Wednesday, 29 October 2008

Unfair commercial practices, consumer protection CPRs: internet shopping, restaurants - "free", "optional" & other misleading claims

'If you sign up for this service or buy this product, you'll get this other stuff "free"!' 'The service charge in this restaurant is "optional"!' (And, perhaps, the good ol' 'Your broadband or mobile internet data usage allowance is "unlimited"'?)

How often have we consumers been fed that sort of line in advertising or marketing material, when in fact it's misleading - and the "free" product is in fact "paid for" by doubling the price of the first one, or the service is limited, or there are hidden extra charges?

This sort of thing really shouldn't be allowed.

And, in many situations, in the UK and Europe, it isn't - thanks to the EU Unfair Commercial Practices Directive (full name, if you must know: Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market and amending Council Directive 84/450/EEC, Directives 97/7/EC, 98/27/EC and 2002/65/EC of the European Parliament and of the Council and Regulation (EC) No 2006/2004 of the European Parliament and of the Council - phew! I'll just call it the UCPD...)

It's just that most consumers don't know much about the UCPD yet, so retailers or providers have been able to get away with trading practices that are unfair to consumers.

To try to help raise awareness of these issues, this post outlines some key points for consumers / users resulting from the UCPD - with a particular emphasis on things technology and food, given my particular interests, but the points apply to all sorts of areas.

The UCPD was implemented in the UK through The Consumer Protection from Unfair Trading Regulations 2008, 2008 No. 1277 (Copy on Statute Law Database) - I'll call them CPRs for short, and I make no comment about whether CPR is what this country's consumer laws needs!

The CPRs took effect in the UK in May 2008, but they have received (in the scale of things) relatively little publicity, even though they represented the most far-reaching change in UK consumer law in years.

A. What are The Consumer Protection from Unfair Trading Regulations 2008 about?

As the Office of Fair Trading puts it:

"The Regulations introduce a general duty not to trade unfairly and seek to ensure that traders act honestly and fairly towards their customers."

To quote the BERR's basic guide to the CPRs for businesses, the CPRs will generally (my emphasis):

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

These fall into four main categories:
• A general ban on conduct below a level which may be expected towards consumers (honest market practice/good faith). This is intended to act as a “safety net” protection for all consumers.
Misleading practices, like false or deceptive messages, or leaving out important information.
Aggressive sales techniques that use harassment, coercion or undue influence.

For a practice to be unfair under these rules, they must harm, or be likely to harm, the economic interests of the average consumer. For example, when a shopper makes a purchasing decision he or she would not have made had he or she been given accurate information or not put under unfair pressure to do so.

• In addition, the regulations ban 31 specific practices outright" (see the list of 31 practices).

Commercial practices. What do commercial practices cover anyway? To quote from the detailed joint OFT / BERR guidance on the CPRs p.64, "Commercial practices may include matters such as advertising, sales, supplies and post-contractual matters such as after-sales services and debt collection."

So how traders treat their customers after the sale is covered too - a very important and welcome extension of consumer rights.

Retail sales / supplies of many types. Note that the CPRs extend to online shopping over the Internet, as well as high street and traditional mail order sales; and they cover the supply of services (e.g. internet or mobile phone services) as well as physical goods.

Penalties? A trader who fails to comply with the CPRs could be investigated by bodies such as the local authority's Trading Standards service, the Department of Enterprise, Trade and Investment in Northern Ireland or the Office of Fair Trading - and could be prosecuted and fined.

That's right - an unfair commercial practice may constitute a criminal offence, which could mean (depending on its exact nature) up to 2 years' imprisonment and an unlimited fine for the offending trader.

And if the offence was committed by a company, any director or manager who agreed to or connived in the unlawful practice may be guilty of a criminal offence too - and similarly if the practice was attributable to the director or manager's neglect.

However, the trader can't be prosecuted more than 3 years after the event, or if the prosecuting authority leaves it for more than 1 year after discovering the offence before trying to prosecute.

B. Misleading practices

It's worth highlighting that a practice is considered misleading if (my emphasis, quoted from rule 5):

"it contains false information and is therefore untruthful in relation to any of the matters in paragraph (4) or if it or its overall presentation in any way deceives or is likely to deceive the average consumer in relation to any of the matters in that paragraph, even if the information is factually correct; and it causes or is likely to cause the average consumer to take a transactional decision he would not have taken otherwise."

From paragraph 4, this includes giving false information on things like the existence or nature of the product, the consumer's rights, and the main characteristics of the product (including its availability and benefits, usage, specification and results to be expected from use of the product).

And also a practice is misleading if its overall presentation is likely to deceive the average consumer, even if the info given is factually correct.

But, in either case, it won't be considered "misleading" unless it was likely to cause the average consumer to e.g. sign up for the contract or buy the product.

