Legal situations and practices in EU member states (case study UK) Ankara 7 th December 2009 Andrew Hadley Office of Fair Trading United Kingdom.

Legal situations and practices Legal situations and practices in EU member states (case in EU member states (case study UK)study UK)

Ankara 7Ankara 7thth December 2009 December 2009

Andrew Hadley

Office of Fair Trading

United Kingdom

What I will cover● IntroductionIntroduction

●UK experience of implementing the UK experience of implementing the UCPD UCPD

-ImplementingImplementing

-UnderstandingUnderstanding

-ExplainingExplaining

●Enforcing the Directive (general)Enforcing the Directive (general)

●Detailed case studies on specific casesDetailed case studies on specific cases

●ConclusionsConclusions

Introduction● In the UK, consumer protection is the In the UK, consumer protection is the

responsibility of a number of agenciesresponsibility of a number of agencies

●This includes OFT and sectoral bodies This includes OFT and sectoral bodies such as the FSA and OFCOM, but the such as the FSA and OFCOM, but the majority of formal enforcement is done majority of formal enforcement is done by 200+ Trading Standards by 200+ Trading Standards Departments, who are managed by Departments, who are managed by local councilslocal councils

● Implementation of new laws is the Implementation of new laws is the responsibility of BIS, formerly DTI/BERR responsibility of BIS, formerly DTI/BERR

Introduction●The Office of Fair Trading is the UK’s The Office of Fair Trading is the UK’s

consumer consumer andand competition authority competition authority

●We work with a wide range of We work with a wide range of stakeholders including government, stakeholders including government, business, enforcers and consumer business, enforcers and consumer groupsgroups

●We were involved in the general We were involved in the general duty to trade fairly from the 1990s duty to trade fairly from the 1990s onwardsonwards

Introduction●Before the UCPD, the UK had a Before the UCPD, the UK had a

large number of very detailed large number of very detailed prescriptive requirementsprescriptive requirements

●UCPD represented a move UCPD represented a move towards principle-based law towards principle-based law which supports greater flexibilitywhich supports greater flexibility

●This meant some serious changes This meant some serious changes to our existing legal framework to our existing legal framework around consumer protectionaround consumer protection

Implementing the Directive Before the UCPDBefore the UCPD

23 laws dealing with UCPD-related areas

Prescriptive, including some specific sectoral or product-based regulation

Detailed rules on certain areas (e.g. Sealskins Goods Order)

Uneven civil and criminal powers and enforcement

Implementing the Directive

Legislative change – after the UCPDLegislative change – after the UCPD

23 laws repealed or amended – simplification of the legal structure

Principles-based, impact-based regulation

Consistent distribution of powers among enforcers

Implementing the Directive

ConsultationsConsultations

Several different consultations: Transposition, Criminal offences, Regulations, Guidance

Vital part of UK policy-making

RegulationsRegulations

Consumer Protection from Unfair Trading Regulations 2008 (‘CPRs) on 26th May 2008 implemented UCPD

Business Protection from Misleading Marking Regulations 2008 (‘BPRs’) implements CMAD

Understanding the Directive Discussions with EU partnersDiscussions with EU partners

Early input into draft Directive

Ongoing discussions at working groups

Discussions with other MS very helpful

OFT involved early on

UK internal discussionsUK internal discussions

Academic and practical discussions

Stakeholder group and project board

Widening circle of discussions during project

Understanding the Directive

Overlap with other laws and processOverlap with other laws and process

Contract law

Financial services

Distance selling

Legal analysisLegal analysis

Legal academic papers

Legal input into production of materials

Preparing for enforcement

Understanding the Directive

Opportunities and positive outcomesOpportunities and positive outcomes

Common framework for protection

Real benefits and shared objectives in working closely with other MS

Prohibitions on aggressive practices

Future-proofed general duty

Flexible, principles-based rules with conceptual materiality tests

Several practices banned outright

Tiers of prohibitions

mustsatisfyeffecttest

MISLEADING

PRACTICES

BANNED PRACTICES

(31 SPECIFIC PRACTICES

BANNED IN ALL CIRCUMSTANCES)

