Government gives new guidance on unfair commercial practices

Out-Law News | 06 Aug 2008 | 12:32 pm | 3 min. read

Online traders that fail to make clear the price of their products including any taxes and delivery charges could face criminal proceedings. New Government guidance has set out examples of commercial practices that are now banned.

The Office of Fair Trading (OFT) and Department of Business and Regulatory Reform (BERR) has jointly published new guidance intended to help traders to comply with the Consumer Protection from Unfair Trading Regulations. These rules, known as the CPRs, came into force on 26th May 2008.

The new guidance was published on Friday, one day after the first court ruling under the new legislation.

The CPRs include controls on "invitations to purchase". The guidance sets out examples of practices that amount to invitations to purchase.

The examples include "a price on a product in a shop"; "a page or pages on a web site where consumers can place an order"; and "a text message promotion to which consumers can directly respond in order to purchase the promoted product".

Where there is such an invitation to purchase, the CPRs require certain information to be given to consumers in a clear, unambiguous, intelligible and timely manner. The CPRs list the required information, which includes the main characteristics of the product, the price, including any taxes, and the existence of a cancellation right if it applies to the sale.

Rules on 'distance selling', which also apply e-commerce sales to consumers, have been in force since October 2000. They also required this information; but the penalties for non-compliance were mild. Under the 2000 rules, the OFT could obtain a court order to force compliance; or a consumer who suffered damage as a result of the breach could sue for compensation. Under the 2008 rules, the penalties range up to a fine and two years' imprisonment for company directors.

The new guidance gives other examples of conduct that will breach the Regulations.

These include failures to disclose limited stock in promotions:

"A camera firm advertises nationally using the line ‘Digital cameras for £3’," says the guidance. "They had only ever planned to have a very small number of such cameras available at that price. This would breach the CPRs because the number of cameras actually available for £3 would not be sufficient to meet the likely level of demand arising from the scale of the advertising and the trader knew this but failed to make clear in the advertisement that only limited numbers were available."

Confusing the brands of a product can now be treated as a criminal offence where once it may only have resulted in trade mark or passing off actions in civil courts.

A trader designs the packaging of shampoo A so that it very closely resembles that of shampoo B, an established brand of a competitor. If the similarity was introduced to deliberately mislead consumers into believing that shampoo A is made by the competitor (who makes shampoo B) – this would breach the CPRs," says the guidance.

The use of the word 'free' is also controlled by the CPRs. This caused some controversy, when there were fears that 'buy one, get one free' promotions – known as BOGOF deals – would be banned. BERR and the European Commission responded to that controversy by confirming that BOGOF deals are not banned.

The new guidance deals with the controls on the word 'free' only briefly: "A trader advertises a ‘free’ gift. He then tells consumers that in order to receive their ‘free’ gift they need to pay an extra fee. This would breach the CPRs."

Misleading discounts or closing down sales where a shop does not close are also banned. The guidance gives an example of a trader advertising televisions, saying the price has been substantially discounted. If they have "only been on sale at the non-discounted price in very small numbers for a very short period of time in one of the trader’s numerous shops," the promotion will be deceptive and in breach of the rules.

The guidance was published on the day after the first court ruling under the new rules. That case, against two Wiltshire traders, resulted in an Enforcement Order.

Jimmy Stockwell and his son Shane offered handy-man services to local homes. Complaints were made to local Trading Standards officers that the Stockwells' behaviour was aggressive and their work of poor quality. The Order, granted by His Honour Judge Cutler at Salisbury County Court, ordered the defendants not to breach a range of provisions in the Regulations.

It is only if the Stockwells disobey the terms of the Order that they face being found in contempt of court and then risk imprisonment, a fine, or both.

A spokesman for Wiltshire Trading Standards told OUT-LAW.COM that the case was brought as a civil action by Trading Standards with the support of the OFT. They requested an Enforcement Order in the action. Asked why the case was not brought before the criminal courts, which have powers to levy fines or imprison defendants, the spokesman said that the lower standard of proof required in a civil action made that approach more attractive. "We could get it done quicker," he said.

In the past, such a case might have been dealt with by Trading Standards under the Enterprise Act which requires warnings to be given and evidence that the offending conduct took place on a regular basis, the spokesman said.

Editor's note, 07/08/2008: The spokesman for Wiltshire Trading Standards had not responded to OUT-LAW's request for comment when this story first appeared. The story has been extended since it first appeared.