The UK Coalition Government has proposed shipping out of the OFT all its ad law enforcement powers and consolidating these into Trading Standards. Stakeholders are pushing back on this as Stephen Groom reports.
Who: UK Government
When: Autumn 2012
Law stated as at: 5 October 2012
Initial ripples of concern over proposed reforms of UK consumer and advertising law involving the effective closure of the Office of Fair Trading ("OFT") are building to a bow wave in industry and legal circles.
The Coalition Government has for some time been making noises about "simplifying" consumer and marketing law enforcement powers and the full extent of its ambitions in this regard became clear in the consultation launched in March 2012 entitled "Enhancing consumer confidence through effective enforcement" ("Consultation").
This confirmed plans to essentially migrate all the existing advertising law enforcement powers of the OFT to Trading Standards Services ("TSS").
Given that the OFT's existing regulatory and enforcement responsibilities in the areas of consumer credit and competition law are already being shipped out to respectively the new Financial Conduct Authority and the new Competition and Markets Authority, this further proposed nail in the OFT's coffin met with a predictably terse reaction from the OFT in its June 2012 response to the Consultation.
As we await the outcome of the consultation, which closed on 20 June 2012, news has percolated through of continuing and strong support for a continuing OFT role in ad control enforcement which has been voiced strongly in many responses to the Consultation.
Effective loss of ad control "legal back stop"?
One particular concern has been the lack of clarity about the future exercise of the OFT's existing "legal backstop" powers under Part 8 of the Enterprise Act 2002.
In an advertising context, until the arrival of the Consumer Protection from Unfair Trading Regulations 2008 ("CPRs"), these were of special relevance under the auspices of the Control of Misleading Advertisements Regulations ("CMARs"). The back stop powers were engaged where the "established means" for controlling misleading ads, such as the Advertising Standards Authority/CAP Code regime, had for whatever reason failed to rein in recidivist code breakers.
In such cases, the OFT was given "back stop" powers to take injunctive action through the courts in order to bring the advertiser to heel.
With the arrival of the CPRs and the repeal of the CMARs, the "first resort" control mechanism provided by "established means" was still provided for at Regulation 19 (4), but the legal back stop remained with the OFT's powers (and the power of TSS) under the Enterprise Act Part 8.
Powers rarely used
Over the years, these powers have only rarely had to be used against repeat offenders against the CAP Code. Where they have been used, it has consistently been the OFT, rather than hard-pressed and resource-challenged TSS which has taken necessary action.
Now it is proposed that effectively all the OFT's powers in respect of misleading advertising, including the "legal backstop," will be subsumed into TSS.
But will TSS will be able to cope?
To pre-empt concerns about resource and the current inability of local trading standards officers to take action outside their "manor," BIS makes various promises including additional funding and measures to do away with the atavistic geographical constraints.
Why this matters:
Despite government assurances that TSS will receive the additional resources and powers needed to enable it to perform its significantly enlarged role, there are real concerns that TSS will be overwhelmed.
In this scenario, the fear is that TSS will simply not have the capacity to take over the OFT's vital "back stop" role, with respect for the now 50 years old ASA/CAP Code ad control regime suffering as a result.
Lobbying continues for a reappraisal of the virtual death sentence pronounced on the OFT and it remains to be seen whether the Coalition Government will stick to its guns. Watch out for the BIS verdict on the consultation!