Business, Innovation and SkillsJoint written evidence submitted by The Trading Standards Institute and The Association of Chief Trading Standards Officers

About The Trading Standards Institute

The Trading Standards Institute is the UK national professional body for the trading standards community working in both the private and public sectors.

Founded in 1881, TSI has a long and proud history of ensuring that the views of our broad church of Members are represented at the highest level of government, both nationally and internationally.

We campaign on behalf of the profession to obtain a better deal for both consumers and businesses.

We are also a forward-looking social enterprise delivering services and solutions to public, private and third sector organisations in the UK and in wider Europe.

We create industry guidance, approve industry codes of practice, run events for both the trading standards profession and a growing number of external organisations. We also provide accredited courses on regulations and enforcement which deliver consistent curriculum, content, knowledge outcomes and evaluation procedures, with the flexibility to meet local authority, business and operational needs.

About the Association of Chief Trading Standards Officers

The Association of Chief Trading Standards Officers (ACTSO) is the single membership organisation representing Heads of Trading Standards and regulatory services from councils across England and Wales. ACTSO, supported by the Trading Standards Institute, is focussed exclusively on providing a comprehensive co-ordinated leadership forum at the national level whilst assisting members to lead their services both locally and regionally.

We are pleased to be able to submit this joint evidence.

1. TSI and ACTSO broadly welcome the Bill. Additional clarity of rights will help not only consumers but also millions of businesses who are often unsure of their legal obligations towards consumers. We welcome the new statutory “guarantees” for service contracts and digital media and believe that the Bill, for the most part, represents a real leap forward for consumers.

2. For the purpose of this submission we intend to make a few general observations before concentrating on an area that causes us the greatest concern: the proposed amendments to powers of trading standards officers.

3. Key Points:

The Bill does not contain proposals to create a statutory requirement for trading standards officers to be “competent”, despite extensive consultation on such a proposal.

TSI and ACTSO welcome the new clarity on remedies available to consumers. We believe, however, that the intended economic benefits arising from the proposals may not be realised without a robust communications and campaign strategy for businesses and consumers alike.

The “single set of powers” only applies to BIS-controlled legislation and as such is not a single set, and we question whether it will remove the confusion amongst businesses as Government intend.

The requirement to serve notice prior to using a power of entry will undermine the effectiveness of trading standards officers’ ability to detect consumer law breaches.

The offence of obstructing an officer who wishes to use a power has been reduced from a level 5 (£5,000) to a level 3 (£1,000) offence. We believe this could incentivise obstructive behaviour amongst unscrupulous businesses who may take a commercial decision to obstruct, rather than co-operate with, an investigation.

Competency

4. In 2012 the Government consulted1 on proposals to abolish the statutory requirement to be “qualified” for the purpose of enforcement duties under the Weights and Measures Act 1985 and replace it with a more generic qualification for all consumer law matters. The proposal would be underpinned with a non-statutory code of practice that would define how officers could meet the new competency requirements.

5. TSI had started work with partners in mapping out how the new code would be constructed and made good progress. We believe that it is in the best interests of both officers and businesses that all officers display professional levels of competency when fulfilling their duties and that a standardised agreed route to achieving such competency is the best way of achieving that. The danger in maintaining the status quo is that budget cuts will drive down the investment in competency which may result in a fragmented approach to training and an inconsistent level of competence amongst the profession. Without a statutory mandate to a minimum level of competence our fear is that some local authorities will minimise investment in training and qualifications and in some cases withdraw investment altogether.

Dilution of Incentives to Co-operate

6. The Government is proposing to reduce the penalty for obstructing an officer when carrying out their duty from a level 5 (£5,000) to a level 3 (£1,000) fine. TSI and ACTSO believe that this could incentivise obstructive behaviour amongst unscrupulous businesses who may take a commercial decision to obstruct, rather than co-operate with, an investigation.

Education

7. We are yet to hear if, or how, the Government plans to help businesses and consumers understand their new rights. Educating and empowering consumers and businesses on their new rights and obligations is an absolute necessity if Government is to realise the economic benefits it cites in the impact assessment.

