Who: BIS, UK Parliament
Where: United Kingdom
When: 1 April 2014
Law stated as at: 8 May 2014
This year sees an update to the Consumer Protection From Unfair Trading Regulations 2008 (“CPRs”) come into force, by way of the Consumer Protection (Amendment) Regulations 2014 (“CPARs”).
The new regulations initially surfaced last year as the draft Consumer Protection from Unfair Practices (Amendment) Regulations 2013.
Following a period of consultation on this draft, the revised regulations were laid before Parliament on 1 April 2014.
What do these new laws say?
Consumer-led court cases
The CPRs provided Trading Standards and the (now defunct) Office of Fair Trading with power to take action against businesses engaging in unfair trading practices which affected consumers. However, consumers themselves were unable to use these regulations to take a business which had been treating them unfairly to court.
This is all changing with the CPARs which, once in force, bestow this power directly upon consumers.
B2C and also C2B
The CPRs have always applied to scenarios where consumers are misled or bullied into forming a contract with a business.
The CPRs apply to Business-to-Consumer (“B2C”) models (the traditional relationship where a business offers and sells a product to a consumer). It is worth noting that the definition of “products” to which these rights apply has been expanded by the CPARs and now includes situations where a business sells to a consumer any of goods, services, digital content, immoveable property, rights or obligations, or makes demands for payment for the settlement of real or purported liabilities.
The CPARs also cover Consumer-to-Business (“C2B”) models (a relationship where a consumer provides goods to a business).
However the new rights relating to C2B are much narrower, only covering “goods” – so C2B arrangements where, for example, a consumer is providing digital content to a business in return for payment would not be captured. If a consumer felt that the business had misled them into entering a contract to sell such content to the business, it seems that these revisions to the CPRs may not assist the consumer.
New protections for consumers are also created in respect of a business misleading or bullying a consumer into making a payment (both in cases where payment is owed and where it is not).
What additional remedies do consumers have?
The new consumer rights apply only where they are the victims of “prohibited practices.” These are defined as either misleading practices under Regulation 5 of the CPRs or aggressive practices under Regulation 7. The rights will not extend to “misleading omissions” under Regulation 6.
If a consumer can prove on a balance-of-probabilities basis that he/she has been inveigled by prohibited practices into either forming a B2C or C2B contract, the consumer will have the right to “unwind the contract” within a 90 day period. In broad terms, this will generally mean that the contract comes to an end, the obligations of each party are released and that, insofar as it is possible to do so, the relevant products and payment that have been exchanged as part of the transaction have to be returned to their original owners.
The 90 day period will run either from when the contract was formed or a later date if relevant (for example when the goods are delivered, the performance of the service begins, the digital content is first supplied, the lease begins or the right is first exercisable).
In respect of a consumer making a payment which was not owed as a result of prohibited practices, a similar right to “unwind the payment” arises.
Damages for detriment
Where prohibited practices lead, on a balance-of-probabilities, to the consumer either forming a B2C or C2B contract, or making a payment (whether this payment was owed or not), the consumer will also have a right to seek damages for any detriment caused.
The consumer will not have the right to damages, however, if the business can prove that the prohibited practice occurred by accident or a mistake, or was caused by reliance on information from a third party, was due to an act or default of a third party, or was otherwise beyond their control, and that the business had taken all reasonable precautions and exercised all due diligence to avoid the occurrence of the prohibited practice.
However, if prohibited practices have already been proved by the consumer, the onus will then be on the trader to prove (also on a balance-of-probabilities basis) that one of these defences applies.
Right to seek a discount
Finally, and only in cases where a consumer has entered into a B2C contract as a result of prohibited practices, , the consumer will have the right to seek a discount on the price paid if they have not exercised the right to unwind the contract.
When do the new laws kick in?
The legislation will be fully in force on 1 October 2014.
Why this matters:
During the consultation period, industry raised concerns about how the changes to the CPRs would interact with self-regulatory regimes. One concern in respect of advertising was that adjudications by the Advertising Standards Authority that advertising was misleading under the CAP or BCAP codes could result in consumers springboarding legal claims under the CPARs from such findings to take advantage of the direct financial remedies.
However BIS was not responsive to these concerns in its response to the consultation, it wrote that:
“A finding that a trader had breached a self-regulatory code of practice would not mean that a consumer had an entitlement to get redress using the new rights. The legislation is distinct and separate – for a consumer to take action under the new rights, the trader must have breached the CPRs […]”.
This is not entirely consistent with CAP’s views on the situation the other way round. The opening words of Section 3 of the CAP code specifically state:
“The ASA may take the Consumer Protection from Unfair Trading Regulations 2008 into account when it adjudicates on complaints about marketing communications that are alleged to be misleading.”
If the ASA has already found something to be misleading while taking the CPRs into account, it is hard to see a court not taking this into consideration if a claim were subsequently to be brought. This, combined with the new direct remedy for consumers presents a risk of the number of complaints about misleading advertising that end up in court increasing and may provide a financial incentive for individuals (and claims management companies) to make such claims.
As ever, advertisers should continue to keep up to speed with the relevant laws and regulations and take all reasonable steps to ensure that their advertising and marketing practices are not misleading or aggressive.