UK makes radical changes to implement Unfair Commercial Practices Directive

28 April 2008

Craig Giles

The UK is set to carry out a major overhaul of its consumer-facing legislation by passing the Consumer Protection from Unfair Trading Regulations 2008. The Regulations contain concepts which are new to the UK legal system including a general prohibition against unfair commercial practices. Breach of the Regulations may result in the commission of a criminal offence. The Regulations will apply to online, as well as offline, commercial activity.

EU harmonisation

The Regulations, which are set to come into force on 26 May 2008, implement the Unfair Commercial Practices Directive. The aim of the Directive is to harmonise European consumer protection laws, reduce barriers to cross-border trade and strengthen consumer confidence in shopping across frontiers. The Directive aims for “maximum harmonisation” which means that Member States should in general not maintain provisions which exceed the requirements of the Directive. Whilst it may be necessary for traders to invest some initial time in ensuring they comply with the new Regulations, in the longer term the harmonisation of consumer legislation should make e-commerce within the EU easier.

Implementation of the Regulation requires the repeal of a host of UK legislation, including certain provisions of well-known statutes such as the Trade Descriptions Act 1968 and the Consumer Protection Act 1987. A short summary of activities which are prohibited by the Regulations is set out below:

The General Prohibition

The Regulations contain a general prohibition on unfair commercial practices. A practice will be considered to be “unfair” if it:

  • contravenes the requirements of professional diligence; and

  • materially distorts or is likely to materially distort the economic behaviour of the average consumer.

The general prohibition is designed as a “catch-all” provision to cover conduct which is not covered by the more specific prohibitions set out in the Regulations.

Misleading actions

The following will be considered as illegal misleading actions under the Regulations:

  • providing false or misleading information about a product or service;

  • creating confusion with competitors’ products, trade marks or trade names; or

  • failing to comply with a code of conduct with which a trader has undertaken to comply.

Aggressive sales techniques

The Regulations not only make it an offence to employ obviously aggressive sales techniques, such as using threatening language, but also to exercise undue influence over consumers. This could affect traders who put disproportionate force on a consumer to switch to their products or services instead of those of a rival trader. The Regulations apply to all commercial practices, including after sale support. This prohibition could therefore catch traders who use aggressive techniques to prevent consumers from cancelling a subscription or seeking a refund.

Misleading omissions

Perhaps the most important development contained in the Regulations is the prohibition against failing to give sufficient information about a product or service. A commercial practice will constitute a misleading omission if:

  • it omits or hides material information which the consumer needs to make an informed decision about a purchase; or

  • provides information in an unclear or ambiguous manner (for example where material information is only included in obscure hyperlinks or footnotes).

Invitations to purchase

If a trader issues a commercial communication which provides:

  • the key characteristics of a product; and

  • details of its price;

in a way in which it enable consumers to make a purchase (known as an “invitation to purchase”), the Regulations set out a mandatory list of information requirements which will be considered to be “material”. These include items such as the trader’s address and any applicable freight charges. Failure to include these in the communication will be a misleading omission.

Automatically unfair practices

The Regulations set out a ‘blacklist’ of 31 practices which will be considered automatically unfair. Whereas the other practices prohibited by the Regulations should be looked at in the context of whether they would have an adverse affect on a consumer’s behaviour, the practices on the blacklist will always be considered unfair.

Traders should make themselves familiar with this entire list, but some of the key prohibitions are set out below:

  • Using ‘bait advertising’ – i.e. making an invitation to purchase a product at a specific price without having sufficient stock. Simply stating that a product is “subject to availability” may not offer traders any protection if they did not have a reasonable belief they had sufficient stock.

  • Running a competition or prize promotion without awarding the prizes described or reasonable equivalent. This prohibition is potentially stronger than the previous rules contained in theCAP Code.

  • Creating a false impression that after-sales service is available in an EEAStateother than the one in which it is sold. Traders could contravene this prohibition easily by simple omission - eg by not making this information clear when selling goods through a website.

  • Making in advertising a direct exhortation to children to buy advertised products or persuade their parents to buy advertised products. Direct exhortation to children was already banned on television, but the new regime extends this blanket ban to other forms of advertising (including advertising over the internet).

What should traders do?

Whilst the Regulations make wholesale changes to UK consumer protection law, the obligations under the new regime are in many ways similar to those which they are replacing. As such, the vast majority of traders should not have to make any fundamental changes to their commercial practices.

However, traders should examine their commercial practices aimed at consumers afresh in the light of the new legislative regime. Traders should check:

  • whether they employ any of the 31 practices which are automatically unfair;

  • whether they are making any misleading omissions in any of their commercial communications; and

  • whether their practices could be considered to be potentially unfair for any other reason.

If traders are in any doubt as to whether their practices comply with the new regime they should seek legal advice.

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