commercially connected uk commercial law updates

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Monthly publication June 2021 Commercially connected UK commercial law updates Key developments European Commission adopts UK adequacy decisions Modern Slavery Bill introduced to Parliament OPSS guidance for businesses selling goods into Northern Ireland Taskforce on Innovation, Growth and Regulatory Reform report published 01 03 02 04

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Monthly publication

June 2021

Commercially connected UK commercial law updates

Key developments

European Commission adopts UK adequacy decisions

Modern Slavery Bill introduced to Parliament

OPSS guidance for businesses selling goods into Northern Ireland

Taskforce on Innovation, Growth and Regulatory Reform report published

01 03

02 04

Commercially connected UK commercial law updates

This report is intended to give you a general overview of legal developments in certain areas. It is provided for

information purposes only and is not intended to be comprehensive or to constitute advice on which you may rely.

Introduction

Welcome to the Eversheds Sutherland UK monthly commercial law update, covering

both case law and regulatory developments.

Select a topic below to take you to the relevant section:

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02

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Commercial – general

EU relations

Consumer law

Cyber security

Data protection and privacy

Technology law

Commercially connected UK commercial law updates

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Commercial – general

Development Summary Impact

Exclusion clause in

standard terms found to be unreasonable under UCTA

In Phoenix Interior Design Ltd v Henley Homes plc and another the High

Court found that a provision in standard terms and conditions stating that a seller would have no liability to the buyer if the total price of the contract goods was not paid by the due date was unreasonable and therefore unenforceable under the Unfair Contract Terms Act 1977. The Court’s reasons included:

• this was an unusual clause and a more common anti-set off

clause (ie a clause preventing the buyer from withholding disputed sums from payment of the price pending settlement of a dispute) would have sufficed to protect the seller’s position

• despite being unusual the clause was not brought to the buyer’s attention; instead it was “tucked away in the undergrowth of the Standard Terms and Conditions without any particular highlighting of the consequences of even the slightest delay in

payment” • the effect of the clause was that even a slight delay or reduction

in payment might leave the buyer with no remedy in respect of goods that were not of the requisite quality; this was further complicated by the fact that in the context of the particular contract it would not necessarily be clear exactly when the due date for payment fell

This case highlights the risk of including overly aggressive exclusion clauses in standard terms, particularly when their effect is to leave the customer with no remedy in a breach situation.

Court of Appeal

finds that party

In Gregor Fisken Limited v Bernard Carl the Court of Appeal followed

established case law in finding that where a person signs a contract with

Commercially connected UK commercial law updates

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Development Summary Impact

executed contract as principal not agent

no qualification as to the capacity in which they sign, they will be a party to the contract unless the document makes it clear that they contracted as an agent. Case law also provides that the description of a person as an agent in the heading of a contract will not be sufficient to

outweigh the effect of an unqualified signature; it would need to be apparent from the rest of the document that the person was not intended to be bound as principal.

In this case, the heading to a contract for the sale of a classic car described the buyer as Gregor Fisken Limited (as agent for an undisclosed principal) but the contract was signed by Mr Fisken of Gregor Fisken Limited without qualification. It was held that Gregor

Fisken Limited was the party to the contract.

Contract construction when general and special

terms conflict

In Septo Trading Inc v Tintrade Limited the Court of Appeal gave a helpful summary of how to approach contract construction when general terms incorporated into a contract allegedly conflict or are inconsistent

with a special term that is expressly agreed by the parties.

In order to be inconsistent a term must contradict another term or be in conflict with it so that effect cannot fairly be given to both clauses. If a term simply qualifies or modifies another term that is not sufficient for inconsistency. In deciding whether a special term is inconsistent with a general term it will be relevant to consider whether the general term effectively deprives the special term of any effect and whether the special term is part of the main purpose or a central feature of the

contract.

If there is an inconsistency then the prevail clause (if there is one in the contract) will determine which provision takes precedence.

