Parts of the Regulatory Enforcement and Sanctions Act 2008 are now in force, bringing with them the prospect of a range of new penalties for non-compliant advertisers. But does any regulator want these powers? And how will they affect advertisers? Phil Lee reports.
Topic: Consumer protection
Who: BERR
When: 1 October 2008
Where: UK
Law stated as at: 22 October 2008
What happened:
You (probably) heard it here first. In July this year, we announced that the little known Regulatory Enforcement and Sanctions Bill would "radically change the UK's advertising law enforcement landscape" and was soon to receive Royal Assent. Those readers that have been waiting on tenterhooks for this momentous event to occur need wait no longer: not only has the bill received Royal Assent, but three-quarters of it came into force on 1 October 2008.
As previously reported, the bill (now the Regulatory Enforcement and Sanctions Act 2008) is divided into four key parts.
These are:
- Part 1: which provides for the establishment of a statutory corporation known as the Local Better Regulation Office (LBRO) and makes provision about its objectives and functions;
- Part 2: which provides for more consistent and co-ordinated regulatory enforcement by local authorities;
- Part 3: which provides for the introduction of a new expanded framework for regulatory sanctions by enabling Ministers to confer new civil sanctioning powers on regulators in relation to specific offences; and
- Part 4: which provides for the introduction of a duty on regulators not to impose or maintain unnecessary burdens.
Parts 1, 3 and 4 have all now come into force. Part 2 is timetabled to come into force on 6 April 2009. Readers who are interested in Parts 1, 2 and 4 are encouraged to read our earlier article on the Regulatory Enforcement and Sanctions Bill published on Marketinglaw in July this year.
From an advertiser's perspective, Part 3 is the interesting bit (and here we use "interesting" in the sense of a surgeon referring to an "interesting" medical condition). Broadly speaking, Part 3 aims to give specified regulators (such as the Gambling Commission, ICO and the Office of Fair Trading) an extended toolkit of alternative civil sanctions for non-compliance by business. The idea is to allow regulators to directly tackle cases of non-compliance in a way which is transparent, flexible and proportionate and to reduce the workload of the criminal courts. The powers up for grabs are:
Fixed monetary penalties
This sanction enables regulators to impose a monetary penalty of a fixed amount. The amount of the penalty will be specified by the relevant order or calculated in accordance with it. A regulator may only impose a fixed monetary penalty when satisfied beyond reasonable doubt that a person has committed the relevant offence. Fixed monetary penalties are intended to be used in respect of minor or low level instances of non-compliance with regulations. Where a regulator imposes a fixed monetary penalty the Government guidance suggests that they cannot be prosecuted for the original criminal offence for reasons of double jeopardy.
Discretionary requirements
This allows regulators to issue, by notice, one or more of the following:
- A variable monetary penalty decided by the regulator;
- A requirement to take specified steps within a stated period to ensure that an offence does not continue or happen again (a "compliance notice"); and
- A requirement to take specified steps within a stated period to ensure that the position is restored, as far as possible, to what it would have been had no offence been committed (a "restoration notice").
Again, the regulator may only impose this type of sanction when satisfied beyond reasonable doubt that a person has committed the relevant offence. Discretionary requirements should normally be used in response to instances of mid or high level regulatory non-compliance. With regard to variable monetary penalties only, the same double jeopardy issues. However, Government guidance suggests that this is not the case with compliance and restoration notices, and in the event of a failure to comply with these notices the business could still be prosecuted for the original criminal offence.
Stop notices
A stop notice requires a business to cease carrying on an activity that is causing harm or involves a significant risk of causing harm until the business has taken the steps specified in the notice to secure regulatory compliance. They can also be used as a preventative measure where an activity likely to be carried on in the near future will cause, or is likely to cause, a significant risk of harm. However, stop notices are intended to be used only in the most serious cases of regulatory non-compliance and a person who fails to comply with a stop notice will be guilty of a criminal offence.
Enforcement undertakings
Enforcement undertakings are agreements made between a regulator and a business for the business to undertake specified actions. They are to be used where a regulator has reasonable grounds to suspect that a business has committed a relevant offence, although it may in practice be the business that brings it to the regulator's attention. Unlike the other new sanctions it is for the business to offer to give an undertaking, perhaps after discussions with the regulator concerned. However, they do not have to be accepted by the regulator in any particular case. Enforcement undertakings are designed to facilitate creative solutions to regulatory non-compliance. Where there is a breach of an undertaking it is open to the regulator to prosecute the business for the original offence or impose an administrative sanction (e.g. a discretionary requirement) instead.
However, it is worth noting that these powers are not automatically conferred on regulators. Instead, the Act requires a Minister to award these powers to the specified regulators by way of an enabling statutory instrument. Further, regulators who wish to make use of the new sanctions must publish guidance about them ("Penalty Guidance") along with guidance on the approach the regulator will take towards enforcement ("Enforcement Policy").
Why this matters:
To say that the coming into force of parts of the Regulatory Enforcement and Sanctions Act 2008 has not exactly received a trumpeted fanfare would be something of an understatement. Many businesses (and lawyers!) remain largely unaware of this piece of legislation. By the same token, interest by regulators in the additional powers they could be awarded has been similarly underwhelming. Reports suggest that, of all the regulators who are entitled to ask for these powers, so far only the Financial Services Authority has expressed an interest. In particular, the Information Commissioner's Office has reportedly indicated that it does not intend to pursue additional powers under the Act, citing that it is in separate negotiations with the Government about increasing its enforcement capabilities.
But to ignore this Act would be foolhardy, and it has the potential to be something of a regulatory sleeping dragon. Ostensibly, the Act has the aim of "reducing administrative burdens" – but does so by apparently increasing the range and number of sanctions available to regulators! If regulators wake up to the coming into force of the Act, they may begin to take a sharp interest in the additional powers available to them, over and above their existing powers. And if this happens, advertisers could find themselves exposed to a completely new enforcement landscape…
