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COVID-19 Legal considerations: Changing your business model

Legal considerations: Changing your business model

What are the legal considerations businesses should consider when making changes to their business model at pace to navigate the COVID-19 pandemic.

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Isabel Ost - profile image

Director, KPMG Law

KPMG in the UK

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During the COVID-19 pandemic, people in business are having to make strategic decisions at a pace that they would not normally contemplate. We are seeing a rise in businesses reinventing and adapting business models to mitigate the impact of COVID-19 and establishing footing in the new reality.

Two key examples of business model changes include Business to Business (B2B) are rapidly converting to Business to Consumer (B2C), such as wholesale food suppliers and events caterers adapting to taking online grocery and meal orders from households.

Also, the forced closure of shops and venues is causing businesses to pivot from the real, physical world of shops and studios to online sales of goods and services.

Careful thought, upfront, of the commercial legal and regulatory considerations should be given and some of these are noted below.

Moving from Physical to Online Sales: Key Considerations

  • Brand and Asset Protection, with a wider reach in terms of audience and profile, IP assets of the business must be protected, and the reputation of the brand maintained or enhanced (e.g. by meeting new commitments).
  • Health and Safety, businesses have a duty of care to personnel and customers, for face to face interactions, consider what policies are required e.g. doorstep delivery etiquette, use of PPE by frontline and middle/back office staff.
  • Infrastructure, does the company have an existing online infrastructure, or does it need to consider new channels, including partnering models?
    For more information, please see KPMG’s article, here.
  • Insurance, are adjustments to the level and scope of insurance cover required? Businesses are generally bound to notify planned changes and failure to do so could risk invalidating the insurance.
  • Privacy and Data Protection, due to increased capability and need to collect data relating to individuals, a move to online is likely to bring greater compliance responsibilities. Also the use of cookies and similar technologies, to increase the efficiency of the website and/or collect data about visitors’ use of the site, are regulated. Advertising technology or “adtech” (allowing advertisers to compete for digital space) is an area that is under particular scrutiny by the Information Commissioners Office (ICO).
  • Restrictions and Permissions, consider the terms of any regulatory licences and/or, the terms of existing upstream or downstream contracts (e.g. software, brand or product licences) where the business is looking to rely on existing supply chains and infrastructure to fulfil demand.
  • Risk Profile, consider increased risks, e.g., an exercise instructor may not have the same visibility over class participants, limiting their ability to supervise in the same way they would in physical classes. New tailored disclaimers and/or amendments to existing liability clauses may be required.
  • Sales Systems/Practices and Regulatory Compliance, an extensive body of e-commerce and consumer protection laws govern online sales, covering advertising and marketing practices pre-sale information, anti-discrimination, and the terms and conditions of the sale itself.
  • Strategy for managing increased demand, an immediate peak in demand following go-live, or market fluctuations need to be managed. Some retailers are having to close their doors to new customers. Others are taking on temporary staff or co-ordinating with other entities to share resources (competition law permitting). For more information see our articles · ‘Changes to Business Models’ and ‘Additional Staff’.

 

Moving from B2B to B2C : Key considerations

  • Brand and Asset Protection, clarity over the goals and objectives of the adjustment will help identify how much emphasis is to be placed on enhancing consumer confidence and brand value during this time. Failure to secure sufficient operational resilience to meet service levels could potentially do more harm than good.
  • Health and Safety, with a duty of care to both its personnel and its customers, in face to face interactions, what policies are required? Consider doorstep delivery etiquette, and use of PPE by frontline and middle/back office staff.
  • Infrastructure, does the company intend to make use of existing supply and distribution infrastructure, or does it intend to branch out and establish relations with new business partners? These relationships will be paramount in ensuring the quality of service and maintaining and enhancing the brand’s reputation. For more information, please see our articles: Business response to COVID-19 supply chain disruption and Supply Chain Negotiations.
  • Insurance, are adjustments to the level and scope of cover required? Businesses are generally subject to a duty to notify planned changes and failure to do so could risk invalidating the insurance. 
  • Privacy and Data Protection, a move from B2B to B2C is likely to bring about greater responsibilities in compliance due to the increased need to collect data relating to individuals. Marketing activities to individuals are strictly regulated and also any profiling or other new or unexpected use of personal data will need careful thought to ensure compliance.
  • Restrictions and Permissions, consider the terms of any regulatory licences or, where the business is looking to rely on existing supply chains and infrastructure to fulfil demand, the terms of existing upstream or downstream contracts (e.g. software, brand or product licences).
  • Risk Profile, similar to B2B sales, the business will want to make sure that its liabilities towards the end customer are appropriately backed-off throughout the supply chain. The business will also be subject to a more stringent package of consumer protection laws in its sales. Please see the row entitled ‘Sales Systems/Practices and Regulatory Compliance’ below for more.
  • Sales Systems/Practices and Regulatory Compliance, it is likely that changes will need to be made in order to cater for the enhanced rights that consumers enjoy. Consumer laws impact everything from the language in which contracts are to be written, to the returns policies which must be offered.
  • Strategy for managing increased demand, an immediate peak in demand following go-live, or market fluctuations will need to be managed. Some retailers are having to close their doors to new customers. Others are taking on temporary staff or co-ordinating with other entities to share resources (competition law permitting).  For more information, please see our articles: Changes to Business ModelsIndustry Collaborations and Additional Staff.

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KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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