By spring 2003 new legislation will mean more exposure for advertisers to court “Enforcement Orders,” orders to publish “Corrective statements” and consumer body “Supercomplaints.” All in the very best interests of consumer protection of course.
Topic: Consumer protection
Who: The Enterprise Act 2002
Background:
For many years now it has been accepted that the 1973 Fair Trading Act has been relatively toothless when it comes to dealing with its raison d'etre, namely, the control of anti-competitive conduct on the part of businesses and the encouragement of consumer-friendly practices by UK traders. The Competition Act 2000 has already radically restructured UK anti-trust laws, whilst a raft of measures in recent years, most of them driven by European Union legislation, has improved consumer protection. One of the most well-used examples of legislation in this latter category has been the so called "Stop now" consumer injunction legislation. This empowers trading standards bodies, the Office of Fair Trading and qualifying consumer bodies, to seek "stop now" orders from the Courts in respect of business conduct which is prejudicial to consumers and breaches any one of seven specific European Union directives. The Enterprise Act 2002 moves the game on a number of stages further in both these areas so as to strengthen the competition law framework and additionally empower consumers.
What will change:
The circumstances in which "Stop now" – type orders can be obtained from the Courts will be substantially broadened and a new "fast track" procedure introduced obliging the Office of Fair Trading to deal with "super complaints" by consumer bodies about egregious business practices.
So far as "Stop now" orders are concerned, these will be renamed "Enforcement orders" and will be obtainable not only in respect of conduct which is contrary to the seven existing named EU directives, but also in respect of any other business conduct which (1) does not comply with legal requirements in other existing legislation to be specified in subsequent regulations and (2) is causing "harm to the collective interest of consumers".
Under the new rules, there will be three types of enforcer. There will be "General enforcers", for example, the Office of Fair Trading and trading standards officers. Secondly there will be "designated enforcers", designated by the Secretary of State once she is satisfied that the body in question has the protection of the collective interest of consumers as one of its purposes (for example the Information Commissioner, the Civil Aviation Authority and the Rail Regulator). Thirdly there will be "Community enforcers", who will be equivalent bodies in other EU states. This latter category of body will be able to bring proceedings before the UK Court for enforcement orders where the activity in question is by a UK entity and has been shown to be harmful to the collective interests of consumers in that body's home EU state. The same will apply the other way round so that UK enforcers will be able to go before the French Courts, for example, if a French business has been shown to be harming the collective interests of UK consumers.
The OFT will be required to coordinate any applications for enforcement orders and these will only be capable of being brought before the Courts once the OFT has been consulted. Consultation periods will be imposed in most circumstances, giving businesses time to respond to enforcement order threats. The current OFT guidance indicate, however, that there could be scenarios, for instance in the advertising context, where even the minimum period of consultation could be abandoned justifiably. The example given of the sort of situation that might warrant such action would be of a business already committing serious breaches of the law which was about to launch a new, misleading marketing campaign.
Once the stage has been reached where the Court is handing down an enforcement order requiring immediate cessation of the conduct in question, another facet of the rules which could be of relevance in an advertising scenario is the power given to the Courts to require the defendant to publish a corrective statement. Such orders are frequently handed down by the Federal Trade Commission in the US against miscreant advertisers, and with the introduction of this new legislation we may see the start of a similar trend here in the UK, and perhaps in other EU states.
The separate, "super complaint" procedure, to be introduced at the same time as the "enforcement order" regime, will again be triggerable by recognised consumer protection groups. Those bodies could operate, the OFT guidelines suggest, in particular consumer sectors such as energy, postal, financial services or telecoms. The guidelines give helpful hints as to how the required "reasoned case" should be placed before the Office of Fair Trading. Once that reasoned case has been submitted to the OFT, it is legally obliged to respond within 90 days and to indicate any measures it proposes to take to deal with the situation. Such measures could take the form of applications for enforcement orders.
As to the factors that are likely to influence the OFT in deciding whether to take action, the guidance indicates the sort of factors it will look at, for instance, profit levels in the relevant industry, competition levels and "selling practices", including advertising and marketing.
Timetable:
The Act received the Royal Assent on 7 November 2002 and it is currently anticipated that it will be fully in force by April 2003. As for the additional UK consumer protection legislation which can be enforced by "enforcement orders", one suspects it might be a while before the Secretary of State issues a list of the relevant statutes, but we will have to wait and see.
