A Business Guide to Office of Fair Trading Consumer Regulations

Sam Healey

Regulations ban traders in all sectors from using unfair commercial practices towards consumers. They set out broad rules outlining when commercial practices are unfair

Defending a Business requires a good understanding of the way in which the OFT / BIS apply their own guidance and the availability of certain defences (e.g. due diligence or innocent publication). A detailed knowledge of the relevant investigative powers is also essential in ensuring that enquiries are properly challenged

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 The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) was brought into force on 26th May 2008 following the Unfair Commercial Practices Directive (UCPD).  The emphasis behind this directive was to ensure cross border transactions, between either consumers or traders, were guaranteed certain levels of protection.  Thus promoting the internal market in the European Union and ensuring consumers can easily understand their rights and whether there has been a breach in commercial practice.

The regulations will work alongside other legislation that protects the consumer including contract law and the law on unfair contract terms.

It is important to ensure, as a Business you are compliant with the regulations as failure to comply may result in education, advice and guidance, established means, codes of conduct,  Civil enforcement or Criminal enforcement.

The Criminal offences are offences of strict liability, with the exception of the general prohibition which requires ‘mens rea’.  The offences are outlined below;

  • Contravention of requirements of the general prohibition (Regulation 3)
  • Misleading actions (Regulation 5 with the exception of 5(3)(b) – code commitments)
  • Misleading omissions (Regulation 6 - including the omission of specified information in invitations to purchase) 
  • Aggressive practices (Regulation 7)
  • Specific unfair commercial practices (Schedule 1) – with the exception of numbers 11 and 28

If you are found guilty of any of the above, you may face on summary conviction, a fine not exceeding the statutory maximum, on conviction on indictment, a fine or imprisonment not exceeding two years or both.

The Regulations

 The main direction of the new regulations is to protect the consumers by ensuring traders act honestly and fairly towards their customers.  The question, therefore, is what does this mean for your businesses and what is the impact?

The CPRs apply to commercial practices before, during and after a contract is made.  A commercial practice can be described as ‘business to consumer’.  In general, if consumers are treated fairly then traders are likely to be complying with the CPRs.  Although if it can be shown that the trader has misled or behaves aggressively or otherwise unfairly towards a consumer, you are likely to be in breach of the CPRs.  As a result, you may face enforcement action which can be either Civil or Criminal.

What do the regulations themselves say?

 Regulation 3 provides a general prohibition of unfair commercial practices, or in other words a general duty not to trade unfairly.  It outlines that a commercial practice is unfair where;

a) It contravenes the requirements of professional diligence and,
b)  Materially distorts or is likely to materially distort the economic behaviour of the average consumer.
To satisfy this prohibition it would need to be shown that the practice is unacceptable when measured against an objective standard and there must also be (or likely to be) an effect on the economic behaviour of the average consumer. 

By considering what a reasonable person would expect in terms of honest market practice and good faith from a trader is the objective standard.

The definition of ‘professional diligence’ is defined in regulation 2 as;
‘the standard of special skill and care which a trader may reasonably be expected to exercise  onwards consumers which is commensurate with either — (a) honest market practice in the trader’s field of activity, or (b) the general principle of good faith in the trader’s field of activity’.

The second stage of the tests relates to material distortion which is defined under regulation 2 as;

‘Appreciably to impair the average consumer’s ability to make an informed decision thereby causing him to take a transactional decision that he would not have taken otherwise’.

However, the impairment through material distortion must be significant enough to change the decisions the average consumer makes.

At JMW Solicitors, we can assist and advise you in understanding the regulations and guidance to ensure you do not breach your requirements as a trader.

Regulation 4

 Regulation 4 simply states “The promotion of any unfair commercial practice by a code owner in a code of conduct is prohibited”.   Whilst there is no criminal offence attached to the breach of this regulation you may find action being brought in civil proceedings under Part 8 of the Enterprise Act 2002.  To be in breach of this regulation, the business must have a code of conduct which promotes a practice which is unfair as set out by the other prohibitions in the CPR (see below).

