Consumer Protection from Unfair Trading 2008 Report (Assessment)

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Table of Contents

Introduction
Principle of Maximum Harmonization
The Scope of the Unfair Commercial Protection Directive
The extent of Implementation in the UK
Prohibited Commercial Practices
Misleading Commercial Actions
Conclusions
References
Footnotes

Introduction

The Consumer Trading from Unfair Regulations 2008 provides a general deterrence on business people in all sectors involved in commercial practices that are deemed unfair against consumers. The enactment of Consumer Protection from Unfair Trading 2008 (SI 2008/1277) on May 26, 2008, has resulted in significant reforms in consumer protection. [1] Specifically, Consumer Protection from Unfair Trading Regulations guides advertising and marketing aimed at consumers. These regulations also apply an elaborate approach based on principles to protect consumers as opposed to efforts to deal with unfair trade practices on an ad hoc basis. The adoption of the Unfair Trading Regulations 2008 has driven the UK closer to a general duty to trade fairly. The extent of the implementation of these regulations is indicative in the repeal of the Trade Descriptions Act 1968 and part III of the Consumer Protection Act 1987. [2] The regulations have also changed several statutory instruments concerned with specific trade practices. This paper assesses the extent to which the implementation of the requirements of the Unfair Commercial Practices Directive by Consumer Protection from Unfair Trading Regulations 2008 has resulted in the general duty for fair trade. [3]

SI 2008/1277 regulations enforce the Unfair Commercial Practices Directives formulated by the European Commission. This directive was formulated to enable trading across boundaries for the gain of both traders and consumers. It’s aimed at enhancing the satisfaction and confidence of consumers, thereby encouraging cross-border buying by consumers. Additionally, the directive also aimed at simplifying the local consumer law and ensuring high-level protection of consumers. In essence, the UCPD replaced national unfair commercial practices laws with standardized European Union regulations. The UCPD provided for a general fairness clause an ambition desired by enforcement authorities and the consumer movement. The implementation of this clause enabled Europe to fulfill what could not be attained in domestic consumer policy. However, the maximum harmonization provision requires the exclusion of any national laws provisions that are more protective of the consumer within the scope of the Directive. [4]

Principle of Maximum Harmonization

The UCPD insists on maximal harmonization of unfair trading laws in the European Union. Previous EU directives on consumer protection insisted on minimum harmonization allowing member countries to ensure that their consumer laws offered a minimum level of protection; at the same time, allowing member states to exceed this and offer more consumer protection. As a maximum directive, UCPD does not allow variations in terms of application of the law. All member states of the EU including the UK are required to offer protection as per the provisions or standards provided in the areas required. The standards set must be adhered to, that is, it demands member nations to neither fall below the set standard nor goes beyond it. This is to facilitate consumer protection laws in EU countries to achieve needed harmonization to allow trade across borders, thereby increasing choice and competition for consumers. All EU member countries including the UK have had to review the body of their consumer laws to comply with this directive or standards. [5]

The Scope of the Unfair Commercial Protection Directive

UCPD harmonizes unfair commercial practices controls including unfair advertising across the EU as they impact directly on consumers’ economic interests and on their ability to make transactional decisions. The directive is not intended to cover business-to-business dealings or unfair commercial practices which impact only on a competitor’s economic interests. [6] The unfair commercial practices aimed at protecting consumers will coincidentally deliver a benefit to legitimate traders as well for a practice that directly and adversely affects consumers’ interests will also indirectly harm legitimate traders. [7] In seeking to regulate unfair commercial practices aimed at consumers, competition is leveled for traders also. EU nations will remain free to enact and maintain national laws concerned with unfair trading practices as they apply to transactions between traders or where they only affect a competitor’s economic interests[8]. Equally, the Directive does not seek to address advertising that only affects businesses and not consumers and advertising that, while influencing consumers would not affect their ability to make informed decisions when deciding whether or not to buy the product or service so advertised. [9] However, the UK while implementing the Directive to protect consumers, is also introducing corresponding controls over advertising in the business-to-business relationship with the passage of the Business Protection from Misleading Marketing Regulations 2007 to absorb effects of some of the repeals occasioned by the Directive, such as the Trade Descriptions Act and the protection offered to traders by that statute, and to ensure continued compliance with the Misleading and Comparative Advertising Directive. [10]

Protection of the consumer’s ability to transact fairly lies at the heart of the scope of the Unfair Commercial Practices Directive seeking as it does to protect the consumers ‘economic interests’ in unfair business-to-consumer transactions. The focus on ‘economic’ protection delineates the outer parameters of the Directive’s scope. Thus it does not seek to impinge upon national or international provisions governing allied matters such as health and safety issues relating to products or services, intellectual property rights, financial services, immovable property, gambling, or the construction of contracts. [11]

Achieving such an ambitious aim necessarily requires widely drawn provisions that both encompass all manner of undesirable practices and recognize the need for a multiplicity of strategies that together will control them and thereby achieve the rationale underpinning the Directive. It addresses aggressive commercial practices in addition to including a list of 31 commercial practices which will be deemed to be unfair in all circumstances. [12]

