Seller Beware:Sales & marketing teams across all business sectors are likely to come under closer scrutiny from law enforcement bodies as new rules on unfair commercial practices come into effect next year. Shepherd and Wedderburn provide the low-down as to what's happening.
As if finding fresh and interesting ways to market your brand and sell your products isn't enough of a challenge for most marketing and sales teams, for many businesses, there is also the frequent trial of getting your promotional campaign past the critical eye of the lawyers and copy clearance team without your creative efforts being vandalised in the interests of legal compliance. From early next year, new rules are could add another level of complexity to this task.
The Unfair Commercial Practices (UCP) Regulations, which are due to come into effect in April 2008, is an attempt to comprehensively regulate perceived sharp practices in marketing and sales across all consumer facing businesses
The UCP Regulations are based on a European Directive, passed in 2005, which has the aim of harmonising national consumer protection rules across the EU. The idea is ostensibly "pro-business" in the sense that by ensuring a level legal playing field, traders should as a consequence, find it easier to engage in cross-border marketing, advertising and sales promotions. Business-to-business marketing and sales should be largely unaffected by the changes, although the Business Protection from Misleading Marketing Regulations 2007 which also come into affect at the same time will apply to misleading advertising and sales techniques aimed at business (as well as the public).
At least as far as the UK is concerned, the UCP Regulations alter the consumer protection regime significantly and introduce a new series of legal duties on traders (with back-up of criminal penalties in more serious cases). Whilst there has been some move to amend or repeal existing consumer laws (such as the Trade Descriptions Act), rather than consolidating the already patchwork array of rules and regulations that apply to sales and advertising, the UCP Regulations will largely sit alongside and supplement existing industry wide legislation, such as the Enterprise Act 2002 and sector specific rules (for example, in financial services).
The consumer-facing activities and transactions that are likely to come under closer scrutiny are varied. Essentially any advertising, marketing and other commercial practice when dealing with consumers will be prohibited if it is unfair, or likely to be misleading or regarded as unduly aggressive (for example, high-pressure sales techniques where there is an element of harassment, coercion or undue influence involved).
There are also a number of concepts that are relatively new to UK law. The notion of a "commercial practice", which is at the heart of the new rules, is interpreted very widely and covers all sorts of activity connected to advertising, marketing, promotion, sale and supply of product (both before and after sales). The type of practices affected is diverse and can range from misleading selections of quotes from film reviews to refusing to leave a consumers home without them signing a contract.
An "unfair" practice is one that fails to meet the usual standard of skill and care consumers could expect from a trader and is also likely to restrict a consumers' ability to take an informed decision. The UK Regulations also more controversially have introduced the concept of a "typical consumer" (as departure from the underlying EU Directive) which as well as including "average consumers" to which a commercial practice is addressed, extends in some circumstances to consumers who are particularly vulnerable because of factors such as mental or physical infirmity, age or credulity. Businesses therefore need to be particularly careful if there is deemed to be an element of targeting a product at the elderly or children.
The UCP Regulations also specify a number of trade practices (thirty one to be precise), which will automatically be considered to be unfair. These include falsely stating that a product will only be available for a very limited time, making persistent and unwanted telephone calls, and falsely claiming to be a member of a trade association or other recognised body.
Whether the Regulations will have their intended effect opening the way up for business to take advantage of the EU's internal market whilst cleaning up some of the more unscrupulous sales and marketing techniques remains to be seen. It is clear that for many commercial organisation dealing with the public, those in charge of sales and marketing need ensure that their promotional literature, campaigns, sales techniques and copy clearance procedures are all line with the Regulations before they come into effect. With criminal sanctions backing up some of the statutory requirements and the possibility of fines and jail sentences for culpable directors and managers in the more serious cases, turning a blind eye to sharp marketing practice may no longer be an option.