The digital age has changed how commercial agents work, from online selling and CRM tools to social media and the data protection rules that come with them. It also feeds directly into an agent’s legal position: the goodwill and customer base built online affect what an agent is owed when the agency ends, and a principal can reasonably expect an agent to keep up with digital ways of working.
This page brings together two contributions: a broad look at the challenges and opportunities of the digital age, and a closer look at the specific risks and rewards of social media. Both are dated 2023, and the area moves quickly, so treat them as a guide to the issues rather than the last word. This is general information, not legal advice.
The short answers
How does the digital age affect a commercial agent’s rights?
The customer base and goodwill an agent builds feed directly into the compensation or indemnity due under Regulation 17 when the agency ends, so growing sales online can increase that entitlement. At the same time, a principal can reasonably expect an agent to use digital tools and reporting, and refusing can risk a breach of the Regulation 3 duty to follow reasonable instructions.
Can an agent get into trouble for social media posts?
Yes. A misleading or defamatory post can expose the agent to liability, and can breach the Regulation 3 duty to look after the principal’s interests and act in good faith, potentially seriously enough for the principal to terminate and claim damages.
Do data protection rules apply to agents operating online?
Yes. Collecting, storing and using data online engages UK GDPR, including obtaining consent and using data only for the purpose it was collected. It is an area often overlooked.
What are the opportunities?
New markets and customers, better efficiency through CRM and automation, and the goodwill built online, which lifts the value of the agent’s termination entitlement.
The digital age: challenges and opportunities
Contributed by Myerson Solicitors LLP, May 2023.
The digital age has brought about significant changes and challenges for commercial agents and principals in the UK, but it has also presented new opportunities for growth and innovation. Below we consider some of those challenges and opportunities, and how they may impact on an agent’s obligations and entitlements under the Commercial Agents (Council Directive) Regulations 1993 (the Regulations).
Challenges of the digital age
- Increased competition: The digital age has made it far easier for new competitors to enter the market, which can lead to increased competition and price pressure for existing principals. Principals must work harder to retain their market position and incentivising their commercial agents to retain and develop goodwill with existing customers is paramount. A failure to do so is likely to result in higher rates of customer migration, resulting in lower sales and ultimately lower commission levels for commercial agents. This would then be reflected in an agent’s compensation or indemnity entitlement pursuant to Regulation 17 upon termination of the agency.
- The need for digital skills: Commercial agents and principals must possess the digital skills necessary to operate in the digital age. These skills include social media management, digital marketing, and data analysis. This can often be a struggle for agents who have previously worked in a more manual fashion. Electronic reporting using reporting software is often an area where agents fall foul, preferring instead to continue to operate in the way they have done for many years. Failing to comply with a principal’s new electronic reporting requirements can result in allegations of breach, such as a breach of Regulation 3 which places a duty on an agent to comply with reasonable instructions given by their principal. It is therefore critical that agents develop the necessary skills to be able to correctly utilise digital reporting software.
- Privacy and data protection: With the increased use of digital technologies comes the need to protect personal data and comply with data protection regulations such as GDPR. Principals and agents should be alive to the obligations imposed on them under the GDPR as a data controller, so they can avoid any unintentional data breaches.
Opportunities of the digital age
The flip side of the digital age is the opportunities it presents, and if used well, technology can have a massive impact on business growth.
- Improved efficiency: The digital age has enabled commercial agents and principals to improve their efficiency and reduce costs through the use of digital tools such as CRM software, automation, and online communication.
- New markets: The digital age has opened up new markets for commercial agents and principals, allowing them to expand their reach and tap into new customer bases both within the UK and further afield. Agents can take advantage of the opportunity this presents to build their customer base, which will be reflected in any termination award should the agency end.
- Innovation: The digital age has created opportunities for commercial agents and principals to innovate and develop new products and services that meet the changing needs and preferences of consumers.