Modern slavery developments

The Modern Slavery (Amendments) Bill has been introduced to the House of Lords. This seeks to:

• introduce minimum and meaningful disclosure and transparency standards in supply chains with the ability for the Independent Anti-slavery Commissioner to issue a formal warning to a commercial organisation that fails to meet these requirements. These requirements are:

o publish and verify information about the country of origin of sourcing inputs in the supply chain

o arrange for credible external inspections, external audits and unannounced external spot-checks

o report on the use of employment agents acting on behalf of an overseas government

• make it an offence for a person to knowingly or recklessly include false or incomplete information in a modern slavery statement

• make it an offence for a commercial organisation to source from suppliers or sub-suppliers which fail to demonstrate minimum standards of transparency after having been issued

with a formal warning by the Independent Anti-slavery Commissioner

This is a private member’s bill and as such it may not progress further. That said, the Government has committed to statutory reform of the Modern Slavery Act 2015 and so this Bill may prompt that reform or may be amended during its passage through Parliament to incorporate the Government’s intended reforms.

Separately, the Home Office has published revised guidance on how to identify and support victims of modern slavery. In England and Wales

this constitutes statutory guidance (under Section 49(1) of the Modern Slavery Act 2015) and in Scotland and Northern Ireland the guidance has non-statutory status.

Commercially connected UK commercial law updates

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Development Summary Impact

Temporary insolvency measures extended

The Corporate Insolvency and Governance Act 2020 (Coronavirus) (Extension of the Relevant Period) (No 2) Regulations 2021 have been passed, extending the period during which the COVID-19 related temporary restrictions on use of statutory demands and winding up

petitions apply until 30 September 2021. These regulations do not extend the small supplier exemption from the restrictions on termination of supply contracts or the suspension of liability for wrongful trading, both of which end on 30 June 2021.

Prompt Payment Code changes from

1 July 2021

A reminder that from 1 July 2021 the Prompt Payment Code requires signatories to pay 95% of invoices from small businesses within 30

days. The target for larger businesses remains 95% of invoices within 60 days.

CMA consults on proposed UK

Vertical

Agreements Block Exemption Order

The Competition and Markets Authority (“CMA”) has launched a consultation on a proposed UK Vertical Agreements Block Exemption

Order.

Following expiry of the post-Brexit transition period the EU Vertical Agreements Block Exemption became retained law in the UK in respect of in-scope vertical agreements that impact competition within the UK. This is due to expire on 31 May 2022. The CMA’s proposed legislation would replace the existing regime from 1 June 2022. The proposal includes the following changes to the existing regime:

• clarification of the boundary between active and passive sales,

particularly in the context of the growth in online sales • removing from the list of hardcore restrictions indirect measures

restricting online sales, namely the prohibition on dual pricing and the requirement for overall equivalence

• wide most-favoured nation clauses to be added to the list of hardcore restrictions

The CMA also intends to create guidance on the new Order which will, amongst other things, provide more guidance on resale price maintenance and on agency agreements and will include considerations relating to environmental sustainability.

The consultation closes on 22 July 2021.

Note that this UK consultation is entirely separate from the EU

consultation on the future of the EU Vertical Restraints Block Exemption. The EU legislation will continue to be relevant to UK businesses operating in the EU.

CMA consults on OIM

The Competition and Markets Authority has launched a consultation on how the new Office for the Internal Market (“OIM”) will work. The OIM is established by the UK Internal Market Act and its role is to support the

effective operation of the UK internal market, including by considering and reporting on barriers to trade and investment and regulatory

divergence. Consultation closes on 22 July 2021.

IPO consultation on UK regime for

exhaustion of IP rights

The UK Intellectual Property Office (“IPO”) is consulting on the UK’s future regime for exhaustion of IP rights, the system which enables the

secondary market for the cross-border supply of IP protected goods to function. Pre expiry of the post-Brexit transition period the UK was part of the EEA regime, under which once an IP protected good is put on the market with the right-holder’s consent in one EEA state the right-holder’s rights are exhausted and they cannot object to further trade in that good within the EEA (also known as parallel trade). Following expiry of the post-Brexit transition period the UK needs to decide what

its new system should be.