Enforcement of the Directive is the responsibility of the Member States which is required to ensure that an adequate and effective enforcement regime is in place. This can, of course, includes the use of both civil law provisions. Further, the use of codes of practice is specifically permitted though not to the exclusion of legal or administrative controls. This sits well with the current approach in the UK where the use of the British Code of Advertising Practice enforced by the Advertising Standards Authority is an integral and effective part of regulatory controls over misleading advertising. [13]

The extent of Implementation in the UK

The implementation of the Commercial Practices Directive in the UK will be achieved through the Consumer Protection from Unfair Trading Regulations which are focused on consumer protection, and directly address the requirements of the Directive. By contrast, the Business Protection from Unfair Marketing Regulations 2007 is focused on businesses and addresses the knock-on effect on businesses from the adoption of the Directive and the need to continue to comply with the Misleading and Comparative Advertising Directive. In practice, this largely relates to the impact of the revocation of the Control on Misleading Advertising Regulations 1988 which protected both businesses and consumers. [14]

In considering the implementation of the new Consumer Protection from Unfair Marketing Regulations 2007 and how they will fit into the UK consumer protection law, it starts by identifying those pieces of existing legislation that will be either repealed or significantly amended. First is the Trade Descriptions Act 1968 from which the major offenses are to be removed. It should be remembered that, although the Trade Descriptions Act is typically referred to as a piece of consumer protection legislation, it was not so restricted and provided the same protection to businesses as well. [15] Advertising is often at the center of Trade Description Act offenses and thus the repeal of these offenses will leave a gap that must be addressed to protect both consumers and legitimate traders. [16]

The second major repeal involves the demise of the misleading pricing offenses currently to be found in sections 20-26 of the Consumer Protection Act 1987. [17] These sections prohibited the use of any show of acts by the trader that would mislead a consumer; as the price at which any goods, services, accommodation, or facilities were being offered. The use of the word ‘show’ is widely drawn and includes; shelf edge tickets, price labels, and marking on the products themselves as well as the more traditional advertising found in newspapers, magazines, brochures, flyers, and in the broadcast media. [18]

The other significant repeal involves the revocation of the Control on Misleading Advertising Regulations 1988 which have provided for controls over advertisements that are deemed to be misleading and the use of comparative advertising. Subject to the provisions of the directive, advertisers can compare their goods with those of their competitors; the comparison ensures the advertisement is not misleading, does not create confusion in the marketplace, and that it ‘objectively compares one or more relevant, verifiable and representative features of the products’. [19]

While these three repeals and revocations are arguably the most dramatic, it should be noted that some 22 pieces of legislation will be repealed or amended to a greater or lesser extent. In addition to the three mentioned above, other repeals and revocations worthy of note in this context are section 46 of the Consumer Credit Act 1974, the removal of credit hire advertisements from the Consumer Credit Regulations 2004, and the revocation of the Business Advertisements Order 1977 under which traders have to make clear their business status when advertising their goods and services and the Consumer Transactions Order 1976 which forbids the publication of any advertisement intended to induce someone to enter a consumer transaction which purports to include an exclusion or limitation clause which would be void by section 6 of the Unfair Contract Terms Act 1977. [20]

The combined effect of these repeals and revocations will be to remove some of the legal controls that currently govern advertisements used to promote goods and services. The key question, therefore, is what will replace them if, in the future, advertising is to be regulated in a way that will protect both consumers and legitimate businesses. [21]

Prohibited Commercial Practices

Regulation of fair trading is linked inevitably to issues of competition between traders. Prohibitions on unfair commercial practices restrict how traders may compete for the market share with one another. The general underlying thrust is that numerous current offenses and practices will be swept up into one overarching set of offenses that should control the undesirable practices of rogue traders while not restricting honest traders from going about their legitimate business. Naturally, the interpretation of the offenses will ultimately depend on the courts but it is reasonable to assume that existing precedents under the Trade Descriptions Act, pricing legislation, etc will be relied upon in the development of new precedents. [22]

While the meanings and parameters of the new offenses will require interpretation to decide whether particular facts have given rise to an unfair commercial practice, Schedule 1 lists 31 commercial practices which will automatically be considered to be unfair. [23] This includes a variety of practices that can be linked to advertising in some way. Misleading advertising is harmful to consumers because it deprives them of the information necessary to make conscious economic choices. Advertising influences the minds and choices of consumers without them being aware of these facts. [24] Examples of misleading advertising would include falsely claiming to be a signatory to a code of conduct, falsely displaying a quality mark to which the trader is not entitled, and falsely stating that a product will only be available for a limited time thereby pressuring the consumer to buy the product without having appropriate time to consider the purchase carefully. Given that many of the practices detailed in Schedule 1 may be incorporated within advertisements, it will be important for publishers to be wary of the advertisements that they accept for publication and the defenses that will be available in cases of innocent publication. A breach of any of the practices listed in paragraphs 1 to 10, 12 to 27, and 29-31 of Schedule 1 is a criminal offense under regulation. [25] In addition,

“Regulation 3 of the directive provides that a commercial practice to be judged unfair if it is a misleading action under regulation 5 or it is a misleading omission under regulation 6 or it is aggressive under regulation 7 or is listed in Schedule 1”. [26] However, the UK consumer law does not legislate on matters of unfair competition because it is not easy to determine unfairness of commercial activity since an individual can only rely on a format based on ethical assumptions that are elusive and subjective. UK law regulates only issues of truthfulness since this concept is objectively verifiable to them.

