Who: Trading Standards
When: May 2014
Law stated as at: 10 June 2014
The Department for Business, Innovation and Skills (“BIS”) has recently closed its consultation on giving the right to businesses to take enforcement action under the Consumer Protection from Unfair Trading Regulations 2008 (“CPRs”) (by applying for a court injunction) against competitors who produce lookalike or copy-cat packaging.
The CPRs protect consumers from unfair and misleading commercial practices and are currently enforced, for the most part, by local authority trading standards and the Competition and Markets Authority by taking criminal proceedings against a business (although often they will try to resolve an issue informally first).
Copy-cat packaging, or parasitic packaging as its also known, can give the impression to consumers that price alone is the only term of comparison, rather than the consumer assessing both the quality and the price – therefore falling foul of Regulation 5 of the CPRs and also likely to constitute an “always unfair” commercial practice under 13 of Schedule 1.
The proposal, if brought into force, would bring the UK more in line with the rights businesses in continental Europe have under a claim for ‘unfair competition’. Currently if a business is concerned with the copy-cat or lookalike commercial practices of a competitor its remedies are limited to IP claims (trademark, design or copyright infringement), malicious falsehood, groundless threats and the tort of passing off. All of these have a high test to satisfy in order to be successful and therefore may not be as useful a tool in practice as they may appear on the surface.
B2B enforcement rejected when CPRs first introduced
At the time the CPRs were brought into force BIS did consider whether to give this enforcement right to businesses but decided that the public authority enforcers provided ‘an adequate and effective enforcement regime’ and allowing b2b civil action may result in ‘a considerable number of disputes reaching the courts in an attempt to further their commercial interests and not the collective interests of consumers’.
This sentiment is echoed in an open letter from the Trading Standards Institute (“TSI”), the UK national professional body for the trading standards community, to BIS in response to the consultation.
TSI recognises the desire for larger companies to have greater brand protection powers but TSI are concerned ‘that any new powers for business would only be of use to those companies which can afford to take legal action’. The TSI ‘believes that it is imperative that businesses are supported in a fair way and that consumers are protected’ and that the current protections that the Trading Standards have under the current regulations and businesses have under trademark and copyright legislation are sufficient.
The consultation called for feedback and evidence on a number of questions ranging from the nature and scale of the problems with the current enforcement arrangements, the extent of any consumer detriment from copycat packaging, how equivalent provisions in Europe have worked and the cost/benefit to businesses of having the civil injunction right.
Why this matters:
For many the current lack of an ‘unfair competition’ right puts UK businesses at a disadvantage when it comes to their ability to effectively manage their brand protection. Where a competitor may be carrying out misleading marketing there may be the avenue for recourse to the Advertising Standards Authority under the CAP Non-Broadcast Advertising Code, but the competitor may need to do more than just use copy-cat packaging for an upheld complaint under this code. Furthermore an action for copyright infringement or for passing off may be taken, but these can be a drain on a company’s resources and are a high bar to hurdle to achieve the desired effect – which is for the competitor to discontinue its use of parasitic packaging.
If BIS concludes that the new civil injunction right should be created, whilst this will be welcomed by many it may still have its limitations. The focus of any such action will remain on whether a customer has been misled and not on damage to a business. It will also only apply in the b2c arena and no such right will be created, at this point, for b2b under the Business Protection from Misleading Marketing Regulations 2008.
BIS are currently reviewing the evidence that they were provided with through the consultation and will be issuing an interim report in July followed by a final report in September of this year.