Regulation 5, 6 and 7 define what is a misleading action, misleading omission and aggressive commercial practice respectively.

A business is a misleading action if it contains false information and is, therefore, untruthful in relation to any of the following matters or its overall presentation in any way deceives or is likely to deceive the average consumer in relation to any of the matters listed below, even if the information is factually correct; 

(a)the existence or nature of the product;
(b)the main characteristics of the product
(c)the extent of the trader’s commitments;
(d)the motives for the commercial practice;
(e)the nature of the sales process;
(f)any statement or symbol relating to direct or indirect sponsorship or approval of the trader or the product;
(g)the price or the manner in which the price is calculated;
(h)the existence of a specific price advantage;
(i)the need for a service, part, replacement or repair;
(j)the nature, attributes and rights of the trader (as defined in paragraph 6);
(k)the consumer’s rights or the risks he may face.

In the alternative, a business may be misleading if it markets a product (including comparative advertising) which creates confusion with any products, trademarks, trade names or other distinguishing marks of a competitor.  Or if the business fails to comply with a commitment contained in a code of conduct, which the trader has undertaken to comply with where the business indicates in a commercial practice that he is bound by that code of conduct, and the commitment is firm and capable of being verified and is not aspirational, and it causes or is likely to cause the average consumer to take a transactional decision he would not have taken otherwise, taking account of its factual context and of all its features and circumstances.

Those practices that are prohibited in all circumstances can be found at Schedule 1 of the regulations (See below).  It is important to note that evidence of their effect or likely effect on the average consumer is not necessary to prove a breach given the outright prohibition of these practices.

Regulation 5– Misleading Action

 As a business, you must not mislead an average consumer.  Misleading or deceptive presentation can be interpreted in many ways and therefore your business should be careful not to mislead consumers to take a different decision had it not have been for your misleading actions.

The regulations outline three specific actions;

Misleading information generally are actions that mislead through products containing false or deceiving information, the information relates to one or more pieces of information e.g. the main characteristics of the product or existence and nature of the product.  As a result of the information, the average consumer takes, or is likely to take a different decision.

Businesses should also be aware of other consumer rights under Part 5A of the Sale of Goods Act 1979 or Part 1B of the Supply of Goods and Services Act 1982.

Creating confusion with competitors’ products would include marketing in a way which creates confusion with other products, trade-marks, trade names or distinguishing marks of a competitor.  E.g. “Tecco Express” as opposed to “Tesco Express”.  As a result of creating this confusion, the average consumer takes, or is likely to take a different decision as a result.

Failing to honour firm and verifiable commitments made in a code of conduct is where a trader has agreed to be bound by a code of conduct (or code of practice), indicates he is bound by such code, however fails to comply with that firm and verifiable commitment to the code.  Again, and as a result of this, the average consumer takes a different decision.

Regulation 6 – Misleading Omission

 As a business, you must ensure that you provide sufficient information or ‘material information’ about the product for consumers to make an informed choice.  Failure of which may be classed as an omission.

This information needs to be ‘in context’ with the product and what is required will depend on each circumstance.  Naturally, the information required may vary substantially when dealing with a simple product to that of a more complex product.  Material information can be generally described as information which causes or is likely to cause the average customer to take a different decision about the product.  An example could be the price of a product.  This is material information and failure to provide in a timely fashion is likely to amount to a misleading omission.

‘In context’ will consider the practicality of providing information where there are limitations of the communication medium used.  It will be for the business to show that the material information has been conveyed or available and this will be relevant to the consideration as to whether information has been provided in context.

JMW Solicitors can provide further information relating to this regulation including whether your business makes an invitation to purchase.  This would also need to satisfy the requirements of the regulations.

