Amendments which broaden the scope of the Hong Kong Trade Descriptions rules now in force
The Hong Kong Trade Descriptions (Unfair Trade Practices) (Amendment) Ordinance 2012 is now in force. The amendments extend the scope of the existing Trade Descriptions Ordinance and introduce new offences and enforcement mechanisms in a bid to promote consumer protection. Enforcement guidelines have also been issued.
The amendments extend the scope of the existing Trade Descriptions Ordinance to include false trade descriptions relating to services (previously, the prohibition only applied to goods). The definition of ‘trade descriptions’ has also been expanded to cover any information relating to a product’s availability, price, quality or features, that is given in any form or by any means.
A number of new offences have also been introduced, including misleading omissions, aggressive commercial practices, bait advertising, bait and switch practices and failure to disclose a commercial interest or intent where a company posts on social media disguised as a consumer.
Customs and Excise and the Communications Authority are responsible for enforcing the rules, with the Communications Authority’s remit relating to the enforcement of fair trading provisions for telecommunications and broadcasting licensees. The amendments do not afford any private rights of action to other traders.
Breaches of the rules can result in criminal prosecution, with offenders liable to a fine of up to HK$500,000 (US$65,000) and imprisonment of up to five years. Individual corporate officers can also be liable for offences committed by a company.
The enforcement authorities may apply to the courts for injunctive relief (including interim injunctions) to restrain non‑compliant conduct. They may also accept undertakings not to continue or repeat non‑compliant conduct, as an alternative to prosecution.
The Commissioner of Customs and Excise and the Communications Authority has published enforcement guidelines for the amended Trade Descriptions Ordinance, which are available here.
EU
Cross-border consumer protection consultation
The European Commission has launched a consultation on how best to strengthen cross border consumer protection.
The European Commission is due to report on the functioning of the CPC Regulation to the European Parliament and the European Council in 2014.
The consultation, Review of the Consumer Protection Cooperation Regulation, is seeking views on how to improve the functioning and effectiveness of the
EU Regulation for the enforcement of consumers’ economic interests in the EU (the Consumer Protection Cooperation (CPC) Regulation (2006/2004/EC)).
The CPC Regulation establishes rules for co‑operation between national enforcement authorities and the European Commission and provides mechanisms to address cross‑border breaches of a wide range of EU consumer protection legislation involving at least two EU member states. The CPC Regulation is far‑ reaching and enables a national authority to take action in respect of infringements committed by a company located in its territory which harms the collective interest of consumers in another EU country.
This consultation seeks feedback on four key topics:
- key challenges and possibilities for improvement in the enforcement of consumer rights;
- improving the methodology for identifying infringements (currently there are no practical procedures for member states to follow when co‑ordinating market surveillance);
- enhancing the capacity of national authorities to perform duties under the CPC Regulation, including more efficient and robust enforcement responses. The consultation seeks views as to what sanctions would best deter infringing practices and whether it would be useful to introduce a common set of standards or criteria to overcome procedural differences between EU countries; and
- identifying the means of investigation and intervention required by national enforcement authorities to co‑operate to tackle infringements involving several countries.
The consultation closes on 31 January 2014 and is part of a wider review of the CPC Regulation. The European Commission is due to report on the functioning of the CPC Regulation to the European Parliament and the European Council in 2014.
Neven Mimica, European Commissioner for Consumer Policy, said: ‘Improving the effective implementation of consumer rights is one of my priorities. Today all of Europe is our high street. I want to hear from consumers, shop owners, businesses how we can strengthen protection, especially across borders, without increasing red tape.’
Nanotechnology round-up
The European Commission is seeking to tighten up regulation in the nanotechnology industry, is consulting on introducing a nanomaterials register, and has launched a scheme to market and to boost public acceptance of nanotechnologies.
Reporting requirements under REACH
The European Commission has closed its consultation on the possible amendment of existing EU chemical laws (REACH) in order to tighten reporting requirements for nanomaterials. The objective of the consultation was to provide the European Commission with the best possible evidence for its proposal to amend the REACH Annexes to ensure further clarity on how nanomaterials are regulated. Amendments of the REACH Annexes could provide stricter REACH requirements for nanomaterials to ensure that industry demonstrates their safety in registration dossiers.
