Business, Innovation and SkillsWritten evidence submitted by Professor Peter Cartwright

Introduction

Thank you for providing the opportunity to comment on the Draft Consumer Rights Bill (Cm 8657). I will confine my comments to the provisions on enhanced consumer measures.

Please note that I was a member of the Law Society’s Advisory Committee on the Bill, and am also a Council member of the Consumers’ Association (Which?) I am commenting in a personal capacity and my views do not necessarily reflect those of these organisations.

Summary

The Enhanced Consumer Measures are broadly to be supported.

They will work well in cases where prosecution is not appropriate.

It is important that enforcers should be able to use enhanced consumer measures where there is also a prosecution. If they are not, enforcers will not have effective powers to ensure compliance, choice and redress in cases where a prosecution is necessary.

The Consumer Rights Bill and Enhanced Consumer Measures

1. I believe that the proposed reforms to Part 8 of the Enterprise Act are to be given a cautious welcome. There is widespread agreement that the current powers available to enforcers are inadequate in achieving the aims of consumer protection law. In particular:

Prosecution is not particularly well-suited to achieving redress for consumers, nor at specifying what a trader should do to avoid breaches in future; and

Part 8 can be used to require traders not to engage in conduct that falls foul of the law but cannot be used to obtain redress for consumers.

2. Attaching additional measures to enforcement orders and undertakings makes sense. However, there are a number of concerns with the proposed reforms.

3. The most fundamental concern is that enhanced consumer measures appear to be viewed only as an alternative to prosecution. There will certainly be cases where they operate appropriately as such. For example, where a trader has inadvertently breached the law and caused loss to consumers, negotiating redress or (in cases where this fails) having redress imposed through the courts makes sense. Similarly, where the concern of enforcers is that the same mistakes will be made again, requiring the trader to undertake certain remedial action may be sensible. There are good reasons too for informing consumers of wrongdoing (broadly understood) and helping them to make better-informed decisions, and the choice category gives a flavour of how this might be done. I have argued elsewhere that “reputational sanctioning” has a role for consumers both as a deterrent and as a way of correcting the operation of markets.1 When coupled with other uses of publicity by enforcers (such as a publication requirement or even a press release) it is clear that the choice category could help to achieve these.

4. Unfortunately, seeing enhanced consumer measures solely as an alternative to prosecution would provide a significant problem for enforcers. This is best illustrated by a hypothetical example. Suppose a number of consumers have been misled by a trader and that breaches of regulation 5 the Consumer Protection from Unfair Trading Regulations 2008 have taken place. Trading standards officers have evidence that this is ongoing. They are going to face a dilemma. On the one hand this is a case where they believe they should prosecute; there is evidence of wrongdoing, perhaps of clear mens rea on the part of the trader, and significant harm to consumers has been caused. But they also want to achieve redress for consumers and to make sure that the trader takes particular measures for the future. If the enhanced consumer measures cannot be used in cases where there is a prosecution an absurd position results. The enforcer can seek enhanced consumer measures (so as to get redress and (perhaps) compliance) but it cannot prosecute. The trader will escape censure by way of a formal penalty. On the other hand, if the conduct is so bad that the enforcer feels it really should prosecute, the possibility on enhanced measures (and so effective redress) will be unavailable (subject to what is said below about compensation orders). This cannot be sensible.

5. The Draft Bill should be amended so that enhanced consumer measures can, in appropriate cases, be used alongside prosecution. In most cases, enhanced consumer measures will be used rather than prosecution. Where, for example, there is a breach of the law but no mens rea or other significant culpability, the enforcer might choose to use the enhanced measures alone (initially through seeking undertakings, but ultimately by going to court). This is likely to take some cases out of the criminal courts.

6. There might also be some cases (for example where dishonest conduct is picked up before there is any loss) where only a prosecution would follow.

7. It is true that the Legal Aid, Sentencing and Punishment of Offenders Act 2012 contains a requirement to consider imposing compensation in all eligible cases. But the traditional reluctance of the criminal courts to award compensation in consumer protection cases is unlikely to be easily shifted. Furthermore, at the time of conviction the courts will not always have details of many of the affected consumers. One strength of the enhanced consumer measures is that they make it easier to identify such consumers through the obligations they place on traders.

8. If the Government remains determined to avoid the criminal courts where enhanced consumer measures are used there would remain the possibility of allowing enforcers to impose variable monetary penalties on traders. This would mean that there would, at least, be the possibility of having some form of censorious penalty for a trader in appropriate circumstances. Despite what the Government has argued there are significant doubts about the extent to which prosecution for consumer protection offences operates effectively as a deterrent.2 Given that variable monetary penalties are likely to be higher than criminal law fines and breaches easier to establish, it may be that variable monetary penalties would be a more effective deterrent. They would, of course, be subject to challenge through the courts and subject to controls on how they are enforced, thus minimising any risk of their being used in a disproportionate manner.

9. There appears to be a misunderstanding of how consumer law enforcement operates at present. First, the consultation paper Civil Enforcement Remedies (Nov 2012) states that Part 8 currently works for “minor and inadvertent consumer law infringements”. However, in practice it is more commonly used to tackle long-term and often significant wrongdoing. Second, there appears to be an assumption that prosecution is currently the default response of enforcers. The Minister has stated that trading standards bring prosecutions “wherever necessary”. In fact, there are significant barriers to prosecution and it is, at present, viewed very much as a last resort.

10. I would also argue that the RES Act has been dismissed too readily. Civil Enforcement Remedies suggests that the Act focuses too heavily on penalties and too little on securing remedies. It is true that much of the Act is concerned with penalties, but it also makes provision for restoration requirements (and enforcement undertakings) which could have formed the basis for a successful system of redress. In addition, compliance requirements could have played a similar role to compliance category of enhanced consumer measures. Had the Civil Sanctions Pilot gone ahead as planned, the appropriateness of the RES Act for consumer law could have been established.

11. The provisions of the Consumer Rights Bill on enhanced consumer measures should be welcomed, but only if they can be used with, as well as as an alternative to, prosecution.

Peter Cartwright
Professor of Consumer Protection Law
School of Law
University of Nottingham

13 September 2013