The new rules implement an EU Directive, the Unfair Commercial
Practices Directive (UCP). That Directive is designed to outlaw
unfair practices across the business spectrum, replacing current
sector-specific laws.
The Department of Trade and Industry (DTI) has announced a
13-week consultation on its plans to implement the
Directive.
"Consumers ought to be dealt with fairly by business – whether
they shop at home, online or in the high street," said the DTI's
consultation document. "Sharp marketing practices not only harm
consumers but also respected companies who lose out if the
activities of their unscrupulous competitors are left unchallenged.
They also affect consumer confidence in markets."
The Government intends to create two new sets of Regulations,
one protecting consumers from unfair business dealings and the
other protecting businesses from misleading marketing.
A breach of the rules will in most cases be a criminal offence.
In addition to a fine, directors and managers could be sentenced to
up to two years in prison.
The rules make it an offence to mislead through omission as well
as commission and outlaw aggressive practices.
"The UCP Directive seeks to stamp out unfair selling and
marketing methods in a simpler and more effective way than the
current sector specific laws," said the DTI's consultation
document. "It will put in place a comprehensive framework for
dealing with sharp practices and rogue traders who deliberately set
out to exploit the loopholes in existing legislation."
The business-specific rules will replace the Control of
Misleading Advertisements Regulations. They implement an older EU
law, the Misleading and Comparative Advertising Directive, which
itself has been superseded by the UCP Directive. Numerous other
laws are amended by the proposals.
Consumer Protection from Unfair Trading Regulations
The draft Consumer Protection from Unfair Trading Regulations
2007 impose a blanket ban on unfair commercial practices. They
state that a misleading action or misleading omission will amount
to an unfair commercial practice.
A commercial practice becomes a misleading action, and therefore
a criminal offence, if it:
- "contains false information and is therefore untruthful […] or
if it or its overall presentation in any way deceives or is likely
to deceive the typical consumer […], even if the information is
factually correct; and
- causes or is likely to cause the typical consumer to take
a transactional decision he would not have taken
otherwise"
Numerous examples of what may constitute false information are
listed in the draft rules. Wrong information about availability and
geographic origin of a product and even the seller's "awards and
distinctions" can fall foul.
Displaying a trust mark without authorisation or falsely
claiming an endorsement from another body will be considered
unfair. Advertorials that fail to make clear that a trader has paid
for media promotion will also be considered unfair.
Business Protection from Misleading Marketing Regulations
The draft Business Protection from Misleading Marketing
Regulations 2007 seek to control the circumstances in which
comparative advertising is permitted. They criminalise misleading
adverts or "indications".
Under the draft rules, an indication is misleading:
- "if in any way, including its presentation, it deceives or is
likely to deceive the trader to whom it is addressed or whom it
reaches; and
- if, by reason of its deceptive nature, it is likely to affect
his economic behaviour or, for those reasons, injures or is likely
to injure a competitor."
The new laws could have an effect on e-commerce practices. The
fact that they apply to "indications" and not just traditional
advertising is thought likely to mean that fake reviews will caught
by the rules.
A number of businesses have been caught posing as customers to
hype their business on online forums, exploiting the fact that more
and more consumers make their choices based on the reviews of past
customers whom they do not know.
The Regulations will be enforced by the Office of Fair Trading,
Trading Standards officers and media regulator Ofcom.