The four regimes under consideration are:

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• UK+ - this is the default position following Brexit and it means that parallel imports from the EEA into the UK are permitted

• National – rights are exhausted in the UK only when the goods are put on the market in the UK; parallel imports into the UK

are not allowed (although it is noted that this option would be incompatible with the Northern Ireland Protocol and so it is included for completeness only)

• International – rights are exhausted in the UK when goods are put on the market anywhere in the world; parallel imports from any country are allowed

• Mixed – specific goods are subject to one regime and all others

to a different regime

With each option, parallel exports from the UK to any other country would only be permitted if the relevant country allows this.

The consultation closes on 31 August 2021.

International trade

developments

The accession process for the UK to join the Comprehensive and

Progressive Agreement for Trans-Pacific Partnership (“CPTPP”) has commenced. This is a comprehensive free trade agreement to which Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam are currently party. The UK Government has also published a policy paper setting out the UK’s strategic case for joining the CPTPP and its approach to negotiations.

The UK, Norway, Iceland and Liechtenstein have announced that they

have reached an agreement in principle for a new trade deal.

The UK and Australia have reached an agreement in principle for a free trade agreement.

The UK Government has launched a consultation on the UK’s trading arrangements with India and where changes and improvements could be made. The consultation closes on 31 August 2021.

TIGRR report published

The Taskforce on Innovation, Growth and Regulatory Reform (“TIGGR”) has published an independent report, requested by the Prime Minister. TIGRR was given the remit of looking at ways to refresh the UK’s approach to regulation post Brexit in order to, in its words, “take advantage of our new-found regulatory freedom, to support innovation and growth”.

The overarching recommendations contained in the report are that UK regulation should be proportionate, forward-looking, outcome-focused, collaborative, experimental and responsive. It also recommends a “one in, two out” approach to regulatory reform.

Recommendations with potential impact in the Commercial sphere include the following:

• restore a common law principles based approach to financial

services regulation including amendment of MiFID II

• deliver a regulatory framework to support UK global leadership in fintech and digitalisation of financial services infrastructure including mandating the expansion of Open Banking to Open Finance

• replace the UK GDPR with a new, more proportionate UK

Framework of Citizen Data Rights to give people more control of their data while allowing data to also flow more freely (see the data protection section below for more detail)

• create a smart energy grid for the future including creation of a platform to facilitate data-sharing across the energy sector and consistent technical and regulatory standards for energy smart appliances

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• reform the current UK regulatory framework governing energy generation and distribution to match the Government’s ambitions for green growth and net zero

• create a new regulatory framework to support UK leadership in

the future of transport including for autonomous and other disruptive mobility solutions

• establish a new UK clinical trials regulatory landscape and a clear regulatory pathway for new digital health technology

• liberalise parallel import laws to reduce prices and increase choices for consumers

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Commercially connected UK commercial law updates

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EU relations

Development Summary Impact

Draft Regulations to correct legislative references to TCA

Draft European Union (Future Relationship) Act 2020 (References to the Trade and Cooperation Agreement) Regulations 2021 have been published. These amend references in legislation to the UK-EU Trade and Cooperation Agreement (“TCA”) to reflect the renumbering and error correction exercise carried out for publication of the final form TCA.

OPSS guidance for businesses selling goods into Northern Ireland

The Office for Product Safety and Standards (“OPSS”) has issued guidance on compliance with EU Regulation 2019/1020 on Market Surveillance and Compliance of Products when putting products on the market in Northern Ireland (“NI”). As a result of the Northern Ireland Protocol (which applies EU rules on goods to NI) this EU Regulation

comes into force in NI on 16 July 2021. It requires that, for certain types of products (broadly those that are subject to specific EU legislation including but not limited to machinery, PPE, radio equipment and toys) to be placed on the NI/EU market, there has to be an economic operator based in the NI/EU that is responsible for compliance tasks.

The guidance is of particular relevance to businesses that sell online to

consumers in NI, as if the online sale of a product is targeted at a customer in NI it is considered placed on the NI market.

