Trading Standards body calls for windfall tax on online marketplaces

The Chartered Trading Standards Institute (CTSI) has called for a windfall tax on online marketplaces to be introduced to fund measures that help safeguard consumers when buying products online.

In a new report released on Friday, the organisation has argued consumers are being put at risk by dangerous products for sale by third-party sellers on online marketplaces.

The "Mind the Gap Between the Chain and the Platform" report, informed by evidence sessions held by the all-party parliamentary group on consumer protection, also highlights that outdated legislation designed for bricks-and-mortar retailers is not fit for purpose in the digital age, and calls for new measures to ensure its relevance to contemporary shopping habits.

The report urges the next government to introduce a raft of new measures, including:

• 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.
• New rules to make online marketplaces and other platforms responsible for the legal compliance of products sold by third-party sellers on their platforms.
• 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.
• The expansion of the legal definition of an ‘economic operator’ to include online marketplaces and fulfilment houses.
• The introduction of consumer rights lessons into Citizenship and Personal, Social, Health and Economic (PSHE) syllabuses in schools to empower and educate the next generation.

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 that are most vulnerable due to the cost of living crisis. The report does highlight examples of voluntary safety initiatives some online marketplace retailers have created and instigated, which the CTSI said they would like to see replicated across other platforms.

The British Toy and Hobby Association, 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 per cent being unsafe for a child to play with. Electrical Safety First — another APPG participant — found that 93 per cent 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 per cent 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 per cent considering online marketplaces are trustworthy.

“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,” John Herriman, CTSI chief executive, commented.

“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 CTSI is secretariat to the APPG on consumer protection.