Consumer Protection from “Unfair Trading”

Does your business deal with consumers? Understanding your responsibilities

This guidance is for England, Scotland and Wales

The Consumer Protection from Unfair Trading Regulations 2008 (known as the CPRs) cover commercial practices between traders and consumers and introduce a general prohibition on unfair commercial practices.

The Regulations provide consumers with rights to redress in circumstances where a trader has engaged in misleading or aggressive practices.

The law

The Consumer Protection from Unfair Trading Regulations 2008 (known as the CPRs) are the Regulations that control descriptions used between traders and consumers. They create criminal offences for traders that breach them. The Regulations prohibit ‘misleading actions‘ and ‘misleading omissions‘ that cause, or are likely to cause, the average consumer to take a transactional decision he would not have taken otherwise. They prohibit 31 specific practices that are always considered to be unfair and the regulations create further offences for aggressive practices.

In their latest amendment – the Consumer Protection (Amendment) Regulations 2014 – they provide consumers with rights to redress in respect of misleading and aggressive commercial practices and set out the remedies available to them.

The Regulations apply to commercial practices before, during and after a contract is made.

What is prohibited?

Effectively the CPRs prohibit trading practices that are unfair to consumers. There are four different types of practices to consider:

• practices prohibited in all circumstances
• misleading actions and omissions
• aggressive practices
• general duty not to trade unfairly

For the last three practice types above it is necessary to show that the action of the trader has an effect (or is likely to have an effect) on the actions of the consumer. This does not mean that there has to be evidence about how any particular individual(s) have been affected, as the test looks at the effect (or likely effect) on the average consumer.

The CPRs identify three different types of consumer:

• average consumer
• targeted consumer
• vulnerable consumer

…recognising that different types of consumers may react to a practice in different ways.

Practices prohibited in all circumstances

Schedule 1 to the CPRs introduces 31 practices that are always considered to be unfair and therefore are banned in all circumstances. These include:

FALSE ENDORSEMENTS / AUTHORISATIONS

• false claims of membership of trade associations
• claiming a product has been approved by a public or private body when it has not

MISLEADING AVAILABILITY

• bait advertising (or ‘bait and switch’) where a trader lures a consumer into believing he can buy a product at a low price when the trader is aware he does not have reasonable stock available or is not able to supply at that price, or attempts to ‘up-sell’ to a higher priced product
• falsely stating a product is only available for a very limited time in order to make the consumer make an immediate decision

MISLEADING CONTEXT / EFFECT

• claiming a trader is going to cease trading or move premises when he is not (for example, bogus closing down sales)
• falsely claiming a product has curative properties
• describing a product as ‘free’, ‘gratis’, ‘without charge’ or similar if a consumer is going to have to pay more than the cost of responding to the advertisement and collecting or paying for delivery of the item
• including an invoice or similar in marketing material, implying a consumer has ordered the product when he has not
• failing to make it clear that a person is actually a trader or creating the impression he is a consumer (for example, failing to indicate trade status when selling a second-hand car)
• creating the impression that a product can legally be sold when in fact it cannot

PYRAMID SCHEMES

• operating or promoting such schemes are specifically prohibited, provided they fit within the definition of a pyramid scheme (that is, a scheme where a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme, rather than from the sale or consumption of products)

PRIZE DRAWS

• competitions where the prizes described (or equivalent) are not awarded
• creating the false impression that a consumer has won, or will win, a prize when there is no prize or claiming the prize is subject to the consumer paying money or incurring a cost

AGGRESSIVE SALES

• creating the impression a consumer can’t leave the premises until a contract is formed
• visiting a consumer at home and refusing to leave when asked to leave (except when the trader has a legal right to enforce a contractual obligation)
• making persistent and unwanted solicitations by phone, fax, or email (except when a trader has a legal right to enforce a contractual obligation)
• making a direct exhortation to children to buy a product or to persuade their parents to buy a product for them (pester power)
• telling a consumer a trader’s job will be in jeopardy if the consumer does not buy the product

