Unfair Commercial Practices

Introduction

The Department of Trade & Industry has recently issued a consultation paper on the draft Regulations which implement the European Union Unfair Commercial Practices Directive. The Unfair Commercial Practices Directive (“UCPD”) aims to:

• ensure consumers are treated fairly by businesses; and

• improve the single market by making it easier for businesses to sell and consumers to buy across the EU.

The UCPD will become English law by virtue of the Consumer Protection from Unfair Trading Regulations 2007 (“CPRs”) and it is expected that the CPRs will come into force in April 2008.

What the CPRs Try to Achieve

The CPRs will:

• Apply before, during and after a contract has been formed;

• Stop any unfair commercial practice. It will be unfair if it:

  • breaches the requirements of professional diligence; and/or

  • distorts the economic behaviour of a consumer.

• Stop any commercial practices which are either:

  • misleading (which includes both misleading actions or omissions); or

  • aggressive (which includes practices such as taking a customer to a cash point so she can pay a bill).

• Stop thirty-one specific commercial practices; and

• Set different standards applicable to different types of consumers.

The CPRs scope is wide: it applies to all business sections. The CPRs bring a distinct movement from the current haphazard approach of piecemeal legislation to cover all unfair commercial practices.

One System of Regulation

When the CPRs come into force in April 2008, it will replace legislation such as the Trade Descriptions Act 1968, Part III of the Consumer Protection Act 1987 and the Price Indications (Method of Payment) Regulations 1991. Instead, there will be an all embracing ban on unfair commercial practices between businesses and consumers.

Whilst it has been argued that an all embracing approach rarely achieves its aims, it is likely to simplify the task of enforcement agencies like local trading standards departments.

Application of the CPRs

The key test will be whether the nature and content of the business practice is unfair on the typical consumer. It is likely to have a significant impact on businesses but will ensure that a uniform approach and regulation is provided to all businesses.

All business will therefore need to

• Review existing practices to discover whether they are fair and ensure that none fall within the thirty-one banned commercial practices;

• Consider whether anything they are failing to do will amount to a misleading omission.

Some Examples

Some examples of the thirty-one banned commercial practices are:

• Claiming to be a member of a trade association when it is not.

• Falsely stating that goods are available at a certain price for a certain period when they are not.

• Stating the consumer's legal rights are a distinct feature of the businesses' offer.

• Claiming the business is about to stop trading when it is not.

• Creating the impression that the consumer cannot leave the premises unless a contract is entered into.

Enforcement

Like many other consumer protection laws, local trading standards officers will ensure businesses comply with the regulations. 

Conclusion

There is, at the moment, no particular guidance on what will amount to an unfair business practice. Businesses should be aware that until cases have been brought before the courts, the CPRs are open to interpretation and are likely (if there is any doubt) to be taken in favour of the consumer.