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Legal situations and practices in EU
member states (case study UK)
Ankara 7th December 2009
Andrew Hadley
Office of Fair Trading
United Kingdom
What I will cover
● Introduction
● UK experience of implementing the
UCPD
-Implementing
-Understanding
-Explaining
● Enforcing the Directive (general)
● Detailed case studies on specific cases
● Conclusions
Introduction
● In the UK, consumer protection is the
responsibility of a number of agencies
● This includes OFT and sectoral bodies
such as the FSA and OFCOM, but the
majority of formal enforcement is done by
200+ Trading Standards Departments,
who are managed by local councils
● Implementation of new laws is the
responsibility of BIS, formerly DTI/BERR
Introduction
● The Office of Fair Trading is the UK’s
consumer and competition authority
● We work with a wide range of
stakeholders including government,
business, enforcers and consumer
groups
● We were involved in the general duty
to trade fairly from the 1990s onwards
Introduction
● Before the UCPD, the UK had a large
number of very detailed prescriptive
requirements
● UCPD represented a move towards
principle-based law which supports
greater flexibility
● This meant some serious changes to
our existing legal framework around
consumer protection
Implementing the Directive
 Before 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 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23 laws repealed or amended – simplification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
 Consultations
Several different consultations:
Transposition, Criminal offences, Regulations,
Guidance
Vital part of UK policy-making
 Regulations
Consumer Protection from Unfair Trading
Regulations 2008 (‘CPRs) on 26th May 2008
implemented UCPD
Business Protection from Misleading Marking
Understanding the
Directive
 Discussions 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 discussions
Academic and practical discussions
Stakeholder group and project board
Widening circle of discussions during project
Understanding the
Directive
 Overlap with other laws and process
Contract law
Financial services
Distance selling
 Legal analysis
Legal academic papers
Legal input into production of materials
Preparing for enforcement
Understanding the
Directive
 Opportunities 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
GENERAL PROHIBITION
(CONTRARY TO REQUIREMENTS OF
PROFESSIONAL DILIGENCE)
MISLEADING
PRACTICES
ACTIONS
AGGRESSIVE
PRACTICES
must
satisfy
effect
test
OMISSIONS
BANNED PRACTICES
(31 SPECIFIC PRACTICES
BANNED IN ALL CIRCUMSTANCES)
deemed
effect
Explaining the Directive
 Dialogue with stakeholders
Worked with business, enforcers and
consumer groups on guidance and difficult
areas
Workshops on enforcement
Consultations
 Guidance
Illustrative (about 90 pages) gives example of
unfair practices, and gives short explanations
Published in summer 2008, but available in
Explaining the Directive
 Training – 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 aware
Work with trade associations
Press releases and short guide for business
Presentations and advice
Enforcing the Directive
 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 / 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
Enforcing the Directive
 Method / 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 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 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 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 IV
Some initial uncertainty in the absence of clear
precedent (may be a unique UK issue)
Some initial costs to businesses & enforcers
May be addressed by the SANCO Guidelines
Subjective assessments means MS may take
different views on some areas until clear
precedent develops at EU level
Case Studies
Horrendous Home improvements
Wiltshire gained a (final) Enforcement
Order under the Injunctions Directive
against a father and son
Misleading (giving false info), aggressive
(coercing the consumer) and not
professionally diligent – also other
legislative breaches
Vulnerable consumers affected – often
elderly and/or disabled
Case Studies
 Rogue Roofers
 Cumbria TSD successfully prosecuted an
aggressive roofer who targeted a vulnerable
widow
 Misleading actions (claimed to be a member of
Weatherseal), misleading omissions (failed to
give cancellation rights) and aggressive practices
(started work without permission and escorted
the consumer to the bank to withdraw money) and
a failure to act in a professionally diligent manner
 Was given an 18-month prison sentence
Case Studies
Misleading Membership
Brent and Harrow TSD gained a community
order against a builder who had been
illegally using the logo of a trade
association, and also claiming to be ‘TSS
approved’
These would be misleading, and also
possibly breaches of Annex Practices 2 and
4. Also pleaded guilty to Fraud Act charges
Case Studies
Potential Pyramid Selling
OFT has brought criminal charges against
alleged pyramid sellers
Their actions are thought to breach Annex
Practice 14 which relates to pyramid selling
This is a first consumer criminal case for
OFT and is a key capacity building case
Will also help deal with this problem
Case Studies
Informal actions
OFT (and others) have taken less formal
action to promote compliance with the
UCPD
Airlines and price transparency – working
with business to remove misleading prices
Consumer alerts on misleading prize draws
Guidance on second hand cars
Conclusions
 Flexibility in handling developing unfair practices is
very useful
 May come at the cost of some certainty in the shortterm
 Early need for clear legal direction
 Useful to engage with Commission and other Member
States as early as possible
 Directive will become more useful as precedent is
developed and tested
 Useful for promoting cross-border trade
Conduct
Reg 3 Contrary to the
requirements of
professional
diligence
Effect
AND
(Likely to) appreciably
impair the average
consumer's ability to
make an informed
decision
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
Sched One of 31 specified
practices
AND
(Likely to) significantly
impair the average
consumer's freedom
of choice or conduct
(Likely to)
cause the
average
consumer to
take a
A transactiona
N l decision
D they would
not have
taken
otherwise
DOES NOT APPLY
(No impairment/transactional decision tests)
START HERE
Yes
Might the
trader’s
practice affect
consumers?
No
Is the trader’s practice
prohibited outright (see list of
31 practices)?
No
Is the trader giving false
information to, or deceiving,
his customers?
OR
Is he failing to give enough
information about a product?*
OR
Is he selling aggressively?
Yes
No
Is the trader failing to act in
accordance with the standards
a reasonable person would
expect?
Does the
practice
cause, or
might it
cause, an
average
consumer to
take a
different
decision in
relation to a
product?
Yes
No
Practice not caught
by CPRs
Practice
is
unfair
Yes
Yes
Yes
No
Practice is not unfair
*In certain situations (where an invitation to purchase is made) certain specified information must
always be provided.
Legal situations and practices in EU
member states (case study UK)
Ankara 7th December 2009
Andrew Hadley
Office of Fair Trading
United Kingdom