The Government's consultation period in respect of the draft Consumer Protection from Unfair Trading Regulations 2007 (UK) ("Regulations") closed on 21 August 2007. It is intended that the Regulations will come into force on 6 April 2008.
The Regulations implement into UK law an EU Directive (2005/29/EC of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market otherwise known as the Unfair Commercial Practices Directive) (UCPD). The aim of the UCPD is to harmonise unfair trading laws across the EU by replacing the different national laws with a single EU-wide consumer protection framework designed to encourage cross-border commerce by enabling consumers to trade with more confidence with businesses across the EU.
The Regulations alter the UK consumer protection regime significantly. They apply to a very wide range of business to consumer transactions and ban advertising, marketing and other commercial practices used by businesses in their dealings with consumers which may be considered to be unfair. The Regulations prohibit traders in any sector:
- generally treating consumers unfairly;
- committing actions and omissions that may mislead consumers;
- using aggressive commercial behaviour (including harassment, coercion or undue influence); and
- undertaking other specified practices which will automatically be considered unfair in certain circumstances.
Breach of any part of the Regulations is enforceable by means of civil action. The Regulations also provide for imposition of criminal sanctions ranging from fines to imprisonment.
Intention (in the form of knowledge or recklessness) on the part of the trader must be established to prove breach of most of the Regulations although breach of other parts of the Regulations is a strict liability offence, which means that the carrying out of the prohibited practice itself automatically constitutes an offence without having to prove knowledge.
The draft Regulations also introduce some definitions that need to be explained:-
- "Commercial practice" is very widely defined in the Regulations to include "any act, omission, course of conduct, representation or commercial communication (including advertisement and marketing) by a trader, which is directly connected with a promotion, sale or supply of a product to or from a consumer, whether occurring before, during or after a commercial transaction in relation to a product". This broad definition catches a wide range of practices and extends to both the presale and after sale stages of a transaction.
- The definition of "product" is similarly wide covering rights and obligations as well as goods and services. Therefore, the Regulations apply to behaviour that might influence consumers' decisions as to whether to exercise rights under a contract (for example, returning goods, ending a subscription, or claiming under an insurance policy).
- A practice will be "unfair" if it fails to meet the usual standard of skill and care consumers could expect from a trader and if it is also likely to restrict typical consumers' ability to take an informed decision to such an extent that consumers are likely to make a different decision than they would have made otherwise.
- It is important to note that a "consumer" is an individual only and does not include a corporate entity, business or partnership. The consumer must be acting in his or her personal capacity not for his or her business. Therefore, business entities of any sort cannot seek the protection of the Regulations. The definition of "typical consumers" extends in some circumstances to consumers who are particularly vulnerable because of factors such as mental or physical infirmity, age or credulity. Practices such as "pressure selling" to the elderly and unfair marketing aimed at children are therefore caught.
The trade practices which will automatically be considered unfair form a list of 31 specific commercial practices. 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 recognised body.
In view of the very wide scope of the Regulations, businesses should take steps now to familiarise themselves with the new requirements and to review their current trading practices to ensure that sales and marketing teams in particular stay "legal" when the new regime comes into force.