In the absence of EU‑wide legislation, Belgium, Denmark, France, Italy and Norway have each set up their own registers of nanomaterials.
Submissions to the consultation indicate that NGOs favour the tightening of the REACH requirements for nanomaterials, while industry’s preference is for narrowing some REACH requirements. The Nanotechnology Industries Association has expressed concern that additional requirements could be costly for companies.
The European Commission met with member state representatives in October 2013 to discuss the results of the Consultation and it is anticipated that the European Commission’s proposal of possible amendments to the REACH Annexes will be made in early 2014.
EU-wide register of nanomaterials
Following pressure from MEPs and a number of member states, the Commission is to consult on the need for an EU‑wide register of nanomaterials next spring. An impact assessment is already underway and is due to be finalised next autumn.
In the absence of EU‑wide legislation, Belgium, Denmark, France, Italy and Norway have each set up their own registers of nanomaterials. Denmark has also proposed the introduction of its own disclosure requirements from next year.
The Nanotechnology Industries Association has expressed concern about the potential market disruptions caused by the development of different requirements for data collection across the EU.
The European Commission’s nanotechnology ‘outreach’ scheme
In July 2013, the European Commission’s research department launched a €2.4m initiative to aid the responsible introduction and development of nanotechnologies to the market and to boost public acceptance of nanotechnologies.
The initiative involves 12 groups: six from industry and the remainder from academic institutions and consultancies, the European Trade Union Institute and an association of scientific journals. The scheme’s remit is to provide policy advice for the research function of the Commission and to inform spending, rather than for nanotechnology regulation. The initiative is to be 80 per cent funded by the Commission and 20 per cent funded by industry.
Advertising and metatags
The ECJ has held that the use of metatags and domain names can constitute ‘advertising’ and are, therefore, subject to EU rules prohibiting misleading advertising.
Belgian Electronic Sorting Technology NV v Bert Peelaers, Visys NV (case C-657/11)
Belgian Electronic Sorting Technology NV (BEST) operated a business producing and distributing sorting machines based on laser technology. An employee of BEST left the company and established a competitor business, Visys NV. Visys went on to embed its website with various metatags (hidden key words which are read by internet search engines and used to rank the results displayed to a user) containing the names of popular BEST sorters and also registered the domain name www. bestlasersorter.com, where it set up a mirror image of its own website.
Belgium’s highest court referred to the ECJ the question of whether Visys’ use of metatags, and its registration and use of the domain name, fell within the meaning of ‘advertising’ for the purposes of the Comparative Advertising Directive (Directive 2006/114).
Neither their task of public interest nor their public law status are sufficient reason for them not to be covered by such prohibitions.
The ECJ concluded that, based on the broad definition given to advertising‑related terms in the Directive, and on the contents of a number of the introductory provisions, the EU legislature had intended to establish ‘a complete framework for every form of advertising event’ for the protection of consumers and traders. It ruled that the use of metatags can constitute ‘advertising’ and that the use of a domain name (though not the registration of a domain name as such) is also covered by the term ‘advertising’ and is, therefore, subject to the same rules as for conventional forms of advertising. The Court went on to declare that, so long as a trader’s actions were taken to promote the sale of his or her products or services and were capable of influencing the economic behaviour of consumers, it would not give any interpretation to ‘advertising’ that exempted the trader’s actions from the rules of fair competition.
Germany
Unfair business-to-consumer commercial practices rules apply equally to health insurance funds
The ECJ has held that the prohibition of unfair business-to-consumer commercial practices are applicable to health insurance funds. Neither their task of public interest nor their public law status are sufficient reason for them not to be covered by such prohibitions.
BKK Mobil Oil v Zentrale zur Bekämpfung des unlauteren Wettb – C-59/12
The German Competition Authority (Wettbewerbszentrale) sought to take action against BKK on the basis of the Unfair Commercial Practices Directive in respect of misleading wording on its website.
BKK, a health insurance fund established in Germany as a public body, argued that the provisions of the Directive did not apply to it on the basis that: (1) it was a public body carrying out a task of public interest, and (2) it did not seek to make a profit, and therefore was not a ‘trader’ carrying out ‘commercial practices’ for the purposes of the Directive.