8. While TSI has a general duty to help businesses understand their obligations and receives a grant from BIS to cover information and interpretive guidance (c.£388k), we feel a project following the enactment of the Bill requires much greater investment to enable the approximately one million consumer-facing businesses to fully understand their new obligations. While we appreciate some of these businesses will turn to the private training market to fulfil the knowledge gap amongst staff, we risk leaving micro and small businesses behind who are unlikely to recognise the change in their obligations and perhaps even less likely to use paid-for sources of training and information.

9. We would also stress the same need for consumers to understand their rights. Without knowledge, we are unlikely to create the confident, empowered consumer market that Government describes. TSI and ACTSO would advocate that consumer education starts with children; it then becomes a valuable life-long skill. But equally, unless all consumers are made aware of the key changes (particularly around the new early right to reject goods) then we would be unlikely to see the transformation in consumer markets that the Bill is intended to create. For this reason we believe that there is merit in exploring a statutory requirement to have key consumer rights displayed at point of sale in a retail premise or via e-commerce channels.

Powers of Entry

10. In line with the Government’s commitment following the Protection of Freedoms Act 2012, the draft Bill proposes to introduce new safeguards that will not only consolidate the powers of trading standards officers but also reduce the circumstances when powers of entry can be used.

11. The purpose of consolidation was to bring together trading standards powers into a single set. The proposals currently only consolidate “BIS policy” powers—they have not incorporated officers’ powers derived from food, agriculture, age restricted sales law or other powers that trading standards officers may use during their work, so the net result is that a trading standards officer will still draw from a range of powers during a single inspection/exercise. That in itself doesn’t pose any difficulties unless the powers vary, which, of course, is the case with the power of entry.

12. While all trading standards officers appreciate, and are sympathetic with, the need for businesses to operate free from interference from the “inspectorate”, and totally agree that all powers should be used proportionately, we feel the proposals don’t recognise the major advances in working methodology that has been introduced over recent years. These changes have arisen from the Hampton Review (2005),2 changes arising from the work of the Better Regulation Delivery Office and, in some cases, changes arising from resource cuts. These changes mean that unannounced inspections are much less frequent than they were five years ago and that the work of the trading standards service is much more aligned to help a business improve rather than to “catch them out” (which serves no real economic purpose).

13. That said, there are a small proportion of businesses which have been found to cut corners so far that they put the safety or economic interests of consumers at significant risk, and some organisations blatantly use the façade of a legitimate operating business as a guise for criminal activity. It is with this minority group in mind that we feel that the power of entry in its current form risks undermining the integrity of the consumer protection system in the UK and would be in the interests of neither businesses nor consumers—the former rely on trading standards to “police” a level economic playing field and the latter lose £4 billion+ to unfair trading every year in the UK.

14. Specifically our main concern lies with the new requirement for trading standards officers to give reasonable notice to businesses prior to inspections.

Powers to Enter Premise without Warrant, Schedule 5 Part 3, para. 20 (1)

(Summarised)

The power of entry may only be exercised if a notice has been given to the occupier of the premises setting out why the entry is necessary, and there are at least two working days between date of receipt of the notice and the date of entry.

Notice need not be given if:

The occupier has waived the requirement to give notice;

Where there is reasonable cause to suspect there is or has been a breach;

Where the notice would defeat the purpose (evidence may be lost etc); and

There is an imminent risk to public safety or health.

In addition Schedule 5 paragraphs 14 and 15 make it clear that the notice is not required to be given for the purposes of:

Making a test purchase of a product; or

Entering premises to which the public has access and inspecting any product on the premises which the public may inspect. (paragraph 14)

An officer may also enter premises to which the public has access in order to observe the carrying on of a business on those premises at any reasonable time. (paragraph 15)

15. We recognise that BIS colleagues have introduced new elements (since the original consultation) to the powers so that entering retail premises unannounced to observe the operations in “public areas” or to sample goods is permitted without serving notice. However, we feel that the principle of giving notice to businesses which may be operating illegally defeats the purpose and simply allows the business operator the opportunity to remove illicit goods or material. This is of particular concern within a manufacturing environment, for activity where offending goods are digital or not in public view, and for transactions that take place in a business to business environment. So while the circumstances for having to serve notice are limited in their application there will still be a number of instances where the serving of notice would limit our ability to detect fraud.