In order to comply with the Regulation there must be a manufacturer, importer, authorised representative or fulfilment service provider in the supply chain that is established in NI/EU and they are required to fulfil specified compliance duties.

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Policy papers and reports of interest

The Cabinet Office has published a policy paper on the UK’s new relationship with the EU which sets out at a very high level what has changed and what remains the same following Brexit.

The Institute for Government has published a report on managing

regulatory divergence between the UK and the EU, warning that at present there is weakness and confusion around the mechanisms for assessing regulatory reform and tracking EU developments.

EU consultation on R&D and specialisation

agreement block exemptions

The EU is consulting on revising the block exemptions on research and development and specialisation agreements which are due to expire on 31 December 2022. Consultation closes on 5 July 2021.

Evaluation of the

eIDAS Regulation and proposed

framework for European Digital Identity

The European Commission has proposed a framework for a European

Digital Identity. This will come into force via changes to the European electronic identification and trust services (eIDAS) Regulation.

Separately, the European Commission has prepared a report evaluating the eIDAS Regulation concluding that, whilst the Regulation has provided the foundations for the development of an identity and trust services market in the EU, it would benefit from a number of improvements in terms of efficiency, effectiveness, coherence and relevance to deliver on new objectives and under new (post pandemic) circumstances.

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Consumer law

Development Summary Impact

NAO report on OPSS

The National Audit Office (“NAO”) has released a report on protecting consumers from unsafe products. It finds that although the Office for Product Safety and Standards (“OPSS”) has made good progress in strengthening the consumer product safety regime, it faces major challenges regulating safety in a changing marketplace, particularly in

the context of increased online sales and the increase in smart devices. Following Brexit the OPSS is now responsible for product safety regulation that was previously carried out at EU level. The report notes that OPSS operations tend to be reactive rather than proactive resulting from risk assessment.

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Cyber security

Development Summary Impact

Research into cyber security sector

The UK Government is carrying out research to understand the UK cyber security sector and how it is growing in order to inform policy in this area. Participants in the UK cyber security sector have been selected and will be contacted by Ipsos MORI.

Research into business use of connected devices and cyber security risk

The Department for Digital, Culture, Media & Sport is carrying out research into how UK businesses procure, use and manage connected devices within their networks in the context of cyber security risk awareness and management. Telephone interviews will take place in June and July.

NCSC outlines what board members should know about ransomware and what they should ask their technical experts

A blog post published by the National Cyber Security Centre (“NCSC”) sets out why board members should concern themselves with ransomware, what board members need to know about ransomware and what board members should ask their technical experts about ransomware.

The blog reminds board members that cyber security within a company is the responsibility of the board and that ransomware attacks targeted

at companies are increasing in frequency.

The blog addresses five specific questions for board members to ask their technical experts, namely:

• how would we know when a ransomware incident occurred?

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• what measures should the organisation take to minimise damage to our network caused by a ransomware attack?

• does the organisation have an incident management plan for cyber-attacks; how do we ensure that the plan is effective?

• does our incident management plan meet challenges posed by ransomware incidents?

• how is our data backed up? would backups be unaffected by a ransomware attack?

NCSC updates alert on ransomware

incidents affecting the UK education sector following further cyber-

attacks on the sector

In light of a further increase in ransomware attacks against establishments in the UK education sector, on 4 June 2021 the NCSC

published an updated version of its Alert regarding ransomware attacks on the UK education sector by cyber criminals.

The updated Alert lists further trends seen in ransomware attacks on

the UK education sector, as well as providing mitigation advice to help protect UK education establishments from being targeted by cyber criminals.

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Commercially connected UK commercial law updates

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Data protection and privacy

Development Summary Impact

European Commission adopts UK adequacy

decisions

The European Commission has adopted two adequacy decisions covering transfers of personal data from the EU to the UK – one agreement under the GDPR and the other

under the Law Enforcement Directive.

This means that the UK is recognised formally as providing an “essentially equivalent level of protection” to personal data flowing from the EU. Therefore, organisations may facilitate transfers from the EU to the UK without the need for specific transfer tools and supplementary measures.

