In a triple whammy of consultation papers published over the last month, the UK government has set out its stall for more consumer protection and greater enforcement against rogue marketers.
Topic: Consumer protection
Who: Department of Trade & Industry
When: June and July 2005
The DTI published no less than three consultation papers in the space of a few weeks kicking off significant initiatives to supposedly improve consumer protection against various activities including misleading advertising and marketing.
"A fair deal for all"
The first initiative was kicked off under the banner "A fair deal for all" and the grammatically challenged sub title "Extending Competitive Markets: Empowered Consumers, Successful Business". http://www.dti.gov.uk/ccp/topics1/pdf1/cstrategy.pdf
In a rousing and similarly ungrammatical introduction Secretary of State Alan Johnson says "Our economy is thriving and, most of the time, consumers and businesses trade with each other without any problems. But sometimes things go wrong. There are rogue traders who want to exploit vulnerable consumers. However there is also too much red tape getting in the way of responsible businesses who are trying their best to look after both their customers and their shareholders. We want a consumer regime fit for 21st Century Britain."
One of the key strands in the grand plan is improving the importance of consumer protection laws so that they are "fair, consistent, effective and proportionate." Other desiderata for the new regime include consumers equipped with the skills, knowledge, information and confidence to exercise their rights to get a good deal and access for consumers to appropriate and convenient sources of advice and redress.
"Representative action" spectre
Amongst the tools that will help achieve this new regime is a plan to introduce representative actions for consumers ("class actions" to you and me).
Here the paper is short on specifics at this stage promising little more than to consult further, but it does recognise that any such scheme should try to avoid inadvertently creating a compensation culture and businesses facing spurious claims. The Government also expects that only certain organisations will be allowed to bring representative actions and it might be necessary, for example, for pre-approval to be obtained from a court before proceeding.
Other goals of "Fair deal" are to proactively pursue simplification of EU consumer legislation. Here the Government is commissioning research to give specific proposals for how EU Consumer directives can be simplified so that the UK can play an active part in the European Commission's up and coming review of the entire body of EU consumer protection law.
New duty not to trade unfairly
Another goal is to introduce a duty not to trade unfairly, although this was going to happen anyway because as previously reported on Marketinglaw, the EU unfair commercial practices directive, which creates this duty, must be implemented by 2007 in the UK.
On enforcement, the Government wants to improve effectiveness in key areas, including improving protection for vulnerable consumers and more consistent enforcement for national companies with outlets in many different local authorities. Here, the current arrangements with over 200 different local authorities enforcing the same laws against the same businesses but not necessarily in the same way does not meet the needs of 21st century national and international business, the paper says.
Amongst the measures to be taken to achieve that goal are defining of national minimum standards for the trading standards service so as to improve their performance. Also the plan is to set up a new Consumer and Trading Standards Agency, on which a separate paper has been published.
New Consumer and Trading Standards Agency
The second Government initiative featured in this report was to publish on 5 July a paper focusing on one of the measures mentioned in the "A Fair Deal for All" paper, namely the setting up of a new "Consumer and Trading Standards Agency".
In the paper's Foreword, Parliamentary Under-Secretary of State Gerry Sutcliffe proclaims "The time is right to develop a co-ordinated organisation that caters not just for business and not just for consumers, but for both".
The plan is that the chief weapon to achieve this will be a new so-called Consumer and Trading Standards Agency ("CTSA"), a strong, proactive body, it says here, well able to respond to the needs of consumers and business in the 21st century.
The CTSA will co-ordinate all aspects of the work of the Trading Standards service apart from that covered by the Food Standards Agency, the proposed Animal Health Agency and the Health and Safety Executive. It will cover issues such as fair trading, product safety and weights and measures.
Amongst its roles will be a priority setting for trading standards, striving for consistency of inspection and enforcement, particularly in cases where national businesses trade in several local authority areas and setting up a co-ordinated performance framework for the Trading Standards service.
Views are also sought on whether the CTSA should have a role in providing the number of redress measures which will be introduced as part of the government's consumer strategy. These include distributing assets recovered from cross border scams and acting as a third party to take representative action on behalf of a group of consumers.
Separate body or part of the OFT?
Options for fulfilling what were originally proposals set out in the Hampton Report, published in March 2005, are cited as either the creation of the CTSA as a new and separate body to which the OFT will transfer its current relevant functions, or the CTSA being established as part of the OFT.
Views on the proposals are sought by 12 October 2005. No prizes for guessing which option the OFT prefers.
Improving pan EU consumer law enforcement
In the third of this slew of consumer initiatives, 5 July also saw the DTI publish the paper "Implementing the EU Regulation on Consumer Protection Cooperation".
Unlike an EU directive, an EU Regulation has direct effect on the appointed day and needs no implementing legislation at member state level. The deadline for full implementation of this regulation is December 2006, two years after the Regulation's adoption.
The principal effect of the regulation is to establish a network of public authorities with powers to co-operate and share information with each other for the purposes of enforcing EC legislation that protects consumers' interests. "Ensuring that laws are effectively and consistently enforced is an essential part of making consumer policy work" the paper intones… "effective enforcement must also stretch across borders as many consumer problems emanate from abroad."
The consultation paper seeks views on which consumer protection enforcement authority should be designated to perform this role for the UK. The DTI strongly favours the designation of the Office of Fair Trading as both the competent authority and the single liaison office for the UK, but views are sought on this and possibly other options.
As for how the enforcement authority ultimately given the job conducts itself, the Regulation requires competent authorities to have "on site inspection power". The DTI's consultation paper seeks views on how any other new enforcement powers should be framed and applied.
Why this matters:
It is certainly high time that the whole area of enforcement of consumer rights, for instance against rogue/non compliant marketers, was revamped. Up until now, there has been significant imbalance between the constant introduction of EU-driven consumer protection laws, such as the up and coming duty not to trade unfairly, and little or nothing being done by way of improving the enforcement landscape.
These papers suggest it is going to be a busy year or two for the DTI in the area of consumer protection and an anxious time for the OFT and trading standards officers, whose current modus operandi looks to be distinctly under threat or facing a new dawn, depending on your viewpoint.
Marketers will need to continue to be vigilant for the introduction of over-protective consumer protection measures. They should also be ready at short notice to take up the cudgels for free commercial speech, including by way of responses to these consultation papers.
How about suggesting a German style right for advertisers to sue competitors for not complying with consumer protection laws? That would concentrate some minds and save public funds as well!