Misleading Commercial Actions

The UCPD law mainly focuses on consumer information among member states. This is reflected in the regulation of commercial practices. The EU directive in this area is intended to create confident and well-informed consumers. It enables consumers to make their decisions with full knowledge of existing facts. The exchange of information between traders and consumers is critical in checking unfair commercial practices. The directive’s regulation of misleading practices is one of the pillars on which the concretization of the fairness principle. This principle also goes in tandem with legal situations in member states including the UK before their implementation. [27]

The directive regulates both actions and inactions. Misleading actions form part of commercial practices containing false information regulated under regulation 5 and can occur in two possible ways. The parts on misleading practices, as well as that on aggressive commercial practices, are intended to concretize the general clause in article 5 of the directive. Regulation 5 (2) is similar to section 3(2) of the Trade Descriptions Act 1968. [28] This Act provides that a trade description that, though true, is misleading shall be regarded to be a false trade description. In these circumstances, the context in which the factual information is presented can create a false impression on a consumer, thus misleading. Furthermore, the misleading information may cause the typical consumer to execute a transactional decision that he would not have taken otherwise. [29]

The CPR regulates misleading information under regulation 5(2) (a) of the directive. This misleading information must relate to one of the issues stipulated in regulation 5(4). Regulation 5 (4) is more concerned with the relevance of the general clause in the interpretation of the particular provisions. The directive in article 5 (4) indicates that specific provisions concerning misleading actions and aggressive actions are supposed to function independently of the general clause. This means that if a commercial practice is determined to be misleading, it will be judged unfairly automatically without any further reference to the set conditions set in article 5 of the directive[30].

The alternative method by which a commercial practice may be deemed to be a misleading action within regulation 5 is to be found in regulation 5(3). This provides two alternatives. [31] First, the practice concentrates on product marketing, together with comparative advertising which can confuse with other products associated with those of a competitor. Thus, if producer A was to deliberately name or package his product in a way that would lead a typical consumer to believe that it was manufactured by producer B, then producer A would have committed a misleading action. This is, in essence, the same as the tort of passing off under UK law which gives a right to compensation to the aggrieved trader. Under the directive, however, it is a criminal offense under regulation 9. The second alternative concerns any failure by a trader to comply with a commitment under a code of conduct if he has indicated that he is bound by it and that the commitment is firm and capable of being verified. [32]

Conclusions

In sum, the Unfair Commercial Practices Directive was an important law that combined a general clause with a maximal harmonization approach. The United Kingdom has implemented this directive for simplifying consumer law. Only the future will tell whether the level of protection has been increased, although new powers to act against aggressive practices will be important. It is considered a criminal offense to contravene the regulations. The office of Fair Trading and specific Local Authorities are responsible for the enforcement of the directive in the UK. The area of enforcement is left for member states to formulate rules to ensure implementation, therefore, remedies such as sanctions for infringement, the burden of proof, and others differ from one state to the other. [33]

The UCPD 2008 represents a useful improvement on the existing directives of the EU on fair trade. The change to maximum harmonization, however, will result in serious consequences in terms of implementation in the UK. For instance, it necessitates a large number of repeals on the existing statutory provisions and eliminates several measures for the protection of consumers which reflect the UK’s consumer market’s specific conditions, practices, and areas of concern. Therefore, necessitating the urge of the UK to the Commission to adopt the approach of retaining minimum standard concept about specific matters on which there is the consensus for complete harmonization. [34]

References

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Office of Fair Trading, Consumer Protection from Unfair Trading 2008.

DTI, Unfair Commercial Practices (UCP) Directive, 2009.

Statutory Instruments, Consumer Protection from Unfair Trading Regulations, 2009.

Campbell, C, Cotter, S, & Center for Legal Studies, Unfair Trading Practices. Cambridge: Cambridge University Press, 1997.

Bhagwati, G, & Hudec, R, Fair Trade and Harmonization. Massachusetts: MIT Press, 1996.

Grenfell, G, Proposed EU consumer Credit Harmonization Directive. London: TSO Shop, 2005.

Simons, & Simons, New Regulations on Unfair Commercial Practices, 2007.

Collins, H, Forthcoming EC Directive on Unfair Commercial Practices. The Hague: Kluwer Law International.

Statutory Instruments, Consumer Protection from Unfair Trading Regulations, 2009.

Hawel, G, Mickliz, & Wilhelmson, T, European Fair Trading Law. The Hague: Kluwer Law International, 2006.

Rush J, & Ottley, M, UK Implementation of EU Directive on Unfair Commercial Practices, 2009.

Statutory Instruments, Consumer Protection from Unfair Trading Regulations, 2009.

Rush J, & Ottley, M, UK Implementation of EU Directive on Unfair Commercial Practices, 2009.