The agreements reference the UK’s data protection legal

rules, which continue to be based on the GDPR and Law Enforcement Directive, and the UK being subject to the jurisdiction of the European Court of Human Rights as key factors in support of the adequacy findings. Therefore, there is somewhat of a shadow over the longevity of the agreements, due to the TIGGR proposals for a new UK data protection framework and the UK government’s review of the

Human Rights Act 1998 by an independent expert panel.

The agreements also contain a sunset clause which limits the duration of their validity to four years after their entry into force. During these four years, the Commission will monitor legal developments in the UK and can intervene to renew the

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adequacy finding at any point if the UK’s privacy protections are deviated from.

The GDPR adequacy finding excludes transfers for the purposes of UK immigration control to reflect the recent

Court of Appeal judgment.

European Commission adopts new standard contractual clauses

The European Commission has adopted two new sets of standard contractual clauses. One set is for controllers and processors under Article 28(7) GDPR (the “Article 28 SCCs”); the other set is for the transfer of personal data to third countries (the “Transfer SCCs”).

The new sets of clauses reflect updated requirements under the GDPR and the European Commission says they will offer more legal predictability to businesses in the form of an easy-to-implement template. Clauses issued by the

European Commission are no longer automatically adopted in the UK post Brexit, and so currently these clauses only

provide an adequate safeguard for transfers from EU countries to countries without adequate protection. The ICO has announced that it is planning on issuing UK specific contractual terms this year.

The Transfer SCCs have attracted particular attention as a means of plugging a compliance gap brought about by the Schrems II judgment, but the Transfer SCCs in and of

themselves are not sufficient to comply with the judgment. They require that the parties, prior to entering into the SCCs, have carried out an assessment of the laws and practices and that they respect the fundamental rights and freedoms of data subjects. If the Transfer SCCs are an appropriate tool for your organisation’s data transfers, you will need to audit all the data transfer agreements you currently have in place

(internally and with third parties) and only then – where applicable – ensure that the body of those contracts are updated to refer to the Transfer SCCs, that the security annex is updated and that the Transfer SCCs are appended accordingly (and are complied with in practice).

In terms of implementing the Transfer SCCs, there are three

key dates to be aware of:

• the Transfer SCCs can be used to safeguard transfers from 27 June 2021 onwards

• the existing standard contractual clauses will not be repealed for another three months, on 27 September 2021. Until that date, you have a choice of whether to use the existing standard contractual

clauses or the Transfer SCCs to safeguard your transfers. After that date, you must use the Transfer

SCCs • lastly, where the existing standard contractual

clauses are used to safeguard any transfers that continue beyond 27 September 2021, then these must be replaced by the Transfer SCCs by 27

December 2022

Click here to read our more detailed briefing on the Transfer SCCs.

The Article 28 SCCs serve a different purpose – they provide

a ready-made annex which controllers and processors can choose to insert into contracts to meet the requirements of Articles 28(3) and (4) GDPR – which to date have commonly been addressed by organisations in their own different ways.

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Even though the Article 28 SCCs contain certain provisions that favour a particular party (controller or processor), they generally present a balanced position and are optional. So whilst the clauses provide a useful benchmarking tool, we

expect many organisations to continue using their own precedents when negotiating data processing clauses in order to secure more favourable terms.

EDPB adopts final recommendations on supplementary

measures for data transfers

The European Data Protection Board has published the final version of its Recommendations 01/2020 on measures that supplement transfer tools to ensure compliance with the EU

level of protection of personal data (“EDPB Recommendations”).

The EDPB Recommendations are designed to be read in tandem with the new Transfer SCCs and set out a six step plan to help organisations assess third countries and identify

appropriate supplementary measures to be implemented on

a case by case basis where needed. The EDPB also released an infographic which provides an illustrative summary of the necessary steps.