Regulation 7 – Aggressive Commercial Practices

Where it can be shown that a business has either; harassed, intimidated, coerced, exploited or unduly influenced a consumer thus affecting how the consumer makes their decision will find itself falling short of the requirements contained in this regulation.  They key factor as with the majority of regulations, however is whether the aggressive practice impaired or likely to impair a consumer’s freedom of choice and thus caused or is likely to cause an average consumer to take a different decision.

There is no confirmed definition in the regulations of harassment or coercion however it can include both physical and non-physical (including psychological) pressure.  Undue influence, however, is defined under regulation 7(3) (b) which confirms as follows;

‘exploiting a position of power in relation to the consumer so as to apply pressure, even  without using or threatening to use physical force, in a way which significantly limits the consumer’s ability to make an informed decision’.

The regulations list a number of factors which are taken into account when determining whether a commercial practice has been aggressive.  These factors include;

(a) Timing, location, nature or persistence,
(b) The use of threatening or abusive language or behaviour,
(c) The exploitation by the trader of any specific misfortune, or
circumstance, of such gravity as to impair the consumer’s
judgement, of which the trader is aware, to influence the
consumer’s decision with regard to the product,
(d) Any onerous or disproportionate non-contractual barriers
imposed by the trader where a consumer wishes to
exercise rights under the contract, including rights to
terminate a contract or switch to another product or
(e) Any threat to take any action that cannot legally be taken.
Under regulation 7(3) (b) ‘significantly impair’ is a matter for interpretation and may occur in a number of ways.  An example provided by the Department for Business, Enterprise and Regulatory Reform is where a trader stays in a consumers home for so long that they feel compelled to sign a contract for a product. 