OMISSIONSACTIONS

AGGRESSIVE

PRACTICES

GENERAL PROHIBITION

(CONTRARY TO REQUIREMENTS OF

PROFESSIONAL DILIGENCE)

deemedeffect

Explaining the Directive Dialogue with stakeholdersDialogue with stakeholders

Worked with business, enforcers and consumer groups on guidance and difficult areas

Workshops on enforcement

Consultations

GuidanceGuidance

Illustrative (about 90 pages) gives example of unfair practices, and gives short explanations

Published in summer 2008, but available in interim format beforehand

Explaining the Directive Training – change in the regimeTraining – change in the regime

Training programme 40+ sessions to 2,200+ local authority officers

Training to other enforcers and Consumer Direct, Citizens Advice

Communications – making people awareCommunications – making people aware

Work with trade associations

Press releases and short guide for business

Presentations and advice

Enforcing the Directive

Who enforces?Who enforces?

Office of Fair Trading

203 (approximately) local authority Trading Standards Departments

Specific department in Northern Ireland and arrangements for Scotland

Sectoral bodies (with civil powers only), including financial services, energy, communications, water, rail travel etc

Enforcing the Directive Sanctions / OutcomesSanctions / Outcomes

Civil

Injunctions (also consultation, undertakings)

Breach of injunction – fines, prison (contempt)

Criminal

Fines, prison

Compensation orders possible

Administrative action

Currently being considered as part of the Government’s Consumer White Paper

Enforcing the Directive Method / Principles of enforcementMethod / Principles of enforcement

Formal action part of a wide compliance toolkit (consultation, advice, guidance, use of codes etc)

Focus is on ending the detriment to consumers

Where enforcement action is needed it:Changes behaviour

Eliminates financial gain

Is appropriate and responsive

Is proportionate to the harm and nature

Restores harm where appropriate

Deters further non-compliance

Enforcing the Directive Findings IFindings I

Implemented in May 2008

In the first 18 months:

15 convictions under the CPRs

Over 200 investigations

Several injunctions

A large number of pending cases

Enforcing the Directive Findings IIFindings II

Honest business practices have been unchanged by the UCPD

Greater flexibility of enforcement and compliance action against key areas such as unfair home improvements

The ‘materiality’ provisions (average consumer and transactional decision) may take a while to become fully effective

Enforcing the Directive Findings IIIFindings III

Annex Practices not as clear as first thought

Need determination and legal resources as an enforcer to ensure compliance and transparency

Misleading omissions the most complex area

Professional diligence can also be ‘challenging’

Some issues with the overlaps with other areas of law (contract, for example)

Enforcing the Directive Findings IVFindings IV

Some initial uncertainty in the absence of Some initial uncertainty in the absence of clear precedent (may be a unique UK issue)clear precedent (may be a unique UK issue)

Some initial costs to businesses & enforcersSome initial costs to businesses & enforcers

May be addressed by the SANCO GuidelinesMay be addressed by the SANCO Guidelines

Subjective assessments means MS may take Subjective assessments means MS may take different views on some areas until clear different views on some areas until clear precedent develops at EU levelprecedent develops at EU level

Case Studies Horrendous Home improvementsHorrendous Home improvements

Wiltshire gained a (final) Enforcement Wiltshire gained a (final) Enforcement Order under the Injunctions Directive Order under the Injunctions Directive against a father and son against a father and son

Misleading (giving false info), Misleading (giving false info), aggressive (coercing the consumer) aggressive (coercing the consumer) and not professionally diligent – also and not professionally diligent – also other legislative breachesother legislative breaches

Vulnerable consumers affected – Vulnerable consumers affected – often elderly and/or disabledoften elderly and/or disabled

Case Studies Rogue RoofersRogue Roofers

Cumbria TSD successfully prosecuted an Cumbria TSD successfully prosecuted an aggressive roofer who targeted a vulnerable aggressive roofer who targeted a vulnerable widowwidow