UNREASONABLE DEMANDS

• requiring a consumer who wishes to claim on an insurance policy to produce irrelevant documents or failing to respond to correspondence in order to dissuade the consumer from exercising his contractual rights

INERTIA SELLING

• demanding payment for products sent to the consumer, but which he did not ask for
• demanding that such unsolicited products are returned

Misleading actions and omissions

The CPRs prohibit misleading actions and misleading omissions that cause, or are likely to cause, the average consumer to take a different transactional decision – that is, any decision taken by the consumer concerning the purchasing of the product or whether to exercise a contractual right in relation to the product, including decisions not to act. This does not only relate to pre-shopping but includes after-sales and continues for the lifetime of the product.

MISLEADING ACTIONS

Regulation 5 of the Consumer Protection from Unfair Trading Regulations 2008 prohibits giving false information to, or deceiving, consumers. A misleading action occurs when a practice misleads through the information it contains, or its deceptive presentation, and causes, or is likely to cause, the average consumer to take a different transactional decision.

There are three different types of misleading actions:

• misleading information generally (see below)
• creating confusion with competitors’ products
• failing to honour commitments made in a code of conduct

The information that may be considered as misleading is very wide, and is listed in the legislation itself, including such things as:

• the existence or nature of the product – for example, advertising goods that don’t exist
• the main characteristics of the product – for example, the benefits of the product or the geographical origin
• the price or the manner in which it is calculated
• the need for a service, part, replacement or repair
• the nature, attributes and rights of the trader – such as qualifications

MISLEADING OMISSIONS

Regulation 6 prohibits giving insufficient information about a product. It is a breach of the CPRs to fail to give consumers the information they need to make an informed choice in relation to a product if this would cause, or be likely to cause, the average consumer to take a different transactional decision. For example, to make an informed decision about whether to buy or how much to pay, the average consumer buying a car needs to know whether the car has previously been an insurance write-off. The trader therefore has to disclose this information, whether or not the consumer asks for it.

Information that you give to consumers must be given in a timely manner. It should be provided to assist the consumer in making an informed choice. Supplying information too late could constitute an omission.

It is a breach of the CPRs to:

• omit material information
• hide material information
• provide material information in a manner that is unclear, unintelligible, ambiguous or untimely
• fail to identify the commercial intent (unless this is apparent from the context)

Aggressive practices

Regulation 7 of the CPRs prohibits aggressive commercial practices that intimidate or exploit consumers, restricting their ability to make free or informed choices. In order for an aggressive practice to be unfair it must cause, or be likely to cause, the average consumer to take a different transactional decision.

A commercial practice is aggressive if:

• it significantly impairs, or is likely to significantly impair, the average consumer’s freedom of choice or conduct in relation to the product through the use of harassment, coercion or undue influence
  …and
• it thereby causes him to take a different transactional decision

To decide whether a practice breaches this regulation, account shall be taken of:

• timing, location, nature or persistence
• use of threatening or abusive language or behaviour
• exploitation by the trader of any specific misfortune or circumstance that impairs the consumer’s judgement, in order to influence the consumer’s decision with regard to the product
• any onerous or disproportionate non-contractual barrier imposed by the trader where a consumer wishes to exercise rights under the contract (for example, rights to terminate the contract or switch to another product or trader)
• any threat to take action that cannot legally be taken

Note: ‘coercion‘ includes the use of physical force, and ‘undue influence‘ means exploiting a position of power in relation to the consumer so as to apply pressure, even without the use of (or threatening to use) physical force, in a way that significantly limits the consumer’s ability to make an informed decision.

General duty not to trade unfairly

Regulation 3 is a ‘Prohibition of unfair commercial practices‘, which effectively is failing to act in accordance with reasonable expectations of acceptable trading practice.