Unfortunately, there seems to be a general assumption that the "average consumer" is "reasonably well informed, reasonably observant and circumspect" - but, hey, if they were, they wouldn't be deceived and wouldn't need to be protected by the law, would they?? (Though there is protection for certain sub-groups if the practice was targeted at them. Personally I think vulnerable groups should be protected even if the practice was aimed at consumers generally.)

Misleading omissions are also banned, i.e. something which omits or hides material information or provides it in a way which is unclear, unintelligible, ambiguous or untimely given the factual context (including all the features and circumstances of the commercial practice, and limitations of space and time e.g. ad posters). But again only if they were likely to influence the consumer's decision.

C. Banned practices list

31 commercial practices are specifically blacklisted - basically, the list is of stuff that's considered so bad that it's banned outright.

Just to pick out a few, they include, as well as "pyramid schemes" (no. 14) and "Congrats you've won (or can win)!" (19 & 31) prize draw scams:

5. "Special offer" – when not actually in stock.

7. False "Limited time only" offers.

15. Bogus "Closing down sales".

20. Describing a product or service 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.

26. Pestering the consumer - 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. Creating extra (unnecessary) paperwork - 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.

29. Inertia selling - sending you stuff you didn't ask for, then demanding payment or the return of the product.

However, the intention is that "buy one get one free" deals (BOGOF) will not generally be banned.

Note that any practice on the list is banned, period. A trader who engages in any of them will breach the CPRs, whether or not a consumer was actually influenced or deceived by the practice.

D. Pricing practices

On the pricing front, the BERR have produced a very helpful detailed guide "Pricing practices guide: guidance for traders on good practice in giving information about prices", which has received even less publicity than the CPRs themselves. Possibly because, as at the date of writing this, it's inexplicably not linked to from the BERR's main CPRs page, but appears only on the BERR's general publications page.

The reason they put out the guide is that the CPRs ban traders from misleading consumers about pricing or how prices are calculated, and also ban the omission (on Websites and the like, which invite consumers to buy), of information on the price or on any related charges including taxes, delivery and postal charges, unless these are already apparent from the context, where any such action or omission would cause, or be likely to cause, the consumer to take a different transactional decision (e.g. if the carriage costs are high, you might buy from another site with a slightly higher price for the goods but much lower postage charges).

Anyway, there's lots of useful information in that guide about the kinds of pricing practices, e.g. ways of presenting information on prices to potential customers, offers, promotions or "special" prices, price comparisons, call-out charges, including VAT clearly, etc etc, that BERR consider are or are not acceptable under the CPRs. So it's worth a look if you think you've been misled or unfairly done by in relation to goods or services you bought.

Like the other guides produced by BERR and the OFT, it only represents their views on the CPRs, and if the legislation comes before a court it's possible that a judge may take a different view, but they do constitute the most authoritative views we have on the subject at the moment.

E. Some particular points of interest

Here are some highlights from some detailed guidance to the CPRs jointly produced by BERR and the OFT, and the pricing practices guide.

1. Online shopping - are delivery charges and VAT extra, and if so how much?

This has always been a bugbear of mine, as many sites don't make clear what their delivery terms are, and you have to email or ring them to ask. Well, it seems that failing to provide obvious links to full delivery information may be considered an unfair commercial practice.

For computer online sales, p. 39 of the detailed guidance from BERR/OFT suggests that websites should provide information, in clearly indicated links from product page, on various matters including the full price (inclusive of taxes and any freight or delivery charge) if this was not given on the main page, and delivery and payment arrangements as well as the complaints/after-sales procedures. See also 2.2.6 of the Pricing practices guide.

I noticed a few months ago that Amazon UK had changed their website so that shipping costs for Amazon Marketplace items are shown on the main Amazon page for the product itself. I wouldn't be surprised if that was because of the CPRs. Kudos to Amazon and their eagle-eyed lawyers, I say!

And yes, that's right - it does seem that this means that websites which don't make provide easily-accessible delivery charges information etc will risk infringing the CPRs. Which is probably a lot of websites!

2. Persistent email or phone etc marketing

If a business keeps spamming you, or making unwanted marketing calls to you, you might be able to get them stop by telling them it's a breach of the CPRs - and if they don't, you can report them to Trading Standards.

The detailed guide at p. 26 even suggests that if you've signed up for the Telephone Preference Service that in itself is probably enough of an indication that any calls will be unwanted.

3. Restaurants, hotels - "optional" service charges

No this isn't tech-related, but I'm a foodie so this is for other foodies who might be interested!