- Online accounts: Technology has paved the way for on-line accounts, with many companies turning to on-line sales as their main method of sales since the pandemic. On-line accounts for many agents have become their most profitable accounts, and are often a source of contention for principals- agents frequently earn very high commission levels on such accounts for what is perceived to be little effort.
In summary, the digital age presents both challenges and opportunities for commercial agents and principals in the UK. To succeed in the digital age, commercial agents and principals must adapt to new technologies and ensure they possess the necessary digital skills, comply with data protection regulations, and innovate to meet the industry’s changing needs.
The digital age also has its pitfalls and can result in inadvertent breach of an agent’s obligations pursuant to the agency agreement and the Commercial Agents Regulations if care is not taken.
How we can help
Our team of experts are ready to assist on all aspects of commercial agency law. We are always happy to have an initial no-obligation chat to help guide you in the right direction. Please do not hesitate to contact us on 0161 941 4000 or via email.
Social media: the legal risks and the upside
Contributed by Suzanne Carr, Senior Associate at Myerson Solicitors LLP, April 2023.
Social media has become an essential tool for commercial sales agents in the UK to promote products, build brand awareness and engage with customers. However, the use of social media also presents legal risks and challenges that commercial agents must navigate to avoid liability.
One of the most significant risks associated with social media use by commercial sales agents is the potential for misleading or defamatory statements. Commercial agents must ensure that any statements made on social media are accurate and not misleading, as they can be held liable for false advertising or other forms of misrepresentation. Additionally, commercial agents must be careful not to make statements that could be deemed defamatory, as this can result in legal action being taken against them.
A sales agent must also remember that he is under a duty under the Commercial Agents Regulations to look after the principal’s interests and act dutifully and in good faith (Regulation 3). If a sales agent is found to have made a misleading or defamatory statement via social media, it is highly likely that the principal will threaten an action in damages for breach of the agency contract and/or breach of the Regulations, or worse, seek to terminate the agency contract on the grounds of repudiatory breach and claim damages for the harm caused by the breach. This is something a sales agent should seek to avoid, as the harm caused to the principal could be substantial and extremely costly for the agent.
Another challenge associated with social media use by commercial agents is the need to comply with data protection and privacy regulations. Commercial agents must ensure that in collecting, storing and using data on social media, they comply with the General Data Protection Regulation (GDPR) in the UK. This includes obtaining explicit consent from individuals before collecting their data and ensuring that data is not used for purposes other than those for which it was collected. Compliance with the GDPR is a complex area and one often overlooked when using social media – the use of an individual’s data is often not given sufficient thought.
Despite these challenges, social media also presents significant opportunities for commercial sales agents to reach new audiences and build brand awareness. By using social media effectively, commercial agents can connect and engage with customers, promote the brand to a wide audience, build long-term relationships that lead to increased sales and revenue, and ultimately generate goodwill for the principal in respect of which the commercial agent will benefit upon termination of the agency. Done well, it is undoubtedly a fantastic tool with which a commercial agent is equipped to expand the customer base, build brand awareness, and ultimately increase sales. Done badly, it could be very damaging.
Upon termination of an agency the sales agent will be entitled to be either compensated or indemnified pursuant to Regulation 17, and in both cases, the expansion of the agent’s customer base combined with an increase in sales, will have a positive effect on the value of this significant termination entitlement.
In summary, social media has become an essential tool for commercial sales agents in the UK, but its use also presents legal risks and challenges that must be navigated to avoid liability. Provided those challenges are successfully navigated, commercial agents can gain significant advantages through effective use of social media.
How we can help
Our team of experts are ready to assist on all aspects of commercial sales agency law. We are always happy to have an initial no-obligation chat to help guide you in the right direction. Suzanne Carr is a Senior Associate at Myerson Solicitors LLP. Please do not hesitate to contact us on 0161 941 4000 or via email.
Related on Agentbase: AI and commercial agents: opportunities and legal implications.
The contributions on this page are general guidance, not legal advice, and reflect the position at the time each was written. Agentbase and the contributing firm accept no liability for any reliance placed on them. Please obtain legal advice before acting on anything set out here.