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New laws to regulate sharp trading practices – the
Consumer Protection from Unfair Trading Regulations
2008
15 May 2008
Introduction
Readers will no doubt be aware of the existence of UK Acts such
as the Trade Descriptions Act 1968 and the Consumer Protection Act
1987. These Acts have served for many years to form the basis of
regulation of trading practices in the UK, and are the mainstay of
prosecuting bodies such as Trading Standards.
But from 26 May 2008, many of the key obligations imposed by
these laws are being revamped by the UK implementation of the EU's
Unfair Commercial Practices Directive. This Directive also
introduces some new obligations into the legal scheme.
The Directive is to be implemented by two pieces of legislation
- the Consumer Protection from Unfair Trading Regulations 2008 and
the Business Protection from Misleading Marketing Regulations
2008.
The Consumer Protection from Unfair Trading Regulations
2008
These Regulations generally prohibit "unfair commercial
practices". The practices fall into five categories:
- Misleading actions
- Misleading omissions
- Aggressive practices
- Breaches of professional diligence
- Blacklisted practices
"Misleading actions" are "actions" (which would include for
example advertisements) which contain false information and are
therefore untruthful, or their overall presentation deceives, or is
likely to deceive, the typical consumer. An example of such a
misleading action would be a direct mailing for a product which
states that the product will help prevent hair loss, but the
product does not in fact work.
A "misleading omission" occurs if, in the context of the sale,
the trader omits or hides material or required information about
his product or service, or provides such information in a way which
is unclear or ambiguous. An example would be where a person buys a
species of plant at a garden centre, but that species cannot
survive in the garden and must be used as a house plant - however
the consumer is not told about this, and so the plant dies.
An "aggressive practice" is one which significantly impairs, or
is likely to impair, the typical consumer's freedom of choice
through the use of harassment, coercion or undue influence. The
relevant factors for assessing whether a practice is aggressive
include any burdensome non-contractual barrier imposed, any
threatening or abusive behaviour, and any threat to take action
which cannot be legally taken. An example of an aggressive
commercial practice would be offering to reschedule an existing
consumer debt only if the consumer purchases further products from
the trader.
To be unfair, the above practices must also cause, or be likely
to cause, a typical consumer to take a transactional decision he
would not have otherwise taken. A "typical consumer" is taken to be
reasonably well-informed and reasonably observant; however where
there is a particular commercial practice to which certain groups,
for instance children, or the elderly and the infirm, are
especially vulnerable and the trader could foresee this, then the
"typical consumer's" fortitude will be decreased.
There is also a further "catch-all" clause - a breach of
"professional diligence" which is likely to materially distort a
typical consumer's economic behaviour. "Professional diligence" is
defined as the standard of special skill and care which a trader
may be expected to exercise, and which goes hand in hand with
honest market practice and the principle of good faith.
The blacklist
The Regulations end with a "blacklist" of commercial activities
which will be considered as prohibited in every situation. This
list of 31 prohibited practices includes:
- "Bait and switch" advertising
- Copycat packaging or marketing, deliberately intended to
mislead a consumer as to the identity of the manufacturer of a
product
- Using editorial content to market without making it clear that
the editorial has been paid for
- Passing on materially inaccurate information about market
conditions
- Describing a product as free when it is tied to another
purchase
- Impersonating a consumer e.g. posting fictional favourable
reviews on your own website
Businesses are advised to familiarise themselves in particular
with all the items on this blacklist, as they have the potential to
affect business practices at every stage, from marketing to after
sales service.
The Business Protection from Misleading Marketing
Regulations 2008
The Business Protection from Misleading Marketing Regulations
2008 provide protection to other traders, rather than to consumers.
The test for "misleading indications" is similar to the test for
misleading actions outlined above, in that an indication is
misleading, and therefore prohibited, if it in any way (including
presentation) deceives or is likely to deceive the trader whom it
reaches, and if because of this, it is likely to affect his
economic behaviour, or is likely to injure a competitor.
In addition, these Regulations set out the conditions that must
be fulfilled before a comparative advertisement i.e. one comparing
your products to those of an identified competitor will be
acceptable.
The bottom line – a risk of prosecution
Breaches of this legislation will be enforced through
enforcement orders, and criminal prosecutions. Offenders may face
an unlimited fine and up to two years imprisonment upon a
conviction. Investigations will be performed by the OFT, plus
certain Local Authorities. As well as the traders themselves, the
current draft legislation makes it possible for third parties, such
as an advertising agency who produced an offending advertisement,
to be liable to prosecution.
For more information or advice, please contact
Fiona
Carter or Oliver Sweeney.
The content of this bulletin is provided for
the purposes of general interest and information. It contains only
brief summaries of aspects of the subject matter and does not
provide comprehensive statements of the law. It does not constitute
legal advice and does not provide a substitute for it.