Schedule 1 - Consumer Protection from Unfair Trading Regulations 2008

1. Claiming to be a signatory to a code of conduct when the trader is not.
2. Displaying a trust mark, quality mark or equivalent without having obtained the necessary authorisation.
3. Claiming that a code of conduct has an endorsement from a public or other body which it does not have.
4. Claiming that a trader (including his commercial practices) or a product has been approved, endorsed or authorised by a public or private body when the trader, the commercial practices or the product have not or making such a claim without complying with the terms of the approval, endorsement or authorisation.
5. Making an invitation to purchase products at a specified price without disclosing the existence of any reasonable grounds the trader may have for believing that he will not be able to offer for supply, or to procure another trader to supply, those products or equivalent products at that price for a period that is, and in quantities that are, reasonable having regard to the product, the scale of advertising of the product and the price offered (bait advertising).
6. Making an invitation to purchase products at a specified price and then—
(a)refusing to show the advertised item to consumers,
(b)refusing to take orders for it or deliver it within a reasonable time, or
(c)demonstrating a defective sample of it,
with the intention of promoting a different product (bait and switch).
7. Falsely stating that a product will only be available for a very limited time, or that it will only be available on particular terms for a very limited time, in order to elicit an immediate decision and deprive consumers of sufficient opportunity or time to make an informed choice.
8. Undertaking to provide after-sales service to consumers with whom the trader has communicated prior to a transaction in a language which is not an official language of the EEA State where the trader is located and then making such service available only in another language without clearly disclosing this to the consumer before the consumer is committed to the transaction.
9. Stating or otherwise creating the impression that a product can legally be sold when it cannot.
10. Presenting rights given to consumers in law as a distinctive feature of the trader’s offer.
11. Using editorial content in the media to promote a product where a trader has paid for the promotion without making that clear in the content or by images or sounds clearly identifiable by the consumer (advertorial).
12.   Making a materially inaccurate claim concerning the nature and extent of the risk to the personal security of the consumer or his family if the consumer does not purchase the product.
13.   Promoting a product similar to a product made by a particular manufacturer in such a manner as deliberately to mislead the consumer into believing that the product is made by that same manufacturer when it is not.
14.   Establishing, operating or promoting a pyramid promotional scheme where a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products.
15.   Claiming that the trader is about to cease trading or move premises when he is not.
16.   Claiming that products are able to facilitate winning in games of chance.
17.   Falsely claiming that a product is able to cure illnesses, dysfunction or malformations.
18.  Passing on materially inaccurate information on market conditions or on the possibility of finding the product with the intention of inducing the consumer to acquire the product at conditions less favourable than normal market conditions.
19.   Claiming in a commercial practice to offer a competition or prize promotion without awarding the prizes described or a reasonable equivalent.
20.   Describing a product as ‘gratis’, ‘free’, ‘without charge’ or similar if the consumer has to pay anything other than the unavoidable cost of responding to the commercial practice and collecting or paying for delivery of the item.
21.   Including in marketing material an invoice or similar document seeking payment which gives the consumer the impression that he has already ordered the marketed product when he has not.
22.   Falsely claiming or creating the impression that the trader is not acting for purposes relating to his trade, business, craft or profession, or falsely representing oneself as a consumer.
23.   Creating the false impression that after-sales service in relation to a product is available in an EEA State other than the one in which the product is sold.
24.   Creating the impression that the consumer cannot leave the premises until a contract is formed.
25.   Conducting personal visits to the consumer’s home ignoring the consumer’s request to leave or not to return, except in circumstances and to the extent justified to enforce a contractual obligation.
26.   Making persistent and unwanted solicitations by telephone, fax, e-mail or other remote media except in circumstances and to the extent justified to enforce a contractual obligation.
27.   Requiring a consumer who wishes to claim on an insurance policy to produce documents which could not reasonably be considered relevant as to whether the claim was valid, or failing systematically to respond to pertinent correspondence, in order to dissuade a consumer from exercising his contractual rights.
28.   Including in an advertisement a direct exhortation to children to buy advertised products or persuade their parents or other adults to buy advertised products for them.
29.   Demanding immediate or deferred payment for or the return or safekeeping of products supplied by the trader, but not solicited by the consumer, except where the product is a substitute supplied in accordance with regulation 19(7) of the Consumer Protection (Distance Selling) Regulations 2000 (inertia selling)(1).
30.   Explicitly informing a consumer that if he does not buy the product or service, the trader’s job or livelihood will be in jeopardy.
31.   Creating the false impression that the consumer has already won, will win, or will on doing a particular act win, a prize or other equivalent benefit, when in fact either—
(a)  There is no prize or other equivalent benefit, or
(b)  Taking any action in relation to claiming the prize or other equivalent benefit is subject to the consumer paying money or incurring a cost.
Examples of Schedule 1 prohibited commercial practices can be found at - http://www.oft.gov.uk/shared_oft/business_leaflets/cpregs/oft1008.pdf

Important considerations

It is important to note that ‘product’ relates to all goods and services and extends to intangible rights such as cancellation or cash-back options.  Therefore products could relate to an item of clothing or to complex purchasers e.g. buying a house.

There are however exclusions to the regulations, this includes business to business transactions.  The key consideration is whether the practice you are involved in will have an effect on the consumer.  Businesses should be aware however of the Business Protection from Misleading Regulations 2008, relating to business to business transactions.

JMW Solicitors LLP offers advice relating to these regulations; find out more about our corporate and commercial team here

It is important to consider the type of business you are conducting as you may be caught under the new regulations (given their wider scope).  JMW Solicitors LLP can advise you further as to whether your business practice falls within the scope of the new regulations.  A few examples of a business which may fall under the new regulations –

  1. An internet business selling parts over the internet.  A range of products are sold by the business and therefore it must consider whether consumers will buy these products 
  2. A business sells processed cheese to supermarkets.  There is no direct sale to the consumer however, the labels the business produce must be compliant with the regulations given their direct connection to the promotion and sale of the cheese.
  3. An expert trader on Turkish pottery informs a consumer selling an item that the item they are selling is a fake.  If shown that this statement is misleading it may amount to misleading action under the regulations.

Sam Healey
Business Crime and Regulation department, JMW

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