16. Our members have submitted a number of actual case studies where they feel the serving of notice would be frustrated in our attempts to uphold consumer protection:

Case Study 1—Cardiff—Unlicensed Software

17. Officers in Cardiff carried out a project looking at independent computer repair shops. Unannounced inspections were based on business profile, not intelligence. The business was found to be supplying unlicensed software. This led to a seizure and an investigation into a fraud worth over £100,000.

Case Study 2—Northumberland—Weights and Measures

18. A food outlet selling sweets by the carton where the carton weighs 15g. At a selling price of £1.00 per 100g, the value of the carton would be 15p were the sweets to be sold gross weight, ie including the weight of the carton. The sweets are in fact required to be sold by net weight. This is achieved by placing an empty carton upon the scale to be used and pressing the scale’s “tare button”—this sets the scale so that a customer buying sweets only pays for the weight of the sweets in the carton, not the gross weight including the carton.

19. Warning of a visit means that an unscrupulous operator has the opportunity to press the tare button before the visit, but then revert to selling gross weight as normal practice after the visit. Complaints are unlikely, because few if any members of the public will know that there is a requirement to sell by net weight and also because the unfair practice is not noticeable in a single transaction (but has a large cumulative effect).

20. An unannounced visit to a premises selling loose sweets allowed an officer to check that a scale was standing “ready tared”.

21. While we recognise there is a new power to observe (as if we were a consumer) at what point does this observation become surveillance which invokes a whole new system of safeguards and procedures?

Case Study 3—South Lanarkshire—Weights and Measures

22. In June 2013 an Officer inspected a 30,000kg x 10kg Class III Non Automatic Weighing Instrument (NAWI) that had been inspected, tested and “calibrated” by an installer on 16 May 2013. The instrument had a conformity assessment sticker affixed.

23. Excessive accuracy errors were discovered upon inspection (-32kg @ 16,000kg) and excessive eccentricity errors (-22kg @ 11,000kg). Consequently the instrument was disqualified. The officer was puzzled as to why a NAWI that had been so recently inspected, tested and calibrated by the manufacturer was so badly wrong.

24. On further investigation the problem was a significant accumulation of dirt in the pit impacting on the structure of the plate and the load cells. The nature of the accumulation of dirt was such that it could only have occurred over a sustained period of time. The dirt was so bad that a gulley cleaner couldn’t clear the accumulation. A crane had to be hired to lift the plate to allow the drains to be rodded and cleared, and the accumulation of dirt removed before the instrument was re-installed and verified again. The only reasonable conclusion that could be drawn was that the accumulation had occurred over a long period and that the instrument had been “calibrated” with the accumulation in situ.

25. Having to give prior notice of our inspection would ensure that all works of such a nature would occur immediately in advance of the inspection. We fear the notice requirement would drive the trader to operate safe in the knowledge that they are only required to maintain their bridge on an annual basis immediately following receipt of the notice rather than discharge their duties throughout the year as required.

Case Study 4—Lancashire—Explosives Storage

26. An officer was conducting inspections in relation to tobacco advertising in East Lancashire in February at small independent retailers following a change in the legislation. As the officer visited one shop they noticed fireworks on sale (outside the restricted time period). The officer made a test purchase but didn’t disclose his identity. Soon after, it transpired that although the shop was registered to sell fireworks within the appropriate period it wasn’t licensed to sell all year round and the officer returned to investigate further.

27. The officer used his power of entry to enter other rooms in the shop and found large quantities of fireworks being stored unsafely, posing significant risks to property, the employees, and neighbouring businesses.

28. Although the officer would be able to make a test purchase without giving notice, they would have been unlikely to find the unsafe fireworks having served notice. The officer was investigating an issue of inappropriate registration and so would not have had “reasonable suspicion” to suspect the storage of fireworks. Unless a very broad definition of “reasonable suspicion” becomes acceptable, the new proposals would have defeated the purpose of the intervention by the officer.

Case Study 5—Wiltshire—Unstamped Liquid Fuel Instruments

29. The local authority prosecuted a filling station twice for selling short measure fuel and using unstamped pumps (the pumps had been deliberately tampered with). Both times the problem was picked up on a routine visit rather than as the result of a complaint. Had the authority given 48 hours notice of inspection then they would not have identified the problem; the pumps would simply have been shut off and “not in use” at the time of the visit.

