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Published: Fri, 02 Feb 2018
Misleading and unfair commercial practices regulated
The UK and European Law are generally very much concerned with protecting consumer rights. This includes not just applying restrictions to traders’ freedoms but also spreading awareness of the rights available to the consumer. A number of Acts and Regulations have been put in place throughout history to protect these rights and to ban certain trading practices used by businesses which are deemed unfair.
A public body is established to monitor commercial transactions and to ensure they comply with standards outlined in the Enterprise Act 2002, the Consumer Credit Act 1974 and the Consumer Protection from Unfair Trading Regulations 2008.
The Enterprise Act 2002 replaced the Fair Trading Act 1973. Despite being issued without much warning, the Fair Trading Act 1973 did not bring any major changes to the previous law concerned with competition. Apart from some improvements, it gave the Director General of Fair Trading authority to protect the consumer by restricting and prohibiting unfair and unwanted trade practices (Part II of the Act). Part III of this Act also allowed the Director General to manage the deceivers and make them obey their legal obligations. Part II of the Fair Trading Act 1973 concentrated on undesirable practices, whereas Part III had its attention on undesirable traders. Part II of the Act – Adverse Consumer Trade Practices – made only Three Orders before it was repealed by the Enterprise Act 2002. These were: the Consumer Transactions (Restrictions on Statements) Order 1976 concerned with taking more serious measures in restricting business from using void exemption clauses such as “No refunds”; the Mail Order Transactions (Information) Order 1976 concerned suppliers taking deposits without keeping or giving delivery dates, this order was later revoked by Consumer Protection (Distance Selling) Regulations 2000 but its conditions were brought forward; and the Business Advertisement (Disclosure) Order 1977 made businesses be more clear about its trading status when advertising in order for the public to be able to see that they are not private sellers. Part III of the Act – Persistently Unfair Traders – was also repealed by the Enterprise Act 2000, as it was said to be “limited” and “weak”.
However, before the reforms were introduced to improve Part III of the Fair Trading Act 1973, the European Commission proposed a new Directive 98/27/EC, which meant that the UK law had to adopt it. The Stop Now Orders (E.C. Directive) Regulations 2001 (SNORS) came into force in June 2001. Whilst the UK now had two systems in place – one for “Community infringements” and the other for “Domestic” – they were both revoked by the Enterprise Act 2002.
The Enterprise Act 2002 was introduced and brought significant changes into the system. It covered a very large scope of law, including competition law. Part 8 of the Act – Enforcement of Certain Consumer Legislation – covered both domestic and Community infringements.
A domestic infringement is defined in s. 211 (1) of the Act as “an act or an omission” and gives three main requirements: this act or omission has to a) be “in the course of business”; b) “harm the collective interests of consumers in the UK”; c) correspond with the description given by the Secretary of State by order in s. 211 (2) and satisfy any of the seven conditions given in the Act.
A Community infringement is explained in s. 212 (1) as “an act or omission which harms the collective interests of consumers”. “Consumer” in this case is “a person who is a consumer for the purposes of (a) the Injunctions Directive and (b) the listed Directive [or the listed Regulations] concerned” (s. 210 (6) Part 8 Enterprise Act 2002).
S. 213 of the Act outlines the list of “enforcers”. These include: the general enforcers (the Office of Fair Trading, every “weights and measures authority” in Great Britain and the Department of Enterprise, Trade and Investment in Northern Ireland); designated enforcers (a person or a body designated by order of Secretary of State and has a purpose to protect collective consumer interests); Community enforcers (a “qualified entity for the purposes of the Injunctions Directive as listed in the Official Journal”); CPC enforcers (a network of enforcement bodies across the EU designated by the Secretary of State). Designated enforcers can be both private and public body and must satisfy the Secretary of State’s condition of being an independent organisation. To this day only public bodies have been designated, these are: the Civil Aviation Authority, the Information Commissioner, the Office of the Rail Regulator, the Gas and Electricity Markets Authority and the Director General of the Communications, of Water Services and of Gas and of Electricity Supply in Northern Ireland. Guidance on the criteria for the private bodies is also available.
The Office of Fair Trading (OFT) is a UK non-ministerial government department. The main role of the OFT is to make the consumer aware of their rights on the market and administer the businesses and commercial transactions in the UK, ensuring fair and resolute trading competitions under the common law. Their main goals are to enforce competition laws under Competition Act 1998, to enforce consumer protection legislation in general matters affecting the consumer and to “monitor consumer credit through a licencing system under the Consumer Credit Act 1974″. The OFT issued a vast amount of publications to spread awareness and to promote the consumer rights. One of the published papers is a ‘Guidance on Part 8 of the Enterprise Act 2002’, which summarises ss. 211 and 212. Although it is not a definitive interpretation of Part 8 of the Act, as stated by OFT, it provides a complete user-friendly guide for the consumer in order to assist them with understanding the enforcement of consumer protection legislation and also contains a number of contacts at the OFT, where one can get assistance on matters related to the Enterprise Act 2002.
