The DTI has published draft “Consumer Protection from Unfair Trading Regulations 2007″ implementing in the UK the EU Unfair Commercial Practices Directive and also, for the first time so far as marketinglaw.co.uk is aware, published suggested “Guidance”. Anna Montes tries not to be unfair.
Who: Department of Trade and Industry
When: 29 May 2007
Where: United Kingdom
Law stated as at: 26 June 2007
On 29 May 2007 the Department of Trade and Industry ("DTI") invited comments from industry and consumer protection groups on the proposed draft Consumer Protection from Unfair Trading Regulations 2007 ("CPUT Regs").
The CPUT Regs are intended to implement the provisions of the Unfair Commercial Practices Directive within the United Kingdom. The Unfair Commercial Practices Directive seeks to harmonise Member States' unfair trading laws and ensure each Member State has general prohibitions against traders treating consumers "unfairly".
When considering how best to implement the Directive's provisions in the United Kingdom to date, the Government has twice sought the views of industry through two previous consultation processes. This new consultation process could well be the last as the DTI has made it clear that it intends to bring the CPUT Regs into force in April 2008. All interested parties therefore have until 21 August 2007 to provide the DTI with their comments and it could well be a case of speak now or forever hold your peace!
The Consultation report invites all those participating in the process to provide some feedback in relation to specific questions as well as providing general comments and views on the draft CPUT Regs. Some of the questions to focus the minds of those participating in the process include questions which are very broad in nature:
(a) Are there any particular additions or changes to the [CPUT Regs] that you would like to see?
(b) Are there any impacts or unforeseen consequences of these proposed [CPUT Regs] that you can identify?
to those which are quite specific:
(c) Do you think OFCOM should be given a duty to consider complaints about unfair commercial practices in the broadcast media to reflect their existing powers under the Control of Misleading Advertisements Regulations 1988, and which are retained in the draft Business protection from Misleading Marketing Regulations?
Plenty of food for thought…..
"Always unfair" practices
The CPUT Regs detail the prohibitions contained within the Unfair Commercial Practices Directive, namely that prohibited commercial practices shall from early 2008 include those which breach the requirements of professional diligence and those that incorporate misleading actions or omissions and aggressive practices. There will also be a schedule which details commercial practices that will always be deemed "unfair" in all circumstances.
As you read through the draft CPUT Regs it comes as no surprise that many of the definitions used closely mirror those contain within the Unfair Commercial Practices Directive. A "commercial practice" is deemed to be capable of occurring before, during or after a commercial transaction in relation to a product and a "typical consumer" is broadly described as either: (a) the average consumer to whom the commercial practice is addressed (or who it reaches); or (b) the average member of the particular group of consumers to whom the commercial practice is directed; or (c) the average member of a clearly identifiable group of consumers whom the trader could reasonably be expected to foresee would be particularly vulnerable to the commercial practice or underlying product concerned.
Whilst the Government's interpretation of the Unfair Commercial Practices Directive does not raise too many surprises, its enforcement ideas may well do. The Directive does not prevent Member States from retaining or introducing criminal sanctions to enforce its provisions and H. M. Government appears to want to take full advantage of this.
It should be noted that a breach of most of the provisions of the CPUT Regs will be a criminal offence. Most offences will follow the general regulatory approach of strict liability (such as breaches of the prohibition on misleading actions and omissions and a breach of the prohibition on aggressive commercial practices) but an offence of breaching the general prohibition against unfair commercial practices will require proof of a mens rea on the part of the trader (knowledge or recklessness will need to be proven).
So far as likely penalties are concerned, draft Regulation 13 of the CPUT Regs sets out the applicable penalties for those who will be found guilty of an offence of engaging in a commercial practice which is unfair and states that they could face on summary conviction a fine of up to £5,000 or on conviction on indictment, a fine and/or imprisonment of up to two years.
Where corporate traders are concerned, it will be possible for directors, managers and company secretaries to be found personally liable for offences under the CPUT Regs and therefore liable for the penalties arising. This is certainly one reason advertisers should take note of the new Regulations when they come into force.
Powers of entry
The Government also intends to give enforcement bodies strong powers to enforce the new rules as the CPUT Regs grant them powers to check compliance through the ability to conduct test purchases and enter premises to inspect, and where required, seize products and documentation.
No warrant will be required for any such entry to premises, only the provision of identification and furthermore any intentional obstruction of an officer of an enforcement body seeking to enter premises in this way will itself be a criminal offence. This is certainly something that industry cannot take lightly. However, in order to meet concerns that the inclusion of criminal offences does not inadvertently undermine successful self and co-regulatory systems, the Government has made it clear enforcers of the CPUT Regs need to have due regard to the suitability of using established means to deal with certain breaches of the CPUT Regs. However, how this balance will work in practise and how the CAP Code, BCAP Code and CPUT Regs work alongside each other, only time will reveal.
Why this matters:
The advertising community will need to ensure that it is up to speed by April 2008 with the final form of the CPUT Regs, particularly now that it is clear that numerous criminal sanctions will be involved. Defences that will be available to a breach of the CPUT Regs include where a trader can prove that the commission of an offence was due to a mistake, reliance on information provided by another person, beyond the trader's control or occurred despite the trader taking all reasonable precautions and exercising all due diligence to prevent the commission of the offence by himself and any other person under his control.
Special advertising defence?
There will also be a special defence in the case of advertisements whereby advertisers will not be liable criminally if they can prove that the advertisement concerned was received and published in the course of "a business involving such publication" and they did not know and had no reason to suspect that its publication would amount to an offence. This will potentially protect not only publishers but also advertising agencies who arrange for the publication of advertisements on behalf of their clients.
It will be interesting to learn the outcome of the consultation process as we also foresee it raising further questions relating to the use of the word "free" in advertising. The schedule to the CPUT Regs detailing commercial practices that will be always be considered unfair, includes a reference to "Describing a product as "gratis", "free", "without charge" or similar if the consumer has to pay anything other than the unavoidable cost of responding to the commercial practice and collecting or paying for the delivery of the item". Food for thought here perhaps given existing debates over use of "free" in advertising.
Beyond the CAP Code?
Many of the issues that the CPUT Regs touch on are already dealt with in the CAP and BCAP Codes so far as advertising is concerned (particular where misleading advertising is concerned). However, if advertisers have not been too concerned to date with general compliance with the codes due to a view the Advertising Standards Authority lacks teeth, such advertisers should be aware that come April 2008, whilst the ASA may not bite, the CPUT Regs may well do.
If anyone has serious views about some of the arguably more draconian measures within the CPUT Regs, now is the time to raise them whilst what could potentially be the last consultation process is in full swing. If you would like to participate in the consultation process regarding the CPUT Regs then for further information on the process look to the information on the DTI's website at: http://www.dti.gov.uk/consultations/page39674.html.