1. Legal situations and practices in EU member states (case study UK) Ankara 7 th December 2009 Andrew Hadley Office of Fair Trading United Kingdom

2. What I will cover ● Introduction ● UK experience of implementing the UCPD  Implementing  Understanding  Explaining ● Enforcing the Directive (general) ● Detailed case studies on specific cases ● Conclusions

3. Introduction ● In the UK, consumer protection is the responsibility of a number of agencies ● This includes OFT and sectoral bodies such as the FSA and OFCOM, but the majority of formal enforcement is done by 200+ Trading Standards Departments, who are managed by local councils ● Implementation of new laws is the responsibility of BIS, formerly DTI/BERR

4. Introduction ● The Office of Fair Trading is the UK’s consumer and competition authority ● We work with a wide range of stakeholders including government, business, enforcers and consumer groups ● We were involved in the general duty to trade fairly from the 1990s onwards

5. Introduction ● Before the UCPD, the UK had a large number of very detailed prescriptive requirements ● UCPD represented a move towards principle-based law which supports greater flexibility ● This meant some serious changes to our existing legal framework around consumer protection

6. Implementing the Directive  Before the UCPD  23 laws dealing with UCPD-related areas  Prescriptive, including some specific sectoral or product-based regulation  Detailed rules on certain areas (e.g. Sealskins Goods Order)  Uneven civil and criminal powers and enforcement

7. Implementing the Directive  Legislative change – after the UCPD  23 laws repealed or amended – simplification of the legal structure  Principles-based, impact-based regulation  Consistent distribution of powers among enforcers

8. 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) on 26 th May 2008 implemented UCPD  Business Protection from Misleading Marking Regulations 2008 (‘BPRs’) implements CMAD

9. 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 during project

10. 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

11. Understanding the Directive  Opportunities and positive outcomes  Common framework for 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

12. Tiers of prohibitions must satisfy effect test MISLEADING PRACTICES BANNED PRACTICES (31 SPECIFIC PRACTICES BANNED IN ALL CIRCUMSTANCES) OMISSIONSACTIONS AGGRESSIVE PRACTICES GENERAL PROHIBITION (CONTRARY TO REQUIREMENTS OF PROFESSIONAL DILIGENCE) deemed effect

13. 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 gives short explanations  Published in summer 2008, but available in interim format beforehand

14. 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 and short guide for business  Presentations and advice

15. Enforcing the Directive  Who enforces?  Office of Fair Trading  203 (approximately) 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

16. Enforcing the Directive  Sanctions / Outcomes  Civil  Injunctions (also consultation, undertakings)  Breach of injunction – fines, prison (contempt)  Criminal  Fines, prison  Compensation orders possible  Administrative action  Currently being considered as part of the Government’s Consumer White Paper

17. Enforcing the Directive  Method / Principles of enforcement  Formal action part of a wide compliance toolkit (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

18. Enforcing the Directive  Findings I  Implemented in May 2008  In the first 18 months:  15 convictions under the CPRs  Over 200 investigations  Several injunctions  A large number of pending cases

19. Enforcing the Directive  Findings II  Honest business practices have been unchanged by the UCPD  Greater flexibility of enforcement and compliance action against key areas such as unfair home improvements  The ‘materiality’ provisions (average consumer and transactional decision) may take a while to become fully effective

20. Enforcing the Directive  Findings III  Annex Practices not as clear as first thought  Need determination and legal resources as an enforcer to ensure compliance and transparency  Misleading omissions the most complex area  Professional diligence can also be ‘challenging’  Some issues with the overlaps with other areas of law (contract, for example)

21. Enforcing the Directive  Findings IV  Some initial uncertainty in the absence of clear precedent (may be a unique UK issue)  Some initial costs to businesses & enforcers  May be addressed by the SANCO Guidelines  Subjective assessments means MS may take different views on some areas until clear precedent develops at EU level

22. Case Studies  Horrendous Home improvements  Wiltshire gained a (final) Enforcement Order under the Injunctions Directive against a father and son  Misleading (giving false info), aggressive (coercing the consumer) and not professionally diligent – also other legislative breaches  Vulnerable consumers affected – often elderly and/or disabled

23. Case Studies  Rogue Roofers  Cumbria TSD successfully prosecuted an aggressive roofer who targeted a vulnerable widow  Misleading actions (claimed to be a member of Weatherseal), misleading omissions (failed to give cancellation rights) and aggressive practices (started work without permission and escorted the consumer to the bank to withdraw money) and a failure to act in a professionally diligent manner  Was given an 18-month prison sentence

24. Case Studies  Misleading Membership  Brent and Harrow TSD gained a community order against a builder who had been illegally using the logo of a trade association, and also claiming to be ‘TSS approved’  These would be misleading, and also possibly breaches of Annex Practices 2 and 4. Also pleaded guilty to Fraud Act charges  100 hours unpaid work and £612 costs

25. Case Studies  Potential Pyramid Selling  OFT has brought criminal charges against alleged pyramid sellers  Their actions are thought to breach Annex Practice 14 which relates to pyramid selling  This is a first consumer criminal case for OFT and is a key capacity building case  Will also help deal with this problem

26. Case Studies  Informal actions  OFT (and others) have taken less formal action to promote compliance with the UCPD  Airlines and price transparency – working with business to remove misleading prices  Consumer alerts on misleading prize draws  Guidance on second hand cars

27. Conclusions  Flexibility in handling developing unfair practices is very useful  May come at the cost of some certainty in the short- term  Early need for clear legal direction  Useful to engage with Commission and other Member States as early as possible  Directive will become more useful as precedent is developed and tested  Useful for promoting cross-border trade

28. ConductEffect Reg 3 Contrary to the requirements of professional diligence AND (Likely to) appreciably impair the average consumer's ability to make an informed decision ANDAND (Likely to) cause the average consumer to take a transactiona l 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 AND (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)

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

30. Legal situations and practices in EU member states (case study UK) Ankara 7 th December 2009 Andrew Hadley Office of Fair Trading United Kingdom