Who: Competition and Markets Authority
When: 1 April 2014
Law stated as at: 7 April 2014
Having reached the ripe old age (for a regulatory body) of 41, the bell finally tolled for the OFT on 31 March 2014. Much of the OFT’s role in consumer protection has been taken over by the new Competition and Markets Authority (the “CMA”) although as previously reported, the OFT’s role as legal backstop for the Advertising Standards Authority has been taken over by Trading Standards.
The CMA has published guidance, effective as of 1 April 2014, on how it will be using its consumer powers in this brave new world of consumer protection: the Consumer protection guidance on the CMA’s approach to use of its consumer powers (the “Guidance”).
The OFT’s bequest
During its life, the OFT published a number of guidance documents. The sum of these notes relating to consumer issues have been inherited by the CMA, which in its Guidance goes through the task of sorting out which it wishes to keep and which need to be disposed of. Annex B of the Guidance sets out which of the OFT’s guidance documents relating to enforcement and compliance with consumer legislation have been adopted by the CMA and which are now obsolete.
While the majority of the OFT’s guidance notes have been adopted by the CMA, readers should note that the following 5 pieces of OFT guidance are no longer in force:
1. OFT1221 – Statement of consumer protection enforcement principles;
2. OFT1292 – The OFT’s approach to promoting business compliance with consumer protection law;
3. OFT1273 – Criminal enforcement of the Consumer Protection from Unfair Trading regulations;
4. OFT884 – Guidance for use of on-site inspection powers under the Consumer Protection Co-operation Regulation; and
5. OFT1494 – The EU Regulation on Consumer Protection Co-operation – on-site inspection powers.
These defunct documents have been superseded or replaced by documents or guidance of the CMA.
How will the CMA be using its powers?
The most suitable one-word answer to this question is probably “Collaboratively”. The Guidance makes clear that unlike the OFT, the CMA will not be taking a leadership role, leaving this to Trading Standards and/or the Consumer Protection Partnership, a group of bodies consisting of BIS, the Trading Standards bodies from each of the UK’s home nations, the CMA and each of the UK home nations’ Citizen’s Advice services:
“Recognising the Government’s desire to give [Trading Standards Services] and CPP a central role in the new landscape, and to ensure the space is created for them to take the initiative, the CMA will adopt a supportive and facilitative partnership role in areas of potential overlap, rather than one of leadership as the OFT would have done, prior to the legislative changes”. (Guidance, page 4, 1.8).
Where collaboration is not possible, it appears that the CMA will, like its predecessor, be selective about the cases it takes on.
“The CMA will act strategically, being selective about which cases it chooses to take on. The CMA will apply its prioritisation principles and aim to maximise the impact of its work by taking an enforcement lead that others can follow and/or seeking delivery partners for targeting messages for business or consumers as appropriate” (Guidance, page 3, 1.6).
However, the CMA has the option to choose to be even more selective than the OFT. The Guidance highlights the fact that the OFT’s duty to act has been replaced by the CMA having a power to act (Guidance, 2.4).
When deciding whether or not to act the CMA will apply its Prioritisation Principles (the “Principles”) which have been published separately to the Guidance. In summary, the principles considered by the CMA focus on 4 areas:
1. Impact: including what likely direct and indirect effect intervention would have on consumer welfare in the market or sector where the intervention takes place, and what the economic impact would be.
2. Strategic significance: whether the work fits with the CMA’s strategy and overall ambition to be “one of the leading competition and consumer agencies in the world”; whether the CMA is best placed to act, and what impact enforcement would have on the CMA’s existing portfolio of work.
3. Risks: how likely enforcement is to succeed.
4. Resources: whether the resource requirements of enforcement are proportionate to the benefits of doing the work.
In addition to the Principles, the Guidance suggests that the CMA’s general position is that enforcement of national cases against single national companies (regardless of size) is to be handled by Trading Standards (Guidance, 3.9) unless there is a wider market justification. The exception to this might be if there is a breach of the Unfair Terms in Consumer Contracts Regulations 1999, in which case the CMA may take action unilaterally in order to uphold the effectiveness of the regime.
Wider market justification?
The Guidance suggests that a wider market justification will be judged as a situation where “breaches of law point to systemic failures in a market, where changing the behaviour of one business would set a precedent or have other market-wide implications, where there is an opportunity to set an important legal precedent or where there is a strong need for deterrence or to secure compensation for consumers” (Guidance, 6.3, 7.4).
In such cases the CMA may take on a case itself. As with the OFT, the CMA has the power to pursue such cases on either a criminal basis (under the Consumer (Protection from Unfair Trading) Regulations 2008), on a civil basis, or via other means. Criminal powers will generally only be used when civil enforcement is unlikely to be effective at achieving a change in behaviour; and/or the breach is sufficiently serious that conviction and punishment of offenders should be pursued, for example to protect the public and to provide wider deterrence (Guidance 7.7).
The CMA has taken on the OFT’s role as the UK’s “competent authority” under the European Consumer Protection Cooperation framework (the “CPC”). This means that requests from other EU country’s consumer protection regulator to supply information about or deal with a trader in the UK whose activities are causing detriment to consumers in another EU country will be channelled through the CMA.
While the CMA is the ultimate co-ordinating body (the so-called “Single Liaison Office”) in the UK for such requests, the Civil Aviation Authority, the Office of Communications, the Financial Conduct Authority, the Medicines and Healthcare Regulatory Authority, the Information Commissioner’s Office are all also nominated “Competent Authorities”, which also have rights and duties under the CPC’s mutual assistance provisions. The CMA is also a competent authority. Competent Authorities can delegate enforcement to other bodies in the UK, nominated under Article 8(3) of Regulation 2006/2004. The UK’s Article 8(3) bodies are Trading Standards and PhonepayPlus. (Guidance, 4.39 – 4.41).
Why this matters:
The end of the OFT marks the demise of a long-lived and experienced regulator. From the Guidance, it appears that the OFT’s relatively “hands-on” approach to consumer protection will not be followed by the CMA, which is set to adopt a more consultative and collaborative approach.
Much of the onus for enforcement now appears to be on local Trading Standards offices, albeit with additional co-ordination from the National Trading Standards Board and the Trading Standards Institute.
The CMA has set itself a high target by aiming to be “one of the leading competition and consumer agencies in the world”. Only time will tell whether the new regime will be more or less effective at supporting the UK’s consumer protection regime than its predecessor.