Let me just quote 2.2.14-15 of the pricing practices guide (addressed to traders), which speaks for itself (my emphasis):

"You should not include suggested optional sums, whether for service or any other item, in the bill presented to the customer. If your customers in hotels, restaurants or similar places must pay any non-optional extra charge, for example a “service charge”:
(a) you should incorporate the charge within fully inclusive prices wherever practicable; and
(b) you should display the fact clearly on any price list or priced menu, whether displayed inside or outside (for example by using statements like “all prices include service”). It may not be practical to include some non-optional extra charges in a quoted price; for example if you make a flat charge per person or per table in a restaurant (often referred to as a “cover charge”), or if you levy a minimum charge. In such cases the extra charge should be shown as prominently as other prices on any list or menu, whether displayed inside or outside the establishment.

This does suggest that lots of restaurants are breaching the CPRs by including suggested "optional" service charges.

I'd be interested to know if anyone tries to call a restaurant out on this and reject a bill that automatically includes "optional" charges, on the basis of the CPRs! But, technically, it seems that you are within your rights to.

4. Businesses' online marketing / promotional practices

Judith Lewis has previously pointed out some other practices by traders (writing rave reviews of their own products pretending to be a customer, etc) which would fall foul of the CPRs.

5. "Unlimited" broadband, high speeds that aren't?

In a separate post I discuss whether certain advertising practices that try to get consumers to sign up for broadband (or mobile broadband / data) internet services by advertising unlimited usage subject to "fair use", or advertising broadband speeds higher than most people can get, might be unfair commercial practices.

F. Problems with the CPRs

In my view there are 2 big problems with the UK's CPRs, as far as consumers are concerned:

  1. Individual consumers have no direct claim against the trader, and
  2. The official bodies who are meant to enforce the CPRs can effectively refuse to take any criminal or even civil action to stop unfair commercial practices, if they can say that there are other ways of dealing with them.

1. No direct consumer rights

Taking problem no. 1 first, I think the biggest shortcoming of this law is that, unfortunately for us UK consumers (but no surprises there), the UK government chose to implement it in such a way that consumers can't sue the guilty trader direct for compensation. Whereas, in some other EU countries like Ireland, consumers can.

It's some consolation I suppose that, as the National Consumer Council reported, the Law Commission note that "Currently the regulations provide no private rights to consumers, who will have to rely on current private law doctrines for redress" - and the Law Commission are now going to start a project to "consider how far a private right of redress for unfair commercial practices would simplify and extend consumer law" (see project 5, pg.8 of their Tenth Programme of law reform published in June 2008). (The NCC by the way has recently merged with Postwatch and Energywatch to become Consumer Focus; their CEO Ed Mayo even has a blog).

But these things take ages (the NCC item said "No timetable has yet been set" - not a good sign), so it'll be a few years at least before victims of unfair trading practices can do anything about it direct - and who can tell which way the Law Commission will go, who knows if they'll decide whether consumers should have a direct right or not?

So, UK consumers have to rely on reporting the matter to their local Trading Standards authority - and hope that overstretched, under-resourced departments, who may also not have quite the same personal incentive as the directly-affected consumer to take the offending trader to task, will receive enough complaints about a particular trader that they decide to take action.

I have no idea if a consumer (who had the time, money and commitment!) could bring a private prosecution against a trader for breach of the CPRs. There is a right of private prosecution in the UK in many cases - I just don't know if this is one of them.

2. Handing off "enforcement" to industry bodies?

As regards problem no. 2, the best way to make my point is to quote from pgs. 51 and 52 of the detailed guidance (my emphasis):

"11.1 Local Authority Trading Standards Services (TSS), the Department of Enterprise, Trade and Investment in Northern Ireland and the OFT have a duty to enforce the CPRs. This does not mean that (civil or criminal) enforcement action must be taken in respect of each and every infringement. Instead, enforcers should promote compliance by the most appropriate means, in line with their enforcement policies, priorities and consistent with available resources.

11.2 Enforcers can use a range of tools to ensure that businesses are complying with CPRs. The main options, which are explained below, are:
• education, advice and guidance
• established means
• codes of conduct
• civil enforcement
• criminal enforcement.

There are alternative well-founded and effective systems of regulation (including self-regulation) in place in the UK. If enforcers are satisfied that complaints and cases are clearly within the scope of these systems and can be adequately dealt with by them, they will be able to refer such complaints and cases to the relevant body (to ensure that businesses comply with the CPRs)...

11.5 The OFT will generally seek to obtain compliance by education, giving advice and guidance in the first instance unless circumstances indicate that enforcement action is the appropriate frst step which may include a criminal investigation and prosecution. Other enforcers may have their own enforcement policies in this regard.

11.7 As under the previous consumer protection regime, the Advertising Standards Authority (ASA) and PhonepayPlus are considered to be established means in the areas described below [i.e. advertising and premium rate telephony respectively], and appropriate cases falling within their areas of expertise will usually be referred to them for action."