Case Study 6—Southampton—Illicit Alcohol and Tobacco

30. The trading standards service took enforcement action against a shop specialising in Polish goods for supplying illicit tobacco and alcohol. The business always kept their illicit goods hidden away from the consumer’s view and it was only discovered following an inspection of the areas out of consumer reach.

31. The service finds that intelligence regarding the sale of these illegal products is poor, in part because customers want cheap alcohol and cigarettes, and it is also very rare for someone to come forward as a witness, so evidence gained during shop inspections is the only method of assessing the risk of such a business.

Case Study 7—Dorset—“Written Off” Motor Cars

32. A car trader was prosecuted by this trading standards service a couple of years ago for selling cars with undisclosed write-off history. Some of the evidence was obtained by inspecting the trader’s premises and checking the V5 documents for vehicles advertised for sale. Many of these documents indicated vehicles had been subjected to prior accident damage, but this information was not made available to consumers before they purchased a vehicle.

33. The service used this information to prove that the trader was in possession of material information that should have been disclosed to potential buyers before they purchased a vehicle.

34. The information was obtained using current powers—the serving of written notice prior to an inspection would have been likely to result in the offending vehicles or documentation being relocated at the time of inspection.

Average Weight Packing—General Observation from our Metrology lead Officers

35. The requirement to give notice would make a mockery of the duties contained in regulation 9(1) and (3) of the Weights and Measures (Packaged Goods) Regulations 2006. This regulation can require a rigorous system of checks and records. What onus is there on a packer or importer to maintain such systems continuously, thereby ensuring compliance with the Three Packers Rules in regulation 4, if they know that there is no prospect of an unannounced inspection? Previous experience has suggested that the more unscrupulous operator, on receipt of a notice informing them in advance of an inspection, would adjust the “fill levels”, systems, procedures, and checks, and records would be “corrected” to ensure compliance is met on the day of inspection.

Conflicting Powers?

36. In the proposed draft Bill, there is a slight conflict between the power to inspect or obtain a warrant and the relevant purpose to which the powers apply to. The relevant purpose of the powers are described at Schedule 5, clause 7 (2) as to ascertain whether there has been a breach of the enforcer’s legislation. Whereas the power to require information at Schedule 5, clause 16 (2) says “unless the enforcing officer has reasonable cause to suspect there is, has been or is likely to be a breach...”. This is also present under 30 (3), whereby the power to enter premises with a warrant is defined as “has been, is being or is about to be a breach...” We fear such inconsistencies would only serve to cause confusion and jeopardise the likelihood of successful court proceedings.

Summary and Recommendations

37. Key to the points made above is the question of what will constitute “reasonable cause” for the purpose of this provision. Can the “reasonable cause” test be satisfied because the business operates in a “high risk” sector or because the profiling of the business represents a high or even medium risk to consumers, or does the suspicion have to form a positive link between the offence and that particular business? There are a number of challenges around this point and one that causes uncertainty and inevitable protracted litigation. Our experience suggests that the terminology is open to too much interpretation in its current form and can only be unhelpful to consumer protection bodies if it becomes law.

38. While we agree with the general thrust of the proposals that interventions need to be proportionate and targeted, we do not believe it is the intention of this Bill to create the unintended consequences of weakening officers’ powers through the provisions contained within Schedule 5, Part 3 (20) (3). As such we would like to propose a compromise:

39. We would suggest that the Regulators’ Code,3 which is currently being refreshed and is due to come into force in 2014, is a much better vehicle for improving the proportionality of regulators (if indeed that is the purpose of the provisions of the Bill). We would like to explore whether local authorities should be mandated to publish how they meet a principle-based code requiring:

Publication of the authorities’ approach to inspection without warrant—this will clearly set out what businesses can expect and the circumstances where an authority feels that serving notice would not be appropriate.

Publication of details of how someone can challenge that policy using locally democratic channels.

40. To our mind the code allows local flexibility and encourages much more transparency and accountability and more importantly retains the integrity of the UK’s consumer protection system.

22 August 2013