The general prohibition prohibits practices that:

• contravene the requirements of professional diligence (defined as the standard of special skill and care that 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 of the average consumer (or are likely to) with regard to the product (that is, 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)

Consumers’ right to redress

In addition to the criminal offences created by a breach of the provisions described above, the Regulations also provide consumers with rights of redress enforceable through the civil courts. For a consumer to have these rights to redress certain conditions must be met.

The first condition is that the consumer does one of the following:

• enters into a contract to buy goods or services from a trader (a business-to-consumer contract)
• enters into a contract to sell goods to a trader (a consumer-to-business contract)
• makes a payment to a trader for supply of a product (consumer-payment contract)

The second condition is that the trader has engaged in a prohibited practice. A prohibited practice means a misleading action or an aggressive practice (see above).

Furthermore, the trader will be liable for misleading actions or aggressive practices carried out by the producers of goods they supply if the trader could reasonably have known of the prohibited practice. An example of this would be where a manufacturer’s television advertisements for a product are misleading.

The final condition is that the prohibited practice was a significant factor in the consumer entering into the contract.

WHAT REMEDIES ARE AVAILABLE TO A CONSUMER?

There are three main remedies available to a consumer: the right to unwind, the right to a discount, and the right to damages.

Right to unwind:
The right to unwind allows consumers to undo the contract and be put back into the position they were in before it was made. There are restrictions to this:

• the consumer must reject the goods within 90 days. In general this 90-day period begins either when the goods are delivered or the service begins
• the right to unwind only applies where it is still possible to undo the transaction. If the goods have been fully consumed or the service fully complete this would not be possible. However if it is still possible to return some element of the goods or reject an element of the service this would be enough. Consumers are entitled to a full refund even if they may have received some benefit from it

The consumer’s right to a full refund in the case of continuous-supply products (such as utility contracts) are reduced.

Right to a discount:
This right applies where the right to unwind has been lost. This may be because of a delay in complaining or because the goods have been fully consumed. For goods and services of less than £5,000 there is a fixed-percentage discount ranging from 25% for minor issues to 100% for very serious cases. Above £5,000, if the misleading or aggressive practice led the consumer to pay more than the market price for the product, the price is reduced to the market price. Otherwise, the fixed-percentage discounts will still apply.

Damages:
Consumers can claim damages if they have suffered losses that exceed the price paid for goods and services. These damages can cover distress as well as economic losses suffered as a result of the prohibited practice.

Penalties

Enforcers may take civil enforcement action in respect of a breach of the CPRs under Part 8 of the Enterprise Act 2002. This can be done by applying to a court for an enforcement order and a breach of any order could lead to up to two years’ imprisonment and/or an unlimited fine.

The CPRs also contain criminal offences that can be prosecuted by the Competition and Markets Authority, trading standards services, or the Department of Enterprise, Trade & Investment in Northern Ireland (and by the Lord Advocate in Scotland). The penalties are:

• on summary conviction, a fine not exceeding the statutory maximum (currently £5,000)
• on conviction on indictment, an unlimited fine and/or imprisonment for up to two years

Further reading

The Department for Business, Innovation and Skills (BIS) has produced guidance on consumers’ right to redress under the Regulations: Misleading and aggressive commercial practices – New private rights for consumers.

Key legislation

• Enterprise Act 2002
• Consumer Protection from Unfair Trading Regulations 2008
• Consumer Protection (Amendment) Regulations 2014

Please note

This information is intended for guidance; only the courts can give an authoritative interpretation of the law.

The guide’s ‘Key legislation’ links may only show the original version of the legislation. Information on amendments to UK legislation can be found on each link’s ‘More Resources’ tab; amendments to EU legislation are usually incorporated into the text. Amending legislation is linked to separately where it is directly related to the content of a guide.

For more information regarding this article or assistance in any other timeshare related issues please contact the TCA on 01908 881058 or email: info@TimeshareConsumerAssociation.org.uk