What just happened?
Blockchain is essentially digital information stored in a public database.[1] This technology is gaining popularity among the luxury retail sector. For example, in 2019 it was announced that LVMH would be launching the first global blockchain, using the Aura platform to allow consumers to trace the origin and authenticity of products.[2]
What does this mean?
This kind of innovation has the potential to revolutionise the luxury industry as it addresses long-standing challenges.
Before the Pandemic, the luxury resale market was expected to grow 12 percent each year and account for 9 percent of the total personal luxury goods market.[3] Despite this, there remained an issue for consumers and brands alike regarding the authenticity of products being sold through online luxury resale platforms.
Blockchain technology can play a role in reducing counterfeits, as each time ownership of the product changes, it is recorded on the blockchain.[4] Consumers will be able to access all of the product information, and therefore validate the authenticity of the product. This can save brands the €26.3 billion of revenue lost annually from counterfeit goods in the EU alone.[5]
How does Blockchain work in practice? watch this video to find out how.
The rise of the conscious consumer has meant that many consumers are now considering the wider environmental and social impacts of the products that they purchase. This means that details about where a product was made and what materials were used can more easily be made available. By way of example, shoe brand Fuchsia uses the blockchain platform ‘Provenance’ to share details about the workers who hand-make the brand’s shoes in Pakistan.[6] As a result, blockchain can make fashion more sustainable through increased transparency.[7]
How will this affect the legal industry?
Given that blockchain is a relatively new concept,[8] the UK Parliament has created a multi-party group to study blockchain, and so heavy regulation in the future is likely.[9]
Any businesses looking to capitalise on this will have to consider potential liability issues regarding data protection, where a real threat is the risk of loss or corruption of data.
However, what will be particularly tricky for lawyers to navigate is the tension between blockchain technology and GDPR. For example, The European Union’s General Data Protection Regulation is fundamentally in conflict with the way that blockchain operates. It outlines obligations on data controllers and rights to data subjects, but the problem is that with blockchains there is joint controllership (which remains undefined in legislation), creating a grey area on the allocation of responsibility for the safeguarding of the data.[10]
Another area of incompatibility is that GDPR includes a ‘right to be forgotten’ for personal data, where data subjects should be able to request that their data be deleted permanently. This is fundamentally in conflict with the immutability of blockchain,[11] which means that once data has been recorded on a blockchain, it is hard to change.[12] Lawyers will need to be able to advise clients on possible solutions to ensure that the blockchain is more compliant with the regulations in order to mitigate any risks.
Written by Sheelpa Maroo
Assessing Firms:
#Bird&Bird #DLAPiper #CharlesRussellSpeechlys #HoganLovells #BakerMcKenzie #MishcondeReya #FoxWilliams
References:
[1]Nathan Reiff, ‘Blockchain Explained’, (Investopedia, 1 Feb
2020) <https://www.investopedia.com/terms/b/blockchain.asp> accessed 25 October 2020
[2] Alice Newbold, ‘Louis Vuitton To Launch First Blockchain To Help Authenticate Luxury Goods’ (Vogue, 17 May 2019) < > https://www.retaildive.com/news/lvmh-creates-blockchain-platform-to-track-luxury-goods/555050/#:~:text=LVMH%20Mo%C3%ABt%20Hennessy%20Louis%20Vuitton,said%20in%20a%20press%20release> accessed 25 October 2020
[3] Tamison O’Connor, ‘What Vestiaire Collective’s €59 Million Fundraise Says About the Future of Luxury Resale’, (Business of Fashion, 20 April 2020) <https://www.businessoffashion.com/articles/news-analysis/luxury-resale-site-vestiaire-collective-funding-round> accessed 25 October 2020
[4] Fashion Innovation Week , ‘Blockchain: powerful applications for fashion’ <> https://fashioninnovationweek.ch/blockchain-powerful-applications-for-fashion/> accessed 25 October 2020
[5] Sarah Shannon, ‘Fighting the $450 Billion Trade in Fake Fashion’ (Business of Fashion, 2 March 2017) <> https://www.businessoffashion.com/articles/intelligence/fighting-the-450-billion-trade-in-fake-fashion> accessed 26 October 2020
[6] Ibid
[8] ICAEW, ‘History of blockchain’ < https://www.icaew.com/technical/technology/blockchain/blockchain-articles/what-is-blockchain/history#:~:text=Blockchain%20has%20the%20potential%20to,the%20pseudonym%20of%20Satoshi%20Nakamoto>
[9] Big Innovation Centre, ‘Parliament in the United Kingdom creates a multi-party group to study blockchain’ (23 March 2018) <https://www.appg-blockchain.org/news-posts/parliament-of-the-united-kingdom-creates-a-multi-party-group-to-study-blockchain/> accessed 27 October 2020
[10] The Law Society, ‘Blockchain: Legal & Regulatory Guidance’ (7 September 2020) <>https://www.lawsociety.org.uk/en/topics/research/blockchain-legal-and-regulatory-guidance-report> accessed 25 October 2020
[11] Finextra, ‘Blockchain versus GDPR and who should adjust most’ (9 October 2018) <>https://www.finextra.com/blogposting/16102/blockchain-versus-gdpr-and-who-should-adjust-most#:~:text=Due%20to%20the%20blockchain%20%22immutability,the%20right%20to%20never%20forget> accessed 25 October 2020
[12] The Law Society, ‘Blockchain: Legal & Regulatory Guidance’ (7 September 2020) <https://www.lawsociety.org.uk/en/topics/research/blockchain-legal-and-regulatory-guidance-report> accessed 25 October 2020
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.
