APPENDIX 3: DRAFT CONSUMER PROTECTION
FROM UNFAIR TRADING REGULATIONS 2008; DRAFT BUSINESS PROTECTION
FROM MISLEADING MARKETING REGULATIONS 2008: EXPLANATORY INFORMATION
Memorandum by the Department for Business, Enterprise
and Regulatory Reform
1. Implementation of the Unfair Commercial Practices
Directive through the Consumer Protection from Unfair Trading
Regulations 2008 will strengthen consumer protection by establishing
a comprehensive framework for tackling sharp practices and rogue
traders. The objective of the Directive is to stop unfair commercial
(mainly marketing and selling) practices for the benefit of consumers
generally.
2. Consumers already have extensive private law
rights in contract and in tort. For instance, a consumer who was
harmed by a misleading communication may be able to seek redress
through an action for breach of contract (where a misleading statement
becomes a term of the contract); or an action for misrepresentation.
Similarly, the laws relating to duress and undue influence provide
some remedies for consumers suffering from aggressive commercial
practices.
3. Nevertheless, the Government's 2005 consultation
on implementing the UCPD sought views on whether a private law
right of redress should be provided for in the implementing legislation.
4. There a number of potential advantages and
disadvantages associated with a new right of action. The potential
advantages are:
it would make consumers' rights simpler to understand
and use: although as mentioned above consumers already have a
large number of existing remedies in English law they exist piecemeal
across statute law and in the common law relating to contract
and tort. Having a single right for this broad area of commercial
practices should make it easier for consumers - and consumer advisers
- to find out what their rights are. This in turn would make it
more likely that they would exercise their rights.
it would encourage compliance with the law: aggrieved
consumers have a personal incentive to make good their loss and
so may be more likely to take action than public enforcement bodies
that have to prioritise their enforcement work to those areas
which are causing the greatest consumer detriment. The existence
of private law rights which consumers easily understood would
encourage businesses to comply with the law.
it would provide consumers with new and/or enhanced
rights: the Directive introduces new prohibitions in the UK, notably
with respect to aggressive commercial practices and pure omissions
(in other words omissions of relevant material in circumstances
where the omission does not make what is said actually misleading).
A right of action in these areas would provide consumers with
strengthened rights or new rights they do not currently have.
5. On the other hand the potential disadvantages
are:
no real added value: despite the above it is not
always easy to identify good examples of where redress is not
currently available but would be desirable. By contrast, it is
easier to identify areas where available redress could be usefully
strengthened - e.g. remedies for practices which are aggressive
through the use of harassment, coercion or undue influence. However,
merely improving and strengthening existing protections may not
be thought sufficient to justify introducing an entirely new right.
adverse unintended consequences: the Directive is
drafted in relatively flexible terms, which are designed for public
enforcement purposes. These may not be appropriate when applied
in relation to the protection of private interests. There is likely
to be tension between a desire by the courts to place a broad
interpretation on the Directive in order to ensure efficacy of
public enforcement and concern about how such a broad interpretation
might affect private rights of action, which are of course not
usually motivated by any public interest concern. This may be
particularly true in relation to pure omissions of information.
A further concern is that although redress opportunities are already
available for much of the ground covered by the prohibition on
misleading actions, these work differently in some areas to the
way in which a right of action under the Directive would be likely
to operate. These differences would risk having the effect of
altering in important ways the law on misrepresentation - and
in effect, we would be introducing a new cause of action for misrepresentation
to those that already exist. There appears to be a lower risk
of unintended consequences with respect to the prohibition on
aggressive commercial practices. This is because the relevant
practice is much more likely to be directly linked to a specific
consumer-trader relationship. Nonetheless, some unintended and
undesirable consequences may arise here too. For example "undue
influence" in the Directive appears to be more flexible compared
with the ability in domestic law to rescind a contract which has
been entered into as a result of undue influence.
6. Consumer organisations (Citizens Advice, National
Consumer Council, Which? and National Consumer Federation), enforcers
and academic respondents strongly supported giving individual
consumers a right of action. They argued that this would give
consumers a clearer and more complete set of rights. In turn this
would lead to greater understanding of consumer rights and empowerment,
and may also encourage traders to resolve problems.
7. Academic respondents said that existing causes
of action are inadequate, especially in relation to misleading
omissions and aggressive practices.
8. Conversely, business respondents strongly
opposed the introduction of a new right. They argued it was difficult
to identify breaches of the UCPD which would cause a consumer
loss which were not already subject to a cause of action under
existing law.
9. The Government's Response to the 2005 consultation
accepted that providing a private right of redress in relation
to the UCPD could clarify existing consumers' rights. It would
enhance consumer rights in areas where the Directive provides
new or improved protections - e.g. in relation to aggressive commercial
practices - and should stimulate traders to greater compliance
with the law. However, the Government is concerned that adopting
a private right of action for the whole Directive might have unintended
and adverse consequences, by potentially providing consumers with
undesirable latitude to sue traders and by impacting on the law
of misrepresentation. The Government has therefore asked the Law
Commission to consider this issue as part of its 10th Work Programme
which begins on 1 April 2008.
10. In their response to the May 2007 consultation
on draft Regulations implementing the UCPD, Citizens Advice and
Which? urged the Government to reverse its decision not to give
a private right of redress. The National Consumer Federation also
expressed disappointed that the draft implementing Regulations
did not include a private right of redress and that the matter
had instead been referred to the Law Commission.
11. The Law Commission's draft 10th Work Programme
includes a project to consider how far a private right of redress
for unfair commercial practices would simplify and extend consumer
rights. The draft Programme notes that the scope of the Directive
is wide, and many of its effects are uncertain. It therefore recognises
that there would be a need to proceed cautiously to avoid unintended
consequences. The Law Commission believe it would be helpful to
gain more experience of how the new rights will work in the UK
- and to learn from the Irish experience of introducing a general
right to redress into their law.
12. The Law Commission cannot begin work on this
project until it has completed its project on consumer remedies
for faulty goods in April 2010. Their intention is to publish
a scoping study in autumn 2010 to consider the advantages and
disadvantages of a private right of redress in the light of experience.
13. The Ministry of Justice are considering proposals
to improve the way in which government deals with Law Commission
recommendations.
March 2008
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