Misleading actions (claimed to be a member Misleading actions (claimed to be a member of Weatherseal), misleading omissions (failed of Weatherseal), misleading omissions (failed to give cancellation rights) and aggressive to give cancellation rights) and aggressive practices (started work without permission practices (started work without permission and escorted the consumer to the bank to and escorted the consumer to the bank to withdraw money) and a failure to act in a withdraw money) and a failure to act in a professionally diligent mannerprofessionally diligent manner

Was given an 18-month prison sentenceWas given an 18-month prison sentence

Case Studies Misleading MembershipMisleading Membership

Brent and Harrow TSD gained a Brent and Harrow TSD gained a community order against a builder who community order against a builder who had been illegally using the logo of a had been illegally using the logo of a trade association, and also claiming to be trade association, and also claiming to be ‘TSS approved’ ‘TSS approved’

These would be misleading, and also These would be misleading, and also possibly breaches of Annex Practices 2 possibly breaches of Annex Practices 2 and 4. Also pleaded guilty to Fraud Act and 4. Also pleaded guilty to Fraud Act chargescharges

100 hours unpaid work and £612 costs100 hours unpaid work and £612 costs

Case Studies Potential Pyramid SellingPotential Pyramid Selling

OFT has brought criminal charges OFT has brought criminal charges against alleged pyramid sellersagainst alleged pyramid sellers

Their actions are thought to breach Their actions are thought to breach Annex Practice 14 which relates to Annex Practice 14 which relates to pyramid sellingpyramid selling

This is a first consumer criminal case This is a first consumer criminal case for OFT and is a key capacity building for OFT and is a key capacity building casecase

Will also help deal with this problemWill also help deal with this problem

Case Studies Informal actionsInformal actions

OFT (and others) have taken less formal OFT (and others) have taken less formal action to promote compliance with the action to promote compliance with the UCPDUCPD

Airlines and price transparency – Airlines and price transparency – working with business to remove working with business to remove misleading pricesmisleading prices

Consumer alerts on misleading prize Consumer alerts on misleading prize drawsdraws

Guidance on second hand carsGuidance on second hand cars

Conclusions Flexibility in handling developing unfair Flexibility in handling developing unfair

practices is very usefulpractices is very useful

May come at the cost of some certainty in the May come at the cost of some certainty in the short-termshort-term

Early need for clear legal directionEarly need for clear legal direction

Useful to engage with Commission and other Useful to engage with Commission and other Member States as early as possibleMember States as early as possible

Directive will become more useful as precedent Directive will become more useful as precedent is developed and testedis developed and tested

Useful for promoting cross-border tradeUseful for promoting cross-border trade

Conduct Effect

Reg 3

Contrary to the requirements of professional diligence

AND (Likely to) appreciably impair the average consumer's ability to make an informed decision

AND

(Likely to) cause the average consumer to take a transactional decision they would not have taken otherwise

Reg 5

False or deceptive statement in relation to a specific list of key factors

Reg 6

Omission of material information

Reg 7

Aggressive practice by harassment, coercion or undue influence

AND(Likely to) significantly impair the average consumer's freedom of choice or conduct

Sched 1

One of 31 specified practices

DOES NOT APPLY(No impairment/transactional decision tests)

START HERE

No

Might the trader’s

practice affect consumers?

Practice is not unfair

Is the trader giving false information to, or deceiving, his customers?ORIs he failing to give enough information about a product?*ORIs he selling aggressively?

Is the trader failing to act in accordance with the standards a reasonable person would expect?

No

No

Does the practice

cause, or might it

cause, an average

consumer to take a

different decision in relation to a

product?

Practice is

unfair

No

*In certain situations (where an invitation to purchase is made) certain specified information must always be provided.

Practice not caught by CPRs

No

YesYesIs the trader’s practice prohibited outright (see list of 31 practices)?

Yes

Yes Yes

Yes

Legal situations and practices Legal situations and practices in EU member states (case in EU member states (case study UK)study UK)

Ankara 7Ankara 7thth December 2009 December 2009

Andrew Hadley

Office of Fair Trading

United Kingdom