Any businesses looking to capitalise on this will have to consider potential liability issues regarding data protection, where a real threat is the risk of loss or corruption of data.
However, what will be particularly tricky for lawyers to navigate is the tension between blockchain technology and GDPR. For example, The European Union’s General Data Protection Regulation is fundamentally in conflict with the way that blockchain operates. It outlines obligations on data controllers and rights to data subjects, but the problem is that with blockchains there is joint controllership (which remains undefined in legislation), creating a grey area on the allocation of responsibility for the safeguarding of the data.[10]
Another area of incompatibility is that GDPR includes a ‘right to be forgotten’ for personal data, where data subjects should be able to request that their data be deleted permanently. This is fundamentally in conflict with the immutability of blockchain,[11] which means that once data has been recorded on a blockchain, it is hard to change.[12] Lawyers will need to be able to advise clients on possible solutions to ensure that the blockchain is more compliant with the regulations in order to mitigate any risks.
Assessing Firms:
#Bird&Bird #DLAPiper #CharlesRussellSpeechlys #HoganLovells #BakerMcKenzie #MishcondeReya #FoxWilliams
References:
[1]Nathan Reiff, ‘Blockchain Explained’, (Investopedia, 1 Feb
2020) <https://www.investopedia.com/terms/b/blockchain.asp> accessed 25 October 2020
[2] Alice Newbold, ‘Louis Vuitton To Launch First Blockchain To Help Authenticate Luxury Goods’ (Vogue, 17 May 2019) < > https://www.retaildive.com/news/lvmh-creates-blockchain-platform-to-track-luxury-goods/555050/#:~:text=LVMH%20Mo%C3%ABt%20Hennessy%20Louis%20Vuitton,said%20in%20a%20press%20release> accessed 25 October 2020
[3] Tamison O’Connor, ‘What Vestiaire Collective’s €59 Million Fundraise Says About the Future of Luxury Resale’, (Business of Fashion, 20 April 2020) <https://www.businessoffashion.com/articles/news-analysis/luxury-resale-site-vestiaire-collective-funding-round> accessed 25 October 2020
[4] Fashion Innovation Week , ‘Blockchain: powerful applications for fashion’ <> https://fashioninnovationweek.ch/blockchain-powerful-applications-for-fashion/> accessed 25 October 2020
[5] Sarah Shannon, ‘Fighting the $450 Billion Trade in Fake Fashion’ (Business of Fashion, 2 March 2017) <> https://www.businessoffashion.com/articles/intelligence/fighting-the-450-billion-trade-in-fake-fashion> accessed 26 October 2020
[6] Ibid
[8] ICAEW, ‘History of blockchain’ < https://www.icaew.com/technical/technology/blockchain/blockchain-articles/what-is-blockchain/history#:~:text=Blockchain%20has%20the%20potential%20to,the%20pseudonym%20of%20Satoshi%20Nakamoto>
[9] Big Innovation Centre, ‘Parliament in the United Kingdom creates a multi-party group to study blockchain’ (23 March 2018) <https://www.appg-blockchain.org/news-posts/parliament-of-the-united-kingdom-creates-a-multi-party-group-to-study-blockchain/> accessed 27 October 2020
[10] The Law Society, ‘Blockchain: Legal & Regulatory Guidance’ (7 September 2020) <>https://www.lawsociety.org.uk/en/topics/research/blockchain-legal-and-regulatory-guidance-report> accessed 25 October 2020
[11] Finextra, ‘Blockchain versus GDPR and who should adjust most’ (9 October 2018) <>https://www.finextra.com/blogposting/16102/blockchain-versus-gdpr-and-who-should-adjust-most#:~:text=Due%20to%20the%20blockchain%20%22immutability,the%20right%20to%20never%20forget> accessed 25 October 2020
[12] The Law Society, ‘Blockchain: Legal & Regulatory Guidance’ (7 September 2020) <https://www.lawsociety.org.uk/en/topics/research/blockchain-legal-and-regulatory-guidance-report> accessed 25 October 2020
Disclaimer: This article (and any information accessed through links in this article) is provided for information purposes only and does not constitute legal advice.