So, in a nutshell, in industries where there is a self-regulatory system or voluntary code of conduct, it seems that it's possible for the official bodies to effectively hand over responsibility to the trade body, or point to the existence of some self-regulatory code.

You'll see that civil and criminal enforcement, which are the most effective measures as far as consumers are concerned, come the very last in the order of priority in 11.2.

This is obviously at least partly a resources-influenced decision. The explanatory memo to the CPRs says in para 70: "It would also ensure that the resource implications of enforcement on the OFT and other enforcers are minimised as a wider range of bodies would be able to secure the cessation of unfair commercial practices, especially misleading advertising."

But this bothers me. Why? Because I feel it makes the CPRs relatively toothless. I believe it would be much better for consumers if enforcement had to be by an independent official regulatory authority, and if the code was produced by an independent regulator. Isn't consumer protection the whole point of this legislation?

For instance, just last month the UK Advertising Standards Authority said that Vodafone's "Unlimited" ads didn't violate their CAP code because their broadband ads "made clear that a fair-use policy applied to the service and the level at which the allowance was set" - for more details see my separate post on certain common broadband / mobile internet advertising claims.

Furthermore, where there is a self-regulatory code, the guidance says:

"11.14 A trader who has agreed to be bound by a self-regulatory code of conduct may breach the CPRs if he fails to comply with commitments in the code which are firm, capable of being verified, and not purely aspirational, when he has indicated in a commercial practice that he is bound by the code and consumers’ transactional decisions are (likely to be) affected by this.

11.15 The two prohibitions above are enforceable only via injunctive civil action and are not subject to criminal sanctions."

Doesn't this suggest that a trader who has signed up to a voluntary code but didn't follow it can only be done for a breach of the CPRs if the code contained "firm" commitments on the part of the signatories (and provided the consumer's decision was probably affected by the trader saying he'd signed up to the code)?

Surely this means there's potential for abuse. I know that some industry bodies do police their own very closely and well in order to preserve the reputation of the industry as a whole, but isn't it possible that businesses in some sectors could get together to produce a "voluntary code of conduct" to point to (just to get the OFT and trading standards bodies off their backs), making sure that the code definitely doesn't contain anything that could "promote non-compliance" with the CPRs, but only contains vague statements that are purely aspirational and aren't "firm" (e.g. "we'll try but we won't promise")?

And how likely is it anyway, in certain industries e.g. internet / phone services, that the consumer's decision would be influenced by the trader saying he was bound by a voluntary code (and that therefore the trader could be done for not following the code)?

Anyway, given that marketing and advertising are the main areas where the CPRs are likely to bite and that what the ASA says seems to go as far as the CPRs are concerned, it's worth noting that the ASA updated their CAP Code (British Code of Advertising, Sales Promotion and Direct Marketing) for non-broadcast advertising to take account of the CPRs (see the changes for the CPRs). They also recently consulted on proposed changes to their Broadcasting Code of Advertising Practice to bring the BCAP into line with the CPRs (see their consultation documents and suggested BCAP changes).

So the revisions are worth a look if you're thinking of complaining to the ASA - though not that the BCAP changes hadn't come in yet, as at the date of writing this post.

G. Further info / resources / links

  1. The Unfair Commercial Practices Directive.
  2. The CPRs as at May 2008 (any later changes won't be reflected in this version or the SLD version), and explanatory memo. See also BERR's UCPD / CPRs page.
  3. Basic guides for businesses (but useful for consumers too):
    1. BERR's A basic guide for business on the CPRs.
    2. Trading Standards' guide to CPRs
    3. Business Link's basic guide on CPRs
    4. ASA's PDF outline of effects of CPRs, and slides
    5. Consumer Protection from Unfair Trading Regulations: an OUT-LAW guide plus their report of the first CPRs enforcement order
  4. Detailed joint OFT / BERR guidance on the CPRs - very clear, has some very helpful examples of the sorts of situations which they consider would breach the CPRs.
  5. BERR's "Pricing practices guide: guidance for traders on good practice in giving information about prices"
  6. ASA's CAP code (with changes); and BCAP codes (different ones for radio and TV) with proposed BCAP code changes.
  7. Consumer support - find your nearest Trading Standards office; see list of BERR's consumer resources.


I hope that the points made in this post will be of interest to consumers, but please note that this post only provides general information and reflects my personal views and speculations on some of the issues raised; it is not legal advice of any kind. I don't claim to be a consumer law expert, I'm just tossing out a few ideas which may be worth considering if someone wants to have a go at taking things forward themselves.

If you have problems with any trader, you should consult a suitably-qualified expert in relation to your individual position e.g. at Consumer Direct, and see BERR's list of consumer support resources.

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