Legalease Home page
Selling and marketing

 

Unfair commercial practices and advertising to consumers regulations

This sections contains:


Introduction


Unfair commercial practices


Automatically unfair commercial practices


Average consumer test


Price comparisons


Prices and drip feeding


Enforcement

 

Introduction

The Consumer Protection from Unfair Trading Regulations 2008 (CPUTR”) implement EU legislation (Directive 2005/29/EC of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices: OJ No L 149, 11.6.2005, p 22). The regulations were a major reform of the UK law on trade descriptions and commercial practices. Much of the former trade descriptions law was repealed by the new regulations.

As in the case of advertising to businesses, compliance with the Advertising Codes will almost certainly mean that the CPUTR are being complied with in relation to advertising. However, CPUTR are much broader in scope than the Advertising Codes as they regulate selling and marketing practices and not only advertising..

Unfair commercial practices

The CPUTR prohibit unfair commercial practices in relation to “consumers” i.e. any individual who in relation to a commercial practice is acting for purposes which are outside his business.

A commercial practice is unfair if it:
* contravenes the requirements of “professional diligence" and
* it materially distorts or is likely to materially distort the economic behaviour of the average consumer in relation to the product.

" Professional diligence" means the standard of special skill and care which a trader may reasonably be expected to exercise towards consumers which is commensurate with either honest market practice in the trader's field of activity or the general principle of good faith in the trader's field of activity.
Materially distort the economic behaviour: this means in relation to an average consumer, appreciably to impair the average consumer's ability to make an informed decision thereby causing him to take a transactional decision that he would not have taken otherwise.

A commercial practice is also deemed unfair if it is:
* a “misleading action”:
* a “misleading omission”
* “aggressive”  or
* in the list of practices which are in all circumstances unfair.

The European Court of Justice has ruled that, if a commercial practice satisfies all the criteria expressly set out in the provisions of the directive which specifically govern misleading practices in relation to the consumer, it is not necessary to determine whether such a practice is also contrary to the requirements of professional diligence for it legitimately to be regarded as unfair and, therefore, prohibited.
See What's New item below: 15/11/2013: ECJ ruling on misleading advertising directive

Automatically unfair commercial practices

The CPUTR reg.3(4)(d) and Sched.1 specify 31 commercial practices which are in all circumstances considered unfair. Examples are:

* Falsely stating that a product will only be available for a very limited time, or that it will only be available on particular terms for a very limited time, in order to elicit an immediate decision and deprive consumers of sufficient opportunity or time to make an informed choice.

* Making an invitation to purchase products at a specified price without disclosing the existence of any reasonable grounds the trader may have for believing that he will not be able to offer for supply, or to procure another trader to supply, those products or equivalent products at that price for a period that is, and in quantities that are, reasonable having regard to the product, the scale of advertising of the product and the price offered (so-called “bait advertising”).

Average consumer test

Average consumer: the CPUTR state that the average consumer must be considered to be “reasonably informed, reasonably observant and circumspect”. In the 2011 case of Office of Fair Trading v Purely Creative Limited [2011] EWHC 106 (Ch), the judge rejected the defendants’ argument that the average consumer must therefore be assumed to read the whole of the text of any relevant promotion Read more>.  

Price comparisons

Price reduction claims were formerly regulated by the Price Marking (Bargain Offers) Order 1979. This Order was revoked in 1989 and replaced by Part III of the Consumer Protection Act 1987 and the Code of Practice for Traders on Price Indications issued under section 25 of the Act. The CPUTR repealed Part III of the 1987 Act and the code of practice was automatically revoked.

The CPUTR prohibit “unfair commercial practices”. There is no specific regulation dealing with price comparisons. However, the BIS Pricing Practices Guide states: “..the basis of a price comparison should be reasonable in terms of time, and what is reasonable will depend on the circumstances. If the basis of the comparison is not set out explicitly, a price used as a basis for comparison should have been the most recent price available for 28 consecutive days or more. The period of time for which the new (lower) price will be available should not be so long that the comparison becomes misleading. How long this will be will depend on all the circumstances…as a general guideline…it is suggested that the period of time for which the new (lower) price will be available should not be more than that for which the old (higher) price was available…and comparisons should not be made with prices last offered more than six months ago”.

Prices and drip feeding

As discussed in our section on e-commerce, the OFT believes that the minimum transparency requirements under CPUTR include that whenever prices are displayed on a website, surcharges must be made clearly available via just “one click” and not simply be revealed at a late stage in the shopping process; and also that retailers should clearly reference card surcharges on any advertising material when prices are being promoted.

Further reading

There is Guidance on the CPUTR issued jointly by the OFT and the Department for Business, Enterprise and Regulatory Reform (now BIS) in 2008. Such guidance, as is the case with the BIS Pricing Practices Guide, sets out the views of the OFT and the Department on how the CPUTR may apply in practice. Ultimately, however, only the courts can decide whether or not a commercial practice is unfair within the meaning of the CPUTR.
Legaleze comment: although the guidance is indeed only an opinion, it nevertheless is important because if followed, a trader should haave a strong argument that he has exercised "due diligence"; see Criminal enforcement (below).

Enforcement of CUPTR

Local Authority Trading Standards Services (“TSS”) and the Department of Enterprise, Trade and Investment in Northern Ireland and have a duty to enforce the CPUTR. As an alternative to civil and criminal enforcement, enforcers may use education, advice and guidance, promotion of codes of conduct and so-called “established means”. The Advertising Standards Authority (“ASA”) is considered to be established means in relation to television and radio advertisements and advertisements in non-broadcast media.

Civil enforcement: an enforcing authority may apply to the court for an enforcement order (Enterprise Act 2002 s.215).
Breach of the regulations does not affect the validity of any agreement.