On appeal, the Court held that, despite its public status and that it carried out tasks in the public interest, BKK constituted a ‘trader’’ within the meaning of the legislation, stating that the Directive does not expressly exclude such bodies from its scope. The Court added that, the Directive’s aim of achieving a high level of consumer protection against unfair business‑to‑consumer commercial practices
(and in particular from misleading advertising) required that protection be ensured whatever the status of the body at issue (public or private) or of its specific task.
UK
The CMA’s consumer-related enforcement powers and functions
The UK government has published guidance setting out the Competition and Markets Authority’s (CMA) consumer-related enforcement powers and functions, as well as publishing a high level strategy paper highlighting its projected vision for the next five years.
The CMA will have primary expertise and lead enforcement responsibility in relation to the application of the Unfair Terms in Consumer Contracts Regulations 1999.
From 1 April 2014, the CMA will function as the UK’s single competition authority, replacing the OFT and the Competition Commission. It will also have some consumer law powers, with enforcement of consumer law shared with Trading Standards Services. The UK government has recently published draft guidance on the CMA’s approach to its consumer protection powers (‘Consumer protection: guidance on the CMA’s approach to use of its consumer powers’), accompanied by a series of consultation questions. The draft guidance is intended to provide an overview of the CMA’s role in the new consumer landscape and to supplement existing OFT guidance on the consumer protection regime.
Overall, the consumer role of the CMA will be to investigate and conduct in‑depth analyses of markets that are not meeting the needs of consumers, with the aim of identifying and addressing market failures. The CMA will have primary expertise and lead enforcement responsibility in relation to the application of the Unfair Terms in Consumer Contracts Regulations 1999. It will also have powers under the Enterprise Act 2002, the Consumer Protection from Unfair Trading Regulations 2008, the Business Protection from Misleading Marketing Regulations 2008, and provide guidance material to businesses and consumers.
The draft guidance details the CMA’s:
- policy objectives, which indicate that the CMA’s focus will be on market‑wide, multi‑party cases (but in limited circumstances single party investigations);
- working partnerships, eg with Trading Standards Services;
- approach to compliance and the enforcement of consumer protection law;
- use of civil consumer enforcement powers pursuant to Part 8 of the Enterprise Act 2002; and
- use of criminal consumer enforcement powers.
The government has indicated that the draft guidance will, in due course, reflect the draft Consumer Bill of Rights, which is currently subject to pre‑legislative scrutiny in a House of Commons Select Committee.
The UK government has also published a high level strategy for the CMA
(Vision, values and strategy for the CMA) setting out the government’s ambitions for reforms to the consumer landscape which will be achieved by ‘refocusing consumer protection’ through:
- working with consumer bodies and enforcement partners across the UK to co‑ordinate activity and share intelligence and best practice;
- pursuing cases where it is best‑placed to do so and where it can be confident of high impact or precedent value, allocating other cases to the most appropriate enforcer;
- acting where consumer enforcement supports competition;
- integrating the use of competition and consumer tools so that whichever best serves the interest of the consumer can be used in each case; and
- embedding the new regime – telling a compelling story about the importance of consumer protection and its interaction with competition, and working with partners to ensure the roles of different organisations are understood.
We already enjoy a close and effective working relationship with trading standards.
The strategy also sets out areas of likely focus for the CMA over the coming years, which includes regulated sectors, as they represent a high proportion of the economy, characterised by suppliers with market power. The CMA also aims to ensure that opportunities and risks to consumers are understood in emerging sectors and business models, including online sectors.
Trading standards becomes the ASA’s legal backstop
The Advertising Standards Authority and Trading Standards have reached an agreement that Trading Standards will act as the ‘legal backstop’ for the ASA, taking over the role from the OFT. The National Trading Standards Board and the ASA have reached a deal which
means that Trading Standards (taking over from the OFT) have agreed to act as the
ASA’s legal backstop.
Under the terms of the agreement, the ASA will be able to refer non‑compliant non‑broadcast advertisers who continually break advertising rules to Trading Standards, which can consider legal sanctions under consumer and business protection laws.
The ASA and the National Trading Standards Board have also agreed new case handling principles, with the ASA remaining responsible for regulating advertising, while Trading Standards will continue to focus its resources on other consumer issues.
