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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 EUs 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 consumers 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 consumers" 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 consumers 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.

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The content on this page 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.

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