There’s something very familiar about all this…

May 4, 2017

 The technological developments depicted in Back to the
Future Part II – the one in which Marty McFly and Doc Brown travel forward from
the ‘reality’ of 1985 to an imagined future in 2015 – seem almost banal by the
standards of today’s science fiction movies: The skies of Hill Valley are
filled with unmanned drones that film the humdrum activities of its
materialistic denizens who, in turn, idle away their time perusing flat screen
TVs, playing hands-free video games, fiddling with tablet computers and paying
for fast food using thumbprint scanners. 

But, for us
real-world 2017-dwellers who while away our own precious time observing and
predicting retail and consumer trends, many of the film’s predictions do seem
to function as an impressively accurate snapshot of the current state of play
in the field of disruptive technologies. For lawyers, they also act as handy
reminders of how, when new technologies are adopted and give rise to legal
issues, they have a tendency simply to be accommodated by existing legal
principles or, if necessary, catered for through new law, before quickly
becoming mainstream and humdrum.

What kinds of
disruptive technologies of the present and near-future are on the horizon for
the retail and consumer sector and what types of legal issues do they give rise

Roads? Where we’re going, we
don’t need roads

For the UK’s largest
online retailers – the likes of Amazon, Argos, Apple and Tesco – the commercial
opportunities presented by internet technologies are well known. The ability to
enter into contracts with customers instantaneously, wherever they may be – not
only in their homes, but also while they are mobile – continues to have an
incubating and transformative effect on those retailers who successfully
embrace innovation.

However, there are
risks and costs. For example, when consumers buy goods online they naturally
expect them to be delivered direct to their houses or offices without delay.
Unfortunately, this is expensive and it accounts for a disproportionate share of
retailers’ overall delivery costs – hence the race to solve what is referred to
as the ‘last mile’ problem. Among the solutions that are currently in play are:

Amazon’s PrimeAir
service, in which Amazon aims to use unmanned flying drones to deliver packages
to customers in less than 30 minutes;

autonomous delivery robots that are designed to deliver packages to homes from
either stores or specialised hubs within a 3-mile radius and a 5 to 30 minute
timeframe; and

Piaggio’s Gita robot
which can apparently also deliver goods to consumers, ‘rolling’ along at speeds
of up to 22mph and carrying up to 18kg of cargo on an 8 hour battery life.

Each of these
(arguably ambitious) potential solutions will no doubt need to overcome
technical, commercial and practical hurdles, not least persuading retailers and
consumers to adopt them. The key regulatory hurdles arise because of the need
to help ensure the safety of using autonomous and unmanned devices in public
spaces. Here, the robots are currently stealing a march on the drones, which
are perceived as being inherently more dangerous. Indeed, the increased use of
autonomous devices seems likely to lead to some far-reaching adjustments in the
interplay between product liability and negligence law in determining fault,
apportioning liability and allocating the cost burden between individual
consumers, retailers, manufacturers, other members of the supply chain and
their respective insurers.

Whichever solution
to the ‘last mile’ problem turns out to be the most successful, one likely
disruptive outcome is that, in future, there will be fewer jobs for the armies
of human drivers (and riders) who are currently engaged by retailers to deliver

Technology has
already disrupted the traditional employer-employee relationship in this area –
because the delivery drivers’ precise employment status tends to be left
ambiguous (they are archetypal participants in the often-maligned ‘gig
economy’). This has already led to disputes. If autonomous vehicles do begin making
driving jobs obsolete, drivers will seek to test their employment status yet
further, potentially leading to industrial unrest and certainly to more
instructions for employment lawyers.

Behind the scenes,
lawyers are helping to draft and negotiate appropriate service level and
technology licensing agreements that function as the commercial ‘glue’ that,
metaphorically, will keep the ‘droids on the street and drones in the air.

Here’s my card. Scan it, I’m

Online retailers are
continually vying for consumers’ attention. Even if they succeed, however,
sales must be closed straightaway because we consumers are an inattentive and
fickle bunch, with an annoying tendency to change our minds, lose interest and
switch off. The upshot is that online payment systems need to be as simple and
convenient as possible or, in retailer-speak, ‘frictionless’.

Pure play online
retailers grasped the importance of simplicity and convenience in payment
systems many years ago. Most notably, Amazon patented its ‘1-Click’ system with
the United States Patent and Trademark Office in 1999.

Fast-forward to
2017, however, and ease of payment remains a key concern. Consumers now
predominantly initiate their online retail experiences through their mobile
devices, rather than through traditional desktop and laptop computers.
Increasingly, they also conclude sales on mobile devices. A significant
proportion, however, move to their traditional desktop or laptop devices in
order to conclude sales. Retailers know this and are keen to ensure they do not
shed sales to more mobile-savvy competitors as a result. Invariably, retailers
who do not supply compelling mobile apps – or at least ensure their traditional
websites work seamlessly on mobile devices – lose market share.

Step forward the
latest batch of emerging payment technologies:

Digital wallets and payment services. The world’s leading mobile technology players –
Apple, Google, Microsoft and Samsung – are all active in the contactless
payment space:

o   ‘Apple Pay’ is a digital wallet and mobile
payment service that uses Europay, MasterCard and Visa’s ‘EMV’ standard;

o   ‘Android Pay’ and ‘Microsoft Wallet’ are
digital wallet and mobile payment services (developed by Google and Microsoft
respectively) that each use near field communication (NFC) technologies and
Host card emulation (HCE) to emulate electronic identity cards; and

o   ‘Samsung Pay’ supports contactless payment
through both NFC and also magnetic stripe only terminals.