The Unfair Commercial Practices Directive 2005 was introduced by the EU to all its Member States with a view to simplify and modernise existing legislation in each of the states. Although the UK were at first reluctant to replace existing laws on consumer protection and marked the proposal to be “over-ambitious”, the Consumer Protection from Unfair Trading Regulations 2008 (CPRs), finally brought the Unfair Commercial Practices Directive 2005 (UCPD) into UK law. The UCPD concerns with “unfair business-to-consumer practices in the internal market” and practices which directly affect the consumer. As Preamble (12) of the Act states both the consumer and businesses “will be able to rely on single regulatory framework based on clearly defined legal concepts regulating all aspects of unfair commercial practices across the EU”. The Department of Trade and Industry (DTI) stated that the acceptance of the Directive, July 2003). The CPRs finally came into force in the UK on May 26, 2008.
The Consumer Protection from Unfair Trading Regulations helped implement the UCPD into the UK law. The OFT has later published two guides which are aimed at, as they put it, “helping traders to comply with the CPRs” – Guidance on the Consumer Protection from Unfair Trading Regulations (2008) and Basic Guide for Business (2008). Part I, General, s. 2 of the Regulations concerns with the interpretations of the terminology used, whereas Part II, Prohibitions, ss. 3-7 prohibits unfair commercial practices and provides a detailed list of what comes under the “misleading actions” and “misleading omissions”, as well as “aggressive commercial practices”.
The CPRs definition of “commercial practices” clearly includes “advertising and marketing”, however, as the Regulations are concerned with “the average consumer” only, the Business Protection from Misleading Marketing Regulations 2008 (BPRs, replacing Control of Misleading Advertisement Regulations 1988) aimed at protecting traders from deceiving promotional material.
The Advertising Standards Authority (ASA) is an independent regulator of all advertisement production in the UK. Their first Code was published in 1961, which in many ways reflected the 1937 International Code of Advertising Practice. The Codes are written by the Committee of Advertising Practice (CAP). The most recent, 12th edition of the UK code was published on September 1, 2010, it replaces all previous publications and is titled “The UK Code of Non-Broadcasting Advertising, Sales Promotion and Direct Marketing”. The broadcasting codes of advertising are managed by the Broadcasting Committee of Advertising Practice (BCAP). Its most recent code also came into force on September 1, 2010, it is titled “The UK Code of Broadcast Advertising” and it supersedes all four previous separate codes. Prior to ASA taking control over the advertisement practices in the UK, The Broadcasting Act 1990 imposed this duty on the Independent Television Commission and the Radio Authority, however, in 2003 the Office of Communications took over the responsibilities under the Communications Act 2003, but later (in 2004) transposed its duties to the ASA, which is now in charge of monitoring both non-broadcast and broadcast advertisements. This transition has simplified the system and the complaints process for both the consumer and businesses.
I would also like to mention the Unfair Contract Terms Directive 1995. The Unfair Terms in Consumer Contracts Regulations 1999 (replacing the 1994 Regulations) brought the 1995 Directive into the English law. It enabled the consumer to challenge contract clauses which they thought to be “unfair”. The 1999 Regulations also gave the OFT the power to control the future usage of such clauses and ban them where necessary. This legislation runs along with the Unfair Contract Terms Act 1977. The UCTA, however, has comparatively limited scope, as for example it mainly concerns with exemption clauses, whereas the Regulations also deal with unfair conditions in contracts. Moreover, the Regulations cover the type of contracts that UCTA does not apply to, such as insurance. UCTA on the other hand deals with both contractual and non-contractual matters, it is also open to all terms and applies to consumer as well as business transactions.
Among the Acts and Regulations listed above, there are a number of other Acts in the UK which help protect consumer rights and regulate unfair commercial practices, to name but a few: Sales of Goods Act 1979, Sales and Supply of Goods to Consumers Regulations 2002, Consumer Protection Act 1987, Misrepresentation Act 1967, Supply of Goods and Services Act 1982 etc. Although the government is largely concerned with the way businesses operate and welcomes improvement proposals, by introducing new codes of conduct, imposing modernised civil, criminal and administrative sanctions, these must always be reviewed and kept up-to-date, as business practices continue to develop and constantly present new ideas. At the moment, the regulations in place might be satisfactory for the market needs, however, in my opinion, with the substantial modern development of the consumer-business relationship it is necessary to continuously ensure that the running legislation is consistent and corresponds with the demand of the market population.
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