Direct civil remedy: following the English and the Scottish Law Commissions report CONSUMER REDRESS FOR MISLEADING AND AGGRESSIVE PRACTICES and government consultation REFORM OF CONSUMER LAW – GOVERNMENT RESPONSEsince Septemer 2014 consumers have a civil remedy in the courts in the event of a breach of CPUTR. There are three conditions that must be satisfied in order for a consumer to have a successful civil action against a trader:

• the consumer must have entered into a contract with a trader for either  the sale or supply of a product by the trader, the sale of goods to the trader or the consumer makes a payment to a trader for the supply of a product;

• the trader engages in a ‘prohibited practice’;

• the ‘prohibited practice’ is a significant factor in the consumer's decision to enter into the contract or make the payment.

If successful, a consumer is entitled to a selection of remedies. They can unwind the transaction (obtain a discount on the product, with discounts ranging from 25% to 100% dependant on the seriousness of the prohibited practice) or be paid damages (including damages for alarm, distress and inconvenience).

Criminal enforcement: breach of the CPUTR is an offence punishable by a fine or up to two years imprisonment. In the case of an offence committed by a corporate body, there is <Director’s criminal liability>. There is a <due diligence defence> for an offence if the accused proves that the commission of the offence was due to a mistake or cause beyond his control and that he took all reasonable precautions and exercised all due diligence to avoid the commission of such an offence by himself or any person under his control. Following official guidance on the CPUTR should provide a good argument that the trader exercised due diligence.

What's new items: [see What's New page or archive for full item]

21/03/2014: Furniture and carpet retailers change pricing practices
www.oft.gov.uk/news-and-updates/press/2014/19-14#.Uywhuqh_umw
A Share & Sons Ltd (trading as SCS), Carpetright Plc, Dream Ltd, Furniture Village Ltd and Homestyle Operations Ltd’s trading the brands 'Harveys' and 'Bensons for Beds' have confirmed a commitment to use genuine reference prices, and have made changes to their reference pricing practices, following an Office of Fair Trading (OFT) investigation. The companies did not admit liability for any unlawful conduct.

15/11/2013: ECJ ruling on misleading advertising directive
http://curia.europa.eu/jcms/upload/docs/application/pdf/2013-09/cp130113en.pdfCHS Tour Services GmbH v Team4 Travel GmbH
C-435/11 Hearing Date 19 September 2013
The ECJ ruled that, if a commercial practice satisfies all the criteria expressly set out in the provisions of the directive which specifically govern misleading practices in relation to the consumer, it is not necessary to determine whether such a practice is also contrary to the requirements of professional diligence for it legitimately to be regarded as unfair and, therefore, prohibited.
Legaleze comment: this case arose from proceedings in Austria. If the case had occurred in the UK, there are two points to make. First, the UK legislation which implements the Directive, i.e. the Consumer Protection from Unfair Trading Regulations 2008, do not permit another trader, or even a consumer, to apply for an injunction in the circumstances of this case, although the Law Commission has made proposals in this regard.
Second, although breach of the UK Regulations is an offence, it would seem that a trader whose brochure was incorrect and misleading in these circumstances would have been entitled to use the due diligence defence.

20/08/2013: Tesco fined GBP 300,000 fine for Tesco over strawberry promotion
Following a complaint to Birmingham City Council’s trading standards department, Tesco has been subjected to a GBP 300,000 fine for an admitted breach which admitted offences under the Consumer Protection from Unfair Trading Regulations 2008 following a misleading ‘half price’ promotion on strawberries.

06/08/2013: Government response to consultation on consumer law reform
The Government in its consultation document of August 2013 REFORM OF CONSUMER LAW – GOVERNMENT RESPONSE has proposed among other things to give consumers a right of redress in certain circmstances where a trader has breached the 2008 Regulations.

12/12/2012: OFT issues CPA principles
The OFT has issued a set of principles for traders using continuous payment authorities (CPAs) following evidence that customers are not always being made aware of what they are signing up to and may be misled about their rights to cancel.
A customer, a CPA allows a trader to take a series of payments using a customer's debit card or credit card without having to seek express authorisation for every payment. CPAs are often used to collect renewal payments for services such as vehicle breakdown services, insurance policies, gym memberships, online dating, mobile and broadband services and magazine subscriptions.

30/11/2012: Supermarkets sign up to OFT principles on special offers and promotions
The OFT has announced that Aldi, Co-Op, Lidl, Marks and Spencer, Morrisons, Sainsbury's, Tesco and Waitrose have agreed to a set of OFT principles to address concerns over special offers and promotions for food and drink.

03/09/2012: Government consults on payment surcharges
BIS has issued a consultation document which seeks views on proposals for early implementation of a ban on above cost payment surcharges, i.e. an additional charge added to the price of goods or services when the consumer chooses to pay by a particular method, for example by using a credit card or a debit card.

12/07/2012: OFT secures court orders against mobility aids company and directors
The OFT has secured court orders against Optimum Care Mobility Limited ('Optimum'), a Derbyshire-based business that sold mobility aids such as stairlifts, scooters and specialist chairs, across the country .

[Page updated: 18/01/2015]

 

More information>
The basics: contract for sale
Legal tender
Limitation and exclusion clauses
Sale of goods
Supply of services
Inertia selling to businesses
E-commerce
Sales to consumers
Unfair terms
Sales to consumers, distance selling
Doorstep selling
Marketing and advertising regulation    introduction
Advertising Codes
Advertising to businesses and    comparative advertising
Advertising to consumer regulations
Approved trader schemes
Direct marketing by telephone, email,    text message, fax and post
Data protection in relation to marketing