The EDPB updated the recommendations (which were originally published in November 2020) to reflect the European Commission’s position on organisations being able to consider practical experience of public authorities’ access

to personal data. In summary, if “problematic legislation” or practices are identified in the destination country which impinge on the effectiveness of the appropriate safeguards of the transfer tool(s), the EDPB now recommends the exporter to consider whether the laws/practices will be applied in practice to the relevant data, taking into account the importer’s experience and sector.

ICO calls for views on first chapter of draft anonymisation, pseudonymisation

and privacy enhancing technologies guidance

On 28 May 2021, the Information Commissioner’s Office (“ICO”) issued a call for views on the first chapter of its draft guidance on anonymisation, pseudonymisation and privacy enhancing technologies.

The first chapter, “Introduction to anonymisation”, explores

issues surrounding anonymisation and pseudonymisation from a data protection law angle (eg when personal data can be considered to be anonymised; whether it is possible to anonymise data adequately to reduce risks; the potential benefits of anonymisation and pseudonymisation).

Further draft chapters will be published this summer and autumn.

Views should be submitted to [email protected]. The consultation on the first draft chapter will close on 28

November 2021.

Court of Appeal holds DPA 2018

“immigration exemption” incompatible with GDPR

The Court of Appeal has issued its judgment in the case of The Open Rights Group & Anor, R (On the Application Of) v

The Secretary of State for the Home Department & Anor.

The case relates to the lawfulness of the “immigration exemption” under Schedule 2 paragraph 4 of the Data Protection Act 2018 (the “DPA 2018”), which allows certain aspects of the DPA 2018 to be disapplied if their application is likely to prejudice immigration control.

The appellants argued that the immigration exemption is

incompatible with Article 23 of the GDPR, the provision authorising this type of exemption, and/or incompatible with

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Articles 7, 8 and 52 of the Charter of Fundamental Rights of the European Union (the “Charter”).

The Court of Appeal held that the immigration exemption is incompatible with Article 23 of the GDPR and the appeal was

allowed. In light of this, the Court found it unnecessary to address the appellants’ additional contention regarding incompatibility with the Charter.

The Court of Appeal deferred its decision on relief and invited further submissions on the appropriate remedy.

The judgment has been welcomed as part of the UK’s efforts to secure an adequacy decision enabling personal data to

flow freely from the EU to the UK.

Taskforce on Innovation, Growth

and Regulatory Reform

recommends replacing GDPR

The Taskforce on Innovation, Growth and Regulatory Reform has issued a report in response to its objective to “look at

ways to refresh the UK’s approach to regulation now that we have left the EU, and to seek out opportunities to take

advantage of our new-found regulatory freedom, to support innovation and growth”.

The report calls for the UK to replace its existing data protection regime (based on the EU GDPR) with “a new, more proportionate, UK Framework of Citizen Data Rights to give people greater control of their data while allowing data to flow more freely and drive growth across healthcare,

public services and the digital economy”.

The taskforce’s proposals include:

• creating a new regulatory infrastructure and exploring the possibility of establishing “data trusts” or “data fiduciaries” in order to give people meaningful control of their data; and

• removing Article 22 GDPR to permit automated

decision-making for machine learning and harness the potential of artificial intelligence.

It will be interesting to observe the role this report has in shaping the UK Government’s policy as regards data protection law and how that may affect the UK’s recent finding of adequacy for data transfers from the EU.

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Technology law

Development Summary Impact

Call for evidence on future of connected and automated mobility

The Department for Business, Energy & Industrial Strategy has issued a call for evidence on the future of connected and automated mobility in the UK in order to inform policy making. It closes on 16 July 2021.

CMA report on algorithms, competition and consumer harm

The Competition and Markets Authority has published the outcome of its consultation on algorithms, competition and consumer harm.

EU Regulation on dissemination of

terrorist content online

EU Regulation 2021/784 on addressing the dissemination of terrorist content online has now been published in the OJEU. It

entered into force on 7 June 2021 and will apply from 7 June 2022.

The Regulation requires hosting service providers to remove or disable access to terrorist content within the EU within one hour of receiving a removal order from a competent authority. It will therefore apply to UK providers who provide their

services in the EU.

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