Retailer-based closed loop solutions. Also known as a single purpose card, these
involve credit or gift cards that consumers can use to make purchases from a
single brand. They allow consumers to pre-load funds into a spending account
that is linked to a payment device, such as a wristband or card and can be
reloaded through a variety of mechanisms, including automatic top-up. MCX’s
flagship ‘CurrentC’ product is a good example.

Mobile money. Gaining ground in
developing countries are mobile phone-based money transfer and financing
services such as ‘Mpesa’ and ‘bKash’. These effectively operate as ‘branchless’
banking services that, for a small fee, allow users to deposit and withdraw
money from mobile phone-stored accounts and send balances using PIN-secured SMS
text messages to other users, including to merchants.

These and other
similar technologies are having the effect of pushing traditional card issuers
and payment processors (such as retail banks and credit card companies) further
down the supply chain as the technology companies foster closer relationships
with consumers.

Other services are
cutting the traditional players out of the loop altogether, by increasing
direct links between merchants and consumers – a phenomenon often referred to
as ‘disintermediation’:

P2P mobile payments. So
far, peer-to-peer (P2P) mobile payments have had little impact in the corporate
and wholesale payments sector. But, the proliferating use of smartphones in the
payments world provides an opportunity for banks and retailers to adapt and
consider solutions that cater to users’ multi-device demands. For example, ‘Alipay’
allows payments to be made by scanning bar or QR codes at cash registers and is
accepted at KFC in China and Walmart.

Bitcoin. As well as being a
virtual cryptocurrency, Bitcoin is also used as a payment system (although it
is reliant on intermediary payment service providers such as BitPay and
Coinbase). Blockchain, the technology which underpins Bitcoin, is evolving from
being the mere ‘rails for digital currency’ into a vehicle for smart contracts
and pegged services in the financial services sector. The technology itself is
being touted as fulfilling the role of a financial middleman, by significantly
reducing transactions’ execution timeframes and improving transparency and
security for counterparties. Despite the hype, however, a ‘killer’ application
of Blockchain technologies that rivals Bitcoin is yet to emerge.

In the EU, the key
legal issues that arise with the advent of technology and innovation in the
payment space are the EU Interchange Fee Regulation, the PSD2 (Payment Services
Directive 2), anti-money laundering, data protection and the access to accounts
that banks have to provide to new players.

You did send me back to the
future. But I’m back – I’m back from the future

Retailers now generally
accept that disruptive technologies do not necessarily need to spell doom for
‘bricks and mortar’ stores. It seems that consumers still enjoy going to the
shops and, in particular, want to see, touch, smell, taste and try products
before they buy. Indeed, technological innovations are helping retailers
reinvent the ‘in store’ experience:

Augmented Reality
(AR) technologies allow retailers to create highly immersive customer
experiences and also to bridge the gap between online and in-store shopping
experiences (online experiences tend to be more information-orientated, with
in-store experiences being more experiential). Presumably with this in mind,
the founders of Yihaodian (a Chinese online grocery store) have set up ‘virtual
shops’ in urban public areas that, with the help of AR and Yihaodian’s mobile
app, enable customers to browse, shop and then have groceries delivered
directly to their homes. Using AR virtual stores, Yihaodian has reportedly sold
2 million boxes of milk in less than an hour, obtaining a Guinness World

Apple’s iBeacon
technology, which uses Bluetooth low energy (BLE) to connect consumers’
smartphones with hardware transmitters installed in stores and carries out
functions that include offering consumers special deals and enabling mobile

identification (RFID) technologies use electromagnetic fields to identify and
track objects. Smart shelves, equipped with an RFID reader, can now
continuously scan RFID-tagged items and notify back-end systems about the
location of such items, identifying any that are ‘misplaced’ and updating
inventory systems accordingly.

Amazon Go’s ‘just
walk out’ technology  uses computer
vision, sensor fusion and deep learning algorithms in order automatically to detect
when products are taken from or returned to the shelves. The plan is that
Amazon can run convenience stores where consumers can bypass the check-out
process entirely, being charged automatically via an app.

Many innovations of
this type raise data privacy concerns, because they rely on the processing of
consumers’ personal data. Here, those who collect personal data in the EU need
to comply with the extensive obligations that are imposed by EU data protection
law, as well as respecting the broad rights of the consumers whose data they
are collecting. In addition, retailers and others involved in deploying
innovations of this kind need to be aware that, in the EU, there is a general
absence of legislation that regulates the ownership of data (although there are
laws that can provide protection in relation to some types of data and
datasets, such as copyright, database rights, rights in confidential
information and trade secrets). Due to the way in which data privacy and
intellectual property law interact (and sometimes collide) in this area,
‘monetising’ data is often not quite as legally straightforward as it may seem.

The justice system works
swiftly in the future…now that they’ve abolished all lawyers

Back to the Future
Part II’s forecast that lawyers would be an extinct breed by 2015 turned out to
be wrong. This may disappoint some, although not the unlucky and
underrepresented children of Marty McFly who ended up with long jail sentences
as a result of the ensuing rough justice.

It also means that,
at least for now, we real-world lawyers can continue helping retailers,
consumers and other players in the supply chain successfully navigate through
all the classic legal issues that arise when new technologies are deployed,
including regulatory compliance, employment law, banking and finance, aviation,
insurance, commercial contracts, data privacy, intellectual property rights and
product liability.

Ben Hughes is a senior associate in Bird & Bird
LLP’s commercial group, based in London, who specialises in the legal issues
relating to e-commerce and disruptive technologies generally in the retail and
consumer sector. Email: