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Trading Standards bring first prosecution under Unfair Commercial Practices Directive (UCPD)

Wiltshire County Council’s Trading Standards Department have become the first consumer protection agency to obtain and enforcement under the new Consumer Protection from Unfair Trading Regulations 2008. Yet many businesses are unaware of the far-reaching implication of the Regulations.

On August 4th 2008 the Office of Fair Trading reported the first use in court of the new Unfair Commercial Practices Directive (UCPD) following a case against two Wiltshire traders engaged in general home handy man services; one might imagine fertile ground for consumer authorities such as the Trading Standards, who are expected to enforce the law nationally, to obtain enforcement under the 2008 Regulations. Although the new regulations are meant to enable Trading Standards and the OFT to crack down on rogue traders and will put in place a comprehensive framework for dealing with “sharp” practices, their implications are far wider and deeper than many have realised.

“The Consumer Protection from Unfair Trading Regulations 2008 came into force on 26 May 2008 having been formerly adopted by the EU in May 2005. They implement the Unfair Commercial Practices Directive (UCPD) in the UK, and replace several pieces of consumer protection legislation that were in force prior to 26 May 2008. The Regulations introduce a general duty not to trade unfairly and seek to ensure that traders act honestly and fairly towards their customers. They apply primarily to business to consumer practices but elements of business to business practices are also covered where they affect consumers.” (OFT)

The vast majority of UK businesses' dealings with consumers are fair and should not need to change any of their business practices. However, a breach of the rules will, in most cases, be a criminal offence. In addition to a fine, directors and managers could be sentenced to up to two years in prison.

The rules make it an offence to mislead through omission as well as commission and outlaw aggressive practices.

Objectives of the UCPD

The key to the Directive is maximum harmonisation of differences in the Member States’ regulations of unfair commercial practices. This means that national measures within its scope cannot impose greater requirements or prohibitions. It is anticipated that consumers' rights be clarified and cross-border trade facilitated by providing EU-wide protections against aggressive or misleading business-to consumer marketing, giving consumers the same protection when buying from, for instance, a website in another Member State.

Scope of the UCPD

The Directive is a far-reaching attempt to regulate the whole relationship between businesses and consumers. It replaces current sector-specific laws and is designed to outlaw unfair practices across the business spectrum, before, during and after a transaction, falling into three broad categories:

1. The general prohibition;
      
2. The prohibition of misleading actions or omissions and aggressive commercial practices; and
      
3. The prohibition of 31 specific practices that will be deemed unfair in any circumstances.

The Regulations state that a misleading action or misleading omission on the part of a ‘trader’ in relation to ‘products’ will amount to an “unfair commercial practice”.

A “trader” is a natural or legal person acting in the course of his trade, business, craft or profession.

A “consumer” is not a natural or legal person acting in the course of his trade, business, craft or profession.

“Products” includes goods and services, rights and obligations and range from simple products such as an item of food to the complex services involved in selling property.

A commercial practice (includes acts, omissions, a course of conduct, representations or commercial communications by a trader promoting, selling or supplying a product to a consumer) becomes a misleading action, and therefore a criminal offence, if it:

• "contains false information and is therefore untruthful […] or if it or its overall presentation in any way deceives or is likely to deceive the typical consumer […], even if the information is factually correct; and
• causes or is likely to cause the typical consumer to take a  transactional decision he would not have taken otherwise"

Examples

The rules give examples of what may make up false and thus, illegal information, from how readily available a product may be, the geographic origin and even the seller's "awards and distinctions".

Displaying a kite mark without approval or falsely claiming the support of another body will be deemed unfair. As will advertorials that fail to indicate that they were paid for by the trader.

Any entertainment or establishment restaurant that quotes selectively from reviews can face prosecution.  The rules ban promotions that are “likely to deceive the average consumer, even if the information is correct”, provided that it is expected to influence and initiate a transaction.

Most commercial practices occur directly between a trader and consumer but any commercial practice that has the potential to affect a consumer may be covered. For example, a wholesaler selling food to a super market must be compliant with the regulations under the UCPD directly connected with the promotion and sale of food.

Conclusion

The Unfair Commercial Practices Directive will affect many businesses including wholesale and retail but also the likes of estate agents, financial advisers, insurers, manufacturers of consumer products; these businesses will need to be aware of how changes in the legislative regime may potentially affect their practices.

The UCPD by being more broadly framed and flexible brings under its remit well defined practices which may in the past have been good enough to escape prosecution by adhering to the letter of the law and not its spirit.

Given the wide extent of the Regulations, businesses should take steps to understand the implications of the new legislation and to assess their current trading practices to ensure compliance by themselves and their staff.

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Telephone: +44 (0)161 785 3500, Fax: +44 (0)161 624 2589, Email: enquiries@pearson-hinchliffe.co.uk