Summary

Last month, the UK government released further proposals to change consumer law – this time, by allowing consumers to sue traders who breach the Consumer Protection from Unfair Trading Regulations 2008 (the CPRs) and specifying the remedies that they would obtain if successful.

In this briefing we examine the main proposals and how they could affect you. In short:

  • businesses should prepare for increased exposure to consumer claims, which could be encouraged by competitors;
  • the remedies available are likely to include damages and rights to unwind certain contracts; and
  • the government is seeking comments on the proposal before 11 October 2013. We are preparing responses and would welcome your views.

Misleading and aggressive commercial practices

The CPRs criminalise misleading and aggressive commercial practices by businesses towards consumers. They are enforced by Trading Standards and the OFT, either via criminal prosecutions or through the process set out in Part 8 of the Enterprise Act 2002, which allows enforcers to seek statutory undertakings or court orders to prohibit conduct that breaches these and other consumer protection regulations. In many cases, the CPRs are also the statutory backdrop for the Advertising Standards Authority (ASA)’s assessment of advertisements and company websites.

Consumers cannot currently bring claims for damages against traders for breach of the CPRs. Instead, a consumer might have to rely on making a complaint to the ASA (which cannot award damages) or on another legal basis, for example misrepresentation, which may well be difficult to establish. A report by the joint Law Commissions of England & Wales and Scotland in 2012 was critical of the situation and the government now wishes to offer consumers clearer and simpler redress for misleading and aggressive commercial practices.

The government proposes to introduce legislation that would create:

  • a private right of redress for consumers who have been victims of misleading or aggressive practices. A consumer will have a right to redress if the trader’s misleading or aggressive practice was a significant factor in the consumer’s decision to enter into the contract or make a payment;
  • standard remedies for victims of misleading and aggressive practices. These include:
    • a right to unwind: if the goods or services have not been fully consumed, and the consumer rejects them within 90 days, the consumer will be entitled to ‘unwind’ the contract or payment and receive a full refund of the price paid; or
    • a right to a discount: consumers may decide to keep the remaining goods or services and claim a discount on the price paid. The right to a discount will continue to be available even when the right to unwind has been lost, and the level of the discount will be set according to statutory bands; and
  • an entitlement to seek damages. In addition to the standard remedies above, consumers will be entitled to damages if they can prove the misleading and aggressive practices caused further economic loss, distress or inconvenience.

What we think of the proposals

  • The creation of new rights for consumers to sue is unlikely to be welcomed by many businesses. The proposals may be more popular with claimant-focused law firms.
  • A particular risk for businesses will be follow-on civil litigation after a finding by the ASA or another regulator that a company has breached the CPRs. This will raise the stakes when it comes to defending complaints made to the ASA about misleading advertising or considering whether to agree to statutory undertakings proposed by the OFT or Trading Standards Services – the risk of follow-on damages claims will need to be taken into account.
  • There is also a risk of inconsistent decision-making. If the ASA rejects a complaint that an advertisement is misleading, but a county court dealing with a civil consumer claim finds to the contrary, can the trader risk continuing to run the campaign?
  • Although the new rights to sue would be open only to consumers, it is possible that traders seeking a competitive advantage may stand behind claims brought against their competitors. Competitor claims relating to misleading advertising are relatively common in many EU countries, where injunctions and damages are usually available.
  • The CPRs themselves are broadly drafted and there have been few court decisions interpreting them. Litigation, at least in the immediate aftermath of these new rights being introduced, is likely to be complicated, with numerous references by the courts to the European Court of Justice for guidance.
  • It is unclear how the proposed remedies, and in particular the right to unwind the contract, will apply to (in particular) digital products – will there be a duty on the consumer to delete digital content?

Have your say

The Department for Business, Innovation and Skills is seeking comments on the detail of how its proposals would apply. The deadline for submitting comments is 11 October 2013.