Later this year consumers will have the right to bring a claim directly against retailers if they are the victim of misleading or aggressive commercial practices.

Retailers would be well advised to review internal pricing promotion and advertising controls to minimise the risk of claims (and regulatory enforcement action), and brief customer service teams on how to respond to such claims before the new rights come into force on 1 October 2014.

Current position

Traders engaged in misleading and aggressive sales practices currently run the risk of civil and/or criminal sanctions under the Consumer Protection from Unfair Trading Regulations (CPRs).

A complaint may also be made by a consumer or a competitor to the Advertising Standards Agency (ASA) in respect of misleading advertisements.

However, even if a trader is prosecuted or the ASA upholds a complaint, the victims of the misleading practice do not currently receive any redress. A consumer seeking compensation has to bring a separate civil claim based upon the general law of misrepresentation which, in practice, is not a realistic option for the average consumer due to the difficulty of the process and disproportionate costs involved.

The Consumer Protection (Amendment) Regulations 2014, which come into force on 1 October 2014, will change this position by introducing a statutory right under the CPRs for consumers to bring a claim directly against the trader concerned.

New consumer right of redress

From 1 October 2014, consumers that are the victims of misleading or aggressive sales practices will, in summary, have the right to unwind the contract within 90 days and obtain a refund, or a discount on the price paid.

Consumers can also claim damages for any additional financial losses, alarm, distress, physical inconvenience and/or discomfort suffered as a result of the misleading or aggressive practice.

A consumer has to make it clear that they reject the product to exercise the right to unwind. In such circumstances, the contract is treated as at an end and the consumer is entitled to a refund of any payments made up to the point of rejection.  However, there are exceptions to the right to unwind including if the goods have been fully consumed or the service has been fully performed.

Consumers that do not exercise the right to unwind may still claim a discount on the price paid for the product/service as well as damages. The amount of discount is determined by the level of seriousness of the aggressive or misleading sales practice concerned with reference to the following statutory bands:

  • If the prohibited practice is minor – 25%
  • If the prohibited practice is significant – 50%
  • If the prohibited practice is serious – 75%
  • If the prohibited practice is very serious – 100%

Although consumers and traders are encouraged to settle any claims informally, consumers still have the right to issue a formal civil claim at court.

Commentary

With ever-growing competition in the retail marketplace, as well as increased scrutiny from customers searching for 'bargains', retailers need to be careful to that ensure their pricing practices are compliant to avoid any unwanted complaints and claims. As several companies found in 2013, most notably Tesco, misleading pricing promotions and marketing campaigns can be a costly mistake to make.

The extent of the impact of the new consumer rights of redress remains to be seen as, ultimately, a consumer still has to bring civil proceedings to enforce their rights if the matter cannot be informally resolved which, as referred to above, is generally not an attractive option for the average consumer.  The most likely area for disagreement is likely to be the appropriate level of discount given that the consumer's view of the seriousness of the issue is likely to differ from the retailer's.

The new rights of redress may also change the way in which complaints made to regulators, like the ASA, are handled and their significance from a commercial perspective. A ruling from the ASA that an advertisement is misleading following a single complaint may open the floodgates to consumer claims. Similarly, whilst one complaint may have little impact on a large retailer, if news of the claim was picked up by social media sites it may also lead to others.  Retailers should therefore give serious consideration as to how such complaints are handled to minimise the risk of exposure.