The experience of the UK in implementing the Unfair Commercial Practices Directive Andrew Hadley Office of Fair Trading United Kingdom

What I will cover Implementing the Directive Understanding the Directive Explaining the Directive Enforcing the Directive

Implementing the Directive Before the UCPD 23 laws dealing with UCPD-related areas Prescriptive and specific sectoral or product-based regulation Uneven civil and criminal powers and enforcement Legislative change – after the UCPD 23 laws repealed or amended – simplification of the legal structure Principles-based, impact-based regulation Consistent distribution of powers among enforcers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) from 26th May 2008 will implement UCPD Business Protection from Misleading Marking Regulations 2008 (‘BPRs’) implements CMAD

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 throughout 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 Areas of concern / difficulty Negotiation produces strange language! Omissions (including I2P) will pose particular problems for the UK courts Some Annex practices (e.g. 9, 17, 20) less clear than initially appears Overlaps with other legislation Benefits in discussions – building understanding of difficult issues Importance of effective harmonisation

Understanding the Directive Opportunities and positive outcomes Common framework for consumer 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 must satisfy effect test deemed effect GENERAL PROHIBITION (CONTRARY TO REQUIREMENTS OF PROFESSIONAL DILIGENCE) must satisfy effect test MISLEADING PRACTICES AGGRESSIVE PRACTICES ACTIONS 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 give short explanations Now published in Interim format Final version once Parliament approve Regulations

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 Short guide for business Presentations and advice

Enforcing the Directive Who enforces? Office of Fair Trading 203 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

Schedule 1 banned practices Misuse of Codes; false endorsements/authorisations (1-4) Misleading Availability (5-9 and 23) Misleading Context or Effect (10-13, 15-18, 20- 22) Pyramid Schemes (14) Prize Draws (19, 31) Aggressive Sales (24-26, 28 and 30) Unreasonable demands (27, 29)

Enforcing the Directive Sanctions / Outcomes Civil Injunctions (also consultation, undertakings) Breach of injunction – fines, prison Criminal Fines, prison Compensation Administrative action Being considered as part of wider review of criminal enforcement

Enforcing the Directive Method / Principles of enforcement Formal action avoided if possible (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

Conduct Effect Reg 3 Contrary to the requirements of professional diligence AND (Likely to) appreciably impair the average consumer's ability to make an informed decision A N D (Likely to) cause the average consumer to take a transactional decision they would not have taken otherwise 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 (Likely to) significantly impair the average consumer's freedom of choice or conduct Sched 1 One of 31 specified practices DOES NOT APPLY (No impairment/transactional decision tests)

Might the trader’s practice affect consumers? START HERE Yes Is the trader’s practice prohibited outright (see list of 31 practices)? Yes Practice is unfair Might the trader’s practice affect consumers? No Is the trader giving false information to, or deceiving, his customers? OR Is he failing to give enough information about a product?* Is he selling aggressively? Does the practice cause, or might it cause, an average consumer to take a different decision in relation to a product? Yes Yes No No Is the trader failing to act in accordance with the standards a reasonable person would expect? Yes Yes No No Practice not caught by CPRs Practice is not unfair *In certain situations (where an invitation to purchase is made) certain specified information must always be provided.

The experience of the UK in implementing the Unfair Commercial Practices Directive Andrew Hadley Office of Fair Trading United Kingdom