Policy paper

Non-discrimination of goods: general principles

Updated 17 November 2020

What are we going to do?

For the UK internal market to operate effectively, businesses will need to be able to trade freely across the four nations of the UK as they do now. The principle of non-discrimination supports this aim by ensuring goods from all parts of the UK can be sold in other parts without facing unjustified discrimination.

Thanks to this principle any discriminatory measures will be of no effect in the part of the UK where the good is being sold. This will ensure businesses do not face discriminatory trade barriers.

How are we going to do it?

The sale of many types of goods is governed by various regulations that may impose requirements upon them before they can lawfully be sold. Where these relate to the good itself or its presentation (labelling for example) the mutual recognition principle will apply. However, the non-discrimination principle is needed to cover regulation about the ‘manner of sale’, such as who can buy or sell something or the terms of a sale, how goods are transported or stored and how the business that makes and sells the products conducts itself.

Any of these requirements could be directly or indirectly discriminatory depending on the requirement and how it is applied to the sale of the good concerned. The Bill expressly outlaws both, subject to limited and proportionate exceptions known as legitimate aims.

Direct discrimination

A requirement contained in law will be considered directly discriminatory if, because of where the goods come from, it puts a good coming from one part of the UK into another part of the UK at a disadvantage when compared to the locally produced good. The disadvantage will occur where the requirement placed on the incoming good does not apply to the locally produced good.

An example of this would be a rule that only goods from Wales must be chilled. This would be direct discrimination as it openly affects the sale of the incoming good in a negative way by making it more difficult or less attractive to buy or sell the good.

A regulatory requirement will not be directly discriminatory where it can reasonably be justified as a response to a public health emergency.

Indirect discrimination

Where a requirement is not directly discriminatory, it may still be considered indirectly discriminatory. Indirect discrimination may not necessarily be obvious. The requirement may appear to apply equally to goods that are the same or similar, yet, has the effect of placing the incoming good at a disadvantage. Such requirements could potentially distort the UK’s internal market, harming competitiveness by creating barriers to trade and limiting consumer choice.

The indirect discrimination provisions in the Bill will ensure that businesses are protected from discriminatory requirements that may have been disguised as being neutral when in practice they are not.

The Bill sets out the criteria that must be met for a requirement to be indirectly discriminatory:

• it does not directly discriminate
• it applies to or in relation to an incoming good in a way that puts them at a disadvantage
• it has an adverse market effect
• it cannot reasonably be considered a necessary means of achieving a legitimate aim

Goods will be placed at a disadvantage if the requirement makes selling or buying goods more difficult or less attractive when compared to the requirement not applying. A hypothetical example would be where an English requirement imposed a rule that dairy goods can only travel 20 miles from the site of production. Although dairy goods from other parts of the UK would not be expressly banned, the effect would be to exclude products from Wales, Scotland and Northern Ireland.

Requirements that favour goods from particular parts of the UK over goods from other parts of the UK could distort competition within the UK internal market. The adverse market effect condition seeks to constrain the harmful effects these requirements could have on intra-UK trade.

A requirement will have an adverse market effect when it puts the incoming good at a disadvantage, and where that disadvantage causes a significant adverse effect on competition. Comparable goods include goods that a purchaser would reasonably believe are interchangeable with the incoming good. An example of this is where an alike or similar product could be substituted.

Legitimate aims

There will be certain situations where permitting requirements that result in indirect discrimination would be justifiable in the public interest. The Bill will allow for indirect discrimination where it is necessary to achieve a legitimate aim for the protection of the life or health of human, animal or plants; and the protection of public safety and security.

An example of where a legitimate aim may be used is where a disease has been identified in cattle with evidence that processing meat from these animals to enter the human food chain, could pose a risk to peoples’ health. In this circumstance the legitimate aim could be invoked to ban the transportation and processing of meat from the affected cattle to ensure the public’s health is protected.

Exclusions

A statutory requirement that is in force before the day the Bill comes into force will not be subject to the non-discrimination principle. Further details on exclusions can be found in the policy statement on exclusions.

Background

Non-discrimination is common to many internal market systems around the world such as Australia, Switzerland and Canada. The principle will ensure that business or consumers in one part of the UK are not favoured over others, and that one part of the UK cannot create the potential to undercut businesses from a different part.

Considerations of fairness are fundamental to a viable internal market system, to prevent trade distortions and not allowing one part of the UK to discriminate against businesses from another part.

Will the non-discrimination principle replicate similar EU provisions?

We have designed a bespoke approach to non-discrimination based on the particular circumstances of the UK. Under UKIM, non-discrimination will sit alongside and complement the main principle of mutual recognition, applying to a list of ancillary areas that fall out of scope of mutual recognition. In these areas the tests will apply to decide whether a good has been either directly or indirectly discriminated against.

When does mutual recognition apply and when does non-discrimination apply – what if they both apply?

Requirements which fall within mutual recognition are excluded from the application of the non-discrimination principle by definition. This is because if mutual recognition applies the good already has market access free of relevant requirements which would otherwise apply and so cannot suffer discrimination.