Fair's fair? - The Unfair Commercial Practices Directive

Fair's fair? - The Unfair Commercial Practices Directive

Fair’s fair? – The Unfair Commercial Practices Directive

Katherine Southby Regulatory Senior Solicitor at Bradford and Leeds-based law firm Gordons LLP.

Back in 2005 the Unfair Commercial Practices Directive promised a comprehensive and consistent Europe-wide ban on pressure selling and misleading marketing.

The advent of the internet as a major retail portal has changed retail shopping patterns dramatically over the last ten years. Therefore, the key motivator was to harmonize unfair trading laws in all European Union (EU) member states so that consumers would receive exactly the same level of protection against sharp practices and rogue traders whether they buy from the local corner shop or from a web site in another member state.

The forthcoming Consumer Protection from Unfair Trading Regulations 2007 (CPRs), which are due to come into force in April 2008, purport to enshrine this into UK law. But what are the implications for businesses and for future marketing strategy? Do the benefits outweigh the burdens? Are they going to affect you?

The main provisions of the CPRs are:

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  A general prohibition of unfair commercial practices – this prohibition is intended to cover any previous gaps in consumer protection legislation.

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  An obligation on businesses not to mislead consumers through acts or omissions; or subject them to aggressive commercial practices such as high pressure selling techniques. There are also additional protections for vulnerable consumers who are often the target of unscrupulous traders.

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  A total of 31 specific practices prohibited in all circumstances (see examples further in this article).

Will they affect my business?

The CPRs are extremely wide in their scope – they apply to all business sectors and all commercial practices directly connected with the promotion, sale or supply of a product to consumers. See the flow chart in Figure 1 (source DTI/OFT Draft Guidance on the Implementation of the Unfair Commercial Practices Directive) to work out if they apply to you and how they work.

Examples of unfair practices

The full list of automatically unfair practices is extensive, but the following are some of the more relevant:

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  Falsely claiming to be a signatory to a code of conduct or to be approved by a recognized body.

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  Displaying a trust mark or logo without authorization.

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  Stating or creating the impression that a product can legally be sold when it cannot.

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  “Bait advertising” scams (advertising a product as a special offer without actually having it in stock, or having only a token stock of the product).

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  Falsely stating that a product will only be available for a very limited time, or that it will only be available on particular terms for a very limited time, in order to elicit an immediate decision and deprive consumers of sufficient opportunity.

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  Promoting a product similar to a product made by a particular manufacturer in such a manner as deliberately to mislead the consumer into believing that the product is made by that same manufacturer when it is not.

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  Claiming that products are able to facilitate winning in games of chance.

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  Falsely claiming that a product is able to cure illnesses, dysfunction or malformations.

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  Claiming in a commercial practice to offer a competition or prize promotion without awarding the prizes described or a reasonable equivalent.

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  Materially misrepresenting the risk to the consumer or his family if the consumer does not purchase the product.

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  Including in marketing material an invoice or similar document seeking payment which gives the consumer the impression that he/she has already ordered the marketed product when he/she has not.

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  Describing a product as “gratis”, “free”, “without charge” or similar if the consumer has to pay anything other than the unavoidable cost of responding and collecting or paying for delivery.

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  Falsely stating the product will be available for a very limited time to get an immediate decision.

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  Falsely claiming the trader is about to cease trading or move premises.

The CPRs give enforcement authorities wide powers to seek civil and criminal sanction for breaches of the regulations. While the general prohibition of unfair commercial practices requires intention and a particular state of mind, all other offences, such as those relating to the prohibited activities will be strict liability, albeit with the possibility of arguing a due diligence defense. Penalties can include imprisonment and unlimited fines, and both the company and the directors can be prosecuted.

In summary, the CPRs will give consumers a powerful and protective deterrent against high pressure selling and misleading advertising. However, for businesses this could be another minefield for marketing departments or copywriters.

If you have any questions about the CPRs or would like more information please contact Katherine Southby or another member of the regulatory law team on 0845 273 3080.

Acknowledgements

Issued on behalf of Gordons LLP by Radiant. For further information please contact Rob Smith (tel: 0113 394 4610; mobile: 07840 677534; e-mail: rob.smith@radiantpr.co.uk) or Nick Wood (tel: 0113 394 4611; mobile: 07809 364975; e-mail: nick.wood@radiantpr.co.uk).