders; and the expansion of the legal definition of an ‘economic operator’ to include online marketplaces and fulfilment houses.

Introducing consumer rights lessons into Citizenship and Personal, Social, Health and Economic (PSHE) syllabuses in schools would also help empower and educate the next generation of consumers, according to CTSI.

High risk for consumers
The report, which is the result of evidence-gathering sessions involving experts from across the consumer protection, business and regulatory landscape, sets out the alarming scale of the problems and challenges that have arisen from the rapid expansion of the multi-billion-pound online shopping industry.

Dangerous and counterfeit products have flooded online marketplaces in recent years, with unsafe toys, cosmetics, foods and electrical appliances among the high-risk items that pose a threat to the public, especially those most affected by the cost-of-living crisis.

The British Toy and Hobby Association (BTHA), which provided evidence to the APPG, found during a study in 2022 that every single toy from a sample of 40 purchased from third-party sellers on four major online marketplaces was illegal to sell in the UK, with 90% being unsafe for a child to play with. Electrical Safety First — another APPG participant — found that 93% of electrical products sold through online marketplaces were unsafe.

However, a lack of clarity in the current legislation, combined with a lack of funding for enforcement, is enabling online marketplaces to evade their responsibilities. According to the report, outdated product safety legislation means online marketplaces and other platforms have no legal obligation to ensure products supplied by third-party sellers through their platforms comply with legal requirements and are safe.

A recent Office of Product Safety and Standards (OPSS) survey of consumer attitudes to product safety showed that only 52% of consumers feel that the UK’s system for regulating the safety of products ensures that products they buy are safe. It also showed a decline in consumers’ trust in suppliers, with only 43% considering online marketplaces are trustworthy.

CTSI Chief Executive, John Herriman, commented: “For too long, online shopping has been something of a gamble for consumers, with a flood of unsafe and illegal goods being listed alongside compliant and legitimate products. Consumers often have no way of telling which products have been tested and approved for sale in the UK, and there are few incentives for third-party sellers to take their responsibilities seriously.

“For the sake of confidence in this massive and rapidly expanding sector, for the sake of clarity and fairness for responsible businesses, and above all, for the sake of consumer protection and safety, there is an urgent need for reform.

“The measures called for in the ‘Mind the Gap’ report are the result of hours of evidence-gathering and input from businesses, regulators, enforcers, charities and other experts from a wide range of disciplines. The fact that they all share concerns about the state of play for online marketplaces and the levels of risk facing the public should be of real concern to the next government, and it is something they should make a priority as soon as they take office.”

Kerri Atherton, Head of Public Affairs at the BTHA, said: ‘We have been evidencing and reporting to government the unacceptable levels of dangerous toys being sold by third-party sellers via online marketplaces since 2018. Sadly, we have not seen the necessary actions to stop these toys from making it into the hands of children. We support the report’s call for reform and hope to see the new government prioritise this long-standing issue to protect children and responsible businesses.”

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