Commenting on the deal, the ASA’s Chief Executive, Guy Parker, said: ‘We already enjoy a close and effective working relationship with trading standards. This new arrangement will help us become more joined‑up and consistent as well as giving consumers and businesses confidence that an advertiser who doesn’t play by the rules will face the consequences.’
Newswatch
- Australia – damages in defective goods claims are usually intended to be compensatory and are calculated by assessing the difference in value between the defective goods received and those which would have been received had the contract been fulfilled. In Macourt v Clark [2012] NSWCA 367, the Court of Appeal granted special leave to appeal in relation to the calculation of contractual damages resulting from defective goods in circumstances where there was no coherent purchase price for the goods and where the purchaser had already fully mitigated his losses.
- Canada – Health Canada has released guidance to the requirements of the Administrative Monetary Penalties (Consumer Products) Regulations. The Regulations establish an Administrative Money Penalty System – a compliance and enforcement tool for the Canada Consumer Product Safety Act – whereby Health Canada can impose money penalties for failure to comply with Ministerial orders to recall or take steps corrective measures in respect of consumer products. The guidance is available here.
The report made a number of recommendations to improve compliance, including increasing awareness of REACH and CLP obligations among smaller downstream users.
- EU – the European Chemicals Agency has published a report on the compliance of downstream users with essential requirements provided by the REACH and CLP Regulations (Obligations of downstream users – formulators of mixtures). Inspectors reported that 67 per cent of the enterprises which were surveyed violated provisions of the chemicals legislation. Non‑compliance included registration and notification contraventions, failing to sufficiently provide information on hazardous chemicals downstream and deficient implementation of risk management measures. The report made a number of recommendations to improve compliance, including increasing awareness of REACH and CLP obligations among smaller downstream users.
- EU – the European Commission has proposed a credit and debit card fee cap.
A proposed Directive would repeal the existing Payments Services Directive (2007/64/EC), with the aim of modernising payment services regulation to address new types of payment services, as well as to improve competition and consumer protection. The proposals would introduce capped interchange fees for consumer credit cards of 0.3 per cent of the value of the transaction and 0.2 per cent for consumer debit cards.
- EU – Regulation (EC) No 1223/2009, which replaces the Cosmetics Directive
of 1976, and which was introduced with the aim of improving cosmetic product safety, is now in force. Key changes include: new labelling requirements
(for example of nanomaterials); the prohibition of animal testing and a requirement for manufacturers to designate a ‘responsible person’ for every product (with responsibility for ensuring legal compliance and, for example, for any withdrawal or recall of products).
- UK/EU – BIS has now closed its consultation on the European Commission’s proposals for a new Product Safety and Market Surveillance Package, comprising two new European Regulations intended to simplify and improve consumer product safety. The proposals are currently being negotiated in the Council and European Parliament and the adoption date is envisaged for spring 2014. For our briefing on the EU proposals, please see Revising the EU product safety regime – at significant cost to business?
- UK – a number of health and fitness club operators have agreed to give consumers better cancellation rights and to make their contract terms more transparent following an OFT investigation. In 2011, a High Court enforcement order imposed on Ashbourne Management Services (a company that recruits members for gym and fitness clubs, provides standard form agreements and collects payments from members under such agreement) prompted the OFT to investigate and put all gyms on notice that they should review their contractual terms to ensure compliance with unfair contract terms and businesses practices. Further details of the 2011 High Court case can be found in PRL News December 2011.
- UK – Which? has conducted an investigation into which home appliances are most likely to cause a fire. Following a Freedom of Information request, the
results showed that, between 2011 and March 2013, washing machines accounted for the highest proportion of incidents (with 14 per cent), tumble dryers at
12 per cent and dishwashers at 11 per cent. Which? also named individual brands which were of particular concern.
- Italy/EU – the European Court of Justice, in Case C‑234/12, has held that setting different hourly broadcasting limits for advertising on pay‑television and on free‑to‑air television is not incompatible with the Audiovisual Media Services Directive, and clarified that the Directive lays down minimum requirements, rather than completely harmonising the areas to which it applies. The ECJ emphasised that the principles of equality and proportionality must be respected.
- Norway – the chemical PFOA will be banned from consumer products from 1 June 2014. PFOA is used to make products waterproof and dirt‑resistant and is used in paints, carpets, clothing and cookware. PFOA was deemed a substance of